You should read the following discussion in conjunction with our consolidated financial statements and related notes in our Annual Report on Form 10-K filed with the SEC on March 30, 2009. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause such differences include those described in "Risk Factors" and elsewhere in our Annual Report on Form 10-K for fiscal 2008 filed with the SEC on March 30, 2009. We undertake no obligation to update any of the forward-looking statement. Certain tabular information may not foot due to rounding. Our fiscal year ends on the Saturday closest to December 31. First quarters ended March 28, 2009 and March 22, 2008 represent the 12-week periods ended March 28, 2009 and March 22, 2008, respectively. In addition to historical information, this quarterly report contains forward-looking statements and are based on current management expectations that involve substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "aim," "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "project," "should," "will be," "will continue," "will likely result," "would" and other words and terms of similar meaning in conjunction with a discussion of future or estimated operating or financial performance. You should read statements that contain these words carefully, because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other "forward-looking" information. Forward-looking statements speak only as of the date of this quarterly report. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this quarterly report, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this quarterly report or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Overview

We are a leading provider of industrial and hazardous waste services to small and mid-sized customers who are engaged in vehicle maintenance or manufacturing activities. We offer a broad range of services desired by these customers including parts cleaning solvent management, and the removal and management of a variety of regulated wastes. We operate from a network of 58 branch facilities providing service to customers in 38 states.

Critical Accounting Policies

Critical accounting policies are those that both are important to the accurate portrayal of a company's financial condition and results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

In order to prepare financial statements that conform to accounting principles generally accepted in the United States, commonly referred to as GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.

Management believes that there have been no significant changes during the first fiscal quarter of 2009 to the items that we disclosed as our critical accounting policies and estimates in the section entitled Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended January 3, 2009 filed with the United States Securities and Exchange Commission on March 30, 2009.

We have adopted FAS 157, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. FAS 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

All financial assets and liabilities are measured at fair value on a recurring basis (at least annually). As of the beginning of fiscal year 2009, FAS 157 is applicable for non-financial assets and liabilities.

In December 2007, the FASB issued FASB Statement No. 141R, Business Combinations (Statement 141R) and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment to ARB No. 51 (Statement 160). Statements 141R and 160 require most identifiable assets, liabilities, noncontrolling interests, and goodwill acquired in a business combination to be recorded at "full fair value" and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Both Statements were adopted on January 4, 2009. The adoption of SFAS 141R and 160 did not have a material impact on results of operations.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP. The FASB believes that the GAAP hierarchy should be directed to entities because it is the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of the PCAOB's amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We do not expect the adoption of SFAS 162 to have a material effect on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP FAS 142-3") which amends the list of factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets ("FAS No. 142"). FSP FAS 142-3 applies to intangible assets that are acquired individually or with a group of assets and intangible assets acquired in both business combinations and asset acquisitions. FSP FAS 142-3 removes the provision under FAS No. 142 that requires an entity to consider whether the renewal or extension can be accomplished without substantial cost or material modifications of the existing terms and conditions associated with the asset. Instead, FSP FAS 142-3 requires that an entity consider its own experience in renewing similar arrangements. An entity would consider market participant assumptions regarding renewal if no such relevant experience exists. FSP FAS 142-3 is effective for us beginning January 1, 2009. We have adopted FSP FAS 142-3 and the impact has been immaterial to our consolidated financial statements.

RESULTS OF OPERATIONS

                                                                         First Quarter Ended,
                                                      March 28, 2009         %        March 22, 2008         %

Sales                                                 $        23,756       100.0 %   $        22,997       100.0 %
Cost of sales                                                   7,497        31.6 %             6,285        27.3 %
   Gross profit                                                16,259        68.4 %            16,712        72.7 %
Operating costs                                                12,239        51.5 %            11,516        50.1 %
Selling, general, and administrative expenses                   3,852        16.2 %             6,631        28.8 %
   Operating income (loss)                                        168         0.7 %            (1,435 )      (6.2 )%
Interest expense - net                                              -         0.0 %               353         1.5 %
Income (loss) before income taxes                                 168         0.7 %            (1,788 )      (7.8 )%
Provision for income taxes                                         68         0.3 %               980         4.3 %
Net income (loss)                                                 100         0.4 %            (2,768 )     (12.0 )%
Preferred return                                                    -         0.0 %               339         1.5 %
Net income (loss) available to common stockholders    $           100         0.4 %   $        (3,107 )     (13.5 )%

First quarter ended March 28, 2009 ("first fiscal quarter of 2009") compared to first quarter ended March 22, 2008 ("first fiscal quarter of 2008")

Sales

For the first fiscal quarter of 2009, sales increased $0.8 million, or 3.5%, to $23.8 million from $23.0 million for the first fiscal quarter of 2008. This is less than the sales growth we reported in prior quarters, and reflects the impact on our business of the start of the recession. We have yet to see a clear sign of recovery or bottoming of this revenue trend and it is possible that in future quarters of 2009, we could report modest revenue declines versus year-ago quarters.

At the end of the first fiscal quarter of 2009, we were operating 58 branch locations compared with 54 at the end of the first fiscal quarter of 2008. There were 54 branches that were in operation during both the first fiscal quarter of 2009 and fiscal 2008, which experienced same-branch sales growth of $0.4 million, or 1.6%. Excluding the 4 branches in this group that gave up customers to new branch openings, the remaining 50 branches experienced same-branch sales growth of 3.4%.

Fuel surcharge revenues that we invoice our customers were the same in the first fiscal quarter of 2009 as compared to the first fiscal quarter of 2008.

Cost of sales

For the first fiscal quarter of 2009, total cost of sales increased $1.2 million, or 19.1%, to $7.5 million from $6.3 million for the first fiscal quarter of 2008. We recorded costs of approximately $0.9 million during the first fiscal quarter of 2009 that related to declining crude oil prices. These increased costs reflect additional revaluation of our solvent held at our locations for use in our service programs which must be valued at the lower of cost or market.

Operating costs

For the first fiscal quarter of 2009, operating costs increased $0.7 million, or 6.1%, to $12.2 million from $11.5 million for the first fiscal quarter of 2008. Operating costs, including branch labor and collection truck costs, increased as a percentage of sales as additional branches were established. Diesel fuel and transportation costs decreased both in total as well as a percent of sales as energy prices decreased in the first fiscal quarter of 2009 compared to the first fiscal quarter of 2008.

Selling, general & administrative expenses

For the first fiscal quarter of 2009, selling, general and administrative expenses decreased $2.7 million, or 40.1%, to $3.9 million from $6.6 million for the first fiscal quarter of 2008. The decline was due to $3.2 million of expense for employee stock options which were granted at the time of our initial public offering and vested immediately along with the vesting of certain Key Employee Membership Interest Trust "KEMIT" units in the first fiscal quarter of 2008.

Interest expense - net

For the first fiscal quarter of 2009, interest expense decreased by $0.4 million, or 100.0%, from $0.4 million in the first fiscal quarter of 2008. The decrease was due to our reduction in total debt outstanding substantially due to our initial public offering in March 2008.

Provision for income taxes

In connection with our initial public offering, we changed our parent company legal structure from a limited liability company to a 'C' corporation. As a limited liability company, we were not subject to federal or state corporate income taxes and as such had not incurred any historical taxes. For comparison purposes, we have presented pro forma net income, which reflects income taxes assuming we had been a corporation since the time of our formation and assuming tax rates equal to the rates that would have been in effect had we been required to report tax expense in such years. A one-time charge to earnings of $2.2 million was recorded in the first quarter of fiscal 2008 reflecting the net deferred tax assets and deferred tax liabilities at the time of the reorganization of the LLC to a 'C' corporation.

FINANCIAL CONDITION

Liquidity and Capital Resources

Cash and Cash Equivalents

As of March 28, 2009 and January 3, 2009, cash and cash equivalents were $2.2 million and $0.3 million, respectively. Our primary sources of liquidity are cash flows from operations and funds available to borrow under our bank credit facility.

Our secured bank credit facility provides for borrowings of up to $25.0 million. On March 3, 2008, we amended the credit facility to extend the maturity date of the credit facility to December 31, 2010. Under the terms of the credit facility, interest is payable monthly at the prime rate, unless the total leverage ratio is greater than or equal to 2.75 to 1. The weighted average effective interest rate for amounts outstanding was 3.25% and 6.58% at March 28, 2009 and January 3, 2009, respectively. Amounts borrowed under the credit facility are secured by a security interest in substantially all of our tangible and intangible assets. As of March 28, 2009, we were in compliance with all covenants under the credit facility. As of March 28, 2009 and January 3, 2009, $25.0 million and approximately $24.9 million were available for borrowing under the bank credit facility, respectively.

We believe that our existing cash, cash equivalents and available borrowings will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. We cannot assure you that this will be the case or that our assumptions regarding sales and expenses underlying this belief will be accurate, especially given the current recession. Because some of our services generally lag trends in the general economy, we do not believe that our sales results reflect the complete impact of the U.S. recession on our business, and expect that our sales could be adversely impacted by the recession in fiscal 2009, which in turn could adversely impact our liquidity. If in the future, we require more liquidity than is available to us under our credit facility, we may need to raise additional funds through debt or equity offerings. Adequate funds may not be available when needed or may not be available on terms favorable to us, especially given the current tightening of the financial credit markets. If additional funds are raised by issuing equity securities, dilution to existing stockholders may result. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility, and would also require us to fund additional interest expense. If funding is insufficient at any time in the future, we may be unable to develop or enhance our products or services, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations.

                                                                            First Quarter Ended,
                                                                           (Dollars in thousands)
                                                                     March 28, 2009       March 22, 2008
Net cash provided by (used in):
 Operating activities                                               $          3,142      $        (1,182 )
 Investing activities                                                         (1,272 )             (1,404 )
 Financing activities                                                             34                2,386
Net increase (decrease) in cash and cash equivalents                $          1,904      $          (200 )

• Share-based compensation - The significant decline in share-based compensation positively affected the comparison of our cash flows from operations by approximately $3.1 million compared to the first fiscal quarter of 2008. This was due to the issuance of employee stock options granted at the time of our initial public offering in the first fiscal quarter of 2008 which vested immediately and also related to the vesting of certain Key Employee Membership Interest Trust "KEMIT" units.

• Inventory - The significant decline in inventory positively affected cash flows from operations by $2.6 million compared to the first fiscal quarter of 2008. The change reflects the declining value of our inventories due to the decline in crude oil prices. Although we show a benefit in cash flows from operations from the decline of prices, our gross margins and profits for the quarter were negatively impacted.

• Accounts Receivable - The decline of accounts receivable provided an improvement of $1.8 million in cash flows from operations compared to the first fiscal quarter of 2008. During the first fiscal quarter of 2009 we saw a reduction of our accounts receivables as receipts were higher than sales for the quarter.

Net Cash Used in Investing Activities - The most significant items affecting the comparison of our investing activities for the periods presented are summarized below:

• Capital expenditures - We used $1.3 million during the first fiscal quarter of 2009 for capital expenditures, compared with $1.4 million in first fiscal quarter of 2008. Capital expenditures in 2009 were mostly flat in our core business. During the first fiscal quarter of 2009, approximately $0.7 million of the capital expenditures were for purchases of parts cleaning machines compared to $0.7 million in the first fiscal quarter of 2008. The remaining $0.6 million in the first fiscal quarter of 2009 was for other items including office equipment, leasehold improvements, software and intangible assets compared to $0.7 million in the first fiscal quarter of 2008.

Net Cash Used in Financing Activities - The most significant items affecting the comparison of our financing activities for the periods presented are summarized below:

• Proceeds from issuance of common stock - In March 2008, we raised net proceeds of $33.2 million from an initial public offering and concurrent direct placement. These net proceeds include offering costs of $0.9 million paid prior to fiscal year end 2007 and include approximately $1.0 million of offering costs paid subsequent the initial public offering. The proceeds were used to reduce borrowings under our credit facility which included $10.9 million borrowed in March 2008 used to pay preferred members for an accrued return on preferred units as part of the reorganization. In the first fiscal quarter of 2009 we had no such event.