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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                             | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended June 30, 2003 
|or                                           
|o                                             | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|For the transaction period
from            to

Commission File Number: 333-98657

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IESI CORPORATION(Exact Name of Registrant as Specified in its Charter)

|Delaware(State or other jurisdiction
of incorporation or organization)                                                                    |  | 75-2712191(I.R.S. Employer
Identification Number)
|----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------
|2301 Eagle Parkway
Suite 200
Fort Worth, Texas(Address of principal executive offices)                                                    |  | 76177(Zip Code)                                  
|(817) 632-4000(Registrant's telephone number, including area code)                                                                       
|6125 Airport Freeway
Suite 202
Haltom City, Texas 76117(Former name, former address and former fiscal year,
if changed since last report)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  o    No  ý

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes  o    No  ý

As
of August 11, 2003, 142,000 shares of the Registrant's Class A voting common stock, par value $.01 per share, and 112,980.2 shares of the Registrant's Class B
non-voting common stock, par value $.01 per share, were outstanding.

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IESI CORPORATION

TABLE OF CONTENTS



|                                |         |                                                                                                 
|------------------------------- | ------- | ------------------------------------------------------------------------------------------------
|Part I    Financial Information
|                                | Item 1. |                                                                                                 
|                                |         | Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                           
|                                |         | Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2003 and 2002 
|                                |         | Consolidated Statements of Stockholders' Equity (Deficit) for the Six Months Ended June 30, 2003
|                                |         | Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002           
|                                |         | Notes to Consolidated Financial Statements                                                      
|                                | Item 2. |                                                                                                 
|                                | Item 3. |                                                                                                 
|                                | Item 4. |                                                                                                 
|Part II.    Other Information  
|                                | Item 1. |                                                                                                 
|                                | Item 2. |                                                                                                 
|                                | Item 3. |                                                                                                 
|                                | Item 4. |                                                                                                 
|                                | Item 5. |                                                                                                 
|                                | Item 6. |                                                                                                 
|Signatures                     

i

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Part I. Financial Information

Item 1. Financial Statements

IESI CORPORATION AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                                                                                                           |  | June 30,
2003 |             | December 31,
2002 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | ----------------- | -
|
|Current assets:                                                                                                                                                                                                                                                            |  |               |             |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                                                  |  | $             | 2,974,489   |                   | $
|Accounts receivable-trade, less allowance of $694,000 and $941,000 at June 30, 2003 and December 31, 2002, respectively                                                                                                                                                    |  |               | 30,347,870  |                   |  
|Deferred income taxes                                                                                                                                                                                                                                                      |  |               | 849,163     |                   |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                                  |  |               | 5,445,951   |                   |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total current assets                                                                                                                                                                                                                                                       |  |               | 39,617,473  |                   |  
|Property and equipment, net of accumulated depreciation of $87,377,000 and $73,475,000 at June 30, 2003 and December 31, 2002, respectively                                                                                                                                |  |               | 250,825,644 |                   |  
|Goodwill                                                                                                                                                                                                                                                                   |  |               | 136,262,792 |                   |  
|Other intangible assets, net                                                                                                                                                                                                                                               |  |               | 19,616,112  |                   |  
|Other assets                                                                                                                                                                                                                                                               |  |               | 5,327,239   |                   |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total assets                                                                                                                                                                                                                                                               |  | $             | 451,649,260 |                   | $
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Liabilities and Stockholders' Equity (Deficit)                                                                                                                                                                                                                             |  |               |             |                   |  
|Current liabilities:                                                                                                                                                                                                                                                       |  |               |             |                   |  
|Accounts payable  trade                                                                                                                                                                                                                                                   |  | $             | 18,993,043  |                   | $
|Accrued expenses and other current liabilities                                                                                                                                                                                                                             |  |               | 13,783,699  |                   |  
|Deferred revenue                                                                                                                                                                                                                                                           |  |               | 5,056,459   |                   |  
|Current portion of long-term debt                                                                                                                                                                                                                                          |  |               | 105,096     |                   |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total current liabilities                                                                                                                                                                                                                                                  |  |               | 37,938,297  |                   |  
|Long-term debt                                                                                                                                                                                                                                                             |  |               | 219,065,855 |                   |  
|Accrued environmental and landfill costs                                                                                                                                                                                                                                   |  |               | 11,841,244  |                   |  
|Deferred income taxes                                                                                                                                                                                                                                                      |  |               | 6,058,690   |                   |  
|Other liabilities                                                                                                                                                                                                                                                          |  |               | 1,370,015   |                   |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total liabilities                                                                                                                                                                                                                                                          |  |               | 276,274,101 |                   |  
|Commitments and contingencies                                                                                                                                                                                                                                              |  |               |             |                   |  
|Redeemable preferred stock:                                                                                                                                                                                                                                                |  |               |             |                   |  
|Redeemable Series A Convertible Preferred Stock, 32,000 shares authorized, issued and outstanding, liquidation preference of $40,000,000 at June 30, 2003 and December 31, 2002                                                                                            |  |               | 39,683,637  |                   |  
|Redeemable Series B Convertible Preferred Stock, 20,100 shares authorized, issued and outstanding, liquidation preference of $25,125,000 at June 30, 2003 and December 31, 2002                                                                                            |  |               | 24,808,636  |                   |  
|Redeemable Series C Convertible Preferred Stock, 55,000 shares authorized, issued and outstanding, liquidation preference of $98,091,281 and $91,247,703 at June 30, 2003 and December 31, 2002, respectively                                                              |  |               | 96,048,820  |                   |  
|Redeemable Series D Convertible Preferred Stock, 145,000 shares authorized, 55,000 shares issued and outstanding, liquidation preference of $66,386,036 and $62,272,416 at June 30, 2003 and December 31, 2002,
respectively                                               |  |               | 62,766,159  |                   |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total redeemable preferred stock                                                                                                                                                                                                                                           |  |               | 223,307,252 |                   |  
|Stockholders' equity (deficit):                                                                                                                                                                                                                                            |  |               |             |                   |  
|Common stock, par value $.01: Authorized shares: Class A  3,600,000 and Class B Convertible  450,000, at June 30, 2003 and December 31, 2002; issued and outstanding shares: Class A  142,000 and Class B
Convertible  112,980, at June 30, 2003 and December 31, 2002 |  |               | 2,550       |                   |  
|Additional paid-in capital                                                                                                                                                                                                                                                 |  |               |            |                   |  
|Accumulated deficit                                                                                                                                                                                                                                                        |  |               | (47,934,643 | )                 |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total stockholders' equity (deficit)                                                                                                                                                                                                                                       |  |               | (47,932,093 | )                 |  
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|Total liabilities and stockholders' equity (deficit)                                                                                                                                                                                                                       |  | $             | 451,649,260 |                   | $
|                                                                                                                                                                                                                                                                           |  |               |             |                   |  
|See accompanying notes.                                                                                                                                                                                                                                                    | 

1

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IESI CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  (UNAUDITED)

|                                                                                                                                                                           |                                          | Six Months Ended
June 30, |             | Three Months Ended
June 30, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------------------------- | ----------- | --------------------------- | -
|
|Services revenue                                                                                                                                                           |                                          | $                         | 116,313,385 |                             | $
|Costs and expenses:                                                                                                                                                        |                                          |                           |             |                             |  
|                                                                                                                                                                           | Operating                                |                           |             | 76,383,436                  |  
|                                                                                                                                                                           | General and administrative               |                           |             | 14,796,797                  |  
|                                                                                                                                                                           | Depreciation, depletion and amortization |                           |             | 16,585,574                  |  
|                                                                                                                                                                           |                                          |                           |             |                             |  
|                                                                                                                                                                           |                                          |                           | 107,765,807 |                             |  
|Income from operations                                                                                                                                                     |                                          |                           | 8,547,578   |                             |  
|Interest expense, net                                                                                                                                                      |                                          |                           | (8,957,852  | )                           |  
|Loss on termination of interest rate swaps                                                                                                                                 |                                          |                           |            |                             |  
|Loss on extinguishment of debt                                                                                                                                             |                                          |                           |            |                             |  
|Other income (expense), net                                                                                                                                                |                                          |                           | (113,455    | )                           |  
|Income (loss) before income taxes                                                                                                                                          |                                          |                           | (523,729    | )                           |  
|Income tax benefit (expense)                                                                                                                                               |                                          |                           | 248,895     |                             |  
|                                                                                                                                                                           |                                          |                           |             |                             |  
|Income (loss) before cumulative effect of change in accounting principle                                                                                                   |                                          |                           | (274,834    | )                           |  
|Cumulative effect of change in accounting principle net of income tax benefit of $0                                                                                        |                                          |                           | (1,476,450  | )                           |  
|                                                                                                                                                                           |                                          |                           |             |                             |  
|Net income (loss)                                                                                                                                                          |                                          | $                         | (1,751,284  | )                           | $
|                                                                                                                                                                           |                                          |                           |             |                             |  
|Pro forma income (loss) before cumulative effect of change in accounting principle, assuming changes in accounting principle described in Note 2 are applied retroactively |                                          | $                         | (274,834    | )                           | $
|                                                                                                                                                                           |                                          |                           |             |                             |  

See
accompanying notes.

2

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IESI CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)  (UNAUDITED)

|                                                         |          | Common Stock |   |   |       |   |   |   |  
|-------------------------------------------------------- | -------- | ------------ | - | - | ----- | - | - | - | -
|
|Balance at December 31, 2002                             |          | 254,980      |   | $ | 2,550 |   | $ |  |  
|                                                         | Net loss |              |  |   |       |  |   |   | 
|Accretion of dividends on Series C and D Preferred Stock |          |             |   |   |      |   |   |  |  
|                                                         |          |              |   |   |       |   |   |   |  
|Balance at June 30, 2003                                 |          | 254,980      |   | $ | 2,550 |   | $ |  |  
|                                                         |          |              |   |   |       |   |   |   |  

See
accompanying notes.

3

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IESI CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)

|                                                                                         |                                                                                                                            | For the Six Months Ended June 30, |            
|---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | -----------
|
|Operating Activities:                                                                    |                                                                                                                            |                                   |            
|Net income (loss)                                                                        |                                                                                                                            | $                                 | (1,751,284 
|Cumulative effect of change in accounting principle                                      |                                                                                                                            |                                   | 1,476,450  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                                                                            |                                   |            
|                                                                                         | Depreciation, depletion and amortization                                                                                   |                                   |            
|                                                                                         | Amortization of deferred financing costs                                                                                   |                                   |            
|                                                                                         | Capping, closure and post-closure accretion                                                                                |                                   |            
|                                                                                         | Provision for doubtful accounts                                                                                            |                                   |            
|                                                                                         | Loss on extinguishment of debt                                                                                             |                                   |            
|                                                                                         | Deferred income tax (benefit) expense                                                                                      |                                   |            
|                                                                                         | Changes in operating assets and liabilities, net of effects of acquired waste management operating assets and liabilities: |                                   |            
|                                                                                         | Accounts receivable                                                                                                        |                                   |            
|                                                                                         | Prepaid expenses and other current assets                                                                                  |                                   |            
|                                                                                         | Accounts payable                                                                                                           |                                   |            
|                                                                                         | Accrued expenses and other liabilities                                                                                     |                                   |            
|                                                                                         | Capping, closure and post closure expenditures                                                                             |                                   |            
|                                                                                         |                                                                                                                            |                                   |            
|Net cash provided by operating activities                                                |                                                                                                                            |                                   | 14,649,332 
|Investing Activities:                                                                    |                                                                                                                            |                                   |            
|Purchases of property and equipment                                                      |                                                                                                                            |                                   | (18,848,138
|Acquisitions of waste management operations                                              |                                                                                                                            |                                   | (8,561,627 
|Initial development costs for newly acquired permitted landfills                         |                                                                                                                            |                                   | (3,726,991 
|Capitalized interest                                                                     |                                                                                                                            |                                   | (1,020,923 
|Deferred costs associated with transactions in process                                   |                                                                                                                            |                                   | (764,789   
|                                                                                         |                                                                                                                            |                                   |            
|Net cash used in investing activities                                                    |                                                                                                                            |                                   | (32,922,468
|Financing Activities:                                                                    |                                                                                                                            |                                   |            
|Borrowings under long-term debt                                                          |                                                                                                                            |                                   | 26,400,000 
|Payments on long-term debt                                                               |                                                                                                                            |                                   | (7,306,030 
|Debt issue costs                                                                         |                                                                                                                            |                                   | (436,071   
|Payments on interest rate swap termination                                               |                                                                                                                            |                                   |           
|                                                                                         |                                                                                                                            |                                   |            
|Net cash provided by financing activities                                                |                                                                                                                            |                                   | 18,657,899 
|                                                                                         |                                                                                                                            |                                   |            
|Net increase (decrease) in cash and cash equivalents                                     |                                                                                                                            |                                   | 384,763    
|Cash and cash equivalents at beginning of period                                         |                                                                                                                            |                                   | 2,589,726  
|                                                                                         |                                                                                                                            |                                   |            
|Cash and cash equivalents at end of period                                               |                                                                                                                            | $                                 | 2,974,489  
|                                                                                         |                                                                                                                            |                                   |            

See
accompanying notes.

4

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IESI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.     Business and Organization

IESI Corporation (IESI) is a Delaware holding company founded in 1995. IESI, together with its subsidiaries (collectively, the Company), is a regional, integrated
non-hazardous solid waste management company that provides collection, transfer, disposal, and recycling services to commercial, industrial and residential customers. The Company was
formed in order to participate in the consolidation of the fragmented solid waste industry. The Company is executing this strategy through an acquisition program, which targets businesses in two
principal geographic regions, the Northeast and the South United States. The Company is currently operating in nine states: Arkansas, Louisiana, Maryland, Missouri, New Jersey, New York, Oklahoma,
Pennsylvania, and Texas.

The
accompanying unaudited consolidated financial statements include the accounts of IESI and its subsidiaries. All significant inter-company accounts and transactions have been
eliminated. Certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the opinion of management, these unaudited condensed consolidated financial statements reflect all material adjustments
(which include only normal recurring adjustments) necessary to fairly state the financial position and the results of operations for the periods presented, and the disclosures herein are adequate to
make the information presented not misleading. Operating results for interim periods are not necessarily indicative of the results for full years. These interim unaudited consolidated financial
statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2002 and the related notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

The
unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on
estimates and assumptions made by management. Actual results could differ from these amounts. Significant items subject to such estimates and assumptions include the depletion and amortization of
landfill development costs, accruals for final closure and post-closure costs, valuation allowances for accounts receivable, liabilities for potential litigation, claims and assessments,
and liabilities for environmental remediation, deferred taxes and self-insurance.

Additionally,
certain reclassifications have been made in the prior period consolidated statement of cash flows in order to conform to the current period presentation.

2.     New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 applies to all legally enforceable obligations associated with the retirement of tangible long-lived assets and provides the accounting
and reporting requirements for such obligations. SFAS No. 143 requires amounts initially recognized as an asset retirement obligation to be measured at fair value. The recognized asset
retirement cost is capitalized as part of the cost of the asset and is depreciated over the useful life of the asset. The Company adopted SFAS No. 143 effective January 1, 2003.

5

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The
following table summarizes the pro forma impact to net income for the six and three months ended June 30, 2002 of the accounting change implemented beginning January 1,
2003:

Six Months Ended June 30, 2002

Three Months Ended June 30, 2002Reported net income

$
1,043,797

$
934,180Adoption of SFAS No. 143, net of tax


(188,849
)

(97,352
)Pro forma net income

$
854,948

$
836,828


The
application of SFAS No. 143 increased loss before cumulative effect of changes in accounting principle for the six months ended June 30, 2003 by approximately $70,000,
net of tax benefit, and decreased income before cumulative effect of changes in accounting principle for the six months ended June 30, 2003 by approximately $20,000, net of tax benefit.

The
following table summarizes the impact on income from operations of applying the provisions of SFAS No. 143 for the six and three months ended June 30, 2003. The
adoption of SFAS No. 143 had no impact on the Company's cash flow.

Six Months Ended June 30, 2003

Three Months Ended June 30, 2003Increase to operating expense

$
266,000

$
109,000Decrease to depletion expense


(126,000
)

(70,000
)Decrease to income from operations

$
140,000

$
39,000


While
SFAS No. 143 impacts the accounting for the Company's landfill operations, it does not change the basic landfill accounting principles that the Company and others in the
waste industry have historically followed. In general, the waste industry has recognized expenses associated with both amortization of capitalized costs and future closure and post-closure
obligations on a units-of-consumption basis as airspace is consumed over the life of the related landfill.

Under
SFAS No. 143, costs associated with future final capping activities that occur during the operating life of a landfill, as well as closure and post closure activities are
accounted for as asset retirement obligations on a discounted basis. The Company recognizes landfill retirement obligations that relate to closure and post-closure activities over the
operating life of a landfill as landfill airspace is consumed and the obligation is incurred. The Company recognizes its final capping obligations on a discrete basis for each expected future final
capping event over the number of tons of waste that each final capping event is expected to cover. The landfill retirement obligations are initially measured at estimated fair value. Fair value is
measured on a present value basis, using a credit-adjusted, risk-free rate (currently at 10.25%). Accretion is recorded on all landfill retirement
obligations using the effective interest method. The Company amortizes landfill retirement costs arising from closure and post-closure obligations, which are capitalized as part of the
landfill asset, on a units of consumption basis as airspace is consumed over the life of the related landfill.

The
Company amortizes landfill retirement costs arising from final capping obligations, which are also capitalized as part of the landfill asset, on a
units-of-consumption basis over the number of units (tons or cubic yards) of waste that each final capping event covers.

6

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The
tables below set forth the significant changes between the Company's historical and current (effective January 1, 2003 upon the Company's adoption of SFAS No. 143)
landfill accounting practices and certain definitions related thereto:

|Term          |  | Historical Definition                                                                                                                                                                                                                 |  | Current Definition
(Effective January 1, 2003)
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|Final Capping |  | Includes installation of flexible membrane and geosynthethic clay liners, drainage, compacted soil layers and topsoil over areas of a landfill where total airspace capacity has been consumed.                                       |  | No change.                                    
|Closure       |  | Includes last final capping event, construction of final portion of methane gas collection system, demobilization, and the routine maintenance costs incurred after site ceases to accept waste, but prior to being certified closed. |  | No change.                                    
|Post-closure  |  | Includes routine monitoring and maintenance of a landfill after it has closed, ceased to accept waste and been certified as closed by the applicable state regulatory agency.                                                         |  | No change.                                    

|Description     |  | Historical Practice                                                                                          |  | Current Practice
(Effective January 1, 2003)                                                                                                                                  
|--------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Discount Rate:  |  | None.                                                                                                        |  | Credit-adjusted, risk-free rate (currently at 10.25%).                                                                                                                        
|Cost Estimates: |  | Cost was estimated based on performance, principally by third parties, with a small portion performed by us. |  | No change, except that the cost of any activities performed internally must be increased to represent an estimate of what a third party would charge to perform such activity.
|Inflation:      |  | Not applicable.                                                                                              |  | 2.5% annually, effective January 1, 2003, based on the prior 10 year average.                                                                                                 
|                |  |                                                                                                              |  |                                                                                                                                                                               

7

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|Recognition of Assets and Liability: |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Final Capping                        |  | Costs were capitalized as spent, except for the last final capping event that occurs after the landfill closes, which is accounted for a part of closure.                                                      |  | All final capping will be recorded as a liability and asset when incurred; the s discounted cash flow associated with each final capping event is recorded to the accrued liability with a corresponding increase to landfill assets as airspace is
consumed related to the specific final capping event. Spending is reflected as a change in liabilities within operating activities in the statement of cash flows.
|Closure and post-closure             |  | Accrued over the life of the landfill, the undiscounted cash flow associated with such liabilities is recorded to accrued liabilities, with a corresponding charge cost of operations as airspace is consumed. |  | Accrued over the life of the landfill; the discounted cash flow associated with such liabilities is recorded to accrued liabilities, to with a corresponding increase in landfill assets as airspace is consumed.                                                                                                                                                                                                     
|Statement of Operations Expense:     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|Liability accrual                    |  | Expense charged to cost of operations at same amount accrued to liability.                                                                                                                                     |  | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                       
|Landfill asset amortization          |  | Not applicable.                                                                                                                                                                                                |  | The landfill asset is amortized to depreciation, depletion and amortization expense as airspace is consumed over life of specific final capping event or life of landfill for closure and post-closure.                                                                                                                                                                                                               
|Accretion                            |  | Not applicable.                                                                                                                                                                                                |  | Expense, charged to cost of operations, is accreted at credit-adjusted, risk-free rate (currently at 10.25%) under the effective interest method.                                                                                                                                                                                                                                                                     

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 requires that gains and losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board Opinion No. 30
("Opinion No. 30"). Applying the provision of

8

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Opinion
No. 30 will distinguish transactions that are part of an entity's recurring operations from those that are unusual and infrequent that meet criteria for classification as an
extraordinary item. As allowed under the provisions of SFAS No. 145, the Company has adopted the provisions of SFAS No. 145 as of April 1, 2002.

3.     Summary of Significant Accounting Policies

Property and Equipment

Property and equipment are stated at cost. Improvements or betterments, which significantly extend the life, or add to the utility, of an asset, are capitalized.
Expenditures for maintenance and repair costs are charged to operations as incurred. The cost of assets retired or otherwise disposed of and the related accumulated depreciation is eliminated from the
accounts in the year of disposal and any resulting gain or loss is reflected in the Consolidated Statements of Operations.

The
Company revises the estimated useful lives of property and equipment acquired through business acquisitions to conform with its' policies regarding property and equipment.
Depreciation is calculated on the straight-line method over the estimated useful lives of the related assets which generally range from three to five years for furniture and fixtures and
computer equipment, five to 10 years for containers, compactors, trucks and collection equipment, and 10 to 40 years for buildings and improvements. The Company assumes no salvage value
for its depreciable property and equipment.
Depreciation expense on property and equipment was approximately $10,087,000 and $7,513,000 for the six months ended June 30, 2003 and 2002, respectively and approximately $5,104,000 and
$3,837,000 for the three months ending June 30, 2003 and 2002, respectively.

Landfills
and landfill improvements are stated at cost and are depleted based on consumed airspace. Landfill improvements include direct costs incurred to obtain landfill permits and
direct costs incurred to construct and develop the site. All indirect landfill development costs are expensed as incurred. Depletion expense was approximately $4,761,000 and $3,874,000 for the six
months ended June 30, 2003 and 2002, respectively, and approximately $2,792,000 and $2,032,000 for the three months ending June 30, 2003 and 2002, respectively.

Interest
is capitalized on certain projects under development including landfill projects and probable landfill expansion projects, and on certain assets under construction, including
operating landfills. The capitalization of interest for operating landfills is based on the costs incurred on discrete cell construction projects. Interest capitalized was approximately $1,021,000 and
$653,000 for the six months ended June 30, 2003 and 2002, respectively and $403,000 and $351,000 for the three months ended June 30, 2003 and 2002, respectively.

Property
and equipment consisted of the following at June 30, 2003 and December 31, 2002:

|                                            |  | June 30,
2003 |             | December 31,
2002
|------------------------------------------- |  | ------------- | ----------- | -----------------
|Land and landfills                          |  | $             | 166,658,196 |                  
|Vehicles                                    |  |               | 79,605,173  |                  
|Containers and compactors                   |  |               | 47,953,995  |                  
|Machinery and equipment                     |  |               | 22,886,236  |                  
|Buildings and improvements                  |  |               | 16,253,235  |                  
|Furniture and office equipment              |  |               | 4,845,355   |                  
|                                            |  |               |             |                  
|                                            |  |               | 338,202,190 |                  
|Less accumulated depreciation and depletion |  |               | 87,376,546  |                  
|                                            |  |               |             |                  
|                                            |  | $             | 250,825,644 |                  
|                                            |  |               |             |                  

9

---

Goodwill and Other Intangible Assets

Intangible assets consist primarily of the cost of acquired businesses in excess of the fair value of net assets acquired (Goodwill). Other intangibles consist of
values assigned to customer lists and covenants not-to-compete, costs incurred to obtain debt financing and other separately identifiable intangible assets. Other intangibles
are recorded at cost and, except for debt issue costs, amortized over periods generally ranging from five to seven years, computed on the straight-line method. Amortization expense was
approximately $1,737,000 and $1,401,000 for the six months ended June 30, 2003 and 2002, respectively, and $815,000 and $743,000 for the three months ended June 30, 2003 and 2002,
respectively. The Company defers costs related to incurring debt and amortizes, as additional interest expense, these costs over the term of the related debt using the effective interest method.

Other
intangible assets consisted of the following at June 30, 2003 and December 31, 2002:

|                              |  | June 30,
2003 |            | December 31,
2002
|----------------------------- |  | ------------- | ---------- | -----------------
|Customer lists                |  | $             | 15,027,701 |                  
|Noncompetition agreements     |  |               | 5,985,820  |                  
|Debt issue costs              |  |               | 16,108,105 |                  
|Other                         |  |               | 994,607    |                  
|                              |  |               |            |                  
|                              |  |               | 38,116,233 |                  
|Less accumulated amortization |  |               | 18,500,121 |                  
|                              |  |               |            |                  
|                              |  | $             | 19,616,112 |                  
|                              |  |               |            |                  

The
Company assesses whether goodwill is impaired on an annual basis. Upon determining the existence of goodwill impairment, the Company measures that impairment based on the amount by
which the book value of goodwill exceeds its implied fair value. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit's identifiable assets and liabilities
from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the purchase price were being initially allocated. Additional impairment assessments may be
performed on an interim basis if the Company encounters events or changes in circumstances that would indicate, more likely than not, the book value of goodwill has been impaired.

10

---

On an ongoing basis, management reviews the valuation and amortization of other intangible assets with consideration toward recovery through future operating results. The Company
periodically evaluates the value and future benefits of its other intangible assets. The Company assesses recoverability from future operations using cash flows and income from operations of the
related asset as measures. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the carrying value would be reduced to estimated fair
value if it becomes probable that the Company's estimate for expected future cash flows of the related asset would be less than the carrying amount of the related intangible assets. There have been no
adjustments to the carrying amount of intangible assets resulting from these evaluations as of June 30, 2003 and December 31, 2002.

Scheduled
estimated amortization of other intangible assets is as follows:

2003

$
2,920,0002004


4,669,0002005


2,923,0002006


2,165,0002007


1,850,000Thereafter


5,089,000$
19,616,000


Accrued Expenses and Other Current Liabilities

The following is a summary of accrued expenses and other current liabilities at June 30, 2003 and December 31, 2002:

June 30,
2003

December 31,
2002Acquisition related accrued liabilities

$
2,439,490

$
2,740,190Interest


1,108,970


1,169,589Accrued payroll and other employee related liabilities


2,199,006


2,663,757Accrued insurance liabilities


3,155,453


2,874,036Other


4,880,780


3,940,306$
13,783,699

$
13,387,878


Income Taxes

Deferred income taxes are determined based on the difference between the financial reporting and tax bases of assets and liabilities. Deferred income tax
provision represents the change during the reporting period in the deferred tax assets and deferred tax liabilities, net of the effect, if any, of acquisitions and dispositions. Deferred tax assets
include tax loss carry forwards and are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be
realized.

The
difference in income taxes computed at the statutory rate and reported income taxes for the three and six months ended June 30, 2003 is due primarily to state and local income
taxes. The difference in income taxes computed at the statutory rate and reported income taxes for the six months ended June 30, 2002 is due primarily to an increase in the valuation allowance
related to a change in the estimated reversal of temporary differences related to tax deductible goodwill.

11

---

4.     Acquisitions

All acquisitions were accounted for as purchases and, accordingly, only the operations of the acquired companies since the acquisition dates are included in the
accompanying unaudited consolidated financial statements.

During
the six months ended June 30, 2003, the Company acquired the hauling assets of six solid waste management companies for an aggregate purchase price of approximately
$10,850,000 consisting of cash and liabilities assumed. In connection with the acquisitions, the Company recorded approximately $6,466,000 of goodwill, all of which is expected to be deductible for
tax purposes, and approximately $1,177,000 of amortizing intangible assets. The amortizing intangible assets consist of $1,113,000 related to customer lists with generally a seven year amortization
period and $64,000 related to non-competition agreements with generally two to five year amortization periods. The pro forma effects of the acquisition are not significant to the Company's
operating results.

In
addition, during the six months ended June 30, 2003, the Company incurred $3,727,000 of development costs in connection with two "greenfield" landfills, which the Company
purchased in 2002. Both landfills included the land and the permit to operate. However, unlike the purchase of an operating landfill, neither greenfield landfill had incurred the costs of development,
which include the infrastructure of an operating landfill and initial cell. Both landfills are scheduled to open in 2003. Upon commencement of the operating activities of the landfill future
development costs will be included in purchases of property and equipment.

5.     Landfill and Accrued Environmental Costs

On April 18, 2003, the Pennsylvania Department of Environmental Protection granted the Company a permit to expand its Bethlehem, PA landfill. The expansion
permit also increased the average daily capacity of the landfill from 750 tons to 1,375 tons. As a result of the expansion permit, the current estimated remaining operating life of the landfill has
been increased to 14 years.

Final Capping, Closure and Post-Closure Obligations

The Company has material financial commitments for final capping, closure and post-closure obligations with respect to its landfills. The Company
develops its estimates of final capping, closure and post-closure obligations using input from its engineers and accountants. The Company's estimates are based on its interpretation of
current requirements and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value should be based on the best available information, including the results of
present value techniques. In general, the Company contracts with third parties to fulfill most of its obligations for final capping, closure and post-closure. Accordingly, the fair market
value of these obligations is based upon quoted and actual prices paid for similar work. The Company intends to perform some of these capping, closure and post-closure activities using
internal resources. Where internal resources are expected to be used to fulfill an asset retirement obligation, the Company has added a profit margin to the estimated cost of such services to better
reflect their fair market value. When the Company then performs these services internally, the added profit margin is recognized as a component of operating income in the period earned. An estimate of
fair value should include the price that marketplace participants are able to receive for bearing the uncertainties in cash flows. However, when utilizing discounted cash flow techniques, reliable
estimates of market premiums may not be obtainable. In the waste industry, there is no market that exists for selling the responsibility for final capping, closure and post-closure
independent of selling the landfill in its entirety. Accordingly, the Company believes that it is not possible to develop a methodology to reliably estimate a market risk premium and have excluded a
market risk premium from its determination of expected cash flows for landfill asset retirement obligations.

12

---

Once
the Company has determined the final capping, closure and post-closure costs, the Company then inflates those costs to the expected time of payment and discounts those
expected future costs back to present value. The Company inflates these costs in current dollars until the expected time of payment using an inflation rate of 2.5% annually and discounts these costs
to present value using a credit-adjusted, risk-free discount rate of 10.25%. The Company reviewed the inflation rate to be used for 2003 and determined that a rate of 2.5%, which is the
rate used by most waste industry participants, was appropriate. The credit-adjusted, risk-free rate is based on the risk-free interest rate on obligations of similar maturity
adjusted for its own credit rating. Changes in the Company's credit-adjusted, risk-free rate do not change recorded liabilities, but subsequently recognized obligations are measured using
the revised credit-adjusted risk-free rate.

Management
reviews the estimates of the Company's obligations at least annually. Significant changes in inflation rates and the amount and timing of future final capping, closure and
post-closure cost estimates typically result in both (i) a current adjustment to the recorded liability (and corresponding adjustment to the landfill asset), based on the landfill's
capacity consumed, and (ii) a change in liability and asset amounts to be recorded prospectively over the remaining capacity of the landfill.

The
Company records the estimated fair value of final capping, closure and post-closure liabilities for its landfills based on the respective final capping or landfill
capacities consumed through the current period. The liability and corresponding asset are recorded on a per-ton basis. The estimated fair value of each final capping event will be fully
accrued when the tons associated with such capping event have been disposed in the landfill. Additionally, the estimated fair value of total final capping, closure and post-closure costs
will be fully accrued for each landfill at the time the site discontinues accepting waste and is closed. Closure and post-closure accruals consider estimates for methane gas control,
leachate management and ground-water monitoring and other operational and maintenance costs to be incurred after the site discontinues accepting waste, which is generally expected to be for a period
of up to thirty years after final site closure. Daily maintenance activities, which include many of these costs, are incurred during the operating life of the landfill and are expensed as incurred.
Daily maintenance activities include leachate disposal; surface water, groundwater, and methane gas monitoring and maintenance; other pollution control activities; mowing and fertilizing the landfill
cap; fence and road maintenance; and third party inspection and reporting costs. For purchased disposal sites, the Company assesses and records final capping, closure and post-closure
costs and the percentage of airspace consumed related to such obligations as of the date it assumed the responsibility. Thereafter, the Company accounts for the landfill and related final capping,
closure and post-closure obligations consistent with the policy described above.

Accretion
on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as final capping, closure and
post-closure expense, which is included in operating costs on the income statement.

In
the United States, the closure and post-closure requirements are established by the Environmental Protection Agency's (EPA) Subtitle C and D regulations, as implemented
and applied on a state-by-state basis. The costs to comply with these requirements could increase in the future as a result of legislation or regulation.

13

---

The
changes to landfill liabilities related to final capping, closure, post-closure and other obligations are as follows:

Six Months Ended June 30,2003

2002Beginning balance

$
12,539,318

$
12,600,157Cumulative effect of change in accounting principle


(1,553,432
)

Obligations incurred


474,042


166,300Obligations settled


(299,147
)

(446,100
)Revisions in estimates


96,086


Accretion


584,377


Ending balance(a)

$
11,841,244

$
12,320,357


---



The
Company pays annual premiums to obtain performance bonds underwritten by a large insurance carrier, which support the Company's financial assurance obligations for its facilities'
closure and post-closure costs. These premiums are expensed as incurred.

6.     Long-Term Debt

Long-term debt consisted of the following at June 30, 2003 and December 31, 2002:

June 30,
2003

December 31,
2002Revolving credit loan

$
65,550,000

$
46,400,000Senior subordinated notes due June 15, 2012


153,515,855


151,964,430Other


105,096


206,796Total long-term debt


219,170,951


198,571,226Less current portion


105,096


184,825$
219,065,855

$
198,386.401


Scheduled
maturities of long-term debt are as follows:

2003

$
105,0962004


65,550,0002005


2006


2007


Thereafter


153,515,855$
219,065,855


On
June 12, 2002, the Company issued $150,000,000 of 10.25% Senior Subordinated Notes due 2012 (Original Notes) in a private placement. Interest is payable
semi-annually on June 15th and December 15th. On January 15, 2003, the Company exchanged the Original Notes for a like amount of notes
(Exchange Notes and, together with the Original Notes, the Notes) with substantially the same terms, which were registered under the Securities Act of 1933, as amended. The net proceeds from the
offering of the Original Notes were approximately $144,000,000, after deducting the initial purchasers'

14

---

fees
and other expenses of the offering. The Company used $142,800,000 of these proceeds to repay amounts outstanding under the term loan and revolving credit loan portions of its senior credit
facility.

The
Exchange Notes are guaranteed by all of IESI's current subsidiaries, all of which are 100% owned by IESI. Condensed consolidating financial information is not provided as IESI has no
independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and there are no significant restrictions on the ability of the Company or any subsidiary
guarantor to obtain funds from its subsidiaries by dividend or loan.

The
Company's senior credit facility is provided by a syndicate of lenders led by Fleet National Bank, as administrative agent (Fleet), and Credit Suisse First Boston and Citicorp North
America, Inc., jointly as syndication agents. As of June 30, 2003, there was $65,550,000 (excluding $12,500,000 underlying letters of credit) outstanding under the revolving loan portion
of the senior credit facility and additional borrowings of $14,700,000 were available under the revolving loan portion, plus a maximum of an additional $17,500,000 underlying letters of credit.

The
senior credit facility permits borrowings at floating interest rates based, at the Company's option, on the designated eurodollar interest rate, which generally approximates LIBOR,
or the Fleet prime rate, in each case, plus an applicable margin, and requires payment of an annual commitment fee based on the unused portion of the revolving loan. As of June 30, 2003, the
interest rate applicable to $49,600,000 outstanding under the revolving loan portion of the Company's senior credit facility was LIBOR plus 325 basis points, or 4.3%. The interest rate applicable to
the remaining $15,950,000 outstanding under the revolving loan portion of the Company's senior credit facility was the Fleet prime rate, or 5.5%. The senior credit facility expires on
August 31, 2004.

In
August 2002, the Company entered into two interest rate swap agreements, which are effective through June 15, 2012, with two financial institutions. Under each swap
agreement, the fixed interest rate on $25,000,000 of the Notes effectively was converted to an interest rate of 5.275% and 5.305%, respectively, plus an applicable floating rate margin that is based
on six month LIBOR which is readjusted semiannually on June 15 and December 15 of each year. As of June 30, 2003 and December 31, 2002, the fair value of the two interest
rate swaps was $3,515,855 and $1,964,430, respectively. The fair value of the hedged Notes has been adjusted for the effects of the change in fair value of the interest rate swaps.

7.     Commitments and Contingencies

The Company's business activities are conducted in the context of a developing and changing statutory and regulatory framework. Governmental regulation of the
waste management industry requires the Company to obtain and retain numerous governmental permits to conduct various aspects of its operations. These permits are subject to revocation, modification or
denial. The costs and other capital expenditures, which may be required to obtain or retain the applicable permits or comply with applicable regulations, could be significant. Any revocation,
modification or denial of permits could have a material adverse effect on the Company.

The
Company is subject to liability for any environmental damage that its solid waste disposal facilities may cause to neighboring landowners or residents, particularly as a result of
the contamination of soil, groundwater or surface water, including, in some cases, damage resulting from conditions existing prior to the acquisition of such facilities by the Company. The Company may
also be subject to liability for any off-site environmental contamination caused by pollutants or hazardous substances whose transportation, treatment or disposal was arranged by the
Company or its predecessors.

Any
substantial liability for environmental damage incurred by the Company could have a material adverse effect on the Company's financial condition, results of operations or cash flows.
As of June 30, 2003, the Company was not aware of any such environmental liabilities.

15

---

In
the normal course of its business and as a result of the extensive governmental regulation of the solid waste industry, the Company is subject to various judicial and administrative
proceedings involving federal, state or local agencies. In these proceedings, an agency may seek to impose fines on the Company or to revoke or deny renewal of an operating permit held by the Company.
From time to time, the Company may also be subject to actions brought by citizens' groups or adjacent landowners or residents in connection with the permitting and licensing of landfills and transfer
stations, or alleging environmental damage or violations of the permits and licenses pursuant to which the Company operates.

In
addition, the Company may become party to various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities
arising out of matters occurring during the normal operation of the waste management business. However, as of June 30, 2003, there were no proceedings or litigation involving the Company that
the Company believed would have a material adverse impact on its business, financial condition, results of operations or cash flows.

8.     Redeemable Preferred Stock

The Company had redeemable preferred stock on its balance sheet of $223,307,000 as of June 30, 2003 and $213,350,000 as of December 31, 2002,
representing the carrying value of its preferred stock as of such dates. In accordance with Emerging Issues Task Force (EITF) Topic No. D-98, "Classification and Measurement of
Redeemable Securities," the Company has classified its preferred stock outside of permanent equity because, pursuant to the terms of such preferred stock, such preferred stock is redeemable upon the
occurrence of certain transactions deemed to be liquidation events. Such redemption is not deemed to be solely within the Company's control because holders of the Company's preferred stock currently
control a majority of the votes of the Company's board of directors.

16

---

9. Segment Reporting

The Company's two geographic regions are the Company's reportable segments. The segments provide integrated waste management services consisting of collection,
transfer, disposal, and recycling services to commercial, industrial, municipal, and residential customers. Summarized financial information concerning the Company's reportable segments for the
respective six-month and three-month periods ended June 30 is shown in the following table:

|                                                                                                              |  | South Region |             | Northeast
Region |   | Corporate
Functions |  | Total
|------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ---------------- | - | ------------------- |  | -----
|Six Months Ended June 30, 2003                                                                                |  |              |             |                  |   |                     |  |      
|Outside revenues                                                                                              |  |              |             |                  |   |                     |  |      
|Collection                                                                                                    |  | $            | 65,938,263  |                  | $ | 16,537,330          |  | $    
|Transfer                                                                                                      |  |              | 2,396,948   |                  |   | 20,034,490          |  |      
|Disposal                                                                                                      |  |              | 4,054,890   |                  |   | 3,673,692           |  |      
|Recycling                                                                                                     |  |              | 1,334,686   |                  |   | 1,907,945           |  |      
|Other                                                                                                         |  |              | 343,704     |                  |   | 91,437              |  |      
|                                                                                                              |  |              |             |                  |   |                     |  |      
|Total outside revenues                                                                                        |  |              | 74,068,491  |                  |   | 42,244,894          |  |      
|Income (loss) from operations                                                                                 |  |              | 7,680,468   |                  |   | 5,117,104           |  |      
|Depreciation, depletion and amortization                                                                      |  |              | 12,214,597  |                  |   | 4,014,634           |  |      
|Purchases of property and equipment                                                                           |  |              | 15,479,159  |                  |   | 4,258,320           |  |      
|Acquisitions of waste operations and initial
    development costs for newly acquired
    permitted landfills |  |              | 12,288,618  |                  |   |                    |  |      
|Goodwill acquired                                                                                             |  |              | 6,465,553   |                  |   |                    |  |      
|Goodwill                                                                                                      |  |              | 88,634,596  |                  |   | 47,628,196          |  |      
|Total assets                                                                                                  |  |              | 279,743,527 |                  |   | 155,117,037         |  |      
|Six Months Ended June 30, 2002                                                                                |  |              |             |                  |   |                     |  |      
|Outside revenues                                                                                              |  |              |             |                  |   |                     |  |      
|Collection                                                                                                    |  | $            | 50,552,004  |                  | $ | 14,866,705          |  | $    
|Transfer                                                                                                      |  |              | 2,208,838   |                  |   | 20,964,456          |  |      
|Disposal                                                                                                      |  |              | 3,607,479   |                  |   | 3,166,855           |  |      
|Recycling                                                                                                     |  |              | 1,055,252   |                  |   | 1,800,956           |  |      
|Other                                                                                                         |  |              | 796,553     |                  |   | 9,128               |  |      
|                                                                                                              |  |              |             |                  |   |                     |  |      
|Total outside revenues                                                                                        |  |              | 58,220,126  |                  |   | 40,808,100          |  |      
|Income (loss) from operations                                                                                 |  |              | 8,516,375   |                  |   | 5,749,878           |  |      
|Depreciation, depletion and amortization                                                                      |  |              | 8,920,088   |                  |   | 3,553,070           |  |      
|Purchases of property and equipment                                                                           |  |              | 7,752,370   |                  |   | 3,237,878           |  |      
|Acquisitions of waste operations and initial
    development costs for newly acquired
    permitted landfills |  |              | 26,779,727  |                  |   | 698,513             |  |      
|Goodwill acquired                                                                                             |  |              | 14,356,289  |                  |   |                    |  |      
|Goodwill                                                                                                      |  |              | 74,384,276  |                  |   | 47,628,196          |  |      
|Total assets                                                                                                  |  |              | 226,638,615 |                  |   | 149,961,007         |  |      
|Three Months Ended June 30, 2003                                                                              |  |              |             |                  |   |                     |  |      
|Outside revenues                                                                                              |  |              |             |                  |   |                     |  |      
|Collection                                                                                                    |  | $            | 34,247,151  |                  | $ | 8,434,038           |  | $    
|Transfer                                                                                                      |  |              | 1,230,640   |                  |   | 10,707,210          |  |      
|Disposal                                                                                                      |  |              | 2,420,192   |                  |   | 2,131,467           |  |      
|Recycling                                                                                                     |  |              | 662,207     |                  |   | 896,595             |  |      
|Other                                                                                                         |  |              | 152,107     |                  |   | 17,907              |  |      
|                                                                                                              |  |              |             |                  |   |                     |  |      
|Total outside revenues                                                                                        |  |              | 38,712,297  |                  |   | 22,187,217          |  |      
|Income (loss) from operations                                                                                 |  |              | 4,029,815   |                  |   | 3,177,848           |  |      
|Depreciation, depletion and amortization                                                                      |  |              | 6,268,615   |                  |   | 2,267,650           |  |      
|Purchases of property and equipment                                                                           |  |              | 7,542,352   |                  |   | 1,784,835           |  |      
|Acquisitions of waste operations and initial
    development costs for newly acquired
    permitted landfills |  |              | 10,907,733  |                  |   |                    |  |      
|Goodwill acquired                                                                                             |  |              | 6,356,044   |                  |   |                    |  |      
|Three Months Ended June 30, 2002                                                                              |  |              |             |                  |   |                     |  |      
|Outside revenues                                                                                              |  |              |             |                  |   |                     |  |      
|Collection                                                                                                    |  | $            | 26,407,119  |                  | $ | 7,686,452           |  | $    
|Transfer                                                                                                      |  |              | 1,154,612   |                  |   | 11,155,727          |  |      
|Disposal                                                                                                      |  |              | 1,979,708   |                  |   | 1,978,178           |  |      
|Recycling                                                                                                     |  |              | 564,552     |                  |   | 946,584             |  |      
|Other                                                                                                         |  |              | 490,915     |                  |   | 6,421               |  |      
|                                                                                                              |  |              |             |                  |   |                     |  |      
|Total outside revenues                                                                                        |  |              | 30,956,906  |                  |   | 21,773,362          |  |      
|Income (loss) from operations                                                                                 |  |              | 4,554,373   |                  |   | 3,158,067           |  |      
|Depreciation, depletion and amortization                                                                      |  |              | 4,662,530   |                  |   | 1,786,143           |  |      
|Purchases of property and equipment                                                                           |  |              | 4,897,807   |                  |   | 2,002,272           |  |      
|Acquisitions of waste operations and initial
    development costs for newly acquired
    permitted landfills |  |              | 24,005,642  |                  |   |                    |  |      
|Goodwill acquired                                                                                             |  |              | 13,828,978  |                  |   |                    |  |      

17

---

Seasonality and weather can temporarily affect some of the Company's revenue and expenses. The Company generally experiences lower construction
and demolition waste volumes during the winter months when the construction industry slows down. Frequent and/or heavy snow and ice storms can affect the productivity of the Company's operations. In
the Company's South Region, higher than normal rainfall and more frequent rain and ice storms over a 30 - 90 day time period can put additional stress on the
construction industry, lowering the volumes of waste the Company handles. Significantly below normal rainfall can lead to higher levels of construction activity, increasing the Company's volumes.

10. Stock Options

The following schedule reflects the pro forma impact for the respective six and three-month periods ended June 30, 2003 on net income of accounting for the
Company's stock option grants using SFAS No. 123, "Accounting for Stock-Based Compensation," which would result in the recognition of compensation expense for the fair value of stock option
grants as computed using the Black-Scholes option-pricing model.

2003

2002For the six months ended June 30,Reported net income (loss)

$
(1,751,340
)
$
1,043,797Less: compensation expense per SFAS No. 123, net of tax


70,764


Pro forma net income (loss)

$
(1,822,104
)
$
1,043,797For the three months ended June 30,Reported net income

$
101,079

$
934,180Less: compensation expense per SFAS No. 123, net of tax


35,382


Pro forma net income

$
65,697

$
934,180


18

---

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with our unaudited consolidated financial statements and the related notes
included elsewhere in this Quarterly Report on Form 10-Q.

General

We are one of the leading regional, non-hazardous solid waste management companies in the United States. We provide collection, transfer, disposal and
recycling services in two geographic regions: our South Region, consisting of Texas, Louisiana, Oklahoma, Arkansas and Missouri; and our Northeast Region, consisting of New York, New Jersey,
Pennsylvania and Maryland. We are the tenth largest, and the third largest privately-held, service provider in the approximately $43 billion non-hazardous solid waste
management industry in the United States.

Application of Critical Accounting Policies

Our consolidated financial statements are based on the selection of accounting policies and application of significant accounting estimates, which require
management to make significant estimates and assumptions. For a detailed discussion of our critical accounting estimates, please refer to Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. In addition, please refer to Note 2 to our
unaudited consolidated financial statements included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q for a discussion of our
adoption of Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS,

19

---

No. 143,
"Accounting for Asset Retirement Obligations." There were no material changes relating to our critical accounting estimates during the three months ended June 30, 2003.

Sources of Revenue

Our revenue consists primarily of fees we charge customers for solid waste collection, transfer and disposal and recycling services. We frequently perform these
services under service agreements with businesses, contracts with municipalities, landlords or homeowners' associations, or subscription arrangements with homeowners. We estimate that more than 30% of
our South Region's revenue was generated from 256 municipal contracts during 2002 and 264 municipal contracts during the first six months of 2003. Our contracts with the City of New York represented
in the aggregate approximately 34% of our Northeast Region's, and approximately 14% of our overall, revenue during 2002 and approximately 33% of our Northeast Region's, and approximately 12% of our
overall, revenue during the first six months of 2003. Contracts with municipalities provide relatively consistent cash flow during the terms of the contracts. Our municipal contracts generally last
from three to five years and usually have renewal options. Many of our municipal contracts are franchise agreements that give us the exclusive right to provide specified waste services within a
specified territory during the contract term. These exclusive arrangements are typically awarded, at least initially, on a competitive bid basis or through a formalized proposal and subsequently on a
bid or negotiated renewal basis. Collection fees are paid either by the municipalities from their tax revenue or directly by the residents receiving the services. Our collection business also
generates revenue from the sale of recyclable commodities. After recyclables are collected, they are either delivered to a sorting facility operated by us or a third party facility.

We
typically determine the prices for our collection services by the collection frequency and level of service, route density, volume, weight and type of waste collected, type of
equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposing or processing, and prices charged by competitors for similar services. The terms of our
contracts sometimes limit our ability to pass on cost increases. Long-term solid waste collection contracts typically contain a formula, normally based on the consumer price index, which
automatically adjusts fees to cover increases in some, but not all, of our operating costs.

We
charge transfer station and landfill customers a "tipping fee" either on a per-ton or per-yard basis for disposing of their municipal solid waste, or MSW,
construction and demolition, or C&D, waste, or both at the transfer stations and landfills we operate. We generally base
our transfer station "tipping fees" on market factors and the cost of processing the waste deposited at the transfer station, the cost of transporting the waste to a disposal facility and the cost of
disposal. We generally base our landfill "tipping fees" on market factors and the type and weight or volume of the waste deposited and the type and size of the vehicles used in the transportation of
the waste.

Many
of our landfills are assessed state, county or local community fees based on the volume of tons or yards disposed of during a defined period, usually either monthly or quarterly.
The types and amounts of fees charged can vary widely but typically a state fee is uniformly charged to all landfills within a state. We report our landfill revenue net of all these fees. Since
July 2002, the Commonwealth of Pennsylvania has imposed an additional disposal fee of $4.00 per ton on all solid waste disposed of at MSW landfills in Pennsylvania, raising the total disposal
fees assessed on MSW landfill operators under Pennsylvania state law to $7.25 per ton. Since its effectiveness, we have passed through the additional fee to our customers by increasing the fees we
charge at our Pennsylvania landfills, New York City transfer stations and New York City and Pennsylvania collection operations.

The
City of New York currently places a maximum limitation of $12.20 per loose yard on the fees a hauler can charge to a commercial customer for waste collection services. The disposal
facilities in and around New York City charge by the ton. Based on the weight of certain customers' loose yardage, it has not been economical for us to service customers with "heavy waste."
Accordingly, our New York

20

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City
collection business has focused on customers that have loose garbage that is lighter and on those customers that have a large paper recycling component, which enables us to reduce our cost of
disposal. In late July 2003, the New York City Business Integrity Commission approved an amendment to the current rate cap to allow haulers to charge up to $12.20 per loose yard or up to
$160.00 per ton on waste collected. It is expected that the new pricing will become effective by September 30, 2003.

During
2002, New York City announced changes to update its Solid Waste Management Plan, pursuant to which it plans to utilize and upgrade its existing marine transfer station system
instead of private transfer stations to process and transfer its residential waste stream of approximately 12,000 tons of MSW per day. New York City has announced it intends to implement these changes
by retrofitting and repermitting these marine transfer stations by 2008 so that the stations can containerize the City's residential MSW on site and then transport the loaded containers to ultimate
disposal sites by alternative transportation methods, such as barge, rail and truck.

In
February 2003, the New York City Department of Sanitation completed a solicitation of bids for the disposal of up to 4,000 tons of MSW per day that the City collects in
Brooklyn. The waste covered by the solicitation of bids includes the waste currently covered by our existing contracts with the City as
well as a larger, existing contract between the City and Waste Management. We submitted bids to transfer and dispose up to an aggregate of 1,500 tons of the waste covered by the solicitation of bids.
Upon the expiration of our current contracts in September 2003, the City will be in a position to, at its option, accept a bid or bids from one or more of our competitors, accept our bid and
enter into a new contract with us or reject all or any portion of our bids and choose to exercise one or both of its one-year extension options on our current contracts. The City has
indicated to us that it intends to renew its existing contracts with us by exercising the first of its two one-year extension options. The contracts would still be subject to the City's
right to terminate on 60 days' advance notice to us. The City has also indicated to us that it desires to ultimately award us a new three-year contract for up to 1,500 tons per day
to commence in November 2003. In order to accomplish this, the City may exercise its 60-day termination right under the renewed contracts and simultaneously issue to us a notice of
award with respect to the new contract. We cannot predict whether we will be successful in all or any portion of our bids, or what effect the bids submitted by us and our competitors will have on our
existing contracts or the City's options to renew those contracts. The loss of the City of New York as a customer could have a significant adverse effect on our business and operations.

The
table below shows, for the periods indicated, the percentage of our total reported revenue attributable to each of our services:

Six Months Ended
June 30,

Three Months Ended
June 30,2003

2002

2003

2002Collection

70.8
%
66.1
%
70.1
%
65.1
%Transfer

19.3
%
23.4
%
19.6
%
23.5
%Disposal

6.6
%
6.8
%
7.5
%
7.6
%Recycling

2.8
%
2.9
%
2.5
%
2.9
%Other

0.5
%
0.8
%
0.3
%
0.9
%Total

100.0
%
100.0
%
100.0
%
100.0
%


Cost Structure

Our operating expenses include labor, fuel, equipment maintenance, "tipping fees" paid to third-party transfer stations and disposal facilities, workers'
compensation and vehicle insurance, third-party transportation expenses, and accretion expense. We monitor the fluctuation in fuel prices and, from time to time, if this cost increases at a higher
rate than inflation, we generally pass the additional cost on to our customers. Our business strategy is to develop vertically integrated operations to internalize

21

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transfer
and dispose of at our own landfillsthe waste that we handle and thus realize higher margins from our operations. By disposing of waste at our own landfills, we retain the margin
generated through disposal operations that would otherwise be earned by third-party landfills. We currently internalize approximately 41% of the solid waste that we handle and deliver the rest to
third-party disposal facilities. If the operators of third-party landfills increase their "tipping fees," we would seek to pass along these increases to our customers, but if we were unable to do so,
our profitability would be adversely affected. If these operators discontinue their arrangements with us and we cannot find alternative disposal sites with favorable arrangements, our costs of
disposal may rise. Also, our failure to obtain the required permits to establish new landfills and transfer stations or expand our existing landfills and transfer stations could hinder our business
strategy to develop vertically integrated operations. Failure to expand capacity could lead to decreased profitability as a result of the increased "tipping fees" we would have to pay to third-party
landfills.

We
operate 22 transfer stations, which reduce our costs by allowing us to use collection personnel and equipment more efficiently and by consolidating waste to gain volume discounts on
disposal rates. We have a limited number of municipal contractual obligations that require us to deliver waste collected under the contracts to a designated disposal facility.

General
and administrative expenses include management, clerical and administrative compensation and overhead costs associated with our marketing and sales force, professional services
and community relations expenses.

Depreciation,
depletion and amortization expense includes depreciation of fixed assets over their estimated useful lives using the straight-line method, depletion of landfill
costs using life cycle accounting and the units-of-consumption method and amortization of intangible assets other than goodwill using the straight-line method. In
allocating the purchase price of an acquired company among its assets, we first assign value to the tangible assets, followed by intangible assets, including non-competition covenants and
certain contracts that are determinable both in terms of size and life. We determine the value of the intangible assets other than goodwill by considering, among other things, the present value of the
cash flows associated with those assets.

We
capitalize some third-party expenditures related to pending acquisitions and development projects, such as legal and engineering expenses. We expense indirect acquisition costs, such
as executive and corporate overhead, public relations and other corporate services, as we incur them. We charge against net income any unamortized capitalized expenditures and advances, net of any
portion that we believe we may recover through sale or otherwise, that relate to any operation that is permanently shut down and any pending acquisition or landfill development project that is not
expected to be completed. We routinely evaluate all capitalized costs and expense those related to projects that we believe are not likely to be completed.

Effective
January 1, 2003, we adopted SFAS No. 143, "Accounting for Asset Retirement Obligations." See Note 2 to our unaudited consolidated financial statements
included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. Under SFAS No. 143, costs associated with final capping activities that occur
during the operating life of a landfill, as well as closure and post closure activities, are accounted for as asset retirement obligations on a discounted basis. We recognize landfill retirement
obligations that relate to closure and post-closure activities over the operating life of a landfill as landfill airspace is consumed and the obligation is incurred. We recognize our final
capping obligations on a discrete basis for each expected future final capping event over the number of tons of waste that each final capping event is expected to cover. The landfill retirement
obligations are initially measured at estimated fair value. Fair value is measured on a present value basis, using a credit-adjusted, risk-free rate (currently at 10.25%). Accretion is
recorded on all landfill retirement obligations using the effective interest method. We amortize landfill retirement costs arising from closure and

22

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post-closure
obligations, which are capitalized as part of the landfill asset, using our historical landfill accounting practices. We amortize landfill retirement costs arising from final
capping obligations, which are also capitalized as part of the landfill asset, on a units-of-consumption basis over the number of tons of waste that each final capping event
covers.

We
periodically evaluate the value and future benefits of our goodwill and other intangible assets. For intangible assets other than goodwill, we assess the recoverability from future
operations using cash flows and income from operations of the related assets as measures. Under this approach, the carrying value is reduced if it becomes probable that our best estimate of expected
future cash flows from the related intangible assets would be less than the carrying amount of the intangible assets. As of December 31, 2002, there were no adjustments to the carrying amounts
of intangibles other than goodwill resulting from these evaluations. We test goodwill for impairment using the two-step process prescribed in SFAS No. 142. The first step is a
screen for potential impairment and the second step measures the amount of the impairment, if any. We performed the first of the required impairment tests of goodwill and indefinite-lived intangible
assets based on the carrying values as of January 1, 2002 and incurred no impairment of goodwill upon the initial adoption of SFAS No. 142. We also performed our annual impairment test
during 2002 and incurred no impairment. As of June 30, 2003, goodwill and other intangible assets represented approximately 34.5% of total assets, 69.8% of redeemable preferred stock and 88.9%
of the sum of our redeemable preferred stock and stockholders' equity (deficit).

Seasonality

Seasonality and weather can temporarily affect some of our revenue and expenses. We generally experience lower C&D waste volumes during the winter months when the
construction industry slows down. Frequent and/or heavy snow and ice storms can affect our revenue and the productivity of our operations. In our South Region, higher than normal rainfall and more
frequent rain and ice storms over a 30 - 90 day time period can put additional stress on the construction industry, lowering the volumes of waste we handle.
Significantly below normal rainfall can lead to higher levels of construction activity, increasing our volumes.

Impact of Inflation

To date, inflation has not significantly affected our operations. Consistent with industry practice, many of our contracts allow us to pass through certain costs
to our customers, including increases in landfill "tipping fees" and, in some cases, fuel costs. Therefore, we believe that we would be able to increase prices to offset many cost increases that
result from inflation. However, competitive pressures and the terms of certain of our long-term contracts may require us to absorb at least part of these cost increases, particularly
during periods of high inflation. For example, during the first six-months of 2003, diesel fuel costs have been significantly higher than during the comparable six-month period of 2002.

Acquisitions

Our integration plan for acquisitions contemplates certain cost savings, including through the elimination of duplicative personnel and facilities. Unforeseen
factors may offset the estimated cost
savings or other components of our integration plan, in whole or in part, and, as a result, we may not realize any cost savings or other benefits from future acquisitions, and we may experience a net
increase in costs.

23

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In accordance with generally accepted accounting principles, or GAAP, we capitalize some expenditures and advances relating to pending acquisitions. For any pending acquisition that is
not consummated, we charge any such expenditures and advances against earnings. Therefore, we may incur charges against earnings in future periods, which could have a material adverse effect on our
business, financial condition and results of operations.

All
of our acquisitions have been accounted for as purchases and, accordingly, only the operations of acquired companies since the acquisition dates are included in our unaudited
consolidated financial statements. These acquisitions were financed through a combination of funds borrowed under our senior credit facility and proceeds from private offerings of our equity
securities. We expect to be able to finance any future acquisitions with cash provided from operations, borrowings under our senior credit facility, debt or equity offerings, or some combination of
the foregoing.

2003.During the first six months of 2003, we acquired the assets of six solid waste management companies, for an aggregate
purchase price of $10.9 million, consisting of cash and liabilities assumed.

2002.During 2002, we acquired the assets of 17 solid waste management companies as well as real estate associated with
landfill expansions, for an aggregate purchase price of $47.3 million, consisting of cash and liabilities assumed.

Results of Operations

The following table sets forth, for the periods indicated, selected consolidated statement of operations data (in thousands) and the percentage relationship that
such data bear to our revenue:

|                                                    |  | Six Months Ended June 30, |   | Three Months Ended June 30, |  
|--------------------------------------------------- |  | ------------------------- | - | --------------------------- | -
|
|
|South Region                                        |  | 74,068                    |   | 63.7                        |  
|Northeast Region                                    |  | 42,245                    |   | 36.3                        |  
|                                                    |  |                           |   |                             |  
|Services revenue                                    |  | 116,313                   |   | 100.0                       |  
|Operating expense                                   |  | 76,383                    |   | 65.7                        |  
|General and administrative                          |  | 14,797                    |   | 12.7                        |  
|Depreciation, depletion and amortization            |  | 16,585                    |   | 14.2                        |  
|                                                    |  |                           |   |                             |  
|Income from operations                              |  | 8,548                     |   | 7.4                         |  
|Interest expense, net                               |  | (8,958                    | ) | (7.7                        | )
|Loss on termination of interest rate swaps          |  |                          |   |                            |  
|Loss on extinguishment of debt                      |  |                          |   |                            |  
|Other income (expense), net                         |  | (114                      | ) | (0.1                        | )
|Income tax benefit (expense)                        |  | 249                       |   | 0.2                         |  
|Cumulative effect of change in accounting principle |  | (1,476                    | ) | (1.3                        | )
|                                                    |  |                           |   |                             |  
|Net income (loss)                                   |  | (1,751                    | ) | (1.5                        | )
|                                                    |  |                           |   |                             |  

Three Months Ended June 30, 2003 Compared With Three Months Ended June 30, 2002

Revenue.Our revenue increased by $8.5 million, or 16.3%, to $60.9 million during the three months ended
June 30, 2003 from $52.4 million during the three months ended June 30, 2002. During the three months ended June 30, 2003, acquisitions completed since April 2002
contributed $5.7 million, or 10.8%, to the increase in our revenue from the three months ended June 30, 2002. Excluding incremental revenue from acquisitions, our revenue increased by
$2.8 million, or 5.5%. During the three months ended June 30, 2003, our new business, from both new municipal contracts and increased sales from existing operations, contributed 2.0% of
such increase, while selective price increases contributed 3.5%. In our South Region, our revenue increased by $8.1 million, or 26.5%, to $38.7 million during the three months ended
June 30, 2003 from $30.6 million during the three months

24

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ended
June 30, 2002. In our Northeast Region, our revenue increased by $0.4 million, or 1.9%, to $22.2 million during the three months ended June 30, 2003 from
$21.8 million during the three months ended June 30, 2002.

Operating Expenses.Our operating expenses increased by $6.1 million, or 18.3%, to $39.5 million during the
three months ended June 30, 2003 from $33.4 million during the three months ended June 30, 2002. Operating expenses as a percentage of our revenue increased by 1.1% to 64.8%
during the three months ended June 30, 2003 from 63.7% during the comparable period in 2002. The increase in our operating expenses was substantially due to the increase in our revenue during
the same period, including as a result of expenses from acquired operations. Our operating expenses also increased during the three months ended June 30, 2003 due to an additional $4.00 per ton
disposal fee enacted by Pennsylvania in July 2002. While we were able to pass this additional fee on to our customers, the additional disposal cost increased operating expenses as a percentage
of our revenue by approximately 1.0%. Fuel costs increased by $400,000 during the three months ended June 30, 2003 as compared to the corresponding period in 2002. While sequentially down
significantly since its peak in the first
quarter of 2003, fuel cost per gallon was still up approximately $0.22 per gallon during the three months ended June 30, 2003 as compared to the corresponding period in 2002.

General and Administrative.Our general and administrative expenses increased by $1.4 million, or 22.1%, to
$7.7 million during the three months ended June 30, 2003 from $6.3 million during the three months ended June 30, 2002. Our general and administrative expenses increased as
a result of our employment of additional personnel from companies acquired and additional corporate and regional overhead to accommodate our internal growth from our collection operations. During the
three months ended June 30, 2003 we wrote off $170,000 from an aborted debt transaction, primarily related to legal and accounting fees. General and administrative expenses as a percentage of
our revenue increased to 12.7% during the three months ended June 30, 2003 from 12.1% during the comparable period in 2002.

Depreciation, Depletion and Amortization.Our depreciation, depletion and amortization expenses increased by
$2.1 million, or 31.7%, to $8.7 million during the three months ended June 30, 2003 from $6.6 million during the three months ended June 30, 2002. This increase
resulted primarily from the inclusion of depreciation, depletion, and amortization of businesses acquired in 2003, a full three months of depreciation, depletion, and amortization from businesses
acquired since April 2002 and depreciation of capital assets purchased for internal growth. Additional depletion expense related to our Bethlehem landfill permit expansion, which was granted in
April 2003 and included an increase in daily permitted volume from 750 tons per day to 1,375 tons per day, resulted in an increase expense for the three months ended June 30, 2003 of
$310,000. Depreciation, depletion and amortization as a percentage of our revenue increased to 14.3% during the three months ended June 30, 2003 from 12.6% during the comparable period in 2002.

Income from Operations.Our income from operations decreased $1.1 million, or 17.8%, to $5.0 million during the
three months ended June 30, 2003 from $6.1 million during the three months ended June 30, 2002. Income from operations as a percentage of our revenue decreased to 8.2% in the
three months ended June 30, 2003 from 11.6% during the comparable period in 2002. The decrease in income from operations (and the related margin decrease) during the three-month period ended
June 30, 2003 was partially attributable to higher fuel costs, the write off of expenses related to an aborted debt transaction and higher depletion expense related to our Bethlehem landfill.
The Pennsylvania disposal tax additionally reduced the margin during the three-month period.

Interest Expense, Net.Our interest expense, net, increased $1.6 million, or 52.1%, to $4.6 million during the
three months ended June 30, 2003 from $3.0 million during the three months ended June 30, 2002. This increase was attributable to higher debt levels during the three months ended
June 30, 2003 as compared to the three months ended June 30, 2002 primarily due to acquisitions and the relatively higher interest rate we paid on $150.0 million of our
101/4% senior subordinated notes

25

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due
2012 (our "Notes") (which was partially offset by interest rate swaps on $50.0 million of this debt) which constituted a substantial portion of our outstanding debt as of June 30,
2003. Interest expense, net, as a percentage of our revenue, increased to 7.6% in the three months ended June 30, 2003 from 5.8% during the comparable period in 2002.

Loss on Termination of Interest Rate Swaps.There was no such expense in the three months ended June 30, 2003. We
incurred a loss on the termination of interest rate swaps of $826,000 in the three months ended June 30, 2002. In conjunction with the payoff of the then outstanding balance under our senior
credit facility with the proceeds from the offering of our Notes, we terminated interest rate swaps that were in place with respect to a portion of the then outstanding debt under our senior credit
facility.

Loss on Extinguishment of Debt.There was no such expense in the three months ended June 30, 2003. We incurred a
non-cash loss on the extinguishment of debt of $586,000 in the three months ended June 30, 2002. In conjunction with the payoff of the $39.2 million term loan under our
senior credit facility with the proceeds from the offering of our Notes, we wrote off loan transaction costs incurred in previous years related to the term loan.

Other Income (Expenses).Our other expenses increased by $109,000 to an other expense of $116,000 in the three months ended
June 30, 2003 from other expenses of $7,000 in the three months ended June 30, 2002. The increase was the result of additional state franchise taxes.

Income Tax Expense (Benefit).Our income tax expense decreased to $141,000 during the three months ended June 30, 2003
from $671,000 during the three months ended June 30, 2002. Income tax expense as a percentage of revenue was 0.2% for the three months ended June 30, 2003. The difference in income taxes
computed at the statutory rate and reported income taxes for the three months ended June 30, 2003 is due primarily to state and local income taxes.

Net Income.Our net income decreased $833,000 to $101,000 during the three months ended June 30, 2003 from net income
of $934,000 during the three months ended June 30, 2002. The decrease in net income was attributable to higher fuel costs, additional depletion expense, increased interest expense, net, from a
higher debt level and a higher effective interest rate, a write-off of aborted debt transaction costs, additional state franchise taxes, offset by a reductions in income tax expense, loss
on extinguishment of debt, and loss on termination of interest rate swaps. Net income as a
percentage of our revenue decreased to 0.2% in the three months ended June 30, 2003 from 1.8% in the three months ended June 30, 2002.

Six Months Ended June 30, 2003 Compared With Six Months Ended June 30, 2002

Revenue.Our revenue increased by $17.3 million, or 17.5%, to $116.3 million during the six months ended
June 30, 2003 from $99.0 million during the six months ended June 30, 2002. During the six months ended June 30, 2003, acquisitions completed since January 2002
contributed $11.2 million, or 11.3%, to the increase in our revenue from the six months ended June 30, 2002. Excluding incremental revenue from acquisitions, our revenue increased by
$6.1 million, or 6.2%. During the six months ended June 30, 2003, our new business, from both new municipal contracts and increased sales from existing operations, contributed 2.6% of
such increase, while selective price increases contributed 3.6%. In our South Region, our revenue increased by $15.9 million, or 27.2%, to $74.1 million during the six months ended
June 30, 2003 from $58.2 million during the six months ended June 30, 2002. In our Northeast Region, our revenue increased by $1.4 million, or 3.5%, to $42.2 million
during the six months ended June 30, 2003 from $40.8 million during the six months ended June 30, 2002. During the winter months of January, February and March, 2003, severe
weather in our Northeast Region and, to a lesser extent, in our South Region, temporarily reduced our roll-off collection, transfer station and landfill revenue by $1.6 million to
$1.8 million, as compared to the same three month period in 2002.

26

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Operating Expenses.Our operating expenses increased by $13.4 million, or 21.3%, to $76.4 million during the
six months ended June 30, 2003 from $63.0 million during the six months ended June 30, 2002. Operating expenses as a percentage of our revenue increased by 2.1% to 65.7% during
the six months ended June 30, 2003 from 63.6% during the comparable period in 2002. The increase in our operating expenses was substantially due to the increase in our revenue during the same
period, including as a result of expenses from acquired operations and new business. Additionally, our operating expenses increased during the six months ended June 30, 2003 due to an
additional $4.00 per ton disposal fee enacted by Pennsylvania in July 2002. While we were able to pass this additional fee on to our customers, the additional disposal cost increased operating
expenses as a percentage of our revenue by approximately 1.0%. Between January and June 2003, pricing for a gallon of diesel fuel increased at its peak by approximately $0.30 per gallon,
resulting in additional fuel costs of $750,000 during the period, as compared to the corresponding period in 2002. As discussed above, the severe winter weather during January, February, and
March 2003 negatively impacted our landfill and transfer station revenue, without a corresponding reduction in expenses. Excluding transportation and disposal costs related to transfer
stations, the other costs at these facilities are mostly fixed, causing margin deterioration during the six months ended June 30, 2003 of 0.1% to 0.2%.

General and Administrative.Our general and administrative expenses increased by $2.7 million, or 22.2%, to
$14.8 million during the six months ended June 30, 2003 from $12.1 million during the six months ended June 30, 2002. Our general and administrative expenses increased as a
result of our employment of additional personnel from companies acquired and additional corporate and regional overhead to accommodate our internal growth from our collection operations. General and
administrative expenses as a percentage of our revenue increased to 12.7% during the six months ended June 30, 2003 from 12.3% during the comparable period in 2002. During the six months ended
June 30, 2003 we wrote off $170,000 from an aborted debt transaction, primarily related to legal and accounting fees. Additionally, the severe winter weather during January, February, and
March, 2003 negatively impacted our revenue, without a corresponding reduction in expenses during the period, which are generally fixed costs, causing a margin deterioration of 0.1% to 0.2%.

Depreciation, Depletion and Amortization.Our depreciation, depletion and amortization expenses increased by
$3.8 million, or 29.7%, to $16.6 million during the six months ended June 30, 2003 from $12.8 million during the six months ended June 30, 2002. This increase
resulted primarily from the inclusion of depreciation, depletion, and amortization of businesses acquired in 2003, a full six months of depreciation, depletion, and amortization from businesses
acquired since January 2002 and depreciation of capital assets purchased for internal growth. In addition, during the six months ended June 30, 2003, we also incurred an asset retirement
obligation expense of $575,000 related to our adoption of SFAS No. 143 effective as of January 1, 2003. There was no asset retirement obligation expense for the comparable period of
2002. Additional depletion expense related to the Bethlehem landfill permit expansion granted in April 2003, that included a increase in daily permitted volume from 750 tons per day to 1,375
tons per day, resulted in an increase expense for the six months ended June 30, 2003 of $310,000. Depreciation, depletion and amortization as a percentage of our revenue increased to 14.2%
during the six months ended June 30, 2003 from 12.9% during the comparable period in 2002. Our depreciation, depletion and amortization expenses are substantially fixed costs. The severe winter
weather during the three months ended March 31, 2003 negatively impacted our revenue, without a corresponding reduction in expenses during the period, which caused 0.2% of the margin
deterioration.

Income from Operations.Our income from operations decreased $2.6 million, or 23.2%, to $8.5 million during the
six months ended June 30, 2003 from $11.1 million during the six months ended June 30, 2002. Income from operations as a percentage of our revenue decreased to 7.4% in the six
months ended June 30, 2003 from 11.2% during the comparable period in 2002. Increases in operating expense from higher fuel cost, the write off of $170,000 from an aborted debt transaction and
higher

27

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depletion
expense related to our Bethlehem landfill reduced our income from operations during the six months ended June 30, 2003. Also, the decrease in income from operations (and the related
margin decrease) during the six-month period was partially attributable to the severe winter weather which negatively impacted our revenue, without a corresponding reduction in expenses,
resulting in additional margin deterioration from the greater relative impact of fixed costs at our landfills and transfer stations in general and administrative expenses and in depreciation,
depletion and amortization. The Pennsylvania disposal tax additionally reduced the margin during the three-month period.

Interest Expense, Net.Our interest expense, net, increased $3.3 million, or 58.1%, to $9.0 million during the
six months ended June 30, 2003 from $5.7 million during the six months ended June 30, 2002. This increase was attributable to higher debt levels during the six months ended
June 30, 2003 as compared to the six months ended June 30, 2002 primarily due to acquisitions and by the relatively higher interest rate we paid on $150.0 million of our Notes
(which was partially offset by interest rate swaps on $50.0 million of this debt) which constituted a substantial portion of our outstanding debt as of June 30, 2003. Interest expense,
net, as a percentage of our revenue, increased to 7.7% in the six months ended June 30, 2003 from 5.7% during the comparable period in 2002.

Loss on Termination of Interest Rate Swaps.There was no such expense in the six months ended June 30, 2003. We
incurred a loss on the termination of interest rate swaps of $826,000 in the six months ended June 30, 2002. In conjunction with the payoff of the then outstanding balance under our senior
credit facility with the proceeds from the offering of our Notes, we terminated interest rate swaps that were in place with respect to a portion of the then outstanding debt under our senior credit
facility.

Loss on Extinguishment of Debt.There was no such expense in the six months ended June 30, 2003. We incurred a
non-cash loss on the extinguishment of debt of $586,000 in the six months ended June 30, 2002. In conjunction with the payoff of the $39.2 million term loan under our senior
credit facility with the proceeds from the offering of our Notes, we wrote off loan transaction costs incurred in previous years related to the term loan.

Other Income (Expenses).Our other expenses increased by $61,000 to $114,000 in the six months ended June 30, 2003
from $53,000 in the six months ended June 30, 2002. The increase was the result of additional state franchise taxes.

Income Tax Expense (Benefit).Our income tax expense (benefit) decreased to $(249,000) during the six months ended
June 30, 2003 from $3.0 million during the six months ended June 30, 2002. Income tax expense (benefit) as a percentage of revenue was (0.2)% for the six months ended
June 30, 2003. The difference in income taxes computed at the statutory rate and reported income taxes for the six months ended June 30, 2003 is due primarily to state and local income
taxes. The difference in income taxes computed at the statutory rate and reported income taxes for the six months ended June 30, 2002 is due primarily to an increase in the valuation allowance
related to a change in the estimated reversal of temporary differences related to tax deductible goodwill.

Cumulative Effect of Change in Accounting Principle.We recorded an after-tax expense of $1.5 million from
a cumulative effect of a change in accounting principle related to our adoption of SFAS No. 143 on January 1, 2003. For more information on SFAS No. 143, please refer to
Note 2 to our unaudited consolidated financial statements included in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q.

Net Income (Loss).Our net income decreased $2.8 million to a loss of $1.8 million during the six months ended
June 30, 2003 from net income of $1.0 million during the six months ended June 30, 2002. The decrease in net income was attributable to an after-tax charge of a
cumulative effect of a change in accounting principle, higher diesel fuel costs, higher expense related to our Bethlehem

28

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landfill,
the write-off of an aborted debt transaction, the severe winter weather and increased interest expense, net, from a higher debt level and a higher effective interest rate, offset by a
reduction in income tax expense. Net income as a percentage of our revenue decreased to a loss of (1.5)% in the six months ended June 30, 2003 from 1.1% in the six months ended June 30,
2002.

Liquidity and Capital Resources

Cash Flow

The following is a summary of our cash flows for the six months ended June 30, 2003 and 2002 (in thousands):

Six Months Ended
June 30,2003

2002Net cash provided by operating activities

$
14,649

$
6,386Net cash used in investing activities

$
(32,922
)
$
(39,730
)Net cash provided by financing activities

$
18,658

$
33,314


Net
cash provided by operating activities increased by $8.2 million from $6.4 million during the six months ended June 30, 2002 to $14.6 million during the
six months ended June 30, 2003. During the six months ended June 30, 2003, net cash used in investing activities was $32.9 million. Of this amount, $8.6 million was used
for the acquisition of a businesses and $3.7 million was used for the initial development costs for two permitted landfills acquired in 2002. Cash used for capital expenditures during the six
months ended June 30, 2003 was $18.8 million, which was principally for investments in fixed assets, consisting primarily of trucks, containers, landfill and transfer station equipment,
and landfill construction projects. Net cash provided by financing activities during the six months ended June 30, 2003 was $18.7 million, which consisted primarily of a net borrowing
increase under our senior credit facility of $19.1 million.

During
the six months ended June 30, 2002, net cash used in investing activities was $39.7 million. Of this amount, $27.5 million was used for the acquisition of
businesses. Cash used for capital expenditures during the six months ended June 30, 2002 was $10.7 million, which was principally for investments in fixed assets, consisting primarily of
trucks, containers, landfill and transfer station equipment, and landfill construction projects. Net cash provided by financing activities during the six months ended June 30, 2002 was
$33.3 million, which consisted primarily of a net borrowing increase under our senior credit facility of $40.1 million.

29

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The
following table summarizes the components of the reconciliation of our debt balances from December 31, 2002 and 2001 to June 30, 2003 and 2002, respectively:

Six Months Ended
June 30,2003

2002(in thousands)Roll-forward of debt balance:Debt balance at beginning of period

$
198,571

$
130,351Free cash flow deficit before acquisitions(1)


5,220


5,012Acquisitions, divestitures and initial development costs for newly acquired permitted landfills, net


12,289


27,478Acquisition-related and non-recurring expenditures


765


854Debt issue costs


436


5,976Debt increase due to interest rate swap termination payment





826Addition related to change in fair value of the hedged long-term debt


1,505


Increase (decrease) in cash


385


(30
)Debt balance at end of period

$
219,171

$
170,467


---

Six Months Ended
June 30,2003

2002(in thousands)Free cash flow (deficit) before acquisitions

$
(5,220
)
$
(5,012
)Capital expenditures, excluding acquisitions


18,848


10,744Capitalized interest


1,021


653Other





1Net cash provided by operating activities

$
14,649

$
6,386


30

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Liquidity

Our business is capital intensive. Our capital requirements include business acquisitions, new franchise agreements, and fixed asset purchases for internal
growth, primarily for trucks, containers and equipment, and for landfill cell construction, landfill development and landfill closure activities. We have historically financed, and plan to continue to
finance, our capital needs with cash provided from operations, borrowings under our senior credit facility (or an amended senior credit facility with increased capacity), debt or equity offerings, or
some combination of the foregoing.

Our
Notes mature on June 15, 2012 and interest on our Notes is due on June 15 and December 15 of each year. Our Notes are guaranteed by all of our current, and will
be guaranteed by certain of our future, subsidiaries and are unsecured senior subordinated obligations that rank junior in right of payment to all of our existing and future senior debt and secured
debt. Our Notes are redeemable on or after June 15, 2007 and we may redeem up to 35.0% of the aggregate principal amount of our Notes on or before June 15, 2005 with the proceeds from
qualified public offerings of our equity securities. The indenture governing our Notes contains covenants which, among other things, limit our ability to incur additional debt, create liens, engage in
sale-leaseback transactions, pay dividends or make other equity distributions, purchase or redeem capital stock, make investments, sell assets, engage in transactions with affiliates and
effect a consolidation or merger. These limitations are subject to certain qualifications and exceptions. As of June 30, 2003, we were in compliance with all covenants contained in the
indenture governing our Notes.

Our
senior credit facility, which is provided by a syndicate of lenders led by Fleet National Bank, as administrative agent ("Fleet"), and Credit Suisse First Boston and Citicorp North
America, Inc., jointly as syndication agents, includes a $222.5 million senior secured revolving loan, including a maximum of $30.0 million underlying letters of credit, and
previously included a $39.2 million senior secured term loan, which has been fully repaid. We are not permitted to reborrow any amounts under the term loan. Subject to certain conditions, we
may request an increase in the revolving loan portion of our senior credit facility of up to $13.3 million such that the total revolving loan portion would equal $235.8 million. As of
June 30, 2003, there was $65.6 million (excluding $12.5 million underlying letters of credit) outstanding under the revolving loan portion of our senior credit facility and
additional borrowings of $14.7 million, plus a maximum of $17.5 million underlying letters of credit, were available thereunder. In order to borrow under the revolving loan portion of
our senior credit facility, we must satisfy customary conditions including maintaining certain financial ratios. Our senior credit facility is secured by a pledge of the stock of our direct and
indirect subsidiaries and a lien on substantially all of our direct and indirect subsidiaries' assets.

Our
senior credit facility permits borrowings at floating interest rates based on, at our option, the designated eurodollar interest rate, which generally approximates LIBOR, or the
Fleet prime rate, in each case, plus an applicable margin, and requires payment of an annual commitment fee based on the unused portion of the revolving loan portion. As of June 30, 2003, the
interest rate applicable to $49.6 million then outstanding under the revolving loan portion of our senior credit facility was LIBOR plus 325 basis points, or 4.3%, and the interest rate
applicable to $16.0 million then outstanding under the revolving loan portion was base, or 5.5%. Our senior credit facility expires on August 31, 2004. In July 2003, we began
negotiating an amended senior credit facility that will extend the expiration date.

The
proceeds of the loans under our senior credit facility may be used solely to refinance certain debt and for certain acquisitions, capital expenditures, working capital and general
corporate purposes. The letters of credit under our senior credit facility may be used solely for working capital and general corporate purposes.

31

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Our
senior credit facility contains affirmative and negative covenants and other terms customary to such financings, including requirements that we maintain specified financial ratios,
including the following:



Quarters Ending

Consolidated EBITDA(1) to
Consolidated Interest Expense RatioMarch 31, 2003

2.75 to 1.0June 30, 2003September 30, 2003

2.40 to 1.0December 31, 2003

2.50 to 1.0March 31, 2004 and thereafter

2.75 to 1.0




Year Ending December 31,

Multiple of Depreciation
Expense for Such
Year2002

1.6xThereafter

1.4x


As
of June 30, 2003, our consolidated debt to consolidated EBITDA(1) ratio was 4.22:1, our consolidated senior debt to consolidated EBITDA(1) ratio was 1.28:1, our consolidated
EBITDA(1) to consolidated interest expense ratio was 2.89:1 and our consolidated net worth was $175.4 million ($3.2 million in excess of the minimum required under our senior credit
facility). In addition, our 2002 annual capital expenditures of $31.5 million (net of $9.8 million representing property and equipment purchased for new municipal contracts) did not
exceed 1.6 times our 2002 annual depreciation expense. Our ability to comply in future periods with the financial covenants in our senior credit facility will depend on our ongoing financial and
operating performance, which, in turn, will be subject to economic conditions and to financial, business and other factors, many of which are beyond our control, and will be substantially dependent on
our ability to successfully implement our overall business strategies.

---

32

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In
August 2002, we entered into two interest rate swap agreements, which are effective through June 15, 2012, with two financial institutions. Under each swap agreement,
the fixed interest rate on $25.0 million of our Notes effectively was converted to an interest rate of 5.275% and 5.305%, respectively, plus an applicable floating rate margin that is based on
six month LIBOR which is readjusted semiannually on June 15 and December 15 of each year.

Environmental
laws and regulation, including Subtitle D, that apply to the non-hazardous solid waste management industry have required us, as well as others in the industry,
to alter the way we conduct our operations and to modify or replace pre-Subtitle D landfills. These expenditures have been, and will continue to be, substantial; however, we do not
anticipate that these expenditures relating to our ongoing operations will be substantially different than what we have experienced to date. Legislative or regulatory changes could increase the costs
of operating our business, accelerate required expenditures for closure activities and post-closure monitoring and obligate us to spend sums in addition to those presently reserved for
such purposes. These factors could substantially increase our operating costs and adversely affect our results of operations, financial condition and cash flow.

We
believe that cash flow from operations and borrowings under the revolving loan portion of our senior credit facility will provide adequate cash to fund our working capital, capital
expenditure, debt service and other cash requirements for the foreseeable future. Our ability to meet future working capital, capital expenditure and debt service requirements, to provide financial
assurance, as requested or required, and to fund capital amounts required for the expansion of our existing business will depend on our future financial performance, which will be affected by a range
of economic, competitive and business factors, many of which are outside of our control. See "Disclosure Regarding Forward Looking Statements." We cannot assure you that our business will
generate sufficient cash flow from operations, that future financings will be available to us in amounts sufficient to enable us to service our debt or to make necessary capital expenditures, or that
any refinancing would be available on commercially reasonable terms, if at all. Further, depending on the timing, amount and structure of any possible future acquisitions and the availability of funds
under, and compliance with certain other covenants in, our senior credit facility, we may need to raise additional capital. We may raise such funds through public or private offerings of our debt or
equity securities. We cannot assure you that we will be able to secure such funding, if necessary, on favorable terms, if at all.

Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations, other than the financial assurance instruments, which are issued in the ordinary course of
business and are not debt (and, therefore, are not reflected in our consolidated balance sheet) which are discussed under "Significant Commercial Commitments" in Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. We have no transactions or
obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third party debt.

Obligations and Commitments

For a discussion of our obligations and commitments, please refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2002. There were no significant changes in our business during the three and six months
ended June 30, 2003 that would require an update to those disclosures.

33

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Capital Expenditures

We made capital expenditures of $18.8 million during the six months ended June 30, 2003, $16.4 million from our existing business and
$2.4 million from new municipal contracts. In addition, during the six months ended June 30, 2003, we incurred $3.7 million of development costs in connection with two
"greenfield" landfills purchased in 2002. Both landfills included the land and the permit to operate. However, unlike the purchase of an operating landfill, neither greenfield landfill had incurred
the costs of development, which include the infrastructure of an operating landfill and initial cell. Both landfills are scheduled to open during the remainder of 2003. We currently expect to make
additional capital expenditures of approximately $13.0 million to $15.0 million during the remainder of 2003 in connection with our existing business. We intend to fund our remaining
planned 2003 capital expenditures principally through existing cash, internally generated funds and borrowings under our senior credit facility.

In
addition, we may make substantial additional capital expenditures in acquiring solid waste management businesses. If we acquire additional landfill disposal facilities, we may also
have to make significant expenditures to bring them into compliance with applicable regulatory requirements, obtain permits or expand our available disposal capacity. In addition we may need to make
additional capital expenditures if we bid and are awarded new municipal contracts. We cannot currently determine the amount of these expenditures because they will depend on the number, nature,
condition and permitted status of any acquired landfill disposal facilities or new municipal contracts.

From
time to time we evaluate our existing operations and their strategic importance to us. If we determine that a given operating unit does not have future strategic importance, we may
sell or otherwise dispose of those operations. Although we believe our operations would not be impaired by such dispositions, we could incur losses on them.

Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 applies to all legally enforceable
obligations associated with the retirement of tangible long-lived assets and provides the accounting and reporting requirements for such obligations. SFAS No. 143 requires amounts
initially recognized as an asset retirement obligation to be measured at fair value. The recognized asset retirement cost is capitalized as part of the cost of the asset and is depreciated over the
useful life of the asset. We adopted SFAS No. 143 effective January 1, 2003.

The
following table summarizes the pro forma impact to our net income for the six and three months ended June 30, 2002 of the accounting change we implemented beginning
January 1, 2003:

Six Months
Ended June 30, 2002

Three Months
Ended June 30, 2002Reported net income

$
1,043,797

$
934,180Adoption of SFAS No. 143, net of tax


(188,849
)

(97,352
)Pro forma net income

$
854,948

$
836,828


The
application of SFAS No. 143 increased loss before cumulative effect of change in accounting principle for the six months ended June 30, 2003 by approximately $70,000,
net of tax benefit, and decreased income before cumulative effect of changes in accounting principle for the three months ended June 30, 2003 by approximately $20,000, net of tax benefit.

34

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The
following table summarizes the impact on income from operations of applying the provisions of SFAS No. 143 for the six and three months ended June 30, 2003. The
adoption of SFAS No. 143 had no impact on our cash flow.

Six Months
Ended June 30, 2003

Three Months
Ended June 30, 2003Increase to operating expense

$
266,000

$
109,000Decrease to depletion expense


(126,000
)

(70,000
)Decrease to income from operations

$
140,000

$
39,000


For
a more detailed description of SFAS No. 143, please refer to Note 2 to our unaudited consolidated financial statements included in Part I, Item 1. "Financial
Statements" of this Quarterly Report in Form 10-Q.

In
April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 requires that gains and losses from extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board Opinion No. 30
("Opinion No. 30"). Applying the provision of Opinion No. 30 will distinguish transactions that are part of an entity's recurring operations from those that are unusual and infrequent
that meet criteria for classification as an extraordinary item. As allowed under the provisions of SFAS No. 145, we have adopted the provisions of SFAS No. 145 as of April 1,
2002.

Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements are not historical facts, but only
predictions and generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or phrases of similar
import. Similarly, statements that describe our objectives, plans or goals are also forward-looking statements.

These
forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those currently anticipated. These risks and
uncertainties include: our business is capital intensive and may consume cash in excess of cash flow from our operations and borrowings; our growth strategy depends, in part, on our acquiring other
solid waste management or related businesses and expanding our existing landfills and other operations, which we may be unable to do; we may not be able to successfully manage our growth; competition
could reduce our profitability or limit our ability to grow; state and municipal requirements to reduce landfill disposal by encouraging various alternatives may adversely affect our ability to
operate our landfills at full capacity; we may lose contracts through competitive bidding or early termination, which would cause our revenue to decline; we are geographically concentrated in the
northeastern and southern United States and susceptible to those regions' local economies and regulations; the loss of the City of New York as a customer could have a significant adverse effect on our
business and operations; our substantial debt could adversely affect our financial condition and make it more difficult for us to make payments with respect to our debt; despite our current
indebtedness, we and our subsidiaries may be able to incur substantially more debt, exacerbating the risks described above; we require a significant amount of cash to service our debt, and our ability
to generate cash depends on many factors, some of which are beyond our control; our failure to comply with the covenants contained in our senior credit facility or the indenture governing our Notes,
including as a result of events beyond our control, could result in an event of default, which could materially and adversely affect our operating results and financial condition; covenant
restrictions in our senior credit facility and the indenture governing our Notes may limit our ability to operate our business; the interests of our controlling stockholders could conflict with

35

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those
of other holders of our securities; we depend heavily on our senior management; if we are unable to obtain performance or surety bonds, letters of credit or insurance, we may not be able to
enter into additional MSW collection contracts or retain necessary landfill operating permits; we are subject to extensive legislation and governmental regulation that may restrict our operations or
increase our costs of operations; we may not be able to obtain permits we require to operate our business; we may be subject to legal action relating to compliance with environmental laws; we may have
liability for environmental contamination; and we will always face the risk of liability, and insurance may not always be available or sufficient.

For
a further list and description of such risks and uncertainties, please refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2002. All subsequent written and oral forward-looking statements attributable to us or persons acting on our
behalf are also expressly qualified in their entirety by such factors. We urge you to carefully consider such factors in evaluating the forward-looking statements and caution you not to place undue
reliance on such forward-looking statements. There may also be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business. In
light of these risks, uncertainties and assumptions, the forward-looking events may or may not occur. The forward-looking statements included herein are made only as of the date of this Quarterly
Report on Form 10-Q and we undertake no obligation to publicly update these forward-looking statements to reflect new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

See
Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risks" of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 for a discussion of our exposure to market risks. There was no significant change in those risks during the three months ended June 30, 2003.

Item 4. Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this Quarterly Report on
Form 10-Q, that our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) were effective as of the date of that evaluation to ensure that the information that we are required to disclose in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

36

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Part II. Other Information

Item 1. Legal Proceedings.

Please see Part I, Item 1. "Financial Statements," Note 7, captioned "Commitments and Contingencies."

Item 2. Changes in Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

By the written consent, effective as of March 17, 2003, of the holders of a majority of the outstanding shares of our Class A voting common stock
and preferred stock, our 1999 stock option plan was amended to increase the number of shares of our Class A voting common stock reserved for issuance thereunder from 200,000 to 250,000.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.



|Exhibit Number |  | Description                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------
|10.1           |  | 1999 Stock Option Plan, as amended.                                                                
|31.1           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1           |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2           |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



On
May 8, 2003, we furnished (but not filed) a Current Report on Form 8-K reporting our financial results for the first quarter ended March 31, 2003.

37

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SIGNATURES

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

|                |  | IESI CORPORATION
|--------------- |  | ----------------
|                |  |                 
|August 13, 2003 |  | By:             

38

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Exhibit Index

|Exhibit
Number |  | Document Name                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------
|10.1           |  | 1999 Stock Option Plan, as amended.                                                                
|31.1           |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2           |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1           |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2           |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---