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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number 000-25955

Registrant’s telephone number, including area code: (905) 319-1237

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in a definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)

Yes o          No þ

      The approximate aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 30, 2003 was approximately $64.9 million based upon the closing price of the Registrant’s common shares as quoted on the Nasdaq National Market as of that date.

      The number of common shares of the Registrant outstanding as of March 31, 2004 was 73,707,902.

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EXPLANATORY NOTE

      As of December 31, 2003, Capital Environmental Resource Inc. (“Capital”, “we”, “us” or “our”) was a foreign private issuer required to file annual reports on Form 20-F and interim reports on Form 6-K with respect to our financial results and certain other matters. On March 31, 2004 we filed an annual report on Form 20-F for the year ended December 31, 2003.

      During the first quarter of 2004, we ceased to be a foreign private issuer. This annual report on Form 10-K is being filed voluntarily by us to satisfy the filing requirements that would have been applicable to us had we not been a foreign private issuer as of December 31, 2003 and to enable us to satisfy the eligibility requirements for Form S-3. Accordingly, unless otherwise stated, this annual report does not reflect events occurring after the filing of our annual report on Form 20-F for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on March 31, 2004 and does not update the disclosures therein in any way. Each of the certifications and Item 9A speak as of their respective dates and the filing date of this annual report. Unless otherwise indicated the exhibits previously filed with our annual report on Form 20-F for the year ended December 31, 2003 are not re-filed herewith. Separately, you should read our other periodic reports filed with the Securities and Exchange Commission in 2004, including but not limited to our interim report on Form 10-Q for the quarter ended March 31, 2004.

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INDEX TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003

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PART I

CAUTIONARY STATEMENT REGARDING

      This annual report on Form 10-K, or the annual report, contains certain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. Some of these forward-looking statements include forward-looking phrases such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “foresees”, “intends”, “may”, “should” or “will continue”, or similar expressions or the negatives thereof or other variations on these expressions, or similar terminology, or discussions of strategy, plans or intentions. These statements also include descriptions in connection with, among other things:

	•	our anticipated revenue, capital expenditures, future cash flows and financing requirements, and those of companies we acquire;
	•	the implementation of our business strategy;
	•	completion of our migration transaction;
	•	descriptions of the expected effects of our competitive strategies; and
	•	the impact of actions taken by our competitors and other third parties, including courts and other governmental authorities.

      Such statements reflect our current views regarding future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements that forward-looking statements may express or imply, including, among others:

	•	changes in inflation;
	•	changes in regulations affecting our business and costs of compliance;
	•	revocation of existing permits and licenses or the refusal to renew or grant new permits and licenses, which are required to enable us to operate our business or implement our growth strategy;
	•	our ability to successfully implement our corporate strategy, including our migration transaction, and integrate any acquisitions we undertake;
	•	the outcome of pending legal claims against us;
	•	changes in general business and economic conditions, changes in exchange rates and in the financial markets; and
	•	changes in accounting standards or pronouncements.

      Some of these factors are discussed in more detail in this annual report, including under “Item 1. Business — Risk Factors”. If one or more of these risks or uncertainties affects future events and circumstances, or if underlying assumptions do not materialize, actual results may vary materially from those described in this annual report as anticipated, believed, estimated or expected, and this could have a material adverse effect on our business, financial condition and the results of our operations. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.

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Overview

      We are a multi-regional, integrated solid waste services company, providing collection, transfer, landfill disposal and recycling services for commercial, industrial and residential customers in the United States and Canada.

      We were formed on the amalgamation of our predecessor, Capital Environmental Resource Inc., with a number of its wholly owned subsidiaries, pursuant to the Business Corporations Act (Ontario) effective January 1, 2003. Our predecessor was incorporated in May 1997 and began operations in June 1997 when it acquired selected Canadian solid waste assets and operations from Canadian Waste Services Inc. and its parent, USA Waste Services, Inc. (now known as Waste Management, Inc.). We completed our initial public offering of 2,760,000 common shares in June of 1999.

      From the time of commencing operations we acquired a number of solid waste service operations in Canada and the United States. In the first half of 2001, we sold our operations in the northeastern United States and exited the U.S. market because those U.S. operations were exclusively collection operations, with no related disposal opportunity and did not provide sufficient cash flow and investment returns.

      Our corporate strategy changed substantially in September 2001 when we appointed our current Chairman and CEO, David Sutherland-Yoest, and new board members. Our new management and board of directors identified an opportunity to create a multi-regional, vertically integrated solid waste company by expanding into high growth markets in the United States. Since September 2001, we have raised approximately $150 million of equity pursuing this strategy and have invested in three newly permitted or to be permitted large landfill disposal assets strategically located in high growth U.S. markets. In addition, we have assembled a management team with significant industry experience and invested in information systems to support our growth plans.

      We expect to continue to make strategic acquisitions in the United States and Canada. These acquisitions will be financed through all or a combination of cash on hand, issuances of our common stock and other debt and equity financings.

      In 2003, we initiated a disposal-based growth strategy to enter the U.S. solid waste market and establish leading, vertically integrated market positions. Under this strategy, we enter geographic markets with attractive growth or competitive characteristics then acquiring and developing waste collection and transfer operations. In the past 12 months, we have implemented this strategy in three geographic markets in the United States: northern and central Florida, including Orlando and Tampa; Phoenix and Tucson, Arizona and Houston, Texas. We have acquired large municipal solid waste landfill developments in each of these markets.

      In May 2003, we entered Florida with the acquisition of the JED Landfill, a permitted municipal solid waste landfill located in Osceola County, which is well-positioned to serve the Orlando metropolitan area and surrounding counties. The JED Landfill began accepting waste in January 2004 and has an initial permitted capacity of 24.0 million cubic yards. We plan to pursue a vertical expansion that would increase the permitted capacity by approximately 18.0 million cubic yards.

      In December 2003, we completed the acquisition of a majority of the collection, transfer and disposal operations of Allied Waste Industries, Inc., or Allied, in northern and central Florida, and expect to acquire the remaining operations in Jacksonville, which we refer to as the remaining Allied assets, in May 2004 upon receipt of the required municipal contract transfer consents and approvals.

      In November 2003, we entered into an agreement, as amended in March 2004, to acquire all of the issued and outstanding shares of Florida Recycling Services, Inc. or Florida Recycling. Florida Recycling’s operations are based in central Florida, primarily servicing the Orlando, Daytona, Fort Myers and Tampa markets and will provide substantial internalization benefits to our JED landfill.

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      In July 2003, we entered Arizona with the acquisition of the Cactus Waste Landfill, a municipal solid waste landfill development located between Phoenix and Tucson, which is well-positioned to serve both metropolitan areas. We also acquired a permit to construct a transfer station in Mesa, outside of Phoenix, which will allow us to transfer waste from the Phoenix metropolitan area to the landfill. We expect to receive permits for the landfill in the second quarter of 2004, and we expect to complete the construction of both the landfill and transfer station and begin accepting waste in the second half of 2004. In addition, since July 2003, we have acquired seven collection operations in the Phoenix metropolitan area, which we intend to vertically integrate with our landfill disposal and transfer operations.

      In February 2004, we entered Texas with the acquisition of the Long Point Landfill, a permitted municipal solid waste landfill development located in Fort Bend County, which is well-positioned to serve the Houston metropolitan area. We also acquired a leasehold interest for a transfer station site that will allow us to increase the volume disposed of at the landfill. We expect to complete construction of both the landfill and transfer station and begin accepting waste at the landfill in the second half of 2004. We intend to pursue opportunities to create a vertically integrated market position in the Houston metropolitan area by acquiring and developing collection and additional transfer operations.

      Our corporate offices are located at 1122 International Blvd., Suite 601 Burlington, Ontario L7L 6Z8. Our telephone number is (905) 319-1237.

      We will file annual reports on Form 10-K, quarterly reports on Form 10-Q and current report on Form 8-K with the SEC. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The internet address is www.sec.gov.

      You may request a copy of those filings, at no cost, by writing or telephoning us at: Capital Environmental Resource Inc., 1122 International Blvd., Suite 601, Burlington, Ontario L7L 6Z8, Attention: General Counsel. You also may obtain them through our website. Our website address is www.capitalenvironmental.com. Information on our website does not form a part of this annual report.

U.S. Migration

      As part of our business strategy to expand into the United States, we propose to enter into a migration transaction. Under the migration transaction, our corporate structure will be reorganized so that Waste Services, Inc. or Waste Services will become the ultimate parent company of our corporate group. Waste Services is currently our Delaware subsidiary.

      The migration transaction will be effected through a plan of arrangement under Section 182 of the Business Corporations Act (Ontario) and must be approved by the Ontario Superior Court of Justice and by our shareholders. We will, through such plan of arrangement, effectively convert the holders of our common shares into holders of shares of common stock of Waste Services as follows:

	•	Holders of our common shares who are U.S. residents will have their holdings automatically transferred to Capital Holdings (an intermediate company incorporated in Nova Scotia, Canada and a wholly owned subsidiary of Waste Services) in exchange for shares of common stock of Waste Services.
	•	Holders of our common shares who are not U.S. residents and who do not elect to receive exchangeable shares will also have their holdings automatically transferred to Capital Holdings in exchange for shares of common stock of Waste Services.
	•	Holders of our common shares who are not U.S. residents and who elect to receive exchangeable shares will have their common shares reclassified as exchangeable shares that are exchangeable for shares of common stock of Waste Services at an exchange ratio of 1:1.

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      The terms of the exchangeable shares will be the economic and functional equivalent of the common stock of Waste Services. Holders of exchangeable shares (i) will receive the same dividends as holders of shares of common stock of Waste Services and (ii) will be entitled to vote on the same matters as holders of shares of common stock of Waste Services. Such voting will be accomplished through the issuance of a special voting share to a trustee who will vote on the instructions of the holders of the exchangeable shares (one vote for each exchangeable share).

      The exchangeable shares will mandatorily be exchanged for shares of common stock of Waste Services upon the occurrence of certain events, such as our liquidation, or after a redemption date. Such redemption date has not yet been determined, but the date will be within a range of approximately seven to twelve years after the issuance of the exchangeable shares.

Our Business Strategy

      Our goal is to be a highly profitable, multi-regional solid waste services company in North America with leading market positions in each of the markets we serve. In order to achieve this goal, we intend to:

      Maximize Density and Vertical Integration of Operations. We believe that achieving a high degree of density and vertical integration of operations leads to higher profitability and returns on invested capital. In each of our local markets, we seek to maximize the density of our collection routes, which allows us to leverage our facilities and vehicle fleet by increasing the number of customers served and revenue generated by each route. In addition, we seek to vertically integrate our operations where possible, using transfer stations to link collection operations with our landfills to increase internalization of waste volume. By securing and controlling the solid waste stream from collection through disposal, we are able to achieve cost savings for our collection operations, while at the same time providing our landfills with more stable and predictable waste volume and enhancing returns on the capital invested in these facilities.

      Provide Consistent, Superior Customer Service. Our long-term growth and profitability will be driven, in large part, by our ability to provide consistent, superior service to our customers. We believe that our local and regional operating focus allows us to respond effectively to customer needs on a local basis, as well as maintain strong relationships with commercial, municipal and residential accounts. In each of our markets, customer retention and new account generation are key areas of focus for our local managers, and are important components of their performance evaluation.

      Maintain a Decentralized Operating Management Structure with Centralized Controls and Information Systems. The solid waste industry is a local and regional business by nature, where we believe that asset investment, customer relationships, pricing and operational productivity are most effectively managed on a local and regional basis. We have structured our operating management team on a geographically decentralized basis, because we believe that talented, experienced and incentivized local management are in the best position to make effective, profitable decisions regarding local operations and to provide strong customer service. Our senior management team provides significant oversight and guidance for our local management, developing operating goals and standards tailored to each market, but does not impose corporate directives regarding local operating decisions, such as pricing.

      While our operating management structure is decentralized, all of our operations adhere to uniform corporate policies and financial controls, as well as utilize integrated information systems. Our information systems provide both corporate and local management with comprehensive, consistent and timely operating and financial data, enabling them to maintain detailed, ongoing visibility of the performance and trends in each of our local market operations.

      Execute a Disciplined, Disposal-Based Growth Strategy. Our growth strategy consists of both new geographic market entries, for which we first secure disposal capacity, and “tuck-in” acquisitions within an existing market, which typically consist of collection operations or transfer stations. In either case, we focus on maximizing cash flow and return on invested capital.

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      For new market entries, we only pursue opportunities where we can:

	•	benefit from (i) above-average underlying economic or population growth, or (ii) a changing competitive or regulatory environment that could lead to above-average growth for solid waste services;
	•	establish a leading market position over time in the local markets in which we operate; and
	•	become vertically integrated with the ability to secure significant waste volume that we collect and transfer to our own landfills.

      We believe that each of the new markets we have entered in the United States in the past 12 months have met these criteria.

      For tuck-in acquisitions, we only pursue opportunities that:

	•	are complementary to our existing infrastructure, allowing us to increase the density of our collection routes or enhance asset utilization; or
	•	increase the waste volume that can be internalized into our transfer stations and landfills.

Operations

      We provide our services on a geographic basis in two regions in Canada, Eastern and Western Canada, and in two regions in the United States, Florida and the Southwest. For a discussion on the seasonality of our business, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Trend Information — Seasonality.”

      We provide collection services to approximately 52,000 commercial and industrial customers and approximately 810,000 residential customers. As of December 31, 2003, we had a front-line collection fleet size of approximately 650 vehicles with an average fleet age of approximately six years.

      Commercial and Industrial Collection. We provide collection services to a variety of commercial and industrial customers in all of our geographic markets where we have collection operations. We perform such services principally under one to three year service agreements, which typically contain provisions for automatic renewal and which prohibit the customer from terminating the agreement prior to its expiration date without incurring a penalty. We provide roll-off containers to customers for temporary services, such as for construction projects, under short-term purchase orders. We also provide stationary compactors to our customers, which allow them to compact their waste at their premises prior to its collection. Commercial and industrial collection vehicles normally require one operator. We provide two to eight cubic yard containers to commercial customers and ten to fifty cubic yard containers to industrial customers, including our roll-off accounts.

      We determine the fees we charge our customers by a variety of factors, including collection frequency; level of service; route density; the type, volume and weight of the waste collected; type of equipment and containers furnished; the distance to the disposal or processing facility; the cost of disposal or processing; and prices charged by competitors for similar services. Our contracts with commercial and industrial customers typically allow us to pass on increased costs resulting from variable items such as disposal and fuel costs and surcharges. Our ability to pass on price increases is sometimes limited by the terms of our contracts.

      Residential Collection. We provide residential waste collection services in all of our geographic markets where we have collection operations through a variety of contractual arrangements, including contracts with municipalities, owners and operators of large residential complexes and mobile home parks, and homeowners associations. We also provide such services through residential subscription arrangements with individual homeowners in certain markets.

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      Our contracts with municipalities are typically for a term of up to five years and contain a formula, generally based on a predetermined published price index, for automatic adjustments to fees to cover increases in some, but not all, of our operating costs. Certain of our contracts with municipalities contain renewal provisions.

      The fees we charge for residential solid waste collection services provided on a subscription basis are based primarily on route density, the frequency and level of service, the distance to the disposal or transfer facility, the cost of disposal or transfer and prices we charge in the market for similar services.

      We operate 14 transfer stations and are constructing new transfer stations in Arizona and Texas. Our transfer stations receive solid waste from our own operations and from third parties, compact the waste and transfer it for disposal to our own or third-party landfills. We charge third parties fees to dispose of their waste at our transfer stations.

      We typically subcontract the transportation of waste from our transfer stations to the landfill. Transfer station fees are generally based on the cost of processing, transportation and disposal. We believe that the benefits of using our transfer stations include improved utilization of our collection infrastructure and better relationships with municipalities and private operators that deliver waste to our transfer stations, which can lead to additional growth opportunities. We believe that transfer stations will become increasingly valuable as new landfills are opening further away from metropolitan areas and waste needs to travel further for disposal.

      We offer collection and processing services to our municipal, commercial and industrial customers for a variety of recyclable materials, including cardboard, office paper, plastic containers, glass bottles, fiberboard, and ferrous and aluminum metals. We operate five material recovery facilities in Ontario, Canada and seven in Florida. These facilities are used to sort, bale and ship recyclable materials to market. We also deliver recyclable materials that we collect to third parties for processing and resale. In an effort to reduce our exposure to commodity price fluctuations on recycled materials, where competitive pressures permit, we charge collection or processing fees for recycling volume collected from our customers. We believe that recycling will continue to be an important component of municipal solid waste management plans due to the public’s environmental awareness and regulations that mandate or encourage recycling.

      We charge our landfill and transfer station customers a tipping fee on a per ton basis for disposing of their solid waste at our transfer stations and landfills. We generally base our landfill tipping fees on market factors and the type and weight of or volume of the waste deposited. We generally base our transfer station tipping fees on market factors and the cost of processing the waste deposited at the transfer station, the cost of transporting the waste to a disposal facility and the cost of disposal.

      We dispose of the solid waste we collect in one of four ways: (i) at our own landfills; (ii) through our own transfer stations; (iii) at municipally-owned landfills; or (iv) at third-party landfills or transfer stations. In markets where we do not have our own landfills, we seek to secure favorable long-term disposal arrangements with municipalities or private owners of landfills or transfer stations. In those markets, our ability to maintain competitive prices for our collection services is generally dependent upon our ability to secure favorable disposal pricing. In some markets we may enter into put or pay disposal arrangements with third party operators of disposal facilities. These arrangements require us to deliver a minimum tonnage of waste for disposal at a fixed disposal rate, or pay a penalty equal to the minimum tonnage multiplied by that disposal rate. These types of arrangements allow us to fix our disposal costs, but also expose us to the risk that if our tonnage declines and we are unable to deliver the minimum tonnage, we will be required to pay the penalty.

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      We offer other specialized services consisting primarily of sales and leasing of compactor equipment and portable toilet services for special events or construction sites.

Local/ Regional Operating Structure

      Each of our operating regions also has a number of operating districts where the business is managed on a local basis.

      From a management perspective, each district has a district manager who reports to a regional vice president responsible for each of our four operating regions. Each of these regional vice presidents reports to our President and Chief Operating Officer. District managers are responsible for the day-to-day operations of their districts, including supervising their sales force, maintaining service quality, implementing our health and safety and environmental programs and overseeing contract administration. District managers work closely with regional vice presidents to execute business plans and identify business development opportunities. This structure is designed to provide decision-making authority to our district managers who are closest to the needs of the customers they serve in the community. This localized approach allows us to quickly identify and address customer needs, manage local operating dynamics and take advantage of market opportunities, while also providing streamlined access to our President and Chief Operating Officer for resource allocation and other major strategic decisions.

      We have operations throughout Ontario and in Saskatchewan, Alberta and British Columbia.

      Eastern Canada. Our Eastern Canada operations are based primarily in and around metropolitan areas of southern Ontario. We operate in 16 districts with 14 collection operations, eight transfer stations, five material recovery facilities and one landfill. While our southern Ontario operations other than Ottawa do not have internal disposal facilities, we have disposal contracts in place for a majority of our collected volume at favorable rates.

      Our Waste Services landfill located in Ottawa, Canada consists of 79 acres zoned for waste disposal and another 21 acres of contiguous land. The 79 acre landfill is permitted to accept up to 234,750 metric tons per year of dry waste for disposal. We estimate that the 79 acre site has a remaining capacity of 1.8 million cubic yards and almost six years of remaining airspace on the 79 acre parcel, at current disposal volumes.

      Western Canada. Our Western Canada operations are located in the three most western Canadian provinces: Saskatchewan, Alberta and British Columbia. Our hauling companies are located in and around metropolitan areas of Alberta and British Columbia and our two landfills are located in proximity to the industrial waste markets that they serve. We operate in 11 districts with nine collection operations, two transfer stations and two landfills. The two landfills we own and operate in Western Canada primarily serve industrial customers and while we do not have significant internal disposal facilities, we have disposal contracts in place for a majority of our collected volume.

      Our Gap Landfill in southern Saskatchewan was acquired in January 2004 and is a fully permitted industrial waste landfill which primarily services the oilfield industry. At the time we acquired the landfill, it had been operating for approximately two years and has an estimated remaining operating life of 33 years.

      Our Paintearth Landfill, located in Coronation, Alberta is permitted to accept non-hazardous solid waste, construction and demolition waste and certain special wastes and includes a composting facility, a bio-remediation facility and a material recycling facility. The landfill consists of approximately 160 acres zoned for waste disposal and another approximately 320 acres of contiguous land that is suitable for future expansion. We estimate that the 160 acre site has a total remaining capacity of 9.1 million cubic yards and 40 years of remaining airspace in the current 160 acre parcel.

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      In 2003, we initiated a disposal-based growth strategy to enter the U.S. solid waste market. To date, we have made strategic acquisitions of permitted or to be permitted landfill sites and collection operations in northern and central Florida, Phoenix, Arizona and Houston, Texas.

      Florida Region. We expect that upon the completion of our acquisition of Allied’s northern and central Florida operations and our pending acquisition of Florida Recycling, our Florida region will be organized into three districts with 13 collection operations, seven transfer stations, five material recovery facilities and three landfills.

      The north Florida district, centered around the Jacksonville metropolitan area, will be comprised of two collection operations, two material recovery facilities and two landfills. The Gulf district, concentrated in the Tampa/ St. Petersburg market area, will have six collection operations, two transfer stations and three material recovery facilities. The central Florida district, focused on the Orlando metropolitan area, will have five collection operations, two transfer stations, two material recovery facilities and our JED landfill.

      Our JED Landfill is located in Osceola County, Florida (approximately 20 miles south of metropolitan Orlando) and commenced operations in January 2004. This municipal solid waste landfill has current permitted airspace of 24 million cubic yards. The site has no daily or annual volume limits, and it is currently permitted to accept waste from Osceola County and six surrounding counties (which include the Orlando metropolitan area).

      Southwest Region. Our southwest region includes our operations in Arizona and Texas and includes new landfill sites outside Phoenix and Houston and collection operations recently acquired in the Phoenix metropolitan area.

      Our Arizona operations are focused in the Phoenix metropolitan area. The Cactus Waste Landfill is located between Phoenix and Tucson, Arizona, and was acquired in September 2003. This municipal solid waste landfill is expected to have an initial capacity of approximately 224 million cubic yards. Construction of the site is expected to begin in April 2004. The site has no daily or annual volume limits and is expected to begin accepting solid waste in the second half of 2004. We have also obtained the required permits and zoning to operate and are currently constructing a transfer station in Mesa, Arizona. We expect the transfer station to commence operations in the second half of 2004.

      Since July 2003, we have acquired seven collection companies that will be consolidated into a single collection operation in the Phoenix market. We believe these collection businesses will deliver significant volumes of municipal solid waste to the Cactus Waste Landfill when it begins to accept delivery of waste, which we expect to occur in the second half of 2004.

      Our Long Point Landfill is located approximately 15 miles southwest of metropolitan Houston, Texas, in Fort Bend County and was acquired in February 2004. This municipal solid waste landfill has a total area of approximately 2,600 acres with initial permitted capacity of 48 million cubic yards. Construction of the site is expected to begin in April 2004. The site has no daily or annual volume limits and is expected to begin accepting solid waste in the second half of 2004. In addition to the landfill facility, we acquired a leasehold interest of a site in Houston that is fully permitted for the construction and operation of a solid waste transfer station. The transfer station is expected to commence operations in the fourth quarter of 2004.

Segment Reporting

      Prior to fiscal 2002, we operated in two reporting segments, the United States and Canada. As a result of the sale of our U.S. business during 2001, we operated exclusively in Canada during 2002. We re-entered the United States in May 2003 with the acquisition of the JED Landfill in Osceola County, Florida. We do not have significant (in volume or dollars) inter-segment operation-related transactions. See Note 17 of the Notes to Consolidated Financial Statements included as Item 15.

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Sales and Marketing

      We market our services on a decentralized basis principally through our district managers and direct sales representatives. Our sales representatives visit customers on a regular basis and call upon potential new customers within a specified territory or service area. These sales representatives receive a portion of their compensation based on meeting certain incentive targets.

      In addition to our sales efforts directed at commercial and industrial customers, we have municipal marketing representatives in our markets in Canada and Florida who are responsible for interfacing with each municipality or community to which we provide residential service to ensure customer satisfaction. Our municipal representatives organize and handle bids for renewal and new municipal contracts in their service areas.

      We have a diverse customer base, with no single contract or customer representing more than 4% of consolidated revenue for the year ended December 31, 2003.

Competition

      The solid waste services industry is highly competitive and fragmented. We compete with large, national solid waste services companies, as well as smaller regional solid waste services companies of varying sizes and resources. Some of our competitors are better capitalized, have greater name recognition and greater financial, operational and marketing resources than we have, and may be able to provide services at a lower cost. We also compete with operators of alternative disposal facilities, and with municipalities that maintain their own waste collection and disposal operations. Public sector operators may have financial advantages over us because of their access to user fees and similar charges as well as to tax revenue.

      The Canadian solid waste industry currently includes one large national waste company: Waste Management, Inc., operating through its Canadian subsidiary, Canadian Waste. The U.S. solid waste industry currently includes three large national waste companies: Waste Management, Inc., Allied Waste Industries, Inc. and Republic Services, Inc. There are also several other large public solid waste services companies, including Waste Connections, Inc., Casella Waste Systems, Inc., and Waste Industries, Inc.

      We compete for collection, transfer and disposal volume based primarily on the price and quality of services. From time to time, competitors may reduce the prices of their services in an effort to expand their market share or service areas or to win competitively bid municipal contracts. These practices may cause us to reduce the prices of our services or, if we elect not to do so, to lose business.

      Competition exists not only for collection, transfer and disposal volume, but also for acquisition candidates. We generally compete for acquisition candidates with publicly owned regional and large national solid waste services companies.

Governmental Regulation

      We are subject to significant federal, provincial, state and local environmental and land use laws and regulations in Canada and the United States. The enforcement of both Canadian and U.S. environmental laws has become increasingly stringent. We believe that we are currently in substantial compliance with all material applicable environmental laws, permits, orders and regulations, and therefore we do not currently anticipate any significant environmental costs necessary to bring our existing operations into compliance. We anticipate that regulation, legislation and regulatory enforcement actions related to the solid waste services industry will continue to increase.

      To transport and manage solid waste, we must possess and comply with one or more permits from federal, provincial, state or local agencies and government offices. These permits must be periodically renewed and may be modified or revoked by the issuing agency.

      The principal statutes and regulations that affect our operations are described below.

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      Our Canadian operations are subject to environmental statutes and regulations at each of the federal, provincial and local levels. These laws impose restrictions designed to control air, soil and water pollution and regulate health and safety, zoning and land use and the handling of hazardous and non-hazardous wastes, and often empower government officials to issue administrative orders, including orders to cease carrying out a specific activity. This regulatory framework imposes significant compliance burdens and risks. The contravention of these laws may result in substantial fines that could equal or exceed the amount of monetary benefit acquired as a result of the commission of the offense and which could materially affect our business, results of operations and financial condition. In addition, our Canadian operations are subject to federal and provincial legislation regulating the operation of our fleet of vehicles, as well as to provincial occupational health and safety and workers compensation statutes which establish employer responsibilities for worker health and safety. The provisions of these statutes impose compliance burdens and costs and may result in significant penalties for failure to comply.

      The Canadian Environmental Protection Act, 1999 and the regulations passed under the act regulate, among other things, the import and export of waste into and out of Canada. The Transportation of Dangerous Goods Act regulates the transport of wastes across provincial and federal borders.

      Ontario’s Environmental Protection Act and the regulations passed under the act regulate general waste management and new or expanding landfill sites, prescribe the principal standards for the location, maintenance and operation of waste management systems, transfer and disposal sites, require the monitoring and reporting of airborne contamination and create offenses for spills, unlawful contaminant discharges or failure to comply with environmental permits or approvals.

      The operation of a waste management system or a waste transfer or disposal site in Ontario requires a certificate of approval or a provisional certificate of approval issued by the Ministry of the Environment under Part V of the Ontario Environmental Protection Act. We have applied for and obtained Certificates of Approval for the operation of all of our existing waste management systems and waste transfer and disposal sites in Ontario.

      The Waste Diversion Act created the Waste Diversion Organization, which has a mandate to develop, implement and operate waste diversion programs, designed to increase the diversion of waste from disposal. Programs developed in 2003 included recycling (municipal Blue-box), waste oil and used tires, with programs for organics, electronics and household special wastes (i.e. paints and solvents) to follow in later years.

      The Ontario Water Resources Act prohibits unlawful discharges into water and regulates wastewater systems in Ontario, including leachate collection, treatment and discharges at landfills.

      In 2003, amendments were passed to the Municipal Act that allow, in certain prescribed circumstances, the formation of municipal businesses to compete directly in a public competitive bidding process with the private sector waste services industry for the collection, transfer, storage, disposal or recycling of residential waste.

      The Environment Management and Protection Act of 2002 and the regulations passed under the act govern waste management activities carried on in Saskatchewan, including the permitting and operation of our Gap Disposal landfill.

      The Environmental Protection and Enhancement Act comprehensively regulates the management and control of waste, including hazardous waste, and creates offenses for spills and other matters of non-

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      The Environmental Management Act creates offenses related to spills, unlawful discharges and failure to comply. A new Environmental Management Act and the Waste Management Act are expected to be proclaimed in effect in the first half of 2004. Among many changes, under the new act, a risk-based approach will be applied to the permitting process for all businesses and activities and regulations will be developed to increase the use of administrative penalties as a compliance enforcement tool. Various other provincial statutes, such as the Transportation of Dangerous Goods Act deal generally with environmental matters and could also impact our operations in British Columbia.

      Many municipal governments have passed local by-laws, including zoning and health measures by-laws that limit our activities to prescribed sites or activities, control the delivery of solid wastes to prescribed sites, restrict or ban the movement of solid waste into a municipality and regulate discharges into municipal sewers from our solid waste facilities. There has been an increasing trend to mandate and encourage waste reduction and separation at source and waste recycling, and to prohibit or restrict the disposal of certain solid waste, such as yard waste, leaves and tires, in landfills. Such restrictions could affect the ability of our transfer stations and landfills to operate at full capacity.

      The principal laws and regulations that affect our U.S. operations (including those that were sold in 2001 and which could continue to result in liability to us), as well as waste that we export from our Canadian operations to landfills located in the United States are described below.

      The Resource Conservation and Recovery Act of 1976, or RCRA, regulates the generation, treatment, storage, handling, transportation and disposal of solid waste and requires states to develop programs to ensure the safe disposal of solid waste. RCRA divides solid waste into two groups, hazardous and non-hazardous. Wastes classified as hazardous under RCRA are subject to much stricter regulation than wastes classified as non-hazardous.

      The Subtitle D Regulations, which govern solid waste landfills, include location restrictions, facility design standards, operating criteria, closure and post-closure requirements, financial assurance requirements, groundwater monitoring requirements, methane gas emission control requirements, groundwater remediation standards and corrective action requirements. The Subtitle D Regulations also require new landfill sites to meet more stringent liner design criteria to keep leachate out of groundwater. Each state is required to revise its landfill regulations to meet these requirements or these requirements will be automatically imposed by the Environmental Protection Agency, or EPA, on landfill owners and operators in that state. Each state is also required to adopt and implement a permit program or other appropriate system to ensure that landfills in each state comply with the Subtitle D Regulations. Various states in

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      The Federal Water Pollution Control Act of 1972, or Clean Water Act, regulates the discharge of pollutants from a variety of sources into waters of the United States. If run-off from transfer stations or run-off or collected leachate from landfills that we operate or own were discharged into streams, rivers or other surface waters, the Clean Water Act requires us to obtain a discharge permit, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in the discharge. Also, virtually all landfills are required to comply with the EPA’s storm water regulations issued in November 1990, which are designed to prevent contaminated landfill storm water run-off from flowing into surface waters. Various states have adopted regulations that are more stringent than the federal requirements.

      The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, established a regulatory and remedial program intended to provide for the investigation and cleanup of facilities where or from which a release of any hazardous substance into the environment has occurred or is threatened. CERCLA imposes strict joint and several liability for cleanup of facilities on current owners and operators of the site, former owners and operators of the site at the time of the disposal of the hazardous substances, any person who arranges for the transportation, disposal or treatment of the hazardous substances, and the transporters who select the disposal and treatment facilities. CERCLA also imposes liability for the cost of evaluation and remediation of any damage to natural resources.

      The costs of a CERCLA investigation and cleanup can be very substantial. Liability under CERCLA may be based on the existence of small amounts of the more than 700 “hazardous substances” listed by the EPA, many of which can be found in household waste. If we were found to be a responsible party for a CERCLA cleanup, the enforcing agency could hold us, or any other generator, transporter or the owner or operator of the contaminated facility, responsible for all investigative and remedial costs, even if others were also liable. CERCLA gives a responsible party the right to bring a contribution action against other responsible parties for their allocable shares of investigative and remedial costs. Our ability to obtain reimbursement from others for their allocable shares of these costs would be limited by our ability to find other responsible parties and prove the extent of their responsibility and by the financial resources of these other parties.

      The Clean Air Act of 1970, or Clean Air Act, regulates emissions of air pollutants. The EPA has developed standards that apply to certain landfills depending on the date of the landfill construction, the location of the landfill, the materials disposed at the landfill and the volume of the landfill emissions. The EPA has also issued standards regulating the disposal of asbestos containing materials under the Clean Air Act. Air permits to construct may be required for gas collection and flaring systems, and operating permits may be required, depending on the estimated volume of emissions.

      All of the federal statutes described above contain provisions authorizing, under certain circumstances, the institution of lawsuits by private citizens to enforce the provisions of the statutes. In addition to a penalty award to the U.S. government, some of those statutes authorize an award of attorneys’ fees to parties successfully advancing such an action.

      The Occupational Safety and Health Act of 1970 is administered by the Occupational Safety and Health Administration, or OSHA, and in many states by state agencies whose programs have been approved by OSHA. The OSHA Act establishes employer responsibilities for worker health and safety, including the obligation to maintain a workplace free of recognized hazards likely to cause death or serious

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      Certain permits and approvals, as well as certain state and local regulations, may limit a landfill in accepting waste that originates from specified geographic areas, restrict the importation of out-of-state waste or otherwise discriminate against out-of-state waste. These restrictions, generally known as flow control restrictions, are controversial, and some courts have held that some flow control schemes violate constitutional limits on state or local regulation of interstate commerce. From time to time, federal legislation is proposed that would allow some local flow control restrictions. Although no such federal legislation has been enacted to date, if this federal legislation should be enacted in the future, states could act to limit or prohibit the importation of out-of-state waste or direct that waste be handled at specified facilities. These state actions could adversely affect landfill owners and could also result in higher disposal costs for collection operations.

      Even in the absence of federal legislation, certain state and local jurisdictions may seek to enforce flow control restrictions through local legislation or contract. These restrictions could result in the volume of waste going to landfills being reduced in certain areas, which could affect the landfill owner’s ability to operate the landfills at full capacity or reduce the prices that it can charge for landfill disposal services. Any such restrictions may also result in higher disposal costs for collection operations.

      Each state has laws and regulations governing the generation, storage, treatment, handling, transportation and disposal of solid waste, occupational safety and health, water and air pollution and, in most cases, the siting, design, operation, maintenance, closure and post-closure maintenance of landfills and transfer stations. In addition, many states have adopted statutes comparable to, and in some cases more stringent than, CERCLA. These statutes impose requirements for investigation and cleanup of contaminated sites and liability for costs and damages associated with these sites, and some provide for the imposition of liens on property owned by responsible parties. Furthermore, many municipalities also have ordinances, local laws and regulations that affect the operations of solid waste services companies. These include zoning and health measures that limit solid waste management activities to specified sites or activities, flow control provisions that direct the delivery of solid wastes to specific facilities, laws that grant the right to establish franchises for collection services and then put these franchises out for bid, and bans or other restrictions on the movement of solid wastes into a municipality.

      Permits or other land use approvals with respect to a landfill, as well as state or local laws and regulations, may specify the quantity of waste that may be accepted at the landfill during a given time period, or specify the types of waste that may be accepted at the landfill. Once an operating permit for a landfill is obtained, it must generally be renewed periodically.

      There has been an increasing trend at the state and local level in the United States to mandate and encourage waste reduction at the source and waste recycling, and to prohibit or restrict the disposal of certain types of solid wastes, such as yard wastes, leaves and tires, in landfills. The enactment of regulations reducing the volume and types of wastes available for transport to and disposal in landfills could affect the ability of transfer station and landfill owners to operate their sites at full capacity.

      Some state and local authorities enforce certain federal laws in addition to state and local laws and regulations. For example, in some states, RCRA, the Occupational Safety and Health Act, parts of the Clean Air Act and parts of the Clean Water Act are enforced by local or state authorities instead of by the EPA, and in some states those laws are enforced jointly by state or local and federal authorities.

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      The rates that landfill operators may charge are also regulated in many states by public authorities. The adoption of rate regulation or the reduction of current rates in states in which solid waste management companies operate could have an adverse effect on their business, financial condition and results of operations.

Employees

      As of December 31, 2003, we employed approximately 1,395 full-time employees, including approximately 149 persons categorized as professionals or managers, approximately 1,054 employees involved in collection, transfer, disposal and recycling operations, and approximately 192 sales, clerical, data processing or other administrative employees.

      Approximately 512 of our employees are covered by collective bargaining agreements, four of which expire in 2004. We are not aware of any current organized efforts among our employees and believe that relations with our employees are good.

Risk Factors

      Part of our strategy to expand our business and increase our revenue and profitability is to pursue the acquisition of disposal-based and collection assets and businesses. We have identified a number of acquisition candidates, both in the United States and Canada, that we believe are suitable. However, we may not be able to acquire these candidates at prices or on terms and conditions that are favorable to us. Our ability to execute our acquisition strategy also depends upon other factors, including the successful integration of acquired businesses and our ability to effectively compete in the new markets we enter.

      If we are unable to identify suitable acquisition candidates or successfully complete and integrate the acquisitions, we may not realize the expected benefits from our acquisition growth strategy, including any expected benefits from the proposed vertical integration of acquired operations and disposal facilities. Our acquisitions also involve numerous risks, including:

	•	difficulties in the assimilation and integration of the operations, technologies and personnel of the acquired company;
	•	the potential disruption of our ongoing business;
	•	potential loss of employees;
	•	diversion of resources and of our management’s attention away from other business concerns;
	•	the need to obtain third party consents and regulatory approval;
	•	expenses of any undisclosed or potential legal liabilities of the acquired company;
	•	risks of entering markets in which we have no or limited prior experience;
	•	the difficulty of managing the growth of a larger combined company; and
	•	competition for acquisition candidates from other and better capitalized companies, which may increase the cost of acquisitions.

      If we encounter any of these difficulties in completing these acquisitions and integrating acquired businesses, this could adversely affect our results of operations. Many of these risks are particularly acute in the fiscal quarters immediately following the completion of an acquisition because that is when the operations of an acquired business are integrated into our operations. Once integrated, acquired operations may not achieve levels of revenue, profitability or productivity comparable with those that our existing

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      Our completed and pending acquisitions of the assets of Allied’s northern and central Florida operations and our pending acquisition of all of the shares of Florida Recycling, Inc. or Florida Recycling may make it more difficult for us to evaluate and predict our future operating performance. Our historical results of operations do not give effect to the completed and pending acquisitions of the Allied assets and the pending acquisition of the shares of Florida Recycling. Accordingly, the historical financial information in this annual report does not necessarily reflect what our financial position, operating results and cash flows will be in the future as a result of these acquisitions.

      We may not be able to successfully integrate or realize the anticipated benefits of these completed and pending acquisitions and may not be able to maintain or achieve profitability of any of the acquired businesses or overall. Consequently, our historical results of operations may not give you an accurate indication of how we, together with the assets from Allied and Florida Recycling, will perform in the future.

      We entered into an agreement to acquire all of the issued and outstanding shares of Florida Recycling for a purchase price of $98.5 million in cash, subject to certain changes in working capital, and the issuance of 9,250,000 common shares. The transaction is subject to regulatory approval and customary closing conditions, including financing conditions. As part of this transaction, we have advanced deposits of $3.75 million in cash and 1,000,000 in common shares. If the closing is not completed on or before May 1, 2004 we are required to make an additional advance of $1.0 million and the sellers may terminate the agreement, at which point we would forfeit all cash and common share advances.

      The amount required to finance the payment of the cash component of the purchase price for the Florida Recycling acquisition is approximately $98.5 million. We currently intend to raise the necessary funds for this payment through the issuance of additional debt or equity securities. If we are not able to obtain financing for the Florida Recycling acquisition on terms acceptable to us, or if any of the other closing conditions are not met for the acquisition as a result of our default, then we would forfeit the deposit we paid under the acquisition agreement.

      We expect to finance future acquisitions through a combination of seller financing, cash from operations, borrowings under our financing facilities or issuing additional equity or debt securities. Seller financing depends upon the sellers’ willingness to accept our shares as part of the consideration for an acquisition and our willingness to issue our common shares, which will be impacted by the market value of our common shares. If seller financing is not available, we will have to use cash from operations, borrowings under our financing facilities or issue additional equity or debt securities. The use of cash from operations to finance acquisitions may reduce the funds we have available for other corporate purposes. Additional borrowings from our lenders will increase interest expenses and may require us to commit to additional covenants, which further limit our financial and operational flexibility. This could restrict our ability to obtain additional debt on favorable terms, or at all, which would limit our ability to finance our

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      Our ability to remain competitive, sustain our growth and maintain our operations largely depends on our cash flow from operations and our access to capital. We intend to fund our cash needs through our operating cash flow, borrowings and equity issuances. We may require additional equity or debt financing to fund our growth and debt repayment obligations.

      During 2003, we had capital expenditures of $24.4 million. Separately, we have provided for our liabilities related to our closure and post-closure obligations. As we undertake acquisitions, expand our operations, and deplete our landfills, our cash expenditures will increase. As a result, working capital levels may decrease and require financing. In addition, if we must close a landfill sooner than we currently anticipate, or if we reduce our estimate of a landfill’s remaining available air space, we may be required to incur such cash expenditures earlier than originally anticipated. Expenditures for closure and post-closure obligations may increase as a result of any federal, state or local government regulatory action taken to accelerate such expenditures. These factors could substantially increase our cash expenditures and therefore impair our ability to invest in our existing or new facilities.

      We will need to refinance our existing credit facilities and may need to refinance other debt to pay the principal amounts due at maturity. In addition, we may need additional capital to fund future acquisitions and the integration of the businesses that we acquire. Our business may not generate sufficient cash flow, we may not be able to obtain sufficient funds to enable us to pay our debt obligations and capital expenditures or we may not be able to refinance on commercially reasonable terms, if at all.

      While we have in place a due diligence process to review the businesses we acquire, we may not identify or we may underestimate our exposure for certain liabilities of the businesses we acquire. As a result, we may become responsible for liabilities of the businesses we acquire, including liabilities for environmental claims that were not discovered or fully quantified prior to completing the acquisition and for which we are unable to recover from the seller. Although we seek to minimize the impact of potential undiscovered liabilities by structuring acquisitions to minimize liabilities and obtaining indemnities and warranties from the selling party, these methods may not fully protect us from the impact of all undiscovered liabilities. For example, indemnities or warranties are often limited in scope, amount or duration, and may not fully cover the liabilities for which they were intended. In addition, even if these undiscovered liabilities are covered by indemnities or warranties, the selling parties may become insolvent and may be unable to satisfy any claims we may have against them.

      We may incur significant expenses in pursuing an acquisition or developing and expanding disposal sites. These include professional and consulting fees paid to complete our due diligence review of our acquisition targets. We capitalize certain of these expenses, as well as the costs of disposal site development and expansions. If an acquisition is no longer considered probable, or if a disposal site development or expansion is not completed or is determined to be impaired, we would charge against earnings any unamortized capitalized expenditures incurred in connection with that acquisition or disposal site or expansion. In future periods, we may be required to incur charges against earnings in accordance with this policy or due to other events that cause impairments. Depending upon the magnitude of the charges, this could materially reduce our operating results and may negatively impact our covenants to our lenders and to the preferred stockholders of Waste Services, which could adversely affect our liquidity.

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      We have indebtedness under our $220.0 million existing credit facilities, other subordinated promissory notes, capital lease obligations, and cumulative mandatory redeemable preferred stock issued by our U.S. subsidiary, Waste Services, Inc. or Waste Services, to a third party. Our existing credit facilities are comprised of a $195.0 million term loan and a $25.0 million revolving credit facility maturing on December 29, 2004. The existing credit facilities are collateralized by a first priority security interest in substantially all of our current and future acquired assets and that of our subsidiaries.

      The amount of indebtedness owed under our existing credit facilities may have adverse consequences for us, including making us more vulnerable to unfavorable economic conditions and competitive pressures, limiting our ability to borrow additional funds, requiring us to dedicate or reserve a large portion of cash flow from operations to service debt, limiting our ability to plan for or react to changes in our business and industry and placing us at a disadvantage compared to competitors with less debt in relation to cash flow. We expect to refinance our existing credit facilities with other sources of financing, which may include, but not be limited to new senior credit facilities, a subordinated note offering and other debt or equity offerings. If we are unable to access capital or private equity markets in the next twelve months, we would be required to extend the existing credit facilities at an increased interest rate. The existing credit facilities bear interest at 9.0% per annum and have an initial term of 364 days with an extension option. If the option is exercised, the term of the existing credit facilities would extend to July 2005 at a rate of 11.0% per annum. The increased interest expense would have an adverse effect on our profitability. See also Item 5B. “Liquidity and Capital Resources — Existing Credit Facilities.”

      In addition to our indebtedness under the existing credit facilities, in May 2003, Waste Services issued 55,000 shares of its preferred stock to Kelso Investment Associates VI, L.P. and KEP VI, LLC (collectively, Kelso). The preferred stock of Waste Services entitles the holders to a liquidation preference of $1,000 per share and a cumulative cash dividend of 17.75% per annum (compounding and accruing quarterly in arrears). The preferred stock, including all accrued and unpaid dividends, must be redeemed in full by no later than May 6, 2015. We have the option to redeem all or any part of the preferred stock prior to that date, subject to the payment of certain premiums if we elect to redeem the preferred stock prior to May 6, 2006. If we do not exercise our option to redeem all of the preferred stock by May 6, 2009, Kelso may require Waste Services to initiate a sale of Waste Services or its assets on terms acceptable to its board of directors consistent with the exercise by the board members of their fiduciary obligations. If Kelso exercises this right, we may lose control of Waste Services or be forced to sell it at a lower price than we might otherwise expect to receive.

      Certain actions of Waste Services and its affiliates require the prior approval of the holders of a majority of the preferred stock. All of these covenants and restrictions could limit the manner in which we conduct our operations and could adversely affect our ability to raise additional capital. Any failure by us to comply with these covenants and restrictions will, unless waived by Kelso, result in an immediate obligation to redeem all of the then outstanding preferred stock. If such events occurred, we would be required to refinance Waste Services or obtain capital from other sources, including sales of additional debt or equity or the sale of assets, in order to meet our redemption obligations. We may not be successful in obtaining alternative sources of funding to repay this obligation should events of default occur.

      We intend to complete a reorganization by way of a plan of arrangement under the Business Corporations Act (Ontario), which we refer to as our migration transaction. By the terms of the plan of

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      In order to complete the migration transaction, we must seek and obtain the approval of the Superior Court of Justice (Ontario) as well as the approval of a special majority of our shareholders. By the terms of the Business Corporations Act (Ontario), shareholders may have a right to dissent from approving the migration transaction. If shareholders are granted a right to dissent, shareholders who properly dissent in accordance with the Business Corporations Act (Ontario) are entitled to be paid the fair value of their common shares, determined as of the close of business on the date before the resolution approving the migration transaction was adopted. We must also seek and obtain certain regulatory approvals in both the United States and Canada.

      In completing the migration transaction, we expect to incur substantial legal and accounting costs. These costs must be expensed as they are incurred and will have a negative effect on our profitability until the completion of the migration transaction. The migration transaction may also divert management’s attention away from its day-to-day responsibilities.

      By the terms of our agreements with Kelso, relating to the shares of preferred stock of Waste Services, if we do not complete the migration transaction by June 30, 2004, the dividend payable on the preferred stock of Waste Services issued to Kelso will increase by 1% per annum, from 17.75%, for every month that the migration transaction is delayed, up to a maximum increase of an additional 12% per annum. We may also be required to issue to Kelso an additional 250,000 warrants per month for each month that the migration transaction is delayed after June 30, 2004, up to an additional 6,000,000 warrants to purchase common stock of Waste Services, at an exercise price of $0.01 per share. The increase in the dividend payable on the Waste Services preferred stock issued to Kelso would increase the amount to be paid to Kelso on the redemption of the preferred stock and would have a material adverse effect on our financial condition by increasing our liabilities. If the migration transaction is not completed at all, Kelso may also require us to exchange the existing 7,150,000 warrants to purchase common stock of Waste Services, and any of the additional warrants for common stock of Waste Services issued as a result of us completing the migration transaction after June 30, 2004, for warrants to purchase our common shares. The issuance of additional common shares upon the exercise of the warrants would result in a substantial dilution of the existing shareholders’ holdings.

      We have significant financial obligations to pay closure and post-closure care costs for the landfills we currently own and will likely have similar obligations with respect to any landfills that we acquire in the future. We rely on internally performed studies in estimating our obligations for future closure and post-closure care costs. These studies could be inaccurate and this could result in the costs incurred by us for closure and post-closure care being higher than those estimated.

      Actual future costs of construction materials and third party labor could differ from the costs we have used in estimating these closure and post-closure care costs, for example, because of the impact of general economic conditions on the availability of the required materials and labor. Technical designs could be altered due to unexpected operating conditions or legislative or regulatory changes resulting in higher costs than currently estimated.