The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included under Item 1. In addition, reference should be made to the Company's audited Consolidated Financial Statements and Notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's Annual Report on Form 10-K for the year ended April 30, 2008.

This Quarterly Report on Form 10-Q and, in particular, this Management's Discussion and Analysis may contain or incorporate a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"), may include statements regarding:

† expected future revenues, operations, expenditures and cash needs;

† fluctuations in the commodity pricing of the Company's recyclables, increases in landfill tipping fees and fuel costs, and general economic and weather conditions;

† projected future obligations related to capping, closure and post-closure costs of the Company's existing landfills and any disposal facilities which the Company may own or operate in the future;

†          the projected development of additional disposal capacity;

†          estimates of the potential markets for the Company's products and
services, including the anticipated drivers for future growth;

†          sales and marketing plans;

†          potential business combinations; and

†          projected improvements to the Company's infrastructure and impact of
such improvements on the Company's business and operations.

In addition, any statements contained in or incorporated by reference into this report that are not statements of historical fact should be considered forward-looking statements. You can identify these forward-looking statements by the use of the words "believes", "expects", "anticipates", "plans", "may", "will", "would", "intends", "estimates" and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates as well as management's beliefs and assumptions, and should be read in conjunction with the Company's consolidated financial statements and notes to consolidated financial statements included in this report. The Company cannot guarantee that the Company actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made. The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as otherwise required by law.

There are a number of important risks and uncertainties that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements. These risks and uncertainties include, without limitation, those detailed in Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended April 30, 2008, as supplemented by Item 1A below.

Company Overview

Casella Waste Systems, Inc. is a vertically-integrated regional solid waste services company that provides collection, transfer, disposal and recycling services to residential, industrial and commercial customers, primarily in the eastern United States. Our Company was founded in 1975 as a single truck operation in Rutland, Vermont and the business now operates in fifteen states. We operate vertically integrated solid

waste operations in Vermont, New Hampshire, New York, Massachusetts, and Maine; and stand alone materials processing facilities in Connecticut, Pennsylvania, New Jersey, North Carolina, South Carolina, Tennessee, Georgia, Florida, Michigan, and Wisconsin.

As of February 27, 2009, the Company owned and/or operated 32 solid waste collection operations, 31 transfer stations, 37 recycling facilities, eight Subtitle D landfills, two landfills permitted to accept construction and demolition materials, and one waste-to-energy facility, as well as a 50% interest in a joint venture that manufactures, markets and sells cellulose insulation made from recycled fiber and a 16.2% interest in a company that markets an incentive based recycling service.

Operating Results

For the three months ended January 31, 2009, the Company reported revenues of $121.2 million, a decrease of $19.7 million, or 14.0%, from $140.9 million in the quarter ended January 31, 2008. Solid waste revenues, including the Company's major accounts program, decreased 6.4%, with lower collection and landfill volumes accounting for 7.8% of the decrease and lower commodity prices and volumes 1.5% of the decline. These decreases were partially offset by the positive effect of price increases of 2.0%, primarily from our collection operations, and 0.9% from the rollover effect of a major accounts tuck-in acquisition. FCR recycling revenues decreased 38.2%, with 30.8% coming from lower commodity prices and 7.4% from lower volumes in the quarter.

The significant decrease in recycling revenues was a result of a sharp decline in commodity prices in the quarter driven by a severe drop in demand for all of the Company's commodity product line as a result of global economic conditions. The Company does not expect to see stabilization and growth in commodity prices in many grades until the global economic climate improves. Prices in the recycling commodity markets began to partially rebound toward the end of January 2009, including fiber (newspapers, cardboard, and mixed papers) and plastic prices. The decrease in FCR recycling revenues were partially offset by hedge contracts which reduce the impact of pricing fluctuations on a portion of FCR's fiber volumes and from an increase in tipping fees year over year.

The slowdown in the U.S. economy also had an impact on collection volumes in the quarter, particularly in the Company's commercial and industrial collection lines. Landfill construction and demolition volumes as well as volumes into our Worcester facility declined year over year as a result of the continued slowdown in construction activities. Landfill volumes also decreased year over year as the Colebrook facility ceased operation in the second quarter of the current fiscal year. Pricing initiatives in the collection operations contributed positively in the quarter, while landfill pricing continues to experience the effect of competitive pressures due to lower volumes.

Operating income for the three months ended January 31, 2009 decreased to $1.9 million from $7.4 million for the quarter ended January 31, 2008, a decrease of 74.3%. FCR recycling operating income decreased $8.2 million year over year due to lower commodity prices and volumes as well as costs associated with the upgrade of the Philadelphia and Boston materials recycling facilities to Zero-Sort Recycling TM. Operating income was also negatively impacted by an environmental remediation charge of $2.8 million associated with a consent order issued by the State of New York to undertake certain work at a scrap yard and solid waste transfer station owned by Waste-Stream, Inc., a subsidiary of the Company. These decreases were partially offset by lower cost of operations, general and administration and depreciation and amortization costs, including a reduction in incentive compensation accruals resulting in a year over year positive impact on operating income in the amount of $4.8 million.

As discussed above, recent economic conditions have had an impact on our financial position and results of operations in the quarter ended January 31, 2009. The Company has reacted to these conditions by

managing various expense categories and capital expenditures. The continuation of weakness in the economy and lack of liquidity in the credit markets will likely result in continued negative pressure on consumer and business spending, which will result in lower future business volumes and resulting cash flows. The Company is monitoring the operating performance of its reporting units and other market factors. The Company will perform its annual goodwill impairment test at the end of its fiscal year or sooner if conditions warrant. If it is determined that goodwill is impaired the amount of the charge could be significant. Additionally the impairment charge could lead to a lack of compliance with certain, if not all, of the senior credit facility financial covenants which would require an amendment to the credit facility if it has not otherwise been refinanced by that time.

The Company expects to refinance the senior credit facility in the fourth quarter of fiscal year 2009 or first quarter of fiscal year 2010. The refinancing will be at terms reflective of the distressed credit markets which will increase the Company's future debt service costs. The Company may also seek alternative sources of capital. The Company cannot be certain that it will be successful in refinancing its debt and it may not have access to the amount of capital it requires, on favorable terms or at all.

During the second quarter of fiscal year 2008, the Company completed the sale of the Company's Buffalo, N.Y. transfer station, hauling operation and related equipment in the Western region for proceeds of $4.9 million including a note receivable for $2.5 million and net cash proceeds of $2.4 million. The company recorded a loss on disposal of discontinued operations (net of tax) of $0.4 million. During the fourth quarter of fiscal year 2008, the Company terminated its operation of MTS Environmental, a soils processing operation in the North Eastern region. The Company completed the divestiture of its FCR Greenville operation in the quarter ended July 31, 2008 for cash proceeds of $0.7 million. The company recorded a loss on disposal of discontinued operations (net of tax) of $0.03 million.

Revenues and loss before income taxes attributable to these operations for the three and nine months ended January 31, 2008 and 2009 were as follows (in thousands):

                             Three Months Ended        Nine Months Ended
                                 January 31,              January 31,
                               2008          2009        2008        2009
Revenues                   $         480     $   -   $      7,755    $ 282
Loss before income taxes   $        (221 )   $   -   $     (2,230 )  $ (19 )

The operating results of the above mentioned operations for the three and nine months ended January 31, 2008 and 2009 have been reclassified from continuing to discontinued operations in the accompanying consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of the Company's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and assumptions which are based on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of their evaluation form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions and circumstances. The Company's significant accounting policies are more fully discussed in Item 7 of the Company's Annual Report on Form 10-K for the year ended April 30, 2008.

General Revenues

The Company's revenues in our North Eastern, South Eastern, Central and Western regions are attributable primarily to fees charged to customers for solid waste disposal and collection, landfill, landfill gas-to-energy, waste-to-energy, transfer and recycling services. The Company derives a substantial portion of its collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of the Company's residential collection services are performed on a subscription basis with individual households. Landfill, waste-to-energy facility and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at the Company's disposal facilities and transfer stations. The majority of the Company's disposal and transfer customers are under one to ten year disposal contracts, with most having clauses for annual cost of living increases. Recycling revenues, which are included in FCR recycling and the Central and Western regions, consist of revenues from the sale of recyclable commodities and operations and maintenance contracts of recycling facilities for municipal customers.

The Company's cellulose insulation business is conducted through a 50/50 joint venture with Louisiana-Pacific Corporation ("GreenFiber"), and accordingly, the Company recognizes half of the joint venture's net income on the equity method in our results of operations. The Company also has a cost method investment in the common stock of RecycleRewards, Inc. ("RecycleRewards"); a company that markets an incentive based recycling service. In April 2008, the Company's voting interest was reduced to 16.2%. Effective April 2008, the Company accounts for its investment in RecycleRewards under the cost method of accounting. Prior to April 2008 the Company accounted for this investment under the equity method of accounting. Additionally, in the "Other" segment, we have ancillary revenues including major customer accounts.

The Company's revenues are shown net of inter-company eliminations. The Company typically establishes its inter-company transfer pricing based upon prevailing market rates. The table below shows, for the periods indicated, the percentages and dollars of revenue attributable to services provided (dollars in millions).

                        Three Months Ended January 31,            Nine Months Ended January 31,
                           2008                  2009                2008                 2009
Collection          $    64.7      45.9 %  $  60.7     50.1 % $   203.0      46.2 % $ 202.1     46.3 %
Landfill /
disposal
facilities               24.0      17.0 %     23.2     19.1 %      82.2      18.7 %    83.1     19.0 %
Transfer                  5.6       4.0 %      6.3      5.2 %      20.6       4.7 %    24.2      5.6 %
Recycling                46.6      33.1 %     31.0     25.6 %     134.1      30.4 %   127.2     29.1 %
Total revenues      $   140.9     100.0 %  $ 121.2    100.0 % $   439.9     100.0 % $ 436.6    100.0 %

Collection, landfill/disposal facilities and transfer revenues each increased as a percentage of total revenues in the three months ended January 31, 2009 compared to the prior year, mainly because of the decrease in recycling revenues. The dollar decrease in collection revenues in the three months ended January 31, 2009 compared to the prior year is primarily due to lower volumes, partially offset by price increases and the effect of a major accounts tuck-in acquisition. The dollar increase in transfer revenue in the three and nine months ended January 31, 2009 is primarily due to volume growth. Recycling revenues are primarily from recycling facilities in the FCR recycling region. As noted above, FCR recycling revenues were negatively impacted as a result of a sharp decline in commodity prices in the quarter ended January 31, 2009.

Operating Expenses

Cost of operations includes labor, tipping fees paid to third-party disposal facilities, fuel, maintenance and repair of vehicles and equipment, worker's compensation and vehicle insurance, the cost of purchasing

materials to be recycled, third party transportation expense, district and state taxes, host community fees and royalties. Cost of operations also includes accretion expense related to landfill capping, closure and post closure, leachate treatment and disposal costs and depletion of landfill operating lease obligations.

General and administration expenses include management, clerical and administrative compensation and overhead, professional services and costs associated with marketing, sales and community relations efforts.

Depreciation and amortization expense includes depreciation of fixed assets over the estimated useful life of the assets using the straight-line method, amortization of landfill airspace assets under the units-of-consumption method, and the amortization of intangible assets (other than goodwill) using the straight-line method. In accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, except for accretion expense, the Company amortizes landfill retirement assets through a charge to cost of operations on a rate per ton basis as landfill airspace is utilized. The amount of landfill amortization expense related to airspace consumption can vary materially from landfill to landfill depending upon the purchase price and landfill site and cell development costs. The Company depreciates all fixed and intangible assets, other than goodwill, to a zero net book value, and does not apply a salvage value to any fixed assets.

The Company capitalizes certain direct landfill development costs, such as engineering, permitting, legal, construction and other costs associated directly with the expansion of existing landfills. Additionally, the Company also capitalizes certain third party expenditures related to pending acquisitions, such as legal and engineering costs. The Company routinely evaluates all such capitalized costs, and expenses those costs related to projects not likely to be successful. Internal and indirect landfill development and acquisition costs, such as executive and corporate overhead, public relations and other corporate services, are expensed as incurred.

The Company has and will have material financial obligations relating to capping, closure and post-closure costs of its existing landfills and any disposal facilities which it may own or operate in the future. The Company has provided, and will in the future provide, accruals for these future financial obligations based on engineering estimates of consumption of permitted landfill airspace over the useful life of any such landfill. There can be no assurance that the Company's financial obligations for capping, closure or post-closure costs will not exceed the amount accrued and reserved or amounts otherwise receivable pursuant to trust funds.

Results of Operations

The following table sets forth for the periods indicated the percentage relationship that certain items from the Company's consolidated financial statements bear to revenues.

                                          Three Months Ended      Nine Months Ended
                                          2008         2009        2008        2009

Revenues                                    100.0 %      100.0 %    100.0 %     100.0 %
Cost of operations                           68.3 %       70.6 %     65.6 %      67.3 %
General and administration                   13.0 %       11.5 %     12.5 %      11.6 %
Depreciation and amortization                13.5 %       14.1 %     13.4 %      12.8 %
Environmental remediation charge              0.0 %        2.3 %      0.0 %       0.7 %
Deferred costs                                0.0 %        0.0 %      0.0 %       0.0 %
Operating income                              5.2 %        1.5 %      8.5 %       7.6 %
Interest expense, net                         7.4 %        7.9 %      7.3 %       6.8 %
Loss (income) from equity method
investments                                   0.6 %       -0.2 %      1.0 %       0.4 %
Other income, net                             0.0 %       -0.3 %     -0.5 %      -0.1 %
Provision (benefit) for income taxes          0.4 %       -2.7 %      0.3 %       0.4 %
Income (loss) before discontinued
operations                                   -3.2 %       -3.2 %      0.4 %       0.1 %

Three months ended January 31, 2009 versus January 31, 2008

Revenues - Revenues decreased $19.7 million, or 14.0%, to $121.2 million in the quarter ended January 31, 2009 from $140.9 million in the quarter ended January 31, 2008. Solid waste revenues, including the Company's major accounts program, decreased $6.9 million, with $8.4 million coming from volume decreases in our collection and landfill operations and $1.6 million from lower commodity prices and volumes within the solid waste group. These decreases were partially offset by price increases in our collection operations of $2.2 million and the rollover effect of acquisitions of $1.0 million. FCR recycling revenues decreased $12.9 million mainly due to sharp declines in commodity prices and to a lesser extent, lower volumes.

Cost of operations - Cost of operations decreased $10.7 million, or 11.1%, to $85.5 million in the quarter ended January 31, 2009 from $96.2 million in the quarter ended January 31, 2008. Primarily as a result of lower revenue levels, cost of operations increased to 70.6% in the quarter ended January 31, 2009 compared to 68.3% in the quarter ended January 31, 2008. The dollar decrease in cost of operations is attributable to a decrease in the cost of purchased materials associated with lower recycling revenues as well as lower fuel costs and direct labor, partially offset by a write-down of FCR on-hand inventory to reflect lower commodity prices.

General and administration - General and administration expenses decreased $4.4 million, or 24.0%, to $13.9 million in the quarter ended January 31, 2009 from $18.3 million in the quarter ended January 31, 2008. General and administration expenses as a percentage of revenues decreased to 11.5% in the quarter ended January 31, 2009 from 13.0% in the quarter ended January 31, 2008. The dollar decrease in general and administration expenses in the quarter is primarily from lower expense associated with reduced incentive compensation accruals, partially offset by higher bad debt expense. General and administrative expenses included a $1.2 million charge in the quarter ended January 31, 2008 for recruiting, equity compensation and termination costs associated with the Company's reorganization.

Depreciation and amortization - Depreciation and amortization expense decreased $2.0 million, or 10.5%, to $17.0 million in the quarter ended January 31, 2009 from $19.0 million in the quarter ended January 31, 2008. Landfill amortization expense decreased by $2.1 million primarily due to lower overall volumes along with lower amortization volumes and rates at our Colebrook facility, which closed in the quarter ended October 31, 2008. Depreciation expense increased between periods by $0.1 million. Depreciation and amortization expense as a percentage of revenue increased to 14.1% for the quarter ended January 31, 2009 from 13.5% for the quarter ended January 31, 2008.

Environmental remediation charge - During the quarter ended January 31, 2009, the Company recorded an environmental remediation charge of $2.8 million for the estimated cost of its share of work associated

with a consent order issued by the State of New York to remediate the scrap yard and solid waste transfer station owned by Waste-Stream, Inc., a subsidiary of the Company. The consent order named other parties responsible in addition to the Company. The Company is jointly and severally liable for the total cost to remediate but expects to be responsible for approximately 30% upon implementation of a cost-sharing agreement. Such amounts could be higher if costs exceed estimates or the other responsible parties are not able to meet their obligation.

Operating income - Operating income for the quarter ended January 31, 2009 decreased to $1.9 million, or 74.3%, from $7.4 million for the quarter ended January 31, 2008. FCR recycling operating income decreased $8.2 million year over year due to lower commodity prices and volumes as well as costs associated with the upgrade of the Philadelphia and Boston materials recycling facilities to Zero-Sort Recycling TM. The Company's operating income was also negatively impacted by an environmental remediation charge of $2.8 million discussed above. These decreases were partially offset by lower cost of operations, general and administration and depreciation and amortization costs as discussed above. Western region operating income was negatively impacted by the environmental remediation charge discussed above. Excluding this charge, Western region operating income increased year over year as lower operating costs and landfill amortization more than offset revenue declines. The Central, Northeast and Southeast regions all reflected operating income increases year over year as lower operating costs and landfill amortization more than offset the revenue declines from lower collection and landfill volumes.

Interest expense, net - Net interest expense decreased $0.8 million, or 7.7%, to $9.6 million in the quarter ended January 31, 2009 from $10.4 million in the quarter ended January 31, 2008. This decrease is attributable to lower interest rates on the Company's senior credit facility partially offset by higher net debt levels. Net interest expense, as a percentage of revenues, increased to 7.9% in the quarter ended January 31, 2009 from 7.4% in the quarter ended January 31, 2008.

Loss (income) from equity method investments - The income from equity method investments in the quarter ended January 31, 2009 relates to the Company's 50% joint venture interest in GreenFiber, and the loss for the quarter ended January 31, 2008 also included losses from the Company's interest in RecycleRewards. GreenFiber reported income for the quarter ended January 31, 2009 of which the Company's share was $0.3 million, compared to a loss in the quarter ended January 31, 2008 of which the Company's share was $0.3 million. Although GreenFiber continues to be negatively impacted by the overall slowdown in the housing market, results for the quarter ended January 31, 2009 improved due to lower costs of goods sold associated with declining fiber prices. The Company also has an investment in the common stock of RecycleRewards; a company that markets an incentive based recycling service. In April 2008, the Company's voting interest was reduced to 16.2% from 20.5%. Effective April 2008, the Company accounts for its investment in RecycleRewards under the cost method of accounting. Prior to April 2008 the Company accounted for this investment under the equity method of accounting. RecycleRewards reported a loss for the quarter ended January 31, 2008, of which the Company's share was $0.6 million.

Other income - Other income for the three months ended January 31, 2009 amounted to $0.4 million compared to $0.1 million in the three months ended January 31, 2008. Other income in the three months ended January 31, 2009 includes a dividend of $0.2 million from our minority investment in Evergreen National Indemnity Company ("Evergreen") and the balance from a gain on the sale of an asset.

Provision (benefit) for income taxes - Provision (benefit) for income taxes decreased $3.8 million to ($3.2) million for the quarter ended January 31, 2009 . . .