Third Quarter Financial Results:

Accounting for 73.6% of the decline of overall revenues, recycling revenues were down $14.5 million over the same quarter last year, primarily as the result of lower commodity prices.

Solid waste revenues were down 7.7% from the same quarter last year; core pricing was up 2.5% (excluding revenue losses from fuel, oil, and environmental fees), and core volumes were down 3.6% (excluding revenues losses due to the ramp-down of landfill volumes at the Pine Tree landfill in Hampden, Maine as it approaches the end of life, the planned closure of the Colebrook, NH landfill in early August 2008, and the idling of a C&D processing facility in October 2008).

Reported results for the 2009 quarter include a pre-tax environmental remediation charge of $2.8 million ($0.07 per share after taxes), and reported results for the 2008 quarter include pre-tax management reorganization charges of $1.2 million ($0.03 per share after taxes).

Operating income for the quarter was $1.9 million, down $5.5 million from the same quarter last year. Net cash provided by operating activities in the quarter was $11.4 million, compared to $16.1 million for the same quarter last year. The company’s earnings before interest, taxes, depreciation and amortization, environmental remediation charge, and development project charge (EBITDA) were $21.7 million, down $4.7 million from the same quarter last year. The company’s free cash flow in the quarter was $0.2 million, compared to $0.5 million in the same quarter last year.

Lower year-over-year operating performance was mainly driven by significantly lower commodity pricing, lower shipped commodity volumes, and one-time costs incurred in the recycling business associated with the global commodity market collapse and the commissioning of two new Zero-Sort Recycling facilities. Other negative factors during the quarter that impacted operating performance include lower hauling and transfer volumes, the ramp-down of landfill volumes at the Pine Tree landfill, and a negative variance from the planned closure of the Colebrook landfill. These factors were partially offset by higher hauling and landfill pricing, the ramp-up of the new landfill gas-to-energy facilities at the Hyland and Clinton landfills, and cost cutting initiatives.

During the third quarter, the recycling operations incurred about $4.0 million of one-time costs associated with impacts from the global commodity collapse in November 2008, including temporary commodity warehousing and inventory costs and higher than market revenue shares to municipal partners due to contractual obligations that calculate revenue shares based on lagging average commodity prices; and the upgrade of the Philadelphia and Boston materials recycling facilities to Zero-Sort Recycling.

During the quarter ended January 31, 2009, the company recorded an environmental remediation charge of $2.8 million related to a scrap yard and transfer station owned by the company. The company expects the majority of these funds to be spent in fiscal 2011.

Nine Month Financial Results:

For the nine months ended January 31, 2009, the company reported revenues of $436.6 million, down $3.3 million, or 0.8% below the same period last year. The company’s net income per common share for the nine month period was $0.02, compared to $0.00 per common share for the same period last year. Reported results for the nine months ended January 31, 2009, include a pre-tax environmental remediation charge of $2.8 million ($0.07 per share after taxes), and reported results for the same period last year include pre-tax management reorganization charges of $1.2 million ($0.03 per share after taxes).

Operating income for the nine month period was $33.5 million, down $3.6 million from the same period last year. Net cash provided by operating activities for the nine month period was $50.6 million, down $0.8 million compared to the same period last year. EBITDA was $92.3 million for the nine month period, down $3.9 million from the same period last year. The company’s free cash flow for nine months period was $4.6 million, up $5.2 million over the same period last year.

Business Update:

Our team rose to the challenges presented by the rapid collapse of the commodities markets and the decline in the regional economy during an extremely challenging third quarter, stated John W. Casella, chairman and chief executive officer of Casella Waste Systems.

The global financial collapse combined with a widening worldwide recession caused a significant downturn in commodity pricing from October 2008 through the end of the quarter, stated Casella. And, while the majority of our residential and commercial solid waste business is recession resistant, we saw lower solid waste volumes in more economically sensitive markets.

We are making intelligent choices during this downturn that I believe will significantly strengthen the company now and in the future, said Casella. We are 18 months into a comprehensive effort to improve all aspects of our operating structure and daily business practices, and we are successfully implementing programs that reduce costs, improve asset utilization, and improve services to our customers.

Fiscal 2009 Outlook:

The company has taken a number of steps to offset the impacts of the global economic slowdown that have resulted in lower commodity prices and lower solid waste volumes. The company is increasing pricing where supported by the market, flexing operations to volumes, and reducing capital spending plans to enable the company to meet its free cash flow guidance for the fiscal year.

Actions include:

Increased solid waste pricing, resulting in an estimated $6.0 million annualized benefit; Increased recycling tipping and processing fees to offset deterioration in commodity revenues, resulting in an estimated $9.6 million annualized benefit; Reduced the company’s workforce by roughly 9.1% since February 1, 2008, mainly as a result of reducing labor to match lower volumes, fleet optimization, and reorganizing nine operating divisions into four new market areas, all resulting in an estimated $10.5 million annualized benefit; Outsourced long-haul transportation in Vermont market, reducing operating costs and on-going capital requirements, resulting in an estimated $0.8 million annualized benefit; Froze new hiring, eliminated fiscal year 2009 merit-based pay increases, suspended the company 401(k) matching contribution, and eliminated fiscal year 2009 management performance bonuses; and Reduced capital expenditures by about $16.0 million from the company’s projected fiscal year 2009 capital plan.

The following updated fiscal year 2009 guidance reflects continued weakness in commodity pricing and softening of economic conditions through the remainder of the fiscal year. The company has updated its guidance for fiscal year 2009 to the following ranges:

Revenues between $540 million and $560 million; Reported free cash flow remaining constant at the original range of $8 million to $14 million; EBITDA between $115 million and $117 million; and Capital expenditures between $57 million and $61 million.

Casella Waste Systems, Inc. is a US based provider of solid waste management services.