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  Exhibit 4.4    
    

 BFI Canada Ltd. — MD&A for the year ended December 31, 2008  

 Conversion  

        Pursuant to the plan of arrangement, the conversion of the BFI Canada Income Fund (the "Fund") trust structure to a corporation
resulted in unitholder's of the Fund receiving one common share of BFI Canada Ltd. (the "Company") for each trust unit held on the effective date of conversion, October 1, 2008.
The Class A unit held by IESI Corporation ("IESI") was redeemed by the Fund for ten dollars and the Company issued, and IESI subscribed for, 11,137 special voting shares for aggregate
cash consideration of ten dollars. The participating preferred shares ("PPSs") issued by IESI remain outstanding and exchangeable into common shares of the Company on a one for one basis, instead of
trust units of the Fund. The consolidated financial statements of the Company have been prepared applying continuity of interests accounting. Accordingly, the comparative figures presented herein are
those of the Fund. 

 Disclaimer  

        This document may contain forward-looking information relating to the operations of the Company or to the environment in which it
operates, which are based on estimates, forecasts, and projections. Forward-looking information is not a guarantee of future performance and involves risks and uncertainties that are difficult to
predict, or are beyond management's control. A number of factors could cause actual outcomes and results to differ materially from those estimated, forecast or projected. These factors include those
set forth in the Company's Annual Information Form ("AIF") for the year ended December 31, 2007 and the Company's Management Information Circular dated August 26, 2008. Consequently,
readers should not rely on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking information contained
herein is based on what management believes to be reasonable assumptions, users are cautioned that actual results may differ. Management disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. 

 Introduction  

        The following is a discussion of the consolidated financial condition and results of operations of the Company for the year ended
December 31, 2008 and has been prepared with all available information up to and including February 26, 2009. In accordance with the Canadian Institute of Chartered Accountants ("CICA")
Emerging Issues Committee ("EIC") abstract 170, "Conversion of an Unincorporated Entity to an Incorporated Entity", the plan of arrangement, and resulting one for one exchange of the Fund's trust
units into common shares of the Company, did not constitute a change of control. Accordingly, the consolidated financial statements of the Company have been prepared applying continuity of interests
accounting. For the purpose of Management's Discussion and Analysis ("MD&A"), the term "Company" shall denote the financial position and results of operations for the Company and the Fund, and its
respective subsidiaries, for all periods presented herein. All amounts are reported in Canadian dollars, unless otherwise stated. The consolidated financial statements ("financial statements") of the
Company have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). This discussion should be read in conjunction with the financial statements of the Company,
including notes thereto, and management's discussion and analysis ("MD&A") for the years ended December 31, 2007 and 2006, which are filed on  www.sedar.com. 

 Corporate Overview  

        The Company, through its operating subsidiaries, is one of North America's largest full-service waste management companies,
providing non-hazardous solid waste ("waste") collection and disposal services to commercial, industrial, municipal and residential customers in five Canadian provinces and ten states, and
the District of Columbia, in the United States
("U.S."). The Company provides service to over 1.8 million customers with vertically integrated collection and disposal assets. 

        The
Company's Canadian segment operates under the BFI Canada brand and is Canada's second largest full-service waste management company providing vertically integrated waste
collection and disposal services in the provinces of British Columbia, Alberta, Manitoba, Ontario, and Quebec. This segment provides service to 

1

 

20 Canadian
markets and operates five landfills, four transfer collection stations, seven material recovery facilities ("MRFs"), and one landfill gas to energy facility. 

        The
Company's U.S. south and northeast segments, collectively the U.S. segment or U.S. segments, operate under the IESI brand and provide vertically integrated waste
collection and disposal services in two geographic regions: the south, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas, Mississippi, and Missouri, and the northeast,
consisting of various service areas in New York, New Jersey, Pennsylvania, Maryland, and the District of Columbia. This segment provides service to 40 U.S. markets and
operates 17 landfills, 29 transfer collection stations, 11 MRFs, and one transportation operation. 

        The
Company pays cash dividends to shareholders based on all amounts received by the Company, and IESI, an indirect subsidiary of the Company, pays equivalent dividends to participating
preferred shareholders ("non-controlling interest"). Dividends are determined by the Board of Directors from time to time. 

        Effective
August 18, 2008, the Company announced a reduction in monthly cash dividends to $0.04166 per share, commencing with the dividend payable January 15, 2009 to
holders of record on December 31, 2008. Effective September 19, 2008, the Company announced that the Board of Directors approved a special quarterly dividend payable in four equal
amounts of $0.125 per share commencing on March 31, 2009. 

 Highlights — For the year ended December 31, 2008  

(all amounts are in thousands of Canadian dollars, except per weighted average share or trust unit, and PPS, unless otherwise stated)

								
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 
	 Operating results
	 	 	 	 	 	 	 
	 Revenues
	 	 $	1,117,030	 	 $	917,357	 
	 Operating expenses
	 	 	 671,996	 	 	 531,614	 
	 Selling, general and administration expenses ("SG&A")
	 	 	 134,835	 	 	 110,208	 
	 	 	 	 	 	 
	 Income before the following ("EBITDA(A)")
	 	 	 310,199	 	 	 275,535	 
	 Amortization
	 	 	 178,703	 	 	 161,006	 
	 Interest on long-term debt
	 	 	 53,737	 	 	 42,964	 
	 Financing costs
	 	 	 3,503	 	 	 7,192	 
	 Net gain on sale of capital assets
	 	 	 (920	)	 	 (1,434	)
	 Net foreign exchange (gain) loss
	 	 	 (653	)	 	 13,671	 
	 Net loss on financial instruments
	 	 	 10,660	 	 	 9,384	 
	 Conversion costs
	 	 	 3,347	 	 	 —	 
	 Other expenses
	 	 	 131	 	 	 48	 
	 	 	 	 	 	 
	 Income before income taxes and non-controlling interest
	 	 	 61,691	 	 	 42,704	 
	 	 	 	 	 	 
	 Net income tax expense
	 	 	 6,060	 	 	 4,697	 
	 Non-controlling interest
	 	 	 9,018	 	 	 6,320	 
	 	 	 	 	 	 
	 Net income
	 	 $	46,613	 	 $	31,687	 
	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic & diluted
	 	
$	

0.81	 	
$	

0.56	 

2

 

								
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 
	 Shares or trust units and PPSs outstanding
	 	 	 	 	 	 	 
	 Weighted average number of shares or trust units outstanding
	 	 	 57,496	 	 	 56,564	 
	 Weighted average number of PPSs outstanding
	 	 	 11,137	 	 	 11,239	 
	 	 	 	 	 	 
	 Weighted average number of shares or trust units and PPSs outstanding
	 	 	 68,633	 	 	 67,803	 
	 	 	 	 	 	 
	 Aggregate number of shares or trust units and PPSs outstanding
	 	 	 68,706	 	 	 68,706	 
	 	 	 	 	 	 
	 Replacement and growth expenditures
	 	 	 	 	 	 	 
	 Replacement capital and landfill expenditures ("replacement expenditures") — (see page 12)
	 	 $	89,509	 	 $	93,838	 
	 Growth capital and landfill expenditures ("growth expenditures)
	 	 	 58,481	 	 	 60,031	 
	 	 	 	 	 	 
	 Total replacement and growth expenditures
	 	 $	147,990	 	 $	153,869	 
	 	 	 	 	 	 
	 Operating and free cash flow(B)
	 	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 $	229,921	 	 $	217,415	 
	 Free cash flow(B) — (see page 11)
	 	 $	102,451	 	 $	66,468	 
	 Free cash flow(B) per weighted average share or trust unit and PPS
	 	 $	1.49	 	 $	0.98	 
	 Dividends and distributions
	 	 	 	 	 	 	 
	 Dividends and distributions declared, per share or trust unit
	 	 $	98,336	 	 $	102,888	 
	 Dividends declared, PPSs
	 	 	 19,026	 	 	 20,438	 
	 	 	 	 	 	 
	 Total dividends and distributions declared
	 	 $	117,362	 	 $	123,326	 
	 	 	 	 	 	 
	 Total dividends or distributions declared per weighted average share or trust unit and PPS
	 	
$	

1.71	 	
$	

1.82	 
	 	 	 	 	 	 

 Financial highlights for the year ended December 31, 2008  

					
	 
	 	Year ended December 31 	 
	 Increase in revenues
	 	 $	199,673	 
	 Percentage increase in revenues
	 	 	 21.8%	 
	 Increase in EBITDA(A)
	 	 $	34,664	 
	 Percentage increase in EBITDA(A)
	 	 	 12.6%	 
	 Increase in cash generated from operating activities
	 	 $	12,506	 
	 Percentage increase in cash generated from operating activities
	 	 	 5.8%	 
	 Increase in free cash flow(B)
	 	 $	35,983	 
	 Percentage increase in free cash flow(B)
	 	 	 54.1%	 

 Other highlights  

	•
	Effective February 12, 2009, the Company announced the issuance of 8,500 common shares for gross proceeds of
$80,750. The underwriters have an option to purchase up to an additional 1,275 common shares on the same terms and conditions, which if exercised brings the total gross proceeds to $92,863. The
Company intends to repay a portion of its outstanding borrowings on its U.S. long-term debt facility.   

	•
	Effective August 18, 2008, the Company's predecessor reduced its distribution per trust unit from $1.818 to $0.50
per annum commencing with the distribution payable to holders of record on December 31, 2008.   

	•
	Effective September 25, 2008, the Company announced a special quarterly dividend payable in four equal amounts of
$0.125 per share commencing on March 31, 2009. 

3

 
	•
	Effective October 1, 2008, the Company amended its Canadian and U.S. long-term debt facilities
to reflect the change in its organizational structure.   

	•
	Effective July 30, 2008, the Company increased and amended its Canadian long-term debt facility.  

	•
	Effective August 6, 2008, the Company extended and amended its U.S. long-term
debt facility.   

	•
	Effective August 1, 2008, the Company fixed the interest rate on U.S. $45,000 of variable rate demand solid
waste disposal revenue bonds ("IRBs").   

	•
	For the year ended December 31, 2008, the Company completed eight acquisitions comprised of seven
"tuck-in's" and one new market. 

 Review of Operations — For the year ended December 31, 2008  

(all amounts are in thousands of Canadian dollars, except foreign currency exchange rate amounts, unless otherwise stated)

 Foreign Currency Exchange Rates  

        The Company reports its financial results in Canadian dollars, accordingly, changes in the foreign currency exchange rate between
Canada and the U.S. impacts the translated value of the Company's U.S. operating results. U.S. operating results are translated to Canadian dollars using the current rate method
of accounting which applies the average foreign currency exchange rate in effect between Canada and the U.S. during the reporting period. U.S. assets and liabilities are translated to
Canadian dollars at the foreign currency exchange rate in effect at the consolidated balance sheet date. Translation adjustments are included in other comprehensive income (loss) and are only included
in the determination of net income when a reduction in the Company's investment in its foreign operations is realized. 

        The
U.S. segments' financial position and operating results have been translated to Canadian dollars applying the following foreign currency exchange rates: 

																				
	 
	 	2008 	 	2007 	 
	 
	 	Current 	 	Average 	 	Cumulative Average 	 	Current 	 	Average 	 	Cumulative Average 	 
	 March 31
	 	 $	1.028	 	 $	1.004	 	 $	1.004	 	 $	1.153	 	 $	1.172	 	 $	1.172	 
	 June 30
	 	 $	1.019	 	 $	1.010	 	 $	1.007	 	 $	1.063	 	 $	1.098	 	 $	1.135	 
	 September 30
	 	 $	1.060	 	 $	1.041	 	 $	1.018	 	 $	0.996	 	 $	1.045	 	 $	1.105	 
	 December 31
	 	 $	1.225	 	 $	1.212	 	 $	1.067	 	 $	0.988	 	 $	0.982	 	 $	1.074	 

4

 

   Foreign Currency Exchange Impact on Consolidated Results  

        The following table has been prepared to assist readers in assessing the impact of foreign currency exchange on the Company's
consolidated results for the year ended December 31, 2008. 

											
	 
	 	Company

results for

2008 less

2007 	 	Impact of

foreign

currency

exchange(1) 	 	Organic growth,

acquisitions and

other

non-operating

changes 	 
	 Financial highlights
	 	 	 	 	 	 	 	 	 	 
	 Revenues
	 	 $	199,673	 	 $	(4,737	)	 $	204,410	 
	 Operating expenses
	 	 	 140,382	 	 	 (3,019	)	 	 143,401	 
	 SG&A
	 	 	 24,627	 	 	 (561	)	 	 25,188	 
	 	 	 	 	 	 	 	 
	 Income before the following (EBITDA(A))
	 	 	 34,664	 	 	 (1,157	)	 	 35,821	 
	 Amortization
	 	 	 17,697	 	 	 (784	)	 	 18,481	 
	 Interest on long-term debt
	 	 	 10,773	 	 	 (272	)	 	 11,045	 
	 Financing costs
	 	 	 (3,689	)	 	 (15	)	 	 (3,674	)
	 Net gain on sale of capital assets
	 	 	 514	 	 	 2	 	 	 512	 
	 Net foreign exchange (gain) loss
	 	 	 (14,324	)	 	 4	 	 	 (14,328	)
	 Net loss on financial instruments
	 	 	 1,276	 	 	 (70	)	 	 1,346	 
	 Conversion costs
	 	 	 3,347	 	 	 —	 	 	 3,347	 
	 Other expenses
	 	 	 83	 	 	 (1	)	 	 84	 
	 	 	 	 	 	 	 	 
	 Income before income taxes and non-controlling interest
	 	 	 18,987	 	 	 (21	)	 	 19,008	 
	 	 	 	 	 	 	 	 
	 Income tax expense
	 	 	 1,363	 	 	 (10	)	 	 1,373	 
	 Non-controlling interest
	 	 	 2,698	 	 	 —	 	 	 2,698	 
	 	 	 	 	 	 	 	 
	 Net income
	 	 $	14,926	 	 $	(11	)	 $	14,937	 
	 	 	 	 	 	 	 	 
	 Review of Operations
	 	 	 	 	 	 	 	 	 	 
	 Revenues — Canada
	 	 $	54,551	 	 $	—	 	 $	54,551	 
	 Revenues — U.S. south
	 	 	 46,138	 	 	 (2,354	)	 	 48,492	 
	 Revenues — U.S. northeast
	 	 	 98,984	 	 	 (2,383	)	 	 101,367	 
	 	 	 	 	 	 	 	 
	 Total revenues
	 	 $	199,673	 	 $	(4,737	)	 $	204,410	 
	 	 	 	 	 	 	 	 
	 Operating expenses — Canada
	 	 $	33,924	 	 $	—	 	 $	33,924	 
	 Operating expenses — U.S. south
	 	 	 24,031	 	 	 (1,489	)	 	 25,520	 
	 Operating expenses — U.S. northeast
	 	 	 82,427	 	 	 (1,530	)	 	 83,957	 
	 	 	 	 	 	 	 	 
	 Total operating costs
	 	 $	140,382	 	 $	(3,019	)	 $	143,401	 
	 	 	 	 	 	 	 	 
	 SG&A — Canada
	 	 $	7,302	 	 $	—	 	 $	7,302	 
	 SG&A — U.S. south
	 	 	 6,438	 	 	 (301	)	 	 6,739	 
	 SG&A — U.S. northeast
	 	 	 11,887	 	 	 (260	)	 	 12,147	 
	 	 	 	 	 	 	 	 
	 Total SG&A
	 	 $	25,627	 	 $	(561	)	 $	26,188	 
	 	 	 	 	 	 	 	 

5

 

											
	 
	 	Company

results for

2008 less

2007 	 	Impact of

foreign

currency

exchange(1) 	 	Organic growth,

acquisitions and

other

non-operating

changes 	 
	 Cash generated from operating activities
	 	 $	12,506	 	 $	(953	)	 $	13,459	 
	 Free cash flow(B)
	 	 $	35,983	 	 $	(203	)	 $	36,186	 
	 Replacement and growth expenditures
	 	 	 	 	 	 	 	 	 	 
	 Total
	 	 $	(7,879	)	 $	(669	)	 $	(7,210	)
	 Replacement — Canada
	 	 $	1,555	 	 $	—	 	 $	1,555	 
	 Replacement — U.S.
	 	 $	(5,884	)	 $	(431	)	 $	(5,453	)
	 Growth — Canada
	 	 $	(3,155	)	 $	—	 	 $	(3,155	)
	 Growth — U.S.
	 	 $	(395	)	 $	(238	)	 $	(157	)

Note: 

	(1)
	U.S. segment
results, stated in U.S. dollars, for the year ended December 31, 2008 multiplied by the difference between the 2008 and
2007 average foreign currency exchange rates. 

        The discussions to follow are in addition to the impact of foreign currency exchange fluctuations detailed in the table above. 

 Revenues  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	1,117,030	 	 $	917,357	 	 $	199,673	 
	 Canada
	 	 $	391,078	 	 $	336,527	 	 $	54,551	 
	 U.S. south
	 	 $	360,828	 	 $	314,690	 	 $	46,138	 
	 U.S. northeast
	 	 $	365,124	 	 $	266,140	 	 $	98,984	 

        The
increase in consolidated revenues is due in part to organic Canadian and U.S. segment growth, approximately $31,200 and $13,800 or 9.7% and 2.4%, respectively. Canadian
segment organic growth is the result of volume and pricing growth, 5.3% and 4.0%, respectively, coupled with a marginal increase in revenues from recycled commodity pricing, 0.4%. Organic growth in
the Company's U.S. segment is due principally to stronger pricing, 3.3%, partially offset by a decline in volumes, (0.9%). U.S. segment recycling commodity pricing remained unchanged
year over year. Organic growth excludes the impact of fuel and environmental surcharges, acquisitions, and foreign currency translation. Acquisitions contributed approximately $137,000 to the change
year to year, with the most pronounced contribution coming from the Winters Bros. Waste Systems, Inc. ("Winter Bros.") acquisition. Fuel and environmental surcharges represent the balance of
the change. 

        The
Company's U.S. northeast segment continued to experience the impact of an overall economic slowdown. Falling commodity prices also impacted organic revenue growth, and the
impact was most notable in the Company's U.S. northeast segment. 

 Operating expenses  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	671,996	 	 $	531,614	 	 $	140,382	 
	 Canada
	 	 $	209,229	 	 $	175,305	 	 $	33,924	 
	 U.S. south
	 	 $	228,354	 	 $	204,323	 	 $	24,031	 
	 U.S. northeast
	 	 $	234,413	 	 $	151,986	 	 $	82,427	 

6

 

        Higher
total disposal and labour costs, approximately $92,200 and $35,200, respectively, are attributable to higher collected waste volumes in the Company's Canadian segment, and higher
costs to service new and existing customers, contracts, and acquisitions. The balance of the change is due principally to higher vehicle operating costs and repairs and maintenance expense due largely
to the higher cost of fuel and an increase in the Company's fleet of service vehicles required to service new and acquired customers, and new contracts. The impact of higher fuel costs was most
pronounced in the U.S. northeast segment, and more specifically at the Seneca Meadows landfill. The consumption of fuel, coupled with the absorption of fuel price increases charged by third
party haulers of waste to the landfill, were absorbed by the Company as result of operating conditions in this market. 

 SG&A  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	134,835	 	 $	110,208	 	 $	24,627	 
	 Canada
	 	 $	48,806	 	 $	41,504	 	 $	7,302	 
	 U.S. south
	 	 $	46,181	 	 $	40,743	 	 $	5,438	 
	 U.S. northeast
	 	 $	39,848	 	 $	27,961	 	 $	11,887	 

        Higher
total salaries represent approximately $11,600 of the total increase. Acquisition and organic growth are the primary reasons for the increase in total salaries. Compensation
expense to retain certain executive employees, recorded in the Company's Canadian segment, totals approximately $1,600. Higher facility and office costs, as a result of acquisition and organic growth,
approximately $5,100, and higher professional fees and corporate development costs are the primary reasons for the balance of the change. 

 Amortization  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	178,703	 	 $	161,006	 	 $	17,697	 
	 Canada
	 	 $	58,536	 	 $	57,538	 	 $	998	 
	 U.S. south
	 	 $	51,851	 	 $	50,561	 	 $	1,290	 
	 U.S. northeast
	 	 $	68,316	 	 $	52,907	 	 $	15,409	 

        In
aggregate, higher intangible and capital asset amortization is due in large part to acquisitions and growth capital expenditures through 2007 and 2008 and represents approximately
$8,200 and $15,700 of the increase, respectively. Revisions to cash flow estimates for landfill closure and post-closure costs and lower amortization rates for most Canadian owned
landfills due to estimated capacity revisions, is the primary reason for the decline in landfill asset amortization. Lower landfill volumes received by certain landfills operating in the Company's
northeast segment coupled with foreign currency translation is the primary reason for the balance of the change. 

 Interest on long-term debt  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	53,737	 	 $	42,964	 	 $	10,773	 
	 Canada
	 	 $	12,092	 	 $	10,567	 	 $	1,525	 
	 U.S.
	 	 $	41,645	 	 $	32,397	 	 $	9,248	 

        Financing
the acquisition of Winter Bros. with long-term debt is the primary reason for the U.S. segment increase. The balance of the U.S. segment change is due
to borrowing for growth expenditures, working capital, and acquisition financing, partially offset by a decline in the variable lending rate, and IRB financings completed in 2007. The Canadian segment
increase is on account of financing acquisitions, growth, working capital expenditures, and absorbing a larger portion of the Company's dividend paid to its shareholders, partially offset by a decline
in variable rate lending. 

7

 

  Financing costs  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	3,503	 	 $	7,192	 	 $	(3,689	)
	 Canada
	 	 $	1,154	 	 $	150	 	 $	1,004	 
	 U.S.
	 	 $	2,349	 	 $	7,042	 	 $	(4,693	)

        The
Company incurred financing costs in connection with amendments to its U.S. long-term debt facility in both 2007 and 2008. In addition, financing costs were
incurred to convert an IRB from a floating to fixed rate facility in 2008 and the Company also incurred financing costs to raise IRBs in the state of Texas in 2007. Amending the Company's Canadian
revolving credit agreement was the reason for the Canadian segment financing costs incurred in 2008 and 2007. Financing costs were also incurred in connection the Company's plan of arrangement in both
Canada and the U.S. 

 Net gain on sale of capital assets  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	(920	)	 $	(1,434	)	 $	514	 
	 Canada
	 	 $	(739	)	 $	(508	)	 $	(231	)
	 U.S.
	 	 $	(181	)	 $	(926	)	 $	745	 

        The
disposition of certain equipment in Canada and the U.S. resulted in the net gains on sale. 

 Net foreign exchange (gain) loss  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	(653	)	 $	13,671	 	 $	(14,324	)
	 Canada
	 	 $	(83	)	 $	17,390	 	 $	(17,473	)
	 U.S.
	 	 $	(570	)	 $	(3,719	)	 $	3,149	 

        Unrealized
foreign exchange losses on translation of the Company's U.S. note receivable ("U.S. note") from IESI were recorded in the Company's Canadian segment results for
2007. The U.S. note was cancelled in August 2007 resulting in no comparable gains or losses for the year ended December 31, 2008. Net foreign exchange gains realized by the
Company's U.S. segment are principally attributable to gains realized on the settlement of foreign currency hedge agreements through February 2008. 

 Net loss on financial instruments  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	10,660	 	 $	9,384	 	 $	1,276	 
	 Canada
	 	 $	(149	)	 $	(176	)	 $	27	 
	 U.S.
	 	 $	10,809	 	 $	9,560	 	 $	1,249	 

        The
Canadian segment gain on financial instruments relates to changes in the fair value of funded landfill post-closure costs. 

        In
2008, the U.S. segment loss for year ended is due principally to changes in the fair value of interest rate swaps, approximately $9,100. Changes in the value of foreign
currency exchange agreements also contributed to 

8

 

the
2008 losses. Losses on interest swaps, partially offset by gains on foreign currency exchange agreements, are the primary reasons for the net loss on financial instruments in 2007. 

 Conversion costs  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	3,347	 	 $	—	 	 $	3,347	 
	 Canada
	 	 $	3,347	 	 $	—	 	 $	3,347	 
	 U.S.
	 	 $	—	 	 $	—	 	 $
	—

	 

        Conversion
costs represent professional fees incurred on the Company's conversion from an income trust to a corporation. 

 Other expenses  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	131	 	 $	48	 	 $	83	 
	 Canada
	 	 $	—	 	 $	—	 	 $	—	 
	 U.S.
	 	 $	131	 	 $	48	 	 $	83	 

        Other
expenses are comprised of various management bonus costs related to certain acquisitions. 

 Income tax expense  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$ Change 	 
	 Total
	 	 $	6,060	 	 $	4,697	 	 $	1,363	 
	 Canada
	 	 $	4,490	 	 $	8,091	 	 $	(3,601	)
	 U.S.
	 	 $	1,570	 	 $	(3,394	)	 $	4,964	 

        Current
and future income taxes both decreased by approximately $1,800 each for the Company's Canadian segment. Amalgamations which occurred in conjunction with Company's conversion
effectively allowed various Canadian operating subsidiaries to immediately utilize available loss carryforwards within the group of companies, which resulted in a corresponding decline in current
income tax. In the prior year, the Company recognized future income tax expenses, approximately $5,400, due to the utilization of future income tax assets associated with timing differences between
accounting and tax for deferred financing costs and offering expenses. In the current year, the equivalent future income tax expense for these same items was approximately $200, resulting a year over
year decline in future income tax expense of approximately $5,200. This future income tax expense decline, was partially offset by the utilization of loss carryforwards in the current year. In the
prior year, the Company recognized a future income tax recovery, approximately $1,300, compared to a future income tax expense of approximately $1,700, which as outlined above, is due in large part to
amalgamations that occurred in conjunction with the Company's conversion. 

        The
increase in U.S. segment income tax expense is due almost entirely to an increase in future income tax expense, approximately $4,900. The increase in future income tax expense
is due largely to recoveries recognized in the prior year, approximately $4,500 (current year $nil), comprised principally of movements in capital assets and deferred financing costs. 

 Non-controlling interest  

        The non-controlling interest's share of net income amounts to $9,018 (2007 — $6,320)
for the year ended December 31, 2008. Non-controlling interest, recorded on the Company's consolidated balance sheet, represents 

9

 

the
initial value of issued PPSs, net of exchanges and cancellations since issuance, plus or minus the non-controlling interest's share of net income or loss, transition adjustments, and
dividends declared. 

 Financial highlights — For the three months ended December 31, 2008
  (all amounts are in thousands of Canadian dollars)  

																										
	 
	 	Three months ended December 31 	 
	 
	 	2008 	 	2007 	 
	 
	 	Canada 	 	U.S.

south 	 	U.S.

northeast 	 	Total 	 	Canada 	 	U.S.

south 	 	U.S.

northeast 	 	Total 	 
	 Revenues
	 	 $	99,557	 	 $	101,394	 	 $	97,923	 	 $	298,874	 	 $	89,418	 	 $	77,479	 	 $	84,132	 	 $	251,029	 
	 Operating expenses
	 	 	 51,833	 	 	 62,189	 	 	 64,449	 	 	 178,471	 	 	 46,562	 	 	 51,805	 	 	 52,989	 	 	 151,356	 
	 SG&A
	 	 	 13,308	 	 	 13,161	 	 	 10,782	 	 	 37,251	 	 	 11,888	 	 	 9,783	 	 	 8,641	 	 	 30,312	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Income before the following
	 	 	 34,416	 	 	 26,044	 	 	 22,692	 	 	 83,152	 	 	 30,968	 	 	 15,891	 	 	 22,502	 	 	 69,361	 
	 Amortization
	 	 	 	 	 	 	 	 	 	 	 	 41,988	 	 	 	 	 	 	 	 	 	 	 	 40,226	 
	 Interest on long-term debt
	 	 	 	 	 	 	 	 	 	 	 	 13,939	 	 	 	 	 	 	 	 	 	 	 	 13,824	 
	 Financing costs
	 	 	 	 	 	 	 	 	 	 	 	 311	 	 	 	 	 	 	 	 	 	 	 	 —	 
	 Net gain on sale of capital assets
	 	 	 	 	 	 	 	 	 	 	 	 (562	)	 	 	 	 	 	 	 	 	 	 	 (91	)
	 Net foreign exchange gain
	 	 	 	 	 	 	 	 	 	 	 	 (25	)	 	 	 	 	 	 	 	 	 	 	 (1,131	)
	 Net loss on derivative financial instruments
	 	 	 	 	 	 	 	 	 	 	 	 6,970	 	 	 	 	 	 	 	 	 	 	 	 7,666	 
	 Conversion costs
	 	 	 	 	 	 	 	 	 	 	 	 1,090	 	 	 	 	 	 	 	 	 	 	 	 —	 
	 Other expenses
	 	 	 	 	 	 	 	 	 	 	 	 41	 	 	 	 	 	 	 	 	 	 	 	 43	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Income before income taxes and non-controlling interest
	 	 	 	 	 	 	 	 	 	 	 	 19,400	 	 	 	 	 	 	 	 	 	 	 	 8,824	 
	 Income tax expense
	 	 	 	 	 	 	 	 	 	 	 	 6,499	 	 	 	 	 	 	 	 	 	 	 	 2,950	 
	 Non-controlling interest
	 	 	 	 	 	 	 	 	 	 	 	 2,092	 	 	 	 	 	 	 	 	 	 	 	 952	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income
	 	 	 	 	 	 	 	 	 	 	 $	10,809	 	 	 	 	 	 	 	 	 	 	 $	4,922	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 Review of Operations — For the three months ended December 31, 2008  

 Revenues  

        The increase in consolidated revenues is due in part to organic Canadian segment growth, approximately $5,100 or 5.9%. Canadian segment
organic growth is the result of volume and pricing growth, 2.5% and 4.0%, respectively, partially offset by a decline in commodity recycling pricing, 0.6%. Organically, the Company's
U.S. segment declined approximately ($7,300) or (4.0%) period over period. The decline is due in large part to a decline in volumes, (4.6%), coupled with a decline in commodity recycling
pricing, (1.4%). These declines were partially offset by stronger pricing in the quarter which increased 2.0%. Translating the Company's U.S. segment results to Canadian dollars represents
approximately $39,800 of the increase while acquisitions contributed approximately $10,600 to the change. Fuel and environmental surcharges account for the balance of the comparative increase. 

        The
Company's U.S. northeast segment continued to experience the impact of an overall economic slowdown. Falling commodity prices also impacted organic revenue growth, and the
impact was most notable in the Company's U.S. northeast segment. 

 Operating expenses  

        Translating the Company's U.S. segment operating expenses to Canadian dollars is the largest contributor to the increase,
approximately $25,400. The balance of the change is due principally to higher total disposal and labour costs incurred in the Company's Canadian segment to service higher
volumes. Higher Canadian segment expenses were partially offset by a decline in U.S. segment costs due in part to lower safety and insurance expenses and lower collected volumes. 

 SG&A  

        Translating the Company's U.S. segment SG&A expenses to Canadian dollars is the largest contributor to the increase,
approximately $4,700. Compensation expense to retain certain executive employees, recorded in 

10

 

the
Company's Canadian segment, totals approximately $600. Higher facility and office costs, as a result of acquisition and organic growth, and higher professional fees and corporate development costs
are the primary reasons for the balance of the change. 

 Amortization  

        Excluding the impact of foreign currency exchange, approximately $6,900, amortization expense declined period over period,
approximately $5,200. Lower landfill asset amortization is the primary reason for the decline, approximately $5,400, and is due primarily to higher downward cash flow revisions in estimated landfill
closure and post-closure costs and lower amortization rates for most Canadian owned landfills due to estimated capacity revisions. Lower landfill volumes received by certain landfills
operating in the Company's northeast segment also contributed to the decline in landfill asset amortization. 

        Explanations
of quarterly changes for the following: interest on long-term debt, financing costs, net gain on sale of capital assets, net foreign exchange gain, net loss on
derivative financial instruments, conversion costs, other expenses, income tax expense, and non-controlling interest, are consistent with those outlined in the Review of
Operations — For the year ended December 31, 2008 section of this MD&A. 

 Other Performance Measures — For the year ended December 31, 2008
  (all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)

 Free cash flow(B)  

 Purpose and objective  

        The purpose of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other
U.S. based companies in the waste industry. Investors and analysts use this calculation as a measure of a company's valuation and liquidity. Management uses this non-GAAP measure to
assess its performance relative to other U.S. based companies, to assess its primary sources and uses of cash flow and to assess its ability to sustain its dividend policy. 

 Free cash flow(B) — cash flow approach  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	Change 	 
	 Cash generated from operating activities (per statement of cash flows)
	 	 $	229,921	 	 $	217,415	 	 $	12,506	 
	 Operating
	 	 	 	 	 	 	 	 	 	 
	 Changes in non-cash working capital items
	 	 	 16,113	 	 	 (6,177	)	 	 22,290	 
	 Capital and landfill asset purchases
	 	 	 (147,990	)	 	 (155,869	)	 	 7,879	 
	 Other expenses
	 	 	 131	 	 	 48	 	 	 83	 
	 Financing
	 	 	 	 	 	 	 	 	 	 
	 Share or trust unit based compensation
	 	 	 (675	)	 	 —	 	 	 (675	)
	 Financing and deferred costs (net of non-cash portion)
	 	 	 2,257	 	 	 7,063	 	 	 (4,806	)
	 Conversion costs
	 	 	 3,347	 	 	 —	 	 	 3,347	 
	 Net realized foreign exchange (gain) loss
	 	 	 (653	)	 	 3,988	 	 	 (4,641	)
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	102,451	 	 $	66,468	 	 $	35,983	 
	 	 	 	 	 	 	 	 

        The
increase in free cash flow(B), applying the cash flow approach, is due largely to higher amounts of cash generated from operating activities (see the Liquidity
and Capital Resources — Cash flows section of this MD&A) and higher working capital uses (see the Financial
Condition — Working capital deficit section of this MD&A), coupled with lower capital and landfill asset purchases
due to less net new business growth in the U.S. 

11

 

   Free cash flow(B) — EBITDA(A) approach  

        The Board of Directors and management of the Company typically calculate free cash flow(B) using an operations approach.
Management views EBITDA(A) as a proxy for cash derived from operations. 

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	Change 	 
	 EBITDA(A)
	 	 $	310,199	 	 $	275,535	 	 $	34,664	 
	 	 	 	 	 	 	 	 
	 Capital and landfill asset purchases
	 	 	

(147,990	
)	 	

(155,869	
)	 	

7,879	 
	 Landfill closure and post-closure expenditures
	 	 	 (2,158	)	 	 (4,541	)	 	 2,383	 
	 Landfill closure and post-closure cost accretion expense
	 	 	 3,212	 	 	 3,086	 	 	 126	 
	 Interest on long-term debt
	 	 	 (53,737	)	 	 (42,964	)	 	 (10,773	)
	 Current income tax expense
	 	 	 (7,075	)	 	 (8,779	)	 	 1,704	 
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	102,451	 	 $	66,468	 	 $	35,983	 
	 	 	 	 	 	 	 	 

        The
increase in free cash flow(B), applying the EBITDA(A) approach, is due largely to higher EBITDA(A) contributions, due principally from
acquisition and organic growth. Higher interest expense on long-term debt (see the Review of Operations — Interest on
long-term debt section of this MD&A) was partially offset by lower capital and landfill asset purchases (see Financial
Condition — Capital assets and Landfill assets sections of this
MD&A) and lower landfill closure and post-closure expenditures. Lower landfill closure and post-closure expenditures were due in part to lower remediation expenditures at the
Company's Seneca Meadows landfill, coupled with variations in the timing of spending in both Canada and the U.S. 

 Capital and landfill purchases  

        Capital and landfill purchases characterized as replacement and growth are as follows: 

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	Change 	 
	 Replacement
	 	 $	89,509	 	 $	93,838	 	 $	(4,329	)
	 Growth
	 	 $	58,481	 	 $	62,031	 	 $	(3,550	)
	 	 	 	 	 	 	 	 
	 Total
	 	 $	147,990	 	 $	155,869	 	 $	(7,879	)
	 	 	 	 	 	 	 	 

 Capital and landfill purchases — replacement  

        Capital and landfill purchases characterized as "replacement expenditures", represent the outlay of monies to sustain current cash
flows and are funded from free cash flow(B). Replacement expenditures may include some or all of the following: the replacement of existing capital assets, including vehicles, equipment,
containers, compactors, furniture, fixtures and computer equipment. Replacement expenditures also include all landfill construction spending for the Company's operating landfills, which is principally
comprised of cell construction. 

        The
comparative decline in replacement expenditures is due largely to a decline in capital assets purchased in the U.S. Lower volumes are the primary reason for the contraction in
replacement expenditures. 

 Capital and landfill purchases — growth  

        Capital and landfill purchases characterized as "growth expenditures", represent the outlay of monies to generate new or future cash
flows and are generally funded from free cash flow(B). Growth expenditures may include some or all of the following: vehicles, equipment, containers, compactors, furniture, fixtures and
computer equipment to support new contract wins and organic business growth. In addition, landfill expenditures for new or expansion permits, and initial construction expenditures for a new landfill,
are also characterized as growth expenditures. 

12

 

        The
comparative decline in growth expenditures is due largely to a decline in capital assets purchased in Canada. Contract wins which commenced in 2007 exceeded those commencing in 2008
and is the primary reason for the comparative decline in Canada. 

        Readers
are reminded that revenue, EBITDA(A), and cash flow contributions derived from vehicles, equipment and container growth expenditures will materialize over the
assets useful life. The typical pay back period benchmark is three to five years. 

        Had
the Company continued to calculate maintenance and growth expenditures in the same manner as the Fund, maintenance and growth expenditures would have been as follows: 

											
	 
	 	December 31 	 
	 
	 	2008 	 	2007 	 	Change 	 
	 Total
	 	 $	159,182	 	 $	153,485	 	 $	5,697	 
	 	 	 	 	 	 	 	 
	 Maintenance:
	 	 	 	 	 	 	 	 	 	 
	 Canada
	 	 $	20,812	 	 $	19,931	 	 $	881	 
	 U.S.
	 	 	 40,353	 	 	 36,532	 	 	 3,821	 
	 	 	 	 	 	 	 	 
	 Total maintenance
	 	 $	61,165	 	 $	56,463	 	 $	4,702	 
	 	 	 	 	 	 	 	 
	 Growth:
	 	 	 	 	 	 	 	 	 	 
	 Canada
	 	 $	34,601	 	 $	25,467	 	 $	9,134	 
	 U.S.
	 	 	 63,416	 	 	 71,555	 	 	 (8,139	)
	 	 	 	 	 	 	 	 
	 Total growth
	 	 $	98,017	 	 $	97,022	 	 $	995	 
	 	 	 	 	 	 	 	 

 Dividends and Distributions  

(all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)

 2008  

        The Company's predecessor declared distributions to unitholders of record for the period from January to September 2008.
Distributions and dividends declared per trust unit and PPS for this period totaled $93,681, and represented a monthly payout of $0.1515 per trust unit and PPS. Dividends declared per share and PPS
for the period October to December 2008 totaled $23,681. Dividends declared for the month of October and November totaled $20,818 and represented a monthly dividend of $0.1515 per share and
PPS. Dividends declared in the month of December 2008 totaled $2,863 and represented a monthly dividend of $0.04166 per share and PPS. 

 2009  

        In conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for
its regular dividends in 2009 are as follows: 

 Expected regular dividend schedule (payable quarterly)  

								
	Record date

 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 31, 2009
	 	 	January 15, 2010	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 

13

 

        In
conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for its special dividends, payable only in 2009, are
as follows: 

 Expected special dividend schedule (payable quarterly)  

								
	Record date

 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 17, 2009
	 	 	December 31, 2009	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 

 2007  

        The Company declared distributions to dividends declared per trust unit and PPS for the year totaled $123,326 and represented a monthly
payout of $0.1515 per trust unit and PPS. 

 Selected Annual Information  

(all amounts are in thousands of Canadian dollars, except per trust unit, PPS, and subscription receipt amounts)

														
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	2006 	 	2005 	 
	 Revenues
	 	 $	1,117,030	 	 $	917,357	 	 $	771,819	 	 $	677,424	 
	 Net income
	 	 $	46,613	 	 $	31,687	 	 $	32,743	 	 $	10,643	 
	 Net income per share or trust unit, basic and diluted
	 	 $	0.81	 	 $	0.56	 	 $	0.61	 	 $	0.22	 
	 Total assets
	 	 $	2,341,043	 	 $	1,971,212	 	 $	1,766,660	 	 $	1,717,742	 
	 Total long-term liabilities
	 	 $	1,172,905	 	 $	920,640	 	 $	634,470	 	 $	498,261	 
	 Dividends and distributions declared, per weighted average share, trust unit, subscription receipt,

and PPS
	 	 $	1.71	 	 $	1.82	 	 $	1.75	 	 $	1.64	 

 Revenues  

 2005-2006  

        The increase in revenues is due in part to solid organic Canadian and U.S. segment growth of approximately $31,300 and $46,000
or 12.9% and 10.7%, respectively. Strategic Canadian and U.S. "tuck-in" acquisitions also contributed to the total increase. 

 2006-2007  

        The increase in revenues is due in part to organic Canadian and U.S. segment growth, approximately $35,000 and $35,600 or 12.6%
and 7.5%, respectively. Revenue growth attributable to acquisitions and fuel and environmental surcharges accounts for the balance of the increase. 

 2007-2008  

        The increase in revenues is detailed in the Review of Operations — Revenues section of
this MD&A. 

 Net income  

        Included in net income are some or all of the following: amortization, interest on long-term debt, financing costs, net
(gain) loss on sale of capital and/or capital and landfill assets, net foreign exchange (gain) loss, net loss 

14

 

(gain)
on financial instruments and/or derivative financial instruments, write-off of deferred financing costs, conversion costs, other expenses, income taxes, and
non-controlling interest. 

 2005-2006  

        The increase, approximately $22,100, is due largely to an increase in revenues which translated to EBITDA(A) growth,
approximately $29,900. In addition, a decline in 2006 financing costs, net of the related tax effect, approximately $22,800 versus the comparative year also contributed to the increase in net income.
The foregoing was partially offset by higher amortization and interest expense, due in part to the consolidation of IESI for a period of 344 days in 2005 compared to 365 in 2006, and a
larger business base due to organic and acquisition growth, approximately $9,200. The balance of the change is due to higher future income tax expense, excluding recoveries recognized on financing
costs, approximately $17,100, and higher non-controlling interest participation in net income, approximately $4,100. Higher future income tax expense is due largely to strong financial
results which eroded tax losses available to shelter taxable income and results in a decline in future income tax assets. 

 2006-2007  

        The decrease, approximately $1,100, is due to various expenses exceeding EBITDA(A) growth. Higher amortization expense,
approximately $12,900, and higher interest on
long-term debt, approximately $8,700, is due largely to acquisitions and growth expenditures for capital and landfill assets. Higher interest on long-term debt, was partially
offset by lower borrowing costs due to the application of net proceeds from issued equity offsetting U.S. revolving credit facility advances and new IRB financings. Higher financing costs,
approximately $7,100, were incurred to amend the Company's U.S. and Canadian revolving credit facilities and to raise IRBs in the state of Texas. No significant amendments or financing activities
occurred in 2006. Higher losses on financial instruments and foreign exchange losses, approximately $6,000 and $16,200, respectively, were due in large part to the prospective adoption of accounting
guidance for financial instruments, resulting in the recognition and measurement of fair value changes in certain financial assets and liabilities, coupled with the recognition of unrealized and
realized foreign exchange losses on the translation of the Company's U.S. note due from IESI. These higher expenses, were partially offset by an increase in revenues, due to organic and
acquisition growth, which translated to an approximately $39,600 increase in EBITDA(A). 

 2007-2008  

        The increase in net income is detailed in the Review of Operations section of this MD&A. 

 Total assets  

 2005-2006  

        The increase in total assets is approximately $48,900. The increase is due largely to a rise in goodwill, approximately $14,700,
attributable to acquisitions completed in 2006 net of foreign currency exchange fluctuations. The increase in capital assets, approximately $29,900 is attributable to completed acquisitions coupled
with an increase in purchases to accommodate growth, net of amortization and foreign currency fluctuations. Lower landfill asset balances, approximately $8,900, are due principally to amortization and
foreign currency fluctuations. 

        Intangible
assets also declined, approximately $7,300, due to amortization outpacing acquired intangibles and foreign currency fluctuations. The approximately $4,900 decline in cash and
cash equivalents is due largely to the timing of cash receipts and payments, partially offset by higher restricted cash balances. An approximately $6,600 increase in amounts due from
non-controlling interest represented amounts due from various IESI selling shareholders in satisfaction of various representations and warranties agreed to on the Company's acquisition of
IESI. Accounts receivable increased approximately $20,500 due to the timing of collections and acquisitions. 

15

 

 2006-2007  

        The increase in total assets is approximately $204,600. The increase is due largely to a rise in goodwill and intangibles,
approximately $135,200 and $67,500, respectively, and is attributable to acquisitions completed in the current year net of amortization and foreign currency exchange fluctuations. The increase in
capital assets, approximately $82,500, was offset by a like decline in landfill assets, approximately $85,600. Higher capital asset balances are due principally to completed acquisitions coupled with
higher purchases to accommodate growth, net of amortization and foreign currency fluctuations. Lower landfill asset balances are due principally to amortization and foreign currency fluctuations. 

        Other
notables include, an approximately $6,600 decline in amounts due from non-controlling interests, the balance of which was repaid on the cancellation of PPS's, and an
approximately $7,000 decline in deferred financing costs which were written-off on the adoption of the CICA's guidance on financial instruments. Increases in cash and cash equivalents,
accounts receivable and prepaid expenses, approximately $4,100, $13,500 and $3,300, respectively, contributed to the increase in total assets. Acquisitions coupled with the timing of cash receipts,
payments and collections are the primary reasons for the increase in the aforementioned assets. 

 2007-2008  

        The increase in total assets is approximately $369,800. The increase is due almost entirely to foreign currency fluctuations which
represent approximately $351,200 of the comparative change. Acquisitions are the primary reason for the balance of the change. 

 Total long-term liabilities  

 2005-2006  

        Of the $136,200 increase in long-term liabilities, approximately $77,100 is in respect of U.S. segment acquisition
and growth spending. In addition, approximately $44,000 is due to the Company's renegotiation of its Canadian revolving credit facility, which resulted in the reclassification of $29,500 previously
recorded in current liabilities to long-term liabilities, and to acquisition and growth spending. The balance of the increase is due largely to an approximately $8,100 increase in closure
and post-closure cost accruals, primarily on account of provisions for landfill closure and post-closure costs, and an approximately $5,200 increase in future income tax
liabilities, due in large part to an approximately $4,300 valuation allowance established on certain U.S. loss carryforwards in 2006. 

 2006-2007  

        Total long-term liabilities increased by approximately $286,200. An increase of $258,500 in long-term debt, due
in large part to the acquisition of Winters Bros. and growth expenditures, was partially offset by the application of net proceeds from the Company's equity offering against long-term debt
borrowings. Future income tax liabilities increased by approximately $25,700, due in large part to the acquisition of Winters Bros. 

 2007-2008  

        Total long-term liabilities increased by approximately $252,300. An increase in long-term debt of approximately
$220,800 is the primary reason for the change. The change includes approximately $154,300 of foreign currency exchange adjustments, and approximately $81,500 of additional borrowings in Canada. The
increase in Canadian borrowing is due to a combination of acquisitions, additional investment in IESI, and the Canadian segment bearing a higher proportional share of the Company's distribution and
dividend payments in 2008. 

16

 

  Summary of Quarterly Results  

(all amounts are in thousands of Canadian dollars, except per share or trust unit amounts)

																		
	2008

 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	 $	99,557	 	 $	104,999	 	 $	100,754	 	 $	85,768	 	 $	391,078	 
	 	 U.S. south
	 	 	 101,394	 	 	 91,384	 	 	 88,234	 	 	 79,816	 	 	 360,828	 
	 	 U.S. northeast
	 	 	 97,923	 	 	 97,164	 	 	 91,274	 	 	 78,763	 	 	 365,124	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	 $	298,874	 	 $	293,547	 	 $	280,262	 	 $	244,347	 	 $	1,117,030	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income
	 	 $	10,809	 	 $	11,979	 	 $	15,049	 	 $	8,776	 	 $	46,613	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic and diluted
	 	 $	0.19	 	 $	0.21	 	 $	0.26	 	 $	0.15	 	 $	0.81	 
	 	 	 	 	 	 	 	 	 	 	 	 

 

																		
	2007

 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	89,418	 	$	87,735	 	$	86,019	 	$	73,355	 	$	336,527	 
	 	 U.S. south
	 	 	77,479	 	 	82,278	 	 	80,398	 	 	74,535	 	 	314,690	 
	 	 U.S. northeast
	 	 	84,132	 	 	68,500	 	 	59,098	 	 	54,410	 	 	266,140	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	251,029	 	$	238,513	 	$	225,515	 	$	202,300	 	$	917,357	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income
	 	$	4,922	 	$	10,540	 	$	5,860	 	$	10,365	 	$	31,687	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average trust unit, basic and diluted
	 	$	0.09	 	$	0.18	 	$	0.10	 	$	0.19	 	$	0.56	 
	 	 	 	 	 	 	 	 	 	 	 	 

 

																		
	2006

 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	74,943	 	$	76,891	 	$	72,329	 	$	64,477	 	$	288,640	 
	 	 U.S. south
	 	 	70,097	 	 	67,183	 	 	66,021	 	 	63,820	 	 	267,121	 
	 	 U.S. northeast
	 	 	55,279	 	 	55,907	 	 	54,305	 	 	50,567	 	 	216,058	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	200,319	 	$	199,981	 	$	192,655	 	$	178,864	 	$	771,819	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income
	 	$	10,168	 	$	10,457	 	$	7,190	 	$	4,928	 	$	32,743	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average trust unit, basic and diluted
	 	$	0.19	 	$	0.20	 	$	0.13	 	$	0.09	 	$	0.61	 
	 	 	 	 	 	 	 	 	 	 	 	 

 Total approximate quarterly revenue growth from Q1 2006 to Q4 2008  

						
	 Revenues — Q1 2006
	 	$	178,900	 
	 	 	 	 
	 Revenue growth additions:
	 	 	 	 
	 	 Acquisitions completed from 2006 to 2008
	 	 	68,900	 
	 	 Net price, volume, and fuel and environmental surcharge growth, net of foreign currency translation
	 	 	51,100	 
	 	 	 	 
	 Revenues — Q4 2008
	 	$	298,900	 
	 	 	 	 

 Financial Condition  

(all amounts are in thousands of Canadian dollars, unless otherwise stated)  

17

 

 Selected Consolidated Balance Sheet Information  

																				
	 
	 	Canada —

December 31,

2008 	 	U.S. —

December 31,

2008 	 	Consolidated —

December 31,

2008 	 	Canada —

December 31,

2007 	 	U.S. —

December 31,

2007 	 	Consolidated —

December 31,

2007 	 
	 Accounts receivable
	 	 $	55,551	 	 $	76,421	 	 $	131,972	 	 $	51,897	 	 $	63,954	 	 $	115,851	 
	 Intangibles
	 	 $	26,986	 	 $	119,841	 	 $	146,827	 	 $	33,736	 	 $	110,950	 	 $	144,686	 
	 Goodwill
	 	 $	61,629	 	 $	694,968	 	 $	756,597	 	 $	61,461	 	 $	555,073	 	 $	616,534	 
	 Deferred costs
	 	 $	4,702	 	 $	5,816	 	 $	10,518	 	 $	3,502	 	 $	3,804	 	 $	7,306	 
	 Capital assets
	 	 $	163,517	 	 $	336,884	 	 $	500,401	 	 $	144,681	 	 $	260,219	 	 $	404,900	 
	 Landfill assets
	 	 $	185,305	 	 $	562,456	 	 $	747,761	 	 $	194,039	 	 $	450,672	 	 $	644,711	 
	 Working capital deficit — (current assets less current liabilities)
	 	 $	(32,310	)	 $	(4,399	)	 $	(36,709	)	 $	(3,423	)	 $	(21,921	)	 $	(25,344	)

 Accounts receivable  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	16,121	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	3,654	 
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	12,467	 

        Acquisitions
completed in 2008 contributed approximately $2,300 to the comparative increase in Canadian segment accounts receivable. The balance of the change is due to
organic growth. 

        Foreign
currency translation had the most pronounced impact on U.S. segment accounts receivable, approximately $14,900. Excluding the impact of foreign currency translation, the
U.S. segment allowance for doubtful accounts increased approximately $1,400 and was partially offset by accounts receivable recognized on acquisitions throughout the year, approximately $1,300.
The balance of the change is due to the overall economic slowdown and its impact on operating results and accounts receivable. 

 Intangibles  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	2,141	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	(6,750	)
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	8,891	 

        Amortization,
approximately $13,400, was partially offset by intangibles recognized on acquisitions, approximately $6,600, for the Company's Canadian segment. 

        Foreign
currency translation represents approximately $24,500 of the comparative change for the Company's U.S. segment, which was largely offset by amortization, approximately
$20,200. Fair value adjustments to preliminary purchase price allocations recorded in prior periods together with current period acquisitions represents approximately $4,600 of the year over
year increase. 

 Goodwill  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	140,063	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	168	 
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	139,895	 

        Goodwill
recognized on acquisitions completed in the year represents the entire Canadian segment change. 

        Foreign
currency translation, approximately $134,400, is the primary reason for the U.S. segment increase. Goodwill recognized on U.S. segment acquisitions completed in the
year totals approximately $8,000, while fair value adjustments to preliminary purchase price allocations recorded in prior periods and recognized goodwill attributable to contingent landfill payments
amounted to approximately ($600). 

18

 

 Deferred costs  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	3,212	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	1,200	 
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	2,012	 

        The
increase in Canadian segment deferred costs is due entirely to landfill development initiatives. 

        Foreign
currency translation, approximately $1,200, is the primary reason for the increase in U.S. segment deferred costs. Corporate development activities, approximately $800,
represent the balance of the increase. 

 Capital assets  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	95,501	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	18,836	 
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	76,665	 

        The
increase in Canadian segment capital assets is primarily attributable to vehicle, equipment, and container purchases, totaling approximately $33,400 and working capital adjustments,
representing additions which remain unpaid, approximately $3,700. Capital asset additions were incurred in respect of new contract wins, organic growth, and capital asset replacement. Acquisitions
contributed approximately $7,600 to the Canadian segment increase, while amortization, approximately $25,600, partially offset the sum of the foregoing. 

        The
increase in U.S. segment capital assets is a function of the following: foreign currency translation, approximately $65,000, capital asset purchases, approximately $54,200,
working capital adjustments, approximately $500, capital assets acquired through acquisition, approximately $8,000, and fair value adjustments to preliminary purchase price allocations recorded in the
prior year, approximately $6,400. Capital asset purchases are principally comprised of vehicle, equipment and container purchases in support of new contract wins, organic growth, and capital asset
replacement. These increases were partially offset by amortization, approximately $56,400. The balance of the U.S. segment change is due to the sale of various capital assets. 

 Landfill assets  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	103,050	 
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	(8,734	)
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	111,784	 

        Amortization,
including the amortization of capitalized landfill asset closure and post-closure costs, approximately $19,600, coupled with working capital adjustments,
approximately $2,700, is the primary reason for the Canadian segment decline in landfill assets. Amortization and working capital adjustments were partially offset by additions, approximately $12,000,
and capitalized landfill closure and post-closure costs, a non-cash item, approximately $1,600. Landfill construction efforts were principally carried out at the Company's
Lachenaie landfill during the year. 

        Foreign
currency translation, approximately $108,400, coupled with additions, approximately $48,400, is the primary reason for the U.S. segment increase. Amortization,
approximately $43,500, and net cash flow revisions in estimated landfill closure and post-closure costs, approximately $1,500, partially offset the aforementioned increases. Landfill
construction at the Fund's Seneca Meadows site is the largest contributor to landfill asset additions during the year. 

19

 

 Working capital deficit  

					
	 $ Change — Consolidated December 31, 2008 versus December 31, 2007
	 	 $	(11,365	)
	 $ Change — Canada — December 31, 2008 versus December 31, 2007
	 	 $	(28,887	)
	 $ Change — U.S. — December 31, 2008 versus December 31, 2007
	 	 $	17,522	 

        The
classification of Canadian senior secured series A debentures, $47,000, from long-term to current is the primary reason for the weakening Canadian segment working
capital position. This change was partially offset by an increase in cash and cash equivalents, accounts receivable, prepaid expenses, approximately $1,600, $3,700, and $5,500, respectively, and a
decline in accounts and dividends payable, approximately $1,500, and $6,300, respectively, all of which strengthened the Canadian segments working capital position. The increase in cash and cash
equivalents is due to the timing of debt repayment and holding more cash to satisfy immediate working capital demands. Changes in accounts receivable are outlined above, while the increase in prepaid
expenses is due largely to containers purchased on account of a city in the province of Quebec, prepaid disposal acquired through an acquisition, and prepaid interest on long-term debt,
which collectively increased $3,700 year over year. The decline in accounts payable is due in large part to the timing of capital and landfill expenditures. 

        At
December 31, 2007, the Company had accrued amounts payable to the original seller of the Seneca Meadows landfill totaling approximately U.S. $15,000. Payment of this
amount in the current period is the primary cause of the strengthening U.S. segment working capital position as the payment was financed with long-term debt. The balance of the
change is principally attributable to a decline in accounts payable, due primarily to the timing of payment for capital and landfill asset purchases, partially offset by a decline in accounts
receivable, which is outlined above. 

 Disclosure of outstanding share capital  

								
	 
	 	December 31, 2008 	 
	 
	 	Shares 	 	$ 	 
	 Common shares
	 	 	 57,569	 	 	 1,006,772	 
	 Special shares
	 	 	 11,137	 	 	 —	 
	 Restricted shares
	 	 	 (210	)	 	 (3,985	)
	 	 	 	 	 	 
	 Total contributed equity
	 	 	 68,496	 	 	 1,002,787	 
	 	 	 	 	 	 

 Shareholders' equity  

        The Company is authorized to issue an unlimited number of common, special and preferred shares, issuable in series. 

 Common Shares  

        On October 1, 2008, pursuant to the plan of arrangement, the Company issued 57,569 common shares. Common shareholders are
entitled to one vote for each common share held and to receive dividends, as and when declared by the Board of Directors. Common shareholders are entitled to receive, on a pro rata basis, the
remaining property and assets of the Company upon dissolution or wind-up, subject to the priority rights of other classes of shares. 

 Special Shares  

        On October 1, 2008, pursuant to the plan of arrangement, the Company issued 11,137 special shares to IESI for the benefit
of each participating preferred shareholder. Special shareholders are entitled to one vote for each special share held. The special shares carry no right to receive dividends or to receive the
remaining property and assets of the Company upon dissolution or wind-up. The number of special shares outstanding is equivalent to the exchange rights granted to holders of the PPSs.
Participating preferred shareholders have the right to exchange one PPS for one common share of the Company. For each PPS exchanged the same number of special shares is automatically cancelled. 

 Preferred Shares  

        On October 1, 2008, pursuant to the plan of arrangement, the Company is authorized to issue an unlimited number of preferred
shares, issuable in series. At December 31, 2008, no preferred shares are issued. Each series of preferred shares shall have rights, privileges, restrictions and conditions as determined by the
Board of Directors prior to issuance. Preferred shareholders are not entitled to vote, but take preference over the common shareholders rights in the remaining property and assets of the Company in
the event of dissolution or wind-up. 

20

 

   Non-controlling interest  

        As of February 26, 2009, 10,879 PPSs have been converted into shares of the Company since issuance on January 21,
2005. Each holder of a PPS receives dividends equivalent to those received by holders of the Company's common shares. Assuming exchange of all special shares, for common shares of the Company,
68,706 equivalent common shares would be outstanding at December 31, 2008. 

 Liquidity and Capital Resources
  (all amounts are in thousands of Canadian dollars, except per tonne amounts, unless otherwise stated)  

																	
	Contractual obligations

 
	 	December 31, 2008 	 
	 
	 	Payments due 	 
	 
	 	Total 	 	Less than 1 year 	 	1-3 years 	 	4-5 years 	 	After 5 years 	 
	 Long-term debt
	 	 $	1,069,798	 	 $	47,000	 	 $	153,500	 	 $	683,940	 	 $	185,358	 
	 Landfill closure and post-closure costs, undiscounted
	 	 	 478,768	 	 	 8,829	 	 	 15,488	 	 	 22,415	 	 	 432,036	 
	 Operating leases
	 	 	 41,952	 	 	 7,105	 	 	 9,929	 	 	 7,752	 	 	 17,166	 
	 Other long-term obligations(2)
	 	 	 21,000	 	 	 —	 	 	 —	 	 	 —	 	 	 21,000	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total contractual obligations
	 	 $	1,611,518	 	 $	62,934	 	 $	178,917	 	 $	714,107	 	 $	655,560	 
	 	 	 	 	 	 	 	 	 	 	 	 

Notes:

	(2)
	Other
long-term obligations include the following: payments on account of a license agreement to use the trade name "BFI" and the related logo
for the period from June 30, 2015 to June 30, 2034. Contingent consideration in respect of certain acquisitions is not included in the table above. 

 Long-term debt  

        Summarized details of the Company's long-term debt facilities are as follows: 

														
	 
	 	Available

lending 	 	Facility drawn at

December 31,

2008 	 	Letters of credit

(not reported as

long-term debt

on the

Consolidated

Balance Sheets) 	 	Current

available

capacity 	 
	 Canadian long-term debt facilities — stated in Canadian dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Senior secured debentures, series A
	 	 $	47,000	 	 $	47,000	 	 $	—	 	 $	—	 
	 Senior secured debentures, series B
	 	 $	58,000	 	 $	58,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	305,000	 	 $	153,500	 	 $	24,916	 	 $	126,584	 
	 U.S. long-term debt facilities — stated in U.S. dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Term loan
	 	 $	195,000	 	 $	195,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	588,500	 	 $	363,500	 	 $	128,735	 	 $	96,265	 
	 IRBs
	 	 $	104,000	 	 $	104,000	 	 $	—	 	 $
	—
 	 

 Senior secured debentures, series A  

        The Company plans to draw on its Canadian revolving credit facility to repay its senior secured series A debentures which mature
on June 26, 2009. 

 Canadian revolving credit facility  

        Effective October 1, 2008, the Company entered into a Fourth Amending Agreement to its Fourth Amended and Restated Credit
Agreement. The amending agreement simply recognizes the structural change from an income trust to a corporation and had no impact on committed amounts, maturity dates or pricing. 

21

 

        Effective
July 30, 2008, the Fund entered into a Third Amending Agreement to its Fourth Amended and Restated Credit Agreement. The Third Amending Agreement increased the Canadian
revolving credit facility commitment from $150,000 to $305,000 and decreased the accordion feature from $50,000 to $45,000. In addition, the Third Amending Agreement increases the pricing grid by one
quarter of one percent and modifies one financial covenant. All other significant terms remain unchanged. 

 U.S. term loan and revolving credit facility  

        Effective October 1, 2008, the Company entered into a Sixth Amending Agreement to its Amended and Restated Revolving Credit and
Term Loan Agreement. The amending agreement simply recognizes the structural change from an income trust to a corporation and had no impact on committed amounts, maturity dates or pricing. 

        Effective
August 6, 2008, the Company entered into a Fifth Amendment to its Amended and Restated Revolving Credit and Term Loan Agreement. The Fifth Amendment extends the maturity
of the U.S. revolving credit facility to January 21, 2012, increases the U.S. revolving credit facility commitment to U.S. $588,500 from U.S. $575,000, and decreases
the accordion feature from U.S. $50,000 to U.S. $36,500. In
addition, the Fifth Amendment increases the applicable margin on the pricing grid by one quarter of one percent throughout. All other significant terms remain unchanged. 

        The
Company's U.S. term loan and revolving credit facility restricts total annualized capital and landfill expenditures, less expenditures for new municipal contracts, to
1.1 times annual capital and landfill asset amortization. If opportunities arise that require growth capital expenditures that are in excess of the restrictive covenant, the Company would seek
a waiver of this covenant. Failure to receive the waiver could accelerate the repayment of the relevant indebtedness or result in the postponement of growth capital expenditures. If the repayment of
the facility were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay this facility in full. 

 IRBs  

        Effective August 1, 2008, the Company remarketed $45,000 of IRBs. The amended and restated IRBs, which originally bore interest
at LIBOR less an applicable discount, bear interest at 6.625% for a term of 5 years. In conjunction with the remarketing, Standard & Poor's re-affirmed IESI's BB long term
corporate rating, with an outlook of stable, and issued a new B+ rating on the remarketed IRBs. 

 Long-term debt to EBITDA(A)  

        At December 31, 2008, the Company is not in default of its long-term debt facility covenants. On a consolidated
basis, the Company's long-term debt, including the current portion, to last twelve months EBITDA(A) ratio is 3.45 times. However, the Company's long-term
debt to EBITDA(A) covenant obligations are not subject to foreign currency exchange fluctuations. Accordingly, holding the foreign currency rate between Canada and the U.S. at
parity, results in a long-term debt to EBITDA(A) ratio of 3.08 times. Readers are reminded that contributions to EBITDA(A) from acquisitions completed
within the last twelve months are not included in the foregoing ratio and that the Company has two revolving credit facilities to support its Canadian and U.S. segment operations which require
financial covenant tests to be prepared independently. 

        Management
of the Company actively reviews its financing alternatives. 

22

 

 Funded debt to EBITDA(A)  

        Long-term debt to EBITDA(A) for Canada and the U.S., at December 31, 2008, and as defined and
calculated in accordance with the underlying Canadian and U.S. long-term debt facility covenants, are as follows: 

								
	 
	 	Canada 	 	U.S. 	 
	 Funded debt to EBITDA(A)
	 	 	 2.10	 	 	 3.93	 
	 Funded debt to EBITDA(A) maximum(3)(4)
	 	 	 2.75	 	 	 4.25	 

Notes: 

	(3)
	The
U.S. long-term debt facility funded debt to EBITDA(A) covenant declines to a maximum of 4.0 on March 31,
2009. Concurrently, the long-term debt facility will preclude the U.S. corporation from paying dividends should the funded debt to EBITDA(A) ratio exceed 3.9
(currently 4.15). The Company expects to fund all, or a significant portion of, its 2009 dividend payments from its Canadian operations and is using the net proceeds from its offering
(see Note 4) to repay U.S. revolving facility advances.

	(4)
	Net
proceeds from the Company's common share issuance, announced on February 12, 2009, and including the exercise of the underwriter's
over-allotment option, are expected to net the Company approximately $88,600. Translating the net proceeds from the offering, at a foreign currency exchange rate of eighty cents
U.S. for every Canadian dollar, results in a U.S. revolving facility repayment of U.S. $70,880. Had this offering been completed at December 31, 2008, the Company's Funded
debt to EBITDA(A) ratio in the U.S. would have been 3.51 times. 

 Risks and restrictions  

        A portion of the Company's term loan, its two revolving credit facilities, and a portion of its IRBs are subject to interest rate
fluctuations with bank prime, the 30 day rate on bankers' acceptances or LIBOR. The Company has hedged U.S. $262,000 of variable rate interest on its U.S. long-term
debt facility. The balance of drawings on the U.S. long-term debt facility, U.S. $296,500, together with amounts drawn on the Company's Canadian revolving credit facility
totaling $153,500, and amounts drawn on a portion of the IRBs, U.S. $59,000, are subject to interest rate risk. A 1.0% rise or fall in the variable interest rate results in a
U.S. $2,965, $1,535, and U.S. $590, change in annualized interest expense incurred on the Company's U.S. long-term debt facility, Canadian revolving credit facility,
and IRBs, respectively. 

        The
Company is obligated under the terms of its debentures, term loan, revolving credit facilities, and IRBs (collectively the "facilities") to repay the full principal amount of each at
their respective maturities. A failure to comply with the terms of any facility could result in an event of default which, if not cured or waived, could accelerate repayment of the relevant
indebtedness. If repayment of the facilities were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay these facilities in full. 

        The
terms of the facilities contain restrictive covenants that limit the discretion of the Company's management with respect to certain business matters. These covenants place
restrictions on, among other things, the ability of the Company to incur additional indebtedness, to create liens or other encumbrances, to pay dividends on shares and PPSs above certain levels or
make certain other payments, investments, loans and guarantees, and to sell or otherwise dispose of assets and merge or consolidate with another entity. In addition, the debentures and revolving
credit facilities contain a number of financial covenants that require the Company to meet certain financial ratios and financial condition tests. A failure to comply with the terms of the facilities
could result in an event of default which, if not cured or waived, could result in accelerated repayment. If the repayment of the facilities were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay these facilities in full. 

        At
December 31, 2008, the Company is not in default of its long-term debt facility covenants. 

        Management
of the Company actively reviews its financing alternatives. 

 Other  

        In April, DBRS re-affirmed their rating of BBB low on the Fund's Canadian senior secured series A and B
debentures. The rating was subsequently placed under review pending the results of the Company's conversion. In July, S&P re-affirmed their rating of BB on the Company's U.S. term
loan and revolving credit facility and issued a rating of B+ on U.S. $45,000 of IRBs which were converted to fixed from a floating rate of interest. In 

23

 

October,
Moody's Investor Services re-affirmed their rating of B1 on the Company's U.S. term loan and revolving credit facility and changed its outlook to negative. The
negative outlook is subject to adjustment, but requires either a covenant modification of the funded debt to EBITDA(A) reduction to 4.0 in March 2009 or a demonstrated
reduction in current funded debt to EBITDA(A) levels. 

 Cash flows  

											
	 
	 	Year ended December 31 	 
	 
	 	2008 	 	2007 	 	$Change 	 
	 Cash flows generated from (utilized in):
	 	 	 	 	 	 	 	 	 	 
	 Operating activities
	 	 $	229,921	 	 $	217,415	 	 $	12,506	 
	 Investing activities
	 	 $	(211,216	)	 $	(522,988	)	 $	311,772	 
	 Financing activities
	 	 $	(15,383	)	 $	308,509	 	 $	(323,892	)

 Operating activities  

        Organic and acquisition growth is the primary reason for the increase in cash generated from operating activities. Cash generated from
organic and acquisition growth was partially offset by higher borrowing costs, approximately $10,800. Higher borrowing costs were incurred principally to support organic and acquisition growth. The
change in non-cash working items is due principally to a payment made to the original seller of the Seneca Meadows landfill, approximately U.S. $15,000, and higher prepaid expenses
(see Financial Condition — Working capital deficit section of this MD&A) and lower dividends payable. 

 Investing activities  

        The decrease in cash utilized in investing activities is due in large part to acquisitions completed in the prior period. Acquisitions
completed in prior year totaled approximately $366,200 and are approximately $305,900 higher than in 2008. Capital and landfill asset purchases represent the bulk of the resulting comparative period
change (see Financial Condition — Capital assets and Landfill
assets sections of this MD&A). 

 Financing activities  

        Financing the Winters Bros. acquisition in 2007 with proceeds from long-term debt facility advances is the primary reason
for the comparative decline in cash generated from financing activities. Dividends and distributions paid to share, unit, and participating preferred shareholders are marginally higher for the year
ended 2008 as a result of equity issued in 2007. The purchase of restricted shares for certain management also resulted in a higher comparative use of cash. 

 Seasonality  

        Revenues are generally higher in spring, summer and autumn months due to higher collected and disposed of waste volumes. Higher
collection and disposal revenues are partially offset by higher operating expenses to service and dispose of additional waste volumes. 

 Risks and Uncertainties  

        The Company is subject to various risks and uncertainties which are summarized below. Additional details are contained in the Fund's
2007 Annual Information Form and Management Information Circular dated August 26, 2008 filed on SEDAR, which can be found at  www.sedar.com.

	•
	renewal or maintenance of landfill operating permits   

	•
	modifications to landfill operating permits   

	•
	continued focus on growth through acquisition   

	•
	continued management of business growth 

24

 

	•
	loss of contracts through competitive bidding or early termination   

	•
	reliance on third party disposal customers   

	•
	geographic concentration of operations   

	•
	customer concentration   

	•
	weather and seasonality   

	•
	union labour agreements   

	•
	fuel surcharge cost pass through   

	•
	reliance on key management executives   

	•
	localized decision making   

	•
	surety bonds, letters of credit and insurance   

	•
	leverage, restrictive covenants, and capital requirements   

	•
	uninsured and underinsured losses   

	•
	legislation and governmental regulation   

	•
	environmental regulation and litigation   

	•
	environmental contamination   

	•
	competition   

	•
	governmental initiatives to reduce landfill disposal by encouraging alternatives   

	•
	foreign exchange exposure   

	•
	accounting estimates   

	•
	internal control over financial reporting and disclosure control procedures   

	•
	dividends or distributions are not guaranteed   

	•
	income tax matters in Canada, including the taxation of income trusts, and the United States  

	•
	distribution of securities on redemption or termination of the Company   

	•
	shareholder liability   

	•
	investment eligibility and foreign property   

	•
	restrictions on certain shareholders and liquidity of shares   

	•
	future exchanges of the non-controlling interests investment 

 Outlook
  (all amounts are in thousands of Canadian dollars, unless otherwise stated)  

 Overview  

        Management is committed to employing its improvement and market-focused strategies with the goal of continuously delivering value to
its shareholders. Management's objective is continuous improvement, which equates to continuous revenue growth coupled with effective cost management. New market entry, existing market densification,
and landfill development will be a continued focus of the Company as it looks for ways to expand its operations, increase customer density in strategic markets, and increase internalization. The
Company's strengths remain founded in the following: consistent historical organic growth, growth through strategic acquisition, strong competitive position, a solid customer base with
long-term contracts, disciplined operating process, predictable replacement expenditure requirements, and stable cash flows. Management remains committed to actively managing these
strengths in the future. 

25

 

 Strategic acquisitions  

        In the long-term, the Company remains committed to its review and pursuit of new market and strategic "tuck-in"
acquisitions. Current disruptions in the financial markets have impacted the Company's valuation and its ability to fund significant acquisitions. Therefore, management expects that in the
near-term, only accretive "tuck-in" acquisitions are likely to be completed. 

 Operations  

        Significant landfill volumes have been received and may not continue at a similar rate. 

        Management
is active in various permit expansion efforts at certain landfills as permitted life is consumed. Additionally, management is actively reviewing alternatives to replace its
Calgary landfill site and is also active in its efforts to expand the Lachenaie landfill. In April 2008, the Company received a one year extension which allows the Lachenaie landfill to
continue operating while management continues to work on a longer-term expansion initiative. Development spending in respect of the Lachenaie expansion initiative is included in deferred
costs on the consolidated balance sheet. 

        Residential
and other government contracts bids may require significant capital expenditures. 

        Fuel
and commodity surcharges, and environmental costs, including government imposed disposal charges, will continue to be passed through to the end customer, with a view to eliminating
cost variability in the Company's operating results and cash flow. Management has entered into some fuel hedges and will continue to review its hedging alternatives for fuel in light of current market
conditions and the resulting fuel price fluctuations. Readers are reminded that increasing fuel costs, environmental costs, and government imposed disposal charges result in higher revenues and, all
else equal, reduce the gross operating margin (defined as revenues less operating expenses divided by revenues). 

        Effective
November 1, 2008, the Company renewed its two Brooklyn transfer contracts with the City of New York. The contract terms are for three years with two one year
renewal options, subject to the City's discretion. 

 Other  

 Taxation  

        In conjunction with the Company's conversion from an income trust to a corporation, intercompany notes existing within the structure
prior to conversion were effectively repaid or
capitalized. Accordingly, intercompany interest expense borne by the Company's subsidiaries is, post conversion, no longer available to shelter income subject to tax. Once the Company utilizes the tax
shelter available from carryforward losses, the Company's cash tax expense will increase. 

 Financing strategic growth  

        One of management's principal longer-term objectives is to grow organically and through strategic acquisition. Growth
through strategic acquisition is dependent on the Company's ability to access debt and equity in the capital markets. Any restrictions will affect the Company's growth through strategic acquisition. 

 Withholding taxes on foreign source income  

        Withholding taxes on foreign source income are recorded as current income tax expense on the consolidated statement of operations and
comprehensive income (loss). An increase in dividends paid, or the erosion of IESI's ability to return capital, will result in increasing withholding taxes from foreign source income received by
the Company. 

 Optimization of tax losses and tax efficiency of structure  

        Management periodically reviews its organizational structure to promote tax efficiency and optimize the use of tax losses within the
structure. The Company expects to incur additional reorganization costs in this regard. 

26

 

 Amortization  

        In accordance with the CICA accounting standard for business combinations (section 1581), the Company is required to apply the
purchase method of accounting to all acquisitions. The purchase method of accounting requires the Company to recognize the fair value of all assets acquired and liabilities assumed, including
recognizing all intangible assets separately from goodwill. On acquisition, fair value adjustments typically increase the carrying amount of capital and landfill assets and typically results in the
allocation of a portion of the purchase price to identified intangible assets. Accordingly, the Company's amortization of capital, landfill and intangible assets not only includes amortization of
original cost but also includes the amortization of fair value adjustments recognized on acquisition. Even though the Company has grown organically, a significant portion of its growth has been
through acquisitions. Therefore, fair value adjustments included in the Company's amortization expense are significant. The Company's most notable fair value adjustments arose from the formation of
the Company's predecessor company, the Company's initial public offering, and the Company's acquisitions of; IESI, the Ridge landfill, and Winters Bros. Due to the inherent difficulty in isolating
each fair value adjustment for every acquisition completed by the Company, the following selected amounts demonstrate the impact fair value adjustments have on the Company's amortization expense for
the year ended December 31, 2008: fair value adjustments for landfill assets and recognized intangible assets on the Company's initial public offering accounted for approximately $21,300, or
11.9%, of the Company's 2008 amortization expense, and fair value adjustments for capital and landfill assets recognized on the Company's acquisition of IESI accounted for approximately $20,000, or
11.2%, of the Company's 2008 amortization expense. Fair value adjustments are recognized in amortization expense over the useful life of the underlying asset. For landfill assets, this is the
landfills permitted or deemed permitted useful life. As the Company continues to grow through acquisition, amortization expense will continue to increase. Increases will be partially offset by
declines in fully amortized fair value adjustments. 

 Critical Accounting Estimates  

 Landfill closure and post-closure costs  

        In the determination of landfill closure and post-closure costs the Company employs a variety assumptions, including but
not limited to, the following: engineering estimates for materials, labour and post-closure monitoring, assumptions market place participants would use to determine these estimates,
including inflation, markups, and inherent uncertainties due to the timing of work performed, the credit standing of the Company, the risk free rate of interest, current economic and financial
conditions, landfill capacity estimates, the timing of expenditures and governmental oversight and regulation. 

        Significant
increases or decreases in engineering cost estimates for materials, labour and monitoring or assumptions market place participants would use to determine these estimates
could have material adverse or positive effect on the Company's financial condition and operating performance, all else equal. Material inputs tied to commodity prices, which may include fuel price or
other commodities, whose value fluctuates with multiple and varied market inputs or conditions, could result in a rise or fall in engineering estimates. Both increases and decreases in cost estimates
will be recognized over the period in which the landfill accepts waste. However, upward revisions in cost estimates are discounted applying the current credit adjusted risk free rates, while downward
revisions are discounted applying the risk free rate when the estimated closure and post-closure costs were originally recorded or a weighted average credit adjusted risk free rate if the
period of original recognition cannot be identified. 

        All
else equal, a decline in either of the risk free rate or the Company's credit spread over the risk free rate, or both, results in higher recorded landfill closure and
post-closure costs at any given time, as cost estimates are estimated applying present value techniques. Inversely, an increase will result in lower recorded landfill closure and
post-closure cost estimates at any given time. Fluctuations in either of these estimates could have a material adverse or positive effect on the Company's financial condition and operating
performance. 

        All
else equal, a decrease or increase in the inflation rate assumption will result in lower or higher recorded landfill closure and post-closure costs at any given time. A
change to the Company's inflation estimate could have a material adverse or positive effect on the Company's financial condition and operating performance. 

27

 

        Landfill
capacity estimates are estimated at least annually using survey information typically provided by independent engineers. An increase in capacity estimates, due to changes in the
landfills operating permit or design, deemed permitted capacity assumptions, or compaction, does not impact recorded landfill closure and post-closure costs reported at any given time, but
does affect the recognition of expense in subsequent periods. All else equal, accretion expense recorded to operating expenses will increase and thereby reduce EBITDA(A), with a
corresponding decrease in landfill amortization expense. The inverse holds true for a decrease in capacity estimates. Changes in landfill capacity estimates could have a material adverse or positive
effect on the Company's financial condition and operating performance. 

        Changes
to the timing of expenditures or changes to the types of expenditures or monitoring periods established through governmental oversight and regulation could have a material
adverse or positive effect on the Company's financial condition and operating performance. If the timing of expenditures becomes more near term, recorded landfill closure and post-closure
cost estimates will increase. Changes to governmental oversight and regulation could increase or decrease estimated costs or the timing thereof, or result in additional or diminished capacity
estimates as a result of permit life expansion or contraction. A governmental change which renders the landfill's operating permit inactive will result in the Company accelerating the recognition of
both closure and post-closure costs, which will increase the recorded amount of landfill closure and post-closure costs, and these amounts could be material. 

        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 

 Landfill assets  

        Similar to landfill closure and post-closure costs, the determination of amortization rates for landfill assets requires
the Company to employ a variety assumptions, including but not limited to, the following: engineering estimates for materials and labour to construct landfill capacity, inflation, landfill capacity
estimates, and governmental oversight and regulation. 

        Changes
to any of the foregoing estimates, which may include changes to material inputs tied to commodity prices, economic and socio-economic conditions which impact the rate of
inflation, changes to landfill operating permits or design,deemed permitted capacity assumptions, or compaction which impacts landfill capacity estimates or a change in government or a governmental
change that impacts estimated costs to construct or impacts capacity, may have a material adverse or positive effect on the Company's financial condition and results of operations. Changes which
increase cost estimates or reduce or constrain capacity estimates will result in higher landfill asset amortization expense in future periods, but have no immediate effect on capitalized landfill
assets. Changes which decrease cost estimates or increase capacity estimates will have an inverse effect. 

        Included
in the capitalized cost of landfill assets, are amounts incurred to develop, expand and secure the landfills operating permit. These amounts are amortized over the period of
time the landfill actively accepts waste. Any change to capacity estimates will impact the period over which these costs are amortized. A governmental change which renders the landfill's operating
permit inactive will result in the Company recognizing an impairment charge on landfill assets, and this charge could be material. 

        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 

 Goodwill  

        The Company tests goodwill for impairment at least annually or more frequently if an event or circumstance occurs that more likely than
not reduces the fair value of a reporting unit below its carrying amount. The impairment test is a two step test. The first test requires the Company to compare the fair value of a reporting unit to
its carrying amount. If the fair value exceeds its carrying
amount, goodwill of the reporting unit is not considered impaired. However, if the carrying amount of the reporting unit exceeds it fair value, the fair value of the reporting unit's goodwill is
compared with its carrying amount to measure the amount of impairment loss, if any. When the carrying amount of the reporting unit goodwill exceeds the fair value of goodwill, an impairment loss is
recognized in an amount equal to the excess. 

28

 

        The
fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination, whereby the excess of the fair value of the reporting unit
over the amounts assigned to its assets and liabilities is the fair value of goodwill. Fair value is the amount at which an item can be bought or sold in a current transaction between willing parties,
that is, other than in a forced sale or liquidation. To establish fair value, the Company may employ one or more valuation techniques including a market multiple based approach. Accordingly, if the
Company's enterprise value declines due to share price erosion or the Company's EBITDA(A) declines as a result of a more pronounced and continuing recession, goodwill may be impaired and
could have a material adverse effect on the Company's financial condition and operating performance. 

        In
light of various economic and financial conditions, the Company reviewed its requirements at December 31, 2008 to perform the goodwill test for impairment in advance of its
next annual test in April 2009. The Company's requirements review concluded that conditions were not present to require the Company to re-perform its goodwill test for impairment
for goodwill allocated to the Canadian and U.S. south segments. The Company did re-perform its goodwill impairment test for goodwill allocated to its U.S. northeast segment
and concluded that goodwill is not currently impaired and accordingly, no write-down is required. The Company will continue to monitor both economic and financial conditions and
re-perform its goodwill test for impairment as conditions warrant. 

 Income taxes  

        Future income taxes are calculated using the liability method of accounting for income taxes. Future income tax assets and liabilities
are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The effect of a change in tax rates on future income tax assets and liabilities is recorded to operations in the period in which the change occurs.
Unutilized tax loss carryforwards that are not more likely than not to be realized are reduced by a valuation allowance in the determination of future income tax assets. 

        Significant
changes to substantively enacted tax rates or laws, or estimates of timing difference reversal, could result in a material adverse or positive effect on the Company's
financial condition and operating
performance. In addition, changes in regulation or insufficient taxable income could impact the Company's ability to utilize its tax loss carryfowards which could have a significant impact on future
income taxes. 

 Accrued accident claims reserve  

        The Company is self-insured for certain general liability, auto liability, and workers' compensation claims. For claims
that are self-insured, stop-loss insurance coverage is maintained for incidents in excess of U.S. $250 and U.S. $500, depending on the policy period in which the
claim occurred. The Company uses independent actuarial reports as a basis for developing reported claims and estimating claims incurred but not reported. 

        Significant
fluctuations in assumptions used to assess and accrue for accident claims reserves, including filed and unreported claims, claims history, the frequency of claims and
settlement amounts, could result in a material adverse or positive impact on the Company's financial condition and operating performance. 

 Other  

        Other estimates include, but are not limited to, the following: estimates of the Company's allowance for doubtful accounts receivable;
deferred cost recoverability assumptions; the useful life of capital and intangible assets; estimates and assumptions used in the determination of the fair value of contingent acquisition payments;
various economic estimates used in the development of fair value estimates, including but not limited to interest and inflation rates; and estimates used in the development of employee future benefit
plan amounts, including but not limited to discount rates, expected long-term rates of return on plan assets, rates of compensation increases and the average remaining service period for
active employees. 

29

 

 New Accounting Policies Adopted  

 Financial instruments  

        Effective January 1, 2008, the Company adopted CICA accounting standards, Financial
Instruments — Disclosures (section 3862), Financial Instruments — Presentation (section 3863), and Capital
Disclosures (section 1535), which collectively required additional disclosures pertaining to the significance, risk, and management of financial instruments, and capital disclosures as they
relate to the Company's objectives, policies, and process for managing capital. 

 New Accounting Policies Requiring Adoption  

 Goodwill and intangible assets  

        CICA accounting standard, Goodwill and Intangibles (section 3064), replaces Goodwill and Other Intangibles (section 3062)
and Research and Development Costs (section 3450). CICA 3064 establish standards for the recognition, measurement, presentation and disclosure of internally generated goodwill and
intangible assets. This section applies to annual and interim financial statements for fiscal years beginning on or after October 1, 2008, with early adoption permitted. The Company is
currently reviewing the impact adopting this section will have on its consolidated financial statements. 

 Business combinations  

        CICA accounting standard, Business Combinations (section 1582), replaces Business Combinations (section 1581). CICA
1582 improves the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. This
section outlines a variety of changes, including, but not limited to the following: an expanded definition of a business, a requirement to measure all business combinations and
non-controlling interests at fair value, and a requirement to recognize future income tax assets and liabilities and acquisition and related costs as expenses of the period. The section
applies to annual and interim financial statements for fiscal years beginning on or after January 1, 2011, with early adoption permitted. The Company has not yet reviewed the impact adopting
this section will have on its consolidated financial statements. 

 Consolidated financial statements  

        CICA accounting standard, Consolidated Financial Statements (section 1601), in combination with CICA 1602, replaces Consolidated
Financial Statements (section 1600). CICA 1601 establishes standards for the preparation of consolidated financial statements and specifically addresses consolidation accounting
following a business combination that involves the purchase of an equity interest in one company by another. The section applies to annual and interim financial statements for fiscal years beginning
on or after January 1, 2011, with early adoption permitted. The Company has not yet reviewed the impact adopting this section will have on its consolidated financial statements. 

 Non-controlling interests  

        CICA accounting standard Non-Controlling Interests (section 1602), in combination with Consolidated Financial
Statements (section 1601), replaces Consolidated Financial Statements (section 1600). CICA 1602 establishes standards for accounting for a non-controlling interest in
a subsidiary in consolidated financial statements subsequent to a business combination. The section applies to annual and interim financial statements for fiscal years beginning on or after
January 1, 2011, with early adoption permitted. The Company has not yet reviewed the impact adopting this section will have on its consolidated financial statements. 

 International Financial Reporting Standards ("IFRS")  

        On February 13, 2008, the Canadian Accounting Standards Board ("AcSB") confirmed that the use of IFRS will be effective for
interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company intends to apply for a listing on the New York Stock Exchange. The
Company expects to report its consolidated financial results in U.S. GAAP commencing in 2009. Accordingly, the 

30

 

Company
expects to transition to IFRS in accordance with the timing set forth by the U.S. Securities and Exchange Commission. 

 Financial Information Controls and Procedures  

        The Vice Chairman and Chief Executive Officer and the Chief Financial Officer of the Company, together with various levels of
management, have evaluated the design and operating effectiveness of the Company's disclosure controls and procedures and internal control over financial reporting at December 31, 2008 and are
collectively satisfied that the Company's disclosure controls and procedures were adequate and effective to ensure significant information relating to the Company is disclosed in accordance with
regulatory requirements and the Company's internal control over financial reporting were adequate and effective to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with GAAP. 

        For
the year ended December 31, 2008, there have been no changes to the Company's internal control over financial reporting that had, or is reasonably likely to have, a material
affect on its internal controls over financial reporting. 

 Definitions of EBITDA and free cash flow  

	(A)
	All
references to "EBITDA" in this MD&A are to "income before the following" on the consolidated statement of operations and comprehensive income (loss).
"Income before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, net gain or loss on sale of capital and landfill assets,
net foreign exchange gain or loss, net gain or loss on financial instruments, write-off of deferred financing costs, conversion costs, other expenses, income taxes, and
non-controlling interest". EBITDA is a term used by the Company that does not have a standardized meaning prescribed by Canadian generally accepted accounting principles ("GAAP") and is
therefore unlikely to be comparable to similar measures used by other issuers. EBITDA is a measure of the Company's operating profitability, and by definition, excludes certain items as detailed
above. These items are viewed by management as either non-cash (in the case of amortization, certain financing costs, write-off of deferred financing costs, net gain or
loss on financial instruments, net foreign exchange gain or loss, and future income taxes) or non-operating (in the case of interest on long-term debt, net gain or loss
on sale of capital and landfill assets, certain financing costs, conversion costs, other expenses, current income taxes, and non-controlling interest). EBITDA is a useful financial and
operating metric for management, the Company's Board of Directors, and its lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons
for exclusion of each item are as follows: 

Amortization — as a non-cash item amortization has no impact on the determination of free cash
flow [nc_nb](B). 

Interest on long-term debt — interest on long-term debt is a function of the Company's
debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the Company and represents a different class of expense than those included in EBITDA. 

Financing costs — financing costs are a function of the Company's treasury/financing activities and represents a
different class of expense than those included in EBITDA. 

Net gain or loss on sale of capital and landfill assets — proceeds from sale of capital and landfill assets are
either reinvested in additional or replacement capital or landfill assets or used to repay the Company's revolving credit facility. 

Net foreign exchange gain or loss — as non-cash items, foreign exchange gains or losses have no impact
on the determination of free cash flow(B). 

Net gain or loss on financial instruments — as non-cash items, gains or losses on financial
instruments have no impact on the determination of free cash flow(B). 

Write-off of deferred financing costs — as a non-cash item, the write-off of
deferred financing costs has no impact on the determination of free cash flow(B). 

31

 

Conversion costs — Conversion costs represent professional fees incurred on the Company's conversion from an
income trust to a corporation. Conversion costs represent a different class of expense than those included in EBITDA. 

Other expenses — other expenses typically represent amounts paid to certain management of acquired companies who
are retained by the Company. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included
in EBITDA. 

Income taxes — income taxes are a function of tax laws and rates and are affected by matters which are separate
from the daily operations of the Company. 

Non-controlling interest — non-controlling interest represents a direct
non-controlling equity interest in IESI through PPS holdings. Accordingly, non-controlling interest represents a different class of expense than those included
in EBITDA. 

EBITDA
should not be construed as a measure of income or of cash flows. The reconciling items between EBITDA and net income (loss) are detailed in the consolidated statement of operations and
comprehensive income (loss) beginning with "income before the following" and ending with "net income (loss)".  

	(B)
	The
Company has adopted a measurement called "free cash flow" to supplement net income (loss) as a measure of operating performance. Free cash flow is a
term which does not have a standardized meaning prescribed by GAAP, is prepared before dividends declared, and is therefore unlikely to be comparable to similar measures used by other issuers. The
objective of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other U.S. based companies in the waste industry, to assess the
Company's primary sources and uses of cash flow, and to assess the Company's ability to sustain its dividend. All references to "free cash flow" in this MD&A have the meaning set out in
this note. 

32

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  Exhibit 4.5    
    

 BFI Canada Ltd. — MD&A for the three months ended March 31, 2009  

 Conversion  

        Pursuant to the plan of arrangement, the conversion of the BFI Canada Income Fund (the "Fund") trust structure to a corporation
resulted in unitholder's of the Fund receiving one common share of BFI Canada Ltd. (the "Company") for each trust unit held on the effective date of conversion, October 1, 2008.
The Class A unit held by IESI Corporation ("IESI") was redeemed by the Fund for ten dollars and the Company issued, and IESI subscribed for, 11,137 special voting shares for aggregate
cash consideration of ten dollars. The participating preferred shares ("PPSs") issued by IESI remained outstanding and exchangeable into common shares of the Company on a one for one basis, instead of
trust units of the Fund. The consolidated financial statements of the Company have been prepared applying continuity of interests accounting. With the exception of the December 31, 2008
consolidated balance sheet, the comparative figures presented herein are those of the Fund. 

 Disclaimer  

        This document may contain forward-looking information relating to the operations of the Company or to the environment in which it
operates, which are based on estimates, forecasts, and projections. Forward-looking information is not a guarantee of future performance and involves risks and uncertainties that are difficult to
predict, or are beyond management's control. A number of factors could cause actual outcomes and results to differ materially from those estimated, forecast or projected. These factors include those
set forth in the Company's Annual Information Form ("AIF") for the year ended December 31, 2008 and the Company's Management Information Circular dated March 23, 2009. Consequently,
readers should not rely on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking information contained
herein is based on what management believes to be reasonable assumptions, users are cautioned that actual results may differ. Management disclaims any intention or obligation to update or revise any
forward-looking information, whether as a result of new information, future events or otherwise, except as required by law. 

 Introduction  

        The following is a discussion of the consolidated financial condition and results of operations of the Company for the three months
ended March 31, 2009 and has been prepared with all available information up to and including April 29, 2009. In accordance with the Canadian Institute of Chartered Accountants ("CICA")
Emerging Issues Committee ("EIC") abstract 170, "Conversion of an Unincorporated Entity to an Incorporated Entity", the plan of arrangement, and resulting one for one exchange of the Fund's trust
units into common shares of the Company, did not constitute a change of control. Accordingly, the consolidated financial statements of the Company have been prepared applying continuity of interests
accounting. For the purpose of Management's Discussion and Analysis ("MD&A"), the term "Company" shall denote the financial position and results of operations for the Company and the Fund, and its
respective subsidiaries, for all periods presented herein. All amounts are reported in Canadian dollars, unless otherwise stated. The consolidated financial statements ("financial statements") of the
Company have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") applicable to interim financial statements. This discussion should be read in conjunction with
the financial statements of the Company, including notes thereto, and the MD&A for the three months ended March 31, 2008 and year ended December 31, 2008, both of which are filed on  www.sedar.com. 

 Corporate Overview  

        The Company, through its operating subsidiaries, is one of North America's largest full-service waste management companies,
providing non-hazardous solid waste ("waste") collection and disposal services to commercial, industrial, municipal and residential customers in five Canadian provinces and ten states, and
the District of Columbia, in the United States
("U.S."). The Company provides service to over 1.8 million customers with vertically integrated collection and disposal assets. 

        The
Company's Canadian segment operates under the BFI Canada brand and is Canada's second largest full-service waste management company providing vertically integrated waste
collection and disposal services in 

1

 

the
provinces of British Columbia, Alberta, Manitoba, Ontario, and Quebec. This segment provides service to 20 Canadian markets and operates five landfills, four transfer collection stations,
seven material recovery facilities ("MRFs"), and one landfill gas to energy facility. 

        The
Company's U.S. south and northeast segments, collectively the U.S. segment or U.S. segments, operate under the IESI brand and provide vertically integrated waste
collection and disposal services in two geographic regions: the south, consisting of various service areas in Texas, Louisiana, Oklahoma, Arkansas, Mississippi, and Missouri, and the northeast,
consisting of various service areas in New York, New Jersey, Pennsylvania, Maryland, and the District of Columbia. This segment provides service to 39 U.S. markets and
operates 16 landfills, 28 transfer collection stations, 11 MRFs, and one transportation operation. 

 Highlights — For the three months ended March 31, 2009  

(all amounts are in thousands of Canadian dollars, except per share or trust unit and participating preferred share ("PPS"), unless otherwise
stated)

 Financial highlights  

								
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008(1) 	 
	 Operating results
	 	 	 	 	 	 	 
	 Revenues
	 	 $	278,818	 	 $	244,347	 
	 Operating expenses
	 	 	 163,357	 	 	 147,148	 
	 Selling, general and administration expenses ("SG&A")
	 	 	 37,434	 	 	 30,341	 
	 	 	 	 	 	 
	 Income before the following ("EBITDA(A)")
	 	 	 78,027	 	 	 66,858	 
	 Amortization
	 	 	 46,564	 	 	 42,577	 
	 Interest on long-term debt
	 	 	 11,461	 	 	 13,374	 
	 Financing costs
	 	 	 383	 	 	 —	 
	 Net (gain) loss on sale of capital assets and landfill assets
	 	 	 (167	)	 	 40	 
	 Net foreign exchange loss (gain)
	 	 	 104	 	 	 (624	)
	 Net loss on financial instruments
	 	 	 660	 	 	 9,047	 
	 Other expenses
	 	 	 37	 	 	 31	 
	 	 	 	 	 	 
	 Income before income taxes
	 	 	 18,985	 	 	 2,413	 
	 	 	 	 	 	 
	 Net income tax expense (recovery)
	 	 	 6,726	 	 	 (8,061	)
	 	 	 	 	 	 
	 Net income
	 	 $	12,259	 	 $	10,474	 
	 	 	 	 	 	 
	 Net income — attributable to common shareholders
	 	 $	10,519	 	 $	8,776	 
	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic
	 	 $	0.18	 	 $	0.15	 
	 Net income per weighted average share or trust unit, diluted
	 	 $	0.17	 	 $	0.15	 
	 Shares or trust units and PPSs outstanding
	 	 	 	 	 	 	 
	 Weighted average number of shares or trust units outstanding
	 	 	 59,306	 	 	 57,568	 
	 Weighted average number of PPSs outstanding
	 	 	 11,137	 	 	 11,138	 
	 	 	 	 	 	 
	 Weighted average number of shares or trust units and PPSs outstanding
	 	 	 70,443	 	 	 68,706	 
	 	 	 	 	 	 
	 Aggregate number of shares or trust units and PPSs outstanding
	 	 	 78,481	 	 	 68,706	 
	 	 	 	 	 	 

2

 

								
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008(1) 	 
	 Replacement and growth expenditures(1)
	 	 	 	 	 	 	 
	 Replacement capital and landfill purchases ("replacement expenditures") — (see page 12)
	 	 $	15,523	 	 $	8,929	 
	 Growth capital and landfill purchases ("growth expenditures")
	 	 	 9,598	 	 	 12,480	 
	 	 	 	 	 	 
	 Total replacement and growth expenditures
	 	 $	25,121	 	 $	21,409	 
	 	 	 	 	 	 
	 Operating and free cash flow(B)(1)
	 	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 $	60,978	 	 $	42,934	 
	 Free cash flow(B) — (see page 10)
	 	 $	37,724	 	 $	30,783	 
	 Free cash flow(B) per weighted average share or trust unit and PPS
	 	 $	0.54	 	 $	0.45	 
	 Dividends and distributions declared
	 	 	 	 	 	 	 
	 Dividends and distributions declared (shares or trust units)
	 	 $	16,836	 	 $	26,164	 
	 Dividends declared (PPSs)
	 	 	 2,784	 	 	 5,063	 
	 	 	 	 	 	 
	 Total dividends and distributions declared
	 	 $	19,620	 	 $	31,227	 
	 	 	 	 	 	 
	 Total dividends or distributions declared per weighted average share or trust

unit and PPS
	 	 $	0.28	 	 $	0.45	 

Notes: 

	(1)
	Net
income presented throughout this MD&A has been restated to reflect the adoption of the new accounting standard for non-controlling interests
(see Note 4 to the consolidated financial statements). In addition, free cash flow(B) and replacement and growth expenditures have been restated to conform to the
current period's presentation. Please refer to page 10 and 12 of this MD&A for further details on the calculations and their methodologies. 

 Financial highlights for the three months ended March 31, 2009  

					
	 
	 	Three months ended

March 31 	 
	 Increase in revenues
	 	 $	34,471	 
	 Percentage increase in revenues
	 	 	 14.1%	 
	 	 	 	 
	 Increase in EBITDA(A)
	 	 $	11,169	 
	 Percentage increase in EBITDA(A)
	 	 	 16.7%	 
	 	 	 	 
	 Increase in cash generated from operating activities
	 	 $	18,044	 
	 Percentage increase in cash generated from operating activities
	 	 	 42.0%	 
	 	 	 	 
	 Increase in free cash flow(B)
	 	 $	6,941	 
	 Percentage increase in free cash flow(B)
	 	 	 22.5%	 
	 	 	 	 

 Other highlights for the three months ended March 31, 2009  

	•
	On March 6, 2009, the Company closed its public offering of 8,500 common shares at $9.50 per share for total
gross proceeds of $80,750. The Company applied the net proceeds from the public offering, approximately U.S. $61,500, to the repayment of outstanding borrowings on its
U.S. long-term debt facility.   

	•
	On March 30, 2009, the Company closed the over-allotment option on its public offering of
1,275 common shares at $9.50 per share for total gross proceeds of $12,113. The Company applied the net proceeds from the over-allotment option, approximately U.S. $9,500, to
the repayment of outstanding borrowings on its U.S. long-term debt facility.   

	•
	At March 31, 2009, the Company's funded debt to EBITDA(A) ratios, calculated in accordance with its
Canadian and U.S. long-term debt facilities, are 1.96 and 3.44 times, respectively. 

3

 

 Review of Operations — For the three months ended March 31, 2009  

(all amounts are in thousands of Canadian dollars, except foreign currency exchange rate amounts, unless otherwise stated)

 Foreign Currency Exchange Rates  

        The Company reports its financial results in Canadian dollars. Accordingly, changes in the foreign currency exchange rate between
Canada and the U.S. impacts the translated value of the Company's U.S. operating results. U.S. operating results are translated to Canadian dollars using the current rate method
of accounting which applies the average foreign currency exchange rate in effect between Canada and the U.S. during the reporting period. U.S. assets and liabilities are translated to
Canadian dollars at the foreign currency exchange rate in effect at the consolidated balance sheet date. Translation adjustments are included in other comprehensive income and are only included in the
determination of net income when a reduction in the Company's investment in its foreign operations is realized. 

        The
U.S. segments' financial position and operating results have been translated to Canadian dollars applying the following foreign currency exchange rates: 

																				
	 
	 	2009 	 	2008 	 
	 
	 	Consolidated

Balance Sheet 	 	Consolidated Statement of

Operations and Comprehensive

Income 	 	Consolidated

Balance Sheet 	 	Consolidated Statement of

Operations and Comprehensive

Income 	 
	 
	 	Current 	 	Average 	 	Cumulative

Average 	 	Current 	 	Average 	 	Cumulative

Average 	 
	 December 31
	 	 	 	 	 	 	 	 	 	 	 $	1.225	 	 	 	 	 $	1.067	 
	 March 31
	 	 $	1.260	 	 $	1.245	 	 $	1.245	 	 $	1.028	 	 $	1.004	 	 $	1.004	 

4

 

   Foreign Currency Exchange Impact on Consolidated Results  

        The following table has been prepared to assist readers in assessing the impact of foreign currency exchange on the Company's
consolidated results for the three months ended March 31, 2009. 

											
	 
	 	Company results

for 2009

less 2008 	 	Impact of foreign

currency

exchange(2) 	 	Organic, acquisition

and other

non-operating

changes 	 
	 
	 	(unaudited) 	 	(unaudited) 	 	(unaudited) 	 
	 Financial highlights
	 	 	 	 	 	 	 	 	 	 
	 Revenues
	 	 $	34,471	 	 $	36,885	 	 $	(2,414	)
	 Operating expenses
	 	 	 16,209	 	 	 22,744	 	 	 (6,535	)
	 SG&A
	 	 	 7,093	 	 	 4,809	 	 	 2,284	 
	 	 	 	 	 	 	 	 
	 EBITDA(A)
	 	 	 11,169	 	 	 9,332	 	 	 1,837	 
	 Amortization
	 	 	 3,987	 	 	 6,288	 	 	 (2,301	)
	 Interest on long-term debt
	 	 	 (1,913	)	 	 1,648	 	 	 (3,561	)
	 Financing costs
	 	 	 383	 	 	 —	 	 	 383	 
	 Net gain (loss) on sale of capital and landfill assets
	 	 	 (207	)	 	 (12	)	 	 (195	)
	 Net foreign exchange loss (gain)
	 	 	 728	 	 	 27	 	 	 701	 
	 Net loss on financial instruments
	 	 	 (8,387	)	 	 109	 	 	 (8,496	)
	 Other expenses
	 	 	 6	 	 	 7	 	 	 (1	)
	 	 	 	 	 	 	 	 
	 Income before income taxes
	 	 	 16,572	 	 	 1,265	 	 	 15,307	 
	 	 	 	 	 	 	 	 
	 Net income tax expense
	 	 	 14,787	 	 	 526	 	 	 14,261	 
	 	 	 	 	 	 	 	 
	 Net income
	 	 $	1,785	 	 $	739	 	 $	1,046	 
	 	 	 	 	 	 	 	 
	 Review of Operations
	 	 	 	 	 	 	 	 	 	 
	 Revenues — Canada
	 	 $	2,628	 	 $	—	 	 $	2,628	 
	 Revenues — U.S. south
	 	 	 19,868	 	 	 19,309	 	 	 559	 
	 Revenues — U.S. northeast
	 	 	 11,975	 	 	 17,576	 	 	 (5,601	)
	 	 	 	 	 	 	 	 
	 Total revenues
	 	 $	34,471	 	 $	36,885	 	 $	(2,414	)
	 	 	 	 	 	 	 	 
	 Operating expenses — Canada
	 	 $	(607	)	 $	—	 	 $	(607	)
	 Operating expenses — U.S. south
	 	 	 8,152	 	 	 11,536	 	 	 (3,384	)
	 Operating expenses — U.S. northeast
	 	 	 8,664	 	 	 11,208	 	 	 (2,544	)
	 	 	 	 	 	 	 	 
	 Total operating costs
	 	 $	16,209	 	 $	22,744	 	 $	(6,535	)
	 	 	 	 	 	 	 	 
	 SG&A — Canada
	 	 $	1,534	 	 $	—	 	 $	1,534	 
	 SG&A — U.S. south
	 	 	 3,457	 	 	 2,685	 	 	 772	 
	 SG&A — U.S. northeast
	 	 	 2,102	 	 	 2,124	 	 	 (22	)
	 	 	 	 	 	 	 	 
	 Total SG&A
	 	 $	7,093	 	 $	4,809	 	 $	2,284	 
	 	 	 	 	 	 	 	 
	 Cash generated from operating activities
	 	 $	18,044	 	 $	6,097	 	 $	11,947	 
	 Free cash flow(B)
	 	 $	6,941	 	 $	4,448	 	 $	2,493	 
	 Replacement and growth expenditures
	 	 	 	 	 	 	 	 	 	 
	 Total
	 	 $	3,712	 	 $	2,868	 	 $	844	 
	 Replacement — Canada
	 	 $	3,339	 	 $	—	 	 $	3,339	 
	 Replacement — U.S.
	 	 $	3,255	 	 $	1,787	 	 $	1,468	 
	 Growth — Canada
	 	 $	(2,251	)	 $	—	 	 $	(2,251	)
	 Growth — U.S.
	 	 $	(631	)	 $	1,081	 	 $	(1,712	)

Notes: 

	(2)
	U.S. segment
results, stated in U.S. dollars, for the three month period ended March 31, 2009 multiplied by the difference between the
2009 and 2008 average foreign currency exchange rate. 

5

 

 Revenues  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	278,818	 	 $	244,347	 	 $	34,471	 
	 Canada
	 	
$	

88,396	 	
$	

85,768	 	
$	

2,628	 
	 U.S. south
	 	 $	99,684	 	 $	79,816	 	 $	19,868	 
	 U.S. northeast
	 	 $	90,738	 	 $	78,763	 	 $	11,975	 

 Revenue by service type  

														
	 
	 	Three months ended March 31, 2009 	 
	 
	 	Canada 	 	Canada — percentage of

gross revenues 	 	U.S. — stated in

U.S. dollars 	 	U.S. — percentage

of gross

revenues 	 
	 Commercial
	 	 $	38,754	 	 	 39.2%	 	 $	45,895	 	 	 25.9%	 
	 Industrial
	 	 	 17,030	 	 	 17.2%	 	 	 25,105	 	 	 14.2%	 
	 Residential
	 	 	 13,885	 	 	 14.1%	 	 	 37,925	 	 	 21.4%	 
	 Transfer and disposal
	 	 	 23,842	 	 	 24.1%	 	 	 61,504	 	 	 34.7%	 
	 Recycling and other
	 	 	 5,247	 	 	 5.3%	 	 	 6,583	 	 	 3.7%	 
	 	 	 	 	 	 	 	 	 	 
	 Gross revenues
	 	 	 98,758	 	 	 100.0%	 	 	 177,012	 	 	 100.0%	 
	 Intercompany
	 	 	 (10,362	)	 	 	 	 	 (24,102	)	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Revenues
	 	 $	88,396	 	 	 	 	 $	152,910	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 

 Gross revenue growth components — expressed in percentages and excluding foreign currency exchange  

									
	 
	 	Three months ended March 31, 2009 	 
	 
	 	Canada 	 	U.S. 	 
	 Price
	 	 	 	 	 	 	 
	 	 Core price
	 	 	 3.4%	 	 	 2.5%	 
	 	 Fuel surcharges
	 	 	 -0.5%	 	 	 -1.2%	 
	 	 Recycled commodities
	 	 	 -0.8%	 	 	 -2.5%	 
	 	 	 	 	 	 
	 	 Total price
	 	 	 2.1%	 	 	 -1.2%	 
	 Volume
	 	 	

-2.0%	 	 	

-4.2%	 
	 	 	 	 	 	 
	 Total organic growth
	 	 	 0.1%	 	 	 -5.4%	 
	 Acquisitions
	 	 	

3.7%	 	 	

2.2%	 
	 	 	 	 	 	 
	 Total gross revenue growth
	 	 	 3.8%	 	 	 -3.2%	 
	 	 	 	 	 	 

        The
increase in Canadian segment gross revenues is due principally to core price and acquisition growth, approximately $3,200 and $3,500, respectively. Core price growth is due in part
to the recovery of recycled commodity price declines. The decline in fuel surcharges is attributable to the decline in the comparative cost of diesel fuel, while the decline in volumes, approximately
$1,900, is due in large part to lower third party waste volumes accepted at the Company's landfills. Management remains optimistic that most of the volume shortfalls experienced in the first quarter
of 2009 will be recovered over the balance of the year. Recycled commodity pricing declines represent the balance of the change. 

        Excluding
the impact of foreign currency exchange, approximately $21,400, U.S. south segment gross revenues increased approximately $600. Core pricing remained strong and
contributed approximately $3,200 to the comparative increase. Fuel surcharges were the primary offsets to core price growth, approximately $1,900, 

6

 

due
to the comparative decline in diesel fuel costs. Lower construction and demolition volumes and recycled commodity pricing also contributed to the decline in U.S. south segment
gross revenues. 

        Net
of the foreign currency exchange impact, approximately $21,300, gross revenues in the U.S. northeast segment declined approximately $6,500. Lower industrial collection,
transfer and disposal volumes accounted for approximately $7,100 of the comparative decline, while recycling commodity price declines contributed an additional approximately $4,200 to this segments
decline. Acquisitions, approximately $3,800, coupled with net price increases, approximately $1,300, partially offset the aforementioned. Compared to the preceding quarter ended December 31,
2008, the Company's U.S. northeast segment exhibited stabilizing characteristics in the first quarter of 2009. Management is encouraged by this trend and is optimistic about the
U.S. northeast segments prospects for the balance of 2009. 

 Operating expenses  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	163,357	 	 $	147,148	 	 $	16,209	 
	 Canada
	 	
$	

45,937	 	
$	

46,544	 	
$	

(607	
)
	 U.S. south
	 	 $	59,554	 	 $	51,402	 	 $	8,152	 
	 U.S. northeast
	 	 $	57,866	 	 $	49,202	 	 $	8,664	 

        The
decline in Canadian segment operating expenses is due to lower vehicle operating costs, largely due to a decline in comparative fuel costs, approximately $1,100, and lower expenses
incurred for landfill development initiatives, approximately $1,000. These declines were partially offset by higher disposal costs, approximately $1,500. Higher disposal costs are the result of
servicing new customers acquired principally through acquisition. 

        Excluding
the impact of foreign currency exchange, approximately $11,500, operating expenses in the U.S. south declined. The decline in operating expenses is due to lower vehicle
operating costs, approximately $3,400, which is due in large part to lower fuel costs. 

        Similarly,
operating expenses in the U.S. northeast segment also declined when foreign currency exchange is excluded from this segments period over period change, approximately
$11,200. The principal contributor to the operating expense decline is lower disposal volumes and third party transportation costs. Lower disposal volumes are due to the economic slowdown in the
region, while lower transportation costs are due to the comparative decline in fuel costs. 

 SG&A  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	37,434	 	 $	30,341	 	 $	7,093	 
	 Canada
	 	
$	

12,604	 	
$	

11,070	 	
$	

1,534	 
	 U.S. south
	 	 $	13,864	 	 $	10,407	 	 $	3,457	 
	 U.S. northeast
	 	 $	10,966	 	 $	8,864	 	 $	2,102	 

        The
increase in Canadian segment SG&A is primarily attributable to higher salaries, approximately $1,300. The comparative increase is the result of acquisition and organic growth,
additional compensation expense to retain certain executive employees, and additional sales staff. 

        Excluding
the impact of foreign currency exchange, U.S. south segment SG&A expense increased approximately $800. The increase is due largely to additional sales staff, salary and
facility and office costs and is attributable to organic growth. 

        The
entire U.S. northeast segment increase is on account of foreign currency exchange, approximately $2,100. 

7

 

  Amortization  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	46,564	 	 $	42,577	 	 $	3,987	 
	 Canada
	 	
$	

14,103	 	
$	

13,592	 	
$	

511	 
	 U.S. south
	 	 $	14,152	 	 $	12,244	 	 $	1,908	 
	 U.S. northeast
	 	 $	18,309	 	 $	16,741	 	 $	1,568	 

        In
aggregate, and excluding the impact of foreign currency exchange, approximately $6,300, amortization declined comparatively. Lower amortization expense is attributable to changes in
future permitted airspace capacity estimates at the Company's Seneca Meadows landfill, which results in projected landfill construction and development costs being amortized over a higher estimate of
landfill capacity. 

 Interest on long-term debt  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	11,461	 	 $	13,374	 	 $	(1,913	)
	 Canada
	 	
$	

2,955	 	
$	

2,784	 	
$	

171	 
	 U.S.
	 	 $	8,506	 	 $	10,590	 	 $	(2,084	)

        Higher
long-term debt borrowings, partially offset by lower borrowing costs on variable rate lending, is the primary reason for the Canadian segment increase in interest on
long-term debt. Higher Canadian segment borrowings are the result of acquisitions, organic growth, capital contributions to IESI in 2008, and absorbing a larger portion of the Company's
distributions and dividends paid to unit and shareholders through 2008. 

        The
decline in U.S. segment interest on long-term debt is due to a combination of lower borrowing costs on variable rate lending and lower long-term debt
borrowings. Lower long-term debt borrowings are primarily attributable to the application of net proceeds from the Company's share offerings in March 2009 and capital contributions
from the Company's Canadian segment in 2008. 

 Financing costs  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	383	 	 $	—	 	 $	383	 
	 Canada
	 	
$	

383	 	
$	

—	 	
$	

383	 
	 U.S.
	 	 $	—	 	 $	—	 	 $
	—

	 

        The
Company incurred additional financing costs to update its lenders security over certain assets in Canada and to explore debt financing options within its structure. 

 Net (gain) loss on sale of capital and landfill assets  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	(167	)	 $	40	 	 $	(207	)
	 Canada
	 	
$	

(105	
)	
$	

(3	
)	
$	

(102	
)
	 U.S.
	 	 $	(62	)	 $	43	 	 $	(105	)

8

 

        In
2009, the disposition of certain equipment in Canada and the U.S. and certain U.S. south segment landfill assets, resulted in the net gain on sale of capital and landfill
assets. 

        For
2008, the Company disposed of certain equipment in Canada and the U.S. which resulted in the net (gain) or loss on sale of capital and landfill assets, respectively. 

 Net foreign exchange loss (gain)  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	104	 	 $	(624	)	 $	728	 
	 Canada
	 	
$	

(32	
)	
$	

(5	
)	
$	

(27	
)
	 U.S.
	 	 $	136	 	 $	(619	)	 $	755	 

        In
2008, net foreign exchange gains realized by the Company's U.S. segment were principally attributable to gains realized on the settlement of foreign currency hedge agreements.
These agreements expired in February 2008 and were not replaced. 

 Net loss on financial instruments  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	660	 	 $	9,047	 	 $	(8,387	)
	 Canada
	 	
$	

98	 	
$	

22	 	
$	

76	 
	 U.S.
	 	 $	562	 	 $	9,025	 	 $	(8,463	)

        In
2009, the Canadian segment loss on financial instruments is due to changes in the fair value of funded landfill post-closure costs. The U.S. segment loss is the
result of changes in the fair value of interest rate swaps. 

        In
2008, the Canadian segment loss on financial instruments relates to changes in the fair value of funded landfill post-closure costs. U.S. segment losses were due
largely to interest rate swaps, approximately $7,400, which was entirely the result of a decline in interest rates. The expiry of foreign currency hedge agreements contributed approximately $1,700 to
the 2008 loss partially offset by a marginal gain on old corrugated cardboard ("OCC") hedge agreements. 

 Other expenses  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	37	 	 $	31	 	 $	6	 
	 Canada
	 	
$	

—	 	
$	

—	 	
$	

—	 
	 U.S.
	 	 $	37	 	 $	31	 	 $	6	 

        Other
expenses are comprised of management bonus costs related to certain acquisitions. 

9

 

 Net income tax expense (recovery)  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Total
	 	 $	6,726	 	 $	(8,061	)	 $	14,787	 
	 Canada
	 	
$	

4,010	 	
$	

(704	
)	
$	

4,714	 
	 U.S.
	 	 $	2,716	 	 $	(7,357	)	 $	10,073	 

        In
Canada, current income tax expense increased by approximately $1,000. The erosion of losses available for carryforward in certain Canadian operating entities is the primary reason for
the increase in current income taxes. The balance of the Canadian segment increase is due to an approximately $3,700 increase in future income tax expense. The utilization of losses available for
carryforward within the Canadian segment group of companies effectively reduces future income tax assets and increases future income tax expense. In the first quarter of 2009, utilized tax losses
accounted for approximately $3,300 of this segments future income tax expense, compared to a 2008 first quarter recovery of approximately $1,300. The balance of the change is due to net future income
tax recoveries recognized on timing differences between the carrying value of Canadian segment intangibles and capital assets and their tax values. 

        Excluding
the impact of foreign currency exchange, approximately $500, income tax expense increased approximately $9,600 period over period for the Company's U.S. segment. Current
income tax expense was virtually unchanged comparatively, leaving future income tax expenses as the lone contributor to the comparative increase. Similar to the Canadian segment, the primary
contributor to the Company's comparative U.S. segment increase in future income tax expense is the utilization of tax losses available for carryfoward. In the first quarter of 2009, the
Company's U.S. segment recognized future income tax expense of approximately $2,000 resulting from the utilization of tax losses, compared to a 2008 first quarter recovery
of approximately $4,700. The balance of the change is due to higher future income tax recoveries recognized in 2008 on timing differences between the carrying value of U.S. segment capital
assets and their tax values. 

 Non-controlling interest  

        With the early adoption of Canadian Institute of Chartered Accountants ("CICA") accounting standard Non-Controlling
Interests (section 1602), effective January 1, 2009, the Company changed its presentation of non-controlling interests from mezzanine equity to equity on the Company's
consolidated balance sheet. Non-controlling interest is no longer deducted in the determination of net income. Instead, net income and each component of other comprehensive income are
attributed to shareholders' equity and non-controlling interest. Adopting this section affects the Company's determination of net income presented in the consolidated statement of
operations and comprehensive income, the presentation of net income and non-controlling interest in the consolidated statement of cash flows, and the presentation of
non-controlling interest in the consolidated statement of equity. 

 Other Performance Measures — For the three months ended March 31, 2009  

(all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)

 Free cash flow(B)  

 Purpose and objective  

        The purpose of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other
U.S. based companies in the waste industry. Investors and analysts use this calculation as a measure of a company's valuation and liquidity. Management
uses this non-GAAP measure to assess its performance relative to other U.S. based companies, to assess its primary sources and uses of cash flow, and to assess its ability to
sustain its dividend policy. 

10

 

  Free cash flow(B) — cash flow approach  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Cash generated from operating activities (per statement of cash flows)
	 	 $	60,978	 	 $	42,934	 	 $	18,044	 
	 	 	 	 	 	 	 	 
	 Operating
	 	 	 	 	 	 	 	 	 	 
	 Changes in non-cash working capital items
	 	 	 1,757	 	 	 10,579	 	 	 (8,822	)
	 Capital and landfill asset purchases
	 	 	 (25,121	)	 	 (21,409	)	 	 (3,712	)
	 Other expenses
	 	 	 37	 	 	 31	 	 	 6	 
	 Financing
	 	 	 	 	 	 	 	 	 	 
	 Share based compensation
	 	 	 (414	)	 	 —	 	 	 (414	)
	 Financing and landfill development costs (net of non-cash portion)
	 	 	 383	 	 	 (728	)	 	 1,111	 
	 Net realized foreign exchange loss (gain)
	 	 	 104	 	 	 (624	)	 	 728	 
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	37,724	 	 $	30,783	 	 $	6,941	 
	 	 	 	 	 	 	 	 

 Free cash flow(B) — EBITDA(A) approach  

        The Board of Directors and management of the Company typically calculate free cash flow(B) using an operations approach.
Management views EBITDA(A) as a proxy for cash derived from operations. 

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 EBITDA(A)
	 	 $	78,027	 	 $	66,858	 	 $	11,169	 
	 	 	 	 	 	 	 	 
	 Capital and landfill asset purchases
	 	 	

(25,121	
)	 	

(21,409	
)	 	

(3,712	
)
	 Landfill closure and post-closure expenditures
	 	 	 (1,527	)	 	 (245	)	 	 (1,282	)
	 Landfill closure and post-closure cost accretion expense
	 	 	 924	 	 	 781	 	 	 143	 
	 Interest on long-term debt
	 	 	 (11,461	)	 	 (13,374	)	 	 1,913	 
	 Current income tax expense
	 	 	 (3,118	)	 	 (1,828	)	 	 (1,290	)
	 	 	 	 	 	 	 	 
	 Free cash flow(B)
	 	 $	37,724	 	 $	30,783	 	 $	6,941	 
	 	 	 	 	 	 	 	 

        Excluding
the impact of foreign currency exchange, approximately $4,400, free cash flow(B) increased comparatively. While the Company enjoyed increasing
EBITDA(A) contributions from its Canadian and U.S. south segments, EBITDA(A) decreased comparatively in the U.S. northeast. On balance, however,
EBITDA(A) increased period over period by approximately $1,800, excluding foreign currency exchange. Contributions from the Canadian and U.S. south segments are attributable to
acquisition and organic revenue growth coupled with declines in vehicle operating costs, driven principally by declines in fuel costs. The decline in U.S. northeast EBITDA(A)
contributions is due largely to lower volumes in the region, which is the result of economic weakness. Lower interest on long-term debt, approximately $3,000 (excluding foreign currency
exchange), also contributed to the comparative increase. Lower long-term debt levels and lower borrowing costs on variable rate lending in both Canada and the U.S. are the primary
reasons for this decline. 

        An
increase in current income tax expense, approximately $1,000 (excluding foreign currency exchange), coupled with the timing of landfill closure and post-closure
expenditures, up approximately $1,000 (excluding foreign currency exchange), partially offset the increases outlined above. The increase in current income tax expense is entirely attributable to the
Canadian segment. The conversion from an income trust to a corporation effectively eliminated the Canadian segments ability to shelter taxable income beyond its available loss carryforwards, which are
being eroded at a more vigorous pace since conversion. The Company's change in dividend policy, stemming from the Company's conversion, contemplated the Company's additional cash tax obligations. The
timing of remediation spending in the Company's U.S. northeast segment is the principal reason for the increase in landfill closure and post-closure expenditures. 

11

 

 Capital and landfill purchases  

        Capital and landfill purchases characterized as replacement and growth expenditures are as follows: 

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	Change 	 
	 Replacement
	 	 $	15,523	 	 $	8,929	 	 $	6,594	 
	 Growth
	 	 	 9,598	 	 	 12,480	 	 	 (2,882	)
	 	 	 	 	 	 	 	 
	 Total
	 	 $	25,121	 	 $	21,409	 	 $	3,712	 
	 	 	 	 	 	 	 	 

 Capital and landfill purchases — replacement  

        Capital and landfill purchases characterized as "replacement expenditures", represent the outlay of cash to sustain current cash flows
and are funded from free cash flow(B). Replacement expenditures may include some or all of the following: the replacement of existing capital assets, including vehicles, equipment,
containers, compactors, furniture, fixtures and computer equipment. Replacement expenditures also include all landfill construction spending for the Company's operating landfills, which is principally
comprised of cell construction. 

        Excluding
the impact of foreign currency exchange, approximately $1,800, replacement expenditures increased approximately $4,800. The Canadian segment represented approximately $3,300 of
the increase with the balance, approximately $1,500, due to the Company's U.S. segment. The Canadian segment increase is due in large part to the timing of landfill cell construction, which
accounts for approximately $2,400 of the
increase, with the balance attributable to working capital adjustments. The U.S. segment increase is also on account of the timing of landfill cell construction and working capital adjustments. 

 Capital and landfill purchases — growth  

        Capital and landfill purchases characterized as "growth expenditures", represent the outlay of cash to generate new or future cash
flows and are generally funded from free cash flow(B). Growth expenditures may include some or all of the following: vehicles, equipment, containers, compactors, furniture, fixtures and
computer equipment to support new contract wins and organic business growth. 

        Net
of foreign currency exchange, approximately $1,100, growth expenditures declined approximately $4,000. In Canada and the U.S., growth expenditures declined approximately $2,300 and
$1,700, respectively, due in large part to a decline in capital required to service new residential contract wins which commenced in 2008. 

        Readers
are reminded that revenue, EBITDA(A), and cash flow contributions derived from vehicles, equipment and container growth expenditures will materialize over the
assets useful life. 

12

 

 Dividends and Distributions  

(all amounts are in thousands of Canadian dollars, except per share or trust unit and PPS amounts)

 2009  

        In conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for
its regular dividends, in 2009, are as follows: 

 Expected regular dividend schedule (payable quarterly)  

								
	Record date

 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 31, 2009
	 	 	January 15, 2010	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 

        In
conjunction with the Company's conversion from an income trust to a corporation, the Company's expected record and payment dates for its special dividends, payable only in 2009, are
as follows: 

 Expected special dividend schedule (payable quarterly)  

								
	Record date

 
	 	Payment date 	 	Dividend amounts per

share and PPS 	 
	 March 31, 2009
	 	 	April 15, 2009	 	$	0.125	 
	 June 30, 2009
	 	 	July 15, 2009	 	 	0.125	 
	 September 30, 2009
	 	 	October 15, 2009	 	 	0.125	 
	 December 17, 2009
	 	 	December 31, 2009	 	 	0.125	 
	 	 	 	 	 	 	 
	 Total
	 	 	 	 	$	0.500	 
	 	 	 	 	 	 	 

 2008  

        The Company's predecessor declared distributions and dividends to trust unit and participating preferred shareholders of record for the
period from January to March 2008 totaling $31,227, representing a monthly payout of $0.1515 per trust unit and PPS. 

13

 

  Summary of Quarterly Results
  (all amounts are in thousands of Canadian dollars, except per share or trust unit amounts)

									
	2009

 
	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 
	 	 Canada
	 	 $	88,396	 	 $	88,396	 
	 	 U.S. south
	 	 	 99,684	 	 	 99,684	 
	 	 U.S. northeast
	 	 	 90,738	 	 	 90,738	 
	 	 	 	 	 	 
	 Total revenues
	 	 $	278,818	 	 $	278,818	 
	 	 	 	 	 	 
	 Net income
	 	 $	12,259	 	 $	12,259	 
	 	 	 	 	 	 
	 Net income per weighted average share, basic
	 	 $	0.18	 	 $	0.18	 
	 	 	 	 	 	 
	 Net income per weighted average share, diluted
	 	 $	0.17	 	 $	0.17	 
	 	 	 	 	 	 

 

																		
	2008

 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	99,557	 	$	104,999	 	$	100,754	 	$	85,768	 	$	391,078	 
	 	 U.S. south
	 	 	101,394	 	 	91,384	 	 	88,234	 	 	79,816	 	 	360,828	 
	 	 U.S. northeast
	 	 	97,923	 	 	97,164	 	 	91,274	 	 	78,763	 	 	365,124	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	298,874	 	$	293,547	 	$	280,262	 	$	244,347	 	$	1,117,030	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income (see Note 1, page 3)
	 	$	12,901	 	$	14,296	 	$	17,960	 	$	10,474	 	$	55,631	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average share or trust unit, basic and diluted
	 	$	0.19	 	$	0.21	 	$	0.26	 	$	0.15	 	$	0.81	 
	 	 	 	 	 	 	 	 	 	 	 	 

 

																		
	2007

 
	 	Q4 	 	Q3 	 	Q2 	 	Q1 	 	Total 	 
	 Revenues
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 Canada
	 	$	89,418	 	$	87,735	 	$	86,019	 	$	73,355	 	$	336,527	 
	 	 U.S. south
	 	 	77,479	 	 	82,278	 	 	80,398	 	 	74,535	 	 	314,690	 
	 	 U.S. northeast
	 	 	84,132	 	 	68,500	 	 	59,098	 	 	54,410	 	 	266,140	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total revenues
	 	$	251,029	 	$	238,513	 	$	225,515	 	$	202,300	 	$	917,357	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income (see Note 1, page 3)
	 	$	5,874	 	$	12,584	 	$	7,034	 	$	12,515	 	$	38,007	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Net income per weighted average trust unit, basic and diluted
	 	$	0.09	 	$	0.18	 	$	0.10	 	$	0.19	 	$	0.56	 
	 	 	 	 	 	 	 	 	 	 	 	 

 Total approximate quarterly revenue growth from Q1 2007 to Q1 2009  

						
	 Revenues — Q1 2007
	 	$	202,300	 
	 	 	 	 
	 Revenue growth additions:
	 	 	 	 
	 	 Acquisitions completed from 2007 to 2009
	 	 	63,700	 
	 	 Net price, volume, and fuel and environmental surcharge growth, net of foreign currency translation
	 	 	12,800	 
	 	 	 	 
	 Revenues — Q1 2009
	 	$	278,800	 
	 	 	 	 

14

 

 Financial Condition
  (all amounts are in thousands of Canadian dollars, unless otherwise stated)

 Selected Consolidated Balance Sheet Information  

																				
	 
	 	Canada —

March 31,

2009 	 	U.S. —

March 31,

2009 	 	Consolidated — March 31,

2009 	 	Canada — December 31,

2008 	 	U.S. —

December 31,

2008 	 	Consolidated — December 31,

2008 	 
	 Accounts receivable
	 	 $	51,541	 	 $	77,074	 	 $	128,615	 	 $	55,551	 	 $	76,421	 	 $	131,972	 
	 Intangibles
	 	 $	23,793	 	 $	117,439	 	 $	141,232	 	 $	26,986	 	 $	119,841	 	 $	146,827	 
	 Goodwill
	 	 $	61,629	 	 $	715,466	 	 $	777,095	 	 $	61,629	 	 $	694,968	 	 $	756,597	 
	 Capital assets
	 	 $	160,814	 	 $	334,976	 	 $	495,790	 	 $	163,517	 	 $	336,884	 	 $	500,401	 
	 Landfill assets
	 	 $	185,209	 	 $	580,884	 	 $	766,093	 	 $	185,305	 	 $	562,456	 	 $	747,761	 
	 Working capital deficit — (current assets less current liabilities)
	 	 $	(47,735	)	 $	(4,975	)	 $	(52,710	)	 $	(32,310	)	 $	(4,399	)	 $	(36,709	)

 Accounts receivable  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(3,357	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(4,010	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	653	 

        The
timing of certain collections due from various cities, reduced landfill volumes, seasonality, and additional efforts to collect owed amounts, is the primary reason for the Canadian
segment decline. 

        Foreign
currency translation represents approximately $2,200 of the U.S. segment rise in accounts receivable. Accordingly, U.S. segment accounts receivable declined period
over period, approximately $1,500. The decline is due in large part to economic weakness in the U.S. northeast segment coupled with seasonality and additional efforts to collect
owed amounts. 

 Intangibles  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(5,595	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(3,193	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(2,402	)

        The
Canadian segment decline is entirely attributable to amortization. 

        Amortization,
approximately $5,800, net of foreign currency exchange, approximately $3,400, is the reason for the decline in U.S. segment intangibles. 

 Goodwill  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	20,498	 
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	—	 
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	20,498	 

        Foreign
currency translation represents approximately $20,200 of the comparative increase in U.S. segment goodwill. Fair value adjustments to preliminary purchase price
allocations recorded in prior periods represents the balance of the increase, approximately $300. 

15

 

 Capital assets  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(4,611	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(2,703	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(1,908	)

        The
decline in Canadian segment capital assets is primarily attributable to amortization, approximately $6,600, and working capital adjustments, approximately $4,100. Cash expenditures
for vehicle, equipment, and container purchases, totaling approximately $8,100, partially offset the foregoing declines. Capital asset additions were incurred principally to service new contract wins.
The balance of the change is on account of capital asset disposals. 

        The
decrease in U.S. segment capital assets is a function of the following: amortization, approximately $16,200, disposals, approximately $1,600, and working capital adjustments,
approximately $2,300. The aforementioned decreases were partially offset by cash expenditures for capital assets, approximately $7,700, and foreign currency exchange, approximately $9,700. Capital
asset additions were incurred principally to maintain the Company's current compliment of capital assets and to service organic growth. The balance of the change is on account of gains recognized on
capital asset disposals. 

 Landfill assets  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	18,322	 
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(96	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	18,428	 

        Amortization,
including the amortization of capitalized landfill asset closure and post-closure costs, approximately $4,300, is the primary reason for the Canadian segment
decline in landfill assets. Amortization was partially offset by additions, approximately $2,300, working capital adjustments, approximately $1,200, and capitalized landfill closure and
post-closure costs, a non-cash item, approximately $700. Landfill construction efforts were principally carried out at the Company's Lachenaie landfill during
the period. 

        Foreign
currency translation, approximately $16,400, coupled with additions, approximately $7,100, capitalized landfill closure and post-closure costs, approximately $9,600,
and working capital adjustments, approximately $600, are the primary reasons for the U.S. segment increase. Amortization, approximately $10,500, and disposals and disposal losses, approximately
$4,800, partially offset the aforementioned increases. Landfill construction at the Fund's Seneca Meadows site is the largest contributor to landfill asset additions during the period. 

 Working capital deficit  

					
	 Change — Consolidated March 31, 2009 versus December 31, 2008
	 	 $	(16,001	)
	 Change — Canada — March 31, 2009 versus December 31, 2008
	 	 $	(15,425	)
	 Change — U.S. — March 31, 2009 versus December 31, 2008
	 	 $	(576	)

        A
decline in accounts receivable, outlined above, approximately $4,000, coupled with an approximately $14,400 increase in dividends payable, are the primary reasons for the Canadian
segment increase in its working capital deficit. Changes to the Company's dividend policy, which occurred in conjunction with the Company's conversion from an income trust to a corporation, coupled
with the Company's share offering in March 2009, contributed to the increase in dividends payable. An increase in income taxes payable, due in large part to the Company's conversion, coupled
with a decline in prepaid expenses, due to the reclassification of containers purchased on behalf of cities in the province of Quebec to other receivables, was partially offset by declines in accounts
payable and accrued charges resulting principally from the payment of capital and landfill asset purchases and compensation expense accrued at December 31, 2008. 

        For
the Company's U.S. segment, declines in accounts payable and accrued charges were largely offset by an increase in dividends payable, a decline in cash and cash equivalents,
and a decline in accounts receivable. The decline in accounts payable and accrued charges is due largely to capital and landfill asset purchases and 

16

 

compensation
expense accrued at December 31, 2008 and paid in the current quarter. Changes to the Company's dividend policy contributed to the increase in dividends payable while the decline in
cash and cash equivalents is a function of timing. The movement in accounts receivable is outlined above. 

 Disclosure of outstanding share capital  

								
	 
	 	March 31, 2009 	 
	 
	 	Shares 	 	$ 	 
	 Common shares
	 	 	 67,344	 	 	 1,096,673	 
	 Special shares
	 	 	 11,137	 	 	 —	 
	 Restricted shares
	 	 	 (210	)	 	 (3,985	)
	 	 	 	 	 	 
	 Total contributed equity
	 	 	 78,271	 	 	 1,092,688	 
	 	 	 	 	 	 

 Shareholders' equity  

        The Company is authorized to issue an unlimited number of common, special and preferred shares, issuable in series. 

 Common Shares  

        Common shareholders are entitled to one vote for each common share held and to receive dividends, as and when declared by the Board of
Directors. Common shareholders are entitled to receive, on a pro rata basis, the remaining property and assets of the Company upon dissolution or wind-up, subject to the priority
rights of other classes of shares. 

        On
March 6, 2009, the Company closed its public offering of 8,500 common shares for total gross proceeds of $80,750 or $9.50 per share. The Company applied the net proceeds
from the public offering, approximately U.S. $61,500, to the repayment of outstanding borrowings on its U.S. long-term debt facility. 

        On
March 30, 2009, the Company closed the over-allotment option on its public offering of 1,275 common shares at $9.50 per share for total gross proceeds of
$12,113. The Company applied the net proceeds from the over-allotment option, approximately U.S. $9,500, to the repayment of outstanding borrowings on its
U.S. long-term debt facility. 

 Special Shares  

        Special shareholders are entitled to one vote for each special share held. The special shares carry no right to receive dividends or to
receive the remaining property and assets of the Company upon dissolution or wind-up. The number of special shares outstanding is equivalent to the exchange rights granted to holders of
the PPSs. Participating preferred shareholders have the right to exchange one PPS for one common share of the Company. For each PPS exchanged the same number of special shares is automatically
cancelled. 

 Preferred Shares  

        At March 31, 2009, no preferred shares are issued. Each series of preferred shares shall have rights, privileges, restrictions
and conditions as determined by the Board of Directors prior to issuance. Preferred shareholders are not entitled to vote, but take preference over the common shareholders rights in the remaining
property and assets of the Company in the event of dissolution or wind-up. 

 Non-controlling interest  

        As of April 29, 2009, 10,879 PPSs have been converted into common shares of the Company since issuance on
January 21, 2005. Each holder of a PPS receives dividends equivalent to those received by holders of the Company's common shares. Assuming exchange of all special shares, for common shares of
the Company, 78,481 equivalent common shares would be outstanding at March 31, 2009. 

17

 

  Liquidity and Capital Resources

(all amounts are in thousands of Canadian dollars, unless otherwise stated)  

																	
	Contractual obligations

 
	 	March 31, 2009 	 
	 
	 	Payments due 	 
	 
	 	Total

 
	 	Less than 1

year 	 	1-3 years 	 	4-5 years 	 	After 5 years 	 
	 Long-term debt
	 	 	 965,615	 	 $	47,000	 	 $	729,554	 	 $	—	 	 $	189,061	 
	 Landfill closure and post-closure costs, undiscounted
	 	 	 497,833	 	 	 11,360	 	 	 18,231	 	 	 24,119	 	 	 444,123	 
	 Operating leases
	 	 	 41,195	 	 	 7,497	 	 	 9,973	 	 	 7,932	 	 	 15,793	 
	 Other long-term obligations(3)
	 	 	 21,000	 	 	 —	 	 	 —	 	 	 —	 	 	 21,000	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 Total contractual obligations
	 	 $	1,525,643	 	 $	65,857	 	 $	757,758	 	 $	32,051	 	 $	669,977	 
	 	 	 	 	 	 	 	 	 	 	 	 

Notes: 

	(3)
	Other
long-term obligations include the following: payments on account of a license agreement to use the trade name "BFI" and the related logo
for the period from June 30, 2015 to June 30, 2034. Contingent consideration in respect of certain acquisitions is not included in the table above. 

 Long-term debt  

        Summarized details of the Company's long-term debt facilities at March 31, 2009 are as follows: 

														
	 
	 	Available

lending 	 	Facility drawn 	 	Letters of

credit (not

reported as

long-term

debt on the

Consolidated

Balance 	 	Available

capacity 	 
	 Canadian long-term debt facilities — stated in Canadian dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Senior secured debentures, series A
	 	 $	47,000	 	 $	47,000	 	 $	—	 	 $	—	 
	 Senior secured debentures, series B
	 	 $	58,000	 	 $	58,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	305,000	 	 $	136,000	 	 $	24,916	 	 $	144,084	 
	 U.S. long-term debt facilities — stated in U.S. dollars
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Term loan
	 	 $	195,000	 	 $	195,000	 	 $	—	 	 $	—	 
	 Revolving credit facility
	 	 $	588,500	 	 $	276,000	 	 $	126,903	 	 $	185,597	 
	 IRBs
	 	 $	104,000	 	 $	104,000	 	 $	—	 	 $
	—
 	 

 Senior secured debentures, series A  

        The Company plans to draw on its available Canadian revolving credit facility capacity to repay its senior secured series A
debentures which mature on June 26, 2009. Drawing on the
revolving credit facility has no impact on the Canadian segments funded debt to EBITDA(A) covenant, as this covenant includes both revolving credit facility drawings and senior secured
debenture borrowings in its determination. If interest rates on variable rate lending remain at current levels, the Company will enjoy an interest expense savings of approximately 4.0% on $47,000 of
borrowings from the date of repayment through the balance of 2009. 

 U.S. term loan and revolving credit facility  

        Effective March 31, 2009, the funded debt to EBITDA(A) covenant declined to a maximum of 4.0 times.
Concurrently the Company's long-term U.S. debt facility precludes the U.S. corporation from paying dividends should the funded debt to EBITDA(A) ratio exceed
3.9 times, which is a decline from the previous threshold of 4.15 times. 

18

 

 Long-term debt to EBITDA(A)  

        At March 31, 2009, the Company is not in default of its long-term debt facility covenants. The Company's
long-term debt to EBITDA(A) covenant obligations are not subject to foreign currency exchange fluctuations. Accordingly, holding the foreign currency rate between Canada and
the U.S. at parity, results in a long-term debt to EBITDA(A) ratio of 2.71 times. Readers are reminded that contributions to EBITDA(A) from
acquisitions completed within the last twelve months are not included in the foregoing ratio and that the Company has two revolving credit facilities to support its Canadian and U.S. segment
operations which require financial covenant tests to be prepared independently. 

 Funded debt to EBITDA(A)  

        At March 31, 2009, long-term debt to EBITDA(A) for Canada and the U.S., as defined and calculated in
accordance with the underlying Canadian and U.S. long-term debt facility covenants, are as follows: 

								
	 
	 	Canada 	 	U.S. 	 
	 Funded debt to EBITDA(A)
	 	 	 1.96	 	 	 3.44	 
	 Funded debt to EBITDA(A) maximum(4)
	 	 	 2.75	 	 	 4.00	 

Notes: 

	(4)
	The
U.S. long-term debt facility funded debt to EBITDA(A) covenant contractually declined to a maximum of 4.0 on
March 31, 2009 from a maximum of 4.25 at December 31, 2008. Concurrently, the U.S. long-term debt facility precludes the U.S. corporation from paying
dividends should the funded debt to EBITDA(A) ratio exceed 3.9 (December 31, 2008 — 4.15). The Company expects to fund all, or a significant
portion of, its 2009 dividend payments from its Canadian operations and has applied the net proceeds from its offering in March 2009 to repay U.S. revolving credit facility advances. 

 Risks and restrictions  

        A portion of the Company's term loan, its two revolving credit facilities, and a portion of its IRBs are subject to interest rate
fluctuations with bank prime, the 30 day rate on bankers' acceptances or LIBOR. The Company has hedged U.S. $195,000 of variable rate interest on its U.S. long-term
debt facility. The balance of drawings on the U.S. long-term debt facility, U.S. $276,000, together with amounts drawn on the Company's Canadian revolving credit facility
totaling $136,000, and amounts drawn on a portion of the IRBs, U.S. $59,000, are subject to interest rate risk. A 1.0% rise or fall in the variable interest rate results in a
U.S. $2,760, $1,360, and U.S. $590, change in annualized interest expense incurred on the Company's U.S. long-term debt facility, Canadian revolving credit facility,
and IRBs, respectively. 

        The
Company is obligated under the terms of its debentures, term loan, revolving credit facilities, and IRBs (collectively the "facilities") to repay the full principal amount of each at
their respective maturities. A
failure to comply with the terms of any facility could result in an event of default which, if not cured or waived, could accelerate repayment of the relevant indebtedness. If repayment of the
facilities were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay these facilities in full. 

        The
terms of the facilities contain restrictive covenants that limit the discretion of Company management with respect to certain business matters. These covenants place restrictions on,
among other things, the ability of the Company to incur additional indebtedness, to create liens or other encumbrances, to pay dividends on shares and PPSs above certain levels or make certain other
payments, investments, loans and guarantees, and to sell or otherwise dispose of assets and merge or consolidate with another entity. In addition, the debentures and revolving credit facilities
contain a number of financial covenants that require the Company to meet certain financial ratios and financial condition tests. A failure to comply with the terms of the facilities could result in an
event of default which, if not cured or waived, could result in accelerated repayment. If the repayment of the facilities were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay these facilities in full. 

        Management
of the Company actively reviews its financing alternatives. 

19

 

 Other  

        In April 2008, DBRS re-affirmed their rating of BBB low on the Company's Canadian senior secured series A
and B debentures. The rating was subsequently placed under review pending the results of the Company's conversion. In July 2008, S&P re-affirmed their rating of BB on the
Company's U.S. term loan and revolving credit facility and issued a rating of B+ on U.S. $45,000 of IRBs which were converted to fixed, from a floating rate of, interest. In
October 2008, Moody's Investor Services re-affirmed their rating of B1 on the Company's U.S. term loan and revolving credit facility and changed its outlook to
negative. The negative outlook is subject to adjustment, but required either a covenant modification of the funded debt to EBITDA(A) reduction to 4.0 in March 2009 or a
demonstrated reduction in current funded debt to EBITDA(A) levels. 

 Cash flows  

											
	 
	 	Three months ended March 31 	 
	 
	 	2009 	 	2008 	 	$Change 	 
	 Cash flows generated from (utilized in):
	 	 	 	 	 	 	 	 	 	 
	 Operating activities
	 	 $	60,978	 	 $	42,934	 	 $	18,044	 
	 Investing activities
	 	 $	(22,968	)	 $	(41,758	)	 $	18,790	 
	 Financing activities
	 	 $	(40,497	)	 $	3,373	 	 $	(43,870	)

 Operating activities  

        Foreign currency exchange accounts for approximately $6,100 of the period over period change, while changes in non-cash
working capital contributed approximately $8,800. As outlined above, changes to the Company's dividend policy, which occurred in conjunction with the Company's conversion from an income trust to a
corporation, coupled with the Company's share offering in March 2009, contributed to the increase in dividends payable, and accordingly, non-cash changes in working capital,
approximately $16,800. Declines in accounts payable and accrued charges partially offset the increase in dividends payable, and their declines represent timing differences in capital and landfill
asset accruals coupled with management compensation payments made in the first quarter. 

 Investing activities  

        The decrease in cash utilized in investing activities is due almost exclusively to a decline in acquisitions period over period,
approximately $18,800. The repayment of long-term debt, coupled with a continued focus on the business, has curtailed the Company's current period acquisition activity. Working capital
adjustments were the primary contributor to the rise in capital and landfill purchases, due principally to assets required to satisfy new contract wins and landfill construction activities, while net
proceeds on the sale of capital and landfill assets partially offset these increases. 

 Financing activities  

        Net proceeds from the Company's share offering, approximately $88,400, were directed to the repayment of
U.S. long-term debt facility borrowings. In addition, the Company applied approximately $38,100 of cash generated from operating activities and the sale of capital and landfill
assets to the repayment of long-term debt in both Canada and the U.S., compared to net borrowings of approximately $34,600 in the prior period. Changes to the Company's dividend policy,
coupled with a decline in the Company's acquisition activity, is the primary reason for the decline in net borrowings period over period. 

 Seasonality  

        Revenues are generally higher in spring, summer and autumn months due to higher collected and disposed of waste volumes. Higher
collection and disposal revenues are partially offset by higher operating expenses to service and dispose of additional waste volumes. 

20

 

 Risks and Uncertainties  

        The Company is subject to various risks and uncertainties which are summarized below. Additional details are contained in the Company's
2008 Annual Information Form, which can be found at www.sedar.com.

	•
	renewal or maintenance of landfill operating permits   

	•
	leverage, restrictive covenants, and capital requirements   

	•
	downturns in the world wide economy   

	•
	continued focus on growth through acquisition   

	•
	continued management of business growth   

	•
	loss of contracts through competitive bidding or early termination   

	•
	reliance on third party disposal customers   

	•
	geographic concentration of operations   

	•
	customer concentration   

	•
	weather and seasonality   

	•
	union labour agreements   

	•
	fuel surcharge cost pass through   

	•
	reliance on key management executives   

	•
	localized decision making   

	•
	surety bonds, letters of credit, and insurance   

	•
	uninsured and underinsured losses   

	•
	legislation and governmental regulation   

	•
	environmental regulation and litigation   

	•
	environmental contamination   

	•
	competition   

	•
	governmental initiatives to reduce landfill disposal by encouraging alternatives   

	•
	control and influence of participating preferred shareholders   

	•
	foreign exchange exposure   

	•
	accounting estimates   

	•
	internal control over financial reporting and disclosure control procedures   

	•
	shareholder dilution   

	•
	future exchanges of the non-controlling interests investment   

	•
	market conditions resulting in share price volatility   

	•
	uncertainty of future dividend payments and level thereof 

 Outlook
  (all amounts are in thousands of Canadian dollars, unless otherwise stated)  

 Overview  

        Management is committed to employing its improvement and market-focused strategies with the goal of continuously delivering value to
its shareholders. Management's objective is continuous improvement, which 

21

 

equates
to continuous revenue growth coupled with effective cost management. New market entry, existing market densification, and landfill development will be a continued focus of the Company as it
looks for ways to expand its operations, increase customer density in strategic markets, and increase internalization. The Company's strengths remain founded in the following: consistent historical
organic growth, growth through strategic acquisition, strong competitive position, a solid customer base with long-term contracts, disciplined operating process, predictable replacement
expenditure requirements, and stable cash flows. Management remains committed to actively managing these strengths in the future. 

 Strategic acquisitions  

        In the long-term, the Company remains committed to its review and pursuit of new market and strategic "tuck-in"
acquisitions. Current disruptions in the economy and financial markets have impacted the Company's acquisition strategy. Accordingly, management expects that in the near-term, only
accretive "tuck-in" acquisitions are likely to be completed. 

 Operations  

        Management is active in various permit expansion efforts at certain landfills as permitted life is consumed. Additionally, management
is actively developing alternatives to replace its Calgary landfill site and is also active in its efforts to expand the Lachenaie landfill. In June 2008, the Company received a certificate of
authorization, to allow the Lachenaie landfill to continue operating through July 2009 while management works on a longer-term expansion initiative. Development spending in respect
of the Lachenaie expansion initiative is included in landfill development assets on the Company's consolidated balance sheet. 

        Fuel
and commodity surcharges, and environmental costs, including government imposed disposal charges, will continue to be passed through to the end customer, with a view to eliminating
variability in the Company's operating results and cash flows. Management has entered into some fuel hedges and will continue to review its hedging alternatives for fuel in light of current market
conditions. Readers are reminded that increasing fuel costs, environmental costs, and government imposed disposal charges result in higher revenues and, all else equal, reduce the gross operating
margin (defined as revenues less operating expenses divided by revenues). 

        Significant
landfill volumes have been received and may not continue at a similar rate. 

        Residential
and other government contracts bids may require significant capital expenditures and may require the Company to borrow on its long-term debt facilities.
EBITDA(A) resulting from new contract wins will materialize in subsequent periods. 

 Other  

 Taxation  

        In conjunction with the Company's conversion from an income trust to a corporation, intercompany notes existing within the structure,
prior to conversion, were effectively repaid or capitalized. Accordingly, intercompany interest expense borne by the Company's subsidiaries is, post conversion, no longer available to shelter income
subject to tax. Once the Company utilizes the tax shelter available from carryforward losses, the Company's cash tax expense will increase. 

 Financing strategic growth  

        One of management's principal longer-term objectives is to grow organically and through strategic acquisition. Growth
through strategic acquisition is dependent on the Company's ability to access debt and equity in the capital markets. Any restrictions will affect the Company's growth through strategic acquisition. 

 Withholding taxes on foreign source income  

        When and as applicable, withholding tax on foreign source income is recorded as current income tax expense on the consolidated
statement of operations and comprehensive income. An increase in dividends paid, 

22

 

or
the erosion of IESI's ability to return capital, will result in increasing withholding taxes from foreign source income received by the Company. 

 Optimization of tax losses and tax efficiency of structure  

        Management periodically reviews its organizational structure to promote tax efficiency and optimize the use of tax losses within the
structure. The Company expects to incur additional reorganization costs in this regard. 

 Amortization  

        Through December 31, 2008, the Company applied CICA accounting standard for business combinations (section 1581), which
required the Company to apply the purchase method of accounting to all acquisitions. The purchase method of accounting required the Company to recognize the fair value of all assets acquired and
liabilities assumed, including recognizing all intangible assets separately from goodwill. On acquisition, fair value adjustments typically increased the carrying amount of capital and landfill assets
and typically resulted in the allocation of a portion of the purchase price to identified
intangible assets. Accordingly, the Company's amortization of capital, landfill and intangible assets not only includes amortization of original cost but also includes the amortization of fair value
adjustments recognized on acquisition. Even though the Company has grown organically, a significant portion of its growth has been through acquisitions. Therefore, fair value adjustments included in
the Company's amortization expense are significant. The Company's most notable fair value adjustments arose from the formation of the Company's predecessor company, the Company's initial public
offering, and the Company's acquisitions of; IESI, the Ridge landfill, and Winters Bros. Due to the inherent difficulty in isolating each fair value adjustment for every acquisition completed by the
Company, the following selected amounts demonstrate the impact fair value adjustments had on the Company's amortization expense for the year ended December 31, 2008: fair value adjustments for
landfill assets and recognized intangible assets on the Company's initial public offering accounted for approximately $21,300, or 11.9%, of the Company's 2008 amortization expense, and fair value
adjustments for capital and landfill assets recognized on the Company's acquisition of IESI accounted for approximately $20,000, or 11.2%, of the Company's 2008 amortization expense. Fair value
adjustments are recognized in amortization expense over the useful life of the underlying asset. For landfill assets, this is the landfills permitted or deemed permitted useful life. As the Company
continues to grow through acquisition, amortization expense will continue to increase. Increases will be partially offset by declines in fully amortized fair value adjustments. 

 Critical Accounting Estimates  

 Landfill closure and post-closure costs  

        In the determination of landfill closure and post-closure costs the Company employs a variety assumptions, including but
not limited to, the following: engineering estimates for materials, labour and post-closure monitoring, assumptions market place participants would use to determine these estimates,
including inflation, markups, and inherent uncertainties due to the timing of work performed, the credit standing of the Company, the risk free rate of interest, current economic and financial
conditions, landfill capacity estimates, the timing of expenditures and governmental oversight and regulation. 

        Significant
increases or decreases in engineering cost estimates for materials, labour and monitoring or assumptions market place participants would use to determine these estimates
could have material adverse or positive effect on the Company's financial condition and operating performance, all else equal. Material inputs tied to commodity prices, which may include fuel price or
other commodities, whose value fluctuates with multiple and varied market inputs or conditions, could result in a rise or fall in engineering estimates. Both increases and decreases in cost estimates
will be recognized over the period in which the landfill accepts waste. However, upward revisions in cost estimates are discounted applying the current credit adjusted risk free rate, while downward
revisions are discounted applying the risk free rate when the estimated closure and post-closure costs were originally recorded or a weighted average credit adjusted risk free rate if the
period of original recognition cannot be identified. 

        All
else equal, a decline in either of the risk free rate or the Company's credit spread over the risk free rate, or both, results in higher recorded landfill closure and
post-closure costs at any given time, as cost estimates are 

23

 

estimated
applying present value techniques. Inversely, an increase will result in lower recorded landfill closure and post-closure cost estimates at any given time. Fluctuations in either
of these estimates could have a material adverse or positive effect on the Company's financial condition and operating performance. 

        All
else equal, a decrease or increase in expected inflation rate will result in lower or higher recorded landfill closure and post-closure costs at any given time. A change
to the Company's inflation estimate could have a material adverse or positive effect on the Company's financial condition and operating performance. 

        Landfill
capacity estimates are estimated at least annually using survey information typically provided by independent engineers. An increase in capacity estimates, due to changes in the
landfills operating permit or design, deemed permitted capacity assumptions, or compaction, does not impact recorded landfill closure and post-closure costs reported at any given time, but
does affect the recognition of expense in subsequent periods. All else equal, accretion expense recorded to operating expenses will increase and thereby reduce EBITDA(A), with a
corresponding decrease in landfill amortization expense. The inverse holds true for a decrease in capacity estimates. Changes in landfill capacity estimates could have a material adverse or positive
effect on the Company's financial condition and operating performance. 

        Changes
to the timing of expenditures or changes to the types of expenditures or monitoring periods established through governmental oversight and regulation could have a material
adverse or positive effect on the Company's financial condition and operating performance. If the timing of expenditures becomes more near term, recorded landfill closure and post-closure
cost estimates will increase. Changes to governmental oversight and regulation could increase or decrease estimated costs or the timing thereof, or result in additional or diminished capacity
estimates as a result of permit life expansion or contraction. A governmental change which renders the landfill's operating permit inactive will result in the Company accelerating the recognition of
both closure and post-closure costs, which will increase the recorded amount of landfill closure and post-closure costs, and these amounts could be material. 

        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 

 Landfill assets  

        Similar to landfill closure and post-closure costs, the determination of amortization rates for landfill assets requires
the Company to employ a variety assumptions, including but not limited to, the following: engineering estimates for materials and labour to construct landfill capacity, inflation, landfill capacity
estimates, and governmental oversight and regulation. 

        Changes
to any of the foregoing estimates, which may include changes to material inputs tied to commodity prices, economic and socio-economic conditions which impact the rate of
inflation, changes to landfill operating permits or design, deemed permitted capacity assumptions, or compaction which impacts landfill capacity estimates or a change in government or a governmental
change that impacts estimated costs to construct or impacts capacity, may have a material adverse or positive effect on the Company's financial condition and results of operations. Changes which
increase cost estimates or reduce or constrain capacity estimates will result in higher landfill asset amortization expense in future periods, but have no immediate effect on capitalized landfill
assets. Changes which decrease cost estimates or increase capacity estimates will have an inverse effect. 

        Included
in the capitalized cost of landfill assets, are amounts incurred to develop, expand and secure the landfills operating permit. These amounts are amortized over the period the
landfill actively accepts waste. Any change to capacity estimates will impact the period over which these costs are amortized. A governmental change which renders the landfill's operating permit
inactive will result in the Company recognizing an impairment charge on landfill assets, and this charge could be material. 

        Competitive
market pressures or significant cost escalation may not be recoverable through gate rate increases and could impact the profitability of the landfills operation or its
ability to operate as a going concern. 

24

 

 Goodwill  

        The Company tests goodwill for impairment at least annually or more frequently if an event or circumstance occurs that more likely than
not reduces the fair value of a reporting unit below its carrying amount. The impairment test is a two step test. The first test requires the Company to compare the fair value of a reporting unit to
its carrying amount. If the fair value exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. However, if the carrying amount of the
reporting unit exceeds it fair value, the fair value of the reporting unit's goodwill is compared with its carrying amount to measure the amount of impairment loss, if any. When the carrying amount of
the reporting unit goodwill exceeds the fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. 

        The
fair value of goodwill is determined in the same manner as the value of goodwill is determined in a business combination, whereby the excess of the fair value of the reporting unit
over the amounts assigned to its assets and liabilities is the fair value of goodwill. Fair value is the amount at which an item can be bought or sold in a current transaction between willing parties,
that is, other than in a forced sale or liquidation. To establish fair value, the Company may employ one or more valuation techniques including a market multiple based approach. Accordingly, if the
Company's enterprise value declines due to share price erosion or the Company's EBITDA(A) declines as a result of a more pronounced and continuing recession, goodwill may be impaired and
could have a material adverse effect on the Company's financial condition and operating performance. 

        The
Company will continue to monitor both economic and financial conditions and re-perform its goodwill test for impairment as conditions warrant. 

 Income taxes  

        Future income taxes are calculated using the liability method of accounting for income taxes. Future income tax assets and liabilities
are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured using the substantively enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The effect of a change in tax rates on future income tax assets and liabilities is recorded to operations in the period in which the change occurs.
Unutilized tax loss carryforwards that are not more likely than not to be realized are reduced by a valuation allowance in the determination of future income tax assets. 

        Significant
changes to substantively enacted tax rates or laws, or estimates of timing difference reversal, could result in a material adverse or positive effect on the Company's
financial condition and operating performance. In addition, changes in regulation or insufficient taxable income could impact the Company's ability to utilize its tax loss carryforwards which could
have a significant impact on future income taxes. 

 Accrued accident claims reserve  

        The Company is self-insured for certain general liability, auto liability, and workers' compensation claims. For claims
that are self-insured, stop-loss insurance coverage is maintained for incidents in excess of U.S. $250 and U.S. $500, depending on the policy period in which the
claim occurred. Annually, the Company uses independent
actuarial reports as a basis for developing estimates for reported claims and estimating claims incurred but not reported. 

        Significant
fluctuations in assumptions used to assess and accrue for accident claims reserves, including filed and unreported claims, claims history, the frequency of claims and
settlement amounts, could result in a material adverse or positive impact on the Company's financial condition and operating performance. 

 Other  

        Other estimates include, but are not limited to, the following: estimates of the Company's allowance for doubtful accounts receivable;
recoverability assumptions for landfill development assets; the useful life of capital and intangible assets; estimates and assumptions used in the determination of the fair value of contingent
acquisition payments; various economic estimates used in the development of fair value estimates, including but not limited to interest and inflation rates; and estimates used in the development of
employee future benefit plan amounts, including but not limited to discount rates, expected long-term rates of return on plan assets, rates of compensation increases and the average
remaining service period for active employees. 

25

 

  Environmental Matters  

 Legislation and governmental regulation  

        The Company is subject to extensive legislation and governmental regulation that may restrict or increase the cost of
its operations. 

        The
Company's equipment, facilities and operations are subject to extensive and changing federal, provincial, state and local laws and regulations relating to environmental protection,
health, safety, training, land use, transportation and related matters. These include, among others, laws and regulations governing the use, treatment, transportation, storage and disposal of wastes
and materials, air quality, water quality, permissible or mandatory methods of processing waste and the remediation of contamination associated with the release of hazardous substances. In addition,
federal, provincial, state and local governments may change the rights they grant to, and the restrictions they impose on, waste management companies, and those changes could restrict the operations
and growth of the Company. 

        The
Company's compliance with regulatory requirements is costly. The Company may be required to enhance, supplement or replace its equipment and facilities and to modify landfill
operations and, if it is unable to comply with applicable regulatory requirements, it could be required to close certain landfills. The Company may not be able to offset the cost of complying with
these requirements. In addition, environmental regulatory changes or an inability to obtain extensions to the life of a landfill could accelerate
or increase accruals or expenditures for closure and post-closure monitoring and obligate the Company to spend monies in addition to those currently accrued. 

        Extensive
regulations govern the design, operation, and closure of landfills. For example, in October 1991, the U.S. Environmental Protection Agency ("EPA") established
minimum federal requirements for solid waste landfills under Subtitle D of The Federal Resource Conservation and Recovery Act of 1976, as amended. If
IESI fails to comply with the Subtitle D regulations, it could be required to undertake investigatory or remedial activities, curtail operations or close a landfill temporarily or permanently, or be
subject to monetary penalties. Moreover, if regulatory agencies fail to enforce the Subtitle D regulations vigorously or consistently, competitors whose facilities do not comply with the
Subtitle D regulations or their state counterparts may obtain an advantage over IESI. The financial obligations of the Company arising from any failure to comply with the Subtitle D regulations could
harm its business and operating results. 

        Certain
of Company's waste disposal operations traverse state, provincial, county and the Canada/U.S. national boundaries. In the future, the Company's collection, transfer, and
landfill operations may be affected by proposed U.S. federal legislation governing interstate shipments of waste. Such proposed federal legislation could prohibit or limit the disposal of
out-of-state waste (including waste from Canada) and may require states, under certain circumstances, to reduce the amount of waste exported to other states. If this or similar
legislation is enacted in states in which IESI operates, it could have an adverse effect on the Company's operating results, including IESI landfills that receive a significant portion of waste
originating from out-of-state. In addition, management believes that several states have proposed or have considered adopting legislation that would regulate the interstate
transportation and disposal of waste in the states' landfills. 

        Collection,
transfer, and landfill operations for IESI may also be affected by "flow control" legislation. Some states and local governments may enact laws or ordinances directing waste
generated within their jurisdiction to a specific facility for disposal or processing. If this or similar legislation is enacted, state or local governments could limit or prohibit disposal or
processing of waste in transfer stations or landfills or in third party landfills used by IESI. 

        In
1996, the New York City Council enacted Local Law 42, which prohibits the collection, disposal or transfer of commercial and industrial waste without a license issued by the
New York City Business Integrity Commission, formerly known as the Trade Waste Commission (the "Business Integrity Commission"), and requires Business Integrity Commission approval of
all acquisitions or other business combinations in New York City proposed by all licensees. The need for review by the Business Integrity Commission could delay the Company's consummation of
acquisitions in New York City, which could limit its ability to expand its business in this region. 

26

 

        From
time to time, provincial, state or local authorities consider and sometimes enact laws or regulations imposing fees or other charges on waste disposed of at landfills. If additional
fees are imposed in
jurisdictions in which the Company operates and it is not able to pass the fees through to its customers, the Company's operating results would be negatively affected. 

        The
Company and its senior representatives, managers and other employees must comply with the requirements of federal, provincial, and state legislation related to worker health and
safety. These requirements can be onerous and include, in Canada, a requirement that any person that directs (or has the authority to direct) how another person does work or performs a task
must take reasonable steps to prevent bodily harm to any person arising from that work or task. Failure to comply with these requirements may result in criminal or quasi-criminal proceedings and
related penalties. 

        The
operational and financial effects discussed above associated with compliance with the laws and regulations and changes thereto to which the Company will be subject, could require it
to make significant expenditures or otherwise affect the way it operates its business, and could affect the Company's financial condition and results of operations. 

 Environmental regulation and litigation  

        The Company may be subject to legal action relating to compliance with environmental laws, and to civil claims from parties alleging
some harm as a consequence of migrating contamination, odours, and other releases to the environment or other environmental matters (including the acts or omissions of its predecessors) for which the
business may be responsible. It may also be subject to court challenges of its operating permits. 

        Solid
waste management companies are often subject to close scrutiny by federal, provincial, state, and local regulators, as well as private citizens, and may be subject to judicial and
administrative proceedings, including proceedings relating to their compliance with environmental and local land use laws. 

        In
general, environmental laws authorize federal, provincial, state or local environmental regulatory agencies and attorneys general (and in some cases, private citizens) to bring
administrative or judicial actions for violations of environmental laws or to revoke or deny the renewal of a permit. Potential penalties for such violations may include, among other things, civil and
criminal monetary penalties, imprisonment, permit suspension or revocation, and injunctive relief. These agencies and attorneys general may also attempt to revoke or deny renewal of the Company's
permits, franchises or licenses for violations or alleged violations of environmental laws or regulations. Under certain circumstances, citizens are also authorized to file lawsuits to compel
compliance with environmental laws, regulations or permits under which the Company will operate and to impose monetary penalties. Surrounding landowners or community groups may also assert claims
alleging environmental damage, personal injury or property damage in connection with Company's operations. 

        From
time to time, the Company has received, and may in the ordinary course of business in the future receive, citations or notices from governmental authorities alleging that its
operations are not in compliance
with its permits or certain applicable environmental or land use laws or regulations. The Company will generally seek to work with the relevant authorities and citizens and citizen groups to resolve
the issues raised by these citations or notices. However, the Company may not always be successful in resolving these types of issues without resorting to litigation or other formal proceedings. Any
adverse outcome in these proceedings, whether formal or informal, could result in negative publicity, reduce the demand for Company's services, and negatively impact results from operations. A
significant judgment against the Company, the loss of a significant permit or license or the imposition of a significant fine could also affect the Company's financial condition and results
of operations. 

        IESI's
future compliance with landfill gas management requirements under the Clean Air Act of 1970, as amended, may require installation
of costly equipment, as well as incurring additional operating and maintenance costs. 

27

 

 Environmental contamination  

        The Company may have liability for environmental contamination associated with its own current and former facilities as well as third
party facilities. The Company may also be susceptible to negative publicity if it is identified as the source of potential environmental contamination. 

        The
Company could be liable to federal, provincial or state governments or other parties if hazardous (or other regulated or potentially harmful) substances contaminate or have
contaminated its properties, including soil or water under its properties, or if such substances from its properties contaminate or have contaminated the properties of others. The Company could be
liable for this type of contamination even if the contamination did not result from its activities or occurred before the Company owned or operated the properties. The Company could also be liable for
such contamination at properties to which it transported such substances or arranged to have hazardous substances transported, treated or disposed. Certain environmental laws impose joint and several
and strict liability in connection with environmental contamination, which means that the Company could have to pay all recoverable damages, even if the Company did not cause or permit the event,
circumstance or condition giving rise to the damages. Moreover, many substances are defined as "hazardous" under various environmental laws and their presence, even in minute amounts, can result in
substantial liability. While the Company may seek contribution for these expenses from others, it may not be able to identify who the other responsible parties are and it may not be able to compel
them to contribute to these expenses or they may be insolvent or unable to afford contribution. If the Company incurs liability and if it cannot identify other parties whom it can compel to contribute
to its expenses and who are financially able to do so, it could impact the Company's financial condition and results of operations. 

        In
addition, the Company has previously acquired, and may in the future acquire, businesses that may have handled and stored, or will handle and store, hazardous substances, including
petroleum products, at their facilities. These businesses may have released substances into the soil or groundwater. They may also have transported or disposed of substances or arranged to have
transported, disposed of or treated substances to or at other properties where substances were released into soil or groundwater. Depending on the nature of Company's acquisition of these businesses,
and other factors, the Company could be liable for the cost of cleaning up any contamination, and other damages, for which the acquired businesses are liable. Any indemnities or warranties the Company
obtained or obtains in connection with the purchases of these businesses may not suffice to cover these liabilities, due to limited scope, amount or duration, the financial limitations of the party
who gave or gives the indemnity or warranty or other reasons. Moreover, available insurance does not cover liabilities associated with some environmental issues that may have existed prior to
attachment of coverage. 

        The
Company could be subject to legal actions brought by governmental or private parties in connection with environmental contamination or discharges. Any substantial liabilities
associated with environmental contamination, whether to federal, provincial or state environmental authorities or other parties, could affect the Company's financial condition and results
of operations. 

        The
currently inactive Tantalo landfill, which is located on the Seneca Meadows landfill, has been identified by the State of New York as an "Inactive Hazardous Waste Disposal
Site". In September 2003, the Department of Environmental Conservation ("DEC") issued a consent order which requires the Seneca Meadows landfill to develop a hazardous waste disposal site
remedial program for the landfill. Because the remediation effort is ongoing, the total cost of the remediation is subject to change. In October 2003, IESI purchased a 10 year
"Clean-up Cost Cap Insurance Policy" which provides an additional U.S. $25,000 of coverage (with 10% co-pay) in excess of a self-insured retention for the
estimated remediation costs. If the total cost of expected compliance costs or any remediation substantially exceeds the Company's applicable reserves and insurance coverage, it could affect the
Company's financial condition and results of operations. 

 New Accounting Policies Adopted  

 Goodwill and intangible assets  

        Effective January 1, 2009, the Company adopted CICA accounting standard Goodwill and Intangibles (section 3064). CICA
3064 establishes standards for the recognition, measurement, presentation and disclosure 

28

 

of
internally generated goodwill and intangible assets. The adoption of CICA 3064 had no impact on the Company's consolidated financial statements. 

 Business combinations  

        Effective January 1, 2009, the Company early adopted CICA accounting standard Business Combinations (section 1582), which
replaced Business Combinations (section 1581). This section outlines a variety of changes, including, but not limited to the following: an expanded definition of a business, a requirement to
measure all business combinations and non-controlling interests at fair value, and a requirement to recognize future income tax assets and liabilities and acquisition and related costs as
expenses of the period. CICA 1582 has been applied prospectively to all business combinations from January 1, 2009 onward and accordingly its adoption had no effect on previously
reported amounts. 

 Consolidated financial statements  

        Effective January 1, 2009, the Company early adopted CICA accounting standard Consolidated Financial Statements
(section 1601), which in combination with CICA 1602, replaces Consolidated Financial Statements (section 1600). CICA 1601 establishes standards for the preparation of consolidated
financial statements and specifically addresses consolidation accounting following a business combination that involves the purchase of an equity interest in one company by another. Adopting this
standard had no effect on the Company's previously reported consolidated financial statements. 

 Non-controlling interests  

        Effective January 1, 2009, the Company early adopted CICA accounting standard Non-Controlling Interests
(section 1602), which in combination with CICA 1601, replaces Consolidated Financial Statements (section 1600). CICA 1602 establishes standards of accounting for a
non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. This section requires retrospective application with certain exceptions.
Adopting CICA 1602 changes the Company's presentation of non-controlling interests from mezzanine equity to equity on the Company's consolidated balance sheet.
Non-controlling interest is no longer deducted in the determination of net income. Instead, net income and each component of other comprehensive income are attributed to shareholders'
equity and non-controlling interest. Adopting this section affects the Company's determination of net income presented in the consolidated statement of operations and comprehensive income,
the presentation of net income and non-controlling interest in the consolidated statement of cash flows, and the presentation of non-controlling interest in the consolidated
statement of equity. 

 New Accounting Policies Requiring Adoption  

 International Financial Reporting Standards ("IFRS")  

        On February 13, 2008, the Canadian Accounting Standards Board ("AcSB") confirmed that the use of IFRS will be effective for
interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company anticipates filing a Preliminary Short Form Base Shelf Prospectus and
applying for a listing on the New York Stock Exchange in 2009. Therefore, the Company expects to report its consolidated financial results in U.S. GAAP commencing in 2009 and expects to
transition to IFRS in accordance with the timing set forth by the Securities and Exchange Commission. 

 Definitions of EBITDA and free cash flow  

	(A)
	All
references to "EBITDA" in this MD&A are to "income before the following" on the consolidated statement of operations and comprehensive income. "Income
before the following" excludes some or all of the following: "amortization, interest on long-term debt, financing costs, net gain or loss on sale of capital and landfill assets, net
foreign exchange gain or loss, net gain or loss on financial instruments, other expenses, and income taxes". EBITDA is a term used by the Company that does not have a standardized meaning prescribed
by Canadian generally accepted accounting principles ("GAAP") and is therefore unlikely to be comparable to similar measures used by other issuers. EBITDA is a measure of the 

29

 

Company's
operating profitability, and by definition, excludes certain items as detailed above. These items are viewed by management as either non-cash (in the case of amortization,
certain financing costs, net gain or loss on financial instruments, net foreign exchange gain or loss, and future income taxes) or non-operating (in the case of interest on
long-term debt, net gain or loss on sale of capital and landfill assets, certain financing costs, other expenses, and current income taxes). EBITDA is a useful financial and operating
metric for management, the Company's Board of Directors, and its lenders, as it represents a starting point in the determination of free cash flow(B). The underlying reasons for
exclusion of each item are as follows: 

Amortization — as a non-cash item amortization has no impact on the determination of free cash
flow[nc_nb](B). 

Interest on long-term debt — interest on long-term debt is a function of the Company's
debt/equity mix and interest rates; as such, it reflects the treasury/financing activities of the Company and represents a different class of expense than those included in EBITDA. 

Financing costs — financing costs are a function of the Company's treasury/financing activities and represents a
different class of expense than those included in EBITDA. 

Net gain or loss on sale of capital and landfill assets — proceeds from sale of capital and landfill assets are
either reinvested in additional or replacement capital or landfill assets or used to repay the Company's revolving credit facility. 

Net foreign exchange gain or loss — as non-cash items, foreign exchange gains or losses have no impact
on the determination of free cash flow(B). 

Net gain or loss on financial instruments — as non-cash items, gains or losses on financial
instruments have no impact on the determination of free cash flow(B). 

Other expenses — other expenses typically represent amounts paid to certain management of acquired companies who
are retained by the Company. These expenses are not considered an expense indicative of continuing operations. Accordingly, other expenses represent a different class of expense than those included
in EBITDA. 

Income taxes — income taxes are a function of tax laws and rates and are affected by matters which are separate
from the daily operations of the Company. 

EBITDA
should not be construed as a measure of income or of cash flows. The reconciling items between EBITDA and net income (loss) are detailed in the consolidated statement of operations and
comprehensive income beginning with "income before the following" and ending with "net income (loss)".  

	(B)
	The
Company has adopted a measurement called "free cash flow" to supplement net income (loss) as a measure of operating performance. Free cash flow is a
term which does not have a standardized meaning prescribed by GAAP, is prepared before dividends and distributions declared, and is therefore unlikely to be comparable to similar measures used by
other issuers. The objective of presenting this non-GAAP measure is to align the Company's disclosure with disclosures presented by other U.S. based companies in the waste industry,
to assess the Company's primary sources and uses of cash flow, and to assess the Company's ability to sustain its dividend. All references to "free cash flow" in this MD&A have the meaning set out in
this note. 

30

QuickLinks

Exhibit 4.5

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