The following discussion of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and other financial information, included elsewhere in this Form10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties. Our actual results may differ materially from those contained in any forward-looking statements.

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 14 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, Tennessee, Georgia, Florida, Michigan and Wisconsin.

As of May 31, 2009, we owned and/or operated 32 solid waste collection operations, 31 transfer stations, 37 recycling facilities, nine Subtitle D landfills, one landfill 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. We also have a 16.2% interest in a company that markets an incentive based recycling service and a 19.9% interest in a surety company which provides surety bonds to us to secure contractual performance for municipal solid waste collection contracts and landfill closure and post-closure obligations.

Outlook

Recent economic conditions had a significant impact on our financial position and results of operations in the fiscal year ended April 30, 2009. The slowdown in the U.S. economy resulted in lower solid waste collection volumes in fiscal year 2009, compared to the prior year, particularly in our commercial and industrial collection lines. Landfill construction and demolition volumes declined in fiscal year 2009 as a result of a slowdown in construction activities. Landfill volumes also decreased year over year due to the planned closure of the Colebrook facility, which ceased operation in the second quarter of fiscal year 2009. Pricing initiatives in the solid waste collection operations contributed positively in fiscal year 2009 while landfill prices declined year over year due to the effect of market pressure on pricing due to lower volumes in the market place. The continuing weak 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. We have reacted to these economic conditions by managing various expense categories and capital expenditures. In the fourth quarter of fiscal year 2009, we recorded a severance and reorganization charge of $1.3 million which consisted of employee severance and benefit costs and operating lease costs as a result of the consolidation of several operating units into market areas, the elimination of one Region office as well as other workforce reductions. Also, in fiscal year 2009 we reduced a substantial portion of our incentive compensation accrual including all amounts due under our annual incentive compensation plan.

We had a net working capital deficit of $522.9 million at April 30, 2009 compared to a net working capital deficit of $20.2 million at April 30, 2008. The main factor accounting for the decrease in net working capital was the classification of our senior secured credit facility and senior subordinated notes as current debt. As discussed in Note 11 to our Consolidated Financial Statements included under Item 8 of this Form 10-K, our senior secured credit facility, including the revolving credit facility and

Term B loan, are scheduled to expire on April 28, 2010. We have received a waiver of various covenants under the senior secured credit facility which is in effect through July 31, 2009. If we are unsuccessful in refinancing before this date, it is likely that we will be in default under our senior secured credit facility. Default of the credit facility may trigger default under the senior subordinated notes which would result in an accelerated redemption of the notes. For this reason, we have classified the senior subordinated notes as current debt as of April 30, 2009.

Given the impending expiration of the senior secured credit facility, we plan to refinance in the first quarter of fiscal year 2010. We anticipate that the refinancing will be effected through a combination of a revolving credit facility, term loan B and secured note or other offering, depending on market conditions. The refinancing will be at terms reflective of the distressed credit markets which will increase our future debt service costs. We may also seek alternative sources of capital. We cannot be certain that it will be successful in refinancing its debt and may not have access to the amount of capital it requires, on favorable terms or at all. As we would not be able to repay our senior secured credit facility obligations in accordance with the contractual terms without either refinancing this debt or obtaining additional debt or equity financing in sufficient amounts, our independent registered public accounting firm has issued an opinion on our fiscal year 2009 consolidated financial statements that includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern.

Goodwill Impairment

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"), we have performed its annual assessment of goodwill impairment at the end of the fourth quarter of fiscal year 2009 by applying a fair value test to identified reporting segments. In the first step of testing for goodwill impairment, we estimated the fair value of each reporting unit, which we determined to be our four operating segments (Eastern, Western, Central and FCR). Effective February 1, 2009 we combined the management of the former South Eastern and North Eastern regions into the Eastern region. In conjunction with this combination, Maine Energy, which was formerly a separate reporting unit, was also combined into the Eastern region reporting unit. The estimated fair value of each reporting unit was compared with the carrying value of the net assets assigned to each reporting unit. Consistent with prior years, to determine the fair value of each of our reporting units as a whole we used discounted cash flow analyses and estimates about the future operations of each reporting unit. This analysis included a determination of an appropriate discount rate, the amount and timing of expected future cash flows and growth rates. The cash flows employed in our discounted cash flow analyses were based on financial forecasts developed internally by management. The discount rate used at the test date was our risk adjusted discount rate applicable for each reporting unit. The sum of the fair values of the reporting units was reconciled to our current market capitalization (based on our stock price) plus an estimated control premium. The step one test determined that the fair value of our Eastern region reporting segment was less than its carrying value. The reasons for this outcome were the continued deterioration of the equity and credit markets and the economy and their related impact on (i) our projected near term cash flows, due to lower projected landfill volumes and commodity pricing and (ii) an increase in our risk adjusted discount rate.

We proceeded to a step two analysis, which included valuing the tangible and intangible assets and liabilities of the Eastern region to determine the implied fair value of goodwill. The result of this assessment indicated that the implied fair value of goodwill was zero. As a result we recognized a non-cash pre-tax charge of $55.3 million for the quarter ended April 30, 2009, to write-off the entire carrying value of the Eastern region goodwill.

In anticipation of the possibility that we would be required to record non-cash charges, including a goodwill impairment charge, in our financial statements for the year ended April 30, 2009, we sought and received a waiver from our lenders on June 3, 2009 of various covenants under this credit facility

which we would have otherwise breached as a result of these non-cash charges. The lenders have given us a waiver with respect to this and other non-cash charges; however, the waiver is only applicable to our April 30, 2009 financial statements and will remain in effect through July 31, 2009. The waiver does not include a waiver of our financial covenant compliance for the quarter ended July 31, 2009, and accordingly, if we are unable to complete our refinancing by that date, it is likely we will be in default under our senior secured credit facility unless we seek another waiver.

Operating Results

For the year ended April 30, 2009, the Company reported revenues of $554.2 million, a decrease of $25.3 million, or 4.4%, from $579.5 million in the year ended April 30, 2008. Solid waste revenues, including the Company's major accounts program, decreased 2.5%, with lower collection and landfill volumes accounting for 5.3% of the decrease and lower commodity prices and volumes 0.4% of the decline. These decreases were partially offset by the positive effect of price increases, including fuel and environmental surcharges, of 2.4%, primarily from our collection operations, and 0.9% from the rollover effect of a major accounts tuck-in acquisition. FCR recycling revenues decreased 10.9%, with 9.0% coming from lower commodity prices and 1.9% from lower volumes in the quarter.

For the quarter ended April 30, 2009, the Company reported revenues of $117.6 million, a decrease of $22.0 million, or 15.7%, from $139.6 million for the quarter ended April 30, 2008. Solid waste revenues, including the Company's major accounts program, decreased 9.8%, with lower collection and landfill volumes accounting for 10.4% of the decrease and lower commodity prices and volumes 1.3% of the decline. These decreases were partially offset by the positive effect of price increases, including fuel and environmental surcharges, of 1.5%, primarily from our collection operations, and 0.4% from the rollover effect of a major accounts tuck-in acquisition. FCR recycling revenues decreased 34.2%, with 26.0% coming from lower commodity prices and 8.2% from lower volumes in the quarter.

FCR recycling revenues declined $14.0 million in fiscal year 2009 compared to the prior year, as a result of a sharp decline in commodity prices at the end of the second quarter of fiscal year 2009, 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 in the quarter ended April 30, 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.

Eastern region revenues declined $2.6 million, or 1.4%, primarily due to the idling of a construction and demolition processing plant and the ramp-down of landfill volumes at the Pine Tree landfill, partially offset by higher revenues from volume increases at other landfill locations as well as revenue increases from the Pine Tree landfill gas-to-energy facility. Collection revenues decreased year over year as volume declines more than offset price increases. Western region revenues decreased $3.0 million or 2.8% due to lower collection volumes, partially offset by price increases. Landfill prices declined year over year and the volume increases at our Hyland and Ontario facilities were partially offset by volume declines at the Hakes construction and demolition site. Revenues from landfill gas-to-energy projects and carbon emission credits at our Ontario and Hyland facility contributed positively to revenue growth year over year. Central region revenues decreased $8.1 million or 6.5% due to lower collection and landfill volumes and the effect of lower commodity prices. Revenue declines from the planned closure of the Colebrook landfill, which ceased operations in August 2008, were $4.7 million year over year. These decreases were partially offset by collection and landfill price increases, the positive effect of tuck-in acquisitions and the start-up of the landfill-gas-to-energy facility at the Clinton County landfill.

Operating loss for the fiscal year 2009 was $18.5 million compared to operating income of $42.6 million in fiscal year 2008. The Company's operating results were negatively impacted by the goodwill impairment charge discussed above as well as by environmental remediation charges in the third quarter 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, and in the fourth quarter, in which the Company recognized an additional charge of $1.5 million for this same matter in recognition of the deteriorating financial condition and eventual bankruptcy filing by General Motors Corporation, one of the other responsible parties to this obligation. Operating results were positively impacted by lower cost of operations, general administration and depreciation and landfill amortization, due to the planned closure of the Colebrook landfill, the ramp-down of landfill volumes at the Pine Tree landfill and lower construction and demolition volumes at the Hakes landfill.

FCR recycling operating income decreased $12.1 million year over year due to the impact in the third and fourth quarters of lower commodity prices as well as costs associated with the upgrade of the Philadelphia and Boston materials recycling facilities to Zero-Sort Recycling™. Also included in FCR's prior year operating income was $1.6 million of income from transactions involving the domestic brokerage and Canadian recycling operations, compared to $0.2 million in fiscal year 2009. Operating income for the Eastern region decreased $49.3 million, primarily due to the goodwill impairment charge discussed above. Excluding this charge, operating income increased $6.0 million as decreased revenues were more than offset by lower operating costs and landfill amortization as well as the favorable impact of a $0.8 million benefit from a reimbursement from the Town of Southbridge for previously paid and expensed closure and post closure costs at the Southbridge landfill site. In fiscal year 2008 operating results for the Eastern region included a $1.4 million charge for revised estimated closing costs for the Hardwick landfill facility. Despite lower revenue levels and the environmental remediation charges discussed above, the Western region operating income increased $1.3 million year over year due to lower operating costs and landfill amortization, primarily due to lower construction and demolition volumes at the Hakes landfill facility, as well as the positive effect of the start-up of the Hyland gas-to-energy facility as well as the sale of $1.4 million of carbon emission credits. Central region operating income increased $0.9 million year over year as lower revenues were more than offset by lower operating costs and landfill amortization, primarily due to the planned closure of the Colebrook landfill.

The Company recorded a net loss of $68.0 million for the fiscal year ended April 30, 2009 compared to a net loss of $7.8 million in fiscal year 2008. The operating loss discussed above was partially offset by lower interest costs and the improved performance from the Company's unconsolidated subsidiary, GreenFiber. The Company pre-tax loss was $58.9 million in fiscal year 2009 compared to a pre-tax loss of $2.3 million in fiscal year 2008. Included in the fiscal year 2008 pre-tax loss was a $2.1 million gain related to the reversal of residual accruals originally established in connection with waste handling agreement disputes between the Company's Maine Energy subsidiary and fifteen municipalities which were party to the agreements. In the fourth quarter of fiscal year 2009, the Company recognized a non-cash charge of $24.1 million in the provision for income taxes from continuing operations related to an increase in the Company's deferred tax asset valuation allowance. In assessing the realizability of federal and state net operating loss carryforwards and other deferred tax assets, management determined that it is more likely than not that some portion of the deferred tax assets will not be realized in accordance with SFAS No. 109, Accounting for Income Taxes (see Note 17 to the consolidated financial statements included in Item 8 of this Form 10-K).

Net cash provided by operations was $77.5 million in fiscal year 2009 up from $71.2 million in fiscal year 2008. The increase in cash provided by operations included $14.0 million from cash received in the fourth quarter from the liquidation of trust assets held as collateral for the Company's self insurance financial obligations. The trust collateral was replaced by bank letter of credit. Our capital

requirements include acquisitions, fixed asset purchases and capital expenditures for landfill development and cell construction, as well as site and cell closure. Our capital expenditures were $57.7 million in fiscal year 2009 compared to $73.2 million in fiscal year 2008. Capital spending was lower in fiscal year 2009 mainly due to delayed landfill projects. We also financed $14.1 million in capital projects in fiscal year 2009 through financing lease obligations that were not included in our reported capital expenditures.

Acquisitions and Divestitures

In fiscal year 2007, the Company completed the sale of the assets of the Holliston Transfer Station in the Eastern region for cash sale proceeds of $7.4 million. A loss amounting to $0.7 million (net of tax) was recorded to loss on disposal of discontinued operations in fiscal year 2007. In fiscal year 2008 the Company recorded the true-up of certain contingent liabilities associated with the Holliston transaction amounting to a gain of $0.3 million (net of tax) recorded to loss on disposal of discontinued operations and also 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. A loss amounting to $0.5 million (net of tax) has been recorded to loss on disposal of discontinued operations in fiscal year 2008.

The Company terminated its operation of MTS Environmental, a soils processing operation in the Eastern region, in fiscal year 2008. A charge was recorded amounting to $3.2 million associated with the abandonment. Included in this charge was the write off of the carrying value of assets along with costs associated with vacating the site. A loss amounting to $1.9 million (net of tax) has been recorded to loss on disposal of discontinued operations in fiscal year 2008. As of April 30, 2008, the Company also deemed its FCR Greenville operation as held for sale and classified this operation as a discontinued operation pursuant to the requirements of SFAS No 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). The divestiture was completed in June 2008 for cash proceeds of $0.7 million. A loss amounting to $0.03 million (net of tax) has been recorded to loss on disposal of discontinued operations in fiscal year 2009. The operating results of the operations discussed above, including those related to prior years, have been reclassified from continuing to discontinued operations in the accompanying consolidated financial statements.

In fiscal year 2009, the Company acquired three solid waste hauling operations in exchange for $2.4 million in cash consideration. Under the rules of purchase accounting, the acquired companies' revenues and results of operations have been included from the date of acquisition and affect the period-to-period comparisons of the Company's historical results of operations.

On August 15, 2008, the Company made a $2.5 million equity contribution to GreenFiber, which was required as a condition to the refinancing of GreenFiber's existing revolving credit facility. In addition, the other member of GreenFiber, Louisiana-Pacific ("LP"), made the same equity contribution resulting in no change to the Company's ownership in GreenFiber. The Company will continue to account for its 50% ownership in GreenFiber using the equity method of accounting. In addition, the Company and LP issued a joint and several guarantee of up to $2.0 million to support the refinancing of a GreenFiber term loan. The guarantee can be drawn only upon a default (as defined) by GreenFiber under this term loan.

General

Revenues

Our revenues in our 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. We derive a substantial portion of our collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of our 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 our disposal facilities and transfer stations. Recycling revenues, which are included in FCR 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. We also generate and sell electricity under a contract at our waste-to-energy facility and at certain of our landfill facilities.

Our cellulose insulation business is conducted through a 50/50 joint venture with Louisiana-Pacific Corporation, and accordingly, we recognize half of the joint venture's net income on the equity method in our results of operations. The Company also has a 16.2% interest in a company that markets an incentive based recycling service and a 19.9% interest in a surety company which provides surety bonds to the Company to secure contractual performance for municipal solid waste collection contracts and landfill closure and post-closure obligations. The Company accounts for these investments under the cost method of accounting. Also, in the "Other" segment, we have ancillary revenues including major customer accounts.

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

                                                   Fiscal Year Ended April 30,
                                          2007                2008                2009
   Collection                       $ 256.4      48.4 % $ 270.1      46.6 % $ 261.5      47.2 %
   Landfill / disposal facilities     106.4      20.0 %   106.2      18.3 % $ 104.5      18.8 %
   Transfer                            25.5       4.8 %    26.2       4.6 % $  30.9       5.6 %
   Recycling                          143.0      26.8 %   177.0      30.5 % $ 157.3      28.4 %

   Total revenues                   $ 531.3     100.0 % $ 579.5     100.0 % $ 554.2     100.0 %

Collection, landfill/disposal facilities and transfer revenues each increased as a percentage of total revenues in the fiscal year ended 2009 compared to fiscal year 2008, mainly because of the decrease in recycling revenues. The dollar decrease in collection revenues in fiscal year 2009 compared to fiscal year 2008 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 fiscal year 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 fiscal year 2009 compared to fiscal year 2008.

Collection and landfill/disposal facilities revenues each decreased as a percentage of total revenues in fiscal year 2008 compared to fiscal year 2007, mainly because of the increase in recycling revenues due to higher commodity prices. Collection and transfer revenue dollars increased in fiscal year 2008 due to the positive impact of price and volume increases in the Eastern region and in the Company's major accounts programs and the effect of tuck-in acquisitions in the Central, Western and Eastern regions and within the major accounts program.

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 force 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, we amortize landfill retirement assets through a charge to cost of operations using a straight-line rate per ton 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. We depreciate all fixed and intangible assets, other than goodwill, to a zero net book value, and do not apply a salvage value to any fixed assets.

We capitalize certain direct landfill development costs, such as engineering, permitting, legal, construction and other costs associated directly with the expansion of existing landfills. Additionally, we also capitalize certain third party expenditures related to development projects and pending . . .