Good day ladies and gentlemen, and welcome to the Fourth Quarter 2007 Waste Connections' Earnings Conference Call. My name is Melanie, and I will be your coordinator today. At this time, all participants are in listen-only mode. We will conduct the question-and-answer session at the end of this conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Ron Mittelstaedt. Please proceed.

Okay. Thank you, operator, and good afternoon everyone. I'd like to welcome you to our conference call to discuss the fourth quarter results and to provide you a detailed outlook for the first quarter and the full year 2008. I am joined this afternoon by Steve Bouck, our President; Darrell Chambliss, our COO; Worthing Jackman, our CFO and several other members of our senior management team. We are extremely pleased with our results, both in the fourth quarter and for the full year 2007. Revenue in 2007 grew 16.3% with double-digit internal growth. Reported operating margins exceeded our initial expectations, expanding about 80 basis points in the year, despite the dilutive impact of acquisitions completed during the year, higher fuel cost, particularly in Q4, and incremental costs associated with an unanticipated labor disruption in El Paso that commenced right before Thanksgiving. In addition, we deployed more than $250 million for capital expenditures and acquisitions to build foundation for future growth, exiting the year at more than $1 billion revenue run rate. We also returned $110 million to shareholders through our stock repurchase program, repurchasing over 5% of our outstanding shares. Despite these capital outlays, our leverage ratio improved during the year, due to the continuing strength of our operating result and increased free cash flow. Our strategic positioning and operating strength were also recognized midway during the year, when S&P upgraded our credit to investment grade. Put simply, we enjoyed record results in 2007, our Company's tenth anniversary year, and are well positioned for the next decade. But before we get into the details, let me turn the call over to Worthing for our forward-looking disclaimer and other housekeeping items.

Thank you, Ron. Good afternoon. We must inform everyone listening that certain matters discussed in this conference call are forward-looking statements, intended to qualify for the Safe Harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those currently anticipated. These risks and uncertainties are set forth in the Company's periodic filings with the Securities and Exchange Commission. Shareholders, potential investors, and other participants are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this conference call and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. On the call, we'll refer to operating income before depreciation and amortization and free cash flow, each a non-GAAP measure. Management uses these non-GAAP measures as two of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We define operating income before depreciation and amortization to exclude any gain or loss on disposal of assets. Free cash flow is defined as net cash provided by operating activities plus or minus any changes in book overdraft plus proceeds from the disposal of assets and excess tax benefit associated with equity-based compensation less capital expenditures and distributions to minority interest holders. Where appropriate, we will highlight particular items in certain periods to improve comparability. Finally, we note, that other companies may calculate these non-GAAP measures differently. Now I will turn the call back over to Ron.

Okay. Thank you, Worthing. In 2007, internal growth help differentiate our results from other public players, and this differentiation should continue in 2008. Strong price and positive volume growth have been and should continue to be primary driver to double-digit revenue growth and margin expansion. Margin expansion in our underlying business is usually easy to see through reported results. However, some times, the strength of it is masked by significant increases in fuel costs or the dilutive impact of acquisition. Q4 was the first time in 2007 when both these items influenced reported results in a material way. As we go through today's call, we will highlight the impact these items had on Q4's result and are expected to have during 2008. Looking at the fourth quarter, revenue was $247.7 million, or almost $2 million above the high end of our guidance. Organic growth was 10.3%, broken down as follows: 4.6% price, 3.5% volume and 2.2% for recycling, intermodal and other services. Acquisitions closed during the quarter contributed approximately $1 million to reported revenue in the quarter. As forecasted, core pricing in the quarter was 4%. Surcharges in selected markets due to spikes in costs such as fuel, increased sequentially from about 20 basis points in Q3 to about 60 basis points in Q4. This sequential increase was primarily due to significantly higher fuel cost as we... that we began to incur in Q4. We expect the pricing environment to remain quite stronger in 2008, especially given continuing high fuel prices. We believe our overall price growth should average between 4.5% and 5% for 2008, with Q1 starting out slightly above 5%, due both to the timing early in the year for when we implement a majority for our price increases, and to expected increases in surcharges, as well as…

Thank you, Ron. In the fourth quarter, revenue increased 17.6% to $247.7 million; 10.3% from internal growth and the remainder from net acquisition activity. Operating income, before depreciation and amortization for the quarter, was $72.8 million, or 29.4% of revenue, which compares to $63.6 million, or 30.2% of revenue in the year ago period. On a reported basis, the following line items in the quarter moved a notable amount year-over-year, as a percentage of revenue. Fuel expense increased about 115 basis points to about 6.9% of revenue. We averaged about $3.25 per gallon for diesel during the quarter, which was about $0.80 per gallon above the prior year period. Insurance cost increased about 95 basis points, due to, both, increased medical expense and incidence severity. Cost associated with the El Paso strike accounted for almost 30 basis point of negative impact. On more positive note, third-party transfer and intermodal drayage and pass-through revenue expense declined about 75 basis points, given the shift in revenue mix and strong core price increases. SG&A declined 65 basis points, due primarily to reductions in incentive compensation, professional fees and bad debt accruals; and following disposal costs, declined about 35 basis points. As Ron had noted, acquisitions closed since the year ago period and the two long-term contracts that commenced in early 2007, accounted for about 80 basis points of dilution to operating income before depreciation and amortization as a percentage of revenue in the current year period. In other words, margins, excluding acquisitions and new contracts, would have been flat year-over-year despite the 145 basis point hit for higher fuel and strike cost. For full year '07, operating income before depreciation and amortization was $292.9 million, or 30.6% of revenue, which compares to $247 million, or 30% of revenue in the year ago period.…

Thank you, Worthing. In closing, again, we are extremely pleased with our results in 2007. Revenue increased 16%, operating income rose 21% and earnings per share increased 28% on a reported basis, showing exactly the type of operating and financial leverage we should see with this type of revenue growth. We exceeded, both, the revenue and margin guidance we provided earlier in the year, and which we increased after our Q2 2007 call as well. As we look at 2008, our outlook already assumes a 10% increase in revenue and more than a 20% increase in free cash flow. Acquisition activity during the year could provide additional upside and push revenue growth up a couple more percentage points along with corresponding flow though. The combination of strong pricing and positive volume growth will continue to differentiate our results and should enable us to deliver strong margin expansion. The amount of which will depend on fuel prices and the diluted margin impact of any new acquisitions. We expect to return our free cash flow to our shareholders through the repurchase of more than 6% of outstanding shares, a meaningful increase over 2007's activity while still maintaining a strong credit profile and a flexible capital structure. On a more personal note, I'd like to thank many of our listeners for their kind thoughts and get well wishes as I've been recovering from a broken pelvis and associated internal injuries from a skiing accident over the New Year. I am thrilled to finally be back in the office, even if in a wheelchair for a while. We appreciate your time today, and more importantly, your accommodating us and moving the time slot up for this one call to fit with my recovery process. We'll get back to our regular morning schedule for our Q1 call. With that, I would now like to turn the call over to the operator to open up the lines for your questions. Operator? Question And Answer

Yes sir. [Operator Instructions] And our first question comes from the line of Jagdeep Ghuman with Credit Suisse. Go ahead.

Good afternoon.

Hey, good afternoon.

Couple of quick ones here. On the landfill side, you had mentioned that you guys saw 6% same-store improvement in volumes there. What's driving the volume up-tick there, and can you also comment on the pricing environment for your land process?

Sure. Just as you've seen in some other quarters, we typically have a couple of sites that drive the majority of that kind of increase year-over-year. As you know, we've been ramping up a landfill in the Southern part of Central Valley, California, that's drawing waste for the LA Basin. That continues to show an up-tick. That combined with just increased disposal activity we see in the Northwest region also has helped, up the reported volume.

Okay.

And as we've said before, our tune on pricing hasn't change for landfills. Our strategy is to push pricing in that 3% to 4% range for landfill. We believe that pushing it too much hard could dislocate volume flows.

All right, fair enough. Can you comment just a little bit on the acquisition environment, the focus going forward? Are you guys, kind of, focusing of tuck-ins or can we also think about new markets being entered?

Sure, go ahead.

Yes, I think, number one, nothing's changed. From an acquisition standpoint, we'll certainly continue to have a number of tuck-ins each quarter. And that's just our regular protocol in those markets. And opportunistically, we will usually do one to two, sort of, new market entries per year, as we did this year, one in Eastern Kentucky and one in Southern Colorado. And we would hope to do one to two of those per year. And that provides the platform to build out for the following years with a number of... tuck-in acquisitions. So, it will be the combination.

Okay. Fair enough. That's all I've got.

Okay.

Our next question comes from the line of Scott Levine with J.P. Morgan. Go ahead.

Good afternoon.

Hey Scott.

A quick question on special waste. It sounded like that kind of reversed course, I guess, a little bit. Is there anything to that, as your general quarter-on-quarter noise or your comment on the general trends there?

No. Again, we look at Q4 and Q1; those are typically the seasonally lowest periods. So, when we say down slightly, it's just that down slightly. When we look at... our thoughts on Q1, we're seeing that to be flat to slightly up, potentially in the quarter.

Okay. With regard to diesel fuel, you've talked in the past about maybe hedging exposure. You put on a couple of one quarter hedges. I mean is there anything you guys would look to do, or could think about doing to kind of mitigate your exposure in the franchise markets there? Is kind of like the norm, I guess, kind of going forward?

Yes, I mean, Scott, the issue is, is that... I mean, again, our hedges are not purely a financial hedge, they're really a guaranteed purchase contract. And right now what you'll find... and it's been this way all throughout 2007, and that's one of the reasons we haven't done it... is that on a historical basis, the long-term supply contract market is usually only around a $0.05 to $0.08 above the spot market. And at those levels, we would do that. But right now you're finding an as much as about $0.30 to $0.40 above the spot market. And so that would be a $6 million to $8 million hit to current projection to lock in certainty. Quite honestly at $95 a barrel crude, I'm not thinking there will be an $8 million upward move from that, so it's just not a bet I'm willing to make right now.

Yes we wouldn't want to be locked in high prices and see the economy rollover, and not be able to recoup that.

Understood. One last one on acquisitions, if indeed we do get the bear case, and we are looking at a recession or can you talk a little about your views on how a scenario like that might impact the acquisition pipeline?

It will slow it.

And... okay.

Yes, I mean, it's pure and simple. What happens is, we're already seeing that nominally somewhat is it's like people trying to sell homes in California and Florida right now, they want what they were worth two years ago, not what they're worth today.

Understood, thank you.

Our next question comes from the line of Leone Young with Citigroup. Go ahead.

Yes, good evening. And first of all, Ron, I think I speak for a lot of people when I am saying we're very glad to hear you are on the mend.

Thanks, Leone, I appreciate it.

Have you seen any change at all in your commercial business, any sign of a weakened consumer or sluggish economy there?

No, not on the commercial side, Leone, which as you know for us is a front-load and the roll-off... the front-load and the rear-load commercial business to restaurants, hotels, strip malls, that kind of thing. No, we have not.

And a little bit more on the acquisitions. You had mentioned that in the event the economy rolls over they can slow. But in general, how would you characterize the activity now, say, versus two years ago?

The activity level is actually fairly high, Leone. Our guys are as busy, or actually busier than I have seen in quite some time. We just got to do a good job of being very discerning right now, because you do have somewhat of the phenomenon I was mentioning to Scott where people want what their business was worth pre run-up of fuel and other costs. And we just have to do our job in vetting through that. And so you might see a little lower success ratio, but we're very active right now. And I wouldn't expect any material change from sort of our last few years' acquisition activity.

Terrific. Thank you.

Our next question comes from the line of Corey Greendale with First Analysis. Go ahead.

Hey, good afternoon.

Hey Corey.

Hey Corey.

A couple of questions. Ron, can you speak to what you are seeing in non-res construction through your markets?

Yes, I mean overall, Corey, we are... I am stumbling around, because the answer is different by geographies, is the short answer. As you saw what we saw in the fourth quarter and what we've actually seen in January, because I'm sitting here and looking at January, is that our pulls are effectively flat to up across the Company, and our revenue per pull is up. So, actual volume and revenue growth in the roll-off system is positive in January and was in the fourth quarter. That's the amalgamation of a number of markets. So, some places we are seeing non-residential construction weaken, because there is associated residential weakness in those markets and it's spilling over. And in other areas, like lot of parts of the Midwest and the Southeast and the Southwest, residential construction is staying strong as is commercial. So, they're pretty much pushing each other and offsetting each other right now. Overall, I would tell you that things... we definitely saw a move throughout Q4 of a softening, not huge but definitely noticeable relative to Q2 and Q3, which is I think what everybody has been saying occurred in Q4.

Okay. And actually, can I ask you for some historical perspective, just looking back to the last downturn. There was a period through the first few quarters of '03, when volumes went negative. Do you think is... are we still, given that this industry can lag somewhat, is that still a risk given the way things are going? Or do you think something is different this time around that we shouldn't see volumes going negative, assuming things don't continue to get worse from where they are at [ph]?

Specific to us or the industry?

For you guys.

Okay, because as you know, a number of the others have already reported negative. So, clearly, there is an impact and more of a correlation to real-time results. We're going to lag the others, and we're going to lag the downturn, Corey; and we did last time. And that's because of the amount of business we have in that exclusive area relative to the competitor, gives us somewhat of a buffer in both circumstances. Do I... is there a risk of volume going from the 1% positive we've guided, excluding municipal contract to a negative? Sure there is. I mean, do I think that risk is high? No, I do not; knowing what I'm seeing right now. I do not believe things decline as much in Q4 as they did the last time we started to go into this, or as quickly. So I don't believe it will be as deep. So could it be closer to zero than one? That possibility exists, but I don't really see it going negative right now.

Corey, I think the encouraging news as you look at the other folks in the industry is that they're still pushing through margin expansion and improvements in free cash flow because pricing is holding up.

Yes.

So, could we go negative on volume? Sure we could. You could see that at the end of this year or early next year. But our outlook on prices continue to strengthen in that 4% to 5% area, which means while the volume is up 1% or down 1%, strengthened prices is that the focus should be on.

And I appreciate it. And, Ron, glad to hear you're doing better. Thanks.

Thanks, Corey.

Our next question comes from the line Bill Fisher with Raymond James. Go ahead.

Hi good afternoon.

Hi Bill.

Hi Bill.

Hey just back on the landfill volumes, the 6% you had in Q4, could you just maybe give some color on some sites you might have in '08 that might, kind of, keep that momentum going or... like you mentioned Hopkins, or are there any other permanent expansions you might get?

Sure well I just... I'd say just, anecdotally, first, on the tonnage. You start with January, January is close, as Ron said; tonnage on the same store basis is actually up a little over 10%, that's excluding acquisitions. And, again, the ones you have seen contribute to that continues to be the lower part of Central Valley, California. We actually had some good weather and some storm work clean-up in the Plains States and Oklahoma City areas. So, you've seen pick-ups there; and some parts of the Northwest, depending upon when the special waste is flowing through. So, the volume strength has continued as we are now one-third into Q1. When it comes to expansions, as you know, we are looking to do an expansion at Harper County outside of Wichita. But that one is still in the process. And if we are successful on that, that should be in '08 which allow us to increase the flow within that cycle.

Okay, great. And then just actually on your... you mentioned about the 100 basis points on margins, taken out fuel, if you will, in '08, would the bulk of that be kind of pricing outstripping cost inflation or just some other... can you touch on some of the productivity things you might get to drive that?

Yes, I think it's... the primary drivers is strength in pricing, Bill.

Okay, perfect. All right, thank you.

Our next question comes from the line of Jonathan Ellis with Merrill Lynch. Go ahead.

Thanks, good evening guys.

Good evening.

I want to talk a little bit about revenues per pull in the roll-off business. You mentioned that it can go up 6%, which is fairly comparable to last year. I am curious though what was the contribution to that from weight versus price? And did that mix change from the prior quarter at all?

What was the contribution... I am sorry, Jonathan, of weight versus price?

Yes, weight versus price in that revenue per pull number?

Don't have it broken down. Only have it on a total basis, so I would not be able to tell you. My gut tells me that it's dramatically nine-tenth price versus weight, but I do not have that.

And you don't think that has changed much since, since the third quarter?

I do not think it has changed materially, because you've got to remember, Jon, that almost 85% of our pulls or more are non-construction oriented. So, I don't think there has been a material change there.

We've had a slight up-tick. And as Ron said the number of pulls in January is up year-over-year. We've also seen revenue per pull sequentially go up from what the average was in Q4 to January position, that we put a lot of our price increases in place in early part of the year. And so revenue per pull was actually up about 9% in January.

Okay, great. And just in terms of the... if I did my math correctly... in the base business in the fourth quarter, looks like volumes were up about 0.9%. And if I went back to guidance from the third quarter call, I think, it was calling for about 1.2% growth... excuse me, growth in the fourth quarter on base business volumes. I'm just wondering is that deceleration relative to the original guidance a function of roll-off business or where is that volume weakness coming from... from third quarter guidance?

Around here.

That sums it up, Jon. And tell me when it rained and you got your answer.

Okay, all right, great. And then just finally on the guidance for 2008. Could you provide a little more detail on price versus volume for the competitive versus franchise markets?

Yes it's about... it's about... no matter what we saw in '07 in that; the franchise business is averaging in that 3.5% to say 4% range. And we are getting somewhere in the 6% plus range within competitive markets.

And that's on the price side, Jon. And on the volume side, we are getting a greater contribution, probably actually close to approaching 2% on the exclusive market and 0% to 0.5% or so in the competitive market.

Okay, great. And Ron, good luck with the rest of recovery.

Thanks Jonathan.

Our next question comes from the line of Brian Butler with FBR. Go ahead.

Thanks. Good evening.

Hey Bryan.

Just wanted to... most of my questions have been answered. But just want to follow up on the intermodal business. Is there any contract opportunities, kind of, coming up in 2008 that could be accretive for you guys? And also just how is that business holding up in a weaker economic, kind of, environment?

Yes, that business actually saw its first year-over-year increase since we bought it. It got out of block strong in its first year then it was flat to down. And then last year it was actually up year-over-year as we finished the year. And it's budgeting... some continued slight positive up-ticks in the first part of this year. It got hit a little bit with some slides in the bad weather in January. Some trains didn't run for a couple of days, but again the container count seems to be holding up in this economy so far. With regards to bids, there are some bids going on in that marketplace; nothing that would impact '08; these are all things that are in the preliminary stages for future years.

Would they possibly going to be impacting '09 or is it further out than that?

Yes, Jon, most of the... excuse me, Brian, most of the large bids that would be impactful and noticeable come up for bidding in the '09 to '10 timeframe, but they really don't begin until the latter part of '10 through actually early 2012. So, we're re a little for large ones. Now there are a couple that we will be bidding this year that if successful could contribute in '09 but not '08.

Okay, great. Thank you very much.

[Operator Instructions] And our next question comes from the line of Nicole Dobroski [ph] with Deutsche Bank. Go ahead.

Hi guys.

Hello.

Quick question for you on your free cash flow guidance. It looks like... well, operating cash flow, sorry, it looks like you're guiding for about $250 million in 2008 which is $30 million higher than you saw in 2007. What is really driving this?

Well I mean, it's a number of things... it's first of all, higher top-line, right. Secondly, you've got increase in deferred taxes, meaning lowering of cash taxes. Cash taxes are likely going to be down year-over-year, looking at 2008 versus 2007. And I think you'll see also some improvement in DSOs that we've not factored into our guidance that could provide additional upside. DSOs were, essentially, about flat year-over-year. And so far we're off to a good start in our first month of '08.

Okay. Thank you.

Thank you.

And I am showing no further questions at this time. I'd like to turn the call back over to management for any closing remarks. Please proceed gentlemen.

Okay, thank you operator. Well, if there are no further questions, on behalf of our entire management team, we appreciate your listening and interest in the call today. Worthing, Steve and I will be in the office for the remainder of the day as well as tomorrow. If there are any direct questions that we did not cover that we are allowed to answer under, either, Regulation FD or Regulation G, we would be happy to do so. Thank you and we look forward to speaking with you on the next call or earlier at up coming investor conferences. Thank you very much.

Ladies and gentlemen thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.