Waste Services Inc.

Waste Services Inc. is a multi-regional integrated solid waste services company that provides collection transfer disposal and recycling services in the United States and Canada. Waste Services Inc. has a market cap of $224.4 million; its shares were traded at around $4.87 with a P/E ratio of 12.2 and P/S ratio of 0.4. Waste Services Inc. had an annual average earning growth of 20.2% over the past 5 years.

Highlight of Business Operations:

Revenue was $95.8 million and $116.6 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $20.8 million or 17.8%. The decrease in revenue from our Florida operations for the three months ended March 31, 2009 of $9.8 million or 16.3% was driven by decreased collection volumes, primarily in our industrial and commercial lines of business of $2.9 million, coupled with lower third-party transfer station, recycling and landfill volumes of $2.6 million. Declining fuel costs resulted in lower surcharges of $2.6 million and other net decreases of $3.5 million, primarily related to the expiration of certain residential recycling collection contracts. Offsetting these decreases were net price increases of $1.3 million, which was adversely affected by commodity pricing declines of $0.8 million, and increases from acquisitions of $0.5 million.

In March 2008, we sold our hauling and material recovery operations and a construction and demolition landfill site in the Jacksonville, Florida market to an independent third party. The proceeds from this sale approximated $56.7 million of cash, including working capital. At the time of close, we were actively pursuing an expansion at the landfill. If the construction and demolition landfill site did not obtain certain permits relating to an expansion, we would have been required to refund $10.0 million of the purchase price and receive title to the expansion property. Accordingly, at the time of closing we deferred this portion of the proceeds, net of our $3.0 million cost basis. During December 2008, the permits relating to the expansion were secured and the deferred gain was recognized. Simultaneously with the closing of the sale transaction we entered into an operating lease with the buyer for certain land and buildings used in the Jacksonville, Florida operations, for a term of five years at $0.5 million per year. The lessee had the option to purchase the leased assets for a purchase price of $6.0 million, which it exercised in March 2009 resulting in a gain on sale of $3.3 million in the quarter. The proceeds from the sale of the leased assets were utilized to repay amounts under the revolver portion of our Credit Facilities. At the time of close in March 2008, we utilized $42.5 million of the proceeds to make a prepayment of the term loan under our Senior Secured Credit Facilities. Accordingly, we expensed approximately $0.5 million of unamortized debt issue costs relating to this retirement. For the year ended 2008, we recognized a pre-tax gain on disposal of $18.4 million ($11.1 million net of tax) relative to the sale of the Jacksonville, Florida operations, of which $11.5 million ($7.0 million net of tax) was realized during the first quarter of 2008. Included in the calculation of the gain on disposal for the Jacksonville, Florida operations was approximately $23.6 million of goodwill. Subsequent to the disposal of the Jacksonville, Florida operations, we adjusted the pre-tax gain on disposal for the settlement of working capital of approximately $0.2 million.

The decrease in revenue from our Canadian operations for the three months ended March 31, 2009 of $11.0 million or 19.5% was primarily due to the unfavorable effect of foreign exchange movements of $10.9 million. After considering foreign exchange rate changes, revenue from our Canadian operations was relatively flat. We realized net price increases of $1.9 million, which were adversely affected by net commodity pricing declines of $0.3 million, and organic volume growth of $0.1 million. Offsetting these increases were decreases in fuel surcharges of $1.0 million resulting from lower fuel costs, and other decreases of $1.1 million, primarily related to the loss of residential contracts.

The decrease in cost of operations from our Canadian operations for the three months ended March 31, 2009 of $6.4 million or 17.0% was primarily due to the favorable effect of foreign exchange movements of $7.5 million. After considering foreign exchange rate changes, the increase in cost of operations from our Canadian operations of $1.1 million primarily relates to increased disposal rates for waste volumes shipped to the United States of $0.9 million, increased labor costs of $0.4 million, repair, maintenance and other increases of $0.8 million, offset by decreased fuel costs of $1.0 million. As a percentage of revenue, cost of operations for our Canadian operations was 68.6% and 66.6% for the three months ended March 31, 2009 and 2008, respectively. The decline in our Canadian gross margin is primarily due to lower commodity revenue coupled with low margin waste streams disposed of at our transfer stations and higher operating costs, as previously discussed.

Depreciation, depletion and amortization was $10.4 million and $11.7 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $1.3 million or 11.1%. As a percentage of revenue, depreciation, depletion and amortization was 10.8% and 10.1% for the three months ended March 31, 2009 and 2008, respectively. This decrease primarily relates to decreased landfill depletion of $0.5 million, which is primarily due to decreased third-party and internal disposal volumes at our domestic and Canadian landfills. Amortization of intangible assets decreased $0.3 million primarily due to lower amortization associated with our customer relationship intangible assets. Foreign exchange rate movements had a favorable effect of $0.9 million. Landfill depletion rates for our U.S. landfills ranged from $5.67 to $6.09 per ton and $3.57 to $6.16 per ton during the three months ended March 31, 2009 and 2008, respectively. Landfill depletion rates for our Canadian landfills ranged from C$0.66 to C$8.01 per tonne and C$2.99 to C$7.28 per tonne during the three months ended March 31, 2009 and 2008, respectively.

Selling, general and administrative expense was $13.2 million and $16.4 million for the three months ended March 31, 2009 and 2008, respectively, a decrease of $3.2 million or 19.5%. As a percentage of revenue, selling, general and administrative expense was 13.8% and 14.0% for the three months ended March 31, 2009 and 2008, respectively. The overall decrease in selling, general and administrative expense was affected by a restructuring of corporate overhead and other administrative and operational functions that we completed during the fourth quarter of 2008, which is more fully described in our annual report on Form 10-K for the year ended December 31, 2008. These restructuring efforts have, for the most part, resulted in decreased salaries, wages, bonuses and other benefits of $1.4 million and decreased consulting and other administrative costs of $0.6 million. Stock-based compensation increased $0.4 million, primarily as a result of grants made in the first quarter of 2009 and the vesting of previously granted options and restricted stock units, which are more fully described in the notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere herein. The favorable effect of foreign exchange movements was $1.6 million.