##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the Quarterly Period Ended September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from to
 Commission File Number: 000-25955
 Waste Services, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    01-0780204(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 1122 International Blvd., Suite 601, Burlington, Ontario, Canada L7L 6Z8  (Address of principal executive offices) (zip code)
 (905) 319-1237  (Registrants telephone number, including area code)
 þ o
  o þ o
 o þ




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##### Table of Contents



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005
    
    
    2Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30,
2006 and 2005
    
    
    3Unaudited Condensed Consolidated Statement of Shareholders Equity for the nine months ended September 30, 2006
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    43Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43Item 3. Defaults upon Senior Securities
    
    
    43Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    44Signatures
    
    
    45EX-10.1 Credit AgreementEX-31.1 Section 302 Chief Executive Officer CertificationEX-31.2 Section 302 Principal Financial Officer CertificationEX-32.1 Section 906 Chief Executive Officer & Principal Financial Officer Certification
 1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash
equivalents
    
    $
    1,696
    
    
    $
    8,886Accounts receivable (net of allowance for doubtful accounts of $415 and $672
as of September 30, 2006 and December 31,
2005, respectively)
    
    
    54,463
    
    
    
    45,381Prepaid expenses and other current
assets
    
    
    6,339
    
    
    
    10,063Current assets of discontinued operations
    
    
    4,033
    
    
    
    5,252Total current assets
    
    
    66,531
    
    
    
    69,582Property and equipment, net
    
    
    142,372
    
    
    
    119,485Landfill sites, net
    
    
    183,840
    
    
    
    156,498Goodwill and other intangible assets,
net
    
    
    335,217
    
    
    
    307,869Other assets
    
    
    9,380
    
    
    
    23,816Non-current assets of discontinued
operations
    
    
    49,944
    
    
    
    51,139Total assets
    
    $
    787,284
    
    
    $
    728,389LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    24,619
    
    
    $
    25,959Accrued expenses and other current
liabilities
    
    
    48,034
    
    
    
    39,065Short-term financing and current portion of long-term
debt
    
    
    1,680
    
    
    
    1,365Current liabilities of discontinued operations
    
    
    2,491
    
    
    
    1,827Total current
liabilities
    
    
    76,824
    
    
    
    68,216Long-term debt
    
    
    314,805
    
    
    
    284,850Accrued closure, post-closure and other
obligations
    
    
    34,040
    
    
    
    25,651Cumulative mandatorily redeemable Preferred Stock (net of discount of nil
and $2,347 as of September 30, 2006 and December 31, 2005,
respectively)
    
    
    99,384
    
    
    
    84,971Non-current liabilities of discontinued operations
    
    
    311
    
    
    
    210Total liabilities
    
    
    525,364
    
    
    
    463,898Shareholders equity:Common stock $0.01 par value; 166,666,666 and 500,000,000 (pre-reverse split) shares
authorized at September 30, 2006 and December 31, 2005, respectively; 33,960,275 shares
issued and outstanding at September 30, 2006; 93,685,889 shares (pre-reverse split) issued
and 93,185,889 shares (pre-reverse split)
outstanding at December 31, 2005
    
    
    340
    
    
    
    937Additional paid-in
capital
    
    
    411,637
    
    
    
    383,618Treasury stock at cost; 500,000 shares (pre-reverse
split)
    
    
    
    
    
    
    (1,235
    )Accumulated other comprehensive
income
    
    
    42,880
    
    
    
    35,673Accumulated deficit
    
    
    (192,937
    )
    
    
    (154,502
    )Total shareholders equity
    
    
    261,920
    
    
    
    264,491Total liabilities and shareholders equity
    
    $
    787,284
    
    
    $
    728,389
  2




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    104,932
    
    
    $
    94,535
    
    
    $
    295,079
    
    
    $
    266,294Operating and other expenses:Cost of operations (exclusive of depreciation, depletion
and amortization)
    
    
    71,022
    
    
    
    67,981
    
    
    
    203,400
    
    
    
    192,795Selling, general and administrative expense (exclusive of
depreciation, depletion and
amortization)
    
    
    14,906
    
    
    
    12,795
    
    
    
    44,507
    
    
    
    40,383Deferred acquisition costs
    
    
    
    
    
    
    
    
    
    
    5,612
    
    
    
    Settlement with sellers of Florida
Recycling
    
    
    
    
    
    
    (4,120
    )
    
    
    
    
    
    
    (4,120
    )Depreciation, depletion and
amortization
    
    
    10,990
    
    
    
    10,797
    
    
    
    30,860
    
    
    
    29,854Foreign exchange loss (gain) and
other
    
    
    (92
    )
    
    
    844
    
    
    
    2,074
    
    
    
    659Income from operations
    
    
    8,106
    
    
    
    6,238
    
    
    
    8,626
    
    
    
    6,723Interest expense
    
    
    7,919
    
    
    
    7,274
    
    
    
    22,799
    
    
    
    21,272Cumulative mandatorily redeemable preferred stock dividends and
amortization of issue
costs
    
    
    4,256
    
    
    
    5,392
    
    
    
    14,793
    
    
    
    15,348Loss from continuing operations before income
taxes
    
    
    (4,069
    )
    
    
    (6,428
    )
    
    
    (28,966
    )
    
    
    (29,897
    )Income tax
provision
    
    
    4,045
    
    
    
    3,252
    
    
    
    8,386
    
    
    
    8,582Net loss from continuing
operations
    
    
    (8,114
    )
    
    
    (9,680
    )
    
    
    (37,352
    )
    
    
    (38,479
    )Net income (loss) from discontinued
operations
    
    
    (479
    )
    
    
    269
    
    
    
    (1,083
    )
    
    
    287Net loss
    
    $
    (8,593
    )
    
    $
    (9,411
    )
    
    $
    (38,435
    )
    
    $
    (38,192
    )Basic and diluted loss per share:Loss per share  continuing
operations
    
    
    (0.22
    )
    
    
    (0.29
    )
    
    
    (1.08
    )
    
    
    (1.18
    )Loss per share  discontinued
operations
    
    
    (0.02
    )
    
    
    0.01
    
    
    
    (0.03
    )
    
    
    0.01Basic and diluted loss per share
    
    $
    (0.24
    )
    
    $
    (0.28
    )
    
    $
    (1.11
    )
    
    $
    (1.17
    )Weighted average common shares outstanding  basic and
diluted
    
    
    36,066
    
    
    
    33,138
    
    
    
    34,534
    
    
    
    32,782
  3




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 For the Nine Months Ended September 30, 2006
 (In thousands)
 AccumulatedWaste Services, Inc.
    
    
    
    
    
    
    Treasury
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Additional
    
    
    Stock
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    at Cost
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance, December
31,
2005
    
    
    93,686
    
    
    $
    937
    
    
    $
    383,618
    
    
    $
    (1,235
    )
    
    $
    35,673
    
    
    $
    (154,502
    )
    
    $
    264,491Common shares
issued
    
    
    8,154
    
    
    
    82
    
    
    
    25,265
    
    
    
    1,235
    
    
    
    
    
    
    
    
    
    
    
    26,582Exercise of options
and
warrants
    
    
    28
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86Stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    2,918
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,918Conversion of
exchangeable
shares
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share reimbursement
agreement
    
    
    
    
    
    
    
    
    
    
    (929
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (929
    )Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,207
    
    
    
    
    
    
    
    7,207Effect of reverse
stock
split
    
    
    (67,916
    )
    
    
    (679
    )
    
    
    679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,435
    )
    
    
    (38,435
    )Balance, September
30,
2006
    
    
    33,960
    
    
    $
    340
    
    
    $
    411,637
    
    
    $
    
    
    
    $
    42,880
    
    
    $
    (192,937
    )
    
    $
    261,920
  4




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Nine Months Ended September 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (38,435
    )
    
    $
    (38,192
    )Adjustments to reconcile net loss to net cash flows
from operating activities:Net loss (income) from discontinued operations
    
    
    1,083
    
    
    
    (287
    )Depreciation, depletion and amortization
    
    
    30,860
    
    
    
    29,854Non-cash component of settlement with sellers of Florida Recycling
    
    
    
    
    
    
    (4,120
    )Cumulative mandatorily redeemable preferred stock dividends and
amortization of issue costs
    
    
    14,793
    
    
    
    15,348Amortization of debt issue costs
    
    
    1,172
    
    
    
    1,057Deferred income tax provision
    
    
    8,298
    
    
    
    8,582Non-cash stock-based compensation
expense
    
    
    2,918
    
    
    
    1,079Deferred acquisition costs expensed
    
    
    5,173
    
    
    
    Foreign exchange loss
    
    
    2,001
    
    
    
    630Other non-cash items
    
    
    536
    
    
    
    729Changes in operating assets and liabilities (excluding the effects
of acquisitions):Accounts receivable
    
    
    (4,959
    )
    
    
    (5,424
    )Prepaid expenses and other current assets
    
    
    (544
    )
    
    
    2,657Accounts payable
    
    
    (5,216
    )
    
    
    (1,256
    )Accrued expenses and other current liabilities
    
    
    8,457
    
    
    
    3,749Net cash provided by continuing operations
    
    
    26,137
    
    
    
    14,406Net cash provided by discontinued operations
    
    
    2,909
    
    
    
    2,222Net cash provided by operating activites
    
    
    29,046
    
    
    
    16,628Cash flows from investing activities:Cash used in business combinations and significant asset
acquisitions, net of cash acquired
    
    
    (28,973
    )
    
    
    (4,470
    )Capital expenditures
    
    
    (38,335
    )
    
    
    (23,462
    )Proceeds from asset sales and business divestitures
    
    
    4,939
    
    
    
    1,735Share reimbursement agreement
    
    
    (929
    )
    
    
    Deposits for business acquisitions and other
    
    
    
    
    
    
    (793
    )Net cash used in continuing operations
    
    
    (63,298
    )
    
    
    (26,990
    )Net cash used in discontinued operations
    
    
    (1,707
    )
    
    
    (6,062
    )Net cash used in investing activities
    
    
    (65,005
    )
    
    
    (33,052
    )Cash flows from financing activities:Proceeds from issuance of debt and draws on revolving credit facility
    
    
    40,532
    
    
    
    6,908Principal repayments of debt and capital lease obligations
    
    
    (11,861
    )
    
    
    (4,171
    )Sale of common shares and warrants
    
    
    
    
    
    
    7,125Proceeds from the exercise of options and warrants
    
    
    86
    
    
    
    521Fees paid for financing transactions
    
    
    (149
    )
    
    
    Net cash provided by financing activities  continuing operations
    
    
    28,608
    
    
    
    10,383Effect of exchange rate changes on cash and cash equivalents
    
    
    161
    
    
    
    73Decrease in cash and cash equivalents
    
    
    (7,190
    )
    
    
    (5,968
    )Cash and cash equivalents, beginning of period
    
    
    8,886
    
    
    
    8,476Cash and cash equivalents, end of period
    
    $
    1,696
    
    
    $
    2,508
  5




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WASTE SERVICES, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization of Business and Basis of Presentation
       6




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Common Shares
issuable under
exercisable
options
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    17Common Shares
issuable under
exercisable
warrants
    
    
    219
    
    
    
    817
    
    
    
    190
    
    
    
    753Dilutive
securities
    
    
    219
    
    
    
    840
    
    
    
    190
    
    
    
    770
  2. Discontinued Operations
  7




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 September 30,
    
    
    December 31,2006
    
    
    2005Accounts
receivable
    
    $
    3,617
    
    
    $
    4,202Prepaid expenses and other
current
assets
    
    
    416
    
    
    
    1,050Current assets of discontinued
operations
    
    
    4,033
    
    
    
    5,252Property and
equipment
    
    
    12,255
    
    
    
    13,777Landfill
sites
    
    
    16,092
    
    
    
    15,630Goodwill and other intangible
assets
    
    
    21,475
    
    
    
    21,602Other
assets
    
    
    122
    
    
    
    130Non-current assets of
discontinued
operations
    
    
    49,944
    
    
    
    51,139Total assets of discontinued
operations
    
    $
    53,977
    
    
    $
    56,391Accounts
payable
    
    $
    333
    
    
    $
    192Accrued expenses and other
current
liabilities
    
    
    2,158
    
    
    
    1,635Current liabilities of
discontinued
operations
    
    
    2,491
    
    
    
    1,827Accrued closure, post closure and
other
obligations
    
    
    311
    
    
    
    210Non-current liabilities of
discontinued
operations
    
    
    311
    
    
    
    210Total liabilities of discontinued
operations
    
    $
    2,802
    
    
    $
    2,037Net assets of discontinued
operations
    
    $
    51,175
    
    
    $
    54,354
 3. Share-Based Payments
     8




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months
    
    
    Nine MonthsNet loss as reported
    
    $
    (9,411
    )
    
    $
    (38,192
    )Add: Employee compensation expense for equity awards included in the determination
of net loss as reported
    
    
    86
    
    
    
    258Less: Stock based employee compensation expense for equity awards determined by
the fair value based method prescribed under SFAS
123
    
    
    (2,467
    )
    
    
    (7,475
    )Pro forma net loss
    
    $
    (11,792
    )
    
    $
    (45,409
    )Basic and diluted loss per share:As reported
    
    $
    (0.28
    )
    
    $
    (1.17
    )Pro forma
    
    $
    (0.36
    )
    
    $
    (1.39
    )
   Three months ended September 30,
    
    Nine months ended September 30,2006
    
    2005
    
    2006
    
    2005Annual dividend
yield
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    Weighted-average
expected life
(years)
    
    
    N/A
    
    
    
    N/A
    
    
    3.0
    years
    
    2.8
    yearsRisk-free interest
rate
    
    
    N/A
    
    
    
    N/A
    
    
    
    4.83
    %
    
    2.57% to 4.62
    %Expected
volatility
    
    
    N/A
    
    
    
    N/A
    
    
    
    38
    %
    
    
    74
    %
    9




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Options
    
    OptionsOutstanding
    
    ExercisableNumber of U.S. dollar denominated
options
    
    
    6,388,500
    
    
    
    5,581,500Number of Canadian dollar denominated
options
    
    
    4,495,000
    
    
    
    4,495,000Total number of
options
    
    
    10,883,500
    
    
    
    10,076,500Aggregate intrinsic value of
options
    
    $
    
    
    
    $
    Weighted average remaining contractual term
(years)
    
    
    2.1
    
    
    
    2.0Weighted average exercise price  U.S. dollar
denominated
options
    
    $
    4.51
    
    
    $
    4.66Weighted average exercise price  Canadian
dollar denominated
options
    
    C$
    6.47
    
    
    C$
    6.47
  4. Business Combinations and Significant Asset Acquisitions
      10




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Liberty WasteTaft
    
    
    and Sun Country
    
    
    OtherRecycling
    
    
    Materials
    
    
    Acquisitions
    
    
    TotalPurchase price:Cash
    
    $
    13,300
    
    
    $
    20,652
    
    
    $
    2,528
    
    
    $
    36,480Common stock
    
    
    7,645
    
    
    
    18,937
    
    
    
    
    
    
    
    26,582Total purchase price
    
    
    20,945
    
    
    
    39,589
    
    
    
    2,528
    
    
    
    63,062Allocated as follows:Working capital assumed:Cash and cash equivalents
    
    
    125
    
    
    
    488
    
    
    
    
    
    
    
    613Accounts receivable
    
    
    952
    
    
    
    2,126
    
    
    
    
    
    
    
    3,078Prepaid expenses and other current
assets
    
    
    10
    
    
    
    591
    
    
    
    
    
    
    
    601Accounts payable
    
    
    (462
    )
    
    
    (2,724
    )
    
    
    
    
    
    
    (3,186
    )Accrued expenses and other current
liabilities
    
    
    (252
    )
    
    
    (787
    )
    
    
    
    
    
    
    (1,039
    )Net working capital
    
    
    373
    
    
    
    (306
    )
    
    
    
    
    
    
    67Property and equipment
    
    
    3,237
    
    
    
    10,926
    
    
    
    675
    
    
    
    14,838Landfill sites
    
    
    
    
    
    
    23,290
    
    
    
    
    
    
    
    23,290Debt
    
    
    
    
    
    
    (396
    )
    
    
    
    
    
    
    (396
    )Accrued closure, post-closure and other
obligations assumed
    
    
    (73
    )
    
    
    (3,093
    )
    
    
    
    
    
    
    (3,166
    )Net book value of assets acquired and liabilities
assumed
    
    
    3,537
    
    
    
    30,421
    
    
    
    675
    
    
    
    34,633Excess purchase price to be
allocated
    
    $
    17,408
    
    
    $
    9,168
    
    
    $
    1,853
    
    
    $
    28,429Allocated as follows:Goodwill
    
    $
    17,408
    
    
    $
    4,686
    
    
    $
    1,672
    
    
    $
    23,766Other intangible assets
    
    
    
    
    
    
    4,482
    
    
    
    181
    
    
    
    4,663Total allocated
    
    $
    17,408
    
    
    $
    9,168
    
    
    $
    1,853
    
    
    $
    28,429
    11




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue
    
    $
    104,932
    
    
    $
    101,407
    
    
    $
    305,717
    
    
    $
    286,946Net loss
    
    $
    (8,593
    )
    
    $
    (9,822
    )
    
    $
    (39,101
    )
    
    $
    (39,624
    )Basic and diluted net loss per common
share
    
    $
    (0.24
    )
    
    $
    (0.27
    )
    
    $
    (1.08
    )
    
    $
    (1.11
    )Basic and diluted pro forma weighted average number of
common shares
outstanding
    
    
    36,066
    
    
    
    36,023
    
    
    
    36,066
    
    
    
    35,667
  5. Allowance for Doubtful Accounts
   2006
    
    
    2005Balance, beginning of
period
    
    $
    672
    
    
    $
    545Provisions
    
    
    386
    
    
    
    498Bad debts charged to
reserves, net of
recoveries
    
    
    (924
    )
    
    
    (563
    )Increase due to
acquisitions
    
    
    275
    
    
    
    Impact of foreign
exchange rate
fluctuations
    
    
    6
    
    
    
    3Balance, end of
period
    
    $
    415
    
    
    $
    483
 6. Prepaid Expenses and Other Current Assets
  September 30,
    
    
    December 31,2006
    
    
    2005Prepaid
expenses
    
    $
    3,138
    
    
    $
    2,357Deferred income
taxes
    
    
    22
    
    
    
    4,763Parts and
supplies
    
    
    1,772
    
    
    
    1,673Other current
assets
    
    
    1,407
    
    
    
    1,270$
    6,339
    
    
    $
    10,063
 7. Property and Equipment
  12




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 September 30,
    
    
    December 31,2006
    
    
    2005Land and
buildings
    
    $
    34,978
    
    
    $
    24,596Vehicles
    
    
    113,128
    
    
    
    96,492Containers, compactors and
landfill and recycling
equipment
    
    
    74,796
    
    
    
    64,547Furniture, fixtures, other
office equipment and
leasehold
improvements
    
    
    10,210
    
    
    
    9,393Total property and
equipment
    
    
    233,112
    
    
    
    195,028Less: Accumulated
depreciation
    
    
    (90,740
    )
    
    
    (75,543
    )Property and equipment,
net
    
    $
    142,372
    
    
    $
    119,485
 8. Landfill Sites, Accrued Closure, Post-Closure and Other Obligations
 Landfill Sites
  September 30,
    
    
    December 31,2006
    
    
    2005Landfill
sites
    
    $
    227,564
    
    
    $
    189,280Less: Accumulated
depletion
    
    
    (43,724
    )
    
    
    (32,782
    )Landfill sites,
net
    
    $
    183,840
    
    
    $
    156,498
  2006
    
    
    2005Balance, beginning of
period
    
    $
    156,498
    
    
    $
    159,385Acquisitions
    
    
    23,290
    
    
    
    Additional landfill site
costs
    
    
    12,140
    
    
    
    6,180Additional asset retirement
obligations
    
    
    1,529
    
    
    
    1,253Depletion
    
    
    (10,027
    )
    
    
    (9,322
    )Effect of foreign exchange
rate
fluctuations
    
    
    410
    
    
    
    304Balance, end of
period
    
    $
    183,840
    
    
    $
    157,800
 Accrued Closure, Post-Closure and Other Obligations
  September 30,
    
    
    December 31,2006
    
    
    2005Accrued closure and
post-closure
obligations
    
    $
    13,503
    
    
    $
    9,074Deferred income tax
liability
    
    
    19,898
    
    
    
    16,206Other
obligations
    
    
    639
    
    
    
    371$
    34,040
    
    
    $
    25,651
  2006
    
    
    2005Balance, beginning of
period
    
    $
    9,074
    
    
    $
    6,385Acquisitions
    
    
    2,037
    
    
    
    Accretion
    
    
    608
    
    
    
    537Additional asset
retirement
obligations
    
    
    1,529
    
    
    
    1,253Effect of foreign
exchange rate
fluctuations
    
    
    255
    
    
    
    213Balance, end of
period
    
    $
    13,503
    
    
    $
    8,388
 13




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 9. Goodwill and Other Intangible Assets
  September 30,
    
    
    December 31,2006
    
    
    2005Other intangible assets subject to amortization:Customer relationships and
contracts
    
    $
    39,177
    
    
    $
    34,768Non-competition agreements and
other
    
    
    2,920
    
    
    
    2,74442,097
    
    
    
    37,512Less: Accumulated amortization:Customer relationships and
contracts
    
    
    (15,789
    )
    
    
    (12,128
    )Non-competition agreements and
other
    
    
    (2,284
    )
    
    
    (1,761
    )Other intangible assets subject to
amortization,
net
    
    
    24,024
    
    
    
    23,623Goodwill
    
    
    311,193
    
    
    
    284,246Goodwill and other intangible assets,
net
    
    $
    335,217
    
    
    $
    307,869
  Nine Months Ended September 30, 2006Florida
    
    
    Canada
    
    
    TotalBalance, beginning
of
period
    
    $
    199,377
    
    
    $
    84,869
    
    
    $
    284,246Acquisitions
    
    
    22,094
    
    
    
    1,672
    
    
    
    23,766Purchase price
allocation
adjustments for
prior
acquisitions
    
    
    (258
    )
    
    
    
    
    
    
    (258
    )Effect of foreign
exchange rate
fluctuations
    
    
    
    
    
    
    3,439
    
    
    
    3,439Balance, end of
period
    
    $
    221,213
    
    
    $
    89,980
    
    
    $
    311,193
 Nine Months Ended September 30, 2005Florida
    
    
    Canada
    
    
    TotalBalance, beginning
of
period
    
    $
    174,629
    
    
    $
    85,255
    
    
    $
    259,884Acquisitions
    
    
    
    
    
    
    162
    
    
    
    162Purchase price
allocation
adjustments for
prior
acquisitions
    
    
    24,748
    
    
    
    
    
    
    
    24,748Effect of foreign
exchange rate
fluctuations
    
    
    
    
    
    
    2,898
    
    
    
    2,898Balance, end of
period
    
    $
    199,377
    
    
    $
    88,315
    
    
    $
    287,692
 10. Other Assets
  September 30,
    
    
    December 31,2006
    
    
    2005Debt and redeemable Preferred
Stock issue costs,
net of accumulated amortization of
$3,456 and $4,761 as of September 30,
2006 and December 31, 2005,
respectively
    
    $
    8,025
    
    
    $
    9,428Acquisition deposits and deferred
acquisition costs
    
    
    
    
    
    
    13,815Other
assets
    
    
    1,355
    
    
    
    573$
    9,380
    
    
    $
    23,816
  14




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Debt
  September 30,
    
    
    December 31,2006
    
    
    2005Senior Secured Credit Facilities:Revolving credit facility, floating interest rate at 9.3% as of
September 30, 2006, due April
2009
    
    $
    8,000
    
    
    $
    Term loan facility, floating interest rate at 8.6% and 7.9% as of
September 30, 2006 and December 31, 2005, respectively, due $370 per
quarter to March 2010, $35,020 per quarter thereafter, due March
2011
    
    
    145,260
    
    
    
    123,250Senior Subordinated Notes, fixed interest rate at 9.5%, due
2014
    
    
    160,000
    
    
    
    160,000Other notes payable, interest at 4.3% to 6.7%, due through June
2025
    
    
    3,225
    
    
    
    2,965316,485
    
    
    
    286,215Less: Current portion
    
    
    (1,680
    )
    
    
    (1,365
    )Long-term portion
    
    $
    314,805
    
    
    $
    284,850
 Senior Secured Credit Facilities
     Senior Subordinated Notes
 1 2
 15




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    12. Cumulative Mandatorily Redeemable Preferred Stock
 3 4
   16




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 13. Commitments and Contingencies
 Environmental Risks
   Legal Proceedings
     Surety Bonds, Letters of Credit and Insurance
   17




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Nine Months Ended September 30,2006
    
    
    2005Balance, beginning of
period
    
    $
    4,356
    
    
    $
    2,426Provisions
    
    
    3,630
    
    
    
    3,282Payments
    
    
    (2,754
    )
    
    
    (1,184
    )Favorable claim
development related to prior periods
    
    
    (107
    )
    
    
    (279
    )Balance, end of
period
    
    $
    5,125
    
    
    $
    4,245
 Disposal Agreement
  Other Contractual Arrangements
   14. Authorized Capital Stock and Migration Transaction
 Total Shares
  
    
    166,666,666 shares of common stock, par value 0.01 per share; and
    
    5,000,000 shares of preferred stock, par value 0.01 per share, of which 100,000
shares have been designated as Series A Preferred Stock and one share has been designated as
Special Voting Preferred Stock.
 Preferred Stock
  Migration Transaction
 18




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     15. Comprehensive Income (Loss)
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net
loss
    
    $
    (8,593
    )
    
    $
    (9,411
    )
    
    $
    (38,435
    )
    
    $
    (38,192
    )Foreign currency
translation
adjustment
    
    
    (194
    )
    
    
    10,314
    
    
    
    7,207
    
    
    
    6,703Comprehensive
income
(loss)
    
    $
    (8,787
    )
    
    $
    903
    
    
    $
    (31,228
    )
    
    $
    (31,489
    )
 16. Segment Information
   19




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Three Months Ended September 30, 2006All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    51,910
    
    
    $
    51,829
    
    
    $
    1,193
    
    
    $
    
    
    
    $
    104,932Depreciation,
depletion and
amortization
    
    
    6,091
    
    
    
    4,155
    
    
    
    388
    
    
    
    356
    
    
    
    10,990Income (loss) from
operations
    
    
    7,072
    
    
    
    8,902
    
    
    
    (58
    )
    
    
    (7,810
    )
    
    
    8,106Capital
expenditures
    
    
    7,261
    
    
    
    5,459
    
    
    
    66
    
    
    
    35
    
    
    
    12,821
 Three Months Ended September 30, 2005All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    47,865
    
    
    $
    45,766
    
    
    $
    904
    
    
    $
    
    
    
    $
    94,535Depreciation,
depletion and
amortization
    
    
    5,147
    
    
    
    4,907
    
    
    
    293
    
    
    
    450
    
    
    
    10,797Income (loss) from
operations
    
    
    2,163
    
    
    
    7,120
    
    
    
    (188
    )
    
    
    (2,857
    )
    
    
    6,238Capital
expenditures
    
    
    5,534
    
    
    
    979
    
    
    
    190
    
    
    
    215
    
    
    
    6,918
 Nine Months Ended September 30, 2006All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    152,940
    
    
    $
    138,763
    
    
    $
    3,376
    
    
    $
    
    
    
    $
    295,079Depreciation,
depletion and
amortization
    
    
    16,946
    
    
    
    11,635
    
    
    
    1,165
    
    
    
    1,114
    
    
    
    30,860Income (loss) from
operations
    
    
    19,860
    
    
    
    21,281
    
    
    
    (290
    )
    
    
    (32,225
    )
    
    
    8,626Capital
expenditures
    
    
    17,521
    
    
    
    18,637
    
    
    
    1,328
    
    
    
    849
    
    
    
    38,335
 Nine Months Ended September 30, 2005All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    141,425
    
    
    $
    123,044
    
    
    $
    1,825
    
    
    $
    
    
    
    $
    266,294Depreciation,
depletion and
amortization
    
    
    14,800
    
    
    
    13,299
    
    
    
    682
    
    
    
    1,073
    
    
    
    29,854Income (loss) from
operations
    
    
    8,004
    
    
    
    16,939
    
    
    
    (854
    )
    
    
    (17,366
    )
    
    
    6,723Capital
expenditures
    
    
    14,494
    
    
    
    6,872
    
    
    
    588
    
    
    
    1,508
    
    
    
    23,462
 17. Condensed Consolidating Financial Statements
  20




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 September 30, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash
equivalents
    
    $
    367
    
    
    $
    1,329
    
    
    $
    
    
    
    $
    1,696Accounts receivable,
net
    
    
    24,337
    
    
    
    30,126
    
    
    
    
    
    
    
    54,463Prepaid expenses and other current
assets
    
    
    2,431
    
    
    
    3,908
    
    
    
    
    
    
    
    6,339Current assets of discontinued
operations
    
    
    4,033
    
    
    
    
    
    
    
    
    
    
    
    4,033Total current assets
    
    
    31,168
    
    
    
    35,363
    
    
    
    
    
    
    
    66,531Property and equipment,
net
    
    
    66,352
    
    
    
    76,020
    
    
    
    
    
    
    
    142,372Landfill sites,
net
    
    
    172,729
    
    
    
    11,111
    
    
    
    
    
    
    
    183,840Goodwill and other intangible assets,
net
    
    
    244,265
    
    
    
    90,952
    
    
    
    
    
    
    
    335,217Other assets
    
    
    9,380
    
    
    
    
    
    
    
    
    
    
    
    9,380Due from
affiliates
    
    
    
    
    
    
    11,734
    
    
    
    (11,734
    )
    
    
    Investment in
subsidiary
    
    
    187,311
    
    
    
    
    
    
    
    (187,311
    )
    
    
    Non-current assets of discontinued
operations
    
    
    49,944
    
    
    
    
    
    
    
    
    
    
    
    49,944Total assets
    
    $
    761,149
    
    
    $
    225,180
    
    
    $
    (199,045
    )
    
    $
    787,284LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    14,286
    
    
    $
    10,333
    
    
    $
    
    
    
    $
    24,619Accrued expenses and other current
liabilities
    
    
    34,113
    
    
    
    13,921
    
    
    
    
    
    
    
    48,034Short-term financing and current
portion of long-term
debt
    
    
    1,680
    
    
    
    
    
    
    
    
    
    
    
    1,680Current liabilities of discontinued
operations
    
    
    2,491
    
    
    
    
    
    
    
    
    
    
    
    2,491Total current liabilities
    
    
    52,570
    
    
    
    24,254
    
    
    
    
    
    
    
    76,824Long-term
debt
    
    
    314,805
    
    
    
    
    
    
    
    
    
    
    
    314,805Accrued closure, post-closure and other
obligations
    
    
    20,425
    
    
    
    13,615
    
    
    
    
    
    
    
    34,040Cumulative mandatorily redeemable
Preferred Stock
    
    
    99,384
    
    
    
    
    
    
    
    
    
    
    
    99,384Due to
affiliates
    
    
    11,734
    
    
    
    
    
    
    
    (11,734
    )
    
    
    Non-current liabilities of discontinued
operations
    
    
    311
    
    
    
    
    
    
    
    
    
    
    
    311Total
liabilities
    
    
    499,229
    
    
    
    37,869
    
    
    
    (11,734
    )
    
    
    525,364Shareholders equity:Common stock of Waste Services,
Inc.
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    340Other
equity
    
    
    261,580
    
    
    
    187,311
    
    
    
    (187,311
    )
    
    
    261,580Total shareholders
equity
    
    
    261,920
    
    
    
    187,311
    
    
    
    (187,311
    )
    
    
    261,920Total liabilities and
shareholders equity
    
    $
    761,149
    
    
    $
    225,180
    
    
    $
    (199,045
    )
    
    $
    787,284
 21




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31, 2005Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash
equivalents
    
    $
    3,680
    
    
    $
    5,206
    
    
    $
    
    
    
    $
    8,886Accounts receivable,
net
    
    
    21,236
    
    
    
    24,145
    
    
    
    
    
    
    
    45,381Prepaid expenses and other current
assets
    
    
    1,969
    
    
    
    8,094
    
    
    
    
    
    
    
    10,063Current assets of discontinued
operations
    
    
    5,252
    
    
    
    
    
    
    
    
    
    
    
    5,252Total current assets
    
    
    32,137
    
    
    
    37,445
    
    
    
    
    
    
    
    69,582Property and equipment,
net
    
    
    53,576
    
    
    
    65,909
    
    
    
    
    
    
    
    119,485Landfill sites,
net
    
    
    146,398
    
    
    
    10,100
    
    
    
    
    
    
    
    156,498Goodwill and other intangible assets,
net
    
    
    221,674
    
    
    
    86,195
    
    
    
    
    
    
    
    307,869Other assets
    
    
    10,263
    
    
    
    13,553
    
    
    
    
    
    
    
    23,816Due from
affiliates
    
    
    
    
    
    
    2,295
    
    
    
    (2,295
    )
    
    
    Investment in
subsidiary
    
    
    177,882
    
    
    
    
    
    
    
    (177,882
    )
    
    
    Non-current assets of discontinued
operations
    
    
    51,139
    
    
    
    
    
    
    
    
    
    
    
    51,139Total assets
    
    $
    693,069
    
    
    $
    215,497
    
    
    $
    (180,177
    )
    
    $
    728,389LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    14,473
    
    
    $
    11,486
    
    
    $
    
    
    
    $
    25,959Accrued expenses and other current
liabilities
    
    
    26,276
    
    
    
    12,789
    
    
    
    
    
    
    
    39,065Short-term financing and current
portion of long-term
debt
    
    
    1,365
    
    
    
    
    
    
    
    
    
    
    
    1,365Current liabilities of discontinued
operations
    
    
    1,827
    
    
    
    
    
    
    
    
    
    
    
    1,827Total current liabilities
    
    
    43,941
    
    
    
    24,275
    
    
    
    
    
    
    
    68,216Long-term
debt
    
    
    284,850
    
    
    
    
    
    
    
    
    
    
    
    284,850Accrued closure, post-closure and other
obligations
    
    
    12,311
    
    
    
    13,340
    
    
    
    
    
    
    
    25,651Cumulative mandatorily redeemable
Preferred Stock
    
    
    84,971
    
    
    
    
    
    
    
    
    
    
    
    84,971Due to
affiliates
    
    
    2,295
    
    
    
    
    
    
    
    (2,295
    )
    
    
    Non-current liabilities of discontinued
operations
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    210Total
liabilities
    
    
    428,578
    
    
    
    37,615
    
    
    
    (2,295
    )
    
    
    463,898Shareholders equity:Common stock of Waste Services,
Inc.
    
    
    937
    
    
    
    
    
    
    
    
    
    
    
    937Other
equity
    
    
    263,554
    
    
    
    177,882
    
    
    
    (177,882
    )
    
    
    263,554Total shareholders
equity
    
    
    264,491
    
    
    
    177,882
    
    
    
    (177,882
    )
    
    
    264,491Total liabilities and
shareholders equity
    
    $
    693,069
    
    
    $
    215,497
    
    
    $
    (180,177
    )
    
    $
    728,389
 22




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended September 30, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    53,103
    
    
    $
    51,829
    
    
    $
    
    
    
    $
    104,932Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and
amortization)
    
    
    35,832
    
    
    
    35,190
    
    
    
    
    
    
    
    71,022Selling, general and administrative expense
(exclusive of depreciation, depletion and
amortization)
    
    
    9,241
    
    
    
    5,665
    
    
    
    
    
    
    
    14,906Depreciation, depletion and
amortization
    
    
    6,491
    
    
    
    4,499
    
    
    
    
    
    
    
    10,990Foreign exchange gain and
other
    
    
    (62
    )
    
    
    (30
    )
    
    
    
    
    
    
    (92
    )Equity earnings in investees
    
    
    (3,848
    )
    
    
    
    
    
    
    3,848
    
    
    
    Income from operations
    
    
    5,449
    
    
    
    6,505
    
    
    
    (3,848
    )
    
    
    8,106Interest expense
    
    
    7,855
    
    
    
    64
    
    
    
    
    
    
    
    7,919Cumulative mandatorily redeemable preferred stock
dividends and amortization of issue
costs
    
    
    4,256
    
    
    
    
    
    
    
    
    
    
    
    4,256Income (loss) from continuing operations before
income taxes
    
    
    (6,662
    )
    
    
    6,441
    
    
    
    (3,848
    )
    
    
    (4,069
    )Income tax provision
    
    
    1,452
    
    
    
    2,593
    
    
    
    
    
    
    
    4,045Net income (loss) from continuing
operations
    
    
    (8,114
    )
    
    
    3,848
    
    
    
    (3,848
    )
    
    
    (8,114
    )Net loss from discontinued
operations
    
    
    (479
    )
    
    
    
    
    
    
    
    
    
    
    (479
    )Net income (loss)
    
    $
    (8,593
    )
    
    $
    3,848
    
    
    $
    (3,848
    )
    
    $
    (8,593
    )
 23




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended September 30, 2005Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    48,769
    
    
    $
    45,766
    
    
    $
    
    
    
    $
    94,535Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and
amortization)
    
    
    37,975
    
    
    
    30,006
    
    
    
    
    
    
    
    67,981Selling, general and administrative expense
(exclusive of depreciation, depletion and
amortization)
    
    
    7,220
    
    
    
    5,575
    
    
    
    
    
    
    
    12,795Settlement with sellers of Florida
Recycling
    
    
    (4,120
    )
    
    
    
    
    
    
    
    
    
    
    (4,120
    )Depreciation, depletion and
amortization
    
    
    5,498
    
    
    
    5,299
    
    
    
    
    
    
    
    10,797Foreign exchange loss and
other
    
    
    35
    
    
    
    809
    
    
    
    
    
    
    
    844Equity earnings in investees
    
    
    (2,152
    )
    
    
    
    
    
    
    2,152
    
    
    
    Income from operations
    
    
    4,313
    
    
    
    4,077
    
    
    
    (2,152
    )
    
    
    6,238Interest expense
    
    
    7,238
    
    
    
    36
    
    
    
    
    
    
    
    7,274Cumulative mandatorily redeemable preferred stock
dividends and amortization of issue
costs
    
    
    5,392
    
    
    
    
    
    
    
    
    
    
    
    5,392Income (loss) from continuing operations before
income taxes
    
    
    (8,317
    )
    
    
    4,041
    
    
    
    (2,152
    )
    
    
    (6,428
    )Income tax provision
    
    
    1,363
    
    
    
    1,889
    
    
    
    
    
    
    
    3,252Net income (loss) from continuing
operations
    
    
    (9,680
    )
    
    
    2,152
    
    
    
    (2,152
    )
    
    
    (9,680
    )Net income from discontinued
operations
    
    
    269
    
    
    
    
    
    
    
    
    
    
    
    269Net income (loss)
    
    $
    (9,411
    )
    
    $
    2,152
    
    
    $
    (2,152
    )
    
    $
    (9,411
    )
 24




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Nine Months Ended September 30, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    156,316
    
    
    $
    138,763
    
    
    $
    
    
    
    $
    295,079Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and
amortization)
    
    
    108,223
    
    
    
    95,177
    
    
    
    
    
    
    
    203,400Selling, general and administrative expense
(exclusive of depreciation, depletion and
amortization)
    
    
    27,040
    
    
    
    17,467
    
    
    
    
    
    
    
    44,507Deferred acquisition costs
    
    
    439
    
    
    
    5,173
    
    
    
    
    
    
    
    5,612Depreciation, depletion and
amortization
    
    
    18,142
    
    
    
    12,718
    
    
    
    
    
    
    
    30,860Foreign exchange loss and
other
    
    
    78
    
    
    
    1,996
    
    
    
    
    
    
    
    2,074Equity earnings in investees
    
    
    (1,856
    )
    
    
    
    
    
    
    1,856
    
    
    
    Income from operations
    
    
    4,250
    
    
    
    6,232
    
    
    
    (1,856
    )
    
    
    8,626Interest expense
    
    
    22,518
    
    
    
    281
    
    
    
    
    
    
    
    22,799Cumulative mandatorily redeemable preferred stock
dividends and amortization of issue
costs
    
    
    14,793
    
    
    
    
    
    
    
    
    
    
    
    14,793Income (loss) from continuing operations before
income taxes
    
    
    (33,061
    )
    
    
    5,951
    
    
    
    (1,856
    )
    
    
    (28,966
    )Income tax provision
    
    
    4,291
    
    
    
    4,095
    
    
    
    
    
    
    
    8,386Net income (loss) from continuing
operations
    
    
    (37,352
    )
    
    
    1,856
    
    
    
    (1,856
    )
    
    
    (37,352
    )Net loss from discontinued
operations
    
    
    (1,083
    )
    
    
    
    
    
    
    
    
    
    
    (1,083
    )Net income
(loss)
    
    $
    (38,435
    )
    
    $
    1,856
    
    
    $
    (1,856
    )
    
    $
    (38,435
    )
 25




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Nine Months Ended September 30, 2005Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    143,250
    
    
    $
    123,044
    
    
    $
    
    
    
    $
    266,294Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and
amortization)
    
    
    110,275
    
    
    
    82,520
    
    
    
    
    
    
    
    192,795Selling, general and administrative expense
(exclusive of depreciation, depletion and
amortization)
    
    
    23,257
    
    
    
    17,126
    
    
    
    
    
    
    
    40,383Settlement with sellers of Florida
Recycling
    
    
    (4,120
    )
    
    
    
    
    
    
    
    
    
    
    (4,120
    )Depreciation, depletion and
amortization
    
    
    15,608
    
    
    
    14,246
    
    
    
    
    
    
    
    29,854Foreign exchange loss and
other
    
    
    34
    
    
    
    625
    
    
    
    
    
    
    
    659Equity earnings in investees
    
    
    (3,844
    )
    
    
    
    
    
    
    3,844
    
    
    
    Income from operations
    
    
    2,040
    
    
    
    8,527
    
    
    
    (3,844
    )
    
    
    6,723Interest expense
    
    
    21,082
    
    
    
    190
    
    
    
    
    
    
    
    21,272Cumulative mandatorily redeemable preferred stock
dividends and amortization of issue
costs
    
    
    15,348
    
    
    
    
    
    
    
    
    
    
    
    15,348Income (loss) from continuing operations before
income taxes
    
    
    (34,390
    )
    
    
    8,337
    
    
    
    (3,844
    )
    
    
    (29,897
    )Income tax provision
    
    
    4,089
    
    
    
    4,493
    
    
    
    
    
    
    
    8,582Net income (loss) from continuing
operations
    
    
    (38,479
    )
    
    
    3,844
    
    
    
    (3,844
    )
    
    
    (38,479
    )Net income from discontinued
operations
    
    
    287
    
    
    
    
    
    
    
    
    
    
    
    287Net income
(loss)
    
    $
    (38,192
    )
    
    $
    3,844
    
    
    $
    (3,844
    )
    
    $
    (38,192
    )
 26




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Nine Months Ended September 30, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net cash provided by operating
activities
    
    $
    7,020
    
    
    $
    22,026
    
    
    $
    
    
    
    $
    29,046Cash flows from investing activities:Cash used in business combinations and
significant asset acquisitions, net of cash
acquired
    
    
    (26,445
    )
    
    
    (2,528
    )
    
    
    
    
    
    
    (28,973
    )Capital
expenditures
    
    
    (19,038
    )
    
    
    (19,297
    )
    
    
    
    
    
    
    (38,335
    )Proceeds from asset sales and business
divestitures
    
    
    4,366
    
    
    
    573
    
    
    
    
    
    
    
    4,939Share reimbursement
agreement
    
    
    (929
    )
    
    
    
    
    
    
    
    
    
    
    (929
    )Intercompany
    
    
    
    
    
    
    (4,345
    )
    
    
    4,345
    
    
    
    Net cash used in continuing
operations
    
    
    (42,046
    )
    
    
    (25,597
    )
    
    
    4,345
    
    
    
    (63,298
    )Net cash used in discontinued
operations
    
    
    (1,707
    )
    
    
    
    
    
    
    
    
    
    
    (1,707
    )Net cash used in investing
activities
    
    
    (43,753
    )
    
    
    (25,597
    )
    
    
    4,345
    
    
    
    (65,005
    )Cash flows from financing activities:Proceeds from issuance of debt and draws on
revolving credit facility
    
    
    37,000
    
    
    
    3,532
    
    
    
    
    
    
    
    40,532Principal repayments of debt and capital lease
obligations
    
    
    (7,862
    )
    
    
    (3,999
    )
    
    
    
    
    
    
    (11,861
    )Proceeds from the exercise of options and
warrants
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    86Fees paid for financing
transactions
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    (149
    )Intercompany
    
    
    4,345
    
    
    
    
    
    
    
    (4,345
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    33,420
    
    
    
    (467
    )
    
    
    (4,345
    )
    
    
    28,608Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    161Decrease in cash and cash
equivalents
    
    
    (3,313
    )
    
    
    (3,877
    )
    
    
    
    
    
    
    (7,190
    )Cash and cash equivalents, beginning of
period
    
    
    3,680
    
    
    
    5,206
    
    
    
    
    
    
    
    8,886Cash and cash equivalents, end of
period
    
    $
    367
    
    
    $
    1,329
    
    
    $
    
    
    
    $
    1,696
 27




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Nine Months Ended September 30, 2005Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net cash provided by operating
activities
    
    $
    (7,699
    )
    
    $
    24,327
    
    
    $
    
    
    
    $
    16,628Cash flows from investing activities:Cash used in business combinations and
significant asset acquisitions, net of cash
acquired
    
    
    (3,987
    )
    
    
    (483
    )
    
    
    
    
    
    
    (4,470
    )Capital
expenditures
    
    
    (15,097
    )
    
    
    (8,365
    )
    
    
    
    
    
    
    (23,462
    )Proceeds from asset sales and business
divestitures
    
    
    1,382
    
    
    
    353
    
    
    
    
    
    
    
    1,735Deposits for business acquisitions and
other
    
    
    (58
    )
    
    
    (735
    )
    
    
    
    
    
    
    (793
    )Intercompany
    
    
    
    
    
    
    (15,318
    )
    
    
    15,318
    
    
    
    Net cash used in continuing
operations
    
    
    (17,760
    )
    
    
    (24,548
    )
    
    
    15,318
    
    
    
    (26,990
    )Net cash used in discontinued
operations
    
    
    (6,062
    )
    
    
    
    
    
    
    
    
    
    
    (6,062
    )Net cash used in investing
activities
    
    
    (23,822
    )
    
    
    (24,548
    )
    
    
    15,318
    
    
    
    (33,052
    )Cash flows from financing activities:Proceeds from issuance of debt and draws on
revolving credit
facility
    
    
    6,500
    
    
    
    408
    
    
    
    
    
    
    
    6,908Principal repayments of debt and capital lease
obligations
    
    
    (3,373
    )
    
    
    (798
    )
    
    
    
    
    
    
    (4,171
    )Sale of common shares and
warrants
    
    
    7,125
    
    
    
    
    
    
    
    
    
    
    
    7,125Proceeds from the exercise of options and
warrants
    
    
    521
    
    
    
    
    
    
    
    
    
    
    
    521Intercompany
    
    
    15,318
    
    
    
    
    
    
    
    (15,318
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    26,091
    
    
    
    (390
    )
    
    
    (15,318
    )
    
    
    10,383Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    73Decrease in cash and cash
equivalents
    
    
    (5,430
    )
    
    
    (538
    )
    
    
    
    
    
    
    (5,968
    )Cash and cash equivalents, beginning of
period
    
    
    6,192
    
    
    
    2,284
    
    
    
    
    
    
    
    8,476Cash and cash equivalents, end of
period
    
    $
    762
    
    
    $
    1,746
    
    
    $
    
    
    
    $
    2,508
 28




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  Sources of Revenue
       29




---



##### Table of Contents



Expense Structure
       Recent Developments
    30




---



##### Table of Contents



Results of Operations for the Three and Nine Months Ended September 30, 2006 and 2005
   Three Months Ended September 30, 2006US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    53,103
    
    
    
    100.0
    %
    
    $
    51,829
    
    
    
    100.0
    %
    
    $
    104,932
    
    
    
    100.0
    %Operating expenses:Cost of
operations
    
    
    35,832
    
    
    
    67.5
    %
    
    
    35,190
    
    
    
    67.9
    %
    
    
    71,022
    
    
    
    67.7
    %Selling, general
and administrative
expense
    
    
    9,241
    
    
    
    17.4
    %
    
    
    5,665
    
    
    
    10.9
    %
    
    
    14,906
    
    
    
    14.2
    %Depreciation,
depletion and
amortization
    
    
    6,491
    
    
    
    12.2
    %
    
    
    4,499
    
    
    
    8.7
    %
    
    
    10,990
    
    
    
    10.5
    %Foreign exchange
gain and
other
    
    
    (62
    )
    
    
    -0.1
    %
    
    
    (30
    )
    
    
    -0.1
    %
    
    
    (92
    )
    
    
    -0.1
    %Income from
operations
    
    $
    1,601
    
    
    
    3.0
    %
    
    $
    6,505
    
    
    
    12.6
    %
    
    $
    8,106
    
    
    
    7.7
    %
 Three Months Ended September 30, 2005US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    48,769
    
    
    
    100.0
    %
    
    $
    45,766
    
    
    
    100.0
    %
    
    $
    94,535
    
    
    
    100.0
    %Operating expenses:Cost of
operations
    
    
    37,975
    
    
    
    77.9
    %
    
    
    30,006
    
    
    
    65.6
    %
    
    
    67,981
    
    
    
    71.9
    %Selling, general
and administrative
expense
    
    
    7,220
    
    
    
    14.8
    %
    
    
    5,575
    
    
    
    12.2
    %
    
    
    12,795
    
    
    
    13.5
    %Settlement with
sellers of Florida
Recycling
    
    
    (4,120
    )
    
    
    -8.4
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (4,120
    )
    
    
    -4.4
    %Depreciation,
depletion and
amortization
    
    
    5,498
    
    
    
    11.3
    %
    
    
    5,299
    
    
    
    11.6
    %
    
    
    10,797
    
    
    
    11.5
    %Foreign exchange
gain and
other
    
    
    35
    
    
    
    0.0
    %
    
    
    809
    
    
    
    1.7
    %
    
    
    844
    
    
    
    0.9
    %Income from
operations
    
    $
    2,161
    
    
    
    4.4
    %
    
    $
    4,077
    
    
    
    8.9
    %
    
    $
    6,238
    
    
    
    6.6
    %
 31




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##### Table of Contents



Nine Months Ended September 30, 2006US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    156,316
    
    
    
    100.0
    %
    
    $
    138,763
    
    
    
    100.0
    %
    
    $
    295,079
    
    
    
    100.0
    %Operating expenses:Cost of
operations
    
    
    108,223
    
    
    
    69.2
    %
    
    
    95,177
    
    
    
    68.6
    %
    
    
    203,400
    
    
    
    68.9
    %Selling, general
and administrative
expense
    
    
    27,040
    
    
    
    17.3
    %
    
    
    17,467
    
    
    
    12.6
    %
    
    
    44,507
    
    
    
    15.1
    %Deferred
acquisition
costs
    
    
    439
    
    
    
    0.3
    %
    
    
    5,173
    
    
    
    3.7
    %
    
    
    5,612
    
    
    
    1.9
    %Depreciation,
depletion and
amortization
    
    
    18,142
    
    
    
    11.7
    %
    
    
    12,718
    
    
    
    9.2
    %
    
    
    30,860
    
    
    
    10.5
    %Foreign exchange
loss and
other
    
    
    78
    
    
    
    0.0
    %
    
    
    1,996
    
    
    
    1.4
    %
    
    
    2,074
    
    
    
    0.7
    %Income from
operations
    
    $
    2,394
    
    
    
    1.5
    %
    
    $
    6,232
    
    
    
    4.5
    %
    
    $
    8,626
    
    
    
    2.9
    %
 Nine Months Ended September 30, 2005US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    143,250
    
    
    
    100.0
    %
    
    $
    123,044
    
    
    
    100.0
    %
    
    $
    266,294
    
    
    
    100.0
    %Operating expenses:Cost of
operations
    
    
    110,275
    
    
    
    77.0
    %
    
    
    82,520
    
    
    
    67.1
    %
    
    
    192,795
    
    
    
    72.4
    %Selling, general
and administrative
expense
    
    
    23,257
    
    
    
    16.2
    %
    
    
    17,126
    
    
    
    13.9
    %
    
    
    40,383
    
    
    
    15.2
    %Settlement with
sellers of Florida
Recycling
    
    
    (4,120
    )
    
    
    -2.9
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (4,120
    )
    
    
    -1.5
    %Depreciation,
depletion and
amortization
    
    
    15,608
    
    
    
    11.0
    %
    
    
    14,246
    
    
    
    11.6
    %
    
    
    29,854
    
    
    
    11.2
    %Foreign exchange
loss and
other
    
    
    34
    
    
    
    0.0
    %
    
    
    625
    
    
    
    0.5
    %
    
    
    659
    
    
    
    0.2
    %Income (loss) from
operations
    
    $
    (1,804
    )
    
    
    -1.3
    %
    
    $
    8,527
    
    
    
    6.9
    %
    
    $
    6,723
    
    
    
    2.5
    %
 32




---



##### Table of Contents



Revenue
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    
    
    
    
    2005
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005Collection
    
    $
    84,317
    
    
    
    72.3
    %
    
    $
    77,832
    
    
    
    75.1
    %
    
    $
    241,165
    
    
    
    73.8
    %
    
    $
    221,887
    
    
    
    76.5
    %Landfill
disposal
    
    
    15,224
    
    
    
    13.1
    %
    
    
    12,906
    
    
    
    12.4
    %
    
    
    41,801
    
    
    
    12.8
    %
    
    
    30,972
    
    
    
    10.7
    %Transfer
station
    
    
    13,477
    
    
    
    11.5
    %
    
    
    9,702
    
    
    
    9.4
    %
    
    
    34,490
    
    
    
    10.6
    %
    
    
    27,484
    
    
    
    9.5
    %Material recovery
facilities
    
    
    3,110
    
    
    
    2.7
    %
    
    
    2,563
    
    
    
    2.5
    %
    
    
    8,206
    
    
    
    2.5
    %
    
    
    8,200
    
    
    
    2.8
    %Other specialized
services
    
    
    472
    
    
    
    0.4
    %
    
    
    668
    
    
    
    0.6
    %
    
    
    915
    
    
    
    0.3
    %
    
    
    1,686
    
    
    
    0.5
    %116,600
    
    
    
    100.0
    %
    
    
    103,671
    
    
    
    100.0
    %
    
    
    326,577
    
    
    
    100.0
    %
    
    
    290,229
    
    
    
    100.0
    %Intercompany
elimination
    
    
    (11,668
    )
    
    
    
    
    
    
    (9,136
    )
    
    
    
    
    
    
    (31,498
    )
    
    
    
    
    
    
    (23,935
    )$
    104,932
    
    
    
    
    
    
    $
    94,535
    
    
    
    
    
    
    $
    295,079
    
    
    
    
    
    
    $
    266,294
 All Other
    
    TotalThree Months Ended September 30,
    
    Florida
    
    Canada
    
    Operations
    
    Revenue2006
    
    $
    51,910
    
    
    $
    51,829
    
    
    $
    1,193
    
    
    $
    104,9322005
    
    
    47,865
    
    
    
    45,766
    
    
    
    904
    
    
    
    94,535
 All Other
    
    TotalNine Months Ended September 30,
    
    Florida
    
    Canada
    
    Operations
    
    Revenue2006
    
    $
    152,940
    
    
    $
    138,763
    
    
    $
    3,376
    
    
    $
    295,0792005
    
    
    141,425
    
    
    
    123,044
    
    
    
    1,825
    
    
    
    266,294
      33




---



##### Table of Contents



Cost of Operations
       Selling, General and Administrative Expense
  34




---



##### Table of Contents



Deferred Acquisition Costs
  Settlement with sellers of Florida Recycling
  Depreciation, Depletion and Amortization
   35




---



##### Table of Contents



Foreign Exchange Loss (Gain) and Other
   Interest Expense
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Preferred Stock
dividends and
amortization of
issue
costs
    
    $
    4,256
    
    
    $
    5,392
    
    
    $
    14,793
    
    
    $
    15,348Credit facility and
Subordinated Note
interest
    
    
    7,217
    
    
    
    6,565
    
    
    
    20,337
    
    
    
    19,083Amortization of
debt issue
costs
    
    
    396
    
    
    
    351
    
    
    
    1,172
    
    
    
    1,057Other interest
expense
    
    
    306
    
    
    
    358
    
    
    
    1,290
    
    
    
    1,132$
    12,175
    
    
    $
    12,666
    
    
    $
    37,592
    
    
    $
    36,620
   Income Tax Provision
  36




---



##### Table of Contents



Liquidity and Capital Resources
  Senior Secured Credit Facilities
       37




---



##### Table of Contents



Maximum ConsolidatedMaximum Consolidated
    
    Senior Secured
    
    Minimum ConsolidatedFiscal Quarter
    
    Leverage Ratio
    
    Leverage Ratio
    
    Interest Coverage RatioFQ3
2006
    
    
    5.00:1.00
    
    
    
    2.25:1.00
    
    
    
    2.00:1.00FQ4
2006
    
    
    4.75:1.00
    
    
    
    2.25:1.00
    
    
    
    2.25:1.00FQ1
2007
    
    
    4.75:1.00
    
    
    
    2.25:1.00
    
    
    
    2.25:1.00FQ2
2007
    
    
    4.50:1.00
    
    
    
    2.25:1.00
    
    
    
    2.25:1.00FQ3
2007
    
    
    4.25:1.00
    
    
    
    2.25:1.00
    
    
    
    2.25:1.00
 Senior Subordinated Notes
 1 2
  Equity Placement
  Cumulative Mandatory Redeemable Preferred Stock
   Migration Transaction
   38




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##### Table of Contents



Surety Bonds, Letters of Credit and Insurance
   Cash Flows
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Off-Balance Sheet Financing
  39




---



##### Table of Contents



Landfill Sites
  September 30, 2006Balance,Beginning of
    
    
    
    
    
    
    Airspace
    
    
    Balance, End ofPeriod
    
    
    Landfills Acquired
    
    
    Consumed
    
    
    PeriodUnited StatesPermitted
Capacity
    
    
    70,840
    
    
    
    17,024
    
    
    
    (1,939
    )
    
    
    85,925Probable expansion
capacity
    
    
    18,300
    
    
    
    
    
    
    
    
    
    
    
    18,300Total available
airspace
    
    
    89,140
    
    
    
    17,024
    
    
    
    (1,939
    )
    
    
    104,225Number of landfill
sites
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    4CanadaPermitted
Capacity
    
    
    11,878
    
    
    
    
    
    
    
    (313
    )
    
    
    11,565Probable expansion
capacity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available
airspace
    
    
    11,878
    
    
    
    
    
    
    
    (313
    )
    
    
    11,565Number of landfill
sites
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3TotalPermitted
Capacity
    
    
    82,718
    
    
    
    17,024
    
    
    
    (2,252
    )
    
    
    97,490Probable expansion
capacity
    
    
    18,300
    
    
    
    
    
    
    
    
    
    
    
    18,300Total available
airspace
    
    
    101,018
    
    
    
    17,024
    
    
    
    (2,252
    )
    
    
    115,790Number of landfill
sites
    
    
    6
    
    
    
    1
    
    
    
    
    
    
    
    7
 Trend Information
 Seasonality
  New Accounting Pronouncements
   40




---



##### Table of Contents



41




---



##### Table of Contents



Disclosure Regarding Forward-Looking Statements and Factors Affecting Future Results
   
    
    our substantial indebtedness and the significant restrictive covenants in our various
credit facilities and our ability to finance acquisitions with cash on hand, debt or equity
offerings;
    
    our ability to implement a refinancing plan for our mandatorily redeemable preferred
stock and to achieve the expected benefits;
    
    our ability to maintain and perform our financial assurance obligations;
    
    changes in regulations affecting our business and costs of compliance;
    
    revocation of existing permits and licenses or the refusal to renew or grant new permits
and licenses, which are required to enable us to operate our business or implement our
growth strategy;
    
    our ability to successfully implement our corporate strategy and integrate any acquisitions we undertake;
    
    our ability to negotiate renewals of existing service agreements at favorable rates;
    
    our ability to enhance profitability of certain aspects of our operations in markets
where we are not internalized through either divestiture or asset swaps;
    
    costs and risks associated with litigation;
    
    changes in general business and economic conditions, changes in exchange rates and in the financial markets;
    
    changes in accounting standards or pronouncements; and
    
    construction, equipment delivery or permitting delays for our transfer stations or landfills.
  42




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
 43




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit 10.1 
    
    Eighth Amendment to Amended and Restated Credit Agreement dated as of October 16, 2006Exhibit 31.1 
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive OfficerExhibit 31.2 
    
    Section 302 Certification of Brian A. Goebel, Principal Financial OfficerExhibit 32.1 
    
    Section 1350 Certification of the Chief Executive Officer and Principal Financial Officer
 44




---



##### Table of Contents



SIGNATURES
  Waste Services, Inc.Date: November 9, 2006By:
    
    /s/ DAVID SUTHERLAND-YOESTDavid Sutherland-YoestChairman of the Board,Chief Executive Officer and DirectorBy:
    
    /s/ BRIAN A. GOEBELBrian A. GoebelVice President, Controller,
Chief Accounting Officer and Principal Financial Officer
 45




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 10.1
    
    Eighth Amendment to Amended and Restated Credit Agreement dated as of October 16, 2006Exhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive OfficerExhibit 31.2
    
    Section 302 Certification of Brian A. Goebel, Principal Financial OfficerExhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Principal Financial Officer
 46