WCA Waste (WCAA) 10-Q 2011 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, 2011

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   þ    NO   ¨

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

Large accelerated filer £ Accelerated filer £ 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 25, 2011, there were 23,710,026 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

First Supplemental Indenture

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 “trend,” “may,” “annualized,” “should,” “outlook,” “project,” “intend,” “seek,” “plan,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “continue,” “goal,” 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 three 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;

·   our failure to remain competitive with our competitors, some of whom have substantially 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 our prices in order to retain certain contracts, any of which would cause our revenue to decline;

·   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;

·   increases in costs of insurance would reduce our operating margins;

·   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;

·   changes in interest rates may affect our profitability;

·   increases in the costs of disposal in landfills owned by third parties may reduce our operating margins;

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

·   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;

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

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

·   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;

·   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 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 is subject to various risks and uncertainties including, but not limited to, the following:

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

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

·   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; and

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

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 February 28, 2011, we completed the acquisition of certain assets of Emerald Waste Services, including one transfer station and three collection operations in Central Florida with cash and issuance of our common stock and the successful integration of these operations is subject to various risks;

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·   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 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.

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.

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, 2010 (sometimes referred to in this report, including the notes to our financial statements, as the “2010 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,
	2011			2010
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,698		$	2,763
Accounts receivable, net of allowance for doubtful accounts of $251 (unaudited) and $482, respectively		33,767			26,113
Deferred tax assets		3,436			3,436
Prepaid expenses and other		4,318			3,962
Total current assets		46,219			36,274
Property and equipment, net of accumulated depreciation and amortization of $182,237 (unaudited) and $159,146, respectively		337,214			320,564
Goodwill, net		101,329			71,578
Intangible assets, net		15,890			7,891
Deferred financing costs, net		6,073			3,210
Other assets		252			345
Total assets	$	506,977		$	439,862
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,604		$	13,131
Accrued liabilities and other		18,871			13,921
Note payable		—			1,251
Current maturities of long-term debt		—			500
Total current liabilities		32,475			28,803
Long-term debt, less current maturities and discount		280,575			232,571
Accrued closure and post-closure liabilities		13,049			11,571
Deferred tax liabilities		1,437			1,399
Other long-term liabilities		1,790			1,789
Total liabilities		329,326			276,133
Commitments and contingencies
Stockholders’ equity:
Series A convertible preferred stock, $0.01 par value per share. Authorized 8,000 shares; issued and outstanding 960 shares and 914 shares, respectively (liquidation preference $96,858 and $96,006, respectively)		10			9
Common stock, $0.01 par value per share. Authorized 50,000 shares; issued 24,781 shares and 21,684 shares, respectively		248			217
Treasury stock, 1,074 shares and 1,074 shares, respectively		(5,322	)		(5,322	)
Additional paid-in capital		218,899			199,627
Contingent considerations		3,225			3,225
Retained earnings (deficit)		(39,409	)		(34,027	)
Total stockholders’ equity		177,651			163,729
Total liabilities and stockholders’ equity	$	506,977		$	439,862

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,
	2011			2010			2011			2010
Revenue	$	74,399		$	59,279		$	205,666		$	171,881
Expenses:
Cost of services		53,764			42,055			150,837			123,458
Depreciation and amortization		9,060			7,623			24,960			22,682
General and administrative (including stock-based compensation of $549, $312, $1,627 and $1,038, respectively)		3,354			2,925			10,554			8,743
Gain on sale of assets		(132	)		(7	)		(190	)		(896	)
		66,046			52,596			186,161			153,987
Operating income		8,353			6,683			19,505			17,894
Other income (expense):
Interest expense, net		(4,994	)		(4,811	)		(15,370	)		(14,190	)
Write-off of deferred financing costs		—			—			(157	)		(184	)
Loss on early extinguishment of debt		(1,722	)		—			(5,797	)		—
Impact of interest rate swap		—			(47	)		—			(231	)
		(6,716	)		(4,858	)		(21,324	)		(14,605	)
Income (loss) before income taxes		1,637			1,825			(1,819	)		3,289
Income tax provision		(1,113	)		(1,042	)		(39	)		(1,932	)
Net income (loss)		524			783			(1,858	)		1,357
Accrued payment-in-kind dividend on preferred stock		(1,193	)		(1,138	)		(3,524	)		(3,358	)
Net loss available to common stockholders	$	(669	)	$	(355	)	$	(5,382	)	$	(2,001	)
Net loss available to common stockholders:
Earnings per share — basic	$	(0.03	)	$	(0.02	)	$	(0.24	)	$	(0.10	)
Earnings per share — diluted	$	(0.03	)	$	(0.02	)	$	(0.24	)	$	(0.10	)
Weighted average shares outstanding — basic		22,670			19,635			22,060			19,580
Weighted average shares outstanding — diluted		22,670			19,635			22,060			19,580

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,
	2011			2010
Cash flows from operating activities:
Net income (loss)	$	(1,858	)	$	1,357
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		24,960			22,682
Non-cash compensation charge		1,627			1,038
Amortization of deferred financing costs		1,089			1,011
Write-off of deferred financing costs		157			184
Loss on early extinguishment of debt		5,797			—
Deferred tax provision		39			1,932
Accretion expense for closure and post-closure obligations		740			828
Gain on sale of assets		(190	)		(896	)
Unrealized gain on interest rate swap		—			(5,776	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(7,654	)		(4,306	)
Prepaid expenses and other		(2,040	)		917
Accounts payable and other liabilities		4,768			3,937
Net cash provided by operating activities		27,435			22,908
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(37,985	)		(3,407	)
Proceeds from sale of assets		385			2,327
Capital expenditures		(25,495	)		(20,419	)
Net cash used in investing activities		(63,095	)		(21,499	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		175,000			—
Early repayment of senior notes		(154,124	)		—
Principal payments on long-term debt		(500	)		(500	)
Net change in revolving line of credit		23,000			—
Deferred financing costs		(5,781	)		(1,133	)
Net cash provided by (used in) financing activities		37,595			(1,633	)
Net change in cash and cash equivalents		1,935			(224	)
Cash and cash equivalents at beginning of period		2,763			4,329
Cash and cash equivalents at end of period	$	4,698		$	4,105

Supplemental cash flow information:
Interest paid	$	10,566	$	9,635
Interest rate swap paid		—		6,103
Income taxes paid		476		515
Income tax refund received		335		—
Non-cash investing and financing activities:
Common stock issued for acquisition	$	14,651	$	—

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 (the “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 for the year ended December 31, 2010 filed with the SEC on March 10, 2011 (the “2010 10-K”) which contains the Company’s audited consolidated financial statements as of and for the year ended December 31, 2010.  The unaudited condensed consolidated financial statements as of September 30, 2011 and for the three and nine months ended September 30, 2011 and 2010 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, that 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 2010 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 (the “FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income.”  ASU 2011-05 amends current guidance on reporting comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity.  Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements.  ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted.  The adoption of this update is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

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In September 2011, the FASB issued ASU 2011-08, “Intangibles — Goodwill and Other (ASC Topic 350).”  This guidance is intended to simplify how entities test goodwill for impairment.  ASU 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.  ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011.  The Company plans to early adopt this guidance for its annual goodwill impairment test that will be conducted as of October 31, 2011.  The adoption of this update is not expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

There were various other updates recently issued, many of which represented technical corrections to the accounting literature or application to specific industries.  None of the updates are expected to have a material impact on the Company’s financial position, results of operations or cash flows.

2.ACQUISITIONS

Effective January 1, 2011, the Company acquired all of the outstanding capital stock of IESI OK Corporation, which is now known as WCA of Chickasha, Inc.  The Company paid cash consideration of approximately $1.9 million to IESI Corporation for all of the capital stock of IESI OK Corporation.  On February 11, 2011, the Company entered into an operating agreement and an option to purchase Stoughton Recycling Technologies, LLC (“SRT”) in Stoughton, Massachusetts.  The consideration for this transaction included $3.0 million of cash and 406,669 shares of the Company’s common stock valued at $2.0 million.  On February 28, 2011, the Company acquired certain assets of Emerald Waste Services (“Emerald Waste”) located in Central Florida pursuant to an amended equity interest purchase agreement.  The total consideration for this acquisition included approximately $33.1 million of cash and 2,409,639 shares of the Company’s common stock valued at $12.7 million.

The purchase price for these transactions has been allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the time of acquisitions, with any residual amounts allocated to goodwill.  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.

Based on the preliminary assessments of values for these acquisitions, the Company recorded fixed assets of $14.6 million, intangible assets of $9.0 million, goodwill of $29.7 million and net working capital of $(0.7) million.

The Company’s condensed consolidated financial statements include the results of operations of the acquired businesses from their acquisition dates.  Only the acquisition from Emerald Waste was significant (within the meaning of Regulation S-X) to the Company as a whole.  The following unaudited pro forma comparison has been prepared assuming that the Emerald Waste acquisition had occurred as of the beginning of the prior comparable period.  This pro forma information is not necessarily indicative of the results of operations that would have occurred had the acquisition been made on that date or of results which may occur in the future.  The historical results of operations do not reflect the level of activity that was in effect at the time of the acquisition nor have any pro forma adjustments been made to reflect such current or anticipated future volume levels.  No material, nonrecurring pro forma adjustments directly attributable to the Emerald Waste acquisition are included in the reported pro forma revenue and earnings.

	Nine Months Ended
	September 30,
	2011			2010
Revenue	$	210,806		$	195,157
Net loss available to common stockholders	$	(4,990	)	$	(220	)
Earnings (loss) per share:
Basic	$	(0.23	)	$	(0.01	)
Diluted	$	(0.23	)	$	(0.01	)

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3.STOCK-BASED COMPENSATION

The Company established the 2004 WCA Waste Corporation Incentive Plan which has been amended and restated from time to time.  On September 28, 2010, the stockholders of the Company approved the Fourth Amended and Restated 2004 WCA Waste Corporation Incentive Plan.  As of September 30, 2011, there were approximately 353,000 remaining shares of the Company’s common stock authorized for issuance under the Incentive Plan.

During the three and nine months ended September 30, 2011, 2,273 and 378,223 restricted shares of the Company’s common stock were granted to certain of the Company’s officers, directors and key employees with an aggregate market value of $10 thousand and $1.9 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.

The following table reflects the Company’s restricted share activity for the three and nine months ended September 30, 2011:

	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	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		1,060		$	4.76			959		$	4.62
Granted		2			4.40			378			5.13
Vested		(167	)		4.76			(442	)		4.78
Forfeited		(4	)		5.12			(4	)		5.12
Unvested at September 30, 2011		891		$	4.76	2.04		891		$	4.76	2.04

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, 2011:

	Three Months Ended September 30, 2011					Nine Months Ended September 30, 2011
	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		491	$	9.52			491	$	9.52
Grants		—		—			—		—
Forfeitures		—		—			—		—
Outstanding at September 30, 2011		491	$	9.52	2.74		491	$	9.52	2.74

As the exercise prices of all outstanding options were greater than the Company’s common stock share price as of September 30, 2011, there was no intrinsic value as of September 30, 2011.  In addition, no compensation expense remains to be recognized as all stock options outstanding are vested.

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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 year.  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, 2011 and 2010 is as follows:

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2011			2010			2011			2010
Numerator:
Net income (loss)	$	524		$	783		$	(1,858	)	$	1,357
Accrued payment-in-kind dividend on preferred stock		(1,193	)		(1,138	)		(3,524	)		(3,358	)
Net loss available to common stockholders	$	(669	)	$	(355	)	$	(5,382	)	$	(2,001	)
Denominator:
Weighted average basic shares outstanding		22,670			19,635			22,060			19,580
Weighted average diluted shares outstanding		22,670			19,635			22,060			19,580
Earnings (loss) per share:
Basic	$	(0.03	)	$	(0.02	)	$	(0.24	)	$	(0.10	)
Diluted	$	(0.03	)	$	(0.02	)	$	(0.24	)	$	(0.10	)

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,
	2011	2010	2011	2010
Stock options	491	491	491	491
Restricted shares	891	855	891	855
Convertible preferred stock	10,063	9,519	9,950	9,470
Convertible debt	154	154	154	154
	11,599	11,019	11,486	10,970

5.LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,		December 31,
	2011		2010
Senior notes, with interest rate of 9.25%, due in June 2014	$	—	$	150,000
Senior notes, with interest rate of 7.50%, due in June 2019		175,000		—
Revolving note payable with financial institutions, variable interest rate based on LIBOR plus a margin (2.87% at September 30, 2011 and December 31, 2010)		104,000		81,000
Seller note, with two installments of $500 due on January 15, 2010 and 2011		—		496
Seller convertible notes, with interest rate of 5.5%, due in October 2012		1,575		1,575
		280,575		233,071
Less current maturities		—		500
	$	280,575	$	232,571

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9.25% Senior Notes Due 2014

On June 7, 2011, the Company accepted for purchase and payment $101.0 million aggregate principal amount (or approximately 67.3%) of its 9.25% senior notes due 2014 (the “2014 Notes”) that were validly tendered and not validly withdrawn, pursuant to its previously announced tender offer and consent solicitation, which commenced on May 23, 2011.  Total payments of approximately $108.4 million associated with the tender offer included tender offer consideration, consent payment, accrued and unpaid interest and related transaction costs. On June 8, 2011, the Company elected to redeem all remaining outstanding 2014 Notes (the “Redeemed Notes”) and instructed the Trustee to provide the requisite notice of redemption to holders of the Redeemed Notes.  The tender offer for the 2014 Notes expired on June 21, 2011.

The Company completed the redemption of all of the Redeemed Notes on July 8, 2011 (the “Redemption Date”).  The redemption price for the Redeemed Notes was 102.313% of the $49.0 million principal amount, call premium, plus accrued and unpaid interest (the “Redemption Price”), resulting in a total redemption payment of $50.5 million.  Following payment of the Redemption Price on the Redemption Date, there are no 2014 Notes outstanding.

As of September 30, 2011, the Company incurred a $5.8 million loss on early extinguishment of debt associated with the tender and redemption of the 2014 Notes, which consisted of $1.7 million write-off of unamortized deferred financing costs and $4.1 million associated with tender offer consent payment, call premium of the Redeemed Notes and related transaction costs.

7.50% Senior Notes Due 2019

On June 7, 2011, the Company issued the senior notes maturing on June 15, 2019 (the “2019 Notes”), which bear interest at 7.50% per annum on the principal amount of $175 million from June 7, 2011, payable semi-annually in arrears in cash on June 15 and December 15 of each year, beginning December 15, 2011.  The 2019 Notes are senior unsecured obligations and rank equally with the Company’s existing and future senior unsecured indebtedness and senior to any of the Company’s existing and future subordinated indebtedness.  The 2019 Notes will be effectively subordinated to any existing or future secured indebtedness, to the extent of the assets securing such indebtedness.

The 2019 Notes were issued under the indenture, by and among the Company, the guarantors named in the indenture and BOKF, NA dba Bank of Texas, as trustee, and are guaranteed by the guarantors.  The guarantees are senior unsecured obligations of the guarantors.  The guarantees rank equally with all existing and future senior unsecured indebtedness of the guarantors and senior to any existing and future subordinated indebtedness of the guarantors.  The guarantees are effectively subordinated to any existing or future secured indebtedness of the guarantors to the extent of the assets securing such indebtedness.

The 2019 Notes are guaranteed by all of the Company’s current and future subsidiaries.  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 intra-company through dividends or otherwise.

The Company may, at its option, redeem all or part of the 2019 Notes, at any time on or after June 15, 2014, at fixed redemption prices specified in the indenture, plus accrued and unpaid interest, if any, to the date of redemption.  The Company may also, at its option, redeem all or part of the 2019 Notes, at any time prior to June 15, 2014, at a “make-whole” price set forth in the indenture, plus accrued and unpaid interest as liquidated damages, if any, to the date of redemption.  At any time, which may be more than once, before June 15, 2014, the Company may redeem up to 35% of the aggregate principal amount of the 2019 Notes with net cash proceeds of one or more equity offerings at a redemption price of 107.5% of the par value of the 2019 Notes redeemed, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, as long as it redeems the 2019 Notes within 180 days of completing the equity offering and at least 65% of the aggregate principal amount of the 2019 Notes issued remains outstanding after the redemption.

The Company incurred approximately $4.4 million of financing costs associated with the 2019 Notes.  As of September 30, 2011, the fair value of the 2019 Notes, based on quoted market prices, was approximately $166.3 million compared to a carrying amount of $175 million.

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Bank Revolving Credit Facility

On May 25, 2011, the Company, Comerica Bank, in its capacity as administrative agent, and certain other lenders, entered into the Fourteenth Amendment to Revolving Credit Agreement (the “Amendment”) to amend the Revolving Credit Agreement dated July 5, 2006 (as amended, the “Credit Agreement”), by and between the Company, Comerica Bank as administrative agent and certain other lenders, as previously amended.

The Amendment provided for the following: (1) extends the maturity date under the Credit Agreement to April 2016 from January 2014; (2) authorizes the Company to issue up to $225 million in aggregate amount of senior notes; (3) includes an accordion feature pursuant to which, and subject to the conditions set forth in the Amendment, the current aggregate revolving credit commitments of $175 million under the Credit Agreement may be increased at the Company’s request by up to $50 million; (4) increases the maximum Leverage Ratio to 5.25:1.00 from 4.50:1.00; (5) increases the maximum Senior Secured Funded Debt Leverage Ratio to 3.25:1.00 from 2.50:1.00; (6) allows net proceeds from any sales of new equity securities to be used to repurchase preferred stock or be used for expansion expenditures, provided that (i) it occurs within 90 days of any such equity offering and (ii) with respect to preferred stock repurchases, there is a 0.25 cushion under both leverage ratios after such repurchase and at least $10 million in liquidity; (7) allows for reinvestment of proceeds from asset sales to be reinvested back into the business so long as they occur within 12 months; (8) provides adjustments to Pro Forma Adjusted EBITDA for up to $10 million in transaction costs for the bond refinancing evidenced by the Purchase Agreement for the 2019 Notes (and the related tender offer for the Company’s senior notes due 2014) and the Amendment, respectively; and (9) provides for the addition of two new lenders to the bank group under the Credit Agreement and for the departure of an existing lender.

The Amendment was made and entered into at the Company’s request in order to allow for the Company to consummate the issuance of the 2019 Notes and to provide greater financial flexibility and access to the senior credit facility extended to the Company under the Credit Agreement.

The Company incurred $1.3 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.

As of September 30, 2011, there were $104.0 million outstanding under the Credit Agreement and approximately $12.1 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $83.9 million in available capacity.  With $4.7 million cash on hand at September 30, 2011, the total capacity was approximately $88.6 million.  The carrying amount of the Company’s revolving credit facility approximates its fair value based on estimated future cash flows discounted at rates currently quoted.  The fair value of the Company’s debt is determined as of its 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 expired on November 1, 2010.  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.

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7.FAIR VALUE MEASUREMENTS

The following disclosure of the estimated fair value of financial instruments is made in accordance with ASC Topic 825.  The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value.  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.

As of September 30, 2011, the fair value of the Company’s 7.50% senior notes due 2019, based on quoted market prices (Level 1), was approximately $166.3 million compared to a carrying amount of $175 million.  The carrying amount of the Company’s revolving credit facility approximates its fair value based on estimated future cash flows discounted at rates currently quoted.  Since the interest rate swap agreement expired on November 1, 2010, the Company had no financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2011.

8.LANDFILL ACCOUNTING

Capitalized Landfill Costs

At September 30, 2011, 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, 2011.

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, 2011, 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 Company’s engineers, outside engineers, management and financial personnel.

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

The Company may be unsuccessful in obtaining expansion permits for airspace that has been considered probable.  If the Company is unsuccessful 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 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.

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, 2010 to September 30, 2011:

	Landfill Assets, Net			Closure and Post-closure Liabilities
December 31, 2010	$	218,373		$	11,571
Capital expenditures		10,804			—
Amortization expense		(9,318	)		—
Obligations incurred and capitalized		706			706
Revisions to estimates of closure and post-closure activities		32			32
Interest accretion		—			740
September 30, 2011	$	220,597		$	13,049

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

	September 30,		December 31,
	2011		2010
Recorded amounts:
Current portion	$	—	$	—
Noncurrent portion		13,049		11,571
Total recorded	$	13,049	$	11,571

The Company’s total anticipated cost for future closure and post-closure activities is $199.5 million, as measured in current dollars.  The Company believes that 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 $45.9 million and $43.1 million at September 30, 2011 and December 31, 2010, 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, 2011 as a percentage of pre-tax loss was 2.1% as compared to the income tax provision for the nine months ended September 30, 2010 as a percentage of pre-tax income of 58.7%.  The rate in the current period is based on the Company’s anticipated 2011 annual effective income tax rate of 52.0% as compared to 54.6% for the nine months ended September 30, 2010, adjusted for discrete items recorded in the current year associated with the early extinguishment of senior notes.  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.

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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 2002.  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, 2011, the Company had unrecognized tax benefits of approximately $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, 2011, the Company accrued approximately $1.4 thousand of interest and penalties.

Within the next 12 months, the Company anticipates a reduction of approximately $21.0 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, 2011, the Company issued 374,243 restricted shares, net of forfeitures, under the Fourth Amended and Restated 2004 WCA Waste Corporation Incentive Plan.  These shares vest over three years from the grant date.  The following table reflects the changes in stockholders’ equity from December 31, 2010 to September 30, 2011:

	Preferred Stock		Common Stock			Treasury Stock			Additional Paid-in Capital			Contingent Considerations		Retained Earnings (Deficit)			Total
December 31, 2010	$	9	$	217		$	(5,322	)	$	199,627		$	3,225	$	(34,027	)	$	163,729
Net loss		—		—			—			—			—		(1,858	)		(1,858	)
Accrued payment-in-kind dividend on preferred stock		—		—			—			3,524			—		(3,524	)		—
Issuance of preferred stock		1		—			—			(1	)		—		—			—
Issuance of common shares		—		28			—			14,623			—		—			14,651
Issuance of restricted shares to employees		—		4			—			(4	)		—		—			—
Accretion of unearned compensation		—		—			—			1,599			—		—			1,599
Restricted shares withheld		—		(1	)		—			(469	)		—		—			(470	)
September 30, 2011	$	10	$	248		$	(5,322	)	$	218,899		$	3,225	$	(39,409	)	$	177,651

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Preferred Stock

On July 13, 2006, the Company’s stockholders approved the issuance of 750,000 shares of convertible preferred stock at $100.00 per share in the private placement with Ares Corporate Opportunities Fund II L.P. (“Ares”).  The 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 would be convertible into 10,089,371 shares of common stock as of September 30, 2011.  Ares 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 liquidation.  The Company can, at its discretion, redeem for cash equal to the liquidation preference, which was approximately $96.9 million as of September 30, 2011.  The Company has the option to PIK or pay a cash dividend at the rate of 5% per annum.  The preferred shares have no stated maturity and no mandatory redemption requirements.  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 were non-discretionary for the initial five-year period that expired on July 27, 2011.  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, 2011 and 2010:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2011		2010		2011		2010
Collection:
Residential	$	17,808	$	13,582	$	50,736	$	39,891
Commercial		10,663		6,268		29,504		18,856
Roll-off		12,086		11,561		34,678		33,126
Total collection		40,557		31,411		114,918		91,873
Disposal		28,578		25,905		77,286		74,184
Less Intercompany		7,951		7,704		22,652		21,505
Disposal, net		20,627		18,201		54,634		52,679
Transfer and other		16,736		12,716		46,627		36,149
Less Intercompany		3,521		3,049		10,513		8,820
Transfer and other, net		13,215		9,667		36,114		27,329
Total revenue	$	74,399	$	59,279	$	205,666	$	171,881

On February 28, 2011 the Company acquired certain assets of Emerald Waste Services.  In conjunction with this acquisition the Company reorganized its regional structure and created Region V by combining these newly acquired assets with its existing Florida assets which were previously included in Region II.  Results for Region II and Region V for the three and nine months ended September 30, 2010 have been restated to reflect this change.

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The table below reflects major operating segments (Region I: Kansas, Missouri; Region II: Colorado, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio; Region V: Florida) for the three and nine months ended September 30, 2011 and 2010:

	Region I		Region II		Region III		Region IV		Region V			Corporate		Total
Three months ended September 30, 2011:
Revenue	$	14,493	$	24,879	$	12,488	$	12,608	$	9,931		$	—	$	74,399
Depreciation and amortization		1,522		2,958		1,749		1,404		1,333			94		9,060
Operating income		1,941		2,094		2,221		1,004		772			321		8,353
Capital expenditures		2,668		4,188		2,202		2,721		1,730			3		13,512
Three months ended September 30, 2010:
Revenue	$	12,908	$	22,985	$	11,757	$	9,973	$	1,656		$	—	$	59,279
Depreciation and amortization		1,365		2,897		1,654		1,156		437			114		7,623
Operating income (loss)		1,797		2,361		2,227		253		(122	)		167		6,683
Capital expenditures		1,934		5,348		1,666		1,185		35			3		10,171
Capital expenditures (Included in acquisitions)		—		470		—		—		—			—		470
Nine months ended September 30, 2011:
Revenue	$	40,970	$	73,094	$	35,758	$	32,003	$	23,841		$	—	$	205,666
Depreciation and amortization		4,241		8,729		4,921		3,552		3,230			287		24,960
Operating income		5,084		6,035		5,812		970		1,135			469		19,505
Capital expenditures		4,810		9,337		4,458		4,519		1,972			118		25,214
Capital expenditures (Included in acquisitions)		—		1,367		—		67		13,198			—		14,632
Nine months ended September 30, 2010:
Revenue	$	38,084	$	67,636	$	33,045	$	28,339	$	4,777		$	—	$	171,881
Depreciation and amortization		4,049		8,624		4,987		3,383		1,298			341		22,682
Operating income (loss)		4,768		7,108		5,882		43		(480	)		573		17,894
Capital expenditures		2,505		11,443		4,451		1,837		171			12		20,419
Capital expenditures (Included in acquisitions)		—		470		—		—		—			—		470
Total assets:
September 30, 2011	$	82,121	$	145,100	$	100,351	$	56,244	$	95,971		$	27,190	$	506,977
December 31, 2010		80,261		142,047		100,575		47,223		46,948			22,808		439,862

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

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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 (this “quarterly report”). In addition, reference should be made to our audited consolidated financial statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K  for the year ended December 31, 2010 as filed with the SEC on March 10, 2011. The discussion below contains forward-looking statements that involve risks and uncertainties.  For additional information regarding some of these risks and uncertainties, please read “Risk Factors and Cautionary Statement About Forward-Looking Statements” included elsewhere in this quarterly report.  Unless the context requires otherwise, references in this quarterly report 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, 2011, we served approximately 451,000 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, 2011, we owned and/or operated 25 landfills, 29 collection operations and 29 transfer stations/materials recovery facilities (MRFs).  Of these facilities, three transfer stations and two landfills are fully permitted but not yet opened, and three transfer stations are idle.  Additionally, we operate but do not own four of the transfer stations.

General Review of Results for the Three and Nine Months Ended September 30, 2011

During the three months ended September 30, 2011, our revenue was $74.4 million, which represents a 25.5% increase over the same period in 2010.  Our operating income was $8.4 million for the three months ended September 30, 2011, which increased 25.0% as compared to the same period in 2010.  Net loss available to common stockholders was $0.7 million, or $0.03 per share, compared to $0.4 million, or $0.02 per share, for the three months ended September 30, 2010.  Adjusted EBITDA for the third quarter of 2011 was $17.4 million, an increase of 21.4% over $14.3 million during the same period last year.  Adjusted for $1.1 million (net of tax) related to loss on early extinguishment of our senior notes, our net income available to common stockholders would have been $0.4 million, or $0.02 per share, during the three months ended September 30, 2011.

Factors that impacted our third quarter 2011 performance include, but are not limited to, the following:

·   increases in revenue and cost of services mainly due to acquisitions, including the Emerald Waste acquisition and the Stoughton transaction described in note 2 to our condensed consolidated financial statements included in Item 1 of this quarterly report;

·   rising fuel costs during the third quarter of 2011 contributed significantly to reduced operating margins;

·   increased volume and improved pricing in Region I and Region IV resulted in higher revenue;

·   higher cost of services as a percentage of revenue, primarily due to higher fuel costs across all regions, higher disposal and hauling costs primarily due to higher rail hauling costs associated with increased volumes, integration costs, a change in our mix of business due to adding more residential collection with the Emerald Waste acquisition, and labor cost increases in Texas associated with acquisitions, produced lower operating margins; and

·   increases in interest expense as a result of carrying larger debt balances due to acquisitions and loss on early extinguishment of debt due to the redemption of our senior notes.

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During the nine months ended September 30, 2011, our revenue was $205.7 million, which represents a 19.7% increase over the same period in 2010.  Our operating income was $19.5 million for the nine months ended September 30, 2011, which increased 9.0% as compared to the same period in 2010.  Net loss available to common stockholders was $5.4 million, or $0.24 per share, compared to $2.0 million, or $0.10 per share, for the nine months ended September 30, 2010.  Adjusted EBITDA for the first nine months of 2011 was $44.9 million, an increase of 10.2% over $40.7 million during the same period last year.  During the nine months ended September 30, 2011, we recorded charges of $3.8 million (net of tax) related to loss on early extinguishment of our senior notes, $0.1 million (net of tax) related to the write-off of deferred financing costs associated with an amendment of our revolving credit facility, and $0.2 million (net of tax) related to merger and acquisition related expenses.  Our net loss for the same period in 2010 included charges of $0.1 million (net of tax) due to the impact of interest rate swap agreements, $0.1 million (net of tax) related to the write-off of deferred financing costs associated with an amendment of our revolving credit facility, $0.1 million (net of tax) related to merger and acquisition related expenses, and $0.1 million due to the tax impact of vested restricted shares.

Factors that impacted our year-to-date 2011 performance include, but are not limited to, the following:

·   increases in revenue and cost of services mainly due to acquisitions, including the Emerald Waste acquisition and the Stoughton transaction described in note 2 to our condensed consolidated financial statements included in Item 1 of this quarterly report;

·   rising fuel costs during 2011 resulted in reduced operating margins;

·   severe weather conditions in several markets causing interruption of normal operations and, as a result, lost revenue during the first and second quarters of 2011;

·   higher cost of services as a percentage of revenue, primarily due to higher fuel costs across all regions, higher disposal and hauling costs primarily due to higher rail hauling costs associated with increased volumes, integration costs, a change in our mix of business due to adding more residential collection with the Emerald Waste acquisition, and labor cost increases in Texas associated with acquisitions, produced lower operating margins; and

·   increases in interest expense as a result of carrying larger debt balances due to acquisitions and debt financing, loss on early extinguishment of debt due to the tender and redemption of our senior notes, and the write-off of deferred financing costs associated with an amendment of our revolving credit facility.

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, and landfills are 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, 2011 was 68.2% and 68.3%, respectively.

The following table reflects our revenue segmentation (before elimination of intercompany revenue) for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Collection		47.2	%		44.9	%		48.1	%		45.4	%
Disposal		33.3	%		37.0	%		32.4	%		36.7	%
Transfer and other		19.5	%		18.1	%		19.5	%		17.9	%
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, 2011 and 2010 (dollars in thousands):

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2011		2010		2011		2010
Collection:
Residential	$	17,808	$	13,582	$	50,736	$	39,891
Commercial		10,663		6,268		29,504		18,856
Roll-off		12,086		11,561		34,678		33,126
Total collection		40,557		31,411		114,918		91,873
Disposal		28,578		25,905		77,286		74,184
Less Intercompany		7,951		7,704		22,652		21,505
Disposal, net		20,627		18,201		54,634		52,679
Transfer and other		16,736		12,716		46,627		36,149
Less Intercompany		3,521		3,049		10,513		8,820
Transfer and other, net		13,215		9,667		36,114		27,329
Total revenue	$	74,399	$	59,279	$	205,666	$	171,881

Please read note 11 to our condensed consolidated financial statements included in Item 1 of this quarterly 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 quarterly 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), (gain) loss on early extinguishment of debt, impact of interest rate swap agreements, income tax expense, depreciation and amortization, impairment of goodwill, net (gain) 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;

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·   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 restricted stock bonuses paid to our executive officers and other employees;

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

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

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

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011			2010
Adjusted EBITDA	$	17,415		$	14,344		$	44,904		$	40,748
Depreciation and amortization		(9,060	)		(7,623	)		(24,960	)		(22,682	)
Merger and acquisition related expenses		(2	)		(38	)		(439	)		(172	)
Interest expense, net		(4,994	)		(4,811	)		(15,370	)		(14,190	)
Write-off of deferred financing costs		—			—			(157	)		(184	)
Loss on early extinguishment of debt		(1,722	)		—			(5,797	)		—
Impact of interest rate swap		—			(47	)		—			(231	)
Income tax provision		(1,113	)		(1,042	)		(39	)		(1,932	)
Accrued payment-in-kind dividend on preferred stock		(1,193	)		(1,138	)		(3,524	)		(3,358	)
Net loss available to common stockholders	$	(669	)	$	(355	)	$	(5,382	)	$	(2,001	)

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 target acquisition opportunities that enable us to internalize waste into our existing landfills and that offer new markets where: (i) we are able to acquire disposal facilities; (ii) we can secure long-term disposal contracts; or (iii) the landfills are municipally owned.  In markets where we already own a landfill, we 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 in market share, to enable disposal internalization and consolidation of duplicative facilities and functions to improve efficiencies and economies of scale.  If we find an attractive new market, we seek to enter that market by acquiring a permitted landfill, followed by acquiring collection and/or transfer operations and internalizing waste into the landfill.

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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.

We completed the IESI Oklahoma acquisition, the Stoughton transaction and the Emerald Waste acquisition during the nine months ended September 30, 2011.  Effective January 1, 2011, we acquired all of the outstanding capital stock of IESI OK Corporation, which is now known as WCA of Chickasha, Inc.  The acquired operations include nine commercial and residential routes around Chickasha, Oklahoma, which is approximately 40 miles southwest of Oklahoma City, and a transfer station, which is approximately 50 miles from our Pauls Valley Landfill.  The transfer station is fully permitted but is not currently in operation.  On February 11, 2011, we entered into an operating agreement with an option to purchase Stoughton Recycling Technologies, LLC (“SRT”).  SRT is a commercial and demolition recycling facility and transfer station in Stoughton, Massachusetts.  This facility is located three miles from the WCA-owned Champion City Recovery transfer station and approximately 25 miles south of Boston, Massachusetts.  On February 28, 2011, we closed the Emerald Waste acquisition pursuant to an amended equity interest purchase agreement to acquire one transfer station and three collection operations located in Central Florida.  The acquired Emerald Waste operations consist of 117 residential, commercial and roll-off routes servicing seven counties and 113,500 customers in the Gainesville, Orange City and Daytona Beach market areas.  Total consideration for these three transactions included $38.0 million of cash and 2,816,308 shares of our common stock valued at $14.7 million.  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 quarterly report.

The following sets forth additional information regarding our acquisitions from January 1, 2008 through September 30, 2011:

Company	Location	Region	Completion Date	Operations
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
IESI OK Corporation	Chickasha, OK	II	January 1, 2011	Collection & Transfer Station
Stoughton Recycling Technologies, LLC	Stoughton, MA	IV	February 11, 2011	Transfer Station
Emerald Waste Services	Central Florida, FL	V	February 28, 2011	Collection & Transfer Station

We continue to seek acquisition opportunities that enable us to effectively leverage our existing infrastructure and maximize the internalization of waste.  We are also evaluating opportunistic potential acquisitions both within and outside our existing footprint.

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Results of Operations

Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Colorado, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio; Region V: Florida) for the three months ended September 30, 2011 and 2010 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II			Region III			Region IV		Region V			Corporate			Total			% of Revenue
Three months ended September 30, 2011:
Revenue	$	14,493		$	24,879		$	12,488		$	12,608	$	9,931		$	—		$	74,399			100.0
Cost of services		10,090			18,008			7,683			10,200		7,783			—			53,764			72.3
Depreciation and amortization		1,522			2,958			1,749			1,404		1,333			94			9,060			12.2
General and administrative		969			1,829			835			—		136			(415	)		3,354			4.5
Gain on sale of assets		(29	)		(10	)		—			—		(93	)		—			(132	)		(0.2	)
Operating income	$	1,941		$	2,094		$	2,221		$	1,004	$	772		$	321		$	8,353			11.2
Three months ended September 30, 2010:
Revenue	$	12,908		$	22,985		$	11,757		$	9,973	$	1,656		$	—		$	59,279			100.0
Cost of services		8,872			16,125			7,265			8,564		1,229			—			42,055			70.9
Depreciation and amortization		1,365			2,897			1,654			1,156		437			114			7,623			12.9
General and administrative		874			1,602			618			—		112			(281	)		2,925			4.9
Gain on sale of assets		—			—			(7	)		—		—			—			(7	)		(0.0	)
Operating income (loss)	$	1,797		$	2,361		$	2,227		$	253	$	(122	)	$	167		$	6,683			11.3
Increase/(decrease) in 2011 compared to 2010:
Revenue	$	1,585		$	1,894		$	731		$	2,635		8,275		$	—		$	15,120
Cost of services		1,218			1,883			418			1,636		6,554			—			11,709
Depreciation and amortization		157			61			95			248		896			(20	)		1,437
General and administrative		95			227			217			—		24			(134	)		429
(Gain) loss on sale of assets		(29	)		(10	)		7			—		(93	)		—			(125	)
Operating income (loss)	$	144		$	(267	)	$	(6	)	$	751		894		$	(154	)	$	1,670

Revenue. Total revenue for the three months ended September 30, 2011 increased $15.1 million, or 25.5%, to $74.4 million from $59.3 million for the three months ended September 30, 2010.  Our revenue growth was primarily driven by acquisitions.  Acquisitions contributed $11.4 million of the revenue growth while internal volume increased $1.8 million, operational price increases contributed $1.0 million, and pricing from fuel surcharges increased $0.9 million, all as compared to the same period in 2010.

The above table reflects the change in revenue in each operating region.  The financial results of completed acquisitions are generally blended with existing operations and do not have separate financial information available, with the exception of newly acquired regions which can be analyzed individually.  Increases and decreases noted are as compared to the same period in 2010.  The Emerald Waste acquisition contributed to $8.2 million of the revenue increase in Region V.  The revenue increase of $1.6 million in Region I was primarily attributed to price increases of $0.3 million, volume increases of $1.0 million and increases in fuel surcharges of $0.3 million.  The revenue increase of $1.9 million in Region II was primarily attributed to acquisition growth of $1.8 million and increases in fuel surcharges of $0.4 million, partially offset by price decreases of $0.2 million and volume decreases of $0.1 million.  The revenue increase of $0.7 million in Region III was primarily attributed to price increases of $0.4 million, volume increases of $0.1 million and increases in fuel surcharges of $0.2 million.  The revenue increase of $2.6 million in Region IV was primarily attributed to $1.4 million from the Stoughton transaction, price increases of $0.5 million and volume increases of $0.7 million.

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Cost of services. Total cost of services for the three months ended September 30, 2011 increased $11.7 million, or 27.8%, to $53.8 million from $42.1 million for the three months ended September 30, 2010.  The increase in cost of services was primarily a result of acquisitions.  Other factors contributing to the increase were higher fuel costs as well as higher disposal and hauling costs due to increased revenue.  For acquisitions within our existing markets, the acquired entities are integrated into our existing operations, and those results are indistinguishable from the remainder of the operations.  The Stoughton transaction accounted for $1.5 million of the increase in cost of services in Region IV.  The Emerald Waste acquisition accounted for $6.5 million of the increase in cost of services in Region V.  Cost of services in Region I increased primarily due to rising fuel costs and increases in hauling and disposal costs as a result of increased revenue.  The increase in cost of services in Region II was primarily attributed to increased revenue, rising fuel costs, and increases in labor costs associated with acquisitions and the addition of several recycling contracts in the region.

Overall cost of services increased to 72.3% of revenue for the three months ended September 30, 2011 from 70.9% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to Region IV and Region V.  Cost of services in Region IV accounted for 80.9% of its revenue due to higher transportation and disposal costs associated with increased rail hauling.  Cost of services in Region V accounted for 78.4% of its revenue due to initial integration costs for assets acquired from Emerald Waste as well as a change in our mix of business to primarily residential collection operations which typically have lower operating margins.  Other than the impact of Region IV and Region V, higher fuel and disposal costs resulted in the increase in cost of services as a percentage of revenue.  Diesel fuel costs as a percentage of revenue increased from 6.1% for the three months ended September 30, 2010 to 7.9% for the three months ended September 30, 2011.  Other than periodic volatility in fuel prices, inflation has not materially affected our operations.

Depreciation and amortization.  Depreciation and amortization expenses for the three months ended September 30, 2011 increased by 18.9% to $9.1 million from $7.6 million for the three months ended September 30, 2010.  The increase can mainly be attributed to the acquisition of Emerald Waste in Region V.

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, 2011 and 2010 (dollars in thousands):

	Three Months Ended September 30,
	2011					2010
Operating income	$	8,353		11.2	%	$	6,683		11.3	%
Interest expense, net		(4,994	)	(6.7	)		(4,811	)	(8.1	)
Loss on early extinguishment of debt		(1,722	)	(2.3	)		—		—
Impact on interest rate swap		—		—			(47	)	(0.1	)
Income tax provision		(1,113	)	(1.5	)		(1,042	)	(1.8	)
Accrued payment-in-kind dividend on preferred stock		(1,193	)	(1.6	)		(1,138	)	(1.9	)
Net loss available to common stockholders	$	(669	)	(0.9	)%	$	(355	)	(0.6	)%

Interest expense, net. Interest expense, net for the three months ended September 30, 2011 increased $0.2 million, or 3.8%, to $5.0 million from $4.8 million for the three months ended September 30, 2010.  The increase in interest expense was mainly caused by higher debt balances due to borrowings to finance acquisitions.

Loss on early extinguishment of debt. Loss on early extinguishment of debt for the three months ended September 30, 2011 resulted from the redemption of $49.0 million aggregate principal amount of our senior notes in July 2011.  The $1.7 million loss was recognized for the write-off of unamortized deferred financing costs and the transaction costs associated with the redeemed senior notes.

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Income tax provision. Income tax provision for the three months ended September 30, 2011 as a percentage of pre-tax income was 68.0% as compared to income tax provision as a percentage of pre-tax income of 57.1% for the three months ended September 30, 2010.  The rate in the current year period is based on our anticipated 2011 annual effective income tax rate of 52.0% as compared to 54.6% for the same period in 2010, adjusted for discrete items recorded in the current year associated with the early extinguishment of senior notes.  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.

Accrued payment-in-kind dividend on preferred stock. The $1.2 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, 2011 and 2010, respectively.

Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010

The following table sets forth the components of operating income (loss) by major operating segments (Region I: Kansas, Missouri; Region II: Colorado, New Mexico, Oklahoma, Texas; Region III: Alabama, Arkansas, North Carolina, South Carolina, Tennessee; Region IV: Massachusetts, Ohio; Region V: Florida) for the nine months ended September 30, 2011 and 2010 and the changes between the segments for each category (dollars in thousands):

	Region I			Region II			Region III			Region IV		Region V			Corporate			Total			% of Revenue
Nine months ended September 30, 2011:
Revenue	$	40,970		$	73,094		$	35,758		$	32,003	$	23,841		$	—		$	205,666			100.0
Cost of services		28,774			52,795			22,553			27,481		19,234			—			150,837			73.4
Depreciation and amortization		4,241			8,729			4,921			3,552		3,230			287			24,960			12.1
General and administrative		2,907			5,488			2,506			—		409			(756	)		10,554			5.1
(Gain) loss on sale of assets		(36	)		47			(34	)		—		(167	)		—			(190	)		(0.1	)
Operating income	$	5,084		$	6,035		$	5,812		$	970	$	1,135		$	469		$	19,505			9.5
Nine months ended September 30, 2010:
Revenue	$	38,084		$	67,636		$	33,045		$	28,339	$	4,777		$	—		$	171,881			100.0
Cost of services		26,495			47,098			21,313			24,913		3,639			—			123,458			71.8
Depreciation and amortization		4,049			8,624			4,987			3,383		1,298			341			22,682			13.2
General and administrative		2,622			4,805			1,894			—		336			(914	)		8,743			5.1
(Gain) loss on sale of assets		150			1			(1,031	)		—		(16	)		—			(896	)		(0.5	)
Operating income (loss)	$	4,768		$	7,108		$	5,882		$	43	$	(480	)	$	573		$	17,894			10.4
Increase/(decrease) in 2011 compared to 2010:
Revenue	$	2,886		$	5,458		$	2,713		$	3,664		19,064		$	—		$	33,785
Cost of services		2,279			5,697			1,240			2,568		15,595			—			27,379
Depreciation and amortization		192			105			(66	)		169		1,932			(54	)		2,278
General and administrative		285			683			612			—		73			158			1,811
(Gain) loss on sale of assets		(186	)		46			997			—		(151	)		—			706
Operating income (loss)	$	316		$	(1,073	)	$	(70	)	$	927		1,615		$	(104	)	$	1,611

Revenue. Total revenue for the nine months ended September 30, 2011 increased $33.8 million, or 19.7%, to $205.7 million from $171.9 million for the nine months ended September 30, 2010.  Our revenue growth was primarily driven by acquisitions.  Acquisitions contributed $27.8 million of the revenue growth while operational price increases contributed $5.2 million, pricing from fuel surcharges increased $2.8 million, and internal volume decreased $1.3 million, all as compared to the same period in 2010.  In addition, our revenue was negatively impacted by $0.7 million due to the asset sale of our Jonesboro operations in April 2010.

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The above table reflects the change in revenue in each operating region.  The financial results of completed acquisitions are generally blended with existing operations and do not have separate financial information available, with the exception of newly acquired regions which can be analyzed individually.  Increases and decreases noted are as compared to the same period in 2010.  The Emerald Waste acquisition contributed to $18.8 million of the revenue increase in Region V.  The revenue increase of $2.9 million in Region I was primarily attributed to price increases of $1.3 million, volume increases of $0.7 million and increases in fuel surcharges of $0.9 million.  The revenue increase of $5.5 million in Region II was primarily attributed to acquisition growth of $5.1 million and increases in fuel surcharges of $1.1 million, partially offset by price decreases of $0.1 million and volume decreases of $0.6 million.  The revenue increase of $2.7 million in Region III was primarily attributed to price increases of $1.5 million, volume increases of $1.2 million and increases in fuel surcharges of $0.7 million, partially offset by the Jonesboro divestiture of $0.7 million.  The revenue in Region III was largely boosted by $2.0 million of additional special waste volumes in Arkansas.  The revenue increase of $3.7 million in Region IV was primarily attributed to $3.9 million from the Stoughton transaction and prices increases of $2.5 million, partially offset by volume decreases of $2.7 million.

Cost of services. Total cost of services for the nine months ended September 30, 2011 increased by 22.2% to $150.8 million from $123.5 million for the nine months ended September 30, 2010.  The increase in cost of services was primarily a result of acquisitions.  Other factors contributing to the increase were higher fuel costs as well as higher disposal and hauling costs due to increased revenue.  For acquisitions within our existing markets, the acquired entities are integrated into our existing operations, and those results are indistinguishable from the remainder of the operations.  The Emerald Waste acquisition in Region V accounted for $15.3 million of the increase in cost of services.  Cost of services in Region I increased primarily due to rising fuel costs and increases in hauling and disposal costs associated with increased rail hauling.  The increase in cost of services in Region II was primarily attributed to increased revenue, rising fuel costs, and increases in labor costs associated with acquisitions, the addition of several recycling contracts and wage adjustments in the region.  Cost of services in Region III increased primarily as a result of rising fuel costs and increased labor costs associated with revenue increases in Arkansas and North Carolina.  The Stoughton transaction accounted for $4.2 million of the increase in cost of services in Region IV.  This increase in cost of services was partially offset by various cost reductions, including waste taxes, within the region.

Overall cost of services increased to 73.4% of revenue for the nine months ended September 30, 2011 from 71.8% during the same period last year.  Increases in operating costs as a percentage of revenue were primarily attributable to Region IV and Region V.  Cost of services in Region IV accounted for 85.9% of its revenue due to higher transportation and disposal costs.  Cost of services in Region V accounted for 80.7% of its revenue due to initial integration costs for assets acquired from Emerald Waste as well as a change in our mix of business to primarily residential collection operations which typically have lower operating margins.  Other than the impact of Region IV and Region V, higher fuel and disposal costs resulted in the increase in cost of services as a percentage of revenue.  Diesel fuel costs as a percentage of revenue increased from 6.1% for the nine months ended September 30, 2010 to 8.2% for the nine months ended September 30, 2011.  Other than periodic volatility in fuel prices, inflation has not materially affected our operations.

Depreciation and amortization.  Depreciation and amortization expenses for the nine months ended September 30, 2011 increased $2.3 million, or 10.0%, to $25.0 million from $22.7 million for the nine months ended September 30, 2010.  The increase can mainly be attributed to the acquisition of Emerald Waste in Region V.

General and administrative. Total general and administrative expense for the nine months ended September 30, 2011 increased by 20.7% to $10.6 million from $8.7 million for the nine months ended September 30, 2010.  The increase in general and administrative expense was mainly attributable to increases in payroll-related cost, merger and acquisition related transaction expenses and stock based compensation expenses.

(Gain) loss on sale of assets. Net gain on sale of assets for the nine months ended September 30, 2010 was $0.9 million primarily due to the sale of assets related to our Jonesboro operations in April 2010.

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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, 2011 and 2010 (dollars in thousands):

	Nine Months Ended September 30,
	2011					2010
Operating income	$	19,505		9.5	%	$	17,894		10.4	%
Interest expense, net		(15,370	)	(7.5	)		(14,190	)	(8.3	)
Write-off of deferred financing costs		(157	)	(0.1	)		(184	)	(0.1	)
Loss on early extinguishment of debt		(5,797	)	(2.8	)		—		—
Impact on interest rate swap		—		—			(231	)	(0.1	)
Income tax provision		(39	)	(0.0	)		(1,932	)	(1.1	)
Accrued payment-in-kind dividend on preferred stock		(3,524	)	(1.7	)		(3,358	)	(2.0	)
Net loss available to common stockholders	$	(5,382	)	(2.6	)%	$	(2,001	)	(1.2	)%

Interest expense, net. Interest expense, net for the nine months ended September 30, 2011 increased $1.2 million, or 8.3%, to $15.4 million from $14.2 million for the nine months ended September 30, 2010.  The increase in interest expense was mainly caused by higher debt balances due to borrowings to finance acquisitions, outstanding untendered senior notes and issuance of new senior notes.

Write-off of deferred financing costs.  The $0.2 million and $0.2 million write-offs of deferred financing costs for the nine months ended September 30, 2011 and 2010, respectively, reflect the partial write-off of deferred financing costs associated with our revolving credit facility as a result of amendments on May 25, 2011 and June 30, 2010, respectively.

Loss on early extinguishment of debt. Loss on early extinguishment of debt for the nine months ended September 30, 2011 resulted from the tender and redemption to extinguish $150 million aggregate principal amount of our senior notes in June and July of 2011.  The $5.8 million loss was recognized for the write-off of unamortized deferred financing costs and the transaction costs associated with the tendered and redeemed senior notes.

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.  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 were recognized in the statement of operations.  There was no impact of interest rate swap during the nine months ended September 30, 2011, as the swap expired on November 1, 2010.

Income tax provision. Income tax provision for the nine months ended September 30, 2011 as a percentage of pre-tax loss was 2.1% as compared to income tax provision as a percentage of pre-tax income of 58.7% for the nine months ended September 30, 2010.  The rate in the current year period is based on our anticipated 2011 annual effective income tax rate of 52.0% as compared to 54.6% for the same period in 2010, adjusted for discrete items recorded in the current year associated with the early extinguishment of senior notes.  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.

Accrued payment-in-kind dividend on preferred stock. The $3.5 million and $3.4 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, 2011 and 2010, respectively.

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Liquidity and Capital Resources

Our business 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.  While conditions appear to have stabilized, recent disruptions in the credit markets have resulted in greater volatility, less liquidity, widening of credit spreads and more limited availability of financing.  In addition, the availability under our credit facility is limited by compliance with certain covenants and ratios.  Our inability to obtain funding necessary for our business on acceptable terms would have a material adverse impact on us.

To address potential credit and liquidity issues, we consider several items.  Despite the rising fuel costs, higher labor and integration costs as well as severe weather that impacted our collection and disposal revenues in several markets during the first half of the year 2011, our adjusted EBITDA has improved period over period, with an increase of 8.6% from the second quarter of 2011 to the third quarter of 2011.  We are actively seeking growth opportunities through acquisitions.  Our customer base is broad and diverse with no single customer making up any significant portion of our business.  We are not dependent on any single vendor to meet the needs of our operations.

We consummated the tender offer and payment of $101.0 million aggregate principal amount of our $150 million 9.25% senior notes due 2014 (the “2014 Notes”) in June 2011.  We completed the redemption of all remaining $49.0 million principal amount of the 2014 Notes in July 2011.  Also in June 2011, we issued $175 million 7.50% senior notes due 2019 (the “2019 Notes”).  We used the $25 million in excess proceeds to pay for related transaction costs and pay down our revolving credit facility.  We amended our revolving credit agreement in May 2011 to extend the term from January 31, 2014 to April 2016 and to allow for the issuance of the 2019 Notes.  These transactions allow us to achieve long-term interest savings and to provide greater financial flexibility and access to our revolving credit facility.  For further information about credit risks, please see “Risk Factors and Cautionary Statement About Forward-Looking Statements” in this quarterly report and Item 1A “Risk Factors” below.  For further information about our senior notes and our credit facility, please see “9.25% Senior Notes Due 2014”, “7.50% Senior Notes Due 2019” and “Revolving Bank Credit Facility” below.

A portion of our capital expenditures 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, 2011, we had total outstanding long-term debt of approximately $280.6 million, consisting of $175 million of senior notes, $104.0 million outstanding under our credit facilities, and approximately $1.6 million of various seller notes.  This represented an increase of approximately $48.0 million over our total debt outstanding as of December 31, 2010.  The increase in outstanding debt since December 31, 2010 was primarily due to $25.0 million in additional senior notes and a $23.0 million increase in borrowings under the credit facility.  As of September 30, 2011, we had $104.0 million outstanding under the revolving credit facility and approximately $12.1 million in letters of credit that serve as collateral for insurance claims and bonding, leaving $83.9 million in available capacity under the facility.  With $4.7 million cash on hand at September 30, 2011, our total capacity was approximately $88.6 million.

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9.25% Senior Notes Due 2014

On June 7, 2011, we accepted for purchase and payment $101.0 million aggregate principal amount (or approximately 67.3%) of our 9.25% senior notes due 2014 (the “2014 Notes”) that were validly tendered and not validly withdrawn, pursuant to our previously announced tender offer and consent solicitation, which commenced on May 23, 2011.  Total payments of approximately $108.4 million associated with the tender offer included tender offer consideration, consent payment, accrued and unpaid interest and related transaction costs.  On June 8, 2011, we elected to redeem all remaining outstanding 2014 Notes (the “Redeemed Notes”) and instructed the Trustee to provide the requisite notice of redemption to holders of the Redeemed Notes.  The tender offer for the 2014 Notes expired on June 21, 2011.  Following the expiration of the tender offer, we completed the redemption of all of the Redeemed Notes on July 8, 2011 (the “Redemption Date”).  The redemption price for the Redeemed Notes was 102.313% of the $49.0 million principal amount of the Redeemed Notes, plus accrued and unpaid interest (the “Redemption Price”), resulting in a total redemption payment of $50.5 million.  Following payment of the Redemption Price on the Redemption Date, there are no 2014 Notes outstanding.

As of September 30, 2011, we incurred a $5.8 million loss on early extinguishment of debt associated with the tender and redemption of the 2014 Notes, which consisted of $1.7 million write-off of unamortized deferred financing costs and $4.1 million associated with tender offer consent payment, call premium of the Redeemed Notes and related transaction costs.

The 2014 Notes were issued under an indenture between WCA Waste, the guarantors named therein 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.  On June 6, 2011, we entered into a supplemental indenture, which eliminated substantially all of the restrictive covenants and certain events of default contained in the indenture.

7.50% Senior Notes Due 2019

On June 7, 2011, we issued the senior notes maturing on June 15, 2019 (the “2019 Notes”), which bear interest at 7.50% per annum on the principal amount of $175 million from June 7, 2011, payable semi-annually in arrears in cash on June 15 and December 15 of each year, beginning December 15, 2011.  The 2019 Notes are senior unsecured obligations and rank equally with the Company’s existing and future senior unsecured indebtedness and senior to any of the Company’s existing and future subordinated indebtedness.  The 2019 Notes will be effectively subordinated to any existing or future secured indebtedness, to the extent of the assets securing such indebtedness.  We incurred approximately $4.4 million of financing costs associated with the 2019 Notes.

We may, at our option, redeem all or part of the 2019 Notes, at any time on or after June 15, 2014, at fixed redemption prices specified in the indenture under which the 2019 Notes were issued as described below, plus accrued and unpaid interest, if any, to the date of redemption.  We may also, at our option, redeem all or part of the 2019 Notes, at any time prior to June 15, 2014, at a “make-whole” price set forth in the indenture, plus accrued and unpaid interest as liquidated damages, if any, to the date of redemption.  At any time, which may be more than once, before June 15, 2014, we may redeem up to 35% of the aggregate principal amount of the 2019 Notes with net cash proceeds of one or more equity offerings at a redemption price of 107.5% of the par value of the 2019 Notes redeemed, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, as long as we redeem the 2019 Notes within 180 days of completing the equity offering and at least 65% of the aggregate principal amount of the 2019 Notes issued remains outstanding after the redemption.

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The 2019 Notes were issued under the indenture, by and among us, the guarantors named therein and BOKF, NA dba Bank of Texas, as trustee, and are guaranteed by the guarantors.  The guarantees are senior unsecured obligations of the guarantors.  The guarantees rank equally with all existing and future senior unsecured indebtedness of the guarantors and senior to any existing and future subordinated indebtedness of the guarantors.  The guarantees are effectively subordinated to any existing or future secured indebtedness of the guarantors to the extent of the assets securing such indebtedness.  The 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, 2011, we were in compliance with all covenants under the indenture governing the 2019 Notes.

Revolving Bank Credit Facility

On May 25, 2011, we, Comerica Bank, in its capacity as administrative agent, and certain other lenders, entered into the Fourteenth Amendment to Revolving Credit Agreement (the “Amendment”) to amend the Revolving Credit Agreement dated July 5, 2006 (as amended, the “Credit Agreement”), by and between us, Comerica Bank as administrative agent and certain other lenders, as previously amended.

The Amendment provided for the following: (1) extends the maturity date under the Credit Agreement to April 2016 from January 2014; (2) authorizes us to issue up to $225 million in aggregate amount of senior notes; (3) includes an accordion feature pursuant to which, and subject to the conditions set forth in the Amendment, the current aggregate revolving credit commitments of $175 million under the Credit Agreement may be increased at our request by up to $50 million; (4) increases the maximum Leverage Ratio to 5.25:1.00 from 4.50:1.00; (5) increases the maximum Senior Secured Funded Debt Leverage Ratio to 3.25:1.00 from 2.50:1.00; (6) allows net proceeds from any sales of new equity securities to be used to repurchase preferred stock or be used for expansion expenditures, provided that (i) it occurs within 90 days of any such equity offering and (ii) with respect to preferred stock repurchases, there is a 0.25 cushion under both leverage ratios after such repurchase and at least $10 million in liquidity; (7) allows for reinvestment of proceeds from asset sales to be reinvested back into the business so long as they occur within 12 months; (8) provides adjustments to Pro Forma Adjusted EBITDA for up to $10 million in transaction costs for the bond refinancing evidenced by the Purchase Agreement for the 2019 Notes (and the related tender offer for our senior notes due 2014) and the Amendment, respectively; and (9) provides for the addition of two new lenders to the bank group under the Credit Agreement and for the departure of an existing lender.

We incurred $1.3 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.

The following table highlights the current margins under the Credit Agreement:

Basis for	Leverage	Facility		LIBOR		All-In		Letter of Credit		Base Rate
Pricing	Ratio	Fee		Margin		Spread		Fees		Margin
Level I	< 3.00:1.0		0.375		2.125		2.500		2.125		1.625
Level II	≥3.00:1.0 but <3.50:1.0		0.375		2.375		2.750		2.375		1.875
Level III	≥3.50:1.0 but <4.00:1.0		0.375		2.625		3.000		2.625		2.125
Level IV	≥4.00:1.0 but <4.50:1.0		0.625		2.625		3.250		2.625		2.125
Level V	≥4.50:1.0		0.875		2.625		3.500		2.625		2.125

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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), to maintain specified debt service ratios, to limit capital expenditures, and to maintain a minimum tangible net worth.  Each of the financial covenants incorporates specially defined terms that do not correspond to GAAP or Non-GAAP measures disclosed in this quarterly 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 5.25 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 3.25 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 (as defined in the Credit Agreement) 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.

On February 28, 2011, 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 Thirteenth Amendment to Revolving Credit Agreement (the “Thirteenth Amendment”) to amend the Credit Agreement.

The Thirteenth Amendment provided lender consent to the acquisition of certain assets in Florida collectively referred to as the “Emerald Waste Central Florida (“EWS”) Acquisition”, and the acquired entities were added to the list of Subsidiaries and Guarantors.  The definition of Maintenance Capital Expenditures was modified for the year ending December 31, 2011 to exclude Maintenance Capital Expenditures incurred in connection with the EWS Acquisition in excess of $3 million but not exceeding $14 million for the purposes of determining covenant compliance.

As of September 30, 2011, we were in compliance with all covenants under the credit facility.

Preferred Stock

On June 12, 2006, we entered into a privately negotiated Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Ares Corporate Opportunities Fund II L.P. (“Ares”), which provided for us to issue and sell 750,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share, to Ares. The purchase price per preferred share was $100.00, for an aggregate purchase price of $75 million.  The preferred stock is convertible into our common stock, par value $0.01 per share, at a price of $9.60 per share and carries a 5% PIK dividend payable semi-annually.  The closing of the sale and issuance of the full amount of preferred shares pursuant to the Purchase Agreement was completed on July 27, 2006.  The original issuance date for the preferred stock is the commitment date for both the preferred stock and the initial five years’ worth of dividends as the payment of the dividends through in-kind payments were non-discretionary for the initial five-year period that expired on July 27, 2011.  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.

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The preferred shares are immediately convertible at Ares’ discretion into 10,089,371 shares of our common stock, which would represent approximately 29.9% of our outstanding common stock on a post-conversion basis as of September 30, 2011.  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.  Because the preferred shares have not been converted within five years of issuance, we have the option to PIK or pay a cash dividend at the rate of 5% per annum.  The preferred shares have no stated maturity and no mandatory redemption requirements.

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 our common stock pursuant to an effective registration statement (except for common stock issued pursuant to a 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,” defined in the Purchase Agreement as 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 would result 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;

·   we can redeem for cash equal to the liquidation preference;

·   we can pay dividends 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 would entitle Ares to its 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 would 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 would have the option of requiring Ares to accept such common shares to satisfy the liquidation preference if shares are then quoted on the Nasdaq Stock Market or listed on the New York Stock Exchange.  The value of such shares is to be determined at 98% of the closing price on the trading day preceding the transaction and the shares are freely transferable without legal or contractual restrictions;

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·   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 if it holds below 10% of our post-conversion equity;

·   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 to our business during the three and nine months ended September 30, 2011 other than the items listed in the Contractual Obligations table included in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 10, 2011.

Cash Flows

Net cash provided by operating activities for the nine months ended September 30, 2011 and 2010 was $27.4 million and $22.9 million, respectively.  The changes in cash flows from operating activities period over period were due to the change from net income to net loss adjusted for certain charges and changes in components of working capital.  The adjusted charges primarily consist of depreciation and amortization, deferred taxes, unrealized gain or loss on interest rate swap, amortization and write-off of deferred financing costs, loss on early extinguishment of debt, stock-based compensation, gain or loss on sale of assets and landfill accretion expense.  While these charges affect our earnings comparison, they have no impact on net cash provided by operating activities.  Adjusted for these charges, net income increased $10.0 million in 2011 over 2010.  It primarily reflected increases in operating income and cash savings due to the expiration of interest rate swap on November 1, 2010.  Working capital changes are typically driven by changes in accounts receivable, which are affected by both revenue changes and timing of payments received, and changes in accounts payable, which are affected by both cost changes and timing of payments.  Changes in our working capital accounts unfavorably impacted cash flows from operating activities during the nine months ended September 30, 2011 as compared to the same period in 2010.

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 $63.5 million and $23.8 million for the nine months ended September 30, 2011 and 2010, respectively.  The fluctuation is mainly caused by additional $34.6 million spent on acquisitions period over period.  In addition, capital expenditures related to our existing operations increased $5.1 million period over period.

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Net cash provided by (used in) financing activities for the nine months ended September 30, 2011 and 2010 was $37.6 million and $(1.6) million, respectively.  Net cash provided by (used in) financing activities during the nine months ended September 30, 2011 and 2010 mainly includes a combination of proceeds from issuance of our 2019 Notes, repayment of our 2014 Notes, borrowings under our revolving credit facilities, repayment of other debt and financing costs incurred.

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 quarterly report and in note 1 (f) to our financial statements in our annual report on Form 10-K for the year ended December 31, 2010.  For a description of other significant accounting policies, see note 1 to the financial statements included in Item 1 of this quarterly report and in note 1 to our financial statements in our annual report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 10, 2011.

In summary, our landfill accounting policies include the following:

Capitalized Landfill Costs

At September 30, 2011, we owned 25 landfills.  Two of these landfills are fully permitted but not constructed and have not yet commenced operations as of September 30, 2011.

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, 2011, 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 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 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;

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·   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 we are unsuccessful in obtaining these permits, the previously capitalized costs will be charged to expense.  As of September 30, 2011, we have included 139 million cubic yards of expansion airspace with estimated development costs of approximately $93.5 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.

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, 2011 and the year ended December 31, 2010:

	Nine Months Ended		Year Ended
	September 30,		December 31,
	2011		2010
Number of landfills owned		25		25
Landfill depletion and amortization expense (in thousands)	$	9,318	$	12,598
Accretion expense (in thousands)		740		1,095
	$	10,058	$	13,693
Airspace consumed (in thousands of cubic yards)		4,544		6,186
Depletion, amortization, accretion, closure and post-closure costs per cubic yard of airspace consumed	$	2.21	$	2.21

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.  As of September 30, 2011, we had $104.0 million in borrowings under our revolving credit facility which bears interest at variable or floating rates.  A 100 basis point increase in LIBOR interest rates would increase our annual interest expense by approximately $1.0 million.

Our financial instruments that are potentially sensitive to changes in interest rates also include our 2019 Notes.  As of September 30, 2011, the fair value of the 2019 Notes, based on quoted market prices, was approximately $166.3 million compared to a carrying amount of $175 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, 2011.  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, 2011 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 SEC’s 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 material changes in our risk factors since December 31, 2010.  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, 2010.

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, 2011		—			—		—		—
August 1 – August 31, 2011		—			—		—		—
September 1 – September 30, 2011		17,060	(1)	$	4.22		—		—
Total		17,060	(1)	$	4.22		—		—

(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*	First Supplemental Indenture, dated as of October 12, 2011, by and among WCA Waste Corporation, the guarantors named therein and BOKF, NA dba Bank of Texas, as trustee.
12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2011.
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 27, 2011

EXHIBIT INDEX

10.1*	First Supplemental Indenture, dated as of October 12, 2011, by and among WCA Waste Corporation, the guarantors named therein and BOKF, NA dba Bank of Texas, as trustee.
12.1*	Statement regarding computation of ratio of earnings to fixed charges for the nine months ended September 30, 2011.
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.