WCA Waste (WCAA) 10-Q 2010 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, 2010

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 has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES   ¨    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 £ Non-accelerated filer £ (Do not check if a smaller reporting company) Smaller reporting company þ

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 October 26, 2010, there were 20,504,097 shares of WCA Waste Corporation’s common stock, par value $0.01 per share, outstanding, excluding 1,073,957 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,”  220;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.

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:

·   prevailing U.S. economic conditions over the last two years and the related decline in construction activity, as well as any future downturns, has reduced and may continue to 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;

·   governmental authorities may enact climate change regulations that could increase our costs to operate;

·   increases in the costs of disposal, labor and insurance may 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;

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·   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;

·   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:

·   on December 31, 2009, we consummated the acquisition of the Live Earth Companies with cash and the issuance of our common stock.  The acquisition of the Live Earth Companies is subject to various risks;

·   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 acquisitions have resulted and future acquisitions we make may 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 and other unforeseen expenses related to acquisitions, which could lower our earnings.

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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:

·   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 preclude 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

·   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:

·   adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs, access to capital and cost of capital;

·   the inability or failure of any syndicate bank to meet its obligations under our senior credit facility could adversely impact our short-term and/or long-term capital or cash needs by limiting our access to swing-line loans, increasing the cost of issuing letters of credit, or reducing the total capacity available under the revolving credit facility;

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

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

We describe these and other risks in greater detail in the section entitled “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2009 (sometimes referred to in this report, including the notes to our financial statements, as the “10-K”).

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,
	2010			2009
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,105		$	4,329
Accounts receivable, net of allowance for doubtful accounts of $588 (unaudited) and $318, respectively		26,115			21,767
Deferred tax assets		1,452			1,452
Prepaid expenses and other		3,138			4,575
Total current assets		34,810			32,123
Property and equipment, net of accumulated depreciation and amortization of $152,678 (unaudited) and $135,286, respectively		317,759			320,724
Goodwill, net		67,460			65,318
Intangible assets, net		7,196			7,051
Deferred financing costs, net		3,566			3,628
Deferred tax assets		454			2,385
Other assets		160			145
Total assets	$	431,405		$	431,374
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,260		$	10,013
Accrued liabilities and other		19,455			17,290
Interest rate swap		713			6,489
Note payable		—			1,231
Current maturities of long-term debt		500			500
Total current liabilities		33,928			35,523
Long-term debt, less current maturities and discount		219,059			219,516
Accrued closure and post-closure liabilities		13,921			13,993
Other long-term liabilities		1,815			1,813
Total liabilities		268,723			270,845
Commitments and contingencies
Stockholders’ equity:
Series A convertible preferred stock, $0.01 par value per share. Authorized 8,000 shares; issued and outstanding 914 shares and 870 shares, respectively (liquidation preference $96,006)		9			9
Common stock, $0.01 par value per share. Authorized 50,000 shares; issued 21,578 shares and 21,121 shares, respectively		216			211
Treasury stock,  1,074 shares and 1,074 shares, respectively		(5,322	)		(5,322	)
Additional paid-in capital		197,970			193,821
Contingent considerations		3,225			3,225
Retained earnings (deficit)		(33,416	)		(31,415	)
Total stockholders’ equity		162,682			160,529
Total liabilities and stockholders’ equity	$	431,405		$	431,374

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,
	2010			2009			2010			2009
Revenue	$	59,279		$	49,546		$	171,881		$	147,910
Expenses:
Cost of services		42,055			32,786			123,458			97,907
Depreciation and amortization		7,623			6,714			22,682			20,087
General and administrative (including stock-based compensation of $312, $438, $1,038 and $1,338, respectively)		2,925			3,060			8,743			9,714
Gain on sale of assets		(7	)		(46	)		(896	)		(91	)
		52,596			42,514			153,987			127,617
Operating income		6,683			7,032			17,894			20,293
Other income (expense):
Interest expense, net		(4,811	)		(4,511	)		(14,190	)		(13,525	)
Write-off of deferred financing costs		—			—			(184	)		—
Impact of interest rate swap		(47	)		(905	)		(231	)		(1,748	)
		(4,858	)		(5,416	)		(14,605	)		(15,273	)
Income before income taxes		1,825			1,616			3,289			5,020
Income tax provision		(1,042	)		(790	)		(1,932	)		(2,797	)
Net income		783			826			1,357			2,223
Accrued payment-in-kind dividend on preferred stock		(1,138	)		(1,076	)		(3,358	)		(3,192	)
Net loss available to common stockholders	$	(355	)	$	(250	)	$	(2,001	)	$	(969	)
Net loss available to common stockholders:
Earnings per share — basic	$	(0.02	)	$	(0.02	)	$	(0.10	)	$	(0.06	)
Earnings per share — diluted	$	(0.02	)	$	(0.02	)	$	(0.10	)	$	(0.06	)
Weighted average shares outstanding — basic		19,635			15,850			19,580			15,801
Weighted average shares outstanding — diluted		19,635			15,850			19,580			15,801

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,
	2010			2009
Cash flows from operating activities:
Net income	$	1,357		$	2,223
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		22,682			20,087
Non-cash compensation charge		1,038			1,338
Amortization of deferred financing costs		1,011			931
Write-off of deferred financing costs		184			—
Deferred tax provision		1,932			2,797
Accretion expense for closure and post-closure obligations		828			469
Gain on sale of assets		(896	)		(91	)
Unrealized gain on interest rate swap		(5,776	)		(3,429	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(4,306	)		5,745
Prepaid expenses and other		917			(1,353	)
Accounts payable and other liabilities		3,937			2,342
Net cash provided by operating activities		22,908			31,059
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(3,407	)		(3,689	)
Proceeds from sale of assets		2,327			146
Capital expenditures		(20,419	)		(20,501	)
Net cash used in investing activities		(21,499	)		(24,044	)
Cash flows from financing activities:
Principal payments on long-term debt		(500	)		(167	)
Net change in revolving line of credit		—			(117	)
Deferred financing costs		(1,133	)		(221	)
Net cash used in financing activities		(1,633	)		(505	)
Net change in cash and cash equivalents		(224	)		6,510
Cash and cash equivalents at beginning of period		4,329			955
Cash and cash equivalents at end of period	$	4,105		$	7,465

Supplemental cash flow information:
Interest paid	$	9,635	$	9,267
Interest rate swap paid		6,103		3,964
Income taxes paid		515		509

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 (GAAP) 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 9, 2010 which contains th e Company’s audited consolidated financial statements as of and for the year ended December 31, 2009.  The unaudited condensed consolidated financial statements as of September 30, 2010 and for the three and nine months ended September 30, 2010 and 2009 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 and 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 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.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date.  Unless otherwise discussed, the Company does not expect that the impact of these recently issued accounting standards that are not yet effective will have a material impact on the Company’s financial condition, results of operations or cash flows upon adoption.

In January 2010, the FASB issued Accounting Standards Update 2010-06 (ASU 2010-06), “Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements.” This update requires an entity to disclose separately the amounts of significant transfers in and out of Level 1 and 2 fair value measurements and to describe the reasons for the transfers.  It also requires additional disclosure regarding purchases, sales, issuances and settlements of Level 3 measurements.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the additional disclosure of Level 3 measurements, which is effective for fiscal years beginning after December 15, 2010. The adoption of this standard is not expected to have a material impact on the Company& #8217;s financial condition, results of operations or cash flows.

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2.ACQUISITIONS

The Company completed two acquisitions during the nine months ended September 30, 2010.  On August 1, 2010, the Company acquired the customer base of Washita Disposal located near Oklahoma City, Oklahoma.  On September 1, 2010, the Company purchased certain residential collection routes and assets from Five JAB Environmental Services, LLC near Houston, Texas.  Total consideration of these two acquisitions consisted of $3.4 million in cash and 20,492 shares of the Company’s common stock valued at $0.1 million.

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

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

Based on the preliminary assessments of values for these acquisitions, the Company reflected fixed assets of $0.5 million, intangible assets of $0.8 million, goodwill of $2.5 million and net working capital of $(0.3) million.

Subsequently, on October 1, 2010, the Company completed two acquisitions.  The Company acquired certain assets of Sprint Waste Services, L.P. and DINA Industries, Inc., two collection operations in the greater Houston area.  The consideration for the Sprint acquisition was $3.6 million which included $3.5 million of cash and $0.1 million of the Company’s common stock.  The Company purchased DINA Industries, Inc. for $0.5 million in cash.

3.STOCK-BASED COMPENSATION

The Company established the 2004 WCA Waste Corporation Incentive Plan which has been amended and restated from time to time to comply with applicable federal law.  On September 28, 2010, the stockholders of the Company approved the Fourth Amended and Restated 2004 WCA Waste Corporation Incentive Plan.  This amendment (1) increased the Company’s common stock authorized for issuance under the plan from 2,250,000 shares to 2,900,000 shares, (2) established an “evergreen” provision to increase the number of shares available for awards and grants on January 1 of each year by the lesser of (i) 500,000 additional shares or (ii) a number of shares such that the total authorized shares under the plan following such increase would be equal to 9% of the fully-diluted common shares issued and outstanding as of De cember 31 of the preceding year, and (3) made the shares surrendered by participants to satisfy tax withholding obligations available for future issuance.  As of September 30, 2010, there were approximately 739,000 remaining shares of the Company’s common stock authorized for issuance.

During the three and nine months ended September 30, 2010, 296,484 and 520,444 restricted shares of the Company’s common stock were granted to certain of the Company’s officers and directors with an aggregate market value of $1.4 million and $2.3 million on the grant dates, respectively.  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.

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The following table reflects the Company’s restricted share activity for the three and nine months ended September 30, 2010:

	Three Months Ended September 30, 2010						Nine Months Ended September 30, 2010
	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		561		$	4.54			638		$	5.10
Granted		296			4.76			520			4.50
Vested		(1	)		7.31			(297	)		5.46
Forfeited		(1	)		5.11			(6	)		5.45
Unvested at September 30, 2010		855		$	4.61	2.08		855		$	4.61	2.08

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, 2010:

	Three Months Ended September 30, 2010						Nine Months Ended September 30, 2010
	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		511		$	9.52			525		$	9.52
Grants		—			—			—			—
Forfeitures		(20	)		9.50			(34	)		9.50
Outstanding at September 30, 2010		491		$	9.52	3.74		491		$	9.52	3.74

As the exercise prices of all outstanding options were greater than the Company’s common stock share price as of September 30, 2010, there was no intrinsic value as of September 30, 2010.  In addition, no compensation expense remains to be recognized as all stock options outstanding are vested.

4.EARNINGS PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders 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 loss available to common stockholders for the three and nine months ended September 30, 2010 and 2009 is as follows:

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2010			2009			2010			2009
Numerator:
Net income	$	783		$	826		$	1,357		$	2,223
Accrued payment-in-kind dividend on preferred stock		(1,138	)		(1,076	)		(3,358	)		(3,192	)
Net loss available to common stockholders	$	(355	)	$	(250	)	$	(2,001	)	$	(969	)
Denominator:
Weighted average basic shares outstanding		19,635			15,850			19,580			15,801
Weighted average diluted shares outstanding		19,635			15,850			19,580			15,801
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.02	)	$	(0.10	)	$	(0.06	)
Diluted	$	(0.02	)	$	(0.02	)	$	(0.10	)	$	(0.06	)

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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,
	2010	2009	2010	2009
Stock options	491	534	491	534
Restricted shares	855	652	855	652
Convertible preferred stock	9,519	9,117	9,470	9,014
Convertible debt	154	790	154	790
	11,019	11,093	10,970	10,990

5.LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,		December 31,
	2010		2009
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 (2.89% and 3.24% at September 30, 2010 and December 31, 2009, respectively)		67,500		67,500
Seller note, with two installments of $500 due on January 15, 2010 and 2011		484		941
Seller convertible notes, with interest rate of 5.5%, due in October 2012		1,575		1,575
		219,559		220,016
Less current maturities		500		500
	$	219,059	$	219,516

The 9.25% Senior Notes due 2014 are guaranteed by all of the Company’s current and future subsidiaries as of September 30, 2010.  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.  As of September 30, 2010, the fair value of these notes, based on quoted market prices, was approximately $156 million compared to a carrying amount of $150 million.

On June 30, 2010, the Company, Comerica Bank, in its capacity as Administrative Agent, together with BBVA Compass Bank as Documentation Agent, and in each of those bank’s capacities as Co-Lead Arrangers, along with Regions Bank, in its capacity as Syndication Agent, and certain other lenders, entered into the Twelfth Amendment to Revolving Credit Agreement (the “Amendment”) to amend the Revolving Credit Agreement dated July 5, 2006 (the “Credit Agreement”), by and between the Company, Comerica Bank as administrative agent and certain other lenders set forth therein, as previously amended.  Regions Bank, Branch Banking and Trust Company, and CoBank have become new participating lenders under the Credit Agreement.

The Amendment extended the term of the Credit Agreement and the revolving credit facility, which would have expired on July 5, 2011, to January 31, 2014.  The Amendment also increased the total revolving credit commitments available to the Company from the participating lenders under the Credit Agreement to $200 million from $175 million.  The Company incurred $1.0 million of financing costs associated with the Amendment.  In addition, the Company wrote off $0.2 million of deferred financing costs in proportion to reduced commitments from the original participating lenders.

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The Amendment modified some of the pricing terms and conditions of the Credit Agreement; however, such modifications will not significantly increase the Company’s borrowing costs at current borrowing levels.  In lieu of an unused commitment fee, the Company is required to pay, quarterly in arrears, an annual facility fee in an amount ranging from 0.375% to 0.875% of the total revolving credit commitments of $200 million available under the Credit Agreement (the “Facility Fee”).   The Company is also obligated to pay an annual letter of credit fee in an amount ranging from 2.125% to 2.625% of the letter of credit obligations outstanding under the Credit Agreement (the “L/C Fee”).  Any borrowings under the Credit Agreement will bear interest at either (x) the Eurodollar London Interbank Offered Rate (“LIBOR”) for the applicable interest period, plus a spread ranging from 2.125% to 2.625% per annum (a “LIBOR Loan”) or (y) a base rate equal to the greater of (1) the Federal Funds Rate plus 1%, (2) the Prime Rate as published by Comerica Bank from time to time, or (3) one-month LIBOR plus 1.00%, plus a spread ranging  from 1.625% to 2.125% (a “Base Rate Loan”).  The Facility Fee, the L/C Fee and the applicable spread on a LIBOR Loan and a Base Rate Loan depends on the Company’s Leverage Ratio (as such term is defined in the Credit Agreement as previously amended).  From the date of the Amendment until the Company’s Compliance Certificate is delivered to the administrative agent for the fiscal quarter ended June 30, 2010, the Facility Fee will be 0.625%, the L/C Fee will be 2.625% and the spreads applicable to LIBOR Loans and Base Rate Loans will be 2.625% and 2.125%, respectively.  The Amendment did not result in any material modifications to the representations and warranties, covenants or other terms and provisions of the Credit Agreement.

As of September 30, 2010, there were $67.5 million outstanding under the Credit Agreement and approximately $12.6 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $119.9 million in available capacity.  With $4.1 million cash on hand at September 30, 2010, the total capacity was approximately $124 million.  The carrying amount of our revolving credit facility approximates its fair value based on estimated future cash flows discounted at rates currently quoted.  The fair value of our debt is determined as of our balance sheet date and is subject to change.

6.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 that 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.  This interest rate swap expires on November 1, 2010.  At September 30, 2010, the related floating rate was 0.26%.  Considering the rates in effect at September 30, 2010, the impact of the swap agreement is estimated to result in a $0.7 million loss related to the realized portion of the interest rate swap over the next 12 months.

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 was not designated as a hedging transaction and any changes in the unrealized fair value of the swap are recognized in the statement of operations as a non-cash gain or loss.  During the nine months ended September 30, 2010, the Company reflected ­­­­­approximately $0.2 million net loss related to the impact of interest rate swap in the accompanying condensed consolidated statements of operations.  The realized loss portion of this swap was $1.9 million and $6.0 million, respectively, and the unrealized gain in the mark to market of the swap was $1.9 million and $5.8 million, respectively, for the three and nine months ended September 30, 2010.  During the three and nine months ended September 30, 2009, the Company reflected ­­­­­$0.9 million and $1.7 million net loss related to the impact of interest rate swap, respectively, in the accompanying condensed consolidated statements of operations.  The realized loss portion of this swap was $1.9 million and $5.1 million, respectively, and the unrealized gain in the mark to market of the swap was $1.0 million and $3.4 million, respectively, for the three and nine months ended September 30, 2009.

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7.FAIR VALUE MEASUREMENTS

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2010 by level within the fair value hierarchy.  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	$	—	$	713	$	—	$	713
Total liabilities	$	—	$	713	$	—	$	713

8.LANDFILL ACCOUNTING

Capitalized Landfill Costs

At September 30, 2010, the Company owned 25 landfills.  Two of these landfills are fully permitted but not constructed and had not yet commenced operations as of September 30, 2010.

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, 2010, no capitalized interest had been included in capitalized landfill costs, however, in the future interest could be capitalized on landfill construction projects but only during the period the assets are undergoing activities to ready them for their intended use.  Capitalized landfill costs are amortized ratably using the units-of-production method over the estimated useful life of the site as airspace of the landfill is consumed.  Landfill amortization rates are determined periodically (not less than annually) based on aerial and ground surveys and other density measures and estimates made by the Co mpany’s engineers, outside engineers, management and financial personnel.

Total available airspace includes the total of estimated permitted airspace plus an estimate of probable expansion airspace that the Company believes is likely to be permitted.  Where the Company believes permit expansions are probable, the expansion airspace, and the projected costs related to developing the expansion airspace are included in the airspace amortization rate calculation.  The criteria the Company uses to determine if permit expansion is probable include but are not limited to whether: (i) the Company believes the project has fatal flaws; (ii) the land is owned or controlled by the Company, or under option agreement; (iii) the Company has committed to the expansion; (iv) financial analysis has been completed and the results indicate that the expansion has the prospect of a positive financial and operatio nal 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 not be successful in obtaining expansion permits for airspace that has been considered probable.  If not successful in obtaining these permits, certain previously capitalized costs will be charged to expense.

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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 a 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 between 5 and 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, 2009 to September 30, 2010:

	Landfill Assets, Net			Closure and Post-closure Liabilities
December 31, 2009	$	218,252		$	13,993
Capital expenditures		9,582			—
Amortization expense		(9,600	)		—
Obligations incurred and capitalized		530			530
Revisions to estimates of closure and post-closure activities		(1,430	)		(1,430	)
Interest accretion		—			828
September 30, 2010	$	217,334		$	13,921

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

	September 30,		December 31,
	2010		2009
Recorded amounts:
Current portion	$	—	$	—
Noncurrent portion		13,921		13,993
Total recorded	$	13,921	$	13,993

The Company’s total anticipated cost for future closure and post-closure activities is $183.6 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 $39.3 million and $39.4 million at September 30, 2010 and December 31, 2009, respectively.

9.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 tax provision for the nine months ended September 30, 2010 as a percentage of pre-tax income was 58.7% as compared to 55.7% for the nine months ended September 30, 2009.  The rate in the current period is based on the Company’s anticipated 2010 annual effective income tax rate of 54.6% as comp ared to 46.1% for the nine months ended September 30, 2009.  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 2010 annual effective income tax rate of 54.6%, the Company reflected an additional 4.1% of income taxes in the nine months ended September 30, 2010 for discrete items within the period mainly related to stock-based compensation expense.

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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 2001.  Currently, the Company is not involved in any income tax examinations for any year.

Under the provision of ASC Subtopic 740-10-25, 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, 2010, 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 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, 2010, the Company accrued approximately $1.9 thousand of interest and penalties.

Within the next 12 months, the Company anticipates a reduction of approximately $26.3 thousand in the balance of unrecognized tax benefits for a tax position related to prior years.

10.STOCKHOLDERS’ EQUITY

During the nine months ended September 30, 2010, the Company issued 513,927 restricted shares, net of forfeitures, under the 2004 WCA Waste Corporation Incentive Plan, as amended and restated.  These shares vest over periods ranging from one to three years from the grant date.  The following table reflects the changes in stockholders’ equity from December 31, 2009 to September 30, 2010:

	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-in Capital			Contingent Considerations		Retained Earnings (Deficit)			Total
December 31, 2009	$	9	$	211	$	(5,322	)	$	193,821		$	3,225	$	(31,415	)	$	160,529
Net income		—		—		—			—			—		1,357			1,357
Accrued payment-in-kind dividend on preferred stock		—		—		—			3,358			—		(3,358	)		—
Issuance of common shares		—		—		—			100			—		—			100
Issuance of restricted shares		—		5		—			(5	)		—		—			—
Accretion of unearned compensation		—		—		—			1,023			—		—			1,023
Restricted shares withheld		—		—		—			(327	)		—		—			(327	)
September 30, 2010	$	9	$	216	$	(5,322	)	$	197,970		$	3,225	$	(33,416	)	$	162,682

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Preferred Stock

On July 13, 2006, the Company’s shareholders approved the issuance of 750,000 shares of convertible preferred stock at $100.00 per share in the private placement with Ares Corporate Opportunities Fund II L.P. (Ares).  The shares were issued on July 27, 2006 and a portion of the net proceeds were used to completely repay the amounts outstanding under the 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, all five years’ worth of cumulative PIK dividends would accelerate and become payable to the preferred holder.  The preferred shareholder holds certain preferential rights, including the right to appoint 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 liq uidation.  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.

11.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, 2010 and 2009:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2010		2009		2010		2009
Collection:
Residential	$	13,582	$	13,953	$	39,891	$	41,218
Commercial		6,268		6,307		18,856		18,698
Roll-off		11,561		11,633		33,126		35,402
Total collection		31,411		31,893		91,873		95,318
Disposal		25,905		17,648		74,184		53,203
Less Intercompany		7,704		6,443		21,505		19,212
Disposal, net		18,201		11,205		52,679		33,991
Transfer and other		12,716		9,315		36,149		27,343
Less Intercompany		3,049		2,867		8,820		8,742
Transfer and other, net		9,667		6,448		27,329		18,601
Total revenue	$	59,279	$	49,546	$	171,881	$	147,910

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The table below reflects major operating segments (Region I: Kansas, Missouri; Region II: Colorado, Florida, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio) for the three and nine months ended September 30, 2010 and 2009:

	Region I		Region II		Region III		Region IV		Corporate (1)			Total
Three months ended September 30, 2010:
Revenue	$	12,908	$	24,641	$	11,757	$	9,973	$	—		$	59,279
Depreciation and amortization		1,365		3,334		1,654		1,156		114			7,623
Operating income		1,797		2,239		2,227		253		167			6,683
Capital expenditures		1,934		5,383		1,666		1,185		3			10,171
Capital expenditures (Acquisitions) (2)		—		470		—		—		—			470
Three months ended September 30, 2009:
Revenue	$	13,193	$	25,517	$	10,836	$	—	$	—		$	49,546
Depreciation and amortization		1,490		3,236		1,868		—		120			6,714
Operating income (loss)		1,728		4,384		1,139		—		(219	)		7,032
Capital expenditures		1,047		2,552		796		—		7			4,402
Capital expenditures (Acquisitions) (2)		—		1,027		—		—		—			1,027
Nine months ended September 30, 2010:
Revenue	$	38,084	$	72,413	$	33,045	$	28,339	$	—		$	171,881
Depreciation and amortization		4,049		9,922		4,987		3,383		341			22,682
Operating income		4,768		6,628		5,882		43		573			17,894
Capital expenditures		2,505		11,614		4,451		1,837		12			20,419
Capital expenditures (Acquisitions) (2)		—		470		—		—		—			470
Nine months ended September 30, 2009:
Revenue	$	38,481	$	77,453	$	31,976	$	—	$	—		$	147,910
Depreciation and amortization		4,421		9,736		5,564		—		366			20,087
Operating income (loss)		4,719		13,696		3,077		—		(1,199	)		20,293
Capital expenditures		5,602		13,001		1,871		—		27			20,501
Capital expenditures (Acquisitions) (2)		—		1,027		1,872		—		—			2,899
Total assets:
September 30, 2010	$	80,035	$	182,153	$	100,707	$	46,314	$	22,196		$	431,405
December 31, 2009		81,983		176,913		101,304		45,122		26,052			431,374

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

(2)      Capital expenditures (Acquisitions) represent the fixed assets portion of the purchase prices of acquisitions.

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12.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.

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.

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.

13.SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued.

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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, 2009 as filed with the SEC on March 9, 2010. 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 United States.  As of September 30, 2010, we served approximately 340,000 commercial, industrial and residential collection customers and 6,000 landfill and transfer station customers in Alabama, Arkansas, Colorado, Florida, Kansas, Massachusetts, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee and Texas.  As of September 30, 2010, we owned and/or operated 25 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, one transfer station is idle, and we operate but do not own three of the transfer stations.

General Review of Results for the Three and Nine Months Ended September 30, 2010

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 provides substantial leverage in the waste management business.  Our internalization for the three and nine months ended September 30, 2010 was 73.2% and 71.7%, respectively.

The following table reflects our revenue segmentation (before elimination of intercompany revenue) for the three and nine months ended September 30, 2010 and 2009:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Collection		44.9	%		54.2	%		45.4	%		54.2	%
Disposal		37.0	%		30.0	%		36.7	%		30.3	%
Transfer and other		18.1	%		15.8	%		17.9	%		15.5	%
Total revenue before intercompany elimination		100.0	%		100.0	%		100.0	%		100.0	%

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The following table reflects our total revenue by source for the three and nine months ended September 30, 2010 and 2009 (dollars in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2010		2009		2010		2009
Collection:
Residential	$	13,582	$	13,953	$	39,891	$	41,218
Commercial		6,268		6,307		18,856		18,698
Roll-off		11,561		11,633		33,126		35,402
Total collection		31,411		31,893		91,873		95,318
Disposal		25,905		17,648		74,184		53,203
Less Intercompany		7,704		6,443		21,505		19,212
Disposal, net		18,201		11,205		52,679		33,991
Transfer and other		12,716		9,315		36,149		27,343
Less Intercompany		3,049		2,867		8,820		8,742
Transfer and other, net		9,667		6,448		27,329		18,601
Total revenue	$	59,279	$	49,546	$	171,881	$	147,910

Please read note 11 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.

All acquisition-related transaction and restructuring costs are expensed as incurred.  Acquisition-related costs that were previously capitalized include third-party expenditures related to acquisitions, such as legal, engineering, and accounting expenses, and direct expenditures such as travel costs.  Acquisition-related costs also include indirect expenditures, such as salaries, commissions and other corporate services.

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.

Goodwill represents the excess of the purchase price over the fair value of the net assets of the acquired operations.  In allocating the purchase price of an acquired company among its assets, we first assign value to the tangible assets, followed by intangible assets such as covenants not-to-compete, and any remaining amounts are then allocated to goodwill.

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Forward-Looking Statements and Non-GAAP Measures

As indicated in “Risk Factors and Cautionary Statement About Forward-Looking Statements” above, 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 adjusted EBITDA.  EBITDA, as commonly defined, refers to earnings before interest, taxes, depreciation and amortization.  Our adjusted 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, impairment of goodwill, net loss on early disposition of notes receivable/payable, and merger and acquisition related expenses.  We also use these same measures when evaluating potential acquisition candidates.

We believe adjusted 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 adjusted 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 or adjusted EBITDA) for solid waste companies we intend to acquire.  The appropriate EBITDA or adjusted 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 and stock bonuses paid to our executive officers and other employees;

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

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

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

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2010			2009			2010			2009
Adjusted EBITDA	$	14,344		$	13,746		$	40,748		$	40,639
Depreciation and amortization		(7,623	)		(6,714	)		(22,682	)		(20,087	)
Merger and acquisition related expenses		(38	)		—			(172	)		(259	)
Interest expense, net		(4,811	)		(4,511	)		(14,190	)		(13,525	)
Write-off of deferred financing costs		—			—			(184	)		—
Impact of interest rate swap		(47	)		(905	)		(231	)		(1,748	)
Income tax provision		(1,042	)		(790	)		(1,932	)		(2,797	)
Accrued payment-in-kind dividend on preferred stock		(1,138	)		(1,076	)		(3,358	)		(3,192	)
Net loss available to common stockholders	$	(355	)	$	(250	)	$	(2,001	)	$	(969	)

Our adjusted 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.  Adjusted 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.

Acquisitions

We continue to seek acquisition opportunities that enable us to effectively leverage our existing infrastructure.  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.  We also continue evaluating opportunistic potential acquisitions outside our existing footprint where we feel we can generate meaningful revenue and EBITDA growth.

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.

Since completing our initial public offering in June 2004 through the nine months ended September 30, 2010, we have completed 39 acquisitions.  The purchase price for these acquisitions consisted of approximately $260.0 million of cash and accrued future payments, $1.3 million of prepaid airspace, $6.1 million of convertible debt, a seller note valued at $0.9 million, $11.9 million of assumed debt (net of $0.5 million of debt discount), $4.4 million of assumed deferred tax liabilities, 5,302,384 shares of our common stock and 2,000,000 contingent earn-out shares, less a note receivable valued at $7.2 million.

We completed two acquisitions during the nine months ended September 30, 2010.  Total consideration for these acquisitions included $3.4 million of cash and 20,492 shares of our common stock valued at $0.1 million.  Additionally, on October 1, 2010, we acquired certain assets of Sprint Waste Services, L.P. and DINA Industries, Inc., two collection operations in the greater Houston area.  The consideration for the Sprint acquisition was $3.6 million, which included $3.5 million of cash and $0.1 million of our common stock.  We purchased DINA Industries, Inc. for $0.5 million in cash.  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.

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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	III	September 17, 2004	Collection
Rural Disposal, Inc.	Willow Springs, MO	I	November 12, 2004	Collection
Trash Away, Inc.	Piedmont, SC	III	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	III	April 1, 2005	Landfill, Transfer Station & MRF
Triangle Environmental	Raleigh, NC	III	May 16, 2005	Collection
Foster Ferguson	El Dorado Springs, MO	I	May 16, 2005	Collection
Triad Waste	High Point, NC	III	May 31, 2005	Collection
Proper Disposal	Chanute, KS	I	May 31, 2005	Collection
Fort Meade Landfill	Fort Meade, FL	II	October 3, 2005	Landfill
Meyer & Gabbert	Sarasota/Arcadia, FL	II	October 3, 2005	Collection, Landfill & Transfer Station
Pendergrass Refuse	Springfield, MO	I	October 4, 2005	Collection
Andy’s Hauling	Sarasota, FL	II	October 21, 2005	Collection
Transit Waste	Durango, CO/Bloomfield, NM	II	February 10, 2006	Collection & Landfill
Fort Myers Transfer Station (*)	Fort Myers, FL	II	August 10, 2006	Transfer Station
WCA of St. Lucie, LLC	St. Lucie, FL	II	October 2, 2006	Transfer Station
Sunrise Disposal, LLC	Springfield, MO	I	December 28, 2006	Collection
Southwest Dumpster, Inc. (*)	Fort Myers, FL	II	January 3, 2007	Collection
American Waste, Inc.	Oklahoma City, OK	II	February 21, 2007	Collection & Landfill
Klean Way Disposal, Inc.	Springfield, MO	I	March 30, 2007	Collection
Carpenter Waste Systems, LLC	Oklahoma City, OK	II	May 31, 2007	Collection
Fort Bend Regional Landfill	Houston, TX	II	June 29, 2007	Collection, Landfill & Transfer Station
Big Red Containers, Inc.	Ardmore, OK	II	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	III	October 1, 2007	Collection
DH Griffin Container of Raleigh, LLC	Raleigh, NC	III	October 1, 2007	Collection
Maguire Disposal, Inc.	Oklahoma City, OK	II	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
MRR Southern, LLC	Greensboro, NC	III	January 15, 2009	Transfer Station
Disposal Doctor, Inc.	Houston, TX	II	August 21, 2009	Collection
Live Earth, LLC	Fostoria, OH/Brockton, MA	IV	December 31, 2009	Landfill & Transfer Station
Washita Disposal	Oklahoma City, OK	II	August 1, 2010	Collection
Five JAB Environmental Services, LLC	Houston, TX	II	September 1, 2010	Collection
Sprint Waste Services, L.P.	Houston, TX	II	October 1, 2010	Collection
DINA Industries, Inc.	Houston, TX	II	October 1, 2010	Collection

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

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Results of Operations

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Colorado, Florida, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio) for the three months ended September 30, 2010 and 2009 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II			Region III			Region IV		Corporate			Total			% of Revenue
Three months ended September 30, 2010:
Revenue	$	12,908		$	24,641		$	11,757		$	9,973	$	—		$	59,279			100.0
Cost of services		8,872			17,354			7,265			8,564		—			42,055			70.9
Depreciation and amortization		1,365			3,334			1,654			1,156		114			7,623			12.9
General and administrative		874			1,714			618			—		(281	)		2,925			4.9
Gain on sale of assets		—			—			(7	)		—		—			(7	)		(0.0	)
Operating income	$	1,797		$	2,239		$	2,227		$	253	$	167		$	6,683			11.3
Three months ended September 30, 2009:
Revenue	$	13,193		$	25,517		$	10,836		$	—	$	—		$	49,546			100.0
Cost of services		9,174			16,415			7,197			—		—			32,786			66.2
Depreciation and amortization		1,490			3,236			1,868			—		120			6,714			13.5
General and administrative		801			1,482			678			—		99			3,060			6.2
Gain on sale of assets		—			—			(46	)		—		—			(46	)		(0.1	)
Operating income (loss)	$	1,728		$	4,384		$	1,139		$	—	$	(219	)	$	7,032			14.2
Increase/(decrease) in 2010 compared to 2009:
Revenue	$	(285	)	$	(876	)	$	921		$	9,973	$	—		$	9,733
Cost of services		(302	)		939			68			8,564		—			9,269
Depreciation and amortization		(125	)		98			(214	)		1,156		(6	)		909
General and administrative		73			232			(60	)		—		(380	)		(135	)
Gain on sale of assets		—			—			39			—		—			39
Operating income (loss)	$	69		$	(2,145	)	$	1,088		$	253	$	(386	)	$	(349	)

Revenue. Total revenue for the three months ended September 30, 2010 increased by 19.6% to $59.3 million from $49.5 million for the three months ended September 30, 2009.  Our revenue growth was primarily driven by acquisitions.  Acquisitions contributed $11.0 million of the revenue growth while internal volume decreased $1.7 million, operational price increases contributed $0.5 million, and pricing from fuel surcharges increased $0.6 million.  In addition, our revenue was negatively impacted by a $0.7 million loss due to the asset sale of our Jonesboro operations in April 2010.  The above table reflects the change in revenue in each operating region.  The financial results of completed acquisitions are generally blended with existi ng operations and do not have separate financial information available, with the exception of newly acquired regions which can be analyzed individually.  Region IV was acquired on December 31, 2009 and accounted for $10.0 million of the revenue increase.  The revenue decrease of $0.9 million in Region II was primarily attributed to volume decreases of $1.9 million, price decreases of $0.1 million, partially offset by acquisition growth of $1.0 million and increases in fuel surcharges of $0.1 million.  The revenue increase of $0.9 million in Region III was primarily attributed to volume increases of $0.8 million, price increases of $0.6 million and increases in fuel surcharges of $0.2 million, partially offset by Jonesboro divestiture of $0.7 million.

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Cost of services. Total cost of services for the three months ended September 30, 2010 increased $9.3 million, or 28.3%, to $42.1 million from $32.8 million for the three months ended September 30, 2009.  The increase in cost of services was primarily a result of acquisitions.  Other factors that led to the increase included higher fuel and labor 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.  Region IV was acquired on December 31, 2009 and accounted for $8.6 million of the increase in cost of services.  Cost of services in Region II increased despite the decrease in revenue primarily du e to rising fuel costs in the region, higher labor costs in Texas as well as higher insurance and contract labor costs in Oklahoma.

Overall cost of services increased to 70.9% of revenue for the three months ended September 30, 2010 from 66.2% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to our acquisition of Region IV.  Cost of services in this region accounted for 85.9% of its revenue due to higher transportation costs and waste taxes.  Other than the impact of Region IV, higher fuel, labor and insurance costs resulted in the increase in cost of services as a percentage of revenue.  Diesel fuel costs as a percentage of revenue increased from 5.7% for the three months ended September 30, 2009 to 6.1% for the three months ended September 30, 2010.  Other than periodic volatility in fuel prices, inflation has not materially affected our operation s.

Depreciation and amortization.  Depreciation and amortization expenses for the three months ended September 30, 2010 increased $0.9 million, or 13.5%, to $7.6 million from $6.7 million for the three months ended September 30, 2009.  The increase can be attributed to our acquisition of Region IV, partially offset by decreased amortization associated with volume decline in other regions.

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, 2010 and 2009 (dollars in thousands):

	Three Months Ended September 30,
	2010					2009
Operating income	$	6,683		11.3	%	$	7,032		14.2	%
Interest expense, net		(4,811	)	(8.1	)		(4,511	)	(9.1	)
Impact on interest rate swap		(47	)	(0.1	)		(905	)	(1.8	)
Income tax provision		(1,042	)	(1.8	)		(790	)	(1.6	)
Accrued payment-in-kind dividend on preferred stock		(1,138	)	(1.9	)		(1,076	)	(2.2	)
Net loss available to common stockholders	$	(355	)	(0.6	)%	$	(250	)	(0.5	)%

Interest expense, net. Interest expense, net for the three months ended September 30, 2010 increased $0.3 million, or 6.7%, to $4.8 million from $4.5 million for the three months ended September 30, 2009.  The increase in interest expense was mainly caused by higher debt balances related to our borrowings to finance acquisitions.

Impact of interest rate swap. The impact of interest rate swap for the three months ended September 30, 2010 was attributable to a $1.9 million loss related to the realized portion of the interest rate swap we entered into in July 2006 and a $1.9 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, 2009 consisted of a $1.9 million loss related to the realized portion of the interest rate swap and a $1.0 million gain 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 transactio n was not designated as a hedging transaction and any changes in the unrealized fair value of the swap will be recognized in the statement of operations.  For more information regarding the interest rate swap agreement, please see note 6 to our condensed consolidated financial statements included in Item 1 above and Item 3 “Quantitative and Qualitative Disclosures About Market Risk” below.

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Income tax provision. Income tax provision for the three months ended September 30, 2010 as a percentage of pre-tax income was 57.1% as compared to 48.9% for the three months ended September 30, 2009.  The rate in the current year period is based on our anticipated 2010 annual effective income tax rate of 54.6% as compared to 46.1% for the same period in 2009.  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 2010 annual effective income tax rate of 54.6%, income taxes during the first nine months of 2010 reflected an additional 4.1% for discrete items mainly related to stock-based com pensation expense.

Accrued payment-in-kind dividend on preferred stock. The $1.1 million and $1.1 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, 2010 and 2009, respectively.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Colorado, Florida, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio) for the nine months ended September 30, 2010 and 2009 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II			Region III			Region IV		Corporate			Total			% of Revenue
Nine months ended September 30, 2010:
Revenue	$	38,084		$	72,413		$	33,045		$	28,339	$	—		$	171,881			100.0
Cost of services		26,495			50,737			21,313			24,913		—			123,458			71.8
Depreciation and amortization		4,049			9,922			4,987			3,383		341			22,682			13.2
General and administrative		2,622			5,141			1,894			—		(914	)		8,743			5.1
(Gain) loss on sale of assets		150			(15	)		(1,031	)		—		—			(896	)		(0.5	)
Operating income	$	4,768		$	6,628		$	5,882		$	43	$	573		$	17,894			10.4
Nine months ended September 30, 2009:
Revenue	$	38,481		$	77,453		$	31,976		$	—	$	—		$	147,910			100.0
Cost of services		26,967			49,577			21,363			—		—			97,907			66.2
Depreciation and amortization		4,421			9,736			5,564			—		366			20,087			13.6
General and administrative		2,403			4,444			2,034			—		833			9,714			6.6
Gain on sale of assets		(29	)		—			(62	)		—		—			(91	)		(0.1	)
Operating income (loss)	$	4,719		$	13,696		$	3,077		$	—	$	(1,199	)	$	20,293			13.7
Increase/(decrease) in 2010 compared to 2009:
Revenue	$	(397	)	$	(5,040	)	$	1,069		$	28,339	$	—		$	23,971
Cost of services		(472	)		1,160			(50	)		24,913		—			25,551
Depreciation and amortization		(372	)		186			(577	)		3,383		(25	)		2,595
General and administrative		219			697			(140	)		—		(1,747	)		(971	)
(Gain) loss on sale of assets		179			(15	)		(969	)		—		—			(805	)
Operating income (loss)	$	49		$	(7,068	)	$	2,805		$	43	$	1,772		$	(2,399	)

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Revenue. Total revenue for the nine months ended September 30, 2010 increased $24.0 million, or 16.2%, to $171.9 million from $147.9 million for the nine months ended September 30, 2009.  Our revenue growth was primarily driven by acquisitions.  Acquisitions contributed $30.1 million of the revenue growth while internal volume decreased $3.6 million, operational price decreases contributed $2.0 million, and pricing from fuel surcharges increased $0.8 million.  In addition, our revenue was negatively impacted by a $1.3 million loss due to the asset sale of our Jonesboro operations in April 2010 as well as severe weather during January and February of 2010 which significantly affected our collection and disposal revenues in several markets.  Th e 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 newly acquired regions which can be analyzed individually.  Region IV was acquired on December 31, 2009 and accounted for $28.3 million of the revenue increase.  The revenue decrease of $5.0 million in Region II was primarily attributed to volume decreases of $4.6 million, price decreases of $2.0 million, and decreases in fuel surcharges of $0.1 million, partially offset by acquisition growth of $1.7 million.  The revenue increase of $1.1 million in Region III was primarily attributed to volume increases of $2.6 million and increases in fuel surcharges of $0.3 million, partially offset by price decreases of $0.5 million and Jonesboro divestiture of $1.3 million.

Cost of services. Total cost of services for the nine months ended September 30, 2010 increased $25.6 million, or 26.1%, to $123.5 million from $97.9 million for the nine months ended September 30, 2009.  The increase in cost of services was primarily a result of acquisitions.  Other factors that led to the increase included higher fuel and insurance 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.  Region IV was acquired on December 31, 2009 and accounted for $24.9 million of the increase in cost of services.  Cost of services in Region II increased despite the decrease in revenue primari ly due to rising fuel costs in the region, higher labor costs in Texas and higher insurance costs in Oklahoma.

Overall cost of services increased to 71.8% of revenue for the nine months ended September 30, 2010 from 66.2% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to our acquisition of Region IV.  Cost of services in this region accounted for 87.9% of its revenue due to integration costs as well as higher transportation costs and waste taxes.  Other than the impact of Region IV, higher fuel and insurance costs resulted in the increase in cost of services as a percentage of revenue.  Diesel fuel costs as a percentage of revenue increased from 5.3% for the nine months ended September 30, 2009 to 6.1% for the nine months ended September 30, 2010.  Other than periodic volatility in fuel prices, inflation has not materially aff ected our operations.

Depreciation and amortization.  Depreciation and amortization expenses for the nine months ended September 30, 2010 increased $2.6 million, or 12.9%, to $22.7 million from $20.1 million for the nine months ended September 30, 2009.  The increase can be attributed to our acquisition of Region IV, partially offset by decreased amortization associated with volume decline in other regions.

General and administrative. Total general and administrative expense for the nine months ended September 30, 2010 decreased $1.0 million, or 10.0%, to $8.7 million from $9.7 million for the nine months ended September 30, 2009.  The decrease in general and administrative expense was mainly attributable to decreases in payroll-related expenses, legal fees and stock based compensation expenses.  Such decrease also resulted in the decrease of overall general and administrative expenses from 6.6% of revenue during the nine months ended September 30, 2009 to 5.1% of revenue during the nine months ended September 30, 2010.

(Gain) loss on sale of assets. (Gain) loss on sale of assets for the nine months ended September 30, 2010 was $0.8 million primarily due to the sale of assets related to our Jonesboro operations in April 2010.

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, 2010 and 2009 (dollars in thousands):

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	Nine Months Ended September 30,
	2010					2009
Operating income	$	17,894		10.4	%	$	20,293		13.7	%
Interest expense, net		(14,190	)	(8.3	)		(13,525	)	(9.1	)
Write-off of deferred financing costs		(184	)	(0.1	)		—		—
Impact on interest rate swap		(231	)	(0.1	)		(1,748	)	(1.2	)
Income tax provision		(1,932	)	(1.1	)		(2,797	)	(1.9	)
Accrued payment-in-kind dividend on preferred stock		(3,358	)	(2.0	)		(3,192	)	(2.2	)
Net loss available to common stockholders	$	(2,001	)	(1.2	)%	$	(969	)	(0.7	)%

Interest expense, net. Interest expense, net for the nine months ended September 30, 2010 increased $0.7 million, or 4.9%, to $14.2 million from $13.5 million for the nine months ended September 30, 2009.  The increase in interest expense was mainly caused by higher debt balances related to our borrowings to finance acquisitions.

Write-off of deferred financing costs.  The $0.2 million write-off of deferred financing costs reflects the partial write-off of deferred financing costs associated with our revolving credit facility as a result of an amendment on June 30, 2010, which extended the term of the credit agreement from July 5, 2011 to January 31, 2014 and increased our borrowing capacity from $175 million to $200 million under the agreement.

Impact of interest rate swap. The impact of interest rate swap for the nine months ended September 30, 2010 was attributable to a $6.0 million loss related to the realized portion of the interest rate swap we entered into in July 2006 and a $5.8 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, 2009 consisted of a $5.1 million loss related to the realized portion of the interest rate swap and a $3.4 million gain 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 was not designated as a hedging transaction and any changes in the unrealized fair value of the swap will be recognized in the statement of operations.  For more information regarding the interest rate swap agreement, please see note 6 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. Income tax provision for the nine months ended September 30, 2010 as a percentage of pre-tax income was 58.7% as compared to 55.7% for the nine months ended September 30, 2009.  The rate in the current year period is based on our anticipated 2010 annual effective income tax rate of 54.6% as compared to 46.1% for the same period in 2009.  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 2010 annual effective income tax rate of 54.6%, income taxes during the first nine months of 2010 reflected an additional 4.1% for discrete items mainly related to stock-based compe nsation expense.

Accrued payment-in-kind dividend on preferred stock. The $3.4 million and $3.2 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, 2010 and 2009, respectively.

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.  Any acquisitions that we make will also require 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 additio n, 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.

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To address potential credit and liquidity issues, we consider several items.  Despite severe weather during January and February of 2010 that significantly impacted our collection and disposal revenues in several markets, our EBITDA has improved since March 2010.  Our customer base is broad and diverse with no single 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 $119.9 million in available capacity under our current revolving credit agreement as of September 30, 2010 subject to customary covenant compliance.

A recent amendment to our revolving credit agreement on June 30, 2010 extends the term until January 31, 2014 and increases our borrowing capacity from $175 million to $200 million.  We routinely evaluate the financial stability of the syndicate banks making up the credit facility.  For further information about credit risks, please see “Risk Factors and Cautionary Statement About Forward-Looking Statements” in this report and Item 1A “Risk Factors” below.  For further information about our credit facility, please see “Bank Credit Facility” below.

A portion of our capital additions is discretionary, giving us the ability to modify the timing of such expenditures to preserve cash if appropriate in the future.  In addition, 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.

As of September 30, 2010, we had total outstanding long-term debt of approximately $219.6 million, consisting of $150 million of senior notes, $67.5 million outstanding under our credit facilities, and approximately $2.1 million of various seller notes.  This represented a decrease of $0.4 million over our total debt outstanding as of December 31, 2009.  The decrease in outstanding debt since December 31, 2009 was primarily due to the repayment of $0.5 million on a seller note.  As of September 30, 2010, we had $67.5 million outstanding under the revolving credit facility and approximately $12.6 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $119.9 million in available capacity under the facility.  With $4.1 million cash on hand at September 30, 2010 , our total capacity was approximately $124 million.

9.25% Senior Notes Due 2014

The senior notes were issued under an indenture between WCA Waste and The Bank of New York Trust Company, N.A., as Trustee.  The indenture contains covenants that, among other things, limit our ability to incur additional indebtedness, make capital expenditures, create liens, sell assets and make dividend and other payments.  In addition, the indenture includes financial covenants including a covenant allowing us to incur indebtedness or issue disqualified stock or preferred stock only if the Fixed Charge Coverage Ratio (as defined in the indenture) for the four full fiscal quarters most recently ended prior to issuance would have been at least 2.0 to 1, determined on a pro forma basis, as if the additional indebtedness had been incurred or the disqualified stock or preferred stock had been issued at the beginning of such four-quarter period. The defined terms are set forth in the indenture.  As of September 30, 2010, we were in compliance with all covenants under the senior notes indenture.

Bank Credit Facility

On June 30, 2010, we and Comerica Bank, in its capacity as Administrative Agent, together with BBVA Compass Bank as Documentation Agent, and in each of those bank’s capacities as Co-Lead Arrangers, along with Regions Bank, in its capacity as Syndication Agent, and certain other lenders, entered into the Twelfth Amendment to Revolving Credit Agreement (the “Amendment”) to amend the Revolving Credit Agreement dated July 5, 2006 (the “Credit Agreement”), by and between us, Comerica Bank as administrative agent and certain other lenders set forth therein, as previously amended.  Regions Bank, Branch Banking and Trust Company, and CoBank have become new participating lenders under the Credit Agreement.

The Amendment extended the term of the Credit Agreement and the revolving credit facility, which would have expired on July 5, 2011, to January 31, 2014.  The Amendment also increased the total revolving credit commitments available to us from the participating lenders under the Credit Agreement to $200 million from $175 million.  We incurred $1.0 million of financing costs associated with the Amendment.  In addition, we wrote off $0.2 million of deferred financing costs in proportion to reduced commitments from the original participating lenders.

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The Amendment modified some of the pricing terms and conditions of the Credit Agreement; however, such modifications will not significantly increase our borrowing costs at current borrowing levels.  In lieu of an unused commitment fee, we are required to pay, quarterly in arrears, an annual facility fee in an amount ranging from 0.375% to 0.875% of the total revolving credit commitments of $200 million available under the Credit Agreement (the “Facility Fee”).   We are also obligated to pay an annual letter of credit fee in an amount ranging from 2.125% to 2.625% of the letter of credit obligations outstanding under the Credit Agreement (the “L/C Fee”).  Any borrowings under the Credit Agreement will bear interest at either (x) the Eurodollar London Interbank Offered Rate (“ ;LIBOR”) for the applicable interest period, plus a spread ranging from 2.125% to 2.625% per annum (a “LIBOR Loan”) or (y) a base rate equal to the greater of (1) the Federal Funds Rate plus 1%, (2) the Prime Rate as published by Comerica Bank from time to time, or (3) one-month LIBOR plus 1.00%, plus a spread ranging  from 1.625% to 2.125% (a “Base Rate Loan”).  The Facility Fee, the L/C Fee and the applicable spread on a LIBOR Loan and a Base Rate Loan depends on our Leverage Ratio (as such term is defined in the Credit Agreement as previously amended).  From the date of the Amendment until our Compliance Certificate is delivered to the administrative agent for the fiscal quarter ended June 30, 2010, the Facility Fee will be 0.625%, the L/C Fee will be 2.625% and the spreads applicable to LIBOR Loans and Base Rate Loans will be 2.625% and 2.125%, respectively.  The Amendment did not result in any material modifications to the representat ions and warranties, covenants or other terms and provisions of the Credit Agreement.

Our credit facility is subject to various financial and other covenants, including, but not limited to, limitations on debt, consolidations, mergers, and sales of assets.  The credit facility also contains financial covenants requiring us to limit leverage (both in terms of senior secured debt and total leverage), maintain specified debt service ratios, limit capital expenditures, and maintain a minimum tangible net worth.  Each of the financial covenants incorporates specially defined terms that would not correspond to GAAP or Non-GAAP measures disclosed in this report and that in certain instances are based on determinations and information not derived from or included in our financial statements.  The financial covenants include the following:

·   our maximum “Leverage Ratio” (as defined in the Credit Agreement) for the trailing 12-month reporting period on each quarterly reporting date is 4.75 to 1.00;

·   we maintain a Pro Forma Adjusted EBITDA Debt Service Ratio (as defined in the Credit Agreement) for the trailing 12-month period of not less than 2.25 to 1.00 until maturity;

·   our maximum Senior Secured Funded Debt Leverage Ratio (as defined in the Credit Agreement) is 2.50 to 1.00;

·   we cannot make any Maintenance Capital Expenditures (as defined in the Credit Agreement) exceeding 15% of our consolidated total revenue as calculated at the end of a fiscal year; and

·   we maintain minimum tangible net worth of not less than $30.0 million as of December 31, 2008, plus, as of the end of each fiscal quarter thereafter, 50% of our after-tax consolidated net income (but excluding any quarterly losses), plus 100% of any increase in our net worth resulting from the net cash proceeds of any future equity offerings.

In February 2010, the definitions of “Pro Forma Adjusted EBITDA” and “Pro Forma Adjusted EBITDA Debt Service Ratio” were amended and “Consolidated Net Interest Expense” was added as a further defined term to the Credit Agreement.  The purpose of such definitional modifications and addition are as follows:

·   to exclude cash and non-cash income or expense attributable to any interest rate hedging agreement, now existing or which we enter into in the future, from the determination of our compliance with the Leverage Ratio under the terms of the Credit Agreement; and

·   to include cash income or expense (but not non-cash items) attributable to any interest rate hedging agreement that we enter into in the future from the determination of our compliance with the Pro Form Adjusted EBITDA Debt Service Ratio under the terms of the Credit Agreement.

As of September 30, 2010, we were in compliance with all covenants under the credit facility.

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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.  We completed the closing of the sale and issuance of the full amount of preferred shares pursuant to the purchase agreement 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’ wo rth 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 9,603,265 shares of our common stock, which would represent approximately 31.9% of our outstanding common stock on a post-conversion basis as of September 30, 2010.  Dividends are solely PIK through July 2011 — that is, they are payable solely by adding the amount of dividends to the stated value of each share.  On July 27, 2011, 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 32.8% of our outstanding common stock on a post-conversion basis as of September 30, 2010.  If the preferred shares are not converted after five years, we have the option to PIK or pay a cash dividend at the rate of 5% per an num.  The preferred shares have no stated maturity.

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; and

·   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;

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·   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);

·   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 free ly 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.

Contractual Obligations

There were no material changes outside of the ordinary course of our business during the three or nine months ended September 30, 2010 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 9, 2010.

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Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2010 and 2009 was $22.9 million and $31.1 million, respectively.  The decrease in cash flows from operating activities was primarily due to the changes in net income as well as changes in the components of working capital from period to period.  Other items impacting operating cash flows included depreciation and amortization, stock-based compensation, write-off of deferred financing costs, deferred taxes, landfill accretion expense, gain on sale of assets and unrealized gain on interest rate swap, all of which were non-cash expenses.

Net cash used in investing activities consists primarily of cash used for capital expenditures and the acquisition of businesses.  Cash used for capital expenditures, including acquisitions, was $23.8 million and $24.2 million for the nine months ended September 30, 2010 and 2009, respectively.  Acquisitions of businesses and capital expenditures for normal operations accounted for $0.3 million and $0.1 million of the decrease over the prior year period, respectively.  A $2.2 million increase in proceeds from sale of assets also contributed to the decrease in net cash used in investing activities.

Net cash used in financing activities for the nine months ended September 30, 2010 and 2009 was $1.6 million and $0.5 million, respectively.  Net cash used in financing activities mainly includes repayments of debt, repayments in excess of borrowings under our credit facilities, and additional financing costs that have been incurred and capitalized.

Off Balance Sheet Arrangements

We have evaluated off balance sheet arrangements, and have concluded that we do not have any material relationships with unconsolidated entities or financial partnerships that have been established for the purpose of facilitating off balance sheet arrangements.  Based on this evaluation we believe that no disclosures relating to off balance sheet arrangements are required.

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 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 8 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, 2009.  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, 2009.

In summary, our landfill accounting policies include the following:

Capitalized Landfill Costs

At September 30, 2010, we owned 25 landfills.  Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2010.

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, 2010, no capitalized interest had been included in capitalized landfill costs, however, in the future interest could be capitalized on landfill construction projects but only during the period the assets are undergoing activities to ready them for their intended use.  Capitalized landfill costs are amortized ratably using the units-of-production method over the estimated useful life of the site as airspace of the landfill is consumed.  Landfill amortization rates are determined periodically (not less than annually) based on aerial and ground surveys and other density measures and estimates made by our e ngineers, 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 we believe is likely to be permitted.  Where we believe permit expansions are probable, the expansion airspace, and the projected costs related to developing the expansion airspace are included in the airspace amortization rate calculation.  The criteria we use to determine if permit expansion is probable include but, are not limited to, whether:

·   we believe that the project has fatal flaws;

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

·   we have committed to the expansion;

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

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

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

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

We may be unsuccessful in obtaining expansion permits for airspace that has been considered probable.  If unsuccessful in obtaining these permits, the previously capitalized costs will be charged to expense.  As of September 30, 2010, we have included 138 million cubic yards of expansion airspace with estimated development costs of approximately $102.3 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 between 5 and 30 years depending on type and location.

Standards related to accounting for obligations associated with the retirement of long-lived assets and the associated asset retirement costs require that we record closure and post-closure obligations 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.

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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, 2010 and the year ended December 31, 2009:

	Nine Months Ended		Year Ended
	September 30,		December 31,
	2010		2009
Number of landfills owned		25		25
Landfill depletion and amortization expense (in thousands)	$	9,600	$	9,680
Accretion expense (in thousands)		828		628
	$	10,428	$	10,308
Airspace consumed (in thousands of cubic yards)		4,682		4,933
Depletion, amortization, accretion, closure and post-closure costs per cubic yard of airspace consumed	$	2.23	$	2.09

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 that was 5.51% at the time the swap was entered.  At September 30, 2010, the related floating rate was 0.26%.  The intention of this swap agreement is to limit our exposure to a rising rate interest environment.  For the nine months ended September 30, 2010, the net difference between the fixed amount we paid and the floating amount we received was $6.0 million.  Considering the rates in effect at September 30, 2010, the impact of th e swap agreement is estimated to result in a $0.7 million loss related to the realized portion of the interest rate swap over the next 12 months.  This interest rate swap expires on November 1, 2010, which will improve annual cash flow by approximately $6.7 million based on 2010 results.  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 was not designated as a hedging transaction.  Accordingly, any changes in the unrealized fair value of the swap are recognized in the statement of operations.  We did not enter into the interest rate swap agreements for trading purposes.

As of September 30, 2010 and December 31, 2009, we had no debt outstanding that bears interest at variable or floating rates when our interest rate swap was taken into consideration.  With the placement of the swap agreement, we bear exposure to, and are primarily affected by, changes in LIBOR rates on $132.5 million.  A 100 basis point increase in LIBOR interest rates would result in swap income of approximately $1.3 million annually while a 100 basis point decrease in interest rates would result in $1.3 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, 2010, the fair value of these notes, based on quoted market prices, was approximately $156 million compared to a carrying amount of $150 million.

ITEM 4. CONTROLS AND PROCEDURES.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2010.  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, 2010 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 12 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q for information regarding our legal proceedings.

ITEM 1A. RISK FACTORS.

There have been no significant changes in our risk factors since December 31, 2009.  For a detailed discussion of our risk factors, please read Item 1A “Risk Factors,”in our annual report on Form 10-K for the year ended December 31, 2009.

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, 2010		—			—		—		—
August 1 – August 31, 2010		274	(1)	$	4.96		—		—
September 1 – September 30, 2010		—			—		—		—
Total		274	(1)	$	4.96		—		—

(1) Represents shares of our common stock surrendered to satisfy minimum tax withholding obligations on the vesting of restricted stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. RESERVED.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS.

10.1	Twelfth Amendment to Revolving Credit Agreement, dated June 30, 2010, among WCA Waste Corporation and Comerica Bank (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 6, 2010).
10.2	Fourth Amended and Restated 2004 WCA Waste Corporation Incentive Plan, effective September 28, 2010 (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 28, 2010).
12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2010.
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/ Joseph J. Scarano, Jr.
	Joseph J. Scarano, Jr.
	Vice President and Controller
	(Principal Accounting Officer)

Date: October 29, 2010

EXHIBIT INDEX

10.1	Twelfth Amendment to Revolving Credit Agreement, dated June 30, 2010, among WCA Waste Corporation and Comerica Bank (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on July 6, 2010).
10.2	Fourth Amended and Restated 2004 WCA Waste Corporation Incentive Plan, effective September 28, 2010 (incorporated by reference to Exhibit 10.1 to the registrant’s Form 8-K (File No. 000-50808) filed with the SEC on September 28, 2010).
12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2010.
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.