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  Exhibit 4.5    
    


 BFI Canada Ltd. — MD&A for the three months ended March 31, 2009  



 Conversion  


        Pursuant to the plan of arrangement, the conversion of the BFI Canada Income Fund (the "Fund") trust structure to a corporation
resulted in unitholder's of the Fund receiving one common share of BFI Canada Ltd. (the "Company") for each trust unit held on the effective date of conversion, October 1, 2008.
The Class A unit held by IESI Corporation ("IESI") was redeemed by the Fund for ten dollars and the Company issued, and IESI subscribed for, 11,137 special voting shares for aggregate
cash consideration of ten dollars. The participating preferred shares ("PPSs") issued by IESI remained outstanding and exchangeable into common shares of the Company on a one for one basis, instead of
trust units of the Fund. The consolidated financial statements of the Company have been prepared applying continuity of interests accounting. With the exception of the December 31, 2008
consolidated balance sheet, the comparative figures presented herein are those of the Fund. 


 Disclaimer  


        This document may contain forward-looking information relating to the operations of the Company or to the environment in which it
operates, which are based on estimates, forecasts, and projections. Forward-looking information is not a guarantee of future performance and involves risks and uncertainties that are difficult to
predict, or are beyond management's control. A number of factors could cause actual outcomes and results to differ materially from those estimated, forecast or projected. These factors include those
set forth in the Company's Annual Information Form ("AIF") for the year ended December 31, 2008 and the Company's Management Information Circular dated March 23, 2009. Consequently,
readers should not rely on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking information contained
herein is based on what management believes to be reasonable assumptions, users are cautioned that actual results may differ. Management disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. 



 Introduction  


        The following is a discussion of the consolidated financial condition and results of operations of the Company for the three months
ended March 31, 2009 and has been prepared with all available information up to and including April 29, 2009. In accordance with the Canadian Institute of Chartered Accountants ("CICA")
Emerging Issues Committee ("EIC") abstract 170, "Conversion of an Unincorporated Entity to an Incorporated Entity", the plan of arrangement, and resulting one for one exchange of the Fund's trust
units into common shares of the Company, did not constitute a change of control. Accordingly, the consolidated financial statements of the Company have been prepared applying continuity of interests
accounting. For the purpose of Management's Discussion and Analysis ("MD&A"), the term "Company" shall denote the financial position and results of operations for the Company and the Fund, and its
respective subsidiaries, for all periods presented herein. All amounts are reported in Canadian dollars, unless otherwise stated. The consolidated financial statements ("financial statements") of the
Company have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") applicable to interim financial statements. This discussion should be read in conjunction with
the financial statements of the Company, including notes thereto, and the MD&A for the three months ended March 31, 2008 and year ended December 31, 2008, both of which are filed on  www.sedar.com. 



 Corporate Overview  


        The Company, through its operating subsidiaries, is one of North America's largest full-service waste management companies,
providing non-hazardous solid waste ("waste") collection and disposal services to commercial, industrial, municipal and residential customers in five Canadian provinces and ten states, and
the District of Columbia, in the United States
("U.S."). The Company provides service to over 1.8 million customers with vertically integrated collection and disposal assets. 


        The
Company's Canadian segment operates under the BFI Canada brand and is Canada's second largest full-service waste management company providing vertically integrated waste
collection and disposal services in 


1







 



the
provinces of British Columbia, Alberta, Manitoba, Ontario, and Quebec. This segment provides service to 20 Canadian markets and operates five landfills, four transfer collection stations,
seven material recovery facilities ("MRFs"), and one landfill gas to energy facility. 


        The
Company's U.S. south and northeast segments, collectively the U.S. segment or U.S. segments, operate under the IESI brand and provide vertically integrated waste
collection and disposal services in two geographic regions: the south, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas, Mississippi, and Missouri, and the northeast,
consisting of various service areas in New York, New Jersey, Pennsylvania, Maryland, and the District of Columbia. This segment provides service to 39 U.S. markets and
operates 16 landfills, 28 transfer collection stations, 11 MRFs, and one transportation operation. 



 Highlights — For the three months ended March 31, 2009  


(all amounts are in thousands of Canadian dollars, except per share or trust unit and participating preferred share ("PPS"), unless otherwise
stated)


 Financial highlights  



								
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008(1) 	 
	 Operating results
	 	 	 	 	 	 	 
	 Revenues
	 	 $	278,818	 	 $	244,347	 
	 Operating expenses
	 	 	 163,357	 	 	 147,148	 
	 Selling, general and administration expenses ("SG&A")
	 	 	 37,434	 	 	 30,341	 
	 	 	 	 	 	 
	 Income before the following ("EBITDA(A)")
	 	 	 78,027	 	 	 66,858	 
	 Amortization
	 	 	 46,564	 	 	 42,577	 
	 Interest on long-term debt
	 	 	 11,461	 	 	 13,374	 
	 Financing costs
	 	 	 383	 	 	 —	 
	 Net (gain) loss on sale of capital assets and landfill assets
	 	 	 (167	)	 	 40	 
	 Net foreign exchange loss (gain)
	 	 	 104	 	 	 (624	)
	 Net loss on financial instruments
	 	 	 660	 	 	 9,047	 
	 Other expenses
	 	 	 37	 	 	 31	 
	 	 	 	 	 	 
	 Income before income taxes
	 	 	 18,985	 	 	 2,413	 
	 	 	 	 	 	 
	 Net income tax expense (recovery)
	 	 	 6,726	 	 	 (8,061	)
	 	 	 	 	 	 
	 Net income
	 	 $	12,259	 	 $	10,474	 
	 	 	 	 	 	 
	 Net income — attributable to common shareholders
	 	 $	10,519	 	 $	8,776	 
	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic
	 	 $	0.18	 	 $	0.15	 
	 Net income per weighted average share or trust unit, diluted
	 	 $	0.17	 	 $	0.15	 
	 Shares or trust units and PPSs outstanding
	 	 	 	 	 	 	 
	 Weighted average number of shares or trust units outstanding
	 	 	 59,306	 	 	 57,568	 
	 Weighted average number of PPSs outstanding
	 	 	 11,137	 	 	 11,138	 
	 	 	 	 	 	 
	 Weighted average number of shares or trust units and PPSs outstanding
	 	 	 70,443	 	 	 68,706	 
	 	 	 	 	 	 
	 Aggregate number of shares or trust units and PPSs outstanding
	 	 	 78,481	 	 	 68,706	 
	 	 	 	 	 	 





2







 


								
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008(1) 	 
	 Replacement and growth expenditures(1)
	 	 	 	 	 	 	 
	 Replacement capital and landfill purchases ("replacement expenditures") — (see page 12)
	 	 $	15,523	 	 $	8,929	 
	 Growth capital and landfill purchases ("growth expenditures")
	 	 	 9,598	 	 	 12,480	 
	 	 	 	 	 	 
	 Total replacement and growth expenditures
	 	 $	25,121	 	 $	21,409	 
	 	 	 	 	 	 
	 Operating and free cash flow(B)(1)
	 	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 $	60,978	 	 $	42,934	 
	 Free cash flow(B) — (see page 10)
	 	 $	37,724	 	 $	30,783	 
	 Free cash flow(B) per weighted average share or trust unit and PPS
	 	 $	0.54	 	 $	0.45	 
	 Dividends and distributions declared
	 	 	 	 	 	 	 
	 Dividends and distributions declared (shares or trust units)
	 	 $	16,836	 	 $	26,164	 
	 Dividends declared (PPSs)
	 	 	 2,784	 	 	 5,063	 
	 	 	 	 	 	 
	 Total dividends and distributions declared
	 	 $	19,620	 	 $	31,227	 
	 	 	 	 	 	 
	 Total dividends or distributions declared per weighted average share or trust

unit and PPS
	 	 $	0.28	 	 $	0.45	 











Notes: 


	(1)
	Net
income presented throughout this MD&A has been restated to reflect the adoption of the new accounting standard for non-controlling interests
(see Note 4 to the consolidated financial statements). In addition, free cash flow(B) and replacement and growth expenditures have been restated to conform to the
current period's presentation. Please refer to page 10 and 12 of this MD&A for further details on the calculations and their methodologies. 



 Financial highlights for the three months ended March 31, 2009  



					
	 
	 	Three months ended

March 31 	 
	 Increase in revenues
	 	 $	34,471	 
	 Percentage increase in revenues
	 	 	 14.1%	 
	 	 	 	 
	 Increase in EBITDA(A)
	 	 $	11,169	 
	 Percentage increase in EBITDA(A)
	 	 	 16.7%	 
	 	 	 	 
	 Increase in cash generated from operating activities
	 	 $	18,044	 
	 Percentage increase in cash generated from operating activities
	 	 	 42.0%	 
	 	 	 	 
	 Increase in free cash flow(B)
	 	 $	6,941	 
	 Percentage increase in free cash flow(B)
	 	 	 22.5%	 
	 	 	 	 






 Other highlights for the three months ended March 31, 2009  



	•
	On March 6, 2009, the Company closed its public offering of 8,500 common shares at $9.50 per share for total
gross proceeds of $80,750. The Company applied the net proceeds from the public offering, approximately U.S. $61,500, to the repayment of outstanding borrowings on its
U.S. long-term debt facility.   



	•
	On March 30, 2009, the Company closed the over-allotment option on its public offering of
1,275 common shares at $9.50 per share for total gross proceeds of $12,113. The Company applied the net proceeds from the over-allotment option, approximately U.S. $9,500, to
the repayment of outstanding borrowings on its U.S. long-term debt facility.   



	•
	At March 31, 2009, the Company's funded debt to EBITDA(A) ratios, calculated in accordance with its
Canadian and U.S. long-term debt facilities, are 1.96 and 3.44 times, respectively. 



3







 





 Review of Operations — For the three months ended March 31, 2009  


(all amounts are in thousands of Canadian dollars, except foreign currency exchange rate amounts, unless otherwise stated)



 Foreign Currency Exchange Rates  


        The Company reports its financial results in Canadian dollars. Accordingly, changes in the foreign currency exchange rate between
Canada and the U.S. impacts the translated value of the Company's U.S. operating results. U.S. operating results are translated to Canadian dollars using the current rate method
of accounting which applies the average foreign currency exchange rate in effect between Canada and the U.S. during the reporting period. U.S. assets and liabilities are translated to
Canadian dollars at the foreign currency exchange rate in effect at the consolidated balance sheet date. Translation adjustments are included in other comprehensive income and are only included in the
determination of net income when a reduction in the Company's investment in its foreign operations is realized. 



        The
U.S. segments' financial position and operating results have been translated to Canadian dollars applying the following foreign currency exchange rates: 



																				
	 
	 	2009 	 	2008 	 
	 
	 	Consolidated

Balance Sheet 	 	Consolidated Statement of

Operations and Comprehensive

Income 	 	Consolidated

Balance Sheet 	 	Consolidated Statement of

Operations and Comprehensive

Income 	 
	 
	 	Current 	 	Average 	 	Cumulative

Average 	 	Current 	 	Average 	 	Cumulative

Average 	 
	 December 31
	 	 	 	 	 	 	 	 	 	 	 $	1.225	 	 	 	 	 $	1.067	 
	 March 31
	 	 $	1.260	 	 $	1.245	 	 $	1.245	 	 $	1.028	 	 $	1.004	 	 $	1.004	 





4









 



































   Foreign Currency Exchange Impact on Consolidated Results  


        The following table has been prepared to assist readers in assessing the impact of foreign currency exchange on the Company's
consolidated results for the three months ended March 31, 2009. 



											
	 
	 	Company results

for 2009

less 2008 	 	Impact of foreign

currency

exchange(2) 	 	Organic, acquisition

and other

non-operating

changes 	 
	 
	 	(unaudited) 	 	(unaudited) 	 	(unaudited) 	 
	 Financial highlights
	 	 	 	 	 	 	 	 	 	 
	 Revenues
	 	 $	34,471	 	 $	36,885	 	 $	(2,414	)
	 Operating expenses
	 	 	 16,209	 	 	 22,744	 	 	 (6,535	)
	 SG&A
	 	 	 7,093	 	 	 4,809	 	 	 2,284	 
	 	 	 	 	 	 	 	 
	 EBITDA(A)
	 	 	 11,169	 	 	 9,332	 	 	 1,837	 
	 Amortization
	 	 	 3,987	 	 	 6,288	 	 	 (2,301	)
	 Interest on long-term debt
	 	 	 (1,913	)	 	 1,648	 	 	 (3,561	)
	 Financing costs
	 	 	 383	 	 	 —	 	 	 383	 
	 Net gain (loss) on sale of capital and landfill assets
	 	 	 (207	)	 	 (12	)	 	 (195	)
	 Net foreign exchange loss (gain)
	 	 	 728	 	 	 27	 	 	 701	 
	 Net loss on financial instruments
	 	 	 (8,387	)	 	 109	 	 	 (8,496	)
	 Other expenses
	 	 	 6	 	 	 7	 	 	 (1	)
	 	 	 	 	 	 	 	 
	 Income before income taxes
	 	 	 16,572	 	 	 1,265	 	 	 15,307	 
	 	 	 	 	 	 	 	 
	 Net income tax expense
	 	 	 14,787	 	 	 526	 	 	 14,261	 
	 	 	 	 	 	 	 	 
	 Net income
	 	 $	1,785	 	 $	739	 	 $	1,046	 
	 	 	 	 	 	 	 	 
	 Review of Operations
	 	 	 	 	 	 	 	 	 	 
	 Revenues — Canada
	 	 $	2,628	 	 $	—	 	 $	2,628	 
	 Revenues — U.S. south
	 	 	 19,868	 	 	 19,309	 	 	 559	 
	 Revenues — U.S. northeast
	 	 	 11,975	 	 	 17,576	 	 	 (5,601	)
	 	 	 	 	 	 	 	 
	 Total revenues
	 	 $	34,471	 	 $	36,885	 	 $	(2,414	)
	 	 	 	 	 	 	 	 
	 Operating expenses — Canada
	 	 $	(607	)	 $	—	 	 $	(607	)
	 Operating expenses — U.S. south
	 	 	 8,152	 	 	 11,536	 	 	 (3,384	)
	 Operating expenses — U.S. northeast
	 	 	 8,664	 	 	 11,208	 	 	 (2,544	)
	 	 	 	 	 	 	 	 
	 Total operating costs
	 	 $	16,209	 	 $	22,744	 	 $	(6,535	)
	 	 	 	 	 	 	 	 
	 SG&A — Canada
	 	 $	1,534	 	 $	—	 	 $	1,534	 
	 SG&A — U.S. south
	 	 	 3,457	 	 	 2,685	 	 	 772	 
	 SG&A — U.S. northeast
	 	 	 2,102	 	 	 2,124	 	 	 (22	)
	 	 	 	 	 	 	 	 
	 Total SG&A
	 	 $	7,093	 	 $	4,809	 	 $	2,284	 
	 	 	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 $	18,044	 	 $	6,097	 	 $	11,947	 
	 Free cash flow(B)
	 	 $	6,941	 	 $	4,448	 	 $	2,493	 
	 Replacement and growth expenditures
	 	 	 	 	 	 	 	 	 	 
	 Total
	 	 $	3,712	 	 $	2,868	 	 $	844	 
	 Replacement — Canada
	 	 $	3,339	 	 $	—	 	 $	3,339	 
	 Replacement — U.S.
	 	 $	3,255	 	 $	1,787	 	 $	1,468	 
	 Growth — Canada
	 	 $	(2,251	)	 $	—	 	 $	(2,251	)
	 Growth — U.S.
	 	 $	(631	)	 $	1,081	 	 $	(1,712	)











Notes: 


	(2)
	U.S. segment
results, stated in U.S. dollars, for the three month period ended March 31, 2009 multiplied by the difference between the
2009 and 2008 average foreign currency exchange rate. 


5







 

 Revenues  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	278,818	 	 $	244,347	 	 $	34,471	 
	 Canada
	 	
$	

88,396	 	
$	

85,768	 	
$	

2,628	 
	 U.S. south
	 	 $	99,684	 	 $	79,816	 	 $	19,868	 
	 U.S. northeast
	 	 $	90,738	 	 $	78,763	 	 $	11,975	 






 Revenue by service type  



														
	 
	 	Three months ended March 31, 2009 	 
	 
	 	Canada 	 	Canada — percentage of

gross revenues 	 	U.S. — stated in

U.S. dollars 	 	U.S. — percentage

of gross

revenues 	 
	 Commercial
	 	 $	38,754	 	 	 39.2%	 	 $	45,895	 	 	 25.9%	 
	 Industrial
	 	 	 17,030	 	 	 17.2%	 	 	 25,105	 	 	 14.2%	 
	 Residential
	 	 	 13,885	 	 	 14.1%	 	 	 37,925	 	 	 21.4%	 
	 Transfer and disposal
	 	 	 23,842	 	 	 24.1%	 	 	 61,504	 	 	 34.7%	 
	 Recycling and other
	 	 	 5,247	 	 	 5.3%	 	 	 6,583	 	 	 3.7%	 
	 	 	 	 	 	 	 	 	 	 
	 Gross revenues
	 	 	 98,758	 	 	 100.0%	 	 	 177,012	 	 	 100.0%	 
	 Intercompany
	 	 	 (10,362	)	 	 	 	 	 (24,102	)	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Revenues
	 	 $	88,396	 	 	 	 	 $	152,910	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 






 Gross revenue growth components — expressed in percentages and excluding foreign currency exchange  



									
	 
	 	Three months ended March 31, 2009 	 
	 
	 	Canada 	 	U.S. 	 
	 Price
	 	 	 	 	 	 	 
	 	 Core price
	 	 	 3.4%	 	 	 2.5%	 
	 	 Fuel surcharges
	 	 	 -0.5%	 	 	 -1.2%	 
	 	 Recycled commodities
	 	 	 -0.8%	 	 	 -2.5%	 
	 	 	 	 	 	 
	 	 Total price
	 	 	 2.1%	 	 	 -1.2%	 
	 Volume
	 	 	

-2.0%	 	 	

-4.2%	 
	 	 	 	 	 	 
	 Total organic growth
	 	 	 0.1%	 	 	 -5.4%	 
	 Acquisitions
	 	 	

3.7%	 	 	

2.2%	 
	 	 	 	 	 	 
	 Total gross revenue growth
	 	 	 3.8%	 	 	 -3.2%	 
	 	 	 	 	 	 






        The
increase in Canadian segment gross revenues is due principally to core price and acquisition growth, approximately $3,200 and $3,500, respectively. Core price growth is due in part
to the recovery of recycled commodity price declines. The decline in fuel surcharges is attributable to the decline in the comparative cost of diesel fuel, while the decline in volumes, approximately
$1,900, is due in large part to lower third party waste volumes accepted at the Company's landfills. Management remains optimistic that most of the volume shortfalls experienced in the first quarter
of 2009 will be recovered over the balance of the year. Recycled commodity pricing declines represent the balance of the change. 



        Excluding
the impact of foreign currency exchange, approximately $21,400, U.S. south segment gross revenues increased approximately $600. Core pricing remained strong and
contributed approximately $3,200 to the comparative increase. Fuel surcharges were the primary offsets to core price growth, approximately $1,900, 


6







 



due
to the comparative decline in diesel fuel costs. Lower construction and demolition volumes and recycled commodity pricing also contributed to the decline in U.S. south segment
gross revenues. 


        Net
of the foreign currency exchange impact, approximately $21,300, gross revenues in the U.S. northeast segment declined approximately $6,500. Lower industrial collection,
transfer and disposal volumes accounted for approximately $7,100 of the comparative decline, while recycling commodity price declines contributed an additional approximately $4,200 to this segments
decline. Acquisitions, approximately $3,800, coupled with net price increases, approximately $1,300, partially offset the aforementioned. Compared to the preceding quarter ended December 31,
2008, the Company's U.S. northeast segment exhibited stabilizing characteristics in the first quarter of 2009. Management is encouraged by this trend and is optimistic about the
U.S. northeast segments prospects for the balance of 2009. 


 Operating expenses  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	163,357	 	 $	147,148	 	 $	16,209	 
	 Canada
	 	
$	

45,937	 	
$	

46,544	 	
$	

(607	
)
	 U.S. south
	 	 $	59,554	 	 $	51,402	 	 $	8,152	 
	 U.S. northeast
	 	 $	57,866	 	 $	49,202	 	 $	8,664	 






        The
decline in Canadian segment operating expenses is due to lower vehicle operating costs, largely due to a decline in comparative fuel costs, approximately $1,100, and lower expenses
incurred for landfill development initiatives, approximately $1,000. These declines were partially offset by higher disposal costs, approximately $1,500. Higher disposal costs are the result of
servicing new customers acquired principally through acquisition. 


        Excluding
the impact of foreign currency exchange, approximately $11,500, operating expenses in the U.S. south declined. The decline in operating expenses is due to lower vehicle
operating costs, approximately $3,400, which is due in large part to lower fuel costs. 



        Similarly,
operating expenses in the U.S. northeast segment also declined when foreign currency exchange is excluded from this segments period over period change, approximately
$11,200. The principal contributor to the operating expense decline is lower disposal volumes and third party transportation costs. Lower disposal volumes are due to the economic slowdown in the
region, while lower transportation costs are due to the comparative decline in fuel costs. 


 SG&A  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	37,434	 	 $	30,341	 	 $	7,093	 
	 Canada
	 	
$	

12,604	 	
$	

11,070	 	
$	

1,534	 
	 U.S. south
	 	 $	13,864	 	 $	10,407	 	 $	3,457	 
	 U.S. northeast
	 	 $	10,966	 	 $	8,864	 	 $	2,102	 






        The
increase in Canadian segment SG&A is primarily attributable to higher salaries, approximately $1,300. The comparative increase is the result of acquisition and organic growth,
additional compensation expense to retain certain executive employees, and additional sales staff. 


        Excluding
the impact of foreign currency exchange, U.S. south segment SG&A expense increased approximately $800. The increase is due largely to additional sales staff, salary and
facility and office costs and is attributable to organic growth. 


        The
entire U.S. northeast segment increase is on account of foreign currency exchange, approximately $2,100. 


7









 




































  Amortization  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	46,564	 	 $	42,577	 	 $	3,987	 
	 Canada
	 	
$	

14,103	 	
$	

13,592	 	
$	

511	 
	 U.S. south
	 	 $	14,152	 	 $	12,244	 	 $	1,908	 
	 U.S. northeast
	 	 $	18,309	 	 $	16,741	 	 $	1,568	 






        In
aggregate, and excluding the impact of foreign currency exchange, approximately $6,300, amortization declined comparatively. Lower amortization expense is attributable to changes in
future permitted airspace capacity estimates at the Company's Seneca Meadows landfill, which results in projected landfill construction and development costs being amortized over a higher estimate of
landfill capacity. 


 Interest on long-term debt  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	11,461	 	 $	13,374	 	 $	(1,913	)
	 Canada
	 	
$	

2,955	 	
$	

2,784	 	
$	

171	 
	 U.S.
	 	 $	8,506	 	 $	10,590	 	 $	(2,084	)






        Higher
long-term debt borrowings, partially offset by lower borrowing costs on variable rate lending, is the primary reason for the Canadian segment increase in interest on
long-term debt. Higher Canadian segment borrowings are the result of acquisitions, organic growth, capital contributions to IESI in 2008, and absorbing a larger portion of the Company's
distributions and dividends paid to unit and shareholders through 2008. 


        The
decline in U.S. segment interest on long-term debt is due to a combination of lower borrowing costs on variable rate lending and lower long-term debt
borrowings. Lower long-term debt borrowings are primarily attributable to the application of net proceeds from the Company's share offerings in March 2009 and capital contributions
from the Company's Canadian segment in 2008. 


 Financing costs  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	383	 	 $	—	 	 $	383	 
	 Canada
	 	
$	

383	 	
$	

—	 	
$	

383	 
	 U.S.
	 	 $	—	 	 $	—	 	 $
	—

	 






        The
Company incurred additional financing costs to update its lenders security over certain assets in Canada and to explore debt financing options within its structure. 


 Net (gain) loss on sale of capital and landfill assets  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	(167	)	 $	40	 	 $	(207	)
	 Canada
	 	
$	

(105	
)	
$	

(3	
)	
$	

(102	
)
	 U.S.
	 	 $	(62	)	 $	43	 	 $	(105	)





8







 

        In
2009, the disposition of certain equipment in Canada and the U.S. and certain U.S. south segment landfill assets, resulted in the net gain on sale of capital and landfill
assets. 


        For
2008, the Company disposed of certain equipment in Canada and the U.S. which resulted in the net (gain) or loss on sale of capital and landfill assets, respectively. 


 Net foreign exchange loss (gain)  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	104	 	 $	(624	)	 $	728	 
	 Canada
	 	
$	

(32	
)	
$	

(5	
)	
$	

(27	
)
	 U.S.
	 	 $	136	 	 $	(619	)	 $	755	 






        In
2008, net foreign exchange gains realized by the Company's U.S. segment were principally attributable to gains realized on the settlement of foreign currency hedge agreements.
These agreements expired in February 2008 and were not replaced. 


 Net loss on financial instruments  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	660	 	 $	9,047	 	 $	(8,387	)
	 Canada
	 	
$	

98	 	
$	

22	 	
$	

76	 
	 U.S.
	 	 $	562	 	 $	9,025	 	 $	(8,463	)






        In
2009, the Canadian segment loss on financial instruments is due to changes in the fair value of funded landfill post-closure costs. The U.S. segment loss is the
result of changes in the fair value of interest rate swaps. 


        In
2008, the Canadian segment loss on financial instruments relates to changes in the fair value of funded landfill post-closure costs. U.S. segment losses were due
largely to interest rate swaps, approximately $7,400, which was entirely the result of a decline in interest rates. The expiry of foreign currency hedge agreements contributed approximately $1,700 to
the 2008 loss partially offset by a marginal gain on old corrugated cardboard ("OCC") hedge agreements. 


 Other expenses  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	37	 	 $	31	 	 $	6	 
	 Canada
	 	
$	

—	 	
$	

—	 	
$	

—	 
	 U.S.
	 	 $	37	 	 $	31	 	 $	6	 






        Other
expenses are comprised of management bonus costs related to certain acquisitions. 


9







 

 Net income tax expense (recovery)  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	6,726	 	 $	(8,061	)	 $	14,787	 
	 Canada
	 	
$	

4,010	 	
$	

(704	
)	
$	

4,714	 
	 U.S.
	 	 $	2,716	 	 $	(7,357	)	 $	10,073	 






        In
Canada, current income tax expense increased by approximately $1,000. The erosion of losses available for carryforward in certain Canadian operating entities is the primary reason for
the increase in current income taxes. The balance of the Canadian segment increase is due to an approximately $3,700 increase in future income tax expense. The utilization of losses available for
carryforward within the Canadian segment group of companies effectively reduces future income tax assets and increases future income tax expense. In the first quarter of 2009, utilized tax losses
accounted for approximately $3,300 of this segments future income tax expense, compared to a 2008 first quarter recovery of approximately $1,300. The balance of the change is due to net future income
tax recoveries recognized on timing differences between the carrying value of Canadian segment intangibles and capital assets and their tax values. 


        Excluding
the impact of foreign currency exchange, approximately $500, income tax expense increased approximately $9,600 period over period for the Company's U.S. segment. Current
income tax expense was virtually unchanged comparatively, leaving future income tax expenses as the lone contributor to the comparative increase. Similar to the Canadian segment, the primary
contributor to the Company's comparative U.S. segment increase in future income tax expense is the utilization of tax losses available for carryfoward. In the first quarter of 2009, the
Company's U.S. segment recognized future income tax expense of approximately $2,000 resulting from the utilization of tax losses, compared to a 2008 first quarter recovery
of approximately $4,700. The balance of the change is due to higher future income tax recoveries recognized in 2008 on timing differences between the carrying value of U.S. segment capital
assets and their tax values. 


 Non-controlling interest  


        With the early adoption of Canadian Institute of Chartered Accountants ("CICA") accounting standard Non-Controlling
Interests (section 1602), effective January 1, 2009, the Company changed its presentation of non-controlling interests from mezzanine equity to equity on the Company's
consolidated balance sheet. Non-controlling interest is no longer deducted in the determination of net income. Instead, net income and each component of other comprehensive income are
attributed to shareholders' equity and non-controlling interest. Adopting this section affects the Company's determination of net income presented in the consolidated statement of
operations and comprehensive income, the presentation of net income and non-controlling interest in the consolidated statement of cash flows, and the presentation of
non-controlling interest in the consolidated statement of equity. 


 Other Performance Measures — For the three months ended March 31, 2009  



(all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)


 Free cash flow(B)  


 Purpose and objective  


        The purpose of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other
U.S. based companies in the waste industry. Investors and analysts use this calculation as a measure of a company's valuation and liquidity. Management
uses this non-GAAP measure to assess its performance relative to other U.S. based companies, to assess its primary sources and uses of cash flow, and to assess its ability to
sustain its dividend policy. 


10









 




































  Free cash flow(B) — cash flow approach  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Cash generated from operating activities (per statement of cash flows)
	 	 $	60,978	 	 $	42,934	 	 $	18,044	 
	 	 	 	 	 	 	 	 
	 Operating
	 	 	 	 	 	 	 	 	 	 
	 Changes in non-cash working capital items
	 	 	 1,757	 	 	 10,579	 	 	 (8,822	)
	 Capital and landfill asset purchases
	 	 	 (25,121	)	 	 (21,409	)	 	 (3,712	)
	 Other expenses
	 	 	 37	 	 	 31	 	 	 6	 
	 Financing
	 	 	 	 	 	 	 	 	 	 
	 Share based compensation
	 	 	 (414	)	 	 —	 	 	 (414	)
	 Financing and landfill development costs (net of non-cash portion)
	 	 	 383	 	 	 (728	)	 	 1,111	 
	 Net realized foreign exchange loss (gain)
	 	 	 104	 	 	 (624	)	 	 728	 
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	37,724	 	 $	30,783	 	 $	6,941	 
	 	 	 	 	 	 	 	 






 Free cash flow(B) — EBITDA(A) approach  


        The Board of Directors and management of the Company typically calculate free cash flow(B) using an operations approach.
Management views EBITDA(A) as a proxy for cash derived from operations. 



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 EBITDA(A)
	 	 $	78,027	 	 $	66,858	 	 $	11,169	 
	 	 	 	 	 	 	 	 
	 Capital and landfill asset purchases
	 	 	

(25,121	
)	 	

(21,409	
)	 	

(3,712	
)
	 Landfill closure and post-closure expenditures
	 	 	 (1,527	)	 	 (245	)	 	 (1,282	)
	 Landfill closure and post-closure cost accretion expense
	 	 	 924	 	 	 781	 	 	 143	 
	 Interest on long-term debt
	 	 	 (11,461	)	 	 (13,374	)	 	 1,913	 
	 Current income tax expense
	 	 	 (3,118	)	 	 (1,828	)	 	 (1,290	)
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	37,724	 	 $	30,783	 	 $	6,941	 
	 	 	 	 	 	 	 	 






        Excluding
the impact of foreign currency exchange, approximately $4,400, free cash flow(B) increased comparatively. While the Company enjoyed increasing
EBITDA(A) contributions from its Canadian and U.S. south segments, EBITDA(A) decreased comparatively in the U.S. northeast. On balance, however,
EBITDA(A) increased period over period by approximately $1,800, excluding foreign currency exchange. Contributions from the Canadian and U.S. south segments are attributable to
acquisition and organic revenue growth coupled with declines in vehicle operating costs, driven principally by declines in fuel costs. The decline in U.S. northeast EBITDA(A)
contributions is due largely to lower volumes in the region, which is the result of economic weakness. Lower interest on long-term debt, approximately $3,000 (excluding foreign currency
exchange), also contributed to the comparative increase. Lower long-term debt levels and lower borrowing costs on variable rate lending in both Canada and the U.S. are the primary
reasons for this decline. 


        An
increase in current income tax expense, approximately $1,000 (excluding foreign currency exchange), coupled with the timing of landfill closure and post-closure
expenditures, up approximately $1,000 (excluding foreign currency exchange), partially offset the increases outlined above. The increase in current income tax expense is entirely attributable to the
Canadian segment. The conversion from an income trust to a corporation effectively eliminated the Canadian segments ability to shelter taxable income beyond its available loss carryforwards, which are
being eroded at a more vigorous pace since conversion. The Company's change in dividend policy, stemming from the Company's conversion, contemplated the Company's additional cash tax obligations. The
timing of remediation spending in the Company's U.S. northeast segment is the principal reason for the increase in landfill closure and post-closure expenditures. 


11







 

 Capital and landfill purchases  


        Capital and landfill purchases characterized as replacement and growth expenditures are as follows: 



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Replacement
	 	 $	15,523	 	 $	8,929	 	 $	6,594	 
	 Growth
	 	 	 9,598	 	 	 12,480	 	 	 (2,882	)
	 	 	 	 	 	 	 	 
	 Total
	 	 $	25,121	 	 $	21,409	 	 $	3,712	 
	 	 	 	 	 	 	 	 






 Capital and landfill purchases — replacement  


        Capital and landfill purchases characterized as "replacement expenditures", represent the outlay of cash to sustain current cash flows
and are funded from free cash flow(B). Replacement expenditures may include some or all of the following: the replacement of existing capital assets, including vehicles, equipment,
containers, compactors, furniture, fixtures and computer equipment. Replacement expenditures also include all landfill construction spending for the Company's operating landfills, which is principally
comprised of cell construction. 


        Excluding
the impact of foreign currency exchange, approximately $1,800, replacement expenditures increased approximately $4,800. The Canadian segment represented approximately $3,300 of
the increase with the balance, approximately $1,500, due to the Company's U.S. segment. The Canadian segment increase is due in large part to the timing of landfill cell construction, which
accounts for approximately $2,400 of the
increase, with the balance attributable to working capital adjustments. The U.S. segment increase is also on account of the timing of landfill cell construction and working capital adjustments. 



 Capital and landfill purchases — growth  


        Capital and landfill purchases characterized as "growth expenditures", represent the outlay of cash to generate new or future cash
flows and are generally funded from free cash flow(B). Growth expenditures may include some or all of the following: vehicles, equipment, containers, compactors, furniture, fixtures and
computer equipment to support new contract wins and organic business growth. 


        Net
of foreign currency exchange, approximately $1,100, growth expenditures declined approximately $4,000. In Canada and the U.S., growth expenditures declined approximately $2,300 and
$1,700, respectively, due in large part to a decline in capital required to service new residential contract wins which commenced in 2008. 


        Readers
are reminded that revenue, EBITDA(A), and cash flow contributions derived from vehicles, equipment and container growth expenditures will materialize over the
assets useful life. 


12







 

 Dividends and Distributions  


(all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)


 2009  


        In conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for
its regular dividends, in 2009, are as follows: 


 Expected regular dividend schedule (payable quarterly)  



								
	Record date



 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 31, 2009
	 	 	January 15, 2010	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 






        In
conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for its special dividends, payable only in 2009, are
as follows: 


 Expected special dividend schedule (payable quarterly)  



								
	Record date



 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 17, 2009
	 	 	December 31, 2009	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 






 2008  


        The Company's predecessor declared distributions and dividends to trust unit and participating preferred shareholders of record for the
period from January to March 2008 totaling $31,227, representing a monthly payout of $0.1515 per trust unit and PPS. 


13









 




































  Summary of Quarterly Results
  (all amounts are in thousands of Canadian dollars, except per share or trust unit amounts)



									
	2009



 
	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 
	 	 Canada
	 	 $	88,396	 	 $	88,396	 
	 	 U.S. south
	 	 	 99,684	 	 	 99,684	 
	 	 U.S. northeast
	 	 	 90,738	 	 	 90,738	 
	 	 	 	 	 	 
	 Total revenues
	 	 $	278,818	 	 $	278,818	 
	 	 	 	 	 	 
	 Net income
	 	 $	12,259	 	 $	12,259	 
	 	 	 	 	 	 
	 Net income per weighted average share, basic
	 	 $	0.18	 	 $	0.18	 
	 	 	 	 	 	 
	 Net income per weighted average share, diluted
	 	 $	0.17	 	 $	0.17	 
	 	 	 	 	 	 






 





																		
	2008



 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	99,557	 	$	104,999	 	$	100,754	 	$	85,768	 	$	391,078	 
	 	 U.S. south
	 	 	101,394	 	 	91,384	 	 	88,234	 	 	79,816	 	 	360,828	 
	 	 U.S. northeast
	 	 	97,923	 	 	97,164	 	 	91,274	 	 	78,763	 	 	365,124	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	298,874	 	$	293,547	 	$	280,262	 	$	244,347	 	$	1,117,030	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income (see Note 1, page 3)
	 	$	12,901	 	$	14,296	 	$	17,960	 	$	10,474	 	$	55,631	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic and diluted
	 	$	0.19	 	$	0.21	 	$	0.26	 	$	0.15	 	$	0.81	 
	 	 	 	 	 	 	 	 	 	 	 	 






 





																		
	2007



 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	89,418	 	$	87,735	 	$	86,019	 	$	73,355	 	$	336,527	 
	 	 U.S. south
	 	 	77,479	 	 	82,278	 	 	80,398	 	 	74,535	 	 	314,690	 
	 	 U.S. northeast
	 	 	84,132	 	 	68,500	 	 	59,098	 	 	54,410	 	 	266,140	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	251,029	 	$	238,513	 	$	225,515	 	$	202,300	 	$	917,357	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income (see Note 1, page 3)
	 	$	5,874	 	$	12,584	 	$	7,034	 	$	12,515	 	$	38,007	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average trust unit, basic and diluted
	 	$	0.09	 	$	0.18	 	$	0.10	 	$	0.19	 	$	0.56	 
	 	 	 	 	 	 	 	 	 	 	 	 






 Total approximate quarterly revenue growth from Q1 2007 to Q1 2009  



						
	 Revenues — Q1 2007
	 	$	202,300	 
	 	 	 	 
	 Revenue growth additions:
	 	 	 	 
	 	 Acquisitions completed from 2007 to 2009
	 	 	63,700	 
	 	 Net price, volume, and fuel and environmental surcharge growth, net of foreign currency translation
	 	 	12,800	 
	 	 	 	 
	 Revenues — Q1 2009
	 	$	278,800	 
	 	 	 	 





14







 

 Financial Condition
  (all amounts are in thousands of Canadian dollars, unless otherwise stated)


 Selected Consolidated Balance Sheet Information  



																				
	 
	 	Canada —

March 31,

2009 	 	U.S. —

March 31,

2009 	 	Consolidated — March 31,

2009 	 	Canada — December 31,

2008 	 	U.S. —

December 31,

2008 	 	Consolidated — December 31,

2008 	 
	 Accounts receivable
	 	 $	51,541	 	 $	77,074	 	 $	128,615	 	 $	55,551	 	 $	76,421	 	 $	131,972	 
	 Intangibles
	 	 $	23,793	 	 $	117,439	 	 $	141,232	 	 $	26,986	 	 $	119,841	 	 $	146,827	 
	 Goodwill
	 	 $	61,629	 	 $	715,466	 	 $	777,095	 	 $	61,629	 	 $	694,968	 	 $	756,597	 
	 Capital assets
	 	 $	160,814	 	 $	334,976	 	 $	495,790	 	 $	163,517	 	 $	336,884	 	 $	500,401	 
	 Landfill assets
	 	 $	185,209	 	 $	580,884	 	 $	766,093	 	 $	185,305	 	 $	562,456	 	 $	747,761	 
	 Working capital deficit — (current assets less current liabilities)
	 	 $	(47,735	)	 $	(4,975	)	 $	(52,710	)	 $	(32,310	)	 $	(4,399	)	 $	(36,709	)






 Accounts receivable  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(3,357	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(4,010	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	653	 






        The
timing of certain collections due from various cities, reduced landfill volumes, seasonality, and additional efforts to collect owed amounts, is the primary reason for the Canadian
segment decline. 


        Foreign
currency translation represents approximately $2,200 of the U.S. segment rise in accounts receivable. Accordingly, U.S. segment accounts receivable declined period
over period, approximately $1,500. The decline is due in large part to economic weakness in the U.S. northeast segment coupled with seasonality and additional efforts to collect
owed amounts. 


 Intangibles  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(5,595	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(3,193	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(2,402	)






        The
Canadian segment decline is entirely attributable to amortization. 


        Amortization,
approximately $5,800, net of foreign currency exchange, approximately $3,400, is the reason for the decline in U.S. segment intangibles. 


 Goodwill  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	20,498	 
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	—	 
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	20,498	 






        Foreign
currency translation represents approximately $20,200 of the comparative increase in U.S. segment goodwill. Fair value adjustments to preliminary purchase price
allocations recorded in prior periods represents the balance of the increase, approximately $300. 


15







 

 Capital assets  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(4,611	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(2,703	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(1,908	)






        The
decline in Canadian segment capital assets is primarily attributable to amortization, approximately $6,600, and working capital adjustments, approximately $4,100. Cash expenditures
for vehicle, equipment, and container purchases, totaling approximately $8,100, partially offset the foregoing declines. Capital asset additions were incurred principally to service new contract wins.
The balance of the change is on account of capital asset disposals. 


        The
decrease in U.S. segment capital assets is a function of the following: amortization, approximately $16,200, disposals, approximately $1,600, and working capital adjustments,
approximately $2,300. The aforementioned decreases were partially offset by cash expenditures for capital assets, approximately $7,700, and foreign currency exchange, approximately $9,700. Capital
asset additions were incurred principally to maintain the Company's current compliment of capital assets and to service organic growth. The balance of the change is on account of gains recognized on
capital asset disposals. 


 Landfill assets  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	18,322	 
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(96	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	18,428	 






        Amortization,
including the amortization of capitalized landfill asset closure and post-closure costs, approximately $4,300, is the primary reason for the Canadian segment
decline in landfill assets. Amortization was partially offset by additions, approximately $2,300, working capital adjustments, approximately $1,200, and capitalized landfill closure and
post-closure costs, a non-cash item, approximately $700. Landfill construction efforts were principally carried out at the Company's Lachenaie landfill during
the period. 


        Foreign
currency translation, approximately $16,400, coupled with additions, approximately $7,100, capitalized landfill closure and post-closure costs, approximately $9,600,
and working capital adjustments, approximately $600, are the primary reasons for the U.S. segment increase. Amortization, approximately $10,500, and disposals and disposal losses, approximately
$4,800, partially offset the aforementioned increases. Landfill construction at the Fund's Seneca Meadows site is the largest contributor to landfill asset additions during the period. 


 Working capital deficit  



					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(16,001	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(15,425	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(576	)






        A
decline in accounts receivable, outlined above, approximately $4,000, coupled with an approximately $14,400 increase in dividends payable, are the primary reasons for the Canadian
segment increase in its working capital deficit. Changes to the Company's dividend policy, which occurred in conjunction with the Company's conversion from an income trust to a corporation, coupled
with the Company's share offering in March 2009, contributed to the increase in dividends payable. An increase in income taxes payable, due in large part to the Company's conversion, coupled
with a decline in prepaid expenses, due to the reclassification of containers purchased on behalf of cities in the province of Quebec to other receivables, was partially offset by declines in accounts
payable and accrued charges resulting principally from the payment of capital and landfill asset purchases and compensation expense accrued at December 31, 2008. 


        For
the Company's U.S. segment, declines in accounts payable and accrued charges were largely offset by an increase in dividends payable, a decline in cash and cash equivalents,
and a decline in accounts receivable. The decline in accounts payable and accrued charges is due largely to capital and landfill asset purchases and 


16







 



compensation
expense accrued at December 31, 2008 and paid in the current quarter. Changes to the Company's dividend policy contributed to the increase in dividends payable while the decline in
cash and cash equivalents is a function of timing. The movement in accounts receivable is outlined above. 


 Disclosure of outstanding share capital  



								
	 
	 	March 31, 2009 	 
	 
	 	Shares 	 	$ 	 
	 Common shares
	 	 	 67,344	 	 	 1,096,673	 
	 Special shares
	 	 	 11,137	 	 	 —	 
	 Restricted shares
	 	 	 (210	)	 	 (3,985	)
	 	 	 	 	 	 
	 Total contributed equity
	 	 	 78,271	 	 	 1,092,688	 
	 	 	 	 	 	 






 Shareholders' equity  


        The Company is authorized to issue an unlimited number of common, special and preferred shares, issuable in series. 


 Common Shares  


        Common shareholders are entitled to one vote for each common share held and to receive dividends, as and when declared by the Board of
Directors. Common shareholders are entitled to receive, on a pro rata basis, the remaining property and assets of the Company upon dissolution or wind-up, subject to the priority
rights of other classes of shares. 


        On
March 6, 2009, the Company closed its public offering of 8,500 common shares for total gross proceeds of $80,750 or $9.50 per share. The Company applied the net proceeds
from the public offering, approximately U.S. $61,500, to the repayment of outstanding borrowings on its U.S. long-term debt facility. 


        On
March 30, 2009, the Company closed the over-allotment option on its public offering of 1,275 common shares at $9.50 per share for total gross proceeds of
$12,113. The Company applied the net proceeds from the over-allotment option, approximately U.S. $9,500, to the repayment of outstanding borrowings on its
U.S. long-term debt facility. 


 Special Shares  


        Special shareholders are entitled to one vote for each special share held. The special shares carry no right to receive dividends or to
receive the remaining property and assets of the Company upon dissolution or wind-up. The number of special shares outstanding is equivalent to the exchange rights granted to holders of
the PPSs. Participating preferred shareholders have the right to exchange one PPS for one common share of the Company. For each PPS exchanged the same number of special shares is automatically
cancelled. 


 Preferred Shares  


        At March 31, 2009, no preferred shares are issued. Each series of preferred shares shall have rights, privileges, restrictions
and conditions as determined by the Board of Directors prior to issuance. Preferred shareholders are not entitled to vote, but take preference over the common shareholders rights in the remaining
property and assets of the Company in the event of dissolution or wind-up. 



 Non-controlling interest  


        As of April 29, 2009, 10,879 PPSs have been converted into common shares of the Company since issuance on
January 21, 2005. Each holder of a PPS receives dividends equivalent to those received by holders of the Company's common shares. Assuming exchange of all special shares, for common shares of
the Company, 78,481 equivalent common shares would be outstanding at March 31, 2009. 


17









 




































  Liquidity and Capital Resources

(all amounts are in thousands of Canadian dollars, unless otherwise stated)  



																	
	Contractual obligations



 
	 	March 31, 2009 	 
	 
	 	Payments due 	 
	 
	 	Total



 
	 	Less than 1

year 	 	1-3 years 	 	4-5 years 	 	After 5 years 	 
	 Long-term debt
	 	 	 965,615	 	 $	47,000	 	 $	729,554	 	 $	—	 	 $	189,061	 
	 Landfill closure and post-closure costs, undiscounted
	 	 	 497,833	 	 	 11,360	 	 	 18,231	 	 	 24,119	 	 	 444,123	 
	 Operating leases
	 	 	 41,195	 	 	 7,497	 	 	 9,973	 	 	 7,932	 	 	 15,793	 
	 Other long-term obligations(3)
	 	 	 21,000	 	 	 —	 	 	 —	 	 	 —	 	 	 21,000	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total contractual obligations
	 	 $	1,525,643	 	 $	65,857	 	 $	757,758	 	 $	32,051	 	 $	669,977	 
	 	 	 	 	 	 	 	 	 	 	 	 











Notes: 


	(3)
	Other
long-term obligations include the following: payments on account of a license agreement to use the trade name "BFI" and the related logo
for the period from June 30, 2015 to June 30, 2034. Contingent consideration in respect of certain acquisitions is not included in the table above. 




 Long-term debt  


        Summarized details of the Company's long-term debt facilities at March 31, 2009 are as follows: 



														
	 
	 	Available

lending 	 	Facility drawn 	 	Letters of

credit (not

reported as

long-term

debt on the

Consolidated

Balance 	 	Available

capacity 	 
	 Canadian long-term debt facilities — stated in Canadian dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Senior secured debentures, series A
	 	 $	47,000	 	 $	47,000	 	 $	—	 	 $	—	 
	 Senior secured debentures, series B
	 	 $	58,000	 	 $	58,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	305,000	 	 $	136,000	 	 $	24,916	 	 $	144,084	 
	 U.S. long-term debt facilities — stated in U.S. dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Term loan
	 	 $	195,000	 	 $	195,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	588,500	 	 $	276,000	 	 $	126,903	 	 $	185,597	 
	 IRBs
	 	 $	104,000	 	 $	104,000	 	 $	—	 	 $
	—
 	 






 Senior secured debentures, series A  




        The Company plans to draw on its available Canadian revolving credit facility capacity to repay its senior secured series A
debentures which mature on June 26, 2009. Drawing on the
revolving credit facility has no impact on the Canadian segments funded debt to EBITDA(A) covenant, as this covenant includes both revolving credit facility drawings and senior secured
debenture borrowings in its determination. If interest rates on variable rate lending remain at current levels, the Company will enjoy an interest expense savings of approximately 4.0% on $47,000 of
borrowings from the date of repayment through the balance of 2009. 



 U.S. term loan and revolving credit facility  




        Effective March 31, 2009, the funded debt to EBITDA(A) covenant declined to a maximum of 4.0 times.
Concurrently the Company's long-term U.S. debt facility precludes the U.S. corporation from paying dividends should the funded debt to EBITDA(A) ratio exceed
3.9 times, which is a decline from the previous threshold of 4.15 times. 


18







 

 Long-term debt to EBITDA(A)  




        At March 31, 2009, the Company is not in default of its long-term debt facility covenants. The Company's
long-term debt to EBITDA(A) covenant obligations are not subject to foreign currency exchange fluctuations. Accordingly, holding the foreign currency rate between Canada and
the U.S. at parity, results in a long-term debt to EBITDA(A) ratio of 2.71 times. Readers are reminded that contributions to EBITDA(A) from
acquisitions completed within the last twelve months are not included in the foregoing ratio and that the Company has two revolving credit facilities to support its Canadian and U.S. segment
operations which require financial covenant tests to be prepared independently. 



 Funded debt to EBITDA(A)  




        At March 31, 2009, long-term debt to EBITDA(A) for Canada and the U.S., as defined and calculated in
accordance with the underlying Canadian and U.S. long-term debt facility covenants, are as follows: 



								
	 
	 	Canada 	 	U.S. 	 
	 Funded debt to EBITDA(A)
	 	 	 1.96	 	 	 3.44	 
	 Funded debt to EBITDA(A) maximum(4)
	 	 	 2.75	 	 	 4.00	 











Notes: 


	(4)
	The
U.S. long-term debt facility funded debt to EBITDA(A) covenant contractually declined to a maximum of 4.0 on
March 31, 2009 from a maximum of 4.25 at December 31, 2008. Concurrently, the U.S. long-term debt facility precludes the U.S. corporation from paying
dividends should the funded debt to EBITDA(A) ratio exceed 3.9 (December 31, 2008 — 4.15). The Company expects to fund all, or a significant
portion of, its 2009 dividend payments from its Canadian operations and has applied the net proceeds from its offering in March 2009 to repay U.S. revolving credit facility advances. 



 Risks and restrictions  




        A portion of the Company's term loan, its two revolving credit facilities, and a portion of its IRBs are subject to interest rate
fluctuations with bank prime, the 30 day rate on bankers' acceptances or LIBOR. The Company has hedged U.S. $195,000 of variable rate interest on its U.S. long-term
debt facility. The balance of drawings on the U.S. long-term debt facility, U.S. $276,000, together with amounts drawn on the Company's Canadian revolving credit facility
totaling $136,000, and amounts drawn on a portion of the IRBs, U.S. $59,000, are subject to interest rate risk. A 1.0% rise or fall in the variable interest rate results in a
U.S. $2,760, $1,360, and U.S. $590, change in annualized interest expense incurred on the Company's U.S. long-term debt facility, Canadian revolving credit facility,
and IRBs, respectively. 


        The
Company is obligated under the terms of its debentures, term loan, revolving credit facilities, and IRBs (collectively the "facilities") to repay the full principal amount of each at
their respective maturities. A
failure to comply with the terms of any facility could result in an event of default which, if not cured or waived, could accelerate repayment of the relevant indebtedness. If repayment of the
facilities were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay these facilities in full. 


        The
terms of the facilities contain restrictive covenants that limit the discretion of Company management with respect to certain business matters. These covenants place restrictions on,
among other things, the ability of the Company to incur additional indebtedness, to create liens or other encumbrances, to pay dividends on shares and PPSs above certain levels or make certain other
payments, investments, loans and guarantees, and to sell or otherwise dispose of assets and merge or consolidate with another entity. In addition, the debentures and revolving credit facilities
contain a number of financial covenants that require the Company to meet certain financial ratios and financial condition tests. A failure to comply with the terms of the facilities could result in an
event of default which, if not cured or waived, could result in accelerated repayment. If the repayment of the facilities were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay these facilities in full. 


        Management
of the Company actively reviews its financing alternatives. 


19







 

 Other  




        In April 2008, DBRS re-affirmed their rating of BBB low on the Company's Canadian senior secured series A
and B debentures. The rating was subsequently placed under review pending the results of the Company's conversion. In July 2008, S&P re-affirmed their rating of BB on the
Company's U.S. term loan and revolving credit facility and issued a rating of B+ on U.S. $45,000 of IRBs which were converted to fixed, from a floating rate of, interest. In
October 2008, Moody's Investor Services re-affirmed their rating of B1 on the Company's U.S. term loan and revolving credit facility and changed its outlook to
negative. The negative outlook is subject to adjustment, but required either a covenant modification of the funded debt to EBITDA(A) reduction to 4.0 in March 2009 or a
demonstrated reduction in current funded debt to EBITDA(A) levels. 


 Cash flows  



											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	$Change 	 
	 Cash flows generated from (utilized in):
	 	 	 	 	 	 	 	 	 	 
	 Operating activities
	 	 $	60,978	 	 $	42,934	 	 $	18,044	 
	 Investing activities
	 	 $	(22,968	)	 $	(41,758	)	 $	18,790	 
	 Financing activities
	 	 $	(40,497	)	 $	3,373	 	 $	(43,870	)






 Operating activities  




        Foreign currency exchange accounts for approximately $6,100 of the period over period change, while changes in non-cash
working capital contributed approximately $8,800. As outlined above, changes to the Company's dividend policy, which occurred in conjunction with the Company's conversion from an income trust to a
corporation, coupled with the Company's share offering in March 2009, contributed to the increase in dividends payable, and accordingly, non-cash changes in working capital,
approximately $16,800. Declines in accounts payable and accrued charges partially offset the increase in dividends payable, and their declines represent timing differences in capital and landfill
asset accruals coupled with management compensation payments made in the first quarter. 



 Investing activities  




        The decrease in cash utilized in investing activities is due almost exclusively to a decline in acquisitions period over period,
approximately $18,800. The repayment of long-term debt, coupled with a continued focus on the business, has curtailed the Company's current period acquisition activity. Working capital
adjustments were the primary contributor to the rise in capital and landfill purchases, due principally to assets required to satisfy new contract wins and landfill construction activities, while net
proceeds on the sale of capital and landfill assets partially offset these increases. 



 Financing activities  




        Net proceeds from the Company's share offering, approximately $88,400, were directed to the repayment of
U.S. long-term debt facility borrowings. In addition, the Company applied approximately $38,100 of cash generated from operating activities and the sale of capital and landfill
assets to the repayment of long-term debt in both Canada and the U.S., compared to net borrowings of approximately $34,600 in the prior period. Changes to the Company's dividend policy,
coupled with a decline in the Company's acquisition activity, is the primary reason for the decline in net borrowings period over period. 


 Seasonality  


        Revenues are generally higher in spring, summer and autumn months due to higher collected and disposed of waste volumes. Higher
collection and disposal revenues are partially offset by higher operating expenses to service and dispose of additional waste volumes. 


20







 

 Risks and Uncertainties  


        The Company is subject to various risks and uncertainties which are summarized below. Additional details are contained in the Company's
2008 Annual Information Form, which can be found at www.sedar.com.



	•
	renewal or maintenance of landfill operating permits   



	•
	leverage, restrictive covenants, and capital requirements   



	•
	downturns in the world wide economy   



	•
	continued focus on growth through acquisition   



	•
	continued management of business growth   



	•
	loss of contracts through competitive bidding or early termination   



	•
	reliance on third party disposal customers   



	•
	geographic concentration of operations   



	•
	customer concentration   



	•
	weather and seasonality   



	•
	union labour agreements   



	•
	fuel surcharge cost pass through   



	•
	reliance on key management executives   



	•
	localized decision making   



	•
	surety bonds, letters of credit, and insurance   



	•
	uninsured and underinsured losses   



	•
	legislation and governmental regulation   



	•
	environmental regulation and litigation   



	•
	environmental contamination   



	•
	competition   



	•
	governmental initiatives to reduce landfill disposal by encouraging alternatives   



	•
	control and influence of participating preferred shareholders   



	•
	foreign exchange exposure   



	•
	accounting estimates   



	•
	internal control over financial reporting and disclosure control procedures   



	•
	shareholder dilution   



	•
	future exchanges of the non-controlling interests investment   



	•
	market conditions resulting in share price volatility   



	•
	uncertainty of future dividend payments and level thereof 




 Outlook
  (all amounts are in thousands of Canadian dollars, unless otherwise stated)  



 Overview  


        Management is committed to employing its improvement and market-focused strategies with the goal of continuously delivering value to
its shareholders. Management's objective is continuous improvement, which 


21







 



equates
to continuous revenue growth coupled with effective cost management. New market entry, existing market densification, and landfill development will be a continued focus of the Company as it
looks for ways to expand its operations, increase customer density in strategic markets, and increase internalization. The Company's strengths remain founded in the following: consistent historical
organic growth, growth through strategic acquisition, strong competitive position, a solid customer base with long-term contracts, disciplined operating process, predictable replacement
expenditure requirements, and stable cash flows. Management remains committed to actively managing these strengths in the future. 


 Strategic acquisitions  


        In the long-term, the Company remains committed to its review and pursuit of new market and strategic "tuck-in"
acquisitions. Current disruptions in the economy and financial markets have impacted the Company's acquisition strategy. Accordingly, management expects that in the near-term, only
accretive "tuck-in" acquisitions are likely to be completed. 


 Operations  


        Management is active in various permit expansion efforts at certain landfills as permitted life is consumed. Additionally, management
is actively developing alternatives to replace its Calgary landfill site and is also active in its efforts to expand the Lachenaie landfill. In June 2008, the Company received a certificate of
authorization, to allow the Lachenaie landfill to continue operating through July 2009 while management works on a longer-term expansion initiative. Development spending in respect
of the Lachenaie expansion initiative is included in landfill development assets on the Company's consolidated balance sheet. 



        Fuel
and commodity surcharges, and environmental costs, including government imposed disposal charges, will continue to be passed through to the end customer, with a view to eliminating
variability in the Company's operating results and cash flows. Management has entered into some fuel hedges and will continue to review its hedging alternatives for fuel in light of current market
conditions. Readers are reminded that increasing fuel costs, environmental costs, and government imposed disposal charges result in higher revenues and, all else equal, reduce the gross operating
margin (defined as revenues less operating expenses divided by revenues). 


        Significant
landfill volumes have been received and may not continue at a similar rate. 


        Residential
and other government contracts bids may require significant capital expenditures and may require the Company to borrow on its long-term debt facilities.
EBITDA(A) resulting from new contract wins will materialize in subsequent periods. 


 Other  


 Taxation  


        In conjunction with the Company's conversion from an income trust to a corporation, intercompany notes existing within the structure,
prior to conversion, were effectively repaid or capitalized. Accordingly, intercompany interest expense borne by the Company's subsidiaries is, post conversion, no longer available to shelter income
subject to tax. Once the Company utilizes the tax shelter available from carryforward losses, the Company's cash tax expense will increase. 


 Financing strategic growth  


        One of management's principal longer-term objectives is to grow organically and through strategic acquisition. Growth
through strategic acquisition is dependent on the Company's ability to access debt and equity in the capital markets. Any restrictions will affect the Company's growth through strategic acquisition. 


 Withholding taxes on foreign source income  


        When and as applicable, withholding tax on foreign source income is recorded as current income tax expense on the consolidated
statement of operations and comprehensive income. An increase in dividends paid, 


22








 



or
the erosion of IESI's ability to return capital, will result in increasing withholding taxes from foreign source income received by the Company. 


 Optimization of tax losses and tax efficiency of structure  


        Management periodically reviews its organizational structure to promote tax efficiency and optimize the use of tax losses within the
structure. The Company expects to incur additional reorganization costs in this regard. 



 Amortization  


        Through December 31, 2008, the Company applied CICA accounting standard for business combinations (section 1581), which
required the Company to apply the purchase method of accounting to all acquisitions. The purchase method of accounting required the Company to recognize the fair value of all assets acquired and
liabilities assumed, including recognizing all intangible assets separately from goodwill. On acquisition, fair value adjustments typically increased the carrying amount of capital and landfill assets
and typically resulted in the allocation of a portion of the purchase price to identified
intangible assets. Accordingly, the Company's amortization of capital, landfill and intangible assets not only includes amortization of original cost but also includes the amortization of fair value
adjustments recognized on acquisition. Even though the Company has grown organically, a significant portion of its growth has been through acquisitions. Therefore, fair value adjustments included in
the Company's amortization expense are significant. The Company's most notable fair value adjustments arose from the formation of the Company's predecessor company, the Company's initial public
offering, and the Company's acquisitions of; IESI, the Ridge landfill, and Winters Bros. Due to the inherent difficulty in isolating each fair value adjustment for every acquisition completed by the
Company, the following selected amounts demonstrate the impact fair value adjustments had on the Company's amortization expense for the year ended December 31, 2008: fair value adjustments for
landfill assets and recognized intangible assets on the Company's initial public offering accounted for approximately $21,300, or 11.9%, of the Company's 2008 amortization expense, and fair value
adjustments for capital and landfill assets recognized on the Company's acquisition of IESI accounted for approximately $20,000, or 11.2%, of the Company's 2008 amortization expense. Fair value
adjustments are recognized in amortization expense over the useful life of the underlying asset. For landfill assets, this is the landfills permitted or deemed permitted useful life. As the Company
continues to grow through acquisition, amortization expense will continue to increase. Increases will be partially offset by declines in fully amortized fair value adjustments. 


 Critical Accounting Estimates  



 Landfill closure and post-closure costs  


        In the determination of landfill closure and post-closure costs the Company employs a variety assumptions, including but
not limited to, the following: engineering estimates for materials, labour and post-closure monitoring, assumptions market place participants would use to determine these estimates,
including inflation, markups, and inherent uncertainties due to the timing of work performed, the credit standing of the Company, the risk free rate of interest, current economic and financial
conditions, landfill capacity estimates, the timing of expenditures and governmental oversight and regulation. 



        Significant
increases or decreases in engineering cost estimates for materials, labour and monitoring or assumptions market place participants would use to determine these estimates
could have material adverse or positive effect on the Company's financial condition and operating performance, all else equal. Material inputs tied to commodity prices, which may include fuel price or
other commodities, whose value fluctuates with multiple and varied market inputs or conditions, could result in a rise or fall in engineering estimates. Both increases and decreases in cost estimates
will be recognized over the period in which the landfill accepts waste. However, upward revisions in cost estimates are discounted applying the current credit adjusted risk free rate, while downward
revisions are discounted applying the risk free rate when the estimated closure and post-closure costs were originally recorded or a weighted average credit adjusted risk free rate if the
period of original recognition cannot be identified. 


        All
else equal, a decline in either of the risk free rate or the Company's credit spread over the risk free rate, or both, results in higher recorded landfill closure and
post-closure costs at any given time, as cost estimates are 


23







 

estimated
applying present value techniques. Inversely, an increase will result in lower recorded landfill closure and post-closure cost estimates at any given time. Fluctuations in either
of these estimates could have a material adverse or positive effect on the Company's financial condition and operating performance. 


        All
else equal, a decrease or increase in expected inflation rate will result in lower or higher recorded landfill closure and post-closure costs at any given time. A change
to the Company's inflation estimate could have a material adverse or positive effect on the Company's financial condition and operating performance. 



        Landfill
capacity estimates are estimated at least annually using survey information typically provided by independent engineers. An increase in capacity estimates, due to changes in the
landfills operating permit or design, deemed permitted capacity assumptions, or compaction, does not impact recorded landfill closure and post-closure costs reported at any given time, but
does affect the recognition of expense in subsequent periods. All else equal, accretion expense recorded to operating expenses will increase and thereby reduce EBITDA(A), with a
corresponding decrease in landfill amortization expense. The inverse holds true for a decrease in capacity estimates. Changes in landfill capacity estimates could have a material adverse or positive
effect on the Company's financial condition and operating performance. 


        Changes
to the timing of expenditures or changes to the types of expenditures or monitoring periods established through governmental oversight and regulation could have a material
adverse or positive effect on the Company's financial condition and operating performance. If the timing of expenditures becomes more near term, recorded landfill closure and post-closure
cost estimates will increase. Changes to governmental oversight and regulation could increase or decrease estimated costs or the timing thereof, or result in additional or diminished capacity
estimates as a result of permit life expansion or contraction. A governmental change which renders the landfill's operating permit inactive will result in the Company accelerating the recognition of
both closure and post-closure costs, which will increase the recorded amount of landfill closure and post-closure costs, and these amounts could be material. 


        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 


 Landfill assets  


        Similar to landfill closure and post-closure costs, the determination of amortization rates for landfill assets requires
the Company to employ a variety assumptions, including but not limited to, the following: engineering estimates for materials and labour to construct landfill capacity, inflation, landfill capacity
estimates, and governmental oversight and regulation. 


        Changes
to any of the foregoing estimates, which may include changes to material inputs tied to commodity prices, economic and socio-economic conditions which impact the rate of
inflation, changes to landfill operating permits or design, deemed permitted capacity assumptions, or compaction which impacts landfill capacity estimates or a change in government or a governmental
change that impacts estimated costs to construct or impacts capacity, may have a material adverse or positive effect on the Company's financial condition and results of operations. Changes which
increase cost estimates or reduce or constrain capacity estimates will result in higher landfill asset amortization expense in future periods, but have no immediate effect on capitalized landfill
assets. Changes which decrease cost estimates or increase capacity estimates will have an inverse effect. 


        Included
in the capitalized cost of landfill assets, are amounts incurred to develop, expand and secure the landfills operating permit. These amounts are amortized over the period the
landfill actively accepts waste. Any change to capacity estimates will impact the period over which these costs are amortized. A governmental change which renders the landfill's operating permit
inactive will result in the Company recognizing an impairment charge on landfill assets, and this charge could be material. 



        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 


24







 

 Goodwill  


        The Company tests goodwill for impairment at least annually or more frequently if an event or circumstance occurs that more likely than
not reduces the fair value of a reporting unit below its carrying amount. The impairment test is a two step test. The first test requires the Company to compare the fair value of a reporting unit to
its carrying amount. If the fair value exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. However, if the carrying amount of the
reporting unit exceeds it fair value, the fair value of the reporting unit's goodwill is compared with its carrying amount to measure the amount of impairment loss, if any. When the carrying amount of
the reporting unit goodwill exceeds the fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. 


        The
fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination, whereby the excess of the fair value of the reporting unit
over the amounts assigned to its assets and liabilities is the fair value of goodwill. Fair value is the amount at which an item can be bought or sold in a current transaction between willing parties,
that is, other than in a forced sale or liquidation. To establish fair value, the Company may employ one or more valuation techniques including a market multiple based approach. Accordingly, if the
Company's enterprise value declines due to share price erosion or the Company's EBITDA(A) declines as a result of a more pronounced and continuing recession, goodwill may be impaired and
could have a material adverse effect on the Company's financial condition and operating performance. 



        The
Company will continue to monitor both economic and financial conditions and re-perform its goodwill test for impairment as conditions warrant. 


 Income taxes  


        Future income taxes are calculated using the liability method of accounting for income taxes. Future income tax assets and liabilities
are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The effect of a change in tax rates on future income tax assets and liabilities is recorded to operations in the period in which the change occurs.
Unutilized tax loss carryforwards that are not more likely than not to be realized are reduced by a valuation allowance in the determination of future income tax assets. 


        Significant
changes to substantively enacted tax rates or laws, or estimates of timing difference reversal, could result in a material adverse or positive effect on the Company's
financial condition and operating performance. In addition, changes in regulation or insufficient taxable income could impact the Company's ability to utilize its tax loss carryforwards which could
have a significant impact on future income taxes. 


 Accrued accident claims reserve  


        The Company is self-insured for certain general liability, auto liability, and workers' compensation claims. For claims
that are self-insured, stop-loss insurance coverage is maintained for incidents in excess of U.S. $250 and U.S. $500, depending on the policy period in which the
claim occurred. Annually, the Company uses independent
actuarial reports as a basis for developing estimates for reported claims and estimating claims incurred but not reported. 


        Significant
fluctuations in assumptions used to assess and accrue for accident claims reserves, including filed and unreported claims, claims history, the frequency of claims and
settlement amounts, could result in a material adverse or positive impact on the Company's financial condition and operating performance. 


 Other  


        Other estimates include, but are not limited to, the following: estimates of the Company's allowance for doubtful accounts receivable;
recoverability assumptions for landfill development assets; the useful life of capital and intangible assets; estimates and assumptions used in the determination of the fair value of contingent
acquisition payments; various economic estimates used in the development of fair value estimates, including but not limited to interest and inflation rates; and estimates used in the development of
employee future benefit plan amounts, including but not limited to discount rates, expected long-term rates of return on plan assets, rates of compensation increases and the average
remaining service period for active employees. 


25









 




































  Environmental Matters  


 Legislation and governmental regulation  


        The Company is subject to extensive legislation and governmental regulation that may restrict or increase the cost of
its operations. 


        The
Company's equipment, facilities and operations are subject to extensive and changing federal, provincial, state and local laws and regulations relating to environmental protection,
health, safety, training, land use, transportation and related matters. These include, among others, laws and regulations governing the use, treatment, transportation, storage and disposal of wastes
and materials, air quality, water quality, permissible or mandatory methods of processing waste and the remediation of contamination associated with the release of hazardous substances. In addition,
federal, provincial, state and local governments may change the rights they grant to, and the restrictions they impose on, waste management companies, and those changes could restrict the operations
and growth of the Company. 


        The
Company's compliance with regulatory requirements is costly. The Company may be required to enhance, supplement or replace its equipment and facilities and to modify landfill
operations and, if it is unable to comply with applicable regulatory requirements, it could be required to close certain landfills. The Company may not be able to offset the cost of complying with
these requirements. In addition, environmental regulatory changes or an inability to obtain extensions to the life of a landfill could accelerate
or increase accruals or expenditures for closure and post-closure monitoring and obligate the Company to spend monies in addition to those currently accrued. 


        Extensive
regulations govern the design, operation, and closure of landfills. For example, in October 1991, the U.S. Environmental Protection Agency ("EPA") established
minimum federal requirements for solid waste landfills under Subtitle D of The Federal Resource Conservation and Recovery Act of 1976, as amended. If
IESI fails to comply with the Subtitle D regulations, it could be required to undertake investigatory or remedial activities, curtail operations or close a landfill temporarily or permanently, or be
subject to monetary penalties. Moreover, if regulatory agencies fail to enforce the Subtitle D regulations vigorously or consistently, competitors whose facilities do not comply with the
Subtitle D regulations or their state counterparts may obtain an advantage over IESI. The financial obligations of the Company arising from any failure to comply with the Subtitle D regulations could
harm its business and operating results. 


        Certain
of Company's waste disposal operations traverse state, provincial, county and the Canada/U.S. national boundaries. In the future, the Company's collection, transfer, and
landfill operations may be affected by proposed U.S. federal legislation governing interstate shipments of waste. Such proposed federal legislation could prohibit or limit the disposal of
out-of-state waste (including waste from Canada) and may require states, under certain circumstances, to reduce the amount of waste exported to other states. If this or similar
legislation is enacted in states in which IESI operates, it could have an adverse effect on the Company's operating results, including IESI landfills that receive a significant portion of waste
originating from out-of-state. In addition, management believes that several states have proposed or have considered adopting legislation that would regulate the interstate
transportation and disposal of waste in the states' landfills. 


        Collection,
transfer, and landfill operations for IESI may also be affected by "flow control" legislation. Some states and local governments may enact laws or ordinances directing waste
generated within their jurisdiction to a specific facility for disposal or processing. If this or similar legislation is enacted, state or local governments could limit or prohibit disposal or
processing of waste in transfer stations or landfills or in third party landfills used by IESI. 


        In
1996, the New York City Council enacted Local Law 42, which prohibits the collection, disposal or transfer of commercial and industrial waste without a license issued by the
New York City Business Integrity Commission, formerly known as the Trade Waste Commission (the "Business Integrity Commission"), and requires Business Integrity Commission approval of
all acquisitions or other business combinations in New York City proposed by all licensees. The need for review by the Business Integrity Commission could delay the Company's consummation of
acquisitions in New York City, which could limit its ability to expand its business in this region. 


26







 

        From
time to time, provincial, state or local authorities consider and sometimes enact laws or regulations imposing fees or other charges on waste disposed of at landfills. If additional
fees are imposed in
jurisdictions in which the Company operates and it is not able to pass the fees through to its customers, the Company's operating results would be negatively affected. 


        The
Company and its senior representatives, managers and other employees must comply with the requirements of federal, provincial, and state legislation related to worker health and
safety. These requirements can be onerous and include, in Canada, a requirement that any person that directs (or has the authority to direct) how another person does work or performs a task
must take reasonable steps to prevent bodily harm to any person arising from that work or task. Failure to comply with these requirements may result in criminal or quasi-criminal proceedings and
related penalties. 


        The
operational and financial effects discussed above associated with compliance with the laws and regulations and changes thereto to which the Company will be subject, could require it
to make significant expenditures or otherwise affect the way it operates its business, and could affect the Company's financial condition and results of operations. 



 Environmental regulation and litigation  


        The Company may be subject to legal action relating to compliance with environmental laws, and to civil claims from parties alleging
some harm as a consequence of migrating contamination, odours, and other releases to the environment or other environmental matters (including the acts or omissions of its predecessors) for which the
business may be responsible. It may also be subject to court challenges of its operating permits. 


        Solid
waste management companies are often subject to close scrutiny by federal, provincial, state, and local regulators, as well as private citizens, and may be subject to judicial and
administrative proceedings, including proceedings relating to their compliance with environmental and local land use laws. 


        In
general, environmental laws authorize federal, provincial, state or local environmental regulatory agencies and attorneys general (and in some cases, private citizens) to bring
administrative or judicial actions for violations of environmental laws or to revoke or deny the renewal of a permit. Potential penalties for such violations may include, among other things, civil and
criminal monetary penalties, imprisonment, permit suspension or revocation, and injunctive relief. These agencies and attorneys general may also attempt to revoke or deny renewal of the Company's
permits, franchises or licenses for violations or alleged violations of environmental laws or regulations. Under certain circumstances, citizens are also authorized to file lawsuits to compel
compliance with environmental laws, regulations or permits under which the Company will operate and to impose monetary penalties. Surrounding landowners or community groups may also assert claims
alleging environmental damage, personal injury or property damage in connection with Company's operations. 


        From
time to time, the Company has received, and may in the ordinary course of business in the future receive, citations or notices from governmental authorities alleging that its
operations are not in compliance
with its permits or certain applicable environmental or land use laws or regulations. The Company will generally seek to work with the relevant authorities and citizens and citizen groups to resolve
the issues raised by these citations or notices. However, the Company may not always be successful in resolving these types of issues without resorting to litigation or other formal proceedings. Any
adverse outcome in these proceedings, whether formal or informal, could result in negative publicity, reduce the demand for Company's services, and negatively impact results from operations. A
significant judgment against the Company, the loss of a significant permit or license or the imposition of a significant fine could also affect the Company's financial condition and results
of operations. 


        IESI's
future compliance with landfill gas management requirements under the Clean Air Act of 1970, as amended, may require installation
of costly equipment, as well as incurring additional operating and maintenance costs. 


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 Environmental contamination  


        The Company may have liability for environmental contamination associated with its own current and former facilities as well as third
party facilities. The Company may also be susceptible to negative publicity if it is identified as the source of potential environmental contamination. 



        The
Company could be liable to federal, provincial or state governments or other parties if hazardous (or other regulated or potentially harmful) substances contaminate or have
contaminated its properties, including soil or water under its properties, or if such substances from its properties contaminate or have contaminated the properties of others. The Company could be
liable for this type of contamination even if the contamination did not result from its activities or occurred before the Company owned or operated the properties. The Company could also be liable for
such contamination at properties to which it transported such substances or arranged to have hazardous substances transported, treated or disposed. Certain environmental laws impose joint and several
and strict liability in connection with environmental contamination, which means that the Company could have to pay all recoverable damages, even if the Company did not cause or permit the event,
circumstance or condition giving rise to the damages. Moreover, many substances are defined as "hazardous" under various environmental laws and their presence, even in minute amounts, can result in
substantial liability. While the Company may seek contribution for these expenses from others, it may not be able to identify who the other responsible parties are and it may not be able to compel
them to contribute to these expenses or they may be insolvent or unable to afford contribution. If the Company incurs liability and if it cannot identify other parties whom it can compel to contribute
to its expenses and who are financially able to do so, it could impact the Company's financial condition and results of operations. 



        In
addition, the Company has previously acquired, and may in the future acquire, businesses that may have handled and stored, or will handle and store, hazardous substances, including
petroleum products, at their facilities. These businesses may have released substances into the soil or groundwater. They may also have transported or disposed of substances or arranged to have
transported, disposed of or treated substances to or at other properties where substances were released into soil or groundwater. Depending on the nature of Company's acquisition of these businesses,
and other factors, the Company could be liable for the cost of cleaning up any contamination, and other damages, for which the acquired businesses are liable. Any indemnities or warranties the Company
obtained or obtains in connection with the purchases of these businesses may not suffice to cover these liabilities, due to limited scope, amount or duration, the financial limitations of the party
who gave or gives the indemnity or warranty or other reasons. Moreover, available insurance does not cover liabilities associated with some environmental issues that may have existed prior to
attachment of coverage. 


        The
Company could be subject to legal actions brought by governmental or private parties in connection with environmental contamination or discharges. Any substantial liabilities
associated with environmental contamination, whether to federal, provincial or state environmental authorities or other parties, could affect the Company's financial condition and results
of operations. 


        The
currently inactive Tantalo landfill, which is located on the Seneca Meadows landfill, has been identified by the State of New York as an "Inactive Hazardous Waste Disposal
Site". In September 2003, the Department of Environmental Conservation ("DEC") issued a consent order which requires the Seneca Meadows landfill to develop a hazardous waste disposal site
remedial program for the landfill. Because the remediation effort is ongoing, the total cost of the remediation is subject to change. In October 2003, IESI purchased a 10 year
"Clean-up Cost Cap Insurance Policy" which provides an additional U.S. $25,000 of coverage (with 10% co-pay) in excess of a self-insured retention for the
estimated remediation costs. If the total cost of expected compliance costs or any remediation substantially exceeds the Company's applicable reserves and insurance coverage, it could affect the
Company's financial condition and results of operations. 


 New Accounting Policies Adopted  


 Goodwill and intangible assets  


        Effective January 1, 2009, the Company adopted CICA accounting standard Goodwill and Intangibles (section 3064). CICA
3064 establishes standards for the recognition, measurement, presentation and disclosure 


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of
internally generated goodwill and intangible assets. The adoption of CICA 3064 had no impact on the Company's consolidated financial statements. 


 Business combinations  


        Effective January 1, 2009, the Company early adopted CICA accounting standard Business Combinations (section 1582), which
replaced Business Combinations (section 1581). This section outlines a variety of changes, including, but not limited to the following: an expanded definition of a business, a requirement to
measure all business combinations and non-controlling interests at fair value, and a requirement to recognize future income tax assets and liabilities and acquisition and related costs as
expenses of the period. CICA 1582 has been applied prospectively to all business combinations from January 1, 2009 onward and accordingly its adoption had no effect on previously
reported amounts. 


 Consolidated financial statements  


        Effective January 1, 2009, the Company early adopted CICA accounting standard Consolidated Financial Statements
(section 1601), which in combination with CICA 1602, replaces Consolidated Financial Statements (section 1600). CICA 1601 establishes standards for the preparation of consolidated
financial statements and specifically addresses consolidation accounting following a business combination that involves the purchase of an equity interest in one company by another. Adopting this
standard had no effect on the Company's previously reported consolidated financial statements. 


 Non-controlling interests  


        Effective January 1, 2009, the Company early adopted CICA accounting standard Non-Controlling Interests
(section 1602), which in combination with CICA 1601, replaces Consolidated Financial Statements (section 1600). CICA 1602 establishes standards of accounting for a
non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. This section requires retrospective application with certain exceptions.
Adopting CICA 1602 changes the Company's presentation of non-controlling interests from mezzanine equity to equity on the Company's consolidated balance sheet.
Non-controlling interest is no longer deducted in the determination of net income. Instead, net income and each component of other comprehensive income are attributed to shareholders'
equity and non-controlling interest. Adopting this section affects the Company's determination of net income presented in the consolidated statement of operations and comprehensive income,
the presentation of net income and non-controlling interest in the consolidated statement of cash flows, and the presentation of non-controlling interest in the consolidated
statement of equity. 


 New Accounting Policies Requiring Adoption  


 International Financial Reporting Standards ("IFRS")  


        On February 13, 2008, the Canadian Accounting Standards Board ("AcSB") confirmed that the use of IFRS will be effective for
interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company anticipates filing a Preliminary Short Form Base Shelf Prospectus and
applying for a listing on the New York Stock Exchange in 2009. Therefore, the Company expects to report its consolidated financial results in U.S. GAAP commencing in 2009 and expects to
transition to IFRS in accordance with the timing set forth by the Securities and Exchange Commission. 


 Definitions of EBITDA and free cash flow  


	(A)
	All
references to "EBITDA" in this MD&A are to "income before the following" on the consolidated statement of operations and comprehensive income. "Income
before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, net gain or loss on sale of capital and landfill assets, net
foreign exchange gain or loss, net gain or loss on financial instruments, other expenses, and income taxes". EBITDA is a term used by the Company that does not have a standardized meaning prescribed
by Canadian generally accepted accounting principles ("GAAP") and is therefore unlikely to be comparable to similar measures used by other issuers. EBITDA is a measure of the 


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Company's
operating profitability, and by definition, excludes certain items as detailed above. These items are viewed by management as either non-cash (in the case of amortization,
certain financing costs, net gain or loss on financial instruments, net foreign exchange gain or loss, and future income taxes) or non-operating (in the case of interest on
long-term debt, net gain or loss on sale of capital and landfill assets, certain financing costs, other expenses, and current income taxes). EBITDA is a useful financial and operating
metric for management, the Company's Board of Directors, and its lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons for
exclusion of each item are as follows: 




Amortization — as a non-cash item amortization has no impact on the determination of free cash
flow[nc_nb](B). 


Interest on long-term debt — interest on long-term debt is a function of the Company's
debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the Company and represents a different class of expense than those included in EBITDA. 


Financing costs — financing costs are a function of the Company's treasury/financing activities and represents a
different class of expense than those included in EBITDA. 



Net gain or loss on sale of capital and landfill assets — proceeds from sale of capital and landfill assets are
either reinvested in additional or replacement capital or landfill assets or used to repay the Company's revolving credit facility. 


Net foreign exchange gain or loss — as non-cash items, foreign exchange gains or losses have no impact
on the determination of free cash flow(B). 


Net gain or loss on financial instruments — as non-cash items, gains or losses on financial
instruments have no impact on the determination of free cash flow(B). 


Other expenses — other expenses typically represent amounts paid to certain management of acquired companies who
are retained by the Company. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included
in EBITDA. 


Income taxes — income taxes are a function of tax laws and rates and are affected by matters which are separate
from the daily operations of the Company. 



EBITDA
should not be construed as a measure of income or of cash flows. The reconciling items between EBITDA and net income (loss) are detailed in the consolidated statement of operations and
comprehensive income beginning with "income before the following" and ending with "net income (loss)".  



	(B)
	The
Company has adopted a measurement called "free cash flow" to supplement net income (loss) as a measure of operating performance. Free cash flow is a
term which does not have a standardized meaning prescribed by GAAP, is prepared before dividends and distributions declared, and is therefore unlikely to be comparable to similar measures used by
other issuers. The objective of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other U.S. based companies in the waste industry,
to assess the Company's primary sources and uses of cash flow, and to assess the Company's ability to sustain its dividend. All references to "free cash flow" in this MD&A have the meaning set out in
this note. 


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Exhibit 4.5