##### 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 March 31, 2009
 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
    
    (I.R.S. Employerincorporation or organization)
    
    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)
 o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008
    
    
    2Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008
    
    
    3Unaudited Condensed Consolidated Statement of Shareholders Equity for the Three Months ended March 31, 2009
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    37PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    38Item 1A. Risk Factors
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3. Defaults Upon Senior Securities
    
    
    38Item 4. Submission of Matters to a Vote of Security Holders
    
    
    38Item 5. Other Information
    
    
    38Item 6. Exhibits
    
    
    38Signatures
    
    
    39EX-31.1EX-31.2EX-32.1
  1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WASTE SERVICES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share amounts)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash
    
    $
    11,569
    
    
    $
    7,227Accounts receivable (net of allowance for doubtful accounts of$599 and $631 as of March 31, 2009
and December 31, 2008, respectively)
    
    
    47,341
    
    
    
    52,062Prepaid expenses and other current assets
    
    
    12,065
    
    
    
    13,672Total current assets
    
    
    70,975
    
    
    
    72,961Property and equipment, net
    
    
    181,334
    
    
    
    188,800Landfill sites, net
    
    
    194,823
    
    
    
    196,632Goodwill and other intangible assets, net
    
    
    368,930
    
    
    
    372,886Other assets
    
    
    9,140
    
    
    
    9,648Total assets
    
    $
    825,202
    
    
    $
    840,927LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    15,810
    
    
    $
    19,341Accrued expenses and other current liabilities
    
    
    61,321
    
    
    
    62,802Short-term financing and current portion of long-term debt
    
    
    12,215
    
    
    
    11,102Total current liabilities
    
    
    89,346
    
    
    
    93,245Long-term debt
    
    
    344,067
    
    
    
    360,967Deferred income taxes
    
    
    33,650
    
    
    
    32,298Accrued closure, post-closure, fair value of warrants and other obligations
    
    
    21,720
    
    
    
    19,399Total liabilities
    
    
    488,783
    
    
    
    505,909Shareholders equity:Common stock $0.01 par value: 166,666,666 shares authorized, 44,173,990 and 43,985,436 shares issued and outstanding as of March
31, 2009 and December 31, 2008, respectively
    
    
    441
    
    
    
    439Additional paid-in capital
    
    
    500,321
    
    
    
    512,942Accumulated other comprehensive income
    
    
    36,852
    
    
    
    38,221Accumulated deficit
    
    
    (201,195
    )
    
    
    (216,584
    )Total shareholders equity
    
    
    336,419
    
    
    
    335,018Total liabilities and shareholders equity
    
    $
    825,202
    
    
    $
    840,927
  2




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 Three Months Ended March 31,2009
    
    
    2008Revenue
    
    $
    95,792
    
    
    $
    116,609Operating and other expenses:Cost of operations (exclusive of depreciation, depletion
and amortization)
    
    
    63,208
    
    
    
    76,544Selling, general and administrative expense (exclusive of
depreciation, depletion and amortization)
    
    
    13,209
    
    
    
    16,365Depreciation, depletion and amortization
    
    
    10,360
    
    
    
    11,702Gain on sale of property and equipment, foreign exchange and
other
    
    
    (3,310
    )
    
    
    (173
    )Income from operations
    
    
    12,325
    
    
    
    12,171Interest expense
    
    
    7,498
    
    
    
    10,238Change in fair value of warrants
    
    
    (1,771
    )
    
    
    Income from continuing operations before income taxes
    
    
    6,598
    
    
    
    1,933Income tax provision (benefit)
    
    
    2,588
    
    
    
    (3,397
    )Income from continuing operations
    
    
    4,010
    
    
    
    5,330Income from discontinued operations, net of income tax
provision of $265 for the three months ended March 31, 2008
    
    
    
    
    
    
    409Gain on sale of discontinued operations, net of income tax
provision of $4,549 for the three months ended March 31, 2008
    
    
    
    
    
    
    6,969Net income
    
    $
    4,010
    
    
    $
    12,708Basic and diluted earnings per share:Earnings per
share - continuing operations
    
    $
    0.09
    
    
    $
    0.12Earnings per
share - discontinued operations
    
    
    
    
    
    
    0.16Earnings
per share - basic and diluted
    
    $
    0.09
    
    
    $
    0.28Weighted
average common shares outstanding - basic
    
    
    46,254
    
    
    
    46,075Weighted
average common shares outstanding - diluted
    
    
    46,280
    
    
    
    46,093
  3




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 For the Three Months Ended March 31, 2009
 (In thousands)
 AccumulatedWaste Services, Inc.
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance,
December 31, 2008, as previously reported
    
    
    43,985
    
    
    $
    439
    
    
    $
    512,942
    
    
    $
    38,221
    
    
    $
    (216,584
    )
    
    $
    335,018Cumulative effect of reclassification of warrants
    
    
    
    
    
    
    
    
    
    
    (13,774
    )
    
    
    
    
    
    
    11,379
    
    
    
    (2,395
    )Balance,
January 1, 2009, as adjusted
    
    
    43,985
    
    
    
    439
    
    
    
    499,168
    
    
    
    38,221
    
    
    
    (205,205
    )
    
    
    332,623Stock-based compensation
    
    
    172
    
    
    
    2
    
    
    
    1,153
    
    
    
    
    
    
    
    
    
    
    
    1,155Conversion of exchangeable shares
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,369
    )
    
    
    
    
    
    
    (1,369
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,010
    
    
    
    4,010Balance, March 31, 2009
    
    
    44,174
    
    
    $
    441
    
    
    $
    500,321
    
    
    $
    36,852
    
    
    $
    (201,195
    )
    
    $
    336,419
  4




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    4,010
    
    
    $
    12,708Adjustments to reconcile net income to net cash flows
from operating activities:Net income from discontinued operations, net of tax
    
    
    
    
    
    
    (7,378
    )Depreciation, depletion and amortization
    
    
    10,360
    
    
    
    11,702Amortization of debt issue costs and discounts
    
    
    839
    
    
    
    1,038Deferred income tax provision (benefit)
    
    
    1,578
    
    
    
    (5,520
    )Non-cash stock-based compensation expense
    
    
    1,155
    
    
    
    881Change in fair value of warrants
    
    
    (1,771
    )
    
    
    Gain on sale of property and equipment and other
non-cash items
    
    
    (3,363
    )
    
    
    (4
    )Changes in operating assets and liabilities (excluding
the effects of acquisitions and dispositions):Accounts receivable
    
    
    3,745
    
    
    
    7,209Prepaid expenses and other current assets
    
    
    1,401
    
    
    
    (35
    )Accounts payable
    
    
    (3,181
    )
    
    
    (5,053
    )Accrued expenses and other current liabilities
    
    
    2,132
    
    
    
    (7,214
    )Net cash provided by continuing operations
    
    
    16,905
    
    
    
    8,334Net cash provided by discontinued operations
    
    
    
    
    
    
    1,163Net cash provided by operating activities
    
    
    16,905
    
    
    
    9,497Cash flows from investing activities:Cash used in business combinations
    
    
    (576
    )
    
    
    Capital expenditures
    
    
    (6,944
    )
    
    
    (10,407
    )Proceeds from asset sales and business divestitures
    
    
    6,513
    
    
    
    57,332Deposits for business acquisitions and other
    
    
    
    
    
    
    (1,716
    )Net cash provided by (used in) continuing operations
    
    
    (1,007
    )
    
    
    45,209Net cash used in discontinued operations
    
    
    
    
    
    
    (43
    )Net cash provided by (used in) investing activities
    
    
    (1,007
    )
    
    
    45,166Cash flows from financing activities:Draw on revolving credit facility
    
    
    1,561
    
    
    
    Principal repayments of debt and capital lease obligations
    
    
    (13,317
    )
    
    
    (42,859
    )Fees paid for financing transactions
    
    
    (62
    )
    
    
    Net cash
used in financing activities - continuing operations
    
    
    (11,818
    )
    
    
    (42,859
    )Effect of exchange rate changes on cash
    
    
    262
    
    
    
    (224
    )Increase in cash
    
    
    4,342
    
    
    
    11,580Cash at the beginning of the period
    
    
    7,227
    
    
    
    20,706Cash at the end of the period
    
    $
    11,569
    
    
    $
    32,286
  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)
   2. Recently Issued Accounting Pronouncements and Adopted Accounting
 "
  March 31,
    
    January 1,2009
    
    2009Annual dividend yield
    
    
    
    
    
    
    Expected life (years)
    
    
    1.1
    
    
    
    1.4Risk-free interest rate
    
    
    0.6
    %
    
    
    0.4
    %Expected volatility
    
    
    63
    %
    
    
    56
    %
  7




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WASTE
SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 1 2
  
    
    Level one  Quoted market prices in active markets for identical assets or liabilities;
    
    Level two  Inputs other than level one inputs that are either directly or indirectly
observable; and
    
    Level three  Unobservable inputs developed using estimates and assumptions, which are
developed by the reporting entity and reflect those assumptions that a market participant
would use.
  March 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2009Accrued closure and post-closure obligations
    
    $
    
    
    
    $
    
    
    
    $
    20,123
    
    
    $
    20,123Accrued rent relative to October 2008 restructuring
    
    
    
    
    
    
    
    
    
    
    891
    
    
    
    891Fair value of warrants
    
    
    
    
    
    
    624
    
    
    
    
    
    
    
    624Total
    
    $
    
    
    
    $
    624
    
    
    $
    21,014
    
    
    $
    21,638
   8




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WASTE
SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  3. Share-Based Payments
    WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber
    
    Grant
    
    Contractual
    
    Intrinsicof Shares
    
    Value
    
    Term (Years)
    
    ValueNonvested restricted stock units -Beginning of the period
    
    
    229,158
    
    
    $
    9.02
    
    
    
    0.3
    
    
    $
    1,508Granted
    
    
    438,669
    
    
    
    4.55Vested
    
    
    (171,875
    )
    
    
    9.02Forfeited
    
    
    
    
    
    
    End of the period
    
    
    495,952
    
    
    
    5.07
    
    
    
    1.0
    
    
    
    2,123
  Three Months Ended March 31,2009
    
    2008Annual dividend yield
    
    
    
    
    
    
    Weighted average expected life (years)
    
    
    7.0
    
    
    
    7.0Risk-free interest rate
    
    
    2.6
    %
    
    
    3.2
    %Expected volatility
    
    
    52
    %
    
    
    61
    %
 9




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WASTE
SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Number of
    
    Weighted Average Exercise PriceShares Issuable
    
    US$ Options
    
    C$ Options (C$)Options outstanding at the beginning of the period
    
    
    2,218,965
    
    
    $
    12.29
    
    
    $
    20.41Granted
    
    
    282,500
    
    
    
    4.33
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (14,000
    )
    
    
    9.50
    
    
    
    Expired
    
    
    (701,154
    )
    
    
    15.15
    
    
    
    20.42Options outstanding at the end of the period
    
    
    1,786,311
    
    
    
    10.29
    
    
    
    18.13Options vested or expected to vest at the end of the period
    
    
    1,685,179
    
    
    
    10.56
    
    
    
    18.13Options exercisable at the end of the period
    
    
    1,394,773
    
    
    
    11.56
    
    
    
    18.13
  4. Discontinued Operations
  10




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  5. Business Combinations and Significant Asset Acquisitions
   Purchase price - cash paid and other consideration
    
    $
    630Allocated as follows:Accounts receivable
    
    
    21Property and equipment
    
    
    307Fair value of tangible assets acquired
    
    
    328Excess purchase price allocated to goodwill
    
    $
    302
     Revenue
    
    $
    117,343Net income from continuing operations
    
    $
    5,161Basic and diluted earnings per share - continuing operations
    
    $
    0.11Pro forma weighted average number of common shares outstanding:Basic
    
    
    46,075Diluted
    
    
    46,093
  11




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 6. Prepaid Expenses and Other Current Assets
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Prepaid expenses
    
    $
    8,210
    
    
    $
    9,793Parts and supplies
    
    
    1,715
    
    
    
    1,733Other current assets
    
    
    2,140
    
    
    
    2,146$
    12,065
    
    
    $
    13,672
 7. Property and Equipment
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Land and buildings
    
    $
    72,431
    
    
    $
    74,497Vehicles
    
    
    137,736
    
    
    
    141,650Containers, compactors and landfill and recycling equipment
    
    
    90,521
    
    
    
    89,568Furniture, fixtures, other office equipment and leasehold improvements
    
    
    10,818
    
    
    
    11,060Total property and equipment
    
    
    311,506
    
    
    
    316,775Less: Accumulated depreciation
    
    
    (130,172
    )
    
    
    (127,975
    )Property and equipment, net
    
    $
    181,334
    
    
    $
    188,800
 8. Landfill Sites, Accrued Closure, Post-Closure, Fair Value of Warrants and Other Obligations
 Landfill Sites
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Landfill sites
    
    $
    261,984
    
    
    $
    262,732Less: Accumulated depletion
    
    
    (67,161
    )
    
    
    (66,100
    )Landfill sites, net
    
    $
    194,823
    
    
    $
    196,632
  Three Months Ended March 31,2009
    
    
    2008Balance at the beginning of the period
    
    $
    196,632
    
    
    $
    190,451Landfill site construction costs
    
    
    446
    
    
    
    1,960Additional asset retirement obligations
    
    
    316
    
    
    
    423Depletion
    
    
    (2,076
    )
    
    
    (2,615
    )Effect of foreign exchange rate fluctuations
    
    
    (495
    )
    
    
    (571
    )Balance at the end of the period
    
    $
    194,823
    
    
    $
    189,648
 12




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Accrued Closure, Post-Closure, Fair Value of Warrants and Other Obligations
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Accrued closure and post-closure obligations
    
    $
    14,476
    
    
    $
    12,749Accrued restructuring and severance costs
    
    
    3,308
    
    
    
    3,624Capital lease obligations
    
    
    518
    
    
    
    568Fair value of warrants
    
    
    624
    
    
    
    Other obligations
    
    
    2,794
    
    
    
    2,458$
    21,720
    
    
    $
    19,399
   Three Months Ended March 31,2009
    
    
    2008Current portion at the beginning of the period
    
    $
    7,589
    
    
    $
    4,153Long-term portion at the beginning of the period
    
    
    12,749
    
    
    
    14,678Balance at the beginning of the period
    
    
    20,338
    
    
    
    18,831Additional asset retirement obligations
    
    
    316
    
    
    
    423Accretion
    
    
    158
    
    
    
    198Payments
    
    
    (578
    )
    
    
    Other additions
    
    
    150
    
    
    
    300Effect of foreign exchange rate fluctuations
    
    
    (261
    )
    
    
    (318
    )Balance at the end of the period
    
    
    20,123
    
    
    
    19,434Less: Current portion
    
    
    (5,647
    )
    
    
    (4,430
    )Long-term portion
    
    $
    14,476
    
    
    $
    15,004
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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 9. Goodwill and Other Intangible Assets
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Other intangible assets subject to amortization:Customer relationships and contracts
    
    $
    48,972
    
    
    $
    48,997Non-competition agreements and other
    
    
    5,607
    
    
    
    5,62954,579
    
    
    
    54,626Less: Accumulated amortization:Customer relationships and contracts
    
    
    (27,597
    )
    
    
    (26,536
    )Non-competition agreements and other
    
    
    (2,415
    )
    
    
    (2,133
    )Other intangible assets subject to amortization, net
    
    
    24,567
    
    
    
    25,957Goodwill
    
    
    344,363
    
    
    
    346,929Goodwill and other intangible assets, net
    
    $
    368,930
    
    
    $
    372,886
  Three Months Ended March 31, 2009Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    263,428
    
    
    $
    83,501
    
    
    $
    346,929Acquisitions
    
    
    302
    
    
    
    
    
    
    
    302Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    (2,868
    )
    
    
    (2,868
    )Balance at the end of the period
    
    $
    263,730
    
    
    $
    80,633
    
    
    $
    344,363
 Three Months Ended March 31, 2008Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    262,338
    
    
    $
    102,603
    
    
    $
    364,941Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    (3,519
    )
    
    
    (3,519
    )Balance at the end of the period
    
    $
    262,338
    
    
    $
    99,084
    
    
    $
    361,422
 10. Other Assets
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Debt issue costs, net of accumulated amortization of $3,471 and $3,035
as of March 31, 2009 and December 31, 2008, respectively
    
    $
    8,055
    
    
    $
    8,538Acquisition deposits
    
    
    557
    
    
    
    561Other assets
    
    
    528
    
    
    
    549$
    9,140
    
    
    $
    9,648
 14




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Accrued Expenses and Other Current Liabilities
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Deferred revenue
    
    $
    11,035
    
    
    $
    10,980Accrued waste disposal costs
    
    
    10,525
    
    
    
    7,964Accrued interest
    
    
    7,421
    
    
    
    3,702Insurance reserves
    
    
    6,965
    
    
    
    6,505Accrued compensation, benefits and subcontractor costs
    
    
    5,910
    
    
    
    7,893Accrued closure and post-closure obligations
    
    
    5,647
    
    
    
    7,589Accrued insurance premiums
    
    
    4,377
    
    
    
    6,123Accrued restructuring and severance costs
    
    
    2,423
    
    
    
    3,183Accrued royalties and franchise fees
    
    
    1,764
    
    
    
    2,137Accrued professional fees
    
    
    759
    
    
    
    794Accrued capital expenditures
    
    
    662
    
    
    
    2,204Current portion of capital lease obligations
    
    
    303
    
    
    
    315Accrued acquisition costs
    
    
    167
    
    
    
    631Other accrued expenses and current liabilities
    
    
    3,363
    
    
    
    2,782$
    61,321
    
    
    $
    62,802
 12. Debt
  March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)Credit Facilities:U.S. dollar denominated revolving credit facility, floating interest rate at 4.1%
and 4.5% as of March 31, 2009 and December 31, 2008, respectively
    
    $
    23,499
    
    
    $
    34,600Canadian dollar denominated revolving credit facility, floating interest rate at 4.3%
and 5.3%, net of discount of $59 and $56, as of March 31, 2009 and
December 31, 2008, respectively
    
    
    28,329
    
    
    
    27,699U.S. dollar denominated term loan facility, floating interest rate at 4.1%
and 4.5%, net of discount of $1,175 and $1,268, as of March 31, 2009 and
December 31, 2008, respectively
    
    
    37,719
    
    
    
    38,125Canadian dollar denominated term loan facility, floating interest rate at 4.2%
and 5.3%, net of discount of $3,313 and $3,668, as of March 31, 2009 and
as of December 31, 2008, respectively
    
    
    98,867
    
    
    
    103,505Senior Subordinated Notes, fixed interest rate at 9.5%, due 2014, net of discount
of $1,093 and $1,146 as of March 31, 2009 and December 31, 2008, respectively
    
    
    158,907
    
    
    
    158,854Other secured notes payable, interest at 4.5% to 7.8%, due through
2025, net of discount of $1,433 and $1,563 as of March 31, 2009 and
December 31, 2008, respectively
    
    
    6,619
    
    
    
    6,891Other subordinated notes payable, interest at 6.7%, due through 2017
    
    
    2,342
    
    
    
    2,395356,282
    
    
    
    372,069Less: Current portion
    
    
    (12,215
    )
    
    
    (11,102
    )Long-term portion
    
    $
    344,067
    
    
    $
    360,967
 15




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Senior Secured Credit Facilities
   Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
   Direct Financing Lease Facility
  16




---



##### 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)
  Three Months Ended March 31,2009
    
    
    2008Balance at the beginning of the period
    
    $
    6,505
    
    
    $
    6,055Provisions
    
    
    948
    
    
    
    1,182Payments
    
    
    (899
    )
    
    
    (964
    )Unfavorable claim development for prior periods
    
    
    411
    
    
    
    97Balance at the end of the period
    
    $
    6,965
    
    
    $
    6,370
 Disposal Agreement
   Other Contractual Arrangements
  Severanceand RelatedCosts
    
    
    Rent
    
    
    Consulting
    
    
    TotalBalance at the beginning of the period
    
    $
    3,238
    
    
    $
    984
    
    
    $
    812
    
    
    $
    5,034Provisions
    
    
    94
    
    
    
    20
    
    
    
    
    
    
    
    114Payments
    
    
    (875
    )
    
    
    (113
    )
    
    
    (63
    )
    
    
    (1,051
    )Foreign exchange and other
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    (56
    )Balance at the end of the period
    
    $
    2,401
    
    
    $
    891
    
    
    $
    749
    
    
    $
    4,041
  18




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  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
      19




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Warrants
  WeightedWeighted
    
    AverageNumber
    
    Average
    
    Remaining
    
    Aggregateof Shares
    
    Exercise
    
    Contractual
    
    IntrinsicIssuable
    
    Price
    
    Term (Years)
    
    ValueOutstanding at the beginning of the period
    
    
    3,317,695
    
    
    $
    9.47
    
    
    
    1.3
    
    
    $
    Expired during the period
    
    
    (66,667
    )
    
    
    17.25Outstanding at the end of the period
    
    
    3,251,028
    
    
    
    9.31
    
    
    
    1.1
    
    
    
    
 15. Comprehensive Income (Loss)
  Three Months Ended March 31,2009
    
    
    2008Net income
    
    $
    4,010
    
    
    $
    12,708Foreign currency translation adjustment
    
    
    (1,369
    )
    
    
    (7,301
    )Comprehensive income
    
    $
    2,641
    
    
    $
    5,407
 16. Segment Information
   20




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Three Months Ended March 31, 2009Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    50,243
    
    
    $
    45,549
    
    
    $
    
    
    
    $
    95,792Depreciation, depletion and amortization
    
    
    6,344
    
    
    
    3,778
    
    
    
    238
    
    
    
    10,360Income (loss) from operations
    
    
    11,366
    
    
    
    6,725
    
    
    
    (5,766
    )
    
    
    12,325Capital expenditures
    
    
    2,646
    
    
    
    4,187
    
    
    
    111
    
    
    
    6,944
 Three Months Ended March 31, 2008Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    60,090
    
    
    $
    56,519
    
    
    $
    
    
    
    $
    116,609Depreciation, depletion and amortization
    
    
    6,735
    
    
    
    4,609
    
    
    
    358
    
    
    
    11,702Income (loss) from operations
    
    
    10,207
    
    
    
    9,343
    
    
    
    (7,379
    )
    
    
    12,171Capital expenditures
    
    
    1,682
    
    
    
    8,613
    
    
    
    112
    
    
    
    10,407
 17. Condensed Consolidating Financial Statements
  21




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Three Months Ended March 31, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    
    
    
    $
    60,090
    
    
    $
    56,519
    
    
    $
    
    
    
    $
    116,609Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    
    
    
    
    38,916
    
    
    
    37,628
    
    
    
    
    
    
    
    76,544Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    3,667
    
    
    
    4,433
    
    
    
    8,265
    
    
    
    
    
    
    
    16,365Depreciation, depletion and amortization
    
    
    24
    
    
    
    6,735
    
    
    
    4,943
    
    
    
    
    
    
    
    11,702Foreign exchange loss (gain) and other
    
    
    1
    
    
    
    (201
    )
    
    
    27
    
    
    
    
    
    
    
    (173
    )Equity earnings in investees, net of tax
    
    
    (26,546
    )
    
    
    
    
    
    
    
    
    
    
    26,546
    
    
    
    Income from operations
    
    
    22,854
    
    
    
    10,207
    
    
    
    5,656
    
    
    
    (26,546
    )
    
    
    12,171Interest expense
    
    
    10,146
    
    
    
    50
    
    
    
    42
    
    
    
    
    
    
    
    10,238Income from continuing operations
before income taxes
    
    
    12,708
    
    
    
    10,157
    
    
    
    5,614
    
    
    
    (26,546
    )
    
    
    1,933Income tax provision (benefit)
    
    
    
    
    
    
    (5,485
    )
    
    
    2,088
    
    
    
    
    
    
    
    (3,397
    )Net income from continuing operations
    
    
    12,708
    
    
    
    15,642
    
    
    
    3,526
    
    
    
    (26,546
    )
    
    
    5,330Net income from discontinued operations, net of tax
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    
    
    
    
    409Gain on sale of discontinued operations, net of tax
    
    
    
    
    
    
    6,969
    
    
    
    
    
    
    
    
    
    
    
    6,969Net income
    
    $
    12,708
    
    
    $
    23,020
    
    
    $
    3,526
    
    
    $
    (26,546
    )
    
    $
    12,708
 22




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended March 31, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (10,785
    )
    
    $
    17,462
    
    
    $
    2,820
    
    
    $
    
    
    
    $
    9,497Cash flows from investing activities:Capital expenditures
    
    
    (4
    )
    
    
    (1,682
    )
    
    
    (8,721
    )
    
    
    
    
    
    
    (10,407
    )Proceeds from asset sales and business divestitures
    
    
    
    
    
    
    57,261
    
    
    
    71
    
    
    
    
    
    
    
    57,332Deposits for business acquisitions and other
    
    
    (1,716
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,716
    )Intercompany
    
    
    (504
    )
    
    
    (73,049
    )
    
    
    
    
    
    
    73,553
    
    
    
    Net cash provided by (used in) continuing
operations
    
    
    (2,224
    )
    
    
    (17,470
    )
    
    
    (8,650
    )
    
    
    73,553
    
    
    
    45,209Net cash used in discontinued operations
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Net cash provided by (used in) investing activities
    
    
    (2,224
    )
    
    
    (17,513
    )
    
    
    (8,650
    )
    
    
    73,553
    
    
    
    45,166Cash flows from financing activities:Principal repayments of debt and capital lease
obligations
    
    
    (42,810
    )
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    (42,859
    )Intercompany
    
    
    73,049
    
    
    
    
    
    
    
    504
    
    
    
    (73,553
    )
    
    
    Net cash provided by (used in) financing
activities  continuing operations
    
    
    30,239
    
    
    
    (49
    )
    
    
    504
    
    
    
    (73,553
    )
    
    
    (42,859
    )Effect of exchange rate changes
on cash
    
    
    
    
    
    
    
    
    
    
    (224
    )
    
    
    
    
    
    
    (224
    )Increase (decrease) in cash
    
    
    17,230
    
    
    
    (100
    )
    
    
    (5,550
    )
    
    
    
    
    
    
    11,580Cash at the beginning of the period
    
    
    9,080
    
    
    
    239
    
    
    
    11,387
    
    
    
    
    
    
    
    20,706Cash at the end of the period
    
    $
    26,310
    
    
    $
    139
    
    
    $
    5,837
    
    
    $
    
    
    
    $
    32,286
 23




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  Sources of Revenue
       24




---



##### Table of Contents



Expense Structure
       Recent Developments
 Acquisitions and Dispositions
    25




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##### Table of Contents



Goodwill
   26




---



##### Table of Contents




    
    The fact that, to a significant extent, our shares are held by insiders and affiliates,
reducing market liquidity.
    
    One of our larger shareholders, due to circumstances unrelated to us, is liquidating their
position putting pressure on the market price of our shares.
    
    We believe that in general, the market continues to discount the value of common equity,
believing that current leverage ratios are not sustainable and companies will be required to
refinance debt at higher rates and / or issue additional equity thereby diluting current
shareholders. However, as a result of the October 2008 refinancing of our Senior Secured
Credit Facilities, we believe our capital structure to be stable, but such stability is not
reflected in our share price.
   Results of Operations for the Three Months Ended March 31, 2009 and 2008
   As of:March 31, 2009
    
    $
    0.7928December 31, 2008
    
    $
    0.8210For the three months ended:March 31, 2009
    
    $
    0.8035March 31, 2008
    
    $
    0.9953
 27




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##### Table of Contents



Three Months Ended March 31, 2009Florida
    
    Canada
    
    TotalRevenue
    
    $
    50,243
    
    
    
    100.0
    %
    
    $
    45,549
    
    
    
    100.0
    %
    
    $
    95,792
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    31,975
    
    
    
    63.6
    %
    
    
    31,233
    
    
    
    68.6
    %
    
    
    63,208
    
    
    
    66.0
    %Selling, general and administrative expense
    
    
    6,446
    
    
    
    12.8
    %
    
    
    6,763
    
    
    
    14.8
    %
    
    
    13,209
    
    
    
    13.8
    %Depreciation, depletion and amortization
    
    
    6,364
    
    
    
    12.7
    %
    
    
    3,996
    
    
    
    8.8
    %
    
    
    10,360
    
    
    
    10.8
    %Gain on sale of property and equipment,
foreign exchange and other
    
    
    (3,474
    )
    
    
    -6.9
    %
    
    
    164
    
    
    
    0.4
    %
    
    
    (3,310
    )
    
    
    -3.5
    %Income from operations
    
    $
    8,932
    
    
    
    17.8
    %
    
    $
    3,393
    
    
    
    7.4
    %
    
    $
    12,325
    
    
    
    12.9
    %
 Three Months Ended March 31, 2008Florida
    
    Canada
    
    TotalRevenue
    
    $
    60,090
    
    
    
    100.0
    %
    
    $
    56,519
    
    
    
    100.0
    %
    
    $
    116,609
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    38,916
    
    
    
    64.8
    %
    
    
    37,628
    
    
    
    66.6
    %
    
    
    76,544
    
    
    
    65.6
    %Selling, general and administrative expense
    
    
    8,100
    
    
    
    13.5
    %
    
    
    8,265
    
    
    
    14.6
    %
    
    
    16,365
    
    
    
    14.0
    %Depreciation, depletion and amortization
    
    
    6,759
    
    
    
    11.2
    %
    
    
    4,943
    
    
    
    8.7
    %
    
    
    11,702
    
    
    
    10.1
    %Gain on sale of property and equipment,
foreign exchange and other
    
    
    (200
    )
    
    
    -0.3
    %
    
    
    27
    
    
    
    0.1
    %
    
    
    (173
    )
    
    
    -0.1
    %Income from operations
    
    $
    6,515
    
    
    
    10.8
    %
    
    $
    5,656
    
    
    
    10.0
    %
    
    $
    12,171
    
    
    
    10.4
    %
 Revenue
  Three Months Ended March 31,2009
    
    
    2008Collection
    
    $
    82,261
    
    
    
    77.2
    %
    
    $
    96,505
    
    
    
    74.8
    %Landfill disposal
    
    
    9,574
    
    
    
    9.0
    %
    
    
    11,829
    
    
    
    9.2
    %Transfer station
    
    
    12,974
    
    
    
    12.2
    %
    
    
    14,671
    
    
    
    11.4
    %Material recovery facilities
    
    
    1,572
    
    
    
    1.5
    %
    
    
    5,786
    
    
    
    4.5
    %Other specialized services
    
    
    201
    
    
    
    0.1
    %
    
    
    192
    
    
    
    0.1
    %106,582
    
    
    
    100.0
    %
    
    
    128,983
    
    
    
    100.0
    %Intercompany elimination
    
    
    (10,790
    )
    
    
    
    
    
    
    (12,374
    )$
    95,792
    
    
    
    
    
    
    $
    116,609
  28




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##### Table of Contents



Cost of Operations
    Selling, General and Administrative Expense
  Depreciation, Depletion and Amortization
  29




---



##### Table of Contents



Gain on Sale of Property and Equipment, Foreign Exchange and Other
  Interest Expense
  Three Months Ended March 31,2009
    
    
    2008Senior Secured Credit Facilities
    
    $
    2,259
    
    
    $
    4,908Senior Subordinated Notes
    
    
    3,800
    
    
    
    3,800Amortization of debt issue costs and discounts
    
    
    839
    
    
    
    1,038Other interest expense
    
    
    600
    
    
    
    492$
    7,498
    
    
    $
    10,238
   Change in Fair Value of Warrants
  30




---



##### Table of Contents



Income Tax Provision (Benefit)
   Liquidity and Capital Resources
  Senior Secured Credit Facilities
  31




---



##### Table of Contents



Maximum
    
    Maximum
    
    MinimumConsolidated
    
    Consolidated
    
    ConsolidatedLeverage
    
    Senior Secured
    
    InterestRatio
    
    Leverage Ratio
    
    Coverage RatioFirst quarter - 2009
    
    
    4.50 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.50 : 1.00Second quarter - 2009
    
    
    4.50 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.50 : 1.00Third quarter - 2009
    
    
    4.25 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00Fourth quarter - 2009
    
    
    4.25 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00First quarter - 2010
    
    
    4.25 : 1.00
    
    
    
    2.75 : 1.00
    
    
    
    2.75 : 1.00
  Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
   Direct Financing Lease Facility
  32




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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
  33




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##### Table of Contents



Cash Flow from Discontinued Operations
  Off-Balance Sheet Financing
  Landfill Sites
  Balance,
    
    
    
    
    
    
    Balance,Beginning
    
    
    Airspace
    
    
    Endof Period
    
    
    Consumed
    
    
    of PeriodUnited StatesPermitted capacity
    
    
    80,025
    
    
    
    (465
    )
    
    
    79,560Probable expansion capacity
    
    
    
    
    
    
    
    
    
    
    Total available airspace
    
    
    80,025
    
    
    
    (465
    )
    
    
    79,560Number of sites
    
    
    4
    
    
    
    
    
    
    
    4CanadaPermitted capacity
    
    
    11,018
    
    
    
    (92
    )
    
    
    10,926Probable expansion capacity
    
    
    4,852
    
    
    
    
    
    
    
    4,852Total available airspace
    
    
    15,870
    
    
    
    (92
    )
    
    
    15,778Number of sites
    
    
    3
    
    
    
    
    
    
    
    3TotalPermitted capacity
    
    
    91,043
    
    
    
    (557
    )
    
    
    90,486Probable expansion capacity
    
    
    4,852
    
    
    
    
    
    
    
    4,852Total available airspace
    
    
    95,895
    
    
    
    (557
    )
    
    
    95,338Number of sites
    
    
    7
    
    
    
    
    
    
    
    7
 34




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##### Table of Contents



Trend Information
 Seasonality
  
    
    Less solid waste is generated during the late fall, winter and early spring because of
decreased construction and demolition activity.
    
    Certain operating costs are higher in the winter months because winter weather conditions
slow waste collection activities, resulting in higher labor costs, and rain and snow
increase the weight of collected waste, resulting in higher disposal costs, which are
calculated on a per ton basis.
    
    During the summer months, there are more tourists and part-time residents in some of our
service areas, resulting in more residential and commercial collection.
  New Accounting Pronouncements
  1 2
  35




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##### 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 and / or capital expenditures with
cash on hand, debt or equity offerings;
    
    our ability to pay principal debt amounts due at maturity;
    
    our business is capital intensive and may consume cash in excess of cash flow from
operations and borrowings;
    
    our ability to vertically integrate our operations;
    
    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 domestic operations are concentrated in Florida, which may be subject to specific
economic conditions that vary from those nationally as well as weather related events that
may impact our operations;
    
    construction, equipment delivery or permitting delays for our transfer stations or
landfills;
    
    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; and
    
    changes in general business and economic conditions, commodity pricing, exchange rates,
the financial markets and accounting standards or pronouncements.
 36




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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
  37




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##### Table of Contents



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
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive Officer.Exhibit 31.2
    
    Section 302 Certification of Edwin D. Johnson, Chief Financial Officer.Exhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
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##### Table of Contents



SIGNATURES
  WASTE SERVICES, INC.Date: April 24, 2009
    By:
    /s/ DAVID SUTHERLAND-YOESTDavid Sutherland-YoestPresident and Chief Executive OfficerBy:
    /s/ EDWIN D. JOHNSONEdwin D. JohnsonExecutive Vice President, Chief Financial Officer 39




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No
    
    DescriptionExhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive Officer.Exhibit 31.2
    
    Section 302 Certification of Edwin D. Johnson, Chief Financial Officer.Exhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
 40