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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, 2007
 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
  o þ o
 o þ




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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2007 (unaudited) and December 31, 2006
    
    
    2Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006
    
    
    3Unaudited Condensed Consolidated Statement of Shareholders Equity for the three months ended March 31, 2007
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006
    
    
    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
    
    
    34Item 4. Controls and Procedures
    
    
    34PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    34Item 3. Defaults upon Senior Securities
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    35Signatures
    
    
    36EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEO and CFO
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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 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,520
    
    
    $
    8,532Accounts receivable (net of allowance for doubtful accounts of $531
and $574 as of March 31, 2007 and December 31 2006, respectively)
    
    
    57,455
    
    
    
    52,461Prepaid expenses and other
current assets
    
    
    8,144
    
    
    
    6,256Current assets of discontinued
operations
    
    
    
    
    
    
    3,870Total current assets
    
    
    73,119
    
    
    
    71,119Property and equipment, net
    
    
    159,871
    
    
    
    145,318Landfill sites, net
    
    
    235,696
    
    
    
    237,338Goodwill and other intangible assets, net
    
    
    402,111
    
    
    
    350,035Other assets
    
    
    21,001
    
    
    
    10,667Non-current assets of discontinued operations
    
    
    
    
    
    
    50,586Total assets
    
    $
    891,798
    
    
    $
    865,063LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    23,371
    
    
    $
    24,033Accrued expenses and other current liabilities
    
    
    62,725
    
    
    
    54,476Short-term financing and current portion of long-term debt
    
    
    2,746
    
    
    
    3,975Current liabilities of discontinued operations
    
    
    
    
    
    
    3,874Total current liabilities
    
    
    88,842
    
    
    
    86,358Long-term debt
    
    
    431,024
    
    
    
    406,113Accrued closure, post-closure and other obligations
    
    
    34,322
    
    
    
    32,899Non-current liabilities of discontinued operations
    
    
    
    
    
    
    336Total liabilities
    
    
    554,188
    
    
    
    525,706Shareholders equity:Common stock $0.01 par value: 166,666,666 shares authorized, 43,870,128
and 43,868,606 shares issued and outstanding as of March 31,
2007 and
December 31, 2006,
respectively
    
    
    438
    
    
    
    438Additional paid-in capital
    
    
    507,079
    
    
    
    506,751Accumulated other
comprehensive income
    
    
    36,799
    
    
    
    35,201Accumulated deficit
    
    
    (206,706
    )
    
    
    (203,033
    )Total shareholders equity
    
    
    337,610
    
    
    
    339,357Total liabilities and shareholders equity
    
    $
    891,798
    
    
    $
    865,063
  2




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Three Months Ended March 31,2007
    
    
    2006Revenue
    
    $
    103,272
    
    
    $
    88,560Operating and other expenses:Cost of operations (exclusive of depreciation, depletion
and amortization)
    
    
    68,077
    
    
    
    62,378Selling, general and administrative expense (exclusive of
depreciation, depletion and amortization)
    
    
    14,950
    
    
    
    15,237Deferred acquisition costs
    
    
    
    
    
    
    5,612Depreciation, depletion and amortization
    
    
    12,593
    
    
    
    9,717Foreign exchange gain and other
    
    
    (423
    )
    
    
    (81
    )Income (loss) from operations
    
    
    8,075
    
    
    
    (4,303
    )Interest expense
    
    
    9,745
    
    
    
    7,057Cumulative mandatorily redeemable preferred stock dividends and
amortization of issue costs
    
    
    
    
    
    
    5,697Loss from continuing operations before income taxes
    
    
    (1,670
    )
    
    
    (17,057
    )Income tax provision
    
    
    1,737
    
    
    
    969Net loss from continuing operations
    
    
    (3,407
    )
    
    
    (18,026
    )Net loss from discontinued operations
    
    
    (1,204
    )
    
    
    (739
    )Gain on sale of discontinued operations
    
    
    938
    
    
    
    Net loss
    
    $
    (3,673
    )
    
    $
    (18,765
    )Basic and diluted loss per share:Loss per share  continuing operations
    
    
    (0.07
    )
    
    
    (0.54
    )Loss per share  discontinued operations
    
    
    (0.01
    )
    
    
    (0.02
    )Loss per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.56
    )Weighted average common shares outstanding  basic and diluted
    
    
    45,972
    
    
    
    33,377
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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
For the Three Months Ended March 31, 2007
(In thousands)
 AccumulatedWaste Services, Inc.
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Additional
    
    
    Comprehensive
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Income
    
    
    Deficit
    
    
    EquityBalance, December 31, 2006
    
    
    43,869
    
    
    $
    438
    
    
    $
    506,751
    
    
    $
    35,201
    
    
    $
    (203,033
    )
    
    $
    339,357Exercise of warrants
    
    
    1
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    
    
    
    
    
    
    
    
    323Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,598
    
    
    
    
    
    
    
    1,598Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,673
    )
    
    
    (3,673
    )Balance, March 31, 2007
    
    
    43,870
    
    
    $
    438
    
    
    $
    507,079
    
    
    $
    36,799
    
    
    $
    (206,706
    )
    
    $
    337,610
  4




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WASTE SERVICES, INC.
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three Months Ended March 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (3,673
    )
    
    $
    (18,765
    )Adjustments
to reconcile net loss to net cash flows from operating
activities:Net loss from discontinued operations
    
    
    266
    
    
    
    739Depreciation, depletion and amortization
    
    
    12,593
    
    
    
    9,717Cumulative mandatorily redeemable preferred stock dividends and
amortization of issue costs
    
    
    
    
    
    
    5,697Amortization of debt issue costs
    
    
    485
    
    
    
    388Deferred income tax provision (benefit)
    
    
    227
    
    
    
    858Non-cash stock-based compensation expense
    
    
    323
    
    
    
    1,048Deferred acquisition costs expensed
    
    
    
    
    
    
    5,612Other non-cash items
    
    
    207
    
    
    
    195Changes in operating assets and liabilities (excluding
the effects of acquisitions):Accounts receivable
    
    
    2,715
    
    
    
    2,362Prepaid expenses and other current assets
    
    
    (813
    )
    
    
    (761
    )Accounts payable
    
    
    (1,481
    )
    
    
    (155
    )Accrued expenses and other current liabilities
    
    
    301
    
    
    
    3,483Net cash provided by continuing operations
    
    
    11,150
    
    
    
    10,418Net cash provided by discontinued operations
    
    
    774
    
    
    
    675Net cash provided by operating activities
    
    
    11,924
    
    
    
    11,093Cash flows from investing activities:Cash used in business combinations and significant asset
acquisitions, net of cash acquired
    
    
    (15,312
    )
    
    
    Capital expenditures
    
    
    (9,024
    )
    
    
    (12,347
    )Proceeds from asset sales and business divestitures
    
    
    140
    
    
    
    371Deposits for business acquisitions and other
    
    
    (11,646
    )
    
    
    (3,555
    )Net cash used in continuing operations
    
    
    (35,842
    )
    
    
    (15,531
    )Net cash used in discontinued operations
    
    
    (819
    )
    
    
    (2,036
    )Net cash used in investing activities
    
    
    (36,661
    )
    
    
    (17,567
    )Cash flows from financing activities:Proceeds from issuance of debt and draw on revolving credit facility
    
    
    26,000
    
    
    
    1,000Principal repayments of debt and capital lease obligations
    
    
    (2,318
    )
    
    
    (1,484
    )Proceeds from the exercise of options and warrants
    
    
    5
    
    
    
    84Cash provided by (used in) financing activities  continuing operations
    
    
    23,687
    
    
    
    (400
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    38
    
    
    
    5Decrease in cash and cash equivalents
    
    
    (1,012
    )
    
    
    (6,869
    )Cash and cash equivalents at the beginning of the period
    
    
    8,532
    
    
    
    8,886Cash and cash equivalents at the end of the period
    
    $
    7,520
    
    
    $
    2,017
  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-(Contined)
   Three months ended March 31,2007
    
    2006Common Shares issuable under exercisable options
    
    
    21
    
    
    
    2Common Shares issuable under exercisable warrants
    
    
    596
    
    
    
    302Dilutive securities
    
    
    617
    
    
    
    304
  2. Adopted Accounting
  
    
    an allocation or a shift of income between taxing jurisdictions,
    
    the characterization of income or a decision to exclude reporting taxable income in a tax return, or
    
    a decision to classify a transaction, entity, or other position in a tax return as tax exempt.
    
    
    Federal  We are subject to U.S. federal tax examinations by tax authorities for the tax years ended 2003 to 2006.
    
    State  We are subject to state tax examinations by tax authorities for the tax years ended 2003 to 2006.
    
    Canada  We are no longer subject to foreign tax examinations by tax authorities for years before 1999.
  7




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
  3. Discontinued Operations
   Accounts receivable
    
    $
    3,418Prepaid expenses and other current assets
    
    
    452Current assets of discontinued operations
    
    
    3,870Property and equipment
    
    
    11,803Landfill sites
    
    
    17,229Goodwill and other intangible assets
    
    
    21,433Other assets
    
    
    121Non-current assets of discontinued operations
    
    
    50,586Total assets of discontinued operations
    
    $
    54,456Accounts payable
    
    $
    356Accrued expenses and other current liabilities
    
    
    3,518Current liabilities of discontinued operations
    
    
    3,874Accrued closure, post closure and other obligations
    
    
    336Non-current liabilities of discontinued operations
    
    
    336Total liabilities of discontinued operations
    
    $
    4,210Net assets of discontinued operations
    
    $
    50,246
 4. Share-Based Payments
  Three months ended March 31,2007
    
    2006Annual dividend yield
    
    
    
    
    
    
    Weighted-average expected life (years)
    
    
    3.0
    
    
    
    3.0Risk-free interest rate
    
    
    4.54
    %
    
    
    4.83
    %Expected volatility
    
    
    92
    %
    
    
    38
    %
  8




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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
    
    $
    15,392Sale of assets to Allied Waste
    
    
    52,497Total purchase price
    
    
    67,889Allocated as follows:Working capital assumed:Cash and cash equivalents
    
    
    1Accounts receivable
    
    
    7,501Prepaid expenses and other current assets
    
    
    290Accrued expenses and other current liabilities
    
    
    (4,156
    )Net working capital
    
    
    3,636Property and equipment
    
    
    12,709Net book value of assets acquired and liabilities
assumed
    
    
    16,345Excess purchase price to be allocated
    
    $
    51,544Allocated as follows:Goodwill
    
    $
    20,532Other intangible assets
    
    
    31,012Total allocated
    
    $
    51,544
   9




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
   Three Months Ended March 31,2007
    
    
    2006Revenue
    
    $
    119,146
    
    
    $
    118,492Net loss attributable to common shareholders
    
    $
    (2,179
    )
    
    $
    (17,070
    )Basic and diluted net loss per Common Share
    
    $
    (0.05
    )
    
    $
    (0.47
    )Basic and diluted pro forma weighted average number of common shares outstanding
    
    
    45,972
    
    
    
    36,260
   6. Prepaid Expenses and Other Current Assets
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Prepaid expenses
    
    $
    3,220
    
    
    $
    2,991Parts and supplies
    
    
    1,914
    
    
    
    1,720Other current assets
    
    
    3,010
    
    
    
    1,545$
    8,144
    
    
    $
    6,256
 7. Property and Equipment
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Land and buildings
    
    $
    41,718
    
    
    $
    35,275Vehicles
    
    
    124,143
    
    
    
    116,747Containers, compactors and landfill and recycling equipment
    
    
    82,731
    
    
    
    75,935Furniture, fixtures, other office equipment and leasehold improvements
    
    
    10,591
    
    
    
    10,288Total property and equipment
    
    
    259,183
    
    
    
    238,245Less: Accumulated depreciation
    
    
    (99,312
    )
    
    
    (92,927
    )Property and equipment, net
    
    $
    159,871
    
    
    $
    145,318
 8. Landfill Sites, Accrued Closure, Post-Closure and Other Obligations
 Landfill Sites
 10




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Landfill sites
    
    $
    287,607
    
    
    $
    284,315Less: Accumulated depletion
    
    
    (51,911
    )
    
    
    (46,977
    )Landfill sites, net
    
    $
    235,696
    
    
    $
    237,338
  2007
    
    
    2006Balance at the beginning of the period
    
    $
    237,338
    
    
    $
    156,498Landfill site construction costs
    
    
    3,131
    
    
    
    4,646Reclassification to conservatory
    
    
    (1,029
    )
    
    
    Additional asset retirement obligations
    
    
    806
    
    
    
    421Depletion
    
    
    (4,690
    )
    
    
    (3,266
    )Effect of foreign exchange rate fluctuations
    
    
    140
    
    
    
    (41
    )Balance at the end of the period
    
    $
    235,696
    
    
    $
    158,258
 Accrued Closure, Post-Closure and Other Obligations
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Accrued closure and post-closure obligations
    
    $
    11,010
    
    
    $
    9,941Deferred income tax liability
    
    
    22,671
    
    
    
    22,322Capital lease obligations
    
    
    172
    
    
    
    186Other obligations
    
    
    469
    
    
    
    450$
    34,322
    
    
    $
    32,899
  2007
    
    
    2006Current portion at the beginning of period
    
    $
    6,258
    
    
    $
    Long-term portion at the beginning of period
    
    
    9,941
    
    
    
    9,074Balance at the beginning of period
    
    
    16,199
    
    
    
    9,074Additional asset retirement obligations
    
    
    806
    
    
    
    421Accretion
    
    
    196
    
    
    
    186Payments
    
    
    (599
    )
    
    
    Effect of foreign exchange rate fluctuations
    
    
    67
    
    
    
    (28
    )Balance at the end of period
    
    
    16,669
    
    
    
    9,653Less: Current portion
    
    
    (5,659
    )
    
    
    Long-term portion
    
    $
    11,010
    
    
    $
    9,653
 9. Goodwill and Other Intangible Assets
  11




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Other intangible assets subject to amortization:Customer relationships and contracts
    
    $
    75,007
    
    
    $
    43,964Non-competition agreements and other
    
    
    3,706
    
    
    
    3,69478,713
    
    
    
    47,658Less:
Accumulated amortization:Customer relationships and contracts
    
    
    (18,366
    )
    
    
    (17,080
    )Non-competition agreements and other
    
    
    (2,582
    )
    
    
    (2,435
    )Other intangible assets subject to amortization, net
    
    
    57,765
    
    
    
    28,143Goodwill
    
    
    344,346
    
    
    
    321,892Goodwill and other intangible assets, net
    
    $
    402,111
    
    
    $
    350,035
  Three Months Ended March 31, 2007Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    235,044
    
    
    $
    86,848
    
    
    $
    321,892Acquisitions
    
    
    20,532
    
    
    
    
    
    
    
    20,532Purchase price allocation adjustments for prior acquisitions
    
    
    1,051
    
    
    
    61
    
    
    
    1,112Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    810
    
    
    
    810Balance at the end of the period
    
    $
    256,627
    
    
    $
    87,719
    
    
    $
    344,346
 Three Months Ended March 31, 2006Florida
    
    
    Canada
    
    
    TotalBalance at the beginning of the period
    
    $
    199,377
    
    
    $
    84,869
    
    
    $
    284,246Effect of foreign exchange rate fluctuations
    
    
    
    
    
    
    (355
    )
    
    
    (355
    )Balance at the end of the period
    
    $
    199,377
    
    
    $
    84,514
    
    
    $
    283,891
 10. Other Assets
  March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Debt issue costs, net of accumulated amortization of
$4,337 and $3,853 as of March 31, 2007 and December 31, 2006, respectively
    
    $
    8,669
    
    
    $
    9,060Acquisition deposits and deferred acquisition costs
    
    
    11,063
    
    
    
    1,048Other assets
    
    
    1,269
    
    
    
    559$
    21,001
    
    
    $
    10,667
 11. Debt
  12




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Senior Secured Credit Facilities:Revolving credit facility, floating rate at 10.3% as of March 31, 2007
    
    $
    26,000
    
    
    $
    Term loan facility, floating interest rate at 8.1% as of March 31, 2007
and 10.0% (adjusted to 8.1% in January 2007) as of December 31,
2006,
due $613 per quarter to March 2010, $59,322
per quarter thereafter,
due March 2011
    
    
    244,647
    
    
    
    245,260Senior Subordinated Notes, fixed interest rate at 9.5%, due 2014
    
    
    160,000
    
    
    
    160,000Other secured notes payable, interest at 4.3% to 4.5%, due through 2025
    
    
    383
    
    
    
    2,041Other subordinated notes payable, interest at 6.7%, due through 2017
    
    
    2,740
    
    
    
    2,787433,770
    
    
    
    410,088Less: Current portion
    
    
    (2,746
    )
    
    
    (3,975
    )Long-term portion
    
    $
    431,024
    
    
    $
    406,113
 Senior Secured Credit Facilities
    Senior Subordinated Notes
 1 2
  13




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   12. Cumulative Mandatorily Redeemable Preferred Stock
   13. Commitments and Contingencies
 Environmental Risks
   Legal Proceedings
   14




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WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Surety Bonds, Letters of Credit and Insurance
    Three Months Ended March 31,2007
    
    
    2006Balance at the beginning of the period
    
    $
    5,327
    
    
    $
    4,356Provisions
    
    
    800
    
    
    
    1,289Payments
    
    
    (1,141
    )
    
    
    (775
    )Unfavorable (favorable) claim development for prior periods
    
    
    283
    
    
    
    (315
    )Balance at the end of the period
    
    $
    5,269
    
    
    $
    4,555
  Disposal Agreement
   Other Contractual Arrangements
 15




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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
     15. Comprehensive Income (Loss)
  16




---



##### Table of Contents



Three Months Ended March 31,2007
    
    
    2006Net loss
    
    $
    (3,673
    )
    
    $
    (18,765
    )Foreign currency translation adjustment
    
    
    1,598
    
    
    
    (735
    )Comprehensive loss
    
    $
    (2,075
    )
    
    $
    (19,500
    )
 16. Segment Information
    Three Months Ended March 31, 2007All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    56,512
    
    
    $
    44,801
    
    
    $
    1,959
    
    
    $
    
    
    
    $
    103,272Depreciation, depletion and amortization
    
    
    7,987
    
    
    
    3,663
    
    
    
    624
    
    
    
    319
    
    
    
    12,593Income (loss) from operations
    
    
    8,219
    
    
    
    6,291
    
    
    
    160
    
    
    
    (6,595
    )
    
    
    8,075Capital expenditures
    
    
    3,843
    
    
    
    3,644
    
    
    
    1,013
    
    
    
    524
    
    
    
    9,024
 Three Months Ended March 31, 2006All OtherFlorida
    
    Canada
    
    Operations
    
    Corporate
    
    TotalRevenue
    
    $
    48,393
    
    
    $
    39,091
    
    
    $
    1,076
    
    
    $
    
    
    
    $
    88,560Depreciation, depletion and amortization
    
    
    5,273
    
    
    
    3,688
    
    
    
    371
    
    
    
    385
    
    
    
    9,717Income (loss) from operations
    
    
    5,504
    
    
    
    4,624
    
    
    
    (131
    )
    
    
    (14,300
    )
    
    
    (4,303
    )Capital expenditures
    
    
    7,342
    
    
    
    3,523
    
    
    
    960
    
    
    
    522
    
    
    
    12,347
 17. Condensed Consolidating Financial Statements
  17




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 March 31, 2007Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,297
    
    
    $
    3,223
    
    
    $
    
    
    
    $
    7,520Accounts receivable, net
    
    
    33,096
    
    
    
    24,359
    
    
    
    
    
    
    
    57,455Prepaid expenses and other current assets
    
    
    2,948
    
    
    
    5,196
    
    
    
    
    
    
    
    8,144Total current assets
    
    
    40,341
    
    
    
    32,778
    
    
    
    
    
    
    
    73,119Property and equipment, net
    
    
    90,689
    
    
    
    69,182
    
    
    
    
    
    
    
    159,871Landfill sites, net
    
    
    221,012
    
    
    
    14,684
    
    
    
    
    
    
    
    235,696Goodwill and other intangible assets, net
    
    
    313,407
    
    
    
    88,704
    
    
    
    
    
    
    
    402,111Other assets
    
    
    20,283
    
    
    
    718
    
    
    
    
    
    
    
    21,001Due from affiliates
    
    
    
    
    
    
    1,743
    
    
    
    (1,743
    )
    
    
    Investment in subsidiary
    
    
    171,387
    
    
    
    
    
    
    
    (171,387
    )
    
    
    Total assets
    
    $
    857,119
    
    
    $
    207,809
    
    
    $
    (173,130
    )
    
    $
    891,798LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    13,361
    
    
    $
    10,010
    
    
    $
    
    
    
    $
    23,371Accrued expenses and other current liabilities
    
    
    50,574
    
    
    
    12,151
    
    
    
    
    
    
    
    62,725Short-term
financing and current portion of long-term debt
    
    
    2,746
    
    
    
    
    
    
    
    
    
    
    
    2,746Total current liabilities
    
    
    66,681
    
    
    
    22,161
    
    
    
    
    
    
    
    88,842Long-term debt
    
    
    431,024
    
    
    
    
    
    
    
    
    
    
    
    431,024Accrued closure, post-closure and other obligations
    
    
    20,061
    
    
    
    14,261
    
    
    
    
    
    
    
    34,322Due to affiliates
    
    
    1,743
    
    
    
    
    
    
    
    (1,743
    )
    
    
    Total liabilities
    
    
    519,509
    
    
    
    36,422
    
    
    
    (1,743
    )
    
    
    554,188Shareholders equity:Common stock of Waste Services, Inc
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    438Other equity
    
    
    337,172
    
    
    
    171,387
    
    
    
    (171,387
    )
    
    
    337,172Total shareholders equity
    
    
    337,610
    
    
    
    171,387
    
    
    
    (171,387
    )
    
    
    337,610Total liabilities and shareholders equity
    
    $
    857,119
    
    
    $
    207,809
    
    
    $
    (173,130
    )
    
    $
    891,798
 18




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,753
    
    
    $
    5,779
    
    
    $
    
    
    
    $
    8,532Accounts receivable, net
    
    
    24,801
    
    
    
    27,660
    
    
    
    
    
    
    
    52,461Prepaid expenses and other current assets
    
    
    2,894
    
    
    
    3,362
    
    
    
    
    
    
    
    6,256Current assets of discontinued operations
    
    
    3,870
    
    
    
    
    
    
    
    
    
    
    
    3,870Total current assets
    
    
    34,318
    
    
    
    36,801
    
    
    
    
    
    
    
    71,119Property and equipment, net
    
    
    76,117
    
    
    
    69,201
    
    
    
    
    
    
    
    145,318Landfill sites, net
    
    
    223,507
    
    
    
    13,831
    
    
    
    
    
    
    
    237,338Goodwill and other intangible assets, net
    
    
    262,056
    
    
    
    87,979
    
    
    
    
    
    
    
    350,035Other assets
    
    
    10,667
    
    
    
    
    
    
    
    
    
    
    
    10,667Due from affiliates
    
    
    
    
    
    
    344
    
    
    
    (344
    )
    
    
    Investment in subsidiary
    
    
    167,448
    
    
    
    
    
    
    
    (167,448
    )
    
    
    Non-current assets of discontinued operations
    
    
    50,586
    
    
    
    
    
    
    
    
    
    
    
    50,586Total assets
    
    $
    824,699
    
    
    $
    208,156
    
    
    $
    (167,792
    )
    
    $
    865,063LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,600
    
    
    $
    11,433
    
    
    $
    
    
    
    $
    24,033Accrued expenses and other current liabilities
    
    
    39,013
    
    
    
    15,463
    
    
    
    
    
    
    
    54,476Short-term financing and current
portion of long-term debt
    
    
    3,975
    
    
    
    
    
    
    
    
    
    
    
    3,975Current liabilities of discontinued operations
    
    
    3,874
    
    
    
    
    
    
    
    
    
    
    
    3,874Total current liabilities
    
    
    59,462
    
    
    
    26,896
    
    
    
    
    
    
    
    86,358Long-term debt
    
    
    406,113
    
    
    
    
    
    
    
    
    
    
    
    406,113Accrued closure, post-closure and other obligations
    
    
    19,087
    
    
    
    13,812
    
    
    
    
    
    
    
    32,899Due to affiliates
    
    
    344
    
    
    
    
    
    
    
    (344
    )
    
    
    Non-current liabilities of discontinued operations
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    336Total liabilities
    
    
    485,342
    
    
    
    40,708
    
    
    
    (344
    )
    
    
    525,706Shareholders equity:Common stock of Waste Services, Inc
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    438Other equity
    
    
    338,919
    
    
    
    167,448
    
    
    
    (167,448
    )
    
    
    338,919Total shareholders equity
    
    
    339,357
    
    
    
    167,448
    
    
    
    (167,448
    )
    
    
    339,357Total liabilities and shareholders equity
    
    $
    824,699
    
    
    $
    208,156
    
    
    $
    (167,792
    )
    
    $
    865,063
 19




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended March 31, 2007Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    58,471
    
    
    $
    44,801
    
    
    $
    
    
    
    $
    103,272Operating and other expenses:Cost of operations (exclusive of depreciation,
depletion and amortization)
    
    
    37,245
    
    
    
    30,832
    
    
    
    
    
    
    
    68,077Selling, general and administrative expense (exclusive
of depreciation, depletion and amortization)
    
    
    8,647
    
    
    
    6,303
    
    
    
    
    
    
    
    14,950Depreciation, depletion and amortization
    
    
    8,625
    
    
    
    3,968
    
    
    
    
    
    
    
    12,593Foreign exchange gain and other
    
    
    (208
    )
    
    
    (215
    )
    
    
    
    
    
    
    (423
    )Equity earnings in investees
    
    
    (2,216
    )
    
    
    
    
    
    
    2,216
    
    
    
    Income from operations
    
    
    6,378
    
    
    
    3,913
    
    
    
    (2,216
    )
    
    
    8,075Interest expense
    
    
    9,689
    
    
    
    56
    
    
    
    
    
    
    
    9,745Income (loss) from continuing operations before income taxes
    
    
    (3,311
    )
    
    
    3,857
    
    
    
    (2,216
    )
    
    
    (1,670
    )Income tax provision
    
    
    96
    
    
    
    1,641
    
    
    
    
    
    
    
    1,737Net income (loss) from continuing operations
    
    
    (3,407
    )
    
    
    2,216
    
    
    
    (2,216
    )
    
    
    (3,407
    )Net loss from discontinued operations
    
    
    (1,204
    )
    
    
    
    
    
    
    
    
    
    
    (1,204
    )Gain on sale of discontinued operations
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    938Net income (loss)
    
    $
    (3,673
    )
    
    $
    2,216
    
    
    $
    (2,216
    )
    
    $
    (3,673
    )
 20




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended March 31, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenue
    
    $
    49,469
    
    
    $
    39,091
    
    
    $
    
    
    
    $
    88,560Operating and other expenses:Cost of operations (exclusive of depreciation, depletion
and amortization)
    
    
    35,154
    
    
    
    27,224
    
    
    
    
    
    
    
    62,378Selling, general and administrative expense (exclusive of
depreciation, depletion and amortization)
    
    
    9,165
    
    
    
    6,072
    
    
    
    
    
    
    
    15,237Deferred acquisition costs
    
    
    438
    
    
    
    5,174
    
    
    
    
    
    
    
    5,612Depreciation, depletion and amortization
    
    
    5,653
    
    
    
    4,064
    
    
    
    
    
    
    
    9,717Foreign exchange loss (gain) and other
    
    
    56
    
    
    
    (137
    )
    
    
    
    
    
    
    (81
    )Equity earnings in investees
    
    
    3,008
    
    
    
    
    
    
    
    (3,008
    )
    
    
    Loss from operations
    
    
    (4,005
    )
    
    
    (3,306
    )
    
    
    3,008
    
    
    
    (4,303
    )Interest expense
    
    
    6,961
    
    
    
    96
    
    
    
    
    
    
    
    7,057Cumulative mandatorily redeemable preferred stock dividends and
amortization of issue costs
    
    
    5,697
    
    
    
    
    
    
    
    
    
    
    
    5,697Loss from continuing operations before income taxes
    
    
    (16,663
    )
    
    
    (3,402
    )
    
    
    3,008
    
    
    
    (17,057
    )Income tax provision (benefit)
    
    
    1,363
    
    
    
    (394
    )
    
    
    
    
    
    
    969Net loss from continuing operations
    
    
    (18,026
    )
    
    
    (3,008
    )
    
    
    3,008
    
    
    
    (18,026
    )Net loss from discontinued operations
    
    
    (739
    )
    
    
    
    
    
    
    
    
    
    
    (739
    )Net loss
    
    $
    (18,765
    )
    
    $
    (3,008
    )
    
    $
    3,008
    
    
    $
    (18,765
    )
 21




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended March 31, 2007Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    6,720
    
    
    $
    5,204
    
    
    $
    
    
    
    $
    11,924Cash flows from investing activities:Cash used in business combinations and significant
asset acquisitions, net of cash acquired
    
    
    (15,312
    )
    
    
    
    
    
    
    
    
    
    
    (15,312
    )Capital expenditures
    
    
    (4,876
    )
    
    
    (4,148
    )
    
    
    
    
    
    
    (9,024
    )Proceeds from asset sales and business divestitures
    
    
    131
    
    
    
    9
    
    
    
    
    
    
    
    140Deposits for business acquisitions and other
    
    
    (10,095
    )
    
    
    (1,551
    )
    
    
    
    
    
    
    (11,646
    )Intercompany
    
    
    
    
    
    
    (2,108
    )
    
    
    2,108
    
    
    
    Net cash used in continuing operations
    
    
    (30,152
    )
    
    
    (7,798
    )
    
    
    2,108
    
    
    
    (35,842
    )Net cash used in discontinued operations
    
    
    (819
    )
    
    
    
    
    
    
    
    
    
    
    (819
    )Net cash used in investing activities
    
    
    (30,971
    )
    
    
    (7,798
    )
    
    
    2,108
    
    
    
    (36,661
    )Cash flows from financing activities:Proceeds from issuance of debt and draws on revolving credit facility
    
    
    26,000
    
    
    
    
    
    
    
    
    
    
    
    26,000Principal repayments of debt and capital lease obligations
    
    
    (2,318
    )
    
    
    
    
    
    
    
    
    
    
    (2,318
    )Proceeds from the exercise of options and warrants
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Intercompany
    
    
    2,108
    
    
    
    
    
    
    
    (2,108
    )
    
    
    Net cash provided by financing activities  continuing operations
    
    
    25,795
    
    
    
    
    
    
    
    (2,108
    )
    
    
    23,687Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    38Increase (decrease) in cash and cash equivalents
    
    
    1,544
    
    
    
    (2,556
    )
    
    
    
    
    
    
    (1,012
    )Cash and cash equivalents at the beginning of the period
    
    
    2,753
    
    
    
    5,779
    
    
    
    
    
    
    
    8,532Cash and cash equivalents at the end of the period
    
    $
    4,297
    
    
    $
    3,223
    
    
    $
    
    
    
    $
    7,520
 22




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##### Table of Contents



WASTE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended March 31, 2006Non-Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by operating activities
    
    $
    6,787
    
    
    $
    4,306
    
    
    $
    
    
    
    $
    11,093Cash flows from investing activities:Capital expenditures
    
    
    (8,486
    )
    
    
    (3,861
    )
    
    
    
    
    
    
    (12,347
    )Proceeds from asset sales and business divestitures
    
    
    94
    
    
    
    277
    
    
    
    
    
    
    
    371Deposits for business acquisitions and other
    
    
    (3,557
    )
    
    
    2
    
    
    
    
    
    
    
    (3,555
    )Intercompany
    
    
    
    
    
    
    (4,398
    )
    
    
    4,398
    
    
    
    Net cash used in continuing operations
    
    
    (11,949
    )
    
    
    (7,980
    )
    
    
    4,398
    
    
    
    (15,531
    )Net cash used in discontinued operations
    
    
    (2,036
    )
    
    
    
    
    
    
    
    
    
    
    (2,036
    )Net cash used in investing activities
    
    
    (13,985
    )
    
    
    (7,980
    )
    
    
    4,398
    
    
    
    (17,567
    )Cash flows from financing activities:Proceeds from issuance of debt and draw on revolving credit facility
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000Principal repayments of debt and capital lease obligations
    
    
    (1,293
    )
    
    
    (191
    )
    
    
    
    
    
    
    (1,484
    )Proceeds from the exercise of options and warrants
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    84Intercompany
    
    
    4,398
    
    
    
    
    
    
    
    (4,398
    )
    
    
    Net cash provided by (used in) financing activities  continuing operations
    
    
    4,189
    
    
    
    (191
    )
    
    
    (4,398
    )
    
    
    (400
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Decrease in cash and cash equivalents
    
    
    (3,009
    )
    
    
    (3,860
    )
    
    
    
    
    
    
    (6,869
    )Cash and cash equivalents at the beginning of the period
    
    
    3,680
    
    
    
    5,206
    
    
    
    
    
    
    
    8,886Cash and cash equivalents at the end of the period
    
    $
    671
    
    
    $
    1,346
    
    
    $
    
    
    
    $
    2,017
 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
   Results of Operations for the Three Months Ended March 31, 2007 and 2006
 25




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##### Table of Contents



Three Months Ended March 31, 2007US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    58,471
    
    
    
    100.0
    %
    
    $
    44,801
    
    
    
    100.0
    %
    
    $
    103,272
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    37,245
    
    
    
    63.7
    %
    
    
    30,832
    
    
    
    68.8
    %
    
    
    68,077
    
    
    
    65.9
    %Selling, general and administrative expense
    
    
    8,647
    
    
    
    14.8
    %
    
    
    6,303
    
    
    
    14.1
    %
    
    
    14,950
    
    
    
    14.5
    %Depreciation, depletion and amortization
    
    
    8,625
    
    
    
    14.8
    %
    
    
    3,968
    
    
    
    8.9
    %
    
    
    12,593
    
    
    
    12.2
    %Foreign exchange gain and other
    
    
    (208
    )
    
    
    -0.4
    %
    
    
    (215
    )
    
    
    -0.5
    %
    
    
    (423
    )
    
    
    -0.4
    %Income from operations
    
    $
    4,162
    
    
    
    7.1
    %
    
    $
    3,913
    
    
    
    8.7
    %
    
    $
    8,075
    
    
    
    7.8
    %
 Three Months Ended March 31, 2006US
    
    
    
    
    
    
    Canada
    
    
    
    
    
    
    TotalRevenue
    
    $
    49,469
    
    
    
    100.0
    %
    
    $
    39,091
    
    
    
    100.0
    %
    
    $
    88,560
    
    
    
    100.0
    %Operating expenses:Cost of operations
    
    
    35,154
    
    
    
    71.1
    %
    
    
    27,224
    
    
    
    69.7
    %
    
    
    62,378
    
    
    
    70.4
    %Selling, general and administrative expense
    
    
    9,165
    
    
    
    18.5
    %
    
    
    6,072
    
    
    
    15.6
    %
    
    
    15,237
    
    
    
    17.2
    %Deferred acquisition costs
    
    
    438
    
    
    
    0.9
    %
    
    
    5,174
    
    
    
    13.2
    %
    
    
    5,612
    
    
    
    6.3
    %Depreciation, depletion and amortization
    
    
    5,653
    
    
    
    11.4
    %
    
    
    4,064
    
    
    
    10.4
    %
    
    
    9,717
    
    
    
    11.1
    %Foreign exchange loss (gain) and other
    
    
    56
    
    
    
    0.1
    %
    
    
    (137
    )
    
    
    -0.4
    %
    
    
    (81
    )
    
    
    -0.1
    %Loss from operations
    
    $
    (997
    )
    
    
    -2.0
    %
    
    $
    (3,306
    )
    
    
    -8.5
    %
    
    $
    (4,303
    )
    
    
    -4.9
    %
 26




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##### Table of Contents



Revenue
  Three Months Ended March 31,2007
    
    2006Collection
    
    $
    80,909
    
    
    
    70.2
    %
    
    $
    73,648
    
    
    
    78.1
    %Landfill disposal
    
    
    15,901
    
    
    
    13.8
    %
    
    
    11,416
    
    
    
    12.1
    %Transfer station
    
    
    14,705
    
    
    
    12.8
    %
    
    
    6,885
    
    
    
    7.3
    %Material recovery facilities
    
    
    3,563
    
    
    
    3.1
    %
    
    
    2,252
    
    
    
    2.4
    %Other specialized services
    
    
    141
    
    
    
    0.1
    %
    
    
    155
    
    
    
    0.1
    %115,219
    
    
    
    100.0
    %
    
    
    94,356
    
    
    
    100.0
    %Intercompany elimination
    
    
    (11,947
    )
    
    
    
    
    
    
    (5,796
    )$
    103,272
    
    
    
    
    
    
    $
    88,560
 All Other
    
    
    TotalThree Months Ended March 31,
    
    Florida
    
    
    Canada
    
    
    Operations
    
    
    Revenue2007
    
    $
    56,512
    
    
    $
    44,801
    
    
    $
    1,959
    
    
    $
    103,2722006
    
    
    48,393
    
    
    
    39,091
    
    
    
    1,076
    
    
    
    88,560
    Cost of Operations
   27




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##### Table of Contents



Selling, General and Administrative Expense
  Deferred Acquisition Costs
  Depreciation, Depletion and Amortization
  Foreign Exchange Gain and Other
  Interest Expense
  Three Months Ended March 31,2007
    
    
    2006Preferred Stock dividends and amortization of issue costs
    
    $
    
    
    
    $
    5,697Credit Facility and Senior Subordinated Note interest
    
    
    8,936
    
    
    
    6,167Amortization of debt issue costs
    
    
    485
    
    
    
    388Other interest expense
    
    
    324
    
    
    
    502$
    9,745
    
    
    $
    12,754
 28




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##### Table of Contents



Income Tax Provision
  Liquidity and Capital Resources
  Senior Secured Credit Facilities
    Senior Subordinated Notes
 1 2
 29




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##### Table of Contents



Migration Transaction
     Surety Bonds, Letters of Credit and Insurance
   30




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##### Table of Contents



Cash Flows
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Off-Balance Sheet Financing
  Landfill Sites
  31




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##### Table of Contents



March 31, 2007Balance,
    
    
    
    
    
    
    Balance,Beginning
    
    
    Airspace
    
    
    Endof Period
    
    
    Consumed
    
    
    of PeriodUnited StatesPermitted capacity
    
    
    100,962
    
    
    
    (896
    )
    
    
    100,066Probable expansion capacity
    
    
    18,300
    
    
    
    
    
    
    
    18,300Total available airspace
    
    
    119,262
    
    
    
    (896
    )
    
    
    118,366Number of sites
    
    
    5
    
    
    
    
    
    
    
    5CanadaPermitted capacity
    
    
    11,644
    
    
    
    (111
    )
    
    
    11,533Probable expansion capacity
    
    
    4,970
    
    
    
    
    
    
    
    4,970Total available airspace
    
    
    16,614
    
    
    
    (111
    )
    
    
    16,503Number of sites
    
    
    3
    
    
    
    
    
    
    
    3TotalPermitted capacity
    
    
    112,606
    
    
    
    (1,007
    )
    
    
    111,599Probable expansion capacity
    
    
    23,270
    
    
    
    
    
    
    
    23,270Total available airspace
    
    
    135,876
    
    
    
    (1,007
    )
    
    
    134,869Number of sites
    
    
    8
    
    
    
    
    
    
    
    8
 Trend Information
 Seasonality
  New Accounting Pronouncements
  32




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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 with cash on hand,
debt or equity offerings;
    
    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 ability to successfully implement our corporate strategy and integrate any
acquisitions we undertake;
    
    our ability to negotiate renewals of existing service agreements at favorable
rates;
    
    our ability to enhance profitability of certain aspects of our operations in
markets where we are not internalized through either divestiture or asset swaps;
    
    costs and risks associated with litigation;
    
    changes in general business and economic conditions, exchange rates and the
financial markets and accounting standards or pronouncements; and
    
    construction, equipment delivery or permitting delays for our transfer stations
or landfills.
  33




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
 34




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
    35




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##### Table of Contents



SIGNATURES
  Waste Services, Inc.  By:
    /s/ DAVID SUTHERLAND-YOESTDavid Sutherland-YoestChairman of the Board,
Chief Executive Officer and Director By:
    /s/ EDWIN D. JOHNSONEdwin D. JohnsonExecutive Vice President, Chief Financial Officer 36




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##### Table of Contents



EXHIBIT
    
    INDEX
 Exhibit No.
    
    DescriptionExhibit 31.1
    
    Section 302 Certification of David Sutherland-Yoest, Chief Executive OfficerExhibit 31.2
    
    Section 302 Certification of Edwin D. Johnson, Chief Financial OfficerExhibit 32.1
    
    Section 1350 Certification of the Chief Executive Officer and Principal Financial Officer
 37