##### 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 June 30, 2008
 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(State or other jurisdiction of 
incorporation or organization)
    
    01-0780204(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
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    2Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007
    
    
    3Unaudited Condensed Consolidated Statement of Shareholders Equity for the six months ended June 30, 2008
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    
    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
    
    
    42Item 4. Controls and Procedures
    
    
    42PART 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
    
    
    43Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    44Signatures
    
    
    45EX-10.1 Employment AgreementEX-31.1 Section 302 CEO CertificationEX-31.2 Section 302 CFO CertificationEX-32.1 Section 906 CEO & CFO 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)
 June 30, 2008
    
    
    December 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,548
    
    
    $
    20,706Accounts receivable (net of allowance for doubtful accounts of $638 and
$985 as of June 30, 2008 and December 31, 2007, respectively)
    
    
    65,920
    
    
    
    67,195Prepaid expenses and other current assets
    
    
    8,480
    
    
    
    11,338Current assets of discontinued operations
    
    
    
    
    
    
    167Total current assets
    
    
    107,948
    
    
    
    99,406Property and equipment, net
    
    
    190,375
    
    
    
    192,598Landfill sites, net
    
    
    190,176
    
    
    
    190,451Goodwill and other intangible assets, net
    
    
    391,410
    
    
    
    397,766Other assets
    
    
    19,647
    
    
    
    17,741Non-current assets of discontinued operations
    
    
    
    
    
    
    40,526Total assets
    
    $
    899,556
    
    
    $
    938,488LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    21,972
    
    
    $
    26,641Accrued expenses and other current liabilities
    
    
    63,679
    
    
    
    65,338Short-term financing and current portion of long-term debt
    
    
    1,290
    
    
    
    2,631Current liabilities of discontinued operations
    
    
    
    
    
    
    765Total current liabilities
    
    
    86,941
    
    
    
    95,375Long-term debt
    
    
    400,039
    
    
    
    441,809Accrued closure, post-closure, deferred income taxes and other obligations
    
    
    49,379
    
    
    
    48,514Non-current liabilities of discontinued operations
    
    
    
    
    
    
    2,195Total liabilities
    
    
    536,359
    
    
    
    587,893Shareholders equity:Common stock $0.01 par value: 166,666,666 shares authorized, 43,978,770 and
43,972,362 shares issued and outstanding as of June 30, 2008 and December
31, 2007, respectively
    
    
    439
    
    
    
    439Additional paid-in capital
    
    
    512,280
    
    
    
    510,286Accumulated other comprehensive income
    
    
    59,986
    
    
    
    66,017Accumulated deficit
    
    
    (209,508
    )
    
    
    (226,147
    )Total shareholders equity
    
    
    363,197
    
    
    
    350,595Total liabilities and shareholders equity
    
    $
    899,556
    
    
    $
    938,488
  2




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WASTE SERVICES, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    128,282
    
    
    $
    119,421
    
    
    $
    244,890
    
    
    $
    214,420Operating and other expenses:Cost of operations (exclusive of depreciation, depletion and amortization)
    
    
    83,605
    
    
    
    78,499
    
    
    
    160,149
    
    
    
    141,266Selling, general and administrative expense (exclusive of depreciation,
depletion and amortization)
    
    
    16,505
    
    
    
    14,678
    
    
    
    32,869
    
    
    
    29,110Depreciation, depletion and amortization
    
    
    11,620
    
    
    
    14,341
    
    
    
    23,410
    
    
    
    25,699Foreign exchange gain and other
    
    
    (283
    )
    
    
    (164
    )
    
    
    (457
    )
    
    
    (587
    )Income from operations
    
    
    16,835
    
    
    
    12,067
    
    
    
    28,919
    
    
    
    18,932Interest expense
    
    
    7,802
    
    
    
    10,830
    
    
    
    18,040
    
    
    
    20,575Income (loss) from continuing operations
before income taxes
    
    
    9,033
    
    
    
    1,237
    
    
    
    10,879
    
    
    
    (1,643
    )Income tax provision
    
    
    5,003
    
    
    
    4,407
    
    
    
    1,570
    
    
    
    6,144Net income (loss) from continuing operations
    
    
    4,030
    
    
    
    (3,170
    )
    
    
    9,309
    
    
    
    (7,787
    )Net income from discontinued operations, net of income tax provision of
$301 for the six months ended June 30, 2008 and nil for all other
periods
    
    
    
    
    
    
    957
    
    
    
    461
    
    
    
    963Gain (loss) on sale of discontinued operations, net of income tax
provision (benefit) of $(64) and $4,485 for the three and six months
ended June 30, 2008, respectively and nil for all other periods
    
    
    (100
    )
    
    
    (12,192
    )
    
    
    6,869
    
    
    
    (11,254
    )Net income (loss)
    
    $
    3,930
    
    
    $
    (14,405
    )
    
    $
    16,639
    
    
    $
    (18,078
    )Basic and diluted earnings (loss) per share:Earnings (loss) per share  continuing operations
    
    $
    0.09
    
    
    $
    (0.07
    )
    
    $
    0.20
    
    
    $
    (0.17
    )Earnings (loss) per share  discontinued operations
    
    
    
    
    
    
    (0.25
    )
    
    
    0.16
    
    
    
    (0.22
    )Basic and diluted earnings (loss) per share
    
    $
    0.09
    
    
    $
    (0.32
    )
    
    $
    0.36
    
    
    $
    (0.39
    )Weighted average common shares outstanding  basic
    
    
    46,075
    
    
    
    45,973
    
    
    
    46,075
    
    
    
    45,973Weighted average common shares outstanding  diluted
    
    
    46,075
    
    
    
    45,973
    
    
    
    46,084
    
    
    
    45,973
  3




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WASTE SERVICES, INC.
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
For the Six Months Ended June 30, 2008
(In thousands)
 Waste Services, Inc.
    
    
    
    
    
    
    Accumulated Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Additional
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance, December 31, 2007
    
    
    43,972
    
    
    $
    439
    
    
    $
    510,286
    
    
    $
    66,017
    
    
    $
    (226,147
    )
    
    $
    350,595Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,994
    
    
    
    
    
    
    
    
    
    
    
    1,994Conversion of exchangeable shares
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,031
    )
    
    
    
    
    
    
    (6,031
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,639
    
    
    
    16,639Balance, June 30, 2008
    
    
    43,979
    
    
    $
    439
    
    
    $
    512,280
    
    
    $
    59,986
    
    
    $
    (209,508
    )
    
    $
    363,197
  4




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WASTE SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Six Months Ended June 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    16,639
    
    
    $
    (18,078
    )Adjustments to reconcile net income (loss) to net cash flows
from operating activities:Net loss (income) from discontinued operations
    
    
    (7,330
    )
    
    
    10,291Depreciation, depletion and amortization
    
    
    23,410
    
    
    
    25,699Amortization of debt issue costs
    
    
    1,516
    
    
    
    1,315Deferred income tax provision (benefit)
    
    
    (3,745
    )
    
    
    1,918Non-cash stock-based compensation expense
    
    
    1,994
    
    
    
    973Other non-cash items
    
    
    (50
    )
    
    
    125Changes in operating assets and liabilities (excluding
the effects of acquisitions and dispositions):Accounts receivable
    
    
    426
    
    
    
    (3,199
    )Prepaid expenses and other current assets
    
    
    1,929
    
    
    
    (825
    )Accounts payable
    
    
    (4,434
    )
    
    
    (329
    )Accrued expenses and other current liabilities
    
    
    (8,874
    )
    
    
    2,486Net cash provided by continuing operations
    
    
    21,481
    
    
    
    20,376Net cash provided by discontinued operations
    
    
    1,163
    
    
    
    4,438Net cash provided by operating activities
    
    
    22,644
    
    
    
    24,814Cash flows from investing activities:Cash used in business combinations and significant asset
acquisitions, net of cash acquired
    
    
    
    
    
    
    (31,888
    )Capital expenditures
    
    
    (20,399
    )
    
    
    (21,858
    )Proceeds from sale of the Jacksonville, Florida operations
    
    
    56,685
    
    
    
    Proceeds from asset sales
    
    
    882
    
    
    
    16,091Deposits for business acquisitions and other
    
    
    (3,401
    )
    
    
    (9,528
    )Net cash provided by (used in) continuing operations
    
    
    33,767
    
    
    
    (47,183
    )Net cash used in discontinued operations
    
    
    (43
    )
    
    
    (4,496
    )Net cash provided by (used in) investing activities
    
    
    33,724
    
    
    
    (51,679
    )Cash flows from financing activities:Proceeds from issuance of debt and draw on revolving credit facility
    
    
    
    
    
    
    84,014Principal repayments of debt and capital lease obligations
    
    
    (43,225
    )
    
    
    (49,190
    )Proceeds from the exercise of options and warrants
    
    
    
    
    
    
    5Fees paid for financing transactions
    
    
    
    
    
    
    (1,191
    )Net cash provided by (used in) financing activities of continuing
operations
    
    
    (43,225
    )
    
    
    33,638Effect of exchange rate changes on cash and cash equivalents
    
    
    (301
    )
    
    
    740Increase in cash and cash equivalents
    
    
    12,842
    
    
    
    7,513Cash and cash equivalents at the beginning of the period
    
    
    20,706
    
    
    
    8,532Cash and cash equivalents at the end of the period
    
    $
    33,548
    
    
    $
    16,045
  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
    
    Six MonthsEnded
    
    EndedJune 30, 2007
    
    June 30, 2007Common Shares issuable
under exercisable
options
    
    
    50
    
    
    
    36Common Shares issuable
under exercisable
warrants
    
    
    610
    
    
    
    603Dilutive securities
    
    
    660
    
    
    
    639
  2. Recently Issued Accounting Pronouncements and Adopted Accounting
 1 2
   7




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   3. Share-Based Payments
   Three MonthsEnded June 30,
    
    Six Months Ended June 30,2007
    
    2008
    
    2007Annual dividend yield
    
    
    
    
    
    
    
    
    
    
    Weighted average expected
life (years)
    
    
    3.0
    
    
    
    7.0
    
    
    
    3.0Risk-free interest rate
    
    
    4.5
    %
    
    
    3.2
    %
    
    
    4.5
    %Expected volatility
    
    
    92
    %
    
    
    61
    %
    
    
    92
    %
    8




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 4. Discontinued Operations
      2008
    
    
    2007Jacksonville
    
    
    Arizona
    
    
    TexasOperations
    
    
    Operations
    
    
    Operations
    
    
    TotalFair value of operations received
    
    $
    
    
    
    $
    52,497
    
    
    $
    18,471
    
    
    $
    70,968Cash received, net of amounts deferred and promissory
note issued relative to the Texas disposal
    
    
    46,685
    
    
    
    
    
    
    
    15,690
    
    
    
    15,690Less:Carrying value of operations sold
    
    
    35,331
    
    
    
    51,559
    
    
    
    46,353
    
    
    
    97,912Gain (loss) on disposition of discontinued operations
    
    $
    11,354
    
    
    $
    938
    
    
    $
    (12,192
    )
    
    $
    (11,254
    )
  9




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,2007Prepaid expenses and other current assets
    
    $
    167Current assets of discontinued operations
    
    
    167Property and equipment
    
    
    7,219Landfill sites
    
    
    7,610Goodwill and other intangible assets
    
    
    25,697Non-current assets of discontinued operations
    
    
    40,526Total assets of discontinued operations
    
    $
    40,693Accrued expenses and other current liabilities
    
    $
    765Current liabilities of discontinued operations
    
    
    765Accrued closure, post closure and other obligations
    
    
    2,195Non-current liabilities of discontinued operations
    
    
    2,195Total liabilities of discontinued operations
    
    $
    2,960Net assets of discontinued operations
    
    $
    37,733
 5. Business Combinations and Significant Asset Acquisitions
      10




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2007
    
    
    June 30, 2007Revenue
    
    $
    121,300
    
    
    $
    236,062Net loss from continuing operations
    
    $
    (3,188
    )
    
    $
    (6,924
    )Basic and diluted loss per share 
continuing operations
    
    $
    (0.07
    )
    
    $
    (0.15
    )Basic and diluted pro forma weighted
average number of
common shares outstanding
    
    
    45,973
    
    
    
    45,973
  6. Prepaid Expenses and Other Current Assets
  June 30,
    
    
    December 31,2008
    
    
    2007Prepaid expenses
    
    $
    4,351
    
    
    $
    5,808Parts and supplies
    
    
    2,264
    
    
    
    2,192Royalty receivable
    
    
    
    
    
    
    1,321Other current assets
    
    
    1,865
    
    
    
    2,017$
    8,480
    
    
    $
    11,338
 7. Property and Equipment
  June 30,
    
    
    December 31,2008
    
    
    2007Land and buildings
    
    $
    69,201
    
    
    $
    67,088Vehicles
    
    
    147,761
    
    
    
    144,926Containers, compactors and landfill and recycling equipment
    
    
    94,027
    
    
    
    92,733Furniture, fixtures, other office equipment and leasehold
improvements
    
    
    12,541
    
    
    
    12,449Total property and equipment
    
    
    323,530
    
    
    
    317,196Less: Accumulated depreciation
    
    
    (133,155
    )
    
    
    (124,598
    )Property and equipment, net
    
    $
    190,375
    
    
    $
    192,598
 11




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Landfill Sites, Accrued Closure, Post-Closure, Deferred Income Taxes and Other Obligations
 Landfill Sites
  June 30,
    
    
    December 31,2008
    
    
    2007Landfill sites
    
    $
    257,247
    
    
    $
    253,266Less: Accumulated depletion
    
    
    (67,071
    )
    
    
    (62,815
    )Landfill sites, net
    
    $
    190,176
    
    
    $
    190,451
  Six Months EndedJune 30,2008
    
    
    2007Balance at the beginning of the period
    
    $
    190,451
    
    
    $
    187,796Landfill site construction costs
    
    
    4,505
    
    
    
    6,852Additional asset retirement obligations
    
    
    856
    
    
    
    1,371Depletion
    
    
    (5,214
    )
    
    
    (8,068
    )Purchase price adjustments for prior acquisitions
    
    
    50
    
    
    
    Reclassification to conservatory
    
    
    
    
    
    
    (1,029
    )Effect of foreign exchange rate fluctuations
    
    
    (472
    )
    
    
    1,339Balance at the end of the period
    
    $
    190,176
    
    
    $
    188,261
 Accrued Closure, Post-Closure, Deferred Income Taxes and Other Obligations
  June 30,
    
    
    December 31,2008
    
    
    2007Deferred income tax liability
    
    $
    29,987
    
    
    $
    29,644Accrued closure and post-closure obligations
    
    
    15,691
    
    
    
    14,678Accrued severance
    
    
    1,945
    
    
    
    2,181Capital lease obligations
    
    
    746
    
    
    
    867Other obligations
    
    
    1,010
    
    
    
    1,144$
    49,379
    
    
    $
    48,514
  12




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Six Months Ended June 30,2008
    
    
    2007Current portion at the beginning of period
    
    $
    4,153
    
    
    $
    5,570Long-term portion at the beginning of period
    
    
    14,678
    
    
    
    8,360Balance at the beginning of period
    
    
    18,831
    
    
    
    13,930Additional asset retirement obligations
    
    
    856
    
    
    
    1,371Other additions
    
    
    300
    
    
    
    Accretion
    
    
    395
    
    
    
    276Payments
    
    
    (152
    )
    
    
    (907
    )Effect of foreign exchange rate fluctuations
    
    
    (260
    )
    
    
    683Balance at the end of period
    
    
    19,970
    
    
    
    15,353Less: Current portion
    
    
    (4,279
    )
    
    
    (2,636
    )Long-term portion
    
    $
    15,691
    
    
    $
    12,717
 9. Goodwill and Other Intangible Assets
  June 30,
    
    
    December 31,2008
    
    
    2007Other intangible assets subject to amortization:Customer relationships and contracts
    
    $
    51,823
    
    
    $
    51,924Non-competition agreements and other
    
    
    5,898
    
    
    
    6,01157,721
    
    
    
    57,935Less: Accumulated amortization:Customer relationships and contracts
    
    
    (26,505
    )
    
    
    (23,714
    )Non-competition agreements and other
    
    
    (1,889
    )
    
    
    (1,396
    )Other intangible assets subject to amortization, net
    
    
    29,327
    
    
    
    32,825Goodwill
    
    
    362,083
    
    
    
    364,941Goodwill and other intangible assets, net
    
    $
    391,410
    
    
    $
    397,766
  Six Months Ended June 30, 2008Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    262,338
    
    
    $
    102,603
    
    
    $
    364,941Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    (2,858
    )
    
    
    (2,858
    )Balance at the end of the period
    
    $
    262,338
    
    
    $
    99,745
    
    
    $
    362,083
 13




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2007Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    211,482
    
    
    $
    86,848
    
    
    $
    298,330Acquisitions
    
    
    29,494
    
    
    
    386
    
    
    
    29,880Purchase price allocation adjustments for prior acquisitions
    
    
    1,060
    
    
    
    61
    
    
    
    1,121Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    8,168
    
    
    
    8,168Balance at the end of the period
    
    $
    242,036
    
    
    $
    95,463
    
    
    $
    337,499
 10. Other Assets
  June 30,
    
    
    December 31,2008
    
    
    2007Debt issue costs, net of accumulated amortization of $6,403 and $5,787
as of June 30, 2008 and December 31, 2007, respectively
    
    $
    6,306
    
    
    $
    7,822Acquisition deposits and deferred acquisition costs
    
    
    12,758
    
    
    
    9,407Other assets
    
    
    583
    
    
    
    512$
    19,647
    
    
    $
    17,741
  11. Accrued Expenses and Other Current Liabilities
  June 30,
    
    
    December 31,2008
    
    
    2007Deferred revenue
    
    $
    11,320
    
    
    $
    11,613Accrued waste disposal and subcontractor costs
    
    
    8,535
    
    
    
    7,379Accrued compensation and benefits
    
    
    8,524
    
    
    
    12,317Accrued acquisition costs
    
    
    8,048
    
    
    
    1,200Accrued insurance
    
    
    6,596
    
    
    
    6,055Accrued closure and post-closure obligations
    
    
    4,279
    
    
    
    4,153Accrued interest
    
    
    4,061
    
    
    
    4,588Accrued royalties and franchise fees
    
    
    3,121
    
    
    
    3,239Accrued capital expenditures
    
    
    1,767
    
    
    
    2,233Accrued federal and provincial current taxes payable
    
    
    1,436
    
    
    
    8,158Accrued professional fees
    
    
    1,024
    
    
    
    970Current portion of capital lease obligations
    
    
    239
    
    
    
    232Other accrued expenses and current liabilities
    
    
    4,729
    
    
    
    3,201$
    63,679
    
    
    $
    65,338
 14




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 12. Debt
  June 30,
    
    
    December 31,2008
    
    
    2007Senior Secured Credit Facilities:Revolving credit facility
    
    $
    
    
    
    $
    Term loan facility, floating interest rate at 5.2% and 7.4% as of June 30, 2008
and December 31, 2007, respectively, due $592 per quarter from September 2009
through March 2010 and $57,409 per quarter thereafter, due March 2011
    
    
    231,410
    
    
    
    273,910Senior Subordinated Notes, fixed interest rate at 9.5%, due 2014
    
    
    160,000
    
    
    
    160,000Other secured notes payable, interest at 4.5% to 7.8%, due through
2025 (net of discount of $1,835 and $2,126 at June 30, 2008
and December 31, 2007, respectively)
    
    
    7,421
    
    
    
    7,932Other subordinated notes payable, interest at 6.7%, due through 2017
    
    
    2,498
    
    
    
    2,598401,329
    
    
    
    444,440Less: Current portion
    
    
    (1,290
    )
    
    
    (2,631
    )Long-term portion
    
    $
    400,039
    
    
    $
    441,809
 Senior Secured Credit Facilities
   Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
 15




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Direct Financing Lease Facility
  13. Commitments and Contingencies
 Environmental Risks
   Legal Proceedings
   16




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Surety Bonds, Letters of Credit and Insurance
    Six Months Ended June 30,2008
    
    
    2007Balance at the beginning of the period
    
    $
    6,055
    
    
    $
    5,327Provisions
    
    
    2,921
    
    
    
    2,214Payments
    
    
    (2,742
    )
    
    
    (2,250
    )Unfavorable claim development for prior periods
    
    
    362
    
    
    
    62Balance at the end of the period
    
    $
    6,596
    
    
    $
    5,353
 Disposal Agreement
   Other Contractual Arrangements
  17




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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
     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 June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    3,930
    
    
    $
    (14,405
    )
    
    $
    16,639
    
    
    $
    (18,078
    )Foreign currency translation adjustment
    
    
    1,270
    
    
    
    14,505
    
    
    
    (6,031
    )
    
    
    16,103Comprehensive income (loss)
    
    $
    5,200
    
    
    $
    100
    
    
    $
    10,608
    
    
    $
    (1,975
    )
 16. Segment Information
    Three Months Ended June 30, 2008Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    60,774
    
    
    $
    67,508
    
    
    $
    
    
    
    $
    128,282Depreciation, depletion and amortization
    
    
    6,610
    
    
    
    4,671
    
    
    
    339
    
    
    
    11,620Income (loss) from operations
    
    
    10,099
    
    
    
    13,509
    
    
    
    (6,773
    )
    
    
    16,835Capital expenditures
    
    
    5,819
    
    
    
    3,879
    
    
    
    294
    
    
    
    9,992
 Three Months Ended June 30, 2007Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    63,563
    
    
    $
    55,858
    
    
    $
    
    
    
    $
    119,421Depreciation, depletion and amortization
    
    
    9,356
    
    
    
    4,652
    
    
    
    333
    
    
    
    14,341Income (loss) from operations
    
    
    7,797
    
    
    
    10,418
    
    
    
    (6,148
    )
    
    
    12,067Capital expenditures
    
    
    10,503
    
    
    
    3,628
    
    
    
    324
    
    
    
    14,455
 Six Months Ended June 30, 2008Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    120,862
    
    
    $
    124,028
    
    
    $
    
    
    
    $
    244,890Depreciation, depletion and amortization
    
    
    13,433
    
    
    
    9,282
    
    
    
    695
    
    
    
    23,410Income (loss) from operations
    
    
    20,214
    
    
    
    22,851
    
    
    
    (14,146
    )
    
    
    28,919Capital expenditures
    
    
    7,501
    
    
    
    12,492
    
    
    
    406
    
    
    
    20,399
 19




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2007Florida
    
    Canada
    
    Corporate
    
    TotalRevenue
    
    $
    113,760
    
    
    $
    100,660
    
    
    $
    
    
    
    $
    214,420Depreciation, depletion and amortization
    
    
    16,732
    
    
    
    8,315
    
    
    
    652
    
    
    
    25,699Income (loss) from operations
    
    
    15,441
    
    
    
    16,709
    
    
    
    (13,218
    )
    
    
    18,932Capital expenditures
    
    
    13,738
    
    
    
    7,272
    
    
    
    848
    
    
    
    21,858
 17. Condensed Consolidating Financial Statements
  20




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    22,287
    
    
    $
    199
    
    
    $
    11,062
    
    
    $
    
    
    
    $
    33,548Accounts receivable, net
    
    
    
    
    
    
    28,858
    
    
    
    37,062
    
    
    
    
    
    
    
    65,920Prepaid expenses and other current assets
    
    
    613
    
    
    
    2,268
    
    
    
    5,599
    
    
    
    
    
    
    
    8,480Total current assets
    
    
    22,900
    
    
    
    31,325
    
    
    
    53,723
    
    
    
    
    
    
    
    107,948Property and equipment, net
    
    
    205
    
    
    
    97,795
    
    
    
    92,375
    
    
    
    
    
    
    
    190,375Landfill sites, net
    
    
    
    
    
    
    173,387
    
    
    
    16,789
    
    
    
    
    
    
    
    190,176Goodwill and other intangible assets, net
    
    
    
    
    
    
    290,773
    
    
    
    100,637
    
    
    
    
    
    
    
    391,410Other assets
    
    
    19,485
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    19,647Due from affiliates
    
    
    1,867
    
    
    
    
    
    
    
    
    
    
    
    (1,867
    )
    
    
    Investment in subsidiary
    
    
    775,143
    
    
    
    
    
    
    
    
    
    
    
    (775,143
    )
    
    
    Total assets
    
    $
    819,600
    
    
    $
    593,442
    
    
    $
    263,524
    
    
    $
    (777,010
    )
    
    $
    899,556LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,734
    
    
    $
    1,754
    
    
    $
    11,484
    
    
    $
    
    
    
    $
    21,972Accrued expenses and other current liabilities
    
    
    23,637
    
    
    
    23,027
    
    
    
    17,015
    
    
    
    
    
    
    
    63,679Short-term financing and current
portion of long-term debt
    
    
    1,081
    
    
    
    209
    
    
    
    
    
    
    
    
    
    
    
    1,290Total current liabilities
    
    
    33,452
    
    
    
    24,990
    
    
    
    28,499
    
    
    
    
    
    
    
    86,941Long-term debt
    
    
    397,751
    
    
    
    2,288
    
    
    
    
    
    
    
    
    
    
    
    400,039Accrued closure, post-closure, deferred income taxes
and other obligations
    
    
    25,200
    
    
    
    7,114
    
    
    
    17,065
    
    
    
    
    
    
    
    49,379Due to affiliates
    
    
    
    
    
    
    
    
    
    
    1,867
    
    
    
    (1,867
    )
    
    
    Total liabilities
    
    
    456,403
    
    
    
    34,392
    
    
    
    47,431
    
    
    
    (1,867
    )
    
    
    536,359Shareholders equity:Common stock of Waste Services, Inc
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439Other equity
    
    
    362,758
    
    
    
    559,050
    
    
    
    216,093
    
    
    
    (775,143
    )
    
    
    362,758Total shareholders equity
    
    
    363,197
    
    
    
    559,050
    
    
    
    216,093
    
    
    
    (775,143
    )
    
    
    363,197Total liabilities and shareholders equity
    
    $
    819,600
    
    
    $
    593,442
    
    
    $
    263,524
    
    
    $
    (777,010
    )
    
    $
    899,556
 21




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,080
    
    
    $
    239
    
    
    $
    11,387
    
    
    $
    
    
    
    $
    20,706Accounts receivable, net
    
    
    
    
    
    
    30,902
    
    
    
    36,293
    
    
    
    
    
    
    
    67,195Prepaid expenses and other current assets
    
    
    37
    
    
    
    2,449
    
    
    
    8,852
    
    
    
    
    
    
    
    11,338Current assets of discontinued operations
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    167Total current assets
    
    
    9,117
    
    
    
    33,757
    
    
    
    56,532
    
    
    
    
    
    
    
    99,406Property and equipment, net
    
    
    235
    
    
    
    99,541
    
    
    
    92,822
    
    
    
    
    
    
    
    192,598Landfill sites, net
    
    
    
    
    
    
    173,803
    
    
    
    16,648
    
    
    
    
    
    
    
    190,451Goodwill and other intangible assets, net
    
    
    
    
    
    
    294,056
    
    
    
    103,710
    
    
    
    
    
    
    
    397,766Other assets
    
    
    17,550
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    17,741Due from affiliates
    
    
    1,021
    
    
    
    
    
    
    
    
    
    
    
    (1,021
    )
    
    
    Investment in subsidiary
    
    
    816,054
    
    
    
    
    
    
    
    
    
    
    
    (816,054
    )
    
    
    Non-current assets of discontinued operations
    
    
    
    
    
    
    40,526
    
    
    
    
    
    
    
    
    
    
    
    40,526Total assets
    
    $
    843,977
    
    
    $
    641,874
    
    
    $
    269,712
    
    
    $
    (817,075
    )
    
    $
    938,488LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,480
    
    
    $
    2,903
    
    
    $
    14,258
    
    
    $
    
    
    
    $
    26,641Accrued expenses and other current liabilities
    
    
    17,571
    
    
    
    21,973
    
    
    
    25,794
    
    
    
    
    
    
    
    65,338Short-term financing and current
portion of long-term debt
    
    
    2,428
    
    
    
    203
    
    
    
    
    
    
    
    
    
    
    
    2,631Current liabilities of discontinued operations
    
    
    
    
    
    
    765
    
    
    
    
    
    
    
    
    
    
    
    765Total current liabilities
    
    
    29,479
    
    
    
    25,844
    
    
    
    40,052
    
    
    
    
    
    
    
    95,375Long-term debt
    
    
    439,415
    
    
    
    2,394
    
    
    
    
    
    
    
    
    
    
    
    441,809Accrued closure, post-closure, deferred income taxes
and other obligations
    
    
    24,488
    
    
    
    6,134
    
    
    
    17,892
    
    
    
    
    
    
    
    48,514Due to affiliates
    
    
    
    
    
    
    
    
    
    
    1,021
    
    
    
    (1,021
    )
    
    
    Non-current liabilities of discontinued operations
    
    
    
    
    
    
    2,195
    
    
    
    
    
    
    
    
    
    
    
    2,195Total liabilities
    
    
    493,382
    
    
    
    36,567
    
    
    
    58,965
    
    
    
    (1,021
    )
    
    
    587,893Shareholders equity:Common stock of Waste Services, Inc
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439Other equity
    
    
    350,156
    
    
    
    605,307
    
    
    
    210,747
    
    
    
    (816,054
    )
    
    
    350,156Total shareholders equity
    
    
    350,595
    
    
    
    605,307
    
    
    
    210,747
    
    
    
    (816,054
    )
    
    
    350,595Total liabilities and shareholders equity
    
    $
    843,977
    
    
    $
    641,874
    
    
    $
    269,712
    
    
    $
    (817,075
    )
    
    $
    938,488
 22




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    
    
    
    $
    60,774
    
    
    $
    67,508
    
    
    $
    
    
    
    $
    128,282Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    
    
    
    
    39,468
    
    
    
    44,137
    
    
    
    
    
    
    
    83,605Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    3,430
    
    
    
    4,879
    
    
    
    8,196
    
    
    
    
    
    
    
    16,505Depreciation, depletion and amortization
    
    
    25
    
    
    
    6,610
    
    
    
    4,985
    
    
    
    
    
    
    
    11,620Foreign exchange gain and other
    
    
    
    
    
    
    (282
    )
    
    
    (1
    )
    
    
    
    
    
    
    (283
    )Equity earnings in investees, net of tax
    
    
    (15,063
    )
    
    
    
    
    
    
    
    
    
    
    15,063
    
    
    
    Income from operations
    
    
    11,608
    
    
    
    10,099
    
    
    
    10,191
    
    
    
    (15,063
    )
    
    
    16,835Interest expense
    
    
    7,678
    
    
    
    42
    
    
    
    82
    
    
    
    
    
    
    
    7,802Income from continuing operations
before income taxes
    
    
    3,930
    
    
    
    10,057
    
    
    
    10,109
    
    
    
    (15,063
    )
    
    
    9,033Income tax provision
    
    
    
    
    
    
    1,804
    
    
    
    3,199
    
    
    
    
    
    
    
    5,003Net income from continuing operations
    
    
    3,930
    
    
    
    8,253
    
    
    
    6,910
    
    
    
    (15,063
    )
    
    
    4,030Loss on sale of discontinued operations,
net of income tax benefit of $64
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    (100
    )Net income
    
    $
    3,930
    
    
    $
    8,153
    
    
    $
    6,910
    
    
    $
    (15,063
    )
    
    $
    3,930
 23




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    
    
    
    $
    63,563
    
    
    $
    55,858
    
    
    $
    
    
    
    $
    119,421Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    
    
    
    
    41,901
    
    
    
    36,598
    
    
    
    
    
    
    
    78,499Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    3,417
    
    
    
    4,632
    
    
    
    6,629
    
    
    
    
    
    
    
    14,678Depreciation, depletion and amortization
    
    
    17
    
    
    
    9,356
    
    
    
    4,968
    
    
    
    
    
    
    
    14,341Foreign exchange loss (gain) and other
    
    
    3
    
    
    
    (123
    )
    
    
    (44
    )
    
    
    
    
    
    
    (164
    )Equity earnings in investees, net of tax
    
    
    264
    
    
    
    
    
    
    
    
    
    
    
    (264
    )
    
    
    Income (loss) from operations
    
    
    (3,701
    )
    
    
    7,797
    
    
    
    7,707
    
    
    
    264
    
    
    
    12,067Interest expense
    
    
    10,704
    
    
    
    43
    
    
    
    83
    
    
    
    
    
    
    
    10,830Income (loss) from continuing operations
before income taxes
    
    
    (14,405
    )
    
    
    7,754
    
    
    
    7,624
    
    
    
    264
    
    
    
    1,237Income tax provision
    
    
    
    
    
    
    1,692
    
    
    
    2,715
    
    
    
    
    
    
    
    4,407Net income (loss) from continuing operations
    
    
    (14,405
    )
    
    
    6,062
    
    
    
    4,909
    
    
    
    264
    
    
    
    (3,170
    )Net income from discontinued operations, net of tax of nil
    
    
    
    
    
    
    957
    
    
    
    
    
    
    
    
    
    
    
    957Loss on sale of discontinued operations, net of tax of nil
    
    
    
    
    
    
    (12,192
    )
    
    
    
    
    
    
    
    
    
    
    (12,192
    )Net income (loss)
    
    $
    (14,405
    )
    
    $
    (5,173
    )
    
    $
    4,909
    
    
    $
    264
    
    
    $
    (14,405
    )
 24




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    
    
    
    $
    120,862
    
    
    $
    124,028
    
    
    $
    
    
    
    $
    244,890Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    
    
    
    
    78,384
    
    
    
    81,765
    
    
    
    
    
    
    
    160,149Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    7,094
    
    
    
    9,314
    
    
    
    16,461
    
    
    
    
    
    
    
    32,869Depreciation, depletion and amortization
    
    
    49
    
    
    
    13,433
    
    
    
    9,928
    
    
    
    
    
    
    
    23,410Foreign exchange loss (gain) and other
    
    
    1
    
    
    
    (483
    )
    
    
    25
    
    
    
    
    
    
    
    (457
    )Equity earnings in investees, net of tax
    
    
    (41,606
    )
    
    
    
    
    
    
    
    
    
    
    41,606
    
    
    
    Income from operations
    
    
    34,462
    
    
    
    20,214
    
    
    
    15,849
    
    
    
    (41,606
    )
    
    
    28,919Interest expense
    
    
    17,823
    
    
    
    93
    
    
    
    124
    
    
    
    
    
    
    
    18,040Income from continuing operations
before income taxes
    
    
    16,639
    
    
    
    20,121
    
    
    
    15,725
    
    
    
    (41,606
    )
    
    
    10,879Income tax provision (benefit)
    
    
    
    
    
    
    (3,717
    )
    
    
    5,287
    
    
    
    
    
    
    
    1,570Net income from continuing operations
    
    
    16,639
    
    
    
    23,838
    
    
    
    10,438
    
    
    
    (41,606
    )
    
    
    9,309Net income from discontinued operations,
net of income tax provision of $301
    
    
    
    
    
    
    461
    
    
    
    
    
    
    
    
    
    
    
    461Gain on sale of discontinued operations,
net of income tax provision of $4,485
    
    
    
    
    
    
    6,869
    
    
    
    
    
    
    
    
    
    
    
    6,869Net income
    
    $
    16,639
    
    
    $
    31,168
    
    
    $
    10,438
    
    
    $
    (41,606
    )
    
    $
    16,639
 25




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    
    
    
    $
    113,760
    
    
    $
    100,660
    
    
    $
    
    
    
    $
    214,420Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    
    
    
    
    73,837
    
    
    
    67,429
    
    
    
    
    
    
    
    141,266Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    8,272
    
    
    
    7,907
    
    
    
    12,931
    
    
    
    
    
    
    
    29,110Depreciation, depletion and amortization
    
    
    31
    
    
    
    16,732
    
    
    
    8,936
    
    
    
    
    
    
    
    25,699Foreign exchange gain and other
    
    
    (175
    )
    
    
    (157
    )
    
    
    (255
    )
    
    
    
    
    
    
    (587
    )Equity earnings in investees, net of tax
    
    
    (10,386
    )
    
    
    
    
    
    
    
    
    
    
    10,386
    
    
    
    Income from operations
    
    
    2,258
    
    
    
    15,441
    
    
    
    11,619
    
    
    
    (10,386
    )
    
    
    18,932Interest expense
    
    
    20,336
    
    
    
    101
    
    
    
    138
    
    
    
    
    
    
    
    20,575Income (loss) from continuing operations
before income taxes
    
    
    (18,078
    )
    
    
    15,340
    
    
    
    11,481
    
    
    
    (10,386
    )
    
    
    (1,643
    )Income tax provision
    
    
    
    
    
    
    1,788
    
    
    
    4,356
    
    
    
    
    
    
    
    6,144Net income (loss) from continuing operations
    
    
    (18,078
    )
    
    
    13,552
    
    
    
    7,125
    
    
    
    (10,386
    )
    
    
    (7,787
    )Net income from discontinued operations, net of tax of nil
    
    
    
    
    
    
    963
    
    
    
    
    
    
    
    
    
    
    
    963Loss on sale of discontinued operations, net of tax of nil
    
    
    
    
    
    
    (11,254
    )
    
    
    
    
    
    
    
    
    
    
    (11,254
    )Net income (loss)
    
    $
    (18,078
    )
    
    $
    3,261
    
    
    $
    7,125
    
    
    $
    (10,386
    )
    
    $
    (18,078
    )
 26




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2008Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (20,397
    )
    
    $
    31,008
    
    
    $
    12,033
    
    
    $
    
    
    
    $
    22,644Cash flows from investing activities:Capital expenditures
    
    
    (29
    )
    
    
    (7,501
    )
    
    
    (12,869
    )
    
    
    
    
    
    
    (20,399
    )Proceeds from sale of the Jacksonville,
Florida operations
    
    
    
    
    
    
    56,685
    
    
    
    
    
    
    
    
    
    
    
    56,685Proceeds from asset sales and business divestitures
    
    
    10
    
    
    
    773
    
    
    
    99
    
    
    
    
    
    
    
    882Deposits for business acquisitions and other
    
    
    (3,351
    )
    
    
    
    
    
    
    (50
    )
    
    
    
    
    
    
    (3,401
    )Intercompany
    
    
    80,100
    
    
    
    
    
    
    
    
    
    
    
    (80,100
    )
    
    
    Net cash provided by (used in) continuing operations
    
    
    76,730
    
    
    
    49,957
    
    
    
    (12,820
    )
    
    
    (80,100
    )
    
    
    33,767Net cash used in discontinued operations
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Net cash used in investing activities
    
    
    76,730
    
    
    
    49,914
    
    
    
    (12,820
    )
    
    
    (80,100
    )
    
    
    33,724Cash flows from financing activities:Principal repayments of debt and capital lease obligations
    
    
    (43,126
    )
    
    
    (99
    )
    
    
    
    
    
    
    
    
    
    
    (43,225
    )Intercompany
    
    
    
    
    
    
    (80,863
    )
    
    
    763
    
    
    
    80,100
    
    
    
    Net cash provided by financing
activities  continuing operations
    
    
    (43,126
    )
    
    
    (80,962
    )
    
    
    763
    
    
    
    80,100
    
    
    
    (43,225
    )Effect of exchange rate changes
on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (301
    )
    
    
    
    
    
    
    (301
    )Increase (decrease) in cash and cash equivalents
    
    
    13,207
    
    
    
    (40
    )
    
    
    (325
    )
    
    
    
    
    
    
    12,842Cash and cash equivalents at the beginning of the period
    
    
    9,080
    
    
    
    239
    
    
    
    11,387
    
    
    
    
    
    
    
    20,706Cash and cash equivalents at the end of the period
    
    $
    22,287
    
    
    $
    199
    
    
    $
    11,062
    
    
    $
    
    
    
    $
    33,548
 27




---



##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Six Months Ended June 30, 2007Non-Parent
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in) operating activities
    
    $
    (24,048
    )
    
    $
    34,639
    
    
    $
    14,223
    
    
    $
    
    
    
    $
    24,814Cash flows from investing activities:Cash used in business combinations and significant
asset acquisitions, net of cash acquired
    
    
    
    
    
    
    (30,491
    )
    
    
    (1,397
    )
    
    
    
    
    
    
    (31,888
    )Capital expenditures
    
    
    (104
    )
    
    
    (13,738
    )
    
    
    (8,016
    )
    
    
    
    
    
    
    (21,858
    )Proceeds from asset sales
    
    
    
    
    
    
    16,050
    
    
    
    41
    
    
    
    
    
    
    
    16,091Deposits for business acquisitions and other
    
    
    (7,919
    )
    
    
    (54
    )
    
    
    (1,555
    )
    
    
    
    
    
    
    (9,528
    )Intercompany
    
    
    3,056
    
    
    
    
    
    
    
    
    
    
    
    (3,056
    )
    
    
    Net cash used in continuing operations
    
    
    (4,967
    )
    
    
    (28,233
    )
    
    
    (10,927
    )
    
    
    (3,056
    )
    
    
    (47,183
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (4,496
    )
    
    
    
    
    
    
    
    
    
    
    (4,496
    )Net cash used in investing activities
    
    
    (4,967
    )
    
    
    (32,729
    )
    
    
    (10,927
    )
    
    
    (3,056
    )
    
    
    (51,679
    )Cash flows from financing activities:Proceeds from issuance of debt and
draws on revolving credit facility
    
    
    84,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,014Principal repayments of debt and capital lease obligations
    
    
    (49,033
    )
    
    
    (157
    )
    
    
    
    
    
    
    
    
    
    
    (49,190
    )Proceeds from the exercise of options and warrants
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Fees paid for financing costs
    
    
    (1,191
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,191
    )Intercompany
    
    
    
    
    
    
    (1,770
    )
    
    
    (1,286
    )
    
    
    3,056
    
    
    
    Net cash provided by financing
activities  continuing operations
    
    
    33,795
    
    
    
    (1,927
    )
    
    
    (1,286
    )
    
    
    3,056
    
    
    
    33,638Effect of exchange rate changes
on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    740
    
    
    
    
    
    
    
    740Increase (decrease) in cash and cash equivalents
    
    
    4,780
    
    
    
    (17
    )
    
    
    2,750
    
    
    
    
    
    
    
    7,513Cash and cash equivalents at the beginning of the period
    
    
    2,190
    
    
    
    563
    
    
    
    5,779
    
    
    
    
    
    
    
    8,532Cash and cash equivalents at the end of the period
    
    $
    6,970
    
    
    $
    546
    
    
    $
    8,529
    
    
    $
    
    
    
    $
    16,045
 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
       Acquisitions and Dispositions
   30




---



##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2008 and 2007
  31




---



##### Table of Contents



Three Months Ended June 30, 2008Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    60,774
    
    
    
    100.0
    %
    
    $
    67,508
    
    
    
    100.0
    %
    
    $
    128,282
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    39,468
    
    
    
    64.9
    %
    
    
    44,137
    
    
    
    65.4
    %
    
    
    83,605
    
    
    
    65.2
    %Selling, general and administrative expense
    
    
    8,309
    
    
    
    13.7
    %
    
    
    8,196
    
    
    
    12.1
    %
    
    
    16,505
    
    
    
    12.9
    %Depreciation, depletion and amortization
    
    
    6,635
    
    
    
    10.9
    %
    
    
    4,985
    
    
    
    7.4
    %
    
    
    11,620
    
    
    
    9.1
    %Foreign exchange gain and other
    
    
    (282
    )
    
    
    -0.4
    %
    
    
    (1
    )
    
    
    0.0
    %
    
    
    (283
    )
    
    
    -0.3
    %Income from operations
    
    $
    6,644
    
    
    
    10.9
    %
    
    $
    10,191
    
    
    
    15.1
    %
    
    $
    16,835
    
    
    
    13.1
    %
 Three Months Ended June 30, 2007Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    63,563
    
    
    
    100.0
    %
    
    $
    55,858
    
    
    
    100.0
    %
    
    $
    119,421
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    41,901
    
    
    
    65.9
    %
    
    
    36,598
    
    
    
    65.5
    %
    
    
    78,499
    
    
    
    65.7
    %Selling, general and administrative expense
    
    
    8,049
    
    
    
    12.7
    %
    
    
    6,629
    
    
    
    11.9
    %
    
    
    14,678
    
    
    
    12.3
    %Depreciation, depletion and amortization
    
    
    9,373
    
    
    
    14.7
    %
    
    
    4,968
    
    
    
    8.9
    %
    
    
    14,341
    
    
    
    12.0
    %Foreign exchange gain and other
    
    
    (120
    )
    
    
    -0.2
    %
    
    
    (44
    )
    
    
    -0.1
    %
    
    
    (164
    )
    
    
    -0.1
    %Income from operations
    
    $
    4,360
    
    
    
    6.9
    %
    
    $
    7,707
    
    
    
    13.8
    %
    
    $
    12,067
    
    
    
    10.1
    %
 Six Months Ended June 30, 2008Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    120,862
    
    
    
    100.0
    %
    
    $
    124,028
    
    
    
    100.0
    %
    
    $
    244,890
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    78,384
    
    
    
    64.9
    %
    
    
    81,765
    
    
    
    65.9
    %
    
    
    160,149
    
    
    
    65.4
    %Selling, general and administrative expense
    
    
    16,408
    
    
    
    13.6
    %
    
    
    16,461
    
    
    
    13.3
    %
    
    
    32,869
    
    
    
    13.4
    %Depreciation, depletion and amortization
    
    
    13,482
    
    
    
    11.2
    %
    
    
    9,928
    
    
    
    8.0
    %
    
    
    23,410
    
    
    
    9.6
    %Foreign exchange loss (gain) and other
    
    
    (482
    )
    
    
    -0.5
    %
    
    
    25
    
    
    
    0.0
    %
    
    
    (457
    )
    
    
    -0.2
    %Income from operations
    
    $
    13,070
    
    
    
    10.8
    %
    
    $
    15,849
    
    
    
    12.8
    %
    
    $
    28,919
    
    
    
    11.8
    %
 Six Months Ended June 30, 2007Florida
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    113,760
    
    
    
    100.0
    %
    
    $
    100,660
    
    
    
    100.0
    %
    
    $
    214,420
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    73,837
    
    
    
    64.9
    %
    
    
    67,429
    
    
    
    67.0
    %
    
    
    141,266
    
    
    
    65.9
    %Selling, general and administrative expense
    
    
    16,179
    
    
    
    14.2
    %
    
    
    12,931
    
    
    
    12.8
    %
    
    
    29,110
    
    
    
    13.6
    %Depreciation, depletion and amortization
    
    
    16,763
    
    
    
    14.7
    %
    
    
    8,936
    
    
    
    8.9
    %
    
    
    25,699
    
    
    
    12.0
    %Foreign exchange gain and other
    
    
    (332
    )
    
    
    -0.2
    %
    
    
    (255
    )
    
    
    -0.2
    %
    
    
    (587
    )
    
    
    -0.3
    %Income from operations
    
    $
    7,313
    
    
    
    6.4
    %
    
    $
    11,619
    
    
    
    11.5
    %
    
    $
    18,932
    
    
    
    8.8
    %
 32




---



##### Table of Contents



Revenue
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Collection
    
    $
    104,865
    
    
    
    74.0
    %
    
    $
    98,430
    
    
    
    74.3
    %
    
    $
    201,370
    
    
    
    74.4
    %
    
    $
    174,195
    
    
    
    73.0
    %Landfill disposal
    
    
    12,757
    
    
    
    9.0
    %
    
    
    13,770
    
    
    
    10.4
    %
    
    
    24,586
    
    
    
    9.1
    %
    
    
    27,336
    
    
    
    11.5
    %Transfer station
    
    
    17,896
    
    
    
    12.6
    %
    
    
    15,480
    
    
    
    11.7
    %
    
    
    32,567
    
    
    
    12.0
    %
    
    
    29,267
    
    
    
    12.3
    %Material recovery facilities
    
    
    5,607
    
    
    
    4.0
    %
    
    
    4,483
    
    
    
    3.4
    %
    
    
    11,393
    
    
    
    4.2
    %
    
    
    7,405
    
    
    
    3.1
    %Other specialized services
    
    
    633
    
    
    
    0.4
    %
    
    
    369
    
    
    
    0.2
    %
    
    
    824
    
    
    
    0.3
    %
    
    
    509
    
    
    
    0.1
    %141,758
    
    
    
    100.0
    %
    
    
    132,532
    
    
    
    100.0
    %
    
    
    270,740
    
    
    
    100.0
    %
    
    
    238,712
    
    
    
    100.0
    %Intercompany elimination
    
    
    (13,476
    )
    
    
    
    
    
    
    (13,111
    )
    
    
    
    
    
    
    (25,850
    )
    
    
    
    
    
    
    (24,292
    )$
    128,282
    
    
    
    
    
    
    $
    119,421
    
    
    
    
    
    
    $
    244,890
    
    
    
    
    
    
    $
    214,420
     Cost of Operations
   33




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##### Table of Contents



Selling, General and Administrative Expense
   Depreciation, Depletion and Amortization
   34




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##### Table of Contents



Foreign Exchange Gain and Other
  Interest Expense
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Credit Facility and Senior Subordinated Note interest
    
    $
    6,827
    
    
    $
    9,589
    
    
    $
    15,535
    
    
    $
    18,524Amortization of debt issue costs
    
    
    478
    
    
    
    831
    
    
    
    1,516
    
    
    
    1,315Other interest expense
    
    
    497
    
    
    
    410
    
    
    
    989
    
    
    
    736$
    7,802
    
    
    $
    10,830
    
    
    $
    18,040
    
    
    $
    20,575
    35




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##### Table of Contents



Income Tax Provision (Benefit)
     Liquidity and Capital Resources
  Senior Secured Credit Facilities
  36




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##### Table of Contents



Maximum
    
    Maximum
    
    MinimumConsolidated
    
    Consolidated
    
    ConsolidatedLeverage
    
    Senior Secured
    
    InterestRatio
    
    Leverage Ratio
    
    Coverage RatioSecond quarter  2008
    
    
    4.00 : 1.00
    
    
    
    2.50 : 1.00
    
    
    
    2.50 : 1.00Third quarter  2008
    
    
    4.00 : 1.00
    
    
    
    2.50 : 1.00
    
    
    
    2.50 : 1.00Fourth quarter  2008
    
    
    4.00 : 1.00
    
    
    
    2.00 : 1.00
    
    
    
    2.50 : 1.00First quarter  2009
    
    
    4.00 : 1.00
    
    
    
    N/A
    
    
    
    2.50 : 1.00Second quarter  2009
    
    
    4.00 : 1.00
    
    
    
    N/A
    
    
    
    2.50 : 1.00
  Other Secured Notes Payable
  Senior Subordinated Notes
 1 2
 37




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##### Table of Contents



Direct Financing Lease Facility
  Surety Bonds, Letters of Credit and Insurance
   Cash Flows
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  38




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##### Table of Contents



Cash Flows from Financing Activities
  Cash Flow from Discontinued Operations
  Off-Balance Sheet Financing
  39




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##### Table of Contents



Landfill Sites
  Balance,
    
    
    
    
    
    
    
    
    
    Balance,Beginning
    
    Landfills
    
    Airspace
    
    Endof Period
    
    Expanded
    
    Consumed
    
    of PeriodUnited StatesPermitted capacity
    
    
    51,255
    
    
    
    29,577
    
    
    
    (1,151
    )
    
    
    79,681Probable expansion capacity
    
    
    29,577
    
    
    
    (29,577
    )
    
    
    
    
    
    
    Total available airspace
    
    
    80,832
    
    
    
    
    
    
    
    (1,151
    )
    
    
    79,681Number of sites
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3CanadaPermitted capacity
    
    
    11,564
    
    
    
    
    
    
    
    (196
    )
    
    
    11,368Probable expansion capacity
    
    
    4,709
    
    
    
    
    
    
    
    
    
    
    
    4,709Total available airspace
    
    
    16,273
    
    
    
    
    
    
    
    (196
    )
    
    
    16,077Number of sites
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3TotalPermitted capacity
    
    
    62,819
    
    
    
    29,577
    
    
    
    (1,347
    )
    
    
    91,049Probable expansion capacity
    
    
    34,286
    
    
    
    (29,577
    )
    
    
    
    
    
    
    4,709Total available airspace
    
    
    97,105
    
    
    
    
    
    
    
    (1,347
    )
    
    
    95,758Number of sites
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6
  Trend Information
 Seasonality
  New Accounting Pronouncements
  40




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##### Table of Contents



1 2
    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 refinance our existing debt obligations to pay principal 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;
 41




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##### Table of Contents




    
    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, exchange rates and the
financial markets and accounting standards or pronouncements.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  42




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##### Table of Contents



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
  
 Item 4. Submission of Matters to a Vote of Security Holders
   Number ofNumber of
    
    VotesDirector
    
    Votes For
    
    WithheldMichael B. Lazar
    
    
    37,664,797
    
    
    
    3,372,652Lucien Rémillard
    
    
    36,606,976
    
    
    
    4,430,473Jack E. Short
    
    
    37,617,710
    
    
    
    3,419,739
  43




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##### Table of Contents



Item 5. Other Information
    
 Item 6. Exhibits
 Exhibit 10.1
    
    Employment Agreement dated as of July 22, 2008 between Waste Services, Inc. and Brian A. Goebel.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.
 44




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##### Table of Contents



SIGNATURES
  WASTE SERVICES, INC.Date: July 25, 2008By:
    /s/ DAVID SUTHERLAND-YOESTDavid Sutherland-YoestChairman of the Board, President and Chief Executive OfficerBy:
    /s/ EDWIN D. JOHNSONEdwin D. JohnsonExecutive Vice President, Chief Financial Officer 45




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No
    
    DescriptionExhibit 10.1
    
    Employment Agreement dated as of July 22, 2008 between Waste Services, Inc. and Brian A. Goebel.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.
 46