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

Forward Looking Statements

This Quarterly Report on Form 10-Q and, in particular, this management discussion and analysis contain or incorporate a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"), including statements regarding:

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

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

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

†          the projected development of additional disposal capacity;

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

†          sales and marketing plans;

†          potential business combinations; and

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

In addition, any statements contained in or incorporated by reference into this report that are not statements of historical fact should be considered forward-looking statements. You can identify these forward-looking statements by the use of the words "believes", "expects", "anticipates", "plans", "may", "will", "would", "intends", "estimates" and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates as well as management's beliefs and assumptions, and should be read in conjunction with the Company's consolidated financial statements and notes to consolidated financial statements included in this report. The Company cannot guarantee that the Company actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made. There are a number of important risks and uncertainties that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements. These risks and uncertainties include, without limitation, those detailed in Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended April 30, 2008. The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as otherwise required by law.

Company Overview

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

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

As of November 28, 2008, the Company owned and/or operated 32 solid waste collection operations, 31 transfer stations, 37 recycling facilities, eight Subtitle D landfills, two landfills permitted to accept construction and demolition materials, and one waste-to-energy facility, as well as a 50% interest in a joint venture that manufactures, markets and sells cellulose insulation made from recycled fiber and a 16.2% interest in a company that markets an incentive based recycling service.

Operating Results

For the three months ended October 31, 2008, the Company reported revenues of $157.5 million, an increase of $7.0 million, or 4.7%, from $150.5 million in the quarter ended October 31, 2007. Solid waste revenues, including the Company's major accounts program, increased 2.2%, with 3.3% coming from higher prices, primarily from our collection operations, 1.0% from the rollover effect of a major accounts tuck-in acquisition and the balance from higher landfill volumes, all partially offset by lower collection volumes. FCR recycling revenues increased 14.2%, with 13.0% coming from commodity price increases and 1.2% from higher volumes in the quarter. Operating income for the three months ended October 31, 2008 increased to $16.0 million from $15.8 million for the quarter ended October 31, 2007. Operating income was favorably impacted by higher revenue levels and lower general and administration and depreciation and amortization expenses, which were largely offset by higher cost of operations.

FCR recycling revenues reflect higher commodity prices in the current quarter compared to a year ago. However, beginning in the month of October 2008, average commodity prices began to decline which decreased FCR recycling operating income for the current quarter by approximately $0.4 million. In November 2008, commodity prices declined sharply driven by a severe drop in demand as a result of global economic conditions.

During the second quarter of fiscal year 2008, the Company completed the sale of the Company's Buffalo, N.Y. transfer station, hauling operation and related equipment in the Western region for proceeds of $4.9 million including a note receivable for $2.5 million and net cash proceeds of $2.4 million.The company recorded a loss on disposal of discontinued operations (net of tax) of $0.4 million.

During the fourth quarter of fiscal year 2008, the Company terminated its operation of MTS Environmental, a soils processing operation in the North Eastern region.

The Company completed its divestiture of its FCR Greenville operation in the quarter ended July 31, 2008 for cash proceeds of $0.7 million. For the six months ended October 31, 2008, the company recorded a loss on disposal of discontinued operations (net of tax) of $0.03 million.

The operating results of these operations for the three and six months ended October 31, 2007 and 2008 have been reclassified from continuing to discontinued operations in the accompanying consolidated financial statements.

General

Revenues

The Company's revenues in our North Eastern, South Eastern, Central and Western regions are attributable primarily to fees charged to customers for solid waste disposal and collection, landfill, waste-to-energy, transfer and recycling services. The Company derives a substantial portion of its collection revenues from commercial, industrial and municipal services that are generally performed under service agreements or pursuant to contracts with municipalities. The majority of the Company's residential

collection services are performed on a subscription basis with individual households. Landfill, waste-to-energy facility and transfer customers are charged a tipping fee on a per ton basis for disposing of their solid waste at the Company's disposal facilities and transfer stations. The majority of the Company's disposal and transfer customers are under one to ten year disposal contracts, with most having clauses for annual cost of living increases. Recycling revenues, which are included in FCR recycling and the Central and Western regions, consist of revenues from the sale of recyclable commodities and operations and maintenance contracts of recycling facilities for municipal customers.

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

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

                          Three Months Ended October 31,           Six Months Ended October 31,
                             2007                 2008                2007               2008

Collection            $    69.2      46.0 %  $  70.0    44.5 % $   138.3     46.3 % $ 141.4    44.8 %
Landfill / disposal
facilities            $    29.0      19.2 %  $  30.9    19.6 % $    58.2     19.5 % $  59.9    19.0 %
Transfer              $     7.7       5.1 %  $   8.7     5.5 % $    15.0      5.0 % $  17.9     5.7 %
Recycling             $    44.6      29.7 %  $  47.9    30.4 % $    87.5     29.2 % $  96.2    30.5 %
Total revenues        $   150.5     100.0 %  $ 157.5   100.0 % $   299.0    100.0 % $ 315.4   100.0 %

Collection revenues decreased as a percentage of total revenues in the three and six months ended October 31, 2008 compared to the prior year primarily due to lower volumes, partially offset by price increases and the effect of a major accounts tuck-in acquisition. Landfill/disposal facilities revenues increased as a percentage of total revenues in the quarter ended October 31, 2008 primarily due to volume growth. Landfill/disposal revenues increased in the six months ended October 31, 2008 due to higher volumes and decreased as a percentage of total revenue mainly because of the increase in recycling revenues. Transfer revenues increased as a percentage of total revenues in the three and six months ended October 31, 2008 due to volume growth. Recycling revenues are primarily from recycling facilities in the FCR region. The increase in recycling revenue dollars for the three and six months ended October 31, 2008 is primarily attributable to higher commodity prices and to a lesser extent an increase in commodity volumes. As noted above, beginning in the month of October 2008, FCR recycling revenues were impacted due to lower average commodity prices.

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, the Company amortizes 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. The Company depreciates all fixed and intangible assets, other than goodwill, to a zero net book value, and does not apply a salvage value to any fixed assets.

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

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

Results of Operations



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



                                          Three Months Ended       Six Months Ended
                                             October 31,             October 31,
                                          2007         2008        2007        2008

Revenues                                    100.0 %      100.0 %    100.0 %     100.0 %
Cost of operations                           63.5 %       65.8 %     64.4 %      66.0 %
General and administration                   12.6 %       11.6 %     12.3 %      11.6 %
Depreciation and amortization                13.4 %       12.4 %     13.4 %      12.4 %
Operating income                             10.5 %       10.2 %      9.9 %      10.0 %
Interest expense, net                         7.2 %        6.5 %      7.2 %       6.4 %
Loss from equity method investments           1.0 %        0.7 %      1.2 %       0.7 %
Other income, net                             0.0 %        0.0 %     -0.8 %       0.0 %
Provision (benefit) for income taxes         -0.3 %        1.7 %      0.2 %       1.6 %
Income before discontinued operations         2.6 %        1.3 %      2.1 %       1.3 %

Three months ended October 31, 2008 versus October 31, 2007

Revenues - Revenues increased $7.0 million, or 4.7%, to $157.5 million in the quarter ended October 31, 2008 from $150.5 million in the quarter ended October 31, 2007. Solid waste revenues, including the Company's major accounts program, increased $2.6 million, with $3.5 million coming from price increases in our collection operations. Revenues from the rollover effect of acquisitions, primarily from a major accounts tuck-in acquisition, accounted for $1.2 million of the increase. Although landfill volumes increased year over year, these increases were more than offset by lower collection volumes, which negatively impacted revenue by $2.1 million. FCR recycling revenues increased $4.4 million mainly due to higher commodity prices and volumes.

Cost of operations - Cost of operations increased $8.1 million, or 8.5%, to $103.7 million in the quarter ended October 31, 2008 from $95.6 million in the quarter ended October 31, 2007. Cost of operations as a percentage of revenues increased to 65.8% in the quarter ended October 31, 2008 compared to 63.5% in the quarter ended October 31, 2007. The cost of operations increase is due to an increase in the cost of purchased materials associated with higher FCR recycling revenues, higher fuel costs and property tax expense, due to a property tax refund recognized in the prior year quarter, partially offset by lower direct labor and third party disposal costs. Also included in prior year results was a reduction in cost of operations in the amount of $0.6 million from transactions involving the domestic brokerage and Canadian recycling operations as payments received on the notes receivable in the three months ended October 31, 2007 exceeded the balance of the net assets under contractual obligation.

General and administration - General and administration expenses decreased $0.6 million, or 3.2%, to $18.3 million in the quarter ended October 31, 2008 from $18.9 million in the quarter ended October 31, 2007. General and administration expenses as a percentage of revenues decreased to 11.6% in the quarter ended October 31, 2008 from 12.6% in the quarter ended October 31, 2007. The dollar decrease in general administration expenses year over year is primarily due to lower bad debt expense, due to a recovery in the quarter.

Depreciation and amortization - Depreciation and amortization expense decreased $0.6 million, or 3.0%, to $19.5 million in the quarter ended October 31, 2008 from $20.1 million in the quarter ended October, 31, 2007. Landfill amortization expense decreased by $0.8 million primarily due to lower amortization volumes and rates at our Colebrook closure facility, which closed in the quarter ended October 31, 2008, partially offset by an increase in amortization at our Worcester closure facility due to increased volumes. Depreciation expense increased between periods by $0.2 million. Depreciation and amortization expense as a percentage of revenue decreased to 12.4% for the three months ended October 31, 2008 from 13.4% for the three months ended October 31, 2007.

Operating income - Operating income was $16.0 million for the quarter ended October 31, 2008 compared to $15.8 million for the quarter ended October 31, 2007. As a percentage of revenue, operating income decreased to 10.2% in the quarter ended October 31, 2008 compared to 10.5% for the quarter ended October 31, 2007. Total operating income was favorably impacted by higher revenue levels and lower general and administration and depreciation and amortization expenses, which were largely offset by higher cost of operations as discussed above. Western region operating income increased year over year due to higher landfill volumes, increased collection prices, and lower operating costs. Central region operating income declined year over year due to lower revenues primarily from lower landfill volumes, including the impact of the closure of Colebrook. FCR's recycling operating income decreased year over year as increased revenues from higher commodity prices and volumes were more than offset by an increase in the costs of purchased materials, direct labor and operating costs. Also, included in operating income for the three months ended October 31, 2007 was $0.6 million of income from the transactions involving the domestic brokerage and Canadian recycling operations as discussed above.

Interest expense, net - Net interest expense decreased $0.5 million, or 4.6%, to $10.3 million in the quarter ended October 31, 2008 from $10.8 million in the quarter ended October 31, 2007. This decrease is attributable to lower interest rates on the Company's senior credit facility partially offset by higher net debt levels. Net interest expense, as a percentage of revenues, decreased to 6.5% in the quarter ended October 31, 2008 from 7.2% in the quarter ended October 31, 2007.

Loss from equity method investments - The loss from equity method investments in the quarter ended October 31, 2008 relates to the Company's 50% joint venture interest in GreenFiber, and for the quarter ended October 31, 2007 also included losses from the Company's interest in RecycleRewards. GreenFiber reported a loss for the quarter ended October 31, 2008 of which the Company's share was $1.0 million, compared to a loss of $0.9 million in the quarter ended October 31, 2007. GreenFiber continues to be negatively impacted by the overall slowdown in the housing market. The Company also has an investment in the common stock of RecycleRewards, a company that markets an incentive based recycling service. In April 2008, the Company's voting interest was reduced to 16.2% from 20.5%. Effective April 2008, the Company accounts for its investment in RecycleRewards under the cost method of accounting. Prior to April 2008 the Company accounted for this investment under the equity method of accounting. RecycleRewards reported a loss for the quarter ended October 31, 2007, of which the Company's share was $0.6 million.

Provision (benefit) for income taxes - Provision (benefit) for income taxes increased $3.1 million to $2.7 million for the quarter ended October 31, 2008 from ($0.4) million for the quarter ended October 31, 2007. The effective tax rate increased to 56.7% in the quarter ended October 31, 2008 from (11.8)% in the quarter ended October 31, 2007. The rate variance between the periods is due mainly to the book loss projected for the prior year and the add back of non-deductible items. The high rate for the current quarter results from lower pre-tax income projected for the year and the add back of non-deductible items.

Six Months Ended October 31, 2008 versus October 31, 2007

Revenues - Revenues increased $16.4 million, or 5.5% to $315.4 million in the six months ended October 31, 2008 from $299.0 million in the six months ended October 31, 2007. Solid waste revenues, including the Company's major accounts program, increased $6.0 million, with $6.8 million coming from price increases in our collection operations. Revenues from the rollover effect of acquisitions, primarily from a major accounts tuck-in acquisition, accounted for $2.3 million of the increase. Although landfill volumes increased year over year, these increases were more than offset by lower collection volumes, which negatively impacted revenue by $3.1 million. FCR recycling revenues increased $10.4 million mainly due to higher commodity prices and volumes.

Cost of operations - Cost of operations increased $15.7 million, or 8.2% to $208.2 million in the six months ended October 31, 2008 from $192.5 million in the six months ended October 31, 2007. Cost of operations as a percentage of revenues increased to 66.0% in the six months ended October 31, 2008 from 64.4% in the prior year. Despite lower third party disposal, direct operating and direct labor costs year over year, the cost of operations was up due to an increase in the cost of purchased materials associated with higher FCR recycling revenues, higher fuel costs and property tax expense, due to a property tax refund recognized in the prior year period. Also, included in the prior year was as a reduction in the amount of $1.4 million from transactions involving the domestic brokerage and Canadian recycling operations as payments received on the notes receivable in the six months ended October 31, 2007 exceeded the balance of the net assets under contractual obligation.

General and administration - General and administration expenses were $36.7 million in the six months ended October 31, 2008 compared to $36.8 million in the six months ended October 31, 2007, and decreased as a percentage of revenues to 11.6% in the six months ended October 31, 2008 from 12.3% in

the six months ended October 31, 2007. Higher compensation costs in the six months ended October 31, 2008 were more than offset by lower costs in most other general and administration categories.

Depreciation and amortization - Depreciation and amortization expense decreased $1.0 million, or 2.5%, to $39.0 million in the six months ended October 31, 2008 from $40.0 million in the six months ended October 31, 2007. Landfill amortization expense decreased by $1.0 million primarily due to lower amortization volumes and rates at our Colebrook closure facility, which closed in the quarter ended October 31, 2008, partially offset by an increase in amortization at our Worcester closure facility due to increased volumes. Depreciation expense was relatively consistent between periods. Depreciation and amortization expense as a percentage of revenue decreased to 12.4% for the six months ended October 31, 2008 from 13.4% for the six months ended October 31, 2007.

Operating income - Operating income increased $1.9 million, or 6.4%, to $31.6 million in the six months ended October 31, 2008 from $29.7 million in the six months ended October 31, 2007 and increased slightly as a percentage of revenues to 10.0% in the six months ended October 31, 2008 from 9.9% in the six months ended October 31, 2007. Operating income increased year over year due to higher revenue levels and lower general and administration expenses as a percentage of revenues and lower depreciation and amortization expenses as discussed above. Operating income for the South Eastern region was favorably impacted by $0.8 million from the benefit of a reimbursement from the Town of Southbridge for previously paid and expensed closure and post closure costs at the Southbridge landfill site. Western region operating income increased year over year due to higher landfill volumes, increases in collection revenues, primarily from increased prices, and lower operating costs. Central region operating income declined year over year due to lower revenues primarily due to lower landfill volumes, including the impact of the closure of Colebrook. FCR recycling operating income decreased year over year as increased revenues from higher commodity prices and volumes were more than offset by an increase in the costs of purchased materials, direct labor and operational costs. Also, included in prior year operating income was $1.4 million of income from transactions involving the domestic brokerage and Canadian recycling operations as discussed above.

Interest expense, net - Net interest expense decreased $1.2 million, or 5.6% to $20.2 million in the six months ended October 31, 2008 from $21.4 million in the six months ended October 31, 2007. This decrease is attributable to lower interest rates on the Company's senior credit facility partially offset by higher net debt levels. Net interest expense, as a percentage of revenues, decreased to 6.4% in the six months ended October 31, 2008 from 7.2% in the six months ended October 31, 2007.

Loss from equity method investments - The loss from equity method investments in the six months ended October 31, 2008 relates to the Company's 50% joint venture interest in GreenFiber and for the six months ended October 31, 2007 also included losses from Company's interest in RecycleRewards. GreenFiber reported . . .