WASTE INDUSTRIES INC, S-1/A, 1997-05-28

WASTE INDUSTRIES INC
S-1/A, 1997-05-28
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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1997

REGISTRATION NO. 333-25631
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 4953 56-0954929
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

3949 BROWNING PLACE
RALEIGH, NORTH CAROLINA 27609
(919) 782-0095
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LONNIE C. POOLE, JR.
CHAIRMAN, CHIEF EXECUTIVE OFFICER
ROBERT H. HALL
CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
WASTE INDUSTRIES, INC.
3949 BROWNING PLACE
RALEIGH, NORTH CAROLINA 27609
(919) 782-0095
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
LARRY E. ROBBINS, ESQ. STEPHEN A. RIDDICK, ESQ.
DONALD R. REYNOLDS, ESQ. PIPER & MARBURY L.L.P.
WYRICK ROBBINS YATES & PONTON LLP CHARLES CENTER SOUTH
4101 LAKE BOONE TRAIL, SUITE 300 36 SOUTH CHARLES STREET
RALEIGH, NORTH CAROLINA 27607 BALTIMORE, MARYLAND 21201
(919) 781-4000 (410) 539-2530
FAX (919) 781-4865 FAX (410)576-5051
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER-
BE REGISTERED REGISTERED (1) PER SHARE (2) ING PRICE (2)
<S> <C> <C> <C>
Common Stock,
no par value per share 2,472,500 shares $12.50 $30,906,250
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO REGISTRATION
BE REGISTERED FEE (3)
<S> <C>
Common Stock,
no par value per share $9,366
</TABLE>
(1)Includes 322,500 shares issuable upon exercise of an option granted to the
Underwriters solely to cover over-allotments, if any.
(2)Estimated solely for the purpose of calculating the registration fee.
(3)Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION
, 1997

2,150,000 SHARES

(Waste Logo appears here)

WASTE INDUSTRIES, INC.
COMMON STOCK
Of the 2,150,000 shares of Common Stock offered hereby, 1,605,200 are being
sold by Waste Industries, Inc. ("Waste Industries" or the "Company") and 544,800
by certain shareholders of the Company ("Selling Shareholders"). The Company
will not receive any proceeds from the sale of shares by the Selling
Shareholders. See "Principal and Selling Shareholders". Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$10.50 and $12.50 per share. See "Underwriting" for the factors to be considered
in determining the initial public offering price. Application has been made for
quotation of the Common Stock on the Nasdaq National Market under the symbol
"WWIN".
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
Per Share............................................. $ $ $
Total(2).............................................. $ $ $
<CAPTION>
PROCEEDS TO
SELLING
SHAREHOLDERS
<S> <C>
Per Share............................................. $
Total(2).............................................. $
</TABLE>
(1) Before deducting expenses of the offering, payable by the Company, estimated
at $450,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
322,500 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent the option is exercised, the Underwriters will offer
the additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about ,
1997.
<TABLE>
<S> <C>
ALEX. BROWN & SONS DEUTSCHE MORGAN GRENFELL
INCORPORATED
</TABLE>
THE DATE OF THIS PROSPECTUS IS , 1997.

<PAGE>
WASTE INDUSTRIES, INC.

(Map of North Carolina, South Carolina and Virginia highlighting each of
the Company's branch locations appears here)

The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by its independent auditors
and with quarterly reports containing unaudited interim consolidated financial
information for each of the first three quarters of each year.
CERTAIN PERSONS PARTICIPATING IN THE COMMON STOCK OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE COMMON STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
2

<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION CONTAINED IN THIS PROSPECTUS: (I) GIVES EFFECT TO THE 1-FOR-2.5
REVERSE STOCK SPLIT AND THE AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO PROVIDE THAT ALL SHARES OF COMMON STOCK HAVE VOTING RIGHTS, EACH TO BE
EFFECTIVE PRIOR TO CONSUMMATION OF THIS OFFERING; AND (II) ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. SEE "DESCRIPTION OF
CAPITAL STOCK" AND "UNDERWRITING". EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES,
REFERENCES TO THE TERMS "WASTE INDUSTRIES" AND THE "COMPANY" REFER TO WASTE
INDUSTRIES, INC. AND ITS SUBSIDIARIES.
THE COMPANY

The Company's principal operations as of April 30, 1997 consisted of 19
branch collection operations, 11 transfer stations and four recycling processing
facilities that serve approximately 150,000 municipal, residential, commercial
and industrial locations. Collection operations include front-end and roll-off
collection for commercial and industrial accounts and curbside collection for
residential customers. Transfer stations are located strategically throughout
the served market area to allow the Company to consolidate its waste stream to
gain more favorable disposal rates. Recycling processing facilities receive
almost all forms of recyclable materials from the Company's approximately 100
drop-off centers in 15 counties. Approximately 3% of the Company's waste stream
is recycled, which accounted for approximately 2% of total revenues in 1996. In
addition to these services, the Company provides certain ancillary services to
customers to complement its primary operations, including the operation of
approximately 100 convenience sites, originally developed by the Company to
consolidate waste in rural areas. The Company has acquired 19 solid waste
collection operations since 1990. The Company does not currently own or operate
any landfills; however, future expansion may include the acquisition or
development of one or more landfills either independently or in partnership with
an experienced landfill operator.

The Company's objective is to build the premier solid waste services
company in the Southeastern U.S. by expanding its operations and capitalizing on
its strong market presence. The Company's strategy for achieving this objective
is: (i) to generate internal growth by adding customers and services to its
existing operations; (ii) to acquire solid waste collection companies, customers
and, under appropriate circumstances, landfills in existing and new areas of its
target market; and (iii) to increase operating efficiencies and enhance
profitability in its existing and acquired operations. From December 31, 1992
through December 31, 1996, Company revenues, operating income and income before
income taxes have increased at compounded annual rates of 21.2%, 27.7% and
38.0%, respectively.

The Company operates on a decentralized management basis, with each branch
office having service and decision-making authority. This allows the Company the
flexibility and speed to respond to customer needs, to capitalize on market
opportunities and to identify potential acquisition targets. In addition,
decentralization and a well-developed network of branch offices allow the
Company to operate as a local service provider when negotiating contracts or
developing new business. Branch offices utilize support services for critical
operating functions and the branches are connected to a centralized management
information system utilizing satellite technology.
Members of the senior management team founded Waste Industries in 1970 and
are recognized for their leadership roles throughout the solid waste management
industry and its trade organizations. The Company's management team collectively
has over 240 years of experience in the solid waste industry and over 140 years
with the Company. The Company is a North Carolina corporation with its principal
executive offices located at 3949 Browning Place, Raleigh, North Carolina 27609,
and its telephone number at that location is (919) 782-0095.
RECENT ACQUISITION DEVELOPMENTS

On May 15, 1997, the Company purchased equipment and customer contracts
related to the commercial, industrial and residential solid waste collection
business of two subsidiaries of Waste Management, Inc. in and around
Chattanooga, Tennessee. The purchase price for these assets was $11.2 million in
cash. This acquisition enables the Company to expand its operations into
Tennessee, Georgia and Alabama.

<PAGE>
On April 30, 1997, the Company purchased equipment and customer contracts
related to the solid waste collection business of Browning-Ferris Industries of
South Atlantic, Inc. ("BFISA") in and around Charleston, South Carolina. The
purchase price for these assets was approximately $4.8 million. This acquisition
enables the Company to expand its operations into a new South Carolina market.
On March 21, 1997, the Company purchased equipment and customer contracts
related to the residential solid waste collection business of BFISA in and
around Raleigh and Durham, North Carolina. The purchase price for these assets
was approximately $782,000. This "tuck-in" acquisition increases the Company's
route density in Wake, Durham, Orange, Johnston, Franklin and Chatham counties.
The Charleston and Chattanooga acquisitions are consistent with the
Company's regional operating strategy. These acquisitions broaden the Company's
base from which it can grow both internally and through additional acquisitions.
The Company is also currently examining other opportunities to expand its
presence in the Southeastern U.S. through acquisitions of solid waste services
operations in Mississippi, North Carolina, South Carolina, Tennessee and
Virginia.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company............................... 1,605,200 shares
Common Stock offered by the Selling Shareholders.................. 544,800 shares
Common Stock to be outstanding after this offering................ 11,205,357 shares(1)
Use of proceeds................................................... Repay revolving bank debt and for general corporate
purposes, including possible acquisitions
Nasdaq National Market Symbol..................................... WWIN
</TABLE>

(1) Excludes 526,000 shares issuable upon the exercise of stock options
outstanding as of March 31, 1997 at a weighted average exercise price of
$5.10 per share. See "Management -- Executive Compensation; Stock Options".
4

<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) MARCH 31,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $43,074 $50,598 $66,837 $82,688 $92,887 $20,566 $24,124
Cost of operations............................. 23,770 27,869 37,853 50,395 59,337 13,105 14,838
Selling, general and administrative............ 10,563 12,102 15,143 15,467 16,329 3,606 4,588
Depreciation and amortization.................. 5,450 6,150 7,615 8,217 8,471 1,982 2,319
Operating income............................... 3,291 4,477 6,226 8,609 8,750 1,873 2,379
Interest expense............................... (1,536) (1,625) (1,920) (2,122) (2,395) (497) (610)
Other income................................... 186 171 287 473 694 172 152
Income before income taxes..................... 1,941 3,023 4,593 6,960 7,049 1,548 1,921
Pro forma income taxes(2)...................... 770 1,230 1,865 2,790 2,845 625 775
Pro forma net income(2)........................ $ 1,171 $ 1,793 $ 2,728 $ 4,170 $ 4,204 $ 923 $ 1,146
Pro forma earnings per share(2)(3)............. $ 0.12 $ 0.19 $ 0.28 $ 0.43 $ 0.43 $ 0.10 $ 0.12
Weighted average shares outstanding............ 9,579 9,566 9,596 9,599 9,821 9,605 9,821
OTHER OPERATING DATA:
EBITDA(4)...................................... $ 8,927 $10,798 $14,128 $17,299 $17,915 $ 4,027 $ 4,850
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
PRO FORMA
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................................................... $ 578 $ 578 $ 578
Working capital................................................................... 1,414 834 834
Total assets...................................................................... 60,661 61,561 61,561
Long-term debt, net of current maturities......................................... 34,853 34,853 18,135
Shareholders' equity.............................................................. 16,085 10,005 26,723
</TABLE>

(1) Effective April 1, 1996, Waste Industries completed a corporate
reorganization in which Waste Enterprises, Inc., Waste Industries East,
Inc., Waste Industries South, Inc., Waste Industries West, Inc., KABCO,
Inc., Conway 378, Inc. and AmLease, Inc. were merged with and into Waste
Industries. Simultaneously, certain real estate properties previously leased
to Waste Industries by Property Management Group, a partnership of certain
shareholders of Waste Industries, were transferred to Waste Industries.
These transactions were accounted for at historical cost in a manner similar
to that in pooling of interests accounting. Accordingly, Waste Industries'
financial statements have been restated to include these accounts and
transactions for all periods presented.
(2) For each of the fiscal years presented, the Company was an S Corporation
and, accordingly, was not subject to federal and certain state corporate
income taxes. The pro forma information has been computed as if the Company
were subject to federal and all applicable state corporate income taxes for
each of the periods presented assuming the tax rate that would have applied
had the Company been taxed as a C Corporation. See "Dividend Policy and
Prior S Corporation Status" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

(3) Supplementary net income per share, assuming that the net proceeds to the
Company from this offering (based on the public offering price per share of
$11.50) were used to repay revolving bank debt and for general corporate
purposes, was $0.48 and $0.13 for the year ended December 31, 1996 and for
three months ended March 31, 1997, respectively. Such supplementary net
income per share data assume the transaction occurred at the beginning of
the respective period. Weighted average shares outstanding for purposes of
this computation is 9,820,853.

(4) EBITDA is defined as income before income taxes plus interest expense and
depreciation and amortization. While EBITDA should not be considered an
alternative to (i) operating income or net income (as determined in
accordance with generally accepted accounting principles ("GAAP")) as an
indicator of the Company's operating performance or (ii) cash flows from
operating activities (as determined in accordance with GAAP) as a measure of
operating performance or liquidity, the Company has included EBITDA data
(which are not a measure of financial performance under GAAP) because it
understands that such data are commonly used by certain investors to
evaluate a company's performance in the solid waste industry. Furthermore,
the Company believes that EBITDA data are relevant to an understanding of
the Company's performance because they reflect the Company's ability to
generate cash flows sufficient to satisfy its debt service, capital
expenditure and working capital requirements. However, funds depicted by the
EBITDA measure may not be available for debt service, capital expenditures
or working capital due to legal or functional requirements to conserve funds
or other commitments or uncertainties. EBITDA, as measured by the Company,
might not be comparable to similarly titled measures reported by other
companies. For more information about the Company's cash flows, see page
F-5.

(5) Gives effect to the recognition of deferred tax assets of $900,000 and the
assumption by the Company of a net deferred tax liability of $4.6 million as
a result of the Company terminating its S Corporation election on May 9,
1997 and the S Corporation Distribution of approximately $1.48 million. See
"Dividend Policy and Prior S Corporation Status".

(6) Adjusted to reflect the sale of the 1,605,200 shares offered by the Company
hereby at the assumed initial public offering price of $11.50 per share and
the application of the net proceeds therefrom as described in "Use of
Proceeds".

<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS.
ABILITY TO MANAGE GROWTH. The Company's goal is to increase the scale of
its operations through internal growth and through the acquisition of other
solid waste businesses. Consequently, the Company may experience periods of
rapid growth with significantly increased staffing requirements. Such growth, if
it were to occur, could place a significant strain on the Company's management
and on its operational, financial and other resources. The Company's ability to
maintain and manage its growth effectively will require it to expand its
management information systems capabilities and improve its operational and
financial systems and controls. Moreover, the Company will need to attract,
train, motivate, retain and manage its senior managers, technical professionals
and other employees. Any failure to expand its management information systems
capabilities and its operational and financial systems and controls or to
recruit appropriate additional personnel in an efficient manner at a pace
consistent with any business growth the Company may experience would have a
material adverse effect on the Company's business, financial condition and
results of operations.

AVAILABILITY AND INTEGRATION OF ACQUISITION TARGETS. Waste Industries'
strategy envisions that a substantial part of its future growth will come from
acquiring and integrating independent solid waste collection, transfer and
disposal operations. There can be no assurance that the Company will be able to
identify suitable acquisition candidates or, if identified, negotiate
successfully their acquisition. The Company is not currently a party to any
letters of intent with respect to any other material pending acquisitions.
Failure by the Company to implement successfully its acquisition strategy will
limit the Company's growth potential. See "Business -- Strategy" and
" -- Acquisition Program".

The recent consolidation and integration activity in the solid waste
industry, as well as the difficulties, uncertainties and expenses relating to
the development and permitting of solid waste landfills and transfer stations,
has increased competition for the acquisition of existing solid waste
collection, transfer and disposal operations. Increased competition for
acquisition candidates may result in fewer acquisition opportunities being made
available to the Company as well as less advantageous acquisition terms,
including increased purchase prices. These circumstances may increase
acquisition costs to levels beyond the Company's financial capability or pricing
parameters or which, as to acquisitions made by the Company, may have an adverse
effect on the Company's results of operations. Many of the Company's competitors
for acquisitions are larger, better known companies with significantly greater
resources than the Company. The Company also believes that a significant factor
in its ability to consummate acquisitions after completion of this offering will
be the relative attractiveness of shares of the Company's Common Stock as an
investment instrument to potential acquisition candidates. This attractiveness
may, in large part, be dependent upon the relative market price and capital
appreciation prospects of the Common Stock compared to the equity securities of
the Company's competitors.
COMMODITY RISK UPON RESALE OF RECYCLABLES. One of the components of the
Company's internal growth strategy is to provide recycling services to
customers. The resale prices of, and demand for, recyclable commodities,
particularly wastepaper, can be volatile and subject to changing market
conditions. Accordingly, the Company's results of operations will be affected,
and may be affected materially, by changing resale prices or demand for certain
recyclable commodities, particularly wastepaper. These changes may also
contribute to significant variability in the Company's period-to-period results
of operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations; General".
POTENTIAL INABILITY TO FINANCE THE COMPANY'S POTENTIAL GROWTH. Waste
Industries anticipates that any future business acquisitions will be financed
principally through the issuance of shares of the Company's Common Stock and/or
the payment of cash, and possibly through the assumption of debt of the acquired
businesses. If acquisition candidates are unwilling to accept shares of the
Company's Common Stock as part of the consideration for the sale of their
businesses, the Company would be required to utilize more of its available cash
resources or borrowings under its credit facilities in order to effect such
acquisitions. To the extent that then available sources are insufficient to fund
such requirements, the Company will require additional equity and/or debt
financing in order to provide the cash to effect such acquisitions.
Additionally, growth through newly developed or acquired landfills or transfer
stations, as well as the ongoing maintenance of such landfills or transfer
stations, will require substantial capital expenditures. There can be no
assurance that the Company will have sufficient existing capital resources or
will be able to raise sufficient additional capital resources on terms
satisfactory to the Company, if at all, in order to meet any or all of the
foregoing capital requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
6

<PAGE>
HIGHLY COMPETITIVE INDUSTRY. The solid waste services industry is highly
competitive, very fragmented and requires substantial labor and capital
resources. Each of the markets in which the Company competes or will likely
compete is served by one or more of the large national solid waste companies, as
well as numerous regional and local solid waste companies of varying sizes and
resources. The Company also competes with those counties, municipalities, and
solid waste districts that maintain their own waste collection and disposal
operations. These counties, municipalities, and solid waste districts may have
financial advantages due to the availability to them of user fees, similar
charges or tax revenues and the greater availability to them of tax-exempt
financing. Intense competition exists not only to provide services to customers
but also to acquire other businesses within each market. The national solid
waste companies and some of the large regional companies have significantly
greater financial and other resources than the Company. From time to time, these
or other competitors may reduce the price of their services in an effort to
expand market share or to win a competitively bid municipal contract. These
practices may either require the Company to reduce the pricing of its services
or result in the Company's loss of business. The Company provides approximately
23% of its collection services under municipal contracts. As is generally the
case in the industry, these contracts are subject to periodic competitive
bidding. There can be no assurance that the Company will be the successful
bidder to obtain or retain these contracts. The Company's inability to compete
with larger and better capitalized companies, or to replace a significant number
of municipal contracts lost through the competitive bidding process with
comparable contracts or other revenue sources within a reasonable time period,
could have a material adverse effect on the Company's results of operations. See
"Business -- Competition".
GEOGRAPHIC CONCENTRATION. The Company's operations and customers are
currently located in North Carolina, South Carolina and Virginia. Therefore, the
Company's results of operations are susceptible to downturns in the general
economy in this geographic region. There can be no assurance that the Company
will be able to complete a sufficient number of acquisitions in other markets to
achieve geographic diversification. See "Business -- Acquisition Program".
SEASONALITY OF BUSINESS. The Company's results of operations tend to vary
seasonally, with the first quarter of the year typically generating the least
amount of revenues, and with revenues higher in the second and third quarter,
followed by a decline in the fourth quarter. This seasonality reflects the lower
volume of waste generated and decreased revenues from project-based and other
integrated waste services during the fall and winter months, as well as the
operating difficulties experienced from inclement weather experienced during the
winter. Certain operating and other fixed costs remain relatively constant
throughout the calendar year, resulting in a similar seasonality of operating
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations; Seasonality" and " -- Results of
Operations; Quarterly Results".
INCURRENCE OF CHARGES RELATED TO CAPITALIZED EXPENDITURES. In accordance
with generally accepted accounting principles, the Company capitalizes certain
expenditures and advances relating to acquisitions, pending acquisitions and
landfill development projects. As of March 31, 1997, the Company had capitalized
$107,037 of such expenses. Indirect acquisition costs, such as executive
salaries, general corporate overhead, public affairs and other corporate
services, are expensed as incurred. The Company's policy is to charge against
earnings any unamortized capitalized expenditures and advances (net of any
portion thereof that the Company estimates will be recoverable, through sale or
otherwise) relating to any operation that is permanently shut down, any pending
acquisition that is not consummated and any landfill development project that is
not expected to be successfully completed. Therefore, the Company may be
required to incur a charge against earnings in future periods, which charge,
depending upon the magnitude thereof, could materially adversely affect the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" for a discussion of capitalized
expenditures in connection with certain operations and projects.
USE OF ALTERNATIVES TO LANDFILL DISPOSAL. Alternatives to landfill
disposal, such as recycling and composting, are increasingly being used. In
addition, incineration is an alternative to landfill disposal in certain of the
Company's markets. There also has been an increasing trend at the state and
local levels to mandate recycling and waste reduction at the source and to
prohibit the disposal of certain type of wastes, such as yard wastes, at
landfills. These developments may result in the volume of waste being reduced in
certain areas. North Carolina, South Carolina and Virginia have each adopted
plans or requirements which set goals for specified percentages of certain solid
waste items to be recycled. These recycling goals are being phased in over the
next few years. These alternatives, if and when adopted and implemented, may
have a material adverse effect on the business, financial condition and results
of operations of the Company. See "Business -- Landfill and Other Disposal
Alternatives".
GOVERNMENT REGULATION. The Company is subject to extensive and evolving
environmental laws and regulations which have become increasingly stringent in
recent years as a result of greater public interest in protecting the
environment. These
7

<PAGE>
laws and regulations impose substantial costs on the Company and affect the
Company's business in many ways, including as set forth below and under
"Business -- Regulation".
If the Company implements its strategy relating to landfill ownership and
operation, it will be necessary to obtain and maintain in effect one or more
licenses or permits as well as zoning, environmental and/or other land use
approvals. These licenses or permits and approvals are difficult and time
consuming to obtain and renew and are frequently subject to opposition by
various elected officials or citizens' groups. See "Business -- Legal
Proceedings." There can be no assurance that the Company will be successful in
obtaining and maintaining in effect the permits and approvals required for the
successful operation and growth of future landfill business, and the failure by
the Company to obtain or maintain in effect a permit or approval significant to
its landfill business could have a material adverse effect on the Company's
operations and financial condition.
The design, operation and closure of landfills is extensively regulated.
These regulations include, among others, the regulations ("Subtitle D
Regulations") establishing minimum federal requirements adopted by the U.S.
Environmental Protection Agency ("EPA") in October 1991 under Subtitle D of the
Resource Conservation and Recovery Act of 1976 ("RCRA"). Failure to comply with
these regulations could require the Company to undertake investigatory or
remedial activities, to curtail operations or to close a landfill temporarily or
permanently. Future changes in these regulations may in the future require the
Company to modify, supplement or replace equipment or facilities at costs which
may be substantial. The failure of regulatory agencies to enforce these
regulations vigorously or consistently may give an advantage to competitors of
the Company whose facilities do not comply with the Subtitle D Regulations or
its state counterparts. The Company's ultimate financial obligations related to
any failure to comply with these regulations could have a material adverse
effect on the Company's operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
Companies in the solid waste services business, including the Company, are
frequently subject in the normal course of business to judicial and
administrative proceedings involving federal, state or local agencies or
citizens' groups. These governmental agencies may seek to impose fines or
penalties on the Company or to revoke or deny renewal of the Company's operating
permits or licenses for violations or alleged violations of environmental laws
or regulations or require that the Company make expenditures to remediate
potential environmental problems relating to waste disposed of or stored by the
Company or its predecessors, or resulting from its or its predecessors'
transportation and collection operations. Any adverse outcome in these
proceedings could have a material adverse effect on the Company's financial
condition or results of operations and may subject the Company to adverse
publicity. The Company may be subject to actions brought by individuals or
community groups in connection with the permitting or licensing of its
operations, any alleged violation of such permits or licenses or other matters.
See "Potential Environmental Liability" below and "Business -- Legal
Proceedings".
POTENTIAL ENVIRONMENTAL LIABILITY. The Company is with respect to its
existing business and will be with respect to any future landfill business
subject to liability for any environmental damage that its solid waste
facilities may cause to neighboring landowners, particularly as a result of the
contamination of drinking water sources or soil, including damage resulting from
conditions existing prior to the acquisition of such facilities by the Company.
The Company may also be subject to liability for any off-site environmental
contamination caused by pollutants or hazardous substances whose transportation,
treatment or disposal was arranged by the Company or its predecessors. Any
substantial liability for environmental damage incurred by the Company could
have a material adverse effect on the Company's financial condition and results
of operations. See "Business -- Regulation".
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("Superfund" or "CERCLA"), imposes strict, joint and several
liability on the present owners and operators of facilities from which a release
of hazardous substances into the environment has occurred, as well as any party
that owned or operated the facility at the time of disposal of the hazardous
substances regardless of when the hazardous substance was first detected.
Similar liability is imposed upon the generators of waste which contains
hazardous substances and upon hazardous substance transporters that select the
treatment, storage or disposal site. All such persons, who are referred to as
potentially responsible parties ("PRPs"), generally are jointly and severally
liable for the expense of waste site investigation, waste site cleanup costs and
natural resource damages, regardless of whether they exercised due care and
complied with all relevant laws and regulations. These costs can be very
substantial. Furthermore, such liability can be based upon the existence of even
very small amounts of the more than 700 "hazardous substances" listed by the EPA
and is not limited to the disposal of "hazardous wastes," as statutorily
defined. It is likely that hazardous substances have in the past come to be
located in landfills with which the Company has been associated. The Company
transported hazardous substances in the past and may do so in the future,
however, for the 12-month period ended December 31, 1996 and the three-month
period ended March 31, 1997, the Company transported no hazardous substances and
there were no revenues associated with any such transportation. If any of these
sites or operations ever experiences environmental problems, the Company could
be subject to substantial liability which could have a material adverse effect
on its financial condition and results of operations. See
"Business -- Regulation".
8

<PAGE>
With respect to each business that Waste Industries acquires, there may be
liabilities that the Company fails to or is unable to discover, including
liabilities arising from noncompliance with environmental laws by prior owners,
and for which the Company, as a successor owner, may be legally responsible.
Representations, warranties and indemnities from the sellers of such businesses,
if obtained and if legally enforceable, may not cover fully the resulting
environmental liabilities due to their limited scope, amount or duration, the
financial limitations of the warrantor or indemnitor or other reasons. Certain
environmental liabilities, even though expressly not assumed by the Company, may
nonetheless be imposed on the Company under certain legal theories of successor
liability, particularly under CERCLA. See "Business -- Acquisition Program".
POTENTIAL CLOSURE AND POST-CLOSURE COSTS. In the event that the Company
develops or acquires landfills, the Company will have material financial
obligations relating to closure and post-closure costs of disposal facilities
which it may operate in the future. The Company will provide accruals for future
obligations (generally for a term of 30 to 40 years after final closure of any
such landfill) 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 ultimate financial obligations for actual closing
or post-closing costs will not exceed the amount accrued and reserved or amounts
otherwise receivable pursuant to insurance policies or trust funds. Such a
circumstance could have a material adverse effect on the Company's financial
condition and results of operation.

POTENTIAL UNINSURED RISKS AND INABILITY TO OBTAIN SURETY BONDS OR LETTERS
OF CREDIT. The Company's insurance program does not cover liabilities associated
with any environmental cleanup or remediation on the Company's own sites. As a
result, an uninsured claim against the Company, if successful and of sufficient
magnitude, could have a material adverse effect on the Company's results of
operations and financial condition. Any future difficulty in obtaining insurance
could also impair the Company's ability to secure future contracts conditioned
upon the contractor having adequate insurance coverage. See "Business -- Risk
Management, Insurance and Performance Bonds".

Municipal solid waste collection contracts may require performance bonds or
other means of financial assurance to secure contractual performance. If the
Company were unable to obtain surety bonds or letters of credit in sufficient
amounts or at acceptable rates, it could be precluded from entering into
additional municipal solid waste collection contracts or obtaining or retaining
landfill operating permits. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources".
DEPENDENCE ON MANAGEMENT. The Company is highly dependent upon the services
of the members of its senior management team, the loss of any of whom may have
an adverse effect on the Company. The Company does not maintain key-man life
insurance with respect to any members of management. See
"Management -- Executive Officers and Directors".
CONTROL BY MANAGEMENT. Upon the completion of this offering, executive
officers and directors of the Company as a group will beneficially own
approximately 81.0% of the outstanding Common Stock. See "Principal and Selling
Shareholders". As a result, these existing shareholders, if acting together,
will be able to control the election of individuals to the Board of Directors
and the outcome of other matters submitted for shareholder consideration.
POTENTIAL ANTI-TAKEOVER PROVISIONS. The Company's Articles of Incorporation
authorize the Board of Directors to issue up to 10,000,000 shares of Preferred
Stock and to fix the rights and preferences thereof without shareholder
approval. Issuance of shares of Preferred Stock could have the effect of
delaying or preventing a change of control of the Company otherwise desired by
the shareholders.
The North Carolina Business Corporation Act contains a "Shareholder
Protection Act" which, with certain exceptions discussed below, requires
approval of certain business combinations between a North Carolina corporation
and any beneficial holder of more than 20% of the voting shares of the
corporation by the holders of at least 95% of the voting shares of the
corporation. Business combinations subject to this approval requirement include
any merger or consolidation of the corporation with or into any other
corporation, the sale or lease of all or any substantial part of the
corporation's assets, or any payment, sale or lease to the corporation or any
subsidiary thereof in exchange for securities of the corporation of any assets
(except assets having an aggregate fair market value of less than $5 million) of
any other entity. The principal exception to the special voting requirement
applies to business combinations that satisfy various complex statutory
provisions, including provisions relating to the fairness of the price and the
constituency of the Board of Directors. In addition, the special voting
requirement shall not be applicable to any corporation if (i) the corporation
was not a public corporation at the time such other entity acquired in excess of
10% of the voting shares; (ii) the corporation adopted an amendment to its
bylaws or provided in its original articles of incorporation providing that the
provisions shall not apply to it in accordance with the statute; or (iii) the
business combination in question was the subject of an existing agreement of the
corporation on April 23, 1987. In addition, corporations with fewer than 2,000
shareholders of record and those whose stock is not listed on a national
securities exchange are exempt from the special voting requirement. The Company
has not "opted out" of the Shareholder Protection Act.
Certain North Carolina public corporations are also subject to "The North
Carolina Control Share Acquisition Act". This law provides that shares acquired
in a transaction that would cause the acquiring person's voting strength to meet
or exceed
9

<PAGE>
any of three thresholds (20%, 33.3% or a majority) of voting power have no
voting rights unless granted by a majority vote of all the outstanding shares of
the corporation (not including interested shares) entitled to vote for the
election of directors. "Interested shares" means the shares of a corporation
beneficially owned by (i) any person who has acquired or proposes to acquire
control shares in a control share acquisition; (ii) any officer of the
corporation; or (iii) any employee of the covered corporation who is also a
director of the corporation. This provision empowers an acquiring person to
require the North Carolina corporation to hold a special meeting of shareholders
to consider the matter within 50 days of its request. The Company has not "opted
out" of The North Carolina Control Share Acquisition Act.
The provisions of the Shareholder Protection Act and The North Carolina
Control Share Acquisition Act were designed to deter certain takeovers of North
Carolina corporations.
NO PRIOR PUBLIC MARKET; FLUCTUATIONS IN QUARTERLY RESULTS; POTENTIAL STOCK
PRICE VOLATILITY. Prior to this offering, there has been no public market for
the Company's Common Stock, and there can be no assurance that an active trading
market will develop or be sustained after completion of this offering. The
initial public offering price will be determined through negotiations between
the Company and the representatives of the Underwriters based on several factors
and may not be indicative of the market price of the Common Stock after
completion of this offering. See "Underwriting". The Company believes that
period-to-period comparisons of its operating results should not be relied upon
for an indication of future performance. Due to a variety of factors including
general economic conditions, governmental regulatory action, acquisitions,
capital expenditures and other costs related to the expansion of operations and
services and pricing changes, it is possible that in some future quarter, the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the Company's Common Stock price would
likely be materially affected. The market price of the shares of Common Stock
may be highly volatile and is likely to be affected by factors such as actual or
anticipated fluctuations in the Company's operating results, announcements of
new contracts by the Company, its competitors or their customers, government
regulatory action, general market conditions and other factors. In addition, the
stock market has from time-to-time experienced significant price and volume
fluctuations that have often been unrelated to the operating performance of
companies whose securities are publicly traded; yet, these broad market
fluctuations may also adversely affect the market price of the publicly traded
securities of such companies, including the Company's Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been commenced against such
companies. There can be no assurance that such litigation will not occur in the
future with respect to the Company. Such litigation could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect on the Company's business, financial condition and
results of operations. Any adverse determination in such litigation could also
subject the Company to significant liabilities.
SHARES ELIGIBLE FOR FUTURE SALE. Sale of substantial amounts of the
Company's Common Stock in the public market following this offering, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Company's Common Stock. All of the shares offered hereby will be
freely saleable in the public market after completion of this offering, unless
acquired by affiliates of the Company. All of the shares outstanding prior to
completion of this offering are subject to contractual restrictions which
prohibit the shareholder from selling or otherwise disposing of such shares for
a period of 180 days after the date of this Prospectus without the consent of
Alex. Brown & Sons Incorporated. After this 180-day period expires, 519,252 of
the currently outstanding shares will be freely saleable in the public market
and 8,536,105 shares will be eligible for resale in the public market under Rule
144 promulgated under the Securities Act of 1933, as amended ("Securities Act").
See "Shares Eligible for Future Sale". Approximately 180 days after the
completion of this offering, the Company intends to file a registration
statement under the Securities Act to register up to 1,800,000 shares issuable
upon exercise of stock options or other awards granted or to be granted under
its stock plans. After the filing of such registration statement and subject to
certain restrictions under Rule 144, these shares will be freely saleable in the
public market immediately following exercise of such options. See "Description
of Capital Stock," "Management -- Executive Compensation; Stock Options" and
"Shares Eligible for Future Sale".
IMMEDIATE AND SUBSTANTIAL DILUTION. At an assumed initial public offering
price of $11.50 per share, purchasers of shares of Common Stock in this offering
will incur immediate and substantial dilution of $9.36 per share in the net
tangible book value of their purchased shares of Common Stock. See "Dilution".
Investors may also experience additional dilution as a result of shares of
Common Stock being issued for potential future business acquisitions and as a
result of the exercise of employee stock options. See "Shares Eligible for
Future Sale".
NO DIVIDENDS. The Company intends to retain all earnings for the
foreseeable future for use in the operation and expansion of its business.
Consequently, the Company does not anticipate paying any cash dividends on its
Common Stock for the foreseeable future. See "Dividend Policy and Prior S
Corporation Status".
10

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of its 1,605,200 shares of
Common Stock offered hereby, after deducting the underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be $16.8 million ($20.2 million if the Underwriters' overallotment
option is exercised in full). Approximately all of the net proceeds to the
Company will be used to repay the Company's then outstanding indebtedness to
Branch Banking & Trust Co. ("BB&T"), including indebtedness under its $20.0
million revolving credit facility with BB&T. Any remainder of the net proceeds
may be used for potential future acquisitions, capital expenditures and working
capital, including $2.5 million designated for use in the siting, development
and construction of a land clearing and inert debris ("LCID") landfill. Pending
specific application of the net proceeds, the Company intends to invest unused
net proceeds in short-term interest-bearing securities.

After repayment of the BB&T revolving credit facility, the Company will be
able to redraw on the credit facility as needed for future potential
acquisitions and capital expenditures. The proceeds of the Company's revolving
credit facility were used primarily to refinance other debt and acquire related
businesses and will, in the future, be used to finance certain of the Company's
capital expenditures and acquisitions. The BB&T revolving credit facility had a
weighted average interest rate of approximately 7.308% at March 1, 1997 and will
mature on April 1, 2006. Although the Company regularly engages in discussions
relating to potential acquisitions, it is not currently a party to any letters
of intent with respect to any material pending acquisitions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources".
DIVIDEND POLICY AND PRIOR S CORPORATION STATUS

From 1986 until May 9, 1997, the Company was subject to taxation under
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"). As a
result, during that time the net income of the Company, for federal and certain
state income tax purposes, was reported by and taxable directly to the Company's
shareholders, rather than to the Company. Primarily to provide funds for tax
obligations payable by its shareholders on account of the Company's income in
1995, the Company made $3,119,702 of cash distributions during 1996 to its
shareholders. In connection with its conversion from S Corporation to C
Corporation status, the Company will effect an S Corporation distribution
(consisting of approximately $1.48 million in cash payments) to the Company's S
Corporation shareholders as soon as practicable following completion of this
offering (the "S Corporation Distribution").

Following consummation of this offering, the Company does not intend to pay
cash dividends on the Common Stock for the foreseeable future as it intends to
retain all earnings for use in the operation and expansion of the Company's
business. The Company's credit facilities contain covenants which restrict the
payment of cash dividends.

<PAGE>
DILUTION
The Company's pro forma net tangible book value as of March 31, 1997 was
$7.2 million (excluding intangible assets totalling $4.2 million), or $0.75 per
share of Common Stock. Pro forma net tangible book value per share represents
the amount of the Company's total tangible assets less its total liabilities,
divided by the total number of shares of Common Stock outstanding after giving
effect to the assumption by the Company of a $4.6 million net deferred tax
liability as a result of terminating its S Corporation election concurrent with
the completion of this offering.
After giving effect to the sale by the Company of 1,605,200 shares of
Common Stock in this offering at the assumed initial public offering price of
$11.50 per share (and after deduction of the underwriting discounts and
commissions and estimated offering expenses), the pro forma net tangible book
value of the Common Stock as of March 31, 1997 would have been approximately
$24.0 million or $2.14 per share. This represents an immediate increase in pro
forma net tangible book value of $1.39 per share to existing shareholders and an
immediate dilution in net tangible book value of $9.36 per share to purchasers
of Common Stock in the offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................................................. $11.50
Pro forma net tangible book value per share at March 31, 1997............................................. $0.75
Increase per share attributable to new investors.......................................................... 1.39
Pro forma net tangible book value per share after this offering............................................. 2.14
Net tangible book value dilution per share to new investors................................................. $ 9.36
</TABLE>

The following table sets forth, as of March 31, 1997, the difference
between existing shareholders and purchasers of shares in this offering with
respect to the number of shares purchased from the Company, before deduction of
the underwriting discounts and commissions and estimated offering expenses, the
total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders.......................................... 9,600,157 85.7% $ 3,192,171 14.7% $ 0.33
New investors.................................................. 1,605,200 14.3 18,459,800 85.3 $ 11.50
Total........................................................ 11,205,357 100.0% $21,651,971 100.0%
</TABLE>

As of March 31, 1997, the Company had outstanding stock options exercisable
for 526,000 shares of Common Stock at a weighted average exercise price of $5.10
per share. If these options are exercised, further dilution to new investors
will occur. The Company may also issue additional shares to effect future
potential business acquisitions or upon exercise of future stock option grants
or equity awards, which could also result in additional dilution to then
existing shareholders. See "Management -- Executive Compensation; Stock
Options".
12

<PAGE>
CAPITALIZATION

The following table sets forth as of March 31, 1997 the Company's (i)
actual current maturities of long-term debt and capitalization, (ii) pro forma
current maturities of long-term debt and capitalization after giving effect to
(a) the assumption of a net deferred tax liability of $4.6 million as a result
of the Company terminating its S Corporation election on May 9, 1997 and (b) the
S Corporation Distribution (see "Dividend Policy and Prior S Corporation
Status"), and (iii) pro forma current maturities of long-term debt and
capitalization, as adjusted to give effect to the application of the estimated
net proceeds from the sale by the Company of 1,605,200 shares of Common Stock
offered by it hereby at the assumed initial public offering price of $11.50 per
share, after deducting the underwriting discounts and commissions and estimated
offering expenses. See "Description of Capital Stock" and "Use of Proceeds".

<TABLE>
<CAPTION>
MARCH 31, 1997
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
<S> <C> <C> <C>
(IN THOUSANDS)
Current maturities of long-term debt................................................... $ 102 $ 102 $ 102
Long-term debt, net of current maturities.............................................. $34,853 $34,853 $ 18,135
Shareholders' equity:
Preferred Stock, $0.01 par value, 10,000,000 shares authorized, none outstanding,
actual, pro forma and pro forma as adjusted....................................... -- -- --
Common Stock, no par value, 80,000,000 shares authorized; 9,600,157 shares issued and
outstanding, actual and pro forma; 11,205,357 shares issued and outstanding, pro
forma as adjusted(2).............................................................. 92 92 16,810
Retained earnings.................................................................... 16,240 10,160 10,160
Shareholders' loans.................................................................. (247) (247) (247)
Total shareholders' equity...................................................... 16,085 10,005 26,723
Total capitalization......................................................... $50,938 $44,858 $ 44,858
</TABLE>

(1) The application of the estimated net proceeds from the sale by the Company
of the 1,605,200 shares of Common Stock offered by it hereby will be used to
repay all of the Company's then outstanding indebtedness under the BB&T
facility.
(2) Excludes 526,000 shares issuable upon exercise of stock options outstanding
as of March 31, 1997 at a weighted average exercise price of $5.10 per
share. See "Management -- Executive Compensation; Stock Options".
13

<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated statements of
operations, balance sheet and other operating data of the Company for the
periods and the dates indicated. The selected statements of operations and
balance sheet data, at or for each of the full fiscal years presented below,
were derived from the Company's consolidated financial statements, which have
been audited by Deloitte & Touche LLP, independent auditors. The selected
financial data for the three months ended March 31, 1996 and 1997 are derived
from consolidated financial statements that have not been audited. In the
opinion of management, the unaudited consolidated financial data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the consolidated financial position and results of
operations for that period. The results of operations for the three months ended
March 31, 1996 and 1997 are not necessarily indicative of the results of
operations for any future period. The selected consolidated financial data below
should be read in conjunction with the Company's audited consolidated financial
statements and notes thereto at December 31, 1995 and 1996 and for each of the
three years in the period ended December 31, 1996 included elsewhere in this
Prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations". The Company's audited consolidated financial statements
at and for prior dates and periods are not included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) MARCH 31,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $43,074 $50,598 $66,837 $82,688 $92,887 $20,566 $24,124
Cost of operations............................. 23,770 27,869 37,853 50,395 59,337 13,105 14,838
Selling, general and administrative............ 10,563 12,102 15,143 15,467 16,329 3,606 4,588
Depreciation and amortization.................. 5,450 6,150 7,615 8,217 8,471 1,982 2,319
Operating income............................... 3,291 4,477 6,226 8,609 8,750 1,873 2,379
Interest expense............................... (1,536) (1,625) (1,920) (2,122) (2,395) (497) (610)
Other income................................... 186 171 287 473 694 172 152
Income before income taxes..................... 1,941 3,023 4,593 6,960 7,049 1,548 1,921
Pro forma income taxes(2)...................... 770 1,230 1,865 2,790 2,845 625 775
Pro forma net income(2)........................ $ 1,171 $ 1,793 $ 2,728 $ 4,170 $ 4,204 $ 923 $ 1,146
Pro forma earnings per share(2)(3)............. $ 0.12 $ 0.19 $ 0.28 $ 0.43 $ 0.43 $ 0.10 $ 0.12
Weighted average shares outstanding............ 9,574 9,566 9,596 9,599 9,821 9,605 9,821
OTHER OPERATING DATA:
EBITDA(4)...................................... $ 8,927 $10,798 $14,128 $17,299 $17,915 $ 4,027 $ 4,850
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 1,026 $ 1,987 $ 2,039 $ 2,071 $ 1,803 $ 578
Working capital (deficit)................................ (1,525) (2,779) (3,313) 1,801 1,601 1,414
Property and equipment, net.............................. 25,694 31,184 33,295 33,742 39,842 43,169
Total assets............................................. 34,920 45,404 48,836 50,673 59,068 60,661
Long-term debt, net of current maturities................ 19,215 23,770 22,466 27,193 33,070 34,853
Shareholders' equity..................................... 6,569 8,996 12,579 13,559 14,171 16,085
</TABLE>

(4) EBITDA is defined as income before income taxes plus interest expense and
depreciation and amortization. While EBITDA should not be considered an
alternative to (i) operating income or net income (as determined in
accordance with GAAP) as an indicator of the Company's operating performance
or (ii) cash flows from operating activities (as determined in accordance
with GAAP) as a measure of operating performance or liquidity, the Company
has included EBITDA data (which are not a measure of financial performance
under GAAP) because it understands that such data are commonly used by
certain investors to evaluate a Company's performance in the solid waste
industry. Furthermore, the Company believes that EBITDA data are relevant to
an understanding of the Company's performance because they reflect the
Company's ability to generate cash flows sufficient to satisfy its debt
service, capital expenditure and working capital requirements. However,
funds depicted by the EBITDA measure may not be available for debt service,
capital expenditures or working capital due to legal or functional
requirements to conserve funds or other commitments or uncertainties.
EBITDA, as measured by the Company, might not be comparable to similarly
titled measures reported by other companies. For more information about the
Company's cash flows, see page F-5.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS, INCLUDING WITHOUT LIMITATION THOSE SET FORTH IN "RISK FACTORS" AND THE
MATTERS SET FORTH IN THIS PROSPECTUS GENERALLY.
OVERVIEW

Waste Industries was founded by members of the current senior management
team in 1970. The Company provides solid waste collection, transfer, recycling,
processing and disposal services to customers primarily in North Carolina and
South Carolina and, to a limited extent, in Virginia. The Company's objective is
to build the premier solid waste services company in the Southeastern U.S. by
expanding its operations and capitalizing on its strong market presence.

From December 31, 1992 through December 31, 1996, Company revenues,
operating income and income before income taxes have increased at compounded
annual rates of 21.2%, 27.7% and 38.0%, respectively. The Company has acquired
19 solid waste collection operations since 1990. All of these acquisitions were
accounted for as purchases. Accordingly, the results of operations of these
acquired businesses have been included in the Company's financial statements
only from the respective dates of acquisition and have affected period-to-period
comparisons of the Company's operating results. The Company anticipates that a
substantial part of its future growth will come from acquiring additional solid
waste collection, transfer and disposal businesses and, therefore, it is
expected that additional acquisitions could continue to affect period-to-period
comparisons of the Company's operating results. In connection with the Company's
growth strategy, the Company has invested in collection vehicles and equipment,
in maintenance of existing equipment and in management information systems which
should enable the Company to expand internally and through acquisitions based
upon its existing infrastructure.

From 1986 until May 9, 1997, the Company was subject to taxation under
Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code"). As a
result, during that time the net income of the Company, for federal and certain
state income tax purposes, was reported by and taxable directly to the Company's
shareholders, rather than to the Company. Primarily to provide funds for tax
obligations payable by its shareholders on account of the Company's income in
1995, the Company made $3,119,702 of cash distributions during 1996 to its
shareholders. In connection with its conversion from S Corporation to C
Corporation status, the Company will effect the S Corporation Distribution
(consisting of approximately $1.48 million in cash payments) to the Company's S
Corporation shareholders as soon as practicable following completion of this
offering.

The Company's S Corporation status was terminated on May 9, 1997 and,
accordingly, the Company became fully subject to federal and state income taxes
on that date. In connection with the termination of the Company's S Corporation
status, the Company will distribute to its S Corporation shareholders the S
Corporation Distribution described above. Purchasers of shares of Common Stock
in this offering will not be entitled to the S Corporation Distribution.

RESULTS OF OPERATIONS
GENERAL

The Company's branch waste collection operations generate revenues from
fees collected from commercial, industrial and residential collection and
transfer station customers. The Company derives a substantial portion of its
collection revenues from commercial and industrial services which are performed
under one-year to five-year service agreements. The Company's residential
collection services are performed either on a subscription basis with individual
households, or under contracts with municipalities, apartment owners, homeowners
associations or mobile home park operators. Residential customers on a
subscription basis are billed quarterly in advance and provide the Company with
a stable source of revenues. A liability for future service is recorded upon
billing and revenues are recognized at the end of each month in which services
are actually provided. Municipal contracts in the Company's existing markets are
typically awarded, at least initially, on a competitive bid basis and thereafter
on a bid or negotiated basis and usually range in duration from one to five
years. Municipal contracts provide consistent cash flow during the term of the
contracts.

The Company's prices for its solid waste services are typically determined
by the collection frequency and level of service, route density, volume, weight
and type of 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 in its markets for similar services.
15

<PAGE>
The Company's ability to pass on price increases is sometimes limited by the
terms of its contracts. Long-term solid waste collection contracts typically
contain a formula, generally based on a predetermined published price index, for
automatic adjustment of fees to cover increases in some, but not all, operating
costs.
The Company currently operates approximately 100 convenience sites under
contract with 15 counties in order to consolidate waste in rural areas. These
contracts, which are usually competitively bid, generally have terms of one to
five years and provide consistent cash flow during the term of the contract
since the Company is paid regularly by the local government. The Company also
operates four recycling processing facilities as part of its collection and
transfer operations where it collects, processes, sorts and recycles paper
products, aluminum and steel cans, pallets, certain plastics, glass, and certain
other items. The Company's recycling facilities generate revenues from the
collection, processing and resale of recycled commodities, particularly recycled
wastepaper. Through a centralized effort, the Company resells recycled
commodities using commercially reasonable practices and seeks to manage
commodity pricing risk by spreading the risk among its customers. The Company
also operates curbside residential recycling programs in connection with its
residential collection operations in most of the communities it serves.
Operating expenses for the Company's collection operations include labor,
fuel, equipment maintenance and tipping fees paid to landfills. The Company owns
or operates 11 transfer stations which reduce the Company's costs by improving
its utilization of collection personnel and equipment and by consolidating the
waste stream to gain more favorable disposal rates. The Company does not
currently own or operate any solid waste landfills. In the event that the
Company develops or acquires landfills, operating expenses for such landfill
operations may include labor, equipment, legal and administrative, ongoing
environmental compliance, royalties to former owners, host community fees, site
maintenance and accruals for closure and post-closure maintenance.
The Company capitalizes certain expenditures related to pending
acquisitions or development projects. Indirect acquisition and project
development costs, such as executive and corporate overhead, public relations
and other corporate services, are expensed as incurred. The Company's policy is
to charge against net income any unamortized capitalized expenditures and
advances (net of any portion thereof that the Company estimates to be
recoverable, through sale or otherwise) relating to any operation that is
permanently shut down, any pending acquisition that is not consummated and any
landfill development project that is not expected to be successfully completed.
Engineering, legal, permitting, construction and other costs directly associated
with the acquisition or development of a landfill, together with associated
interest, are capitalized. At December 31, 1996, the Company had recorded no
such capitalized costs. At March 31, 1997, the Company had recorded $62,253 of
capitalized land acquisition costs in connection with the development of a new
LCID landfill and $44,784 relating to pending acquisitions. Because it currently
does not own any landfills, the Company does not accrue for estimated landfill
closure and post-closure maintenance costs.
Selling, general and administrative ("SG&A") expenses include management
salaries, clerical and administrative overhead, professional services, costs
associated with the Company's marketing and sales force and community relations
expense.

Property and equipment is depreciated over the estimated useful life of the
assets using the straight line method.

Other income and expense, which is comprised primarily of interest income
and gains and losses on sales of equipment, has not historically been material
to the Company's results of operations. Also included in other income and
expense are new equipment sales and related installation revenues from third
parties.
To date, inflation has not had a significant impact on the Company's
operations.
16

<PAGE>
The following table sets forth for the periods indicated the percentage of
revenues represented by the individual line items reflected in the Company's
statements of income:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
Revenues....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations............................. 56.6 60.9 63.9 63.7 61.5
Selling, general and administrative............ 22.7 18.7 17.6 17.5 19.0
Depreciation and amortization.................. 11.4 9.9 9.1 9.6 9.6
Operating income............................... 9.3 10.5 9.4 9.2 9.9
Interest expense............................... (2.9) (2.6) (2.6) (2.4) (2.5)
Other income................................... 0.5 0.5 0.8 0.8 0.6
Income before income taxes..................... 6.9% 8.4% 7.6% 7.6% 8.0%
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 VS. THREE MONTHS ENDED MARCH 31, 1996

REVENUES. Revenues increased $3.6 million, or 17.3%, to $24.1 million for
the three months ended March 31, 1997 from $20.6 million for the three months
ended March 31, 1996. This increase was attributable to the following factors:
(i) increased collection volumes resulting from new municipal and commercial
contracts and residential subscriptions; and (ii) to a lesser extent, the effect
of four businesses acquired during the year ended December 31, 1996.

COST OF OPERATIONS. Cost of operations increased $1.7 million to $14.8
million for the three months ended March 31, 1997 from $13.1 million for the
three months ended March 31, 1996. The principal reason for the increase was the
addition of new customers and contracts, including those from the acquisitions
of new businesses, since March 31, 1996. Cost of operations as a percentage of
revenues decreased to 61.5% for the three months ended March 31, 1997 from 63.7%
for the three months ended March 31, 1996. This percentage decrease was the
result of increased route density and a decrease in waste stream processing
costs.

SG&A. SG&A increased $1.0 million to $4.6 million for the three months
ended March 31, 1997 from $3.6 million for the three months ended March 31,
1996. As a percentage of revenues, SG&A increased to 19.0% for the three months
ended March 31, 1997 from 17.5% for the three months ended March 31, 1996. This
increase was due to an increase in personnel-related and general operating
expenses incurred in support of the Company's revenue growth.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
approximately $300,000 to $2.3 million for the three months ended March 31, 1997
from $2.0 million for the three months ended March 31, 1996. This increase was
principally due to the depreciation of the additional property and equipment
acquired to service higher collection volumes as well as depreciation of the
additional assets of businesses acquired during the year ended December 31, 1996
and the three months ended March 31, 1997. Depreciation and amortization, as a
percentage of revenues, remained relatively constant at 9.6% for the three
months ended March 31, 1997 and 1996.

INTEREST EXPENSE. Interest expense increased approximately $100,000 to
approximately $600,000 for the three months ended March 31, 1997 from
approximately $500,000 for the three months ended March 31, 1996. Interest
expense, as a percentage of revenues, increased to 2.5% for the three months
ended March 31, 1997 from 2.4% for the three months ended March 31, 1996. These
increases were primarily due to the higher level of the average outstanding
indebtedness and an increase in the interest rates on outstanding borrowings.
1996 VS. 1995

REVENUES. Revenues increased $10.2 million, or 12.3%, to $92.9 million in
1996 from $82.7 million in 1995. This increase was attributable to the following
two factors: (i) increased collection volumes resulting from new municipal and
commercial contracts and residential subscriptions; and (ii) to a lesser extent,
the effect of a full year of revenues from the three businesses acquired in
1995, as well as a partial year of results from four businesses acquired in
1996. The effect of these revenue increases was partially offset by a decrease
in revenue from sales of recyclable commodities. This decrease was due to a
significant decrease in the weighted average price received by the Company for
recyclable commodities, primarily corrugated and newsprint materials, causing an
approximate 2% decrease in 1996 revenue growth from commodity sales. Price
increases in 1996 for the Company's solid waste collection and disposal services
did not contribute materially to increased 1996 revenues.

<PAGE>

COST OF OPERATIONS. Cost of operations increased $8.9 million to $59.3
million in 1996 from $50.4 million in 1995. The principal reason for the
increase was the addition of new customers and contracts during the year,
including those from the acquisition of new businesses acquired during 1995 and
1996. Cost of operations as a percentage of revenues increased to 63.9% in 1996
from 60.9% in 1995. This increase was the result of: (i) proportionately more
growth in lower margin services; (ii) lower margins in recycling services as a
result of the decline in the weighted average prices of commodities; and (iii)
an increase in waste stream processing and disposal costs.

SG&A. SG&A expenses increased approximately $800,000 to $16.3 million in
1996 from $15.5 million in 1995. As a percentage of revenues, SG&A decreased to
17.6% in 1996 from 18.7% in 1995 due to improved economies of scale in the
Company's collection operations as a result of additional collection volumes
from new customer contracts and acquisitions.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
approximately $300,000 to $8.5 million in 1996 from $8.2 million for the prior
year. The principal reason for the increase was depreciation of the additional
property and equipment acquired and put into service due to higher collection
volumes and depreciation of the additional assets of businesses acquired during
1995 and 1996. Depreciation and amortization, as a percentage of revenues,
decreased to 9.1% in 1996 from 9.9% in 1995, primarily as a result of increased
revenues.

INTEREST EXPENSE. Interest expense increased approximately $300,000 to $2.4
million in 1996 from $2.1 million in 1995. This increase was due to the higher
level of average annual outstanding indebtedness and an increase in the
Company's interest rates on outstanding borrowings. Interest expense as a
percentage of revenues remained relatively constant at 2.6% for both 1996 and
1995.
1995 VS. 1994

REVENUES. Revenues increased $15.9 million, or 23.7%, to $82.7 million in
1995 from $66.8 million in 1994. This increase was attributable primarily to the
following factors: (i) the impact of increased collection volumes resulting from
new municipal and commercial contracts and residential subscriptions; (ii) the
effect of a full year of revenues from the three businesses acquired in 1994, as
well as a partial year of results from three businesses acquired in 1995; and
(iii) an increase in the volumes and a significant increase in prices received
for recyclable commodities, primarily corrugated and newsprint materials. Price
increases in 1995 for the Company's services and products did not contribute
materially to increased 1995 revenues.

COST OF OPERATIONS. Cost of operations increased $12.5 million to $50.4
million in 1995 from $37.9 million in 1994. The principal reason for the
increase was the addition of new customers and contracts during the year,
including those from the acquisition of businesses acquired during 1994 and
1995. Cost of operations as a percentage of revenues increased to 60.9% in 1995
from 56.6% in 1994. This increase was the result of proportionately more growth
in lower margin services and an increase in the waste stream processing and
disposal costs.

SG&A. SG&A expenses increased approximately $400,000 to $15.5 million in
1995 from $15.1 million in 1994. As a percentage of revenues, SG&A improved to
18.7% in 1995 from 22.7% in 1994. The improvement was due to improved economies
of scale in the Company's collection operations as a result of additional
collection volumes from new customer contracts and acquisitions.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
approximately $600,000 to $8.2 million in 1995 from $7.6 million in 1994. The
principal reason for the increase was depreciation of additional property and
equipment acquired and put into service due to higher collection volumes and
depreciation of the additional assets of businesses acquired during 1994 and
1995. Depreciation and amortization decreased as a percentage of revenues to
9.9% in 1995 from 11.4% in 1994 primarily as a result of increase revenues.

INTEREST EXPENSE. Interest expense increased approximately $200,000 to $2.1
million in 1995 from $1.9 million in 1994. The principal reason for the increase
in 1995 was an increase in the Company's interest rates on outstanding
borrowings. Interest expense as a percentage of revenues decreased to 2.6% in
1995 from 2.9% in 1994, primarily as a result of increased revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1996 was $1.6 million
compared to $1.8 million at December 31, 1995. The Company's working capital at
March 31, 1997 decreased to $1.4 million from $1.6 million at December 31, 1996.
The Company's strategy in managing its working capital has been to apply the
cash generated from its operations which remains available after satisfying its
working capital and capital expenditure requirements to reduce its indebtedness
under its bank revolving credit facility and to minimize its cash balances. The
Company finances its working capital requirements
18

<PAGE>

from internally generated funds and bank borrowings. In addition to internally
generated funds, the Company has in place financing arrangements to satisfy its
currently anticipated working capital needs in 1997. The Company has an
established revolving credit facility with BB&T allowing the Company to borrow
up to $20 million for acquisitions and capital expenditures and $5 million for
working capital. In addition, the Company has established two $25 million term
loan facilities with Prudential Insurance Company of America ("Prudential"). As
of March 31, 1997, the Company had fully drawn down one of these facilities,
leaving the Company with an uncommitted shelf facility of $25 million. Both of
the BB&T and the Prudential credit facilities require the Company to maintain
certain financial ratios, such as consolidated current debt to total
capitalization, consolidated debt to earnings and consolidated fixed charges to
earnings, and satisfy other predetermined requirements, such as minimum net
worth, net income and deposit balances. Interest on the BB&T facility is payable
monthly based on an adjusting spread to LIBOR. Interest on the Prudential
facility is paid quarterly, based on a fixed rate of 7.28% The weighted average
interest rate on outstanding borrowings under the BB&T facility was 7.308% at
March 1, 1997. Of the Company's $50 million in committed facilities, $5 million
mature on April 3, 1998, with the remainder maturing on April 1, 2006, subject
to renewal. In May 1997, the Company obtained an additional $5 million under the
BB&T working capital facility. This additional capacity has a 60-day term and
bears interest at a rate of 7.44%. The Company intends to use these borrowings
for acquisitions of related businesses and general corporate purposes.

Net cash provided by operating activities totaled $4.1 million for the
three months ended March 31, 1997, compared to $4.4 million for the three months
ended March 31, 1996. This decrease was caused principally by the reductions in
trade accounts payable and accrued expenses and other liabilities, which was
partially offset by decreases in trade accounts receivable and inventories. Net
cash provided by operations in 1996 decreased to $14.9 million from $15.8
million in 1995. This decrease in 1996 compared to 1995 includes the
approximately $100,000 increase in income before income taxes. Depreciation and
amortization increased approximately $300,000 in 1996 from 1995. Net cash
provided by operations in 1995 increased to $15.8 million from $12.9 million in
1994. This increase in 1995 from the prior year includes the $2.4 million
increase in income before income taxes. Depreciation and amortization increased
approximately $600,000 in 1995 from 1994.
Net cash used in investing activities totaled $6.2 million for the three
months ended March 31, 1997, compared to $6.1 million in for the three months
ended March 31, 1996. This increase was caused principally by the acquisition of
certain assets employed or arising in connection with a residential collection
business for approximately $782,000. This increase was offset by decreases in
(i) capital expenditures of approximately $363,000 and (ii) advances to
affiliates of approximately $380,000. Net cash used in investing activities
totaled $14.8 million for 1996 compared to $8.6 million in the prior year. This
increase in 1996 compared to 1995 was caused principally by the $6.3 million
increase in the amount of capital expenditures for property and equipment
acquired and put into service due to higher collection volumes and, to a lesser
extent, because (i) proceeds from sale of property and equipment decreased
approximately $500,000, (ii) cash used for acquisitions of related businesses
decreased $1.4 million, (iii) the Company incurred debt issuance costs of
approximately $600,000 related to its new credit facilities, and (iv) in 1996
the Company discontinued acquiring equipment through an operating lease. Net
cash used in investing activity totaled $8.6 million in 1995 compared to $11.4
million in 1994. The reduction in 1995 was caused principally by the Company
entering into an operating lease for the acquisition of approximately $3.8
million for equipment due to favorable lease terms.
Capital expenditures for 1997 are currently expected to be approximately
$17.1 million, compared to $14.4 million in 1996 and $8.1 million in 1995. In
1997, approximately $13.0 million is expected to be utilized for vehicle and
equipment additions and replacements, approximately $2.5 million for
construction of a new LCID landfill site and approximately $1.6 million for
expansion of transfer station services. The Company intends to fund its planned
1997 capital expenditures principally through internally generated funds,
proceeds of this offering and borrowings under existing credit facilities. In
addition, the Company anticipates that it may require substantial additional
capital expenditures to facilitate its growth strategy of acquiring solid waste
collection and disposal businesses. If the Company is successful in acquiring
landfill disposal facilities, the Company may also be required to make
significant expenditures to bring any such newly acquired disposal facilities
into compliance with applicable regulatory requirements, obtain permits for any
such newly acquired disposal facilities or expand the available disposal
capacity at any such newly acquired disposal facilities. The amount of these
expenditures cannot be currently determined, since they will depend on the
nature and extent of any acquired landfill disposal facilities, the condition of
any facilities acquired and the permitting status of any acquired sites.
Net cash provided by financing activities totaled $877,000 for the three
months ended March 31, 1997, compared to $274,000 for the three months ended
March 31, 1996. This increase was caused principally by additional borrowings on
long-term notes payable of approximately $632,000, which were used to fund
capital expenditures. Net cash used in financing activities for 1996 was
approximately $400,000, compared to net cash used in financing activities of
$7.2 million for
19

<PAGE>
1995. The difference between the 1996 and 1995 amounts was attributable to: (i)
the Company's increased level of borrowings on bank notes payable to $32.8
million in 1996 from $28.2 million in 1995; (ii) distributions to shareholders
and affiliates of $4.9 million in 1996 compared to distributions of $6.8 million
in 1995; and (iii) the discontinuance of acquiring equipment through operating
leases which accounted for approximately $3.8 million in 1995. Net cash used in
financing activities in 1995 was $7.2 million compared to $1.4 million in 1994.
The difference between the 1995 and 1994 amounts was attributable to: (i)
distributions to shareholders and affiliates of $6.8 million in 1995 compared to
net distributions of $1.2 million in 1994; and (ii) the Company entering into an
operating lease for the acquisition of approximately $3.8 million of equipment
in 1995, an increase of $3.8 million over 1994.
At March 31, 1997, the Company had approximately $35.0 million of long-term
and short-term borrowings outstanding and approximately $746,000 in letters of
credit. At March 31, 1997, the ratio of the Company's long-term debt to total
capitalization was 68.4% compared to 70.0% at December 31, 1996 and 1995,
respectively. Since the Company intends to use the net proceeds from its sale of
shares in this offering to repay all outstanding amounts under the BB&T
revolving credit facility, it will then have available substantially all of the
$25 million borrowing capacity under such facility. In the past, the Company has
been able to obtain other types of financing arrangements to fund its various
capital requirements. The Company believes it can readily access such additional
sources of financing as necessary to facilitate the Company's growth.
QUARTERLY RESULTS
The following table presents the Company's unaudited consolidated quarterly
results and the percentages of revenues represented by the individual line items
reflected in the Company's consolidated statements of operations for each of the
four quarters in the period ended March 31, 1997. This information has been
presented on the same basis as the Company's audited consolidated financial
statements appearing elsewhere in this Prospectus and, in the Company's opinion,
contains all necessary adjustments (consisting only of normal recurring
adjustments) to present fairly the Company's unaudited quarterly results when
read in conjunction with the Company's audited financial statements and notes
thereto. Interim operating results, however, are not necessarily indicative of
the Company's results for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
JUNE 30, 1996 1996 1996 MARCH 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Revenues....................................... $22,761 100.0% $24,894 100.0% $24,665 100.0% $24,124 100.0%
Cost of operations............................. 14,298 62.8 16,142 64.8 15,792 64.0 14,838 61.5
Selling, general and administrative............ 3,935 17.3 4,442 17.8 4,346 17.6 4,588 19.0
Depreciation and amortization.................. 2,113 9.3 2,174 8.7 2,202 8.9 2,319 9.6
Operating income............................... 2,415 10.6 2,136 8.7 2,325 9.5 2,379 9.9
Interest expense............................... (650) (2.9) (626) (2.5) (622) (2.5) (610) (2.5)
Other income................................... 90 0.6 266 1.0 167 0.6 152 0.6
Income before income taxes..................... 1,855 8.3 1,776 7.2 1,870 7.6 1,921 8.0
Pro forma income taxes(1)...................... 749 3.4 717 2.9 754 3.1 775 3.2
Pro forma net income(1)........................ $ 1,106 4.9% $ 1,059 4.3% $ 1,116 4.5% $ 1,146 4.8%
Pro forma earnings per share(1)................ $ 0.11 $ 0.11 $ 0.11 $ 0.12
</TABLE>

(1) For each of the periods presented, the Company was an S Corporation and,
accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for each
of the periods presented assuming the tax rate that would have applied had
the Company been taxed as a C Corporation. See "Dividend Policy and Prior S
Corporation Status" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview".

SEASONALITY
The Company's results of operations tend to vary seasonally, with the first
quarter typically generating the least amount of revenues, higher revenues in
the second and third quarters, and a decline in the fourth quarter. This
seasonality reflects the lower volume of waste during the fall and winter
months. Also, certain operating and fixed costs remain relatively constant
throughout the calendar year, which when offset by these revenues results in a
similar seasonality of operating income.
20

<PAGE>
BUSINESS
INTRODUCTION

Waste Industries is a regional solid waste services company providing solid
waste collection, transfer, recycling, processing and disposal services to
customers primarily in North Carolina and South Carolina and, to a limited
extent, in Virginia. Based on its estimates of landfill disposal tonnage in
1996, the Company believes that it controls an average of over 25% of the waste
stream in the markets it serves and approximately 13% of the total waste stream
in North Carolina and South Carolina. The Company's principal operations as of
April 30, 1997 consisted of 19 branch collection operations, 11 transfer
stations, and four recycling processing centers that serve approximately 150,000
municipal, residential, commercial and industrial locations.

Members of the senior management team founded Waste Industries in 1970 and
are recognized for their leadership roles throughout the solid waste management
industry and trade organizations. The Company's management team collectively has
over 240 years of experience in the solid waste industry and over 140 years with
the Company.
INDUSTRY OVERVIEW
According to the Environmental Business Journal, an industry trade
publication (the "EBJ"), the U.S. nonhazardous solid waste collection and
disposal industry generated estimated revenues of approximately $32.5 billion in
1995. The EBJ also reports that 21% of the solid waste industry revenue is
accounted for by approximately 5,900 private, predominately small, collection
and disposal businesses; 31% by municipal governments that provide collection
and disposal services; and 48% by publicly-traded solid waste companies.
In recent years, the solid waste collection and disposal industry has
undergone a period of significant consolidation and integration. The Company
believes that this consolidation and integration has been caused primarily by:
(i) increasingly stringent environmental regulation and enforcement resulting in
increased capital requirements for collection companies and landfill operators;
(ii) the ability of larger integrated operators to achieve certain economies of
scale; (iii) the evolution of an industry competitive model which emphasizes
providing both collection and disposal/recycling capabilities; and (iv) the
continued privatization of solid waste collection and disposal services by
municipalities and other governmental bodies and authorities. Despite the
considerable consolidation and integration that has occurred in the solid waste
industry in recent years, the Company believes the industry remains primarily
regional in nature and highly fragmented.
The increasingly stringent industry regulations, such as the Subtitle D
Regulations, have resulted in rising operating and capital costs and have caused
consolidation and acquisition activities to accelerate in the solid waste
collection and disposal industry. Many of the smaller industry participants have
found these costs difficult to bear and have decided to either close their
operations or sell them to larger operators. In addition, Subtitle D requires
more stringent engineering of solid waste landfills including liners, leachate
collection and monitoring and gas collection and monitoring. These on-going
costs are coupled with increased financial reserves from solid waste landfill
operators for closure and post-closure monitoring. As a result, the number of
solid waste landfills is declining while the size of solid waste landfills is
increasing. For example, in 1991 North Carolina had 124 municipal solid waste
landfill sites with a total capacity of less than five years, and in 1995 North
Carolina had 69 municipal solid waste landfill sites with a total capacity of
more than 10 years.
Larger integrated operators achieve economies of scale in the solid waste
collection and disposal industry through vertical integration of their
operations. These integrated companies have increased their acquisition activity
levels to expand the breadth of services and density in their market area.
Control of the waste stream in these market areas coupled with access to
significant financial resources to make acquisitions has given larger solid
waste collection and disposal companies the ability to be more cost effective
and competitive.
The evolution of the industry competitive model is forcing remaining
operators to become more efficient by establishing an integrated network of
solid waste collection operations and transfer stations through which they
secure solid waste streams for disposal. These remaining operators have dealt
with disposal issues by a variety of methods which include owning landfills,
establishing strategic relationships to secure access to landfills, or by
otherwise capturing significant waste stream volumes to gain leverage in
negotiating lower landfill fees and securing long-term contracts with high
capacity landfills on most favored pricing status terms.
In the Southeastern U.S. solid waste market, city and county governments
have historically provided a variety of solid waste services using their own
personnel. Over time, many municipalities have opted to privatize or contract
out their collection and disposal services to the private sector. Landfills,
transfer stations and incinerators located in the Company's market
21

<PAGE>
area are predominantly municipally owned. The Southeastern market is currently
undergoing significant economic and population growth. Certain of the states in
the Southeastern U.S. exceed the national average in terms of economic growth as
measured by gains in jobs, personal income and population. For example,
according to Moody's Investors Service, between 1990 and 1995, nonfarm jobs rose
an average of 2.1% per year in North Carolina compared to 1.4% for the U.S.; in
1995, North Carolina's personal income per capita grew 5.8%, the tenth largest
gain among states, and grew 6.9% in 1996; and North Carolina's population grew
10.4% between 1990 and 1996 compared to 6.7% for the U.S.
There is an increasing trend at the state and local levels to encourage
waste reduction at the source and to prohibit the disposal of certain types of
wastes, such as yard wastes and recyclable materials, at landfills. For example,
North Carolina, South Carolina and Virginia have each established the goal of
reducing by 25% the solid waste disposed of in their respective landfills. The
Company believes that these trends and laws have created significant
opportunities for solid waste services companies to provide additional recycling
services to generators of solid waste who are not otherwise able to dispose of
such waste.
STRATEGY
The Company's objective is to build the premier solid waste services
company in the Southeastern U.S. by expanding its operations and capitalizing on
its strong market presence. The Company's strategy for achieving this objective
is: (i) to generate internal growth by adding customers and services to its
existing operations; (ii) to acquire solid waste collection companies, customers
and, under appropriate circumstances, landfills in existing and new areas of its
target market; and (iii) to increase operating efficiencies and enhance
profitability in its existing and acquired operations. The Company's ability to
implement this strategy is enhanced by the experience of its senior management
team and their knowledge of and reputation in the solid waste industry. The
Company intends to implement this strategy as follows:
INTERNAL GROWTH

In order to continue to achieve strong internal growth, the Company will
focus on increasing sales penetration in current and adjacent market areas,
marketing upgraded or additional services (such as on-site solid waste
compaction) to existing customers and implementing selective price increases.
Current levels of population growth and economic development in the Southeastern
U.S. and the strong market presence should provide an opportunity for the
Company to increase revenues and market share in its region. As customers are
added in existing markets, the Company's density is improved, which should
increase the Company's collection efficiencies and profitability. The Company
has a 24-person sales force dedicated to maintaining and increasing the
Company's sales to new and existing commercial, industrial, municipal and
residential customers.

An important part of the Company's internal growth strategy is to establish
transfer stations strategically located throughout its geographic area to
improve the Company's consolidation of collected solid waste and permit the
Company to deliver the collected solid waste to landfills where the Company has
negotiated favorable volume rates with landfill operators. The Company currently
operates 11 transfer stations, two of which it owns. By operating transfer
stations, the Company engages in direct communication with municipalities
regarding waste disposal services, better positioning the Company to gain
additional business in its markets in the event any of these municipalities
privatize their solid waste operations.
EXPANSION THROUGH ACQUISITIONS
The Company's strategy for growth includes: (i) "tuck-in" and other
acquisitions of solid waste collection companies and customers in existing and
adjacent markets; (ii) the acquisition of solid waste collection companies and
customers in new markets; and (iii) the acquisition of landfills in certain
circumstances. The Company seeks to acquire companies with a significant market
presence, high service standards and an experienced management team willing to
remain with the Company.
The Company believes that numerous "tuck-in" acquisition opportunities
exist within its current market area. A "tuck-in" acquisition refers to an
acquisition in which the Company acquires a solid waste collection company, a
division of a company, or certain customers of a company located in the
Company's existing market area and integrates the acquired operations or
customers into the operations of one of the Company's existing branch
facilities. These acquisitions have become an integral part of the industry
competitive model due to the efficiencies involved. Company surveys indicate
that more than 150 entities provide collection services in North Carolina and
South Carolina, and many of these entities are suitable for acquisition by the
Company. Such acquisitions, if consummated, provide the Company opportunities to
improve market share and route density.
22

<PAGE>
As the Company enters new markets through acquisitions, it intends to
continue to implement a regional expansion strategy. The regional expansion
strategy provides the Company with a base of operations to grow internally
through price increases, providing additional services to existing customers,
adding new private and public customers and tuck-in acquisitions. The Company
can then expand its presence in the targeted region by adding solid waste
collection and transfer operations in regional markets adjacent to or contiguous
with the new location.
The Company is currently examining opportunities to expand its presence in
areas of the Southeastern U.S. other than North Carolina and South Carolina. The
Company is analyzing potential acquisitions of solid waste services operations
in Mississippi, North Carolina, South Carolina, Tennessee and Virginia.
While the Company does not currently operate any solid waste landfills, the
Company is actively engaged in identifying solid waste landfill acquisition
candidates in the Southeast. The Company believes that the successful
acquisition of landfills would provide the Company with opportunities to
integrate vertically its collection, transfer and disposal operations while
improving operating margins. Although the Company is actively engaged in
identifying these candidates, the number of candidates is limited in the
Company's current market area. Generally, the Company will evaluate a landfill
target by determining, among other things, whether access to the landfill is
economically feasible from its existing market areas either directly or through
strategically located transfer stations, expected landfill life, the potential
for landfill expansion, and current disposal costs compared with the cost to
acquire the landfill. In addition, where the acquisition of a landfill site is
either not available or not economically feasible, the Company seeks to enter
into long-term disposal contracts with facilities which are located in proximity
to its market areas.
OPERATING ENHANCEMENTS
The Company has implemented advanced management information systems,
financial controls, shared support services and benchmarking systems designed to
improve productivity, efficiency and profitability of its existing and acquired
operations. Each branch facility has on-line real time access to the Company's
financial, operating, cost and customer information. This access enables the
Company's managers to evaluate continuously the Company's performance record and
to establish benchmarks in all phases of the Company's operations. Management
utilizes these systems to: improve collection and transportation efficiencies;
enhance equipment and personnel utilization; reduce equipment acquisition and
maintenance costs; reduce disposal costs by maximizing waste streams directed to
lower cost landfills; timely monitor and collect customer accounts; and provide
current information to the Company's sales force to ensure properly structured
pricing for new customers.
Through the utilization of its systems and controls, the Company will
continue to manage its landfill disposal costs and to negotiate long-term
disposal contracts with Subtitle D landfill operators. In addition, the Company
has developed an extensive network of transfer stations which it uses to
consolidate waste streams to gain greater leverage in negotiating landfill
disposal fees. Management believes the anticipated closing of landfills in North
Carolina will provide opportunities to open more transfer stations and to gain
greater volumes of the waste stream, further enhancing the Company's negotiating
position. Currently, approximately 26% of the Company's waste volume is directed
through Company owned or operated transfer stations.
ACQUISITION PROGRAM

The Company has acquired 19 solid waste companies since 1990. The Company
believes that its reputation, decentralized management strategy and culture make
it an attractive buyer to certain solid waste collection and disposal
acquisition candidates. The Company has developed a set of financial, geographic
and management criteria designed to assist management in the evaluation of
acquisition candidates engaged in solid waste collection and disposal. These
criteria evaluate a variety of factors, including, but not limited to: (i)
historical and projected financial performance; (ii) internal rate of return,
return on assets and return on revenue; (iii) experience and reputation of the
candidate's management and customer service reputation and relationships with
the local communities; (iv) composition and size of the candidate's customer
base; (v) whether the geographic location of the candidate will enhance or
expand the Company's market area or ability to attract other acquisition
candidates; (vi) whether the acquisition will augment or increase the Company's
market share or help protect the Company's existing customer base; (vii) any
synergies gained by combining the acquisition candidate with the Company's
existing operations; and (viii) liabilities of the candidate.

Management of the Company has a proven track record in the integration of
collection company acquisitions. The Company has an established integration
procedure for newly acquired companies designed to effect a prompt and efficient
integration of the acquired business while minimizing disruption to the ongoing
business of the Company and the acquired
23

<PAGE>
business. Once a solid waste collection operation is acquired, programs designed
to improve collection and disposal routing, equipment maintenance and
utilization, employee productivity, operating efficiencies and overall
profitability are implemented. To improve an acquired business' operational
productivity, administrative efficiency and profitability, the Company applies
the same benchmarking programs and systems to the acquired business as are
employed at the Company's existing operations. The Company also solicits new
commercial, industrial and residential customers in areas within and surrounding
the markets served by the acquired collection operations as a means of further
improving operating efficiencies and increasing the volumes of solid waste
collected by the acquired operation. The Company typically attempts to retain
the acquired company's management and key employees and to decentralize
operations, while consolidating administrative and management information
systems through the Company's corporate offices.
Prior to completing an acquisition, Waste Industries performs extensive
environmental, operational, engineering, legal, human resource and financial due
diligence. All acquisitions are subject to initial evaluation and approval by
the Company's management before being recommended to the Board of Directors.
The following table sets forth the Company's acquisitions completed since
1990:

<TABLE>
<CAPTION>
YEAR
COMPANY ACQUIRED PRINCIPAL BUSINESS LOCATION MARKET AREA
<S> <C> <C> <C> <C>
Waste Management Chatanooga 1997 Commercial, Industrial Chatanooga, TN Bradley, Hamilton,
and Residential Marion, Meigs, Rhea and
Collection Sequatchie Counties, TN;
Catoosa, Chattooga,
Dade, Gordon, Murrary,
Walker and Whitfield
Counties, GA; and
Jackson County, AL
BFI Charleston 1997 Commercial, Industrial Charleston, SC Charleston County, SC
and Residential
Collection and
Recycling
BFI Raleigh-Durham 1997 Residential Collection Raleigh, NC Wake and Durham
Counties, NC
Wayco Sanitation, Inc. 1996 Residential Collection Goldsboro, NC Wayne County, NC
QA Refuse Systems, Inc. 1996 Residential Collection Wilson, NC Wilson County, NC
Asi Sanitation 1996 Residential Collection Henderson, NC Vance County, NC
Bruce Kessler 1996 Residential Collection Wake Forest, NC Wake and Franklin
Counties, NC
A Windfish Disposal Co. 1995 Commercial, Industrial Hampstead, NC Coastal Southeastern, NC
and Residential
Collection
F & M Sanitation Services, Inc. 1995 Commercial and Louisburg, NC Franklin County, NC
Residential Collection
Shaw Sanitation Services 1995 Residential Collection Raleigh, NC Wake County, NC
A-OK Home Services, Inc. 1994 Residential Collection Chapel Hill, NC Orange and Durham
Counties, NC
Kerr Lake Area Sanitation, Inc. 1994 Residential Collection Wake Forest, NC Vance and Wake Counties,
NC
Sunshine Sanitation Service -- 1994 Residential Collection Raleigh, NC Wake County, NC
East Wake Division
Chambers Development 1993 Commercial, Industrial Conway, SC Horry County, SC
Company -- Myrtle Beach-Conway and Residential
Collection
Commercial Trash Container Service 1991 Container Rental Haw River, NC Alamance County, NC
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
YEAR
COMPANY ACQUIRED PRINCIPAL BUSINESS LOCATION MARKET AREA
Thomas Sanitation, Inc. 1991 Commercial and Clinton, NC Sampson County, NC
Industrial Collection
<S> <C> <C> <C> <C>
Dependable Sanitation Services, Inc. 1990 Commercial and Goldsboro, NC Wayne County, NC
Industrial Collection
Clean Sweep, Inc. 1990 Commercial and Elizabeth City, NC Pasquotank County, NC
Industrial Collection
Joyner Services, Inc. 1990 Commercial and Fayetteville, NC Cumberland County, NC
Industrial Collection
</TABLE>

RECENT ACQUISITION DEVELOPMENTS

On April 30, 1997, the Company purchased equipment and customer contracts
related to the solid waste collection business of Browning-Ferris Industries of
South Atlantic, Inc. ("BFISA") in and around Charleston, South Carolina. The
purchase price for these assets was approximately $4.8 million. This acquisition
enables the Company to expand its operations into a new South Carolina market.
On March 21, 1997, the Company purchased equipment and customer contracts
related to the solid waste collection business of BFISA in and around Raleigh
and Durham, North Carolina. The purchase price for these assets was
approximately $782,000. This "tuck-in" acquisition increases the Company's route
density in Wake, Durham, Orange, Johnston, Franklin and Chatham counties.
The Charleston and Chattanooga acquisitions are consistent with the
Company's regional operating strategy. These acquisitions broaden the Company's
base from which it can grow both internally and through additional acquisitions.
CONTRACTS PROGRAM
The Company devotes significant resources to securing large contracts from
municipal and other governmental agencies and has been awarded approximately 68
contracts since 1992. The Company believes that opportunities for gaining larger
contracts are increasing due to trends among municipalities to privatize or
outsource solid waste services. In most cases, only larger disposal services
companies such as the Company are financially acceptable to the municipality.
Historically, in the Southeastern U.S., city and county governments have
provided a variety of solid waste services using their own personnel. Over time,
many municipalities have opted to privatize or contract out their collection and
disposal services to the private sector. Typically, these contracts are
competitively bid and have initial terms of one to five years. In bidding for
large contracts, the Company's management team draws on its experience in the
waste industry and its knowledge of local service areas in existing and target
markets. The Company engages in extensive due diligence using its advanced
management information systems and productivity and cost modeling analyses to
respond to requests for proposals to provide services. The Company's reputation
for service in the municipal market is one of its strongest marketing tools for
contract maintenance. The Company's regional managers are responsible for
managing the relationships with local governmental officials within their
respective service area and sales representatives may be assigned specific
municipalities for coverage. The Company may be required to bid for renewal of a
contract previously awarded to the Company, or in certain cases to renegotiate
the contract as a result of changed market conditions. Since 1992, the Company
has been successful in retaining more than 98% of its major contracts at the
time of renewal.
SERVICES

The Company believes that, based on its estimates of landfill tonnage in
1996, it has an average market share of over 25% in the specific markets which
it serves and an approximate 13% market share in all markets located in North
Carolina and South Carolina. The Company serves approximately 150,000
commercial, industrial and residential service locations.

<PAGE>
COMMERCIAL, INDUSTRIAL AND RESIDENTIAL WASTE SERVICES

The Company's commercial and industrial collection and disposal services
are performed under one-year to five-year service agreements, and fees are
determined by such factors as 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 in its markets for similar
service. Collection of larger volumes associated with commercial and industrial
waste streams generally helps improve the Company's operating efficiencies and,
through consolidation of these volumes, enables the Company to negotiate more
favorable disposal prices. The Company's commercial and industrial customers
utilize portable containers for storage thereby enabling the Company to service
many customers with fewer collection vehicles. Commercial and industrial
collection vehicles normally require one operator. The Company provides two to
eight cubic yard containers to commercial customers and 10 to 42 cubic yard
containers to industrial customers. As a part of the services provided by the
Company and for an additional fee under its waste services contract, stationary
compactors that compact waste prior to collection are installed on the premises
of a substantial number of large volume customers. No single commercial or
industrial contract is individually material to the Company's results of
operations.

The Company's residential solid waste collection and disposal services are
performed either on a subscription basis with individual households, or under
contracts with municipalities, homeowners associations, apartment owners or
mobile home park operators. Municipal contracts grant the Company the right to
service all or a portion of the residences in a specified community or to
provide a central repository for residential waste drop-off. The Company had 103
municipal contracts in place as of March 31, 1997. No single municipal or other
residential contract is individually material to the Company's results of
operations. Municipal contracts in the Company's market areas are typically
awarded on a competitive bid basis and thereafter on a bid or negotiated basis
and usually range in duration from one to five years. Residential contract fees
are based primarily on route density, the frequency and level of service, the
distance to the disposal or processing facility, the cost of disposal or
processing and prices charged in its markets for similar service. Municipal
collection fees are paid either by the municipalities from tax revenues or
through direct service charges to the residents receiving the service.
TRANSFER STATION SERVICES
The 11 transfer stations operated by the Company receive, compact and
transfer solid waste to larger Company-owned vehicles for transport to
landfills. The Company believes that transfer stations benefit the Company by:
(i) providing access to multiple landfills; (ii) improving utilization of
collection personnel and equipment; (iii) concentrating the waste stream to gain
leverage in negotiating for more favorable disposal rates; and (iv) building
relationships with municipalities that can lead to opportunities for additional
business in the future. The Company intends to develop, own and operate three
new transfer stations during 1997. Depending on the location, size and local
regulatory environment, transfer stations can be constructed for as little as
$150,000 for a small rural facility or as much as $1.0 million for larger sites.
The Company believes that it has obtained all permits and authorizations
necessary to operate its existing transfer stations and that each of its
existing transfer stations has been operated in compliance in all material
respects with applicable environmental regulations.

The Company operates 11 of the 29 transfer stations existing in North
Carolina and South Carolina. The Company owns two of the transfer stations it
operates, and operates the remaining nine transfer stations pursuant to
operating agreements. These operating agreements have terms ranging from annual
one-year renewals to an indefinite period. The Company generally receives a
fixed monthly operating fee for its services under these agreements, together
with a variable fee based upon the number of hauls made by the Company from the
station. Approximately 60% of waste directed to the transfer stations operated
by the Company is delivered by third parties, who pay the Company a fee based on
the tonnage delivered. Control of these third party waste streams coupled with
the Company's waste stream adds to the bargaining power exerted by the Company
in its negotiations for favorable solid waste disposal rates with landfill
operators.

RECYCLING SERVICES
Recycling involves the removal of reusable materials from the waste stream
for processing and sale in various applications. The Company believes that
recycling will continue to be an important component of local and state solid
waste management plans as a result of the public's increasing environmental
awareness and expanding regulations mandating or encouraging waste recycling.
The Company offers commercial, industrial and residential customers recycling
for office paper, cardboard, newspaper, aluminum and steel cans, plastic, glass,
pallets and yard waste. The Company operates approximately 100 convenience sites
located in 15 counties in its market area where residents can dispose of
recyclables. These
26

<PAGE>

commodities are delivered either to third party processing facilities in
exchange for a fee or to one of four Company-operated facilities for processing
prior to resale.

During the last four years, the Company has invested approximately $5
million in infrastructure to develop regionally located recycling facilities and
equipment. Through these facilities, the Company recycles office paper,
cardboard, aluminum and steel cans, plastic, glass, pallets and yard waste. In
1996, approximately 3% of the Company's waste stream was recycled. Through a
centralized effort, the Company resells recycled waste products using
commercially reasonable practices and seeks to manage commodity pricing risk by
spreading the risk among its customers.
CONVENIENCE SITES AND OTHER SPECIALIZED SERVICES
The Company is a leader in the design and marketing of innovative waste
disposal services in its markets. In 1982, the Company developed the concept of
a convenience site in response to increasing volumes of waste dumped randomly in
rural areas. Each site typically consists of a ramp for easy disposal access, a
trash compactor and trash and recycling containers. Most sites have posted
operating hours during which Company personnel assist residents with the deposit
of waste and recyclables while monitoring the types of waste deposited at the
sites. Because these convenience sites reduce the amount of trash dumped along
roads and adjacent to recreational areas, the Company believes that county and
local governments will contract for these sites to be strategically located. The
Company operates approximately 100 of these convenience sites.

In addition, the Company has increased its efforts to secure additional
contracts to manage comprehensive disposal services for large corporations and
municipalities. For example, after thorough review and evaluation, the Company
may provide a lump sum quote for handling all the waste in a Company's facility.
This would include source separating various wastes into commodities for resale
and non-recyclables for disposal. The process of sorting at the source,
processing through a compaction system and scheduling waste and recyclable
removals only when the containers are full reduces the Company's cost and
increases the operating efficiency. Furthermore, confidential documents can be
controlled throughout the process and destroyed to the customer's satisfaction.

OPERATIONS
BRANCH FACILITY STRUCTURE
The Company believes that a branch facilities structure retains
decision-making authority close to the customer, which enables it to identify
customers' needs quickly and implement cost-effective solutions. Furthermore,
the Company believes that it provides a low-overhead, highly efficient
operational structure which allows the Company to branch into geographically
contiguous markets and operate in small communities which larger competitors may
not find attractive. The Company believes that branch facilities and
decentralized management of operations provide the Company with a strategic
competitive advantage given the relatively rural nature of the Southeastern U.S.

The Company delivers its waste services from branch locations, in
contiguous service areas, which permit the Company's branch facilities to
provide back-up services and support to one another. Each manager of a branch
facility has autonomous service and decision-making authority for the local
market area. Each designated region is overseen by a regional manager, who is
typically also a manager of one of the Company's branch facilities. As of April
30, 1997, the branch network was divided into the five regions set forth below:

<TABLE>
<CAPTION>
CENTRAL SOUTH EAST WEST COASTAL
<S> <C> <C> <C> <C>
Garner, NC Wilmington, NC Wilson, NC Graham, NC Newport, NC
Durham, NC Bolivia, NC Elizabeth City, NC Greensboro, NC Jacksonville, NC
Hope Mills, NC Conway, SC Goldsboro, NC Henderson, NC
Raleigh, NC Sumter, SC Greenville, NC Oxford, NC
Charleston, SC
</TABLE>

The managerial philosophy of the Company centers on the principle that
customers' needs can best be served at the local level by a staff of
well-trained personnel led by a branch manager. Each branch manager is
responsible for implementing sales programs, maintaining service quality,
promoting safety in the branch's operations and overseeing the day-to-day
operations for the branch, including contract administration. Branch managers
also assist regional managers in identifying potential acquisition candidates.
Frequently, the branch manager is also the branch facility's sales manager; but
in larger market areas, branch facilities will have one or more sales persons.
Branch managers are compensated based on the performance of their branch. Each
branch manager reports to a regional manager, who reports directly to the
Company's Executive Vice President.
27

<PAGE>
In addition to delivering the Company's services, branch staff
responsibilities include setting up customer accounts, answering customer
questions, processing accounts payable and maintaining accurate payroll and
personnel information. Maintenance support for collection equipment is also
provided at the branch facility. The facility size, number of maintenance
personnel and capabilities are determined by the number of vehicles operated and
the type of services provided within the branch facility's market area.
On a monthly basis, the corporate and/or regional officers meet with each
branch manager to discuss and evaluate the branch operations. This evaluation is
conducted through the use of flash reports on a weekly basis at the branch and
regional levels and monthly at the corporate level. Flash reports highlight key
operating data such as man hours, overtime hours, truck hours, revenues and
extraordinary costs. These meetings are oriented to identifying trends,
opportunities and strategies in the branch facility's proximate geographic area.
Using a decentralized approach, but with strong corporate monitoring and strict
budgetary and operating guidelines and quality control standards, each branch
manager has the authority to exercise discretion in business decisions. The
Company's management information systems provide corporate management timely
oversight of branch performance.
INFORMATION TECHNOLOGIES
A cornerstone of the Company's desire to deliver responsive and
cost-effective waste services is its management information system network. Many
of the Company's information systems, controls and services are designed to
assist branch facilities' personnel in making decisions based upon centralized
information. Financial control is maintained through personnel, fiscal and
accounting policies which are established at the corporate level for
implementation at the branch locations. The Company's systems allow for
centralized billing and collection through a lock-box system, thus enhancing
cash management. An internal audit program monitors compliance with Company
policies and the benchmarks are monitored continuously using an advanced
management information system. This information system links the Company's IBM
AS400 computer to each branch using satellite technology which allows each
branch on-line, real-time financial, productivity, maintenance and customer
information.
SUPPORT SERVICES
In order to ensure focus at the branch facility level and to support branch
operations, the Company established its Support Services Team during 1995.
Support services include: (i) safety and training services; (ii) risk
management; (iii) capital expenditure evaluation; (iv) human resources services;
(v) equipment maintenance; (vi) location of most economical disposal facilities;
(vii) purchasing; (viii) sales and marketing support; (ix) productivity
analysis; (x) research and development services; and (xi) acquisition due
diligence. The Support Services Team provides significant assistance to the
branch facilities in the integration of newly acquired operations and in
securing new and retaining existing customers. Successful integration of an
acquired business is critical to achieving operational and administrative
efficiencies and improved profitability of the incremental business.
Support services include a comprehensive safety and risk management program
that has strong management support and includes strict safety rules and
policies, accident investigations, tracking and statistical analysis, employee
safety awards, branch safety committees and random facility inspections by both
corporate staff and an outside loss control specialist. Management believes that
its safety program has resulted in accident rates and insurance loss ratios that
are consistently lower than industry averages.
LANDFILL AND OTHER DISPOSAL ALTERNATIVES
Waste Industries currently utilizes approximately 60 disposal sites in the
markets it serves. The Company has historically opted to contract for landfill
services due to the availability of disposal space at favorable tipping fees in
close proximity to its current markets. In certain markets, the Company has been
able to control disposal costs by negotiating long-term disposal contracts with
Subtitle D landfill operators. In addition, the Company operates an extensive
network of transfer stations to consolidate waste streams and receive volume
discounts on disposal costs.
The Company believes that many landfills not in compliance with Subtitle D
Regulations will close in its market area in the next few years. Despite this,
the absolute volume of disposal capacity is increasing due both to the expansion
of capacity at existing landfills and the opening of new landfills. Landfill
operators are aggressively soliciting solid waste volumes to ensure cash flows
sufficient to support the expansion costs and other capital expenditures made to
achieve compliance with the provisions of Subtitle D. Management believes there
will continue to be a significant supply of low-cost disposal capacity in its
current markets and that by controlling a large volume of the waste stream it
will be able to continue to negotiate
28

<PAGE>
favorable disposal costs. The Company plans to continue to secure long-term
disposal contracts with Subtitle D landfill operators and to continue expansion
of transfer stations. Transfer stations allow the Company access to additional
disposal sites and are substantially less expensive to develop than landfills.
The Company believes that landfills that have been targeted for closure may
provide prime sites to develop transfer stations.
Although the Company does not currently own or operate a landfill site, as
the Company penetrates new markets, it may decide to acquire a landfill, develop
a landfill, or partner with an experienced landfill operator for the
acquisition, development or assumption of the operation of a landfill. In its
current markets, such action would be pursued if the Company believed that
ownership or operation of a landfill in a particular market would provide
significant cost benefits compared to its traditional system of consolidating
waste and negotiating favorable disposal rates. In a new market, the Company may
become a landfill owner or operator if that market lacks the amount of disposal
capacity that the Company has experienced in its current markets.

The Company does, however, intend to develop land clearing and inert debris
("LCID") landfills in the near future. Such development would provide the
Company an opportunity to dispose of a portion of the Company's waste stream in
its own landfill, rather than paying a third party to do so. LCID landfills can
only take limited kinds of waste (namely land-clearing and inert debris such as
trees, rocks and concrete), as opposed to traditional solid waste landfills,
which can take any kind of waste (except hazardous waste). Traditional solid
waste landfills are therefore subject to more stringent regulation than LCID
landfills. As a result, LCID landfills generally can be constructed in a
relatively short time and involve fewer regulatory hurdles compared to
traditional solid waste landfills. A portion of the net proceeds of this
offering may be used in the siting, development and construction of an LCID
landfill designed to accommodate daily disposal of approximately 175 tons of
LCID materials with an estimated disposal capacity of more than 10 years.

MARKETING AND SALES
Waste Industries markets its services locally through its regional and
branch managers and 24 direct sales representatives who focus on commercial,
industrial and residential customers. The Company also obtains new customers
from referral sources, its general reputation and local market print
advertising. Leads are also developed from a construction reporting service, new
building permits, business licenses and other public records. Additionally, each
branch facility advertises in the yellow pages and other local business print
media that cover its service area. A variety of methods are used to market
services directly to individual households. Some branch locations have dedicated
sales representatives that market residential services. The Company engages in
direct mail campaigns and door-to-door marketing and works with real estate
agents and developers to sell services to new developments. The Company recently
installed telemarketing programs to sell residential services. All Company
containers display the Company logo, name and telephone number. Additionally,
the Company attends and makes presentations at municipal and state conferences
and advertises in governmental associations' membership publications.
The Company's sales representatives visit customers on a regular basis and
make sales calls to potential new customers. These sales representatives receive
a significant portion of their compensation based upon certain incentive
formulas. The Company emphasizes providing quality services and customer
satisfaction and retention, and believes that its focus on quality service will
help retain existing and attract additional customers. Maintenance of a local
presence and identity is an important aspect of the Company's marketing plan,
and many of the Company's managers are involved in local governmental, civic and
business organizations.
The Company has a diverse customer base, with no single customer accounting
for more than 4% of the Company's revenues in 1996. The Company does not believe
that the loss of any single customer would have a material adverse effect on the
Company's results of operations.
COMPETITION
The solid waste management industry is highly competitive, very fragmented
and requires substantial labor and capital resources. Intense competition exists
within the industry not only for collection, transportation and disposal volume,
but also for acquisition candidates. The industry includes four large national
waste companies: WMX Technologies, Inc., Browning-Ferris Industries, Inc., USA
Waste Services, Inc. and Allied Waste Industries, Inc. There are several other
public companies with annual revenue in excess of $100 million, including
Republic Industries, Inc., United Waste Systems, Inc. and Superior Services,
Inc. The Company competes with a number of these and other regional and local
companies, including publicly or privately owned providers of incineration
services.
29

<PAGE>
The Company also competes with certain municipalities that operate their
own solid waste collection and disposal facilities. These municipalities may
have certain advantages over the Company due to the availability of tax revenues
and tax-exempt financing.
The Company competes for collection and recycling accounts primarily on the
basis of price and quality of its services. From time to time, competitors may
reduce the price of their services in an effort to expand market share or to win
a competitively bid municipal contract. These practices may also lead to reduced
pricing for the Company's services or the loss of business. The Company provides
a substantial portion of its residential collection services under municipal
contracts. As is generally the case in the industry, municipal contracts are
subject to periodic competitive bidding. The balance of the Company's
residential services are provided on a subscription basis.
PROPERTY AND EQUIPMENT

As of April 30, 1997, the Company owned 11 of its branch facilities which
covered in the aggregate approximately 93 acres and approximately 76,000 square
feet of space. As of April 30, 1997, the Company leased the remaining eight
facilities which covered in the aggregate approximately 39 acres and
approximately 62,000 square feet. The Company's corporate headquarters is leased
under a traditional real property lease and contains approximately 10,000 square
feet of space.

The major types of equipment used by the Company to service its customers
are (i) containers in which customers deposit their waste and (ii) vehicles for
collecting and transporting waste.
CONTAINERS
Some type of container is used in almost every service provided by the
Company, and the Company therefore has an extensive inventory on-hand or on-site
at customers' locations. The Company owns all of its containers and centrally
manages its inventory located at the branch facility level. The Company also
owns a significant number of on-site compaction containers, which provide
efficiency for high-volume solid waste generators. Container life is dependent
on the location of the container, the type of waste that is deposited into the
container and how the container is maintained. Proper maintenance of commercial
and industrial front loader and roll-off containers consists of regular
repainting, scheduled repairs and switch-outs, quality cleaning, sanding and
priming and monitoring of the container by Company employees to check for needed
repairs. Residential collection containers require minor maintenance.
COLLECTION VEHICLES
The Company utilizes a fleet of specialized collection vehicles to collect
and transport waste and to provide recycling and convenience site services. The
Company owns 89% of its transportation fleet and leases the remainder. The
Company has implemented an aggressive and reliable maintenance program to extend
the useful lives of its equipment. Preventative and long-term maintenance is
performed on regularly scheduled cycles that are more frequent than most
manufacturers' suggested schedules. Preventative maintenance is performed on
collection vehicles after every 150 to 250 hours of operation depending on its
class, and long-term maintenance (reconstruction of engines, transmissions,
etc.) is performed every four to six years. Additionally, cosmetic repairs
(painting, interior upholstery repairs) are performed as needed. The majority of
the maintenance program is done by Company personnel located in branch
facilities.
EMPLOYEES
At March 31, 1997, the Company employed 830 full-time employees. None of
the Company's employees are represented by unions, and the Company has no
knowledge of any organizational efforts among its employees. The Company has
experienced low turnover among its employees and believes that its relations
with its employees are good.
RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS
Waste Industries actively maintains an environmental and other risk
management programs appropriate for its business. The Company's environmental
risk management program includes evaluating both existing facilities, as well as
potential acquisitions, for environmental law compliance and operating
procedures. The Company also maintains a worker safety program which encourages
safe practices in the workplace. Operating practices at all existing Company
operations stress minimizing the possibility of environmental contamination and
litigation. The Company believes that all of its facilities are in compliance in
all material respects with applicable state and federal regulations.
The Company carries a range of insurance intended to protect its assets and
operations, including a commercial general liability policy and a property
damage policy. A partially or completely uninsured claim against the Company
(including
30

<PAGE>
liabilities associated with cleanup or remediation at its own facilities) if
successful and of sufficient magnitude, could have a material adverse effect on
the Company's results of operations or financial condition. Any future
difficulty in obtaining insurance could also impair the Company's ability to
secure future contracts, which may be conditioned upon the availability of
adequate insurance coverage.
Municipal solid waste collection contracts may require performance bonds or
other means of financial assurance to secure contractual performance. The
Company has not experienced difficulty in obtaining performance bonds or letters
of credit for its current operations. At March 31, 1997, the Company had
provided customers and various regulatory authorities with bonds and letters of
credit of approximately $1.3 million to secure its obligations. If the Company
were unable to obtain surety bonds or letters of credit in sufficient amounts or
at acceptable rates, it may be precluded from entering into additional municipal
solid waste collection contracts or obtaining or retaining landfill operating
permits. If the Company develops or owns landfills in the future, the Company
will attempt to obtain insurance coverage for its long-term care and final
closure obligations with respect to any such landfills.
REGULATION
INTRODUCTION
The Company is currently subject to extensive and evolving federal, state
and local environmental laws and regulations that have been enacted in response
to technological advances and increased concern over environmental issues. These
regulations not only strictly regulate the conduct of the Company's operations
but also are related directly to the demand for many of the services offered by
the Company.

The regulations affecting the Company are administered by the EPA and
various other federal, state and local environmental, zoning, health and safety
agencies. The Company believes that it is currently in substantial compliance
with applicable federal, state and local laws, permits, orders and regulations,
and it does not currently anticipate any material environmental costs (although
there can be no assurance in this regard). The Company anticipates there will
continue to be increased regulation, legislation and regulatory enforcement
actions related to the solid waste services industry. As a result, the Company
attempts to anticipate future regulatory requirements and to plan accordingly to
remain in compliance with the regulatory framework.

In order to transport waste, it is necessary for the Company to possess one
or more permits from state or local agencies. These permits also must be
periodically renewed and are subject to modification and revocation by the
issuing agency. No Company permit has ever been revoked.
In the future, the Company may expand its activities to include ownership
and operation of landfill sites. In order to develop, own or operate a landfill,
a transfer station or most other solid waste facilities, the Company is required
to go through several governmental review processes and obtain one or more
permits and often zoning or other land use approvals. Obtaining these permits
and zoning or land use approvals is difficult, time consuming and expensive and
is often opposed by various local elected officials and citizens' groups. Once
obtained, operating permits generally must be periodically renewed and are
subject to modification and revocation by the issuing agency.
If the Company is successful in acquiring or developing landfill sites, the
Company's facilities will be subject to a variety of operational, monitoring,
site maintenance, closure, post-closure and financial assurance obligations
which change from time to time and which could give rise to increased capital
expenditures and operating costs. In connection with any such landfills, it is
often necessary to expend considerable time, effort and money in complying with
the governmental review and permitting process necessary to maintain or increase
the capacity of these landfills. Governmental authorities have broad power to
enforce compliance with these laws and regulations and to obtain injunctions or
impose civil or criminal penalties in the case of violations.
The principal federal, state and local statutes and regulations applicable
to the Company's various operations are as follows:
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976
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 nonhazardous. Wastes are generally classified as hazardous if they
(i) either (a) are specifically included on a list of hazardous wastes or (b)
exhibit certain hazardous characteristics and (ii) are not specifically
designated as nonhazardous. Wastes classified as hazardous under RCRA are
subject to much stricter regulation than wastes classified as nonhazardous.
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<PAGE>
Among the wastes that are specifically designated as nonhazardous waste are
household waste and "special" waste, including items such as petroleum
contaminated soils, asbestos, foundry sand, shredder fluff and most nonhazardous
industrial waste products.
Although the company is currently not involved with transportation or
disposal of hazardous substances, the Company transported hazardous substances
in the past and may become involved with hazardous substance transportation and
disposal in the future. The EPA regulations issued under Subtitle C of RCRA
impose a comprehensive "cradle to grave" system for tracking the generation,
transportation, treatment, storage and disposal of hazardous wastes. The
Subtitle C regulations provide standards for generators, transporters and
disposers of hazardous wastes, and for the issuance of permits for sites where
such material is treated, stored or disposed. Subtitle C imposes detailed
operating, inspection, training and emergency preparedness and response
standards, as well as requirements for manifesting, record keeping and
reporting, facility closure, post-closure and financial responsibilities.
In October 1991, the EPA adopted the Subtitle D Regulations governing solid
waste landfills. The Subtitle D Regulations, which generally became effective in
October 1993, include location restrictions, facility design standards,
operating criteria, closure and post-closure requirements, financial assurance
requirements, groundwater monitoring requirements, groundwater remediation
standards and corrective action requirements. In addition, the Subtitle D
Regulations require that new landfill sites meet more stringent liner design
criteria (typically, composite soil and synthetic liners or two or more
synthetic liners) designed to keep leachate out of groundwater and have
extensive collection systems to carry away leachate for treatment prior to
disposal. Groundwater monitoring wells must also be installed at virtually all
landfills to monitor groundwater quality and, indirectly, the leachate
collection system operation. The Subtitle D Regulations also require, where
threshold test levels are present, that methane gas generated at landfills be
controlled in a manner that protects human health and the environment. Each
state is required to revise its landfill regulations to meet these requirements
or such requirements will be automatically imposed upon it by the EPA. Each
state is also required to adopt and implement a permit program or other
appropriate system to ensure that landfills within the state comply with the
Subtitle D Regulations criteria. Various states into which the Company operates
or may enter have adopted regulations or programs as stringent as, or more
stringent than, the Subtitle D Regulations.
THE FEDERAL WATER POLLUTION CONTROL ACT OF 1972
The Federal Water Pollution Control Act of 1972, as amended ("Clean Water
Act"), establishes rules regulating the discharge of pollutants from a variety
of sources, including solid waste disposal sites and transfer stations, into
waters of the U.S. If run-off from the Company's transfer stations or if run-off
or collected leachate from the Company's potentially owned or operated landfills
is discharged into streams, rivers or other surface waters, the Clean Water Act
would require the Company to apply for and obtain a discharge permit, conduct
sampling and monitoring and, under certain circumstances, reduce the quantity of
pollutants in such 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 possibly contaminated landfill storm water runoff from
flowing into surface waters. The Company believes that its facilities are in
compliance in all material respects with Clean Water Act requirements,
particularly as they apply to treatment and discharge of leachate and storm
water.
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF
1980 ("CERCLA")
CERCLA established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities from which there has been, or is
threatened, a release of any hazardous substance into the environment. CERCLA's
primary mechanism for remedying such problems is to impose 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, as well as the generators of the hazardous substances
and the transporters who arranged for disposal or transportation of the
hazardous substances. The costs of CERCLA investigation and cleanup can be very
substantial. Liability under CERCLA does not depend upon the existence or
disposal of "hazardous waste" as defined by RCRA, but can also be founded upon
the existence of even very small amounts of the more than 700 "hazardous
substances" listed by the EPA, many of which can be found in household waste. If
the Company were to be found to be a responsible party for a CERCLA cleanup, the
enforcing agency could hold the Company, or any other generator, transporter or
the owner or operator of the facility, completely responsible for all
investigative and remedial costs even if others may also be liable. CERCLA also
authorizes the imposition of a lien in favor of the U.S. upon all real property
subject to, or affected by, a remedial action for all costs for which a party is
liable. CERCLA provides a responsible party with the right to bring legal action
against other responsible parties for their allocable share of investigative and
remedial costs. The Company's ability to get others to reimburse it for
32

<PAGE>
their allocable share of such costs would be limited by the Company's ability to
find other responsible parties and prove the extent of their responsibility and
by the financial resources of such other parties.
THE CLEAN AIR ACT
The Clean Air Act provides for regulation, through state implementation of
federal requirements, of the emission of air pollutants from certain landfills
based upon the date of the landfill construction and volume per year of
emissions of regulated pollutants. The EPA has proposed new source performance
standards regulating air emissions of certain regulated pollutants (methane and
non-methane organic compounds) from municipal solid waste landfills. Landfills
located in areas with air pollution problems may be subject to even more
extensive air pollution controls and emission limitations. In addition, the EPA
has issued standards regulating the disposal of asbestos-containing materials.
Some 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.
THE OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970
OSHA establishes employer responsibilities and authorizes the promulgation
by the Occupational Safety and Health Administration of occupational health and
safety standards, including the obligation to maintain a workplace free of
recognized hazards likely to cause death or serious injury, to comply with
adopted worker protection standards, to maintain certain records, to provide
workers with required disclosures and to implement certain health and safety
training programs. Various of those promulgated standards may apply to the
Company's operations, including those standards concerning notices of hazards,
safety in excavation and demolition work, the handling of asbestos and
asbestos-containing materials, and worker training and emergency response
programs. The Company's employees are trained to respond appropriately in the
event there is an accidental spill or release of packaged asbestos-containing
materials or other regulated substances during transportation or landfill
disposal.
STATE AND LOCAL REGULATIONS
Each state in which the Company now operates or may operate in the future
has laws and regulations governing the generation, storage, treatment, handling,
transportation and disposal of solid waste, 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 Superfund 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 such
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 affecting Company operations. 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 out for bid the right to provide collection
services, and bans or other restrictions on the movement of solid wastes into a
municipality.
Certain permits and approvals may limit the types of waste that may be
accepted at a landfill or the quantity of waste that may be accepted at a
landfill during a given time period. In addition, certain permits and approvals,
as well as certain state and local regulations, may limit a landfill to
accepting waste that originates from specified geographic areas or seek to
restrict the importation of out-of-state waste or otherwise discriminate against
out-of-state waste. Generally, restrictions on the importation of out-of-state
waste have not withstood judicial challenge. However, from time to time federal
legislation is proposed which would allow individual states to prohibit the
disposal of out-of-state waste or to limit the amount of out-of-state waste that
could be imported for disposal and would require states, under certain
circumstances, to reduce the amounts of waste exported to other states. Although
such legislation has not yet been passed by Congress, if this or similar
legislation is enacted, states in which the Company operates landfills could act
to limit or prohibit the importation of out-of-state waste. Such state actions
could materially adversely affect landfills within those states that receive a
significant portion of waste originating from out-of-state.
In addition, certain states and localities may for economic or other
reasons restrict the exportation of waste from their jurisdiction or require
that a specified amount of waste be disposed of at facilities within their
jurisdiction. In 1994, the U.S. Supreme Court held unconstitutional, and
therefore invalid, a local ordinance that sought to impose flow controls on
taking waste out of the locality. However, certain state and local jurisdictions
continue to seek to enforce such restrictions and, in certain cases, the Company
may elect not to challenge such restrictions based upon various considerations.
In addition, the aforementioned proposed federal legislation would allow states
and localities to impose certain flow control restrictions.
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<PAGE>
These restrictions could result in the volume of waste going to landfills being
reduced in certain areas, which may materially adversely affect the Company's
ability to operate its landfills at their full capacity and/or affect the prices
that can be charged for landfill disposal services. These restrictions may also
result in higher disposal costs for the Company's collection operations. If the
Company were unable to pass such higher costs through to its customers, the
Company's business, financial condition and results of operations could be
materially adversely affected.
There has been an increasing trend at the state and local level 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 Company's ability to operate its facilities at their full capacity.
LEGAL PROCEEDINGS
In the normal course of its business and as a result of the extensive
governmental regulation of the waste industry, the Company may periodically
become subject to various judicial and administrative proceedings involving
federal, state or local agencies. In these proceedings, an agency may seek to
impose fines on the Company or to revoke, or to deny renewal of, an operating
permit held by the Company. In addition, the Company may become party to various
claims and suits pending for alleged damages to persons and property, alleged
violation of certain laws and for alleged liabilities arising out of matters
occurring during the normal operation of the waste management business. However,
there is no current proceeding or litigation involving the Company that it
believes will have a material adverse effect upon the Company's financial
condition or results of operations.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company as of May 14, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
Lonnie C. Poole, Jr....................... 60 Chairman, Chief Executive Officer and Director
Jim W. Perry.............................. 52 President, Chief Operating Officer and Director
Robert H. Hall............................ 50 Vice President, Chief Financial Officer, Secretary, Treasurer and Director
Henry E. Dick............................. 49 Executive Vice President
J. Gregory Poole, Jr.(1).................. 62 Director
Thomas F. Darden(2)....................... 42 Director Nominee
</TABLE>

(1) Member of the Audit and Compensation Committees.
(2) Mr. Darden has agreed to serve as a director of the Company and a member of
the Audit and Compensation Committees effective upon completion of this
offering.

Lonnie C. Poole, Jr. founded the Company in 1970 and has served as Chief
Executive Officer and Chairman of the Board of Directors of the Company since
that time. Mr. Poole holds a B.S. in Civil Engineering from North Carolina State
University and an M.B.A. from the University of North Carolina at Chapel Hill.
Mr. Poole has more than 26 years' experience in the solid waste industry. He has
served in the Environmental Industry Association, a non-profit business
association established to, among other things, inform, educate and assist its
members in cost-effective, safe and environmentally responsible management of
waste ("EIA", formerly the National Solid Waste Management Association or the
"NSWMA"), in the following positions: Chairman, Vice-Chairman, Board Member. In
addition, Mr. Poole has served in the EIA Research and Education Foundation as
Chairman and now is a member of its Board of Directors. Mr. Poole was inducted
into the EIA Hall of Fame in 1994.

Jim W. Perry joined the Company in 1971 and has served as the Company's
President and Chief Operating Officer since 1987 and as a director since 1974.
Mr. Perry holds a B.S. in Agricultural and Biological Engineering from North
Carolina State University and an M.S. in Systems Management from the University
of Southern California. Mr. Perry has more than 26 years' experience in the
solid waste industry and has received the Distinguished Service Award from the
NSWMA. In addition, Mr. Perry has served in the Carolinas Chapter of NSWMA as
Chairman and on the Membership Committee. Mr. Perry was inducted into the EIA
Hall of Fame in 1997.

Robert H. Hall joined the Company in 1978 and has served as the Company's
Chief Financial Officer, Vice President, Secretary and Treasurer since 1983 and
as a director since 1983. Mr. Hall is a Certified Public Accountant and holds a
B.S. in Business Administration from East Carolina University. Mr. Hall has more
than 18 years' experience in the solid waste industry.

Henry E. Dick has served as the Company's Executive Vice President,
responsible for all operating divisions and all sales and marketing activities,
since 1991. Prior thereto, he served in various positions, most recently as the
Company's Vice President of Sales and Marketing from 1987 to 1991. Mr. Dick
holds a B.A. in Political Science from Guilford College. Mr. Dick has more than
14 years' experience in the solid waste industry. Mr. Dick has served the
Carolinas Chapter of NSWMA as Chairman for two years, Vice-Chairman for four
years, Legislative Chairman for four years and member of the Waste Hauler's
Council. Mr. Dick was voted EIA Member of the Year for 1997.

J. Gregory Poole, Jr. an original investor in the Company in 1970, has
served as a member of the Board of Directors since 1994. Mr. Poole has been
Chairman of the Board and Chief Executive Officer of Gregory Poole Equipment
Company, a retail distributor of Caterpillar equipment, for over five years. Mr.
Poole is a member of the Board of Directors of First Union Corporation. Mr.
Poole holds a B.S. in Business Administration from the University of North
Carolina at Chapel Hill ("UNC-CH"). Mr. Poole has more than 22 years' experience
in the solid waste industry.

Thomas F. Darden has agreed to serve as a director of the Company effective
upon completion of this offering. Since 1984, Mr. Darden has served as Chairman
of Cherokee Industries, which includes Cherokee Sanford Group (a brick
manufacturing company) and a group of environmental companies, and as a
principal of Franklin Street/Fairview Capital, a private investment company.
Since 1990, Mr. Darden has twice been appointed to and currently serves on the
North Carolina Board
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<PAGE>
of Transportation. He also acts as a Trustee of the Triangle Transit Authority
and of Shaw University, and is a director of Winston Hotels, Inc. In addition,
Mr. Darden has served on the Board of Visitors and currently serves on the
Honors Advisory Board at UNC-CH. Mr. Darden holds a B.A. with Highest Honors and
an M.R.P. in Environmental Planning from UNC-CH, and a J.D. from Yale
University.
None of the executive officers, directors or other key employees of the
Company is related to any other executive officer, director or other such key
employee, except that Lonnie C. Poole, Jr. and Lonnie C. Poole, III are father
and son.
OTHER KEY EMPLOYEES
The following table sets forth certain information concerning the other key
employees of the Company as of March 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
Lonnie C. Poole, III................................................ 35 Vice President and Director of Support Services
Steven C. Goode..................................................... 47 Vice President of Marketing
Joseph W. Peacock, Jr............................................... 47 Vice President
Stephen C. Shaw..................................................... 37 Vice President of Finance and Controller
Joe H. Lowry, Jr.................................................... 42 Director of Human Resources
Ralph A. Ford....................................................... 41 Director of Risk Management
Harrell J. Auten.................................................... 49 South Regional Manager
Roger C. Davis...................................................... 53 West Regional Manager
Dallas D. Goodwin................................................... 46 Coastal Regional Manager
Richard D. Lauck.................................................... 51 Central Regional Manager
James M. Roberts.................................................... 47 Vice President, East Regional Manager
William A. Williams................................................. 51 Division Manager
</TABLE>

Lonnie C. Poole, III has served as the Company's Vice President, Director
of Support Services since 1995. From 1990 to 1995, he served as the Company's
Risk Management Director. Mr. Poole holds a B.S. in Aerospace Engineering from
North Carolina State University. Mr. Poole is the son of Lonnie C. Poole, Jr.
Mr. Poole has more than seven years' experience in the solid waste industry.
Steven C. Goode has served as Vice President of Marketing since 1995. Prior
thereto, he served in various managerial capacities for the Company, including
as Vice President from 1991 to 1995. Mr. Goode studied Business Administration
at Virginia Commonwealth University and holds an A.S. in Business Administration
from John Tyler Community College. Mr. Goode has more than 13 years' experience
in the solid waste industry.
Joseph W. Peacock, Jr. has served as Vice President of the Company since
1994. He has been employed by the Company since 1983, beginning as the parts
manager. Since that time, he has been promoted to Operations Manager, General
Manager and, in 1994, Vice President. Mr. Peacock received a business management
degree from North Carolina State University in 1974. Mr. Peacock has more than
14 years' experience in the solid waste industry.
Stephen C. Shaw has served as the Company's Controller since he joined the
Company in 1985 and as Vice President of Finance since 1991. Mr. Shaw holds a
B.S. in Business Administration from UNC-CH. Mr. Shaw has more than 12 years'
experience in the solid waste industry.
Joe H. Lowry, Jr. has served as the Company's Director of Human Resources
since he joined the Company in October 1995. Prior to joining the Company, he
worked for over 13 years for Carolina Power and Light Company, most recently as
the Senior Human Resources Representative for its Southern Division. Mr. Lowery
holds an A.S. degree from Lees-McRae College and a B.A. in Education from
Western Carolina University. Mr. Lowry has more than two years' experience in
the solid waste industry.
Ralph A. Ford has served as the Company's Risk Manager since he joined the
Company in September 1996. Prior to joining the Company, he worked for over five
years for Chambers Development Company, most recently as the Northern Region
Safety Manager following that company's merger with USA Waste in 1995. Mr. Ford
holds a B.S. in Industrial Education and an M.A. in Vocation/Industrial
Education from Tennessee State University. Mr. Ford has more than six years'
experience in the solid waste industry.
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<PAGE>
Harrell J. Auten has served as the Company's South Regional Manager since
1993. From 1991 to 1993, he owned and operated his own company, Lodal-South,
Inc. Mr. Auten holds a B.S. in Business Administration from UNC-CH. Mr. Auten
has more than 26 years' experience in the solid waste industry.
Roger C. Davis has served as the Company's West Regional Manager since
1995. Since he joined the Company in 1987, he has served in various positions,
including as Division Manager from 1990 to 1995. Mr. Davis holds a B.S. in
Business Administration from the University of New York at Albany and an A.S. in
Applied Science in Industrial Management from El Paso Community College. Mr.
Davis has more than 10 years' experience in the solid waste industry.
Dallas D. Goodwin has served as the Company's Coastal Regional Manager
since 1990. He holds a B.S. in Business Administration from Pembroke State
University and attended the North Carolina School of Banking and the Graduate
School of Retail Banking at the University of Virginia. Mr. Goodwin has more
than seven years' experience in the solid waste industry.
Richard D. Lauck has served as the Company's Central Regional Manager since
November 1995. Prior to joining the Company, Mr. Lauck worked for 14 years with
Waste Management, Inc., where he held various operational positions including
General Manager, Vice President and Region Manager. Mr. Lauck holds a B.S.
degree, specializing in Marketing, from the University of Northern Colorado and
an M.S. from Colorado State University. Mr. Lauck has more than 15 years'
experience in the solid waste industry.
James M. Roberts has served as the Company's East Regional Manager since
1990. Since he joined the Company in 1978 he has served in various positions
including Division Manager from 1985 until 1990. Mr. Roberts studied Forestry
and Business Administration at Wayne Community College. Mr. Roberts has more
than 18 years' experience in the solid waste industry.
William A. Williams has served as a Division Manager of the Company since
1978. Since joining the Company in 1973, he has served in various positions,
including Branch Manager from 1973 to 1978. Mr. Williams has more than 24 years'
experience in the solid waste industry.
BOARD COMMITTEES
The Audit Committee is responsible for recommending to the Board of
Directors the appointment of independent auditors, reviewing and approving the
scope of the annual audit activities of the auditors, approving the audit fee
payable to the auditors, reviewing audit results and approving related party
transactions. J. Gregory Poole, Jr. and Thomas F. Darden have been appointed as
the members of the Audit Committee, effective upon completion of this offering.
The Compensation Committee is responsible for reviewing and recommending to
the Board of Directors the compensation structure for the Company's directors,
officers and other managerial personnel, including salaries, bonuses,
participation in incentive compensation and benefit plans, fringe benefits,
non-cash perquisites and other forms of compensation, and will administer the
Company's stock plans. J. Gregory Poole, Jr. and Thomas F. Darden have been
appointed as the members of the Compensation Committee, effective upon
completion of this offering.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information for 1996 concerning
compensation earned by the Company's Chief Executive Officer and the Company's
other executive officers who were paid more than $100,000 in salary and bonus.
The persons named in the table are sometimes referred to herein as the "named
executive officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
1996 ANNUAL AWARDS
COMPENSATION SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS GRANTED(1) COMPENSATION(2)
<S> <C> <C> <C> <C>
Lonnie C. Poole, Jr., Chairman.................................. $219,154 $212,229 199,320 $42,019(3)
Jim W. Perry, President......................................... 197,060 148,561 96,836 40,831(3)
Robert H. Hall, CFO, Secretary and Treasurer.................... 120,467 63,669 13,456 40,610(3)
Henry E. Dick, Executive Vice President......................... 109,611 52,864 7,740 9,593
</TABLE>

(1) See "Option Grants" below.
(2) Includes profit-sharing contributions and an automobile allowance for each
of the named executive officers of $3,169 and $4,200, respectively. Includes
life insurance premiums paid by the Company on executive group policy
insurance coverage in excess of $50,000 payable to the named executive
officers or their respective families in the amounts: Mr. Poole, $1,715; Mr.
Perry, $953; Mr. Hall, $463; and Mr. Dick, $272. Also includes Company
contributions to the Company's 401(k) Plan in the following amounts: Mr.
Poole, $2,135; Mr. Perry, $1,709; Mr. Hall, $1,978; and Mr. Dick, $1,952.
(3) Includes director's fees of $30,800.
STOCK OPTIONS

OPTION GRANTS. The following table sets forth certain information with
respect to stock options granted during or with respect to 1996 to each of the
named executive officers, all of which options were granted on April 1, 1996 and
are fully vested except as noted in the footnotes to the table:

1996 INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
NUMBER OF SHARES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES PRICE PER EXPIRATION OPTION TERM(1)
NAME OPTIONS GRANTED IN 1996 SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lonnie C. Poole, Jr..................... 199,320 38.33% $5.13 3/31/01 $1,903,000 $2,669,100
Jim W. Perry (2)........................ 96,836 18.62 5.13 3/31/01 924,500 1,296,700
Robert H. Hall (3)...................... 13,456 2.59 5.13 3/31/01 128,500 180,200
Henry E. Dick (4)....................... 7,740 1.49 5.13 3/31/01 73,900 103,600
</TABLE>

(1) The potential realizable values set forth under the columns represent the
difference between the stated option exercise price and the market value of
the Common Stock based on certain assumed rates of stock price appreciation
from the assumed initial public offering price of $11.50 per share and
assuming that the options were exercised on their stated expiration date;
the potential realizable values set forth do not take into account
applicable tax and expense payments which may be associated with such option
exercises. Actual realizable value, if any, will be dependent on the future
price of the Common Stock on the actual date of exercise, which may be
earlier than the stated expiration date. The 5% and 10% assumed annualized
rates of stock price appreciation over the exercise period of the options
used in the table above are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future price of the Common Stock on any date. There is no
representation either express or implied that the stock price appreciation
rates for the Common Stock assumed for purposes of this table will actually
be achieved.

(2) Includes 20,036 shares which become exercisable on April 1, 2000.

(3) Includes 10,256 shares which become exercisable on April 1, 2000.

(4) All of these shares become exercisable on April 1, 2000.

<PAGE>
OPTION VALUES. The following table sets forth information concerning all
option exercises during the year ended December 31, 1996 and the aggregate value
of unexercised options at December 31, 1996 held by each of the named executive
officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
DOLLAR
VALUE OF
UNEXERCISED
NUMBER OF SHARES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT DECEMBER
ACQUIRED VALUE DECEMBER 31, 1996 31, 1996(2)
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE
<S> <C> <C> <C> <C> <C>
Lonnie C. Poole, Jr......................... -- $ -- 199,320 -- $ 1,269,700
Jim W. Perry................................ 8,000 38,700 76,800 20,036 489,200
Robert H. Hall.............................. 8,000 38,700 3,200 10,256 20,400
Henry E. Dick............................... 3,996 19,300 -- 11,740 --
<CAPTION>

NAME UNEXERCISABLE
<S> <C>
Lonnie C. Poole, Jr......................... $ --
Jim W. Perry................................ 127,600
Robert H. Hall.............................. 65,300
Henry E. Dick............................... 85,800
</TABLE>

(1) Fair market value of the underlying Common Stock as of the date of exercise,
minus the aggregate exercise price.
(2) Determined by subtracting the option exercise price per share of Common
Stock from the assumed initial public offering price per share of $11.50,
and multiplying by the number of shares subject to purchase upon option
exercise.
STOCK PLANS
The Company's 1997 Stock Plan (the "Stock Plan") was adopted by the
Company's Board of Directors in April 1997 and will be approved by the Company's
shareholders prior to completion of this offering. A total of 1,800,000 shares
of Common Stock have been reserved for issuance under the Stock Plan. At the
same time that the Stock Plan was adopted, the Board terminated the Company's
Employee Non-Qualified Stock Option Plan (the "Option Plan"; together with the
Stock Plan the "Plans") as to future grants. As of March 31, 1997, 1,416,972
shares of Common Stock had been issued upon exercise of options granted under
the Option Plan and options to purchase 526,000 shares of Common Stock at a
weighted average exercise price of $5.10 per share were outstanding under the
Option Plan. The Plan provides for grants of "incentive stock options," within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to employees (including officers and employee directors), and each of
the Plans provides for grants of nonstatutory options to employees and
consultants. The Stock Plan also allows for the grant of purchase rights. The
Plans are administered by the Compensation Committee of the Board of Directors.
The Stock Plan will terminate in April 2007, unless sooner terminated by the
Board of Directors.
The exercise price of incentive stock options granted under the Stock Plan
must not be less than the fair market value of the Common Stock on the date of
grant, and the exercise price of nonstatutory options under the Stock Plan must
not be less than 85% of the fair market value of the Common Stock on the date of
grant. With respect to any optionee who owns stock representing more than 10% of
the voting power of all classes of the Company's outstanding capital stock, the
exercise price of any incentive stock option must be equal to at least 110% of
the fair market value of the Common Stock on the date of grant, and the term of
the option must not exceed five years. The terms of all other options may not
exceed 10 years. The aggregate fair market value of Common Stock (determined as
of the date of the option grant) for which incentive stock options may for the
first time become exercisable by any individual in any calendar year may not
exceed $100,000.
The Company intends to file a Registration Statement on Form S-8
approximately 180 days following this offering in order to register under the
Securities Act the shares of Common Stock issuable under the Stock Plan. See
"Shares Eligible for Future Sale".
401(K) PLAN
The Company maintains an Employees' Retirement Savings Plan (the "401(k)
Plan") for employees who elect to participate. Subject to certain limitations,
participants may contribute up to 15% of their compensation on a pre-tax basis
to the 401(k) Plan and the Company may contribute matching funds in an amount
equal to 25% of each dollar up to the amount allowed by applicable federal law.
In addition, the 401(k) Plan has an annually discretionary profit sharing plan
rider where the Company makes tax deferred contributions based on eligible
employees' compensation. Amounts attributable to participant contributions under
the 401(k) Plan are fully vested at all times (with Company contributions
vesting in increments of 20% per year after the first two years of employment).
Participants are entitled to receive their vested 401(k) Plan accounts,
including investment earnings, upon death, retirement or other termination of
employment.
39

<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Effective upon completion of this offering, the Compensation Committee of
the Board of Directors will consist of J. Gregory Poole, Jr. and Thomas F.
Darden. Neither Mr. Poole nor Mr. Darden was at any time during the year ended
December 31, 1996 an officer or employee of the Company. No executive officer of
the Company serves as a member of the board of directors or compensation
committee of any entity which has one or more executive officers serving as a
member of the Company's Board of Directors of the Compensation Committee, except
that Jim W. Perry, the Company's President and Chief Operating Officer, has been
since May 1994 a director of Gregory Poole Equipment Company, Mr. Poole's
employer.
DIRECTOR COMPENSATION
In 1996, employee directors of the Company each received $30,800 as
compensation for service as members of the Board of Directors. Effective after
the completion of this offering, non-employee directors (J. Gregory Poole, Jr.,
and Thomas F. Darden) will be entitled to receive an annual retainer fee in cash
or stock of the Company equal in value to $5,000, plus $500 in cash or stock
value at the election of the individual director for attending each meeting of
the Board of Directors and each Board of Directors' committee meeting, in
addition to reimbursement of out-of-pocket expenses. Directors who are also
employees of the Company do not currently receive any compensation for serving
as directors.
LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation, as will be in effect prior to
consummation of this offering, eliminate, to the fullest extent permitted by the
North Carolina Business Corporation Act (the "Business Corporation Act"), the
personal liability of each director to the Company or its shareholders for
monetary damages for breach of duty as a director. This provision in the
Articles of Incorporation will not change a director's duty of care, but will
eliminate monetary liability for certain violation of that duty, including
violations based on grossly negligent business decisions that may include
decisions relating to attempts to change control of the Company. The provision
will not affect the availability of equitable remedies for a breach of the duty
of care, such as an action to enjoin or rescind a transaction involving a breach
of fiduciary duty; in certain circumstances, however, equitable remedies may not
be available as a practical matter. Under the Business Corporation Act, the
limitation of liability provision is ineffective against liabilities for (i)
acts or omissions that the director knew or believed at the time of the breach
to be clearly in conflict with the best interests of the Company, (ii) unlawful
distributions described in Business Corporation Act Section 55-8-33, (iii) any
transaction from which the director derived an improper personal benefit, or
(iv) acts or omissions occurring prior to the date the provision became
effective. The provision also in no way affects a director's liability under the
federal securities laws.
Also, to the fullest extent permitted by the Business Corporation Act, the
Company's Bylaws provide, in addition to the indemnification of directors and
officers otherwise provided by the Business Corporation Act, for indemnification
of the Company's current or former directors, officers, and employees against
any and all liability and litigation expense, including reasonable attorneys'
fees, arising out of their status or activities as directors, officers and
employees, except for liability or litigation expense incurred on account of
activities that were at the time known or believed by such director, officer or
employee to be clearly in conflict with the best interests of the Company.
The Company intends to obtain director and officer liability insurance with
respect to liabilities arising out of certain matters, including matters arising
under the Securities Act.
At present, there is no pending litigation or proceeding involving any
director or officer, employee or agent of the company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
40

<PAGE>
CERTAIN TRANSACTIONS
The Company performs certain management and accounting services on behalf
of Lonnie Poole's Servicenter, Inc. ("LPSC") and ECO Services, Inc. ("ECO"), for
which the Company is reimbursed for its costs for providing these services, plus
a specified percentage of net income of LPSC and ECO. LPSC is owned by the wife
and two sons of Lonnie C. Poole, Jr., one of whom, Lonnie C. Poole, III, is a
key employee of the Company, and the other of whom is an employee of the
Company. Lonnie C. Poole, Jr. is a significant shareholder of ECO, and Jim W.
Perry, Robert H. Hall, Henry E. Dick and Stephen C. Shaw are also shareholders
of ECO. In 1994, 1995 and 1996, the Company earned $26,994, $84,004 and $88,202,
respectively, under these arrangements.
In November 1986, the Company guaranteed a promissory note payable to J.
Gregory Poole, Jr. by Lonnie C. Poole, Jr., Jim W. Perry and Robert H. Hall.
This note bears interest at 7.5% per annum. Outstanding principal under this
note at December 31, 1996 was $100,000, and the note is payable in full on or
before December 31, 1997.
Lonnie C. Poole, Jr., Jim W. Perry, Robert H. Hall and J. Gregory Poole,
Jr. are each indebted to the Company for certain amounts payable in connection
with the purchase of shares of Company Common Stock and for premiums paid by the
Company on life insurance policies under a Cross Purchase Agreement which
expires upon completion of this offering. These debts bear interest at 7.5% per
annum and are payable in full on demand. Outstanding amounts of such
indebtedness at December 31, 1996 were: Lonnie C. Poole, Jr., $131,316; Mr.
Perry, $33,714; Mr. Hall, $32,094; and J. Gregory Poole, Jr., $43,767.
In each of 1993 and 1995, the Company loaned $100,000 to ECO under demand
notes bearing interest at 5.5% and 7.19%, respectively. As of December 31, 1996,
ECO owed the Company approximately $206,500 in principal and accrued interest on
these notes.
In February 1997, the Company purchased 37 acres of land from the Cherokee
Sanford Group, of which Company director nominee Thomas F. Darden is Chairman
and a significant shareholder, for $62,253, which the Company believes
represented fair market value at that time.
The Company has adopted a policy that all future transactions between the
Company and its executive officers, directors and other affiliates must be
approved by a majority of the members of the Company's Board of Directors and by
a majority of the disinterested members of the Company's Board of Directors, and
must be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
41

<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information, as of the date of this
Prospectus, with respect to the beneficial ownership of the Common Stock by: (i)
each person or entity known by the Company to own beneficially 5% or more of the
outstanding Common Stock; (ii) each director, director nominee and named
executive officer of the Company; and (iii) the Company's executive officers and
directors as a group. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options to purchase Common Stock held by that person that are
currently exercisable, or will become exercisable within 60 days after the date
of this Prospectus, are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Unless otherwise noted, each person has sole investment and voting power
with respect to the shares indicated (subject to applicable marital property
laws).

<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED BEFORE OFFERING SHARES OFFERED OWNED AFTER OFFERING
NAME NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
Lonnie C. Poole, Jr. (1).................................... 6,531,773 66.7% 181,600 6,350,173 55.7%
Jim W. Perry (2)............................................ 1,758,313 18.2 181,600 1,576,713 14.0
Robert H. Hall (3).......................................... 81,879 * -- 81,879 *
Henry E. Dick............................................... 11,432 * -- 11,432 *
J. Gregory Poole, Jr. (4)................................... 817,480 8.5 181,600 635,880 5.7
Thomas F. Darden............................................ -- * -- -- *
Lonnie C. Poole, III (5).................................... 2,362,226 24.4 -- 2,362,226 21.0
Scott J. Poole (6).......................................... 2,354,346 24.4 -- 2,354,346 20.9
All directors and executive officers as a group (5 persons)
(7)....................................................... 9,200,877 93.1 544,800 8,656,077 75.3
</TABLE>

* Less than 1%.

(1) Includes (i) an aggregate of 5,178,518 shares held by three grantor trusts
of which Lonnie C. Poole, III and Scott J. Poole, Mr. Poole's children, are
the beneficiaries, (ii) 181,600 shares held by a limited partnership, the
limited partner of which is a charitable trust providing Mr. Poole's wife
income for 12 years, after which his sons (who are also the general partners
of the limited partnership) will become the trust's income beneficiaries,
and (iii) 199,320 shares subject to options to buy Common Stock.

(2) Includes 76,800 shares subject to options to purchase Common Stock.

(3) Includes 3,200 shares subject to options to purchase Common Stock.

(4) Includes an aggregate of 540,000 shares held by Mr. Poole's three children
and an aggregate of 2,520 shares held by Mr. Poole's children as custodian
for his three grandchildren, as to all of which shares Mr. Poole disclaims
beneficial ownership.

(5) Includes (i) 60,280 shares subject to options to purchase Common Stock, (ii)
989,260 shares held by a trust of which Mr. Poole is a co-trustee and
beneficiary, and (iii) 989,258 shares held by a trust of which Mr. Poole is
a beneficiary with shared investment power.

(6) Includes (i) 60,400 shares subject to options to purchase Common Stock, (ii)
989,260 shares held by a trust of which Mr. Poole is a co-trustee and
beneficiary, and (iii) 989,258 shares held by a trust of which Mr. Poole is
a beneficiary with shared investment power.

(7) See footnotes (1) through (4)

<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL
Immediately prior to the issuance of the shares offered hereby, the
authorized capital of the Company will consist of 80,000,000 shares of Common
Stock, no par value per share, and 10,000,000 shares of undesignated Preferred
Stock, par value $0.01 per share.
COMMON STOCK
As of March 31, 1997, assuming no exercise of options, there were 9,600,157
shares of Common Stock outstanding, held of record by 19 shareholders. The
holders of the Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Holders of the Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in all assets remaining after payment of all
liabilities. The outstanding shares of the Common Stock are fully paid and
nonassessable. No preemptive rights, conversion rights, redemption rights or
sinking fund provisions are applicable to the Common Stock.
PREFERRED STOCK
Upon the consummation of this offering, no shares of Preferred Stock will
be outstanding. The Company's Board of Directors is authorized, without further
shareholder action, to issue Preferred Stock in one or more series and to fix
the voting rights, liquidation preferences, dividend rights, repurchase rights,
conversion rights, redemption rights and terms, including sinking fund
provisions, and certain other rights and preferences, of the Preferred Stock.
Although there is no current intention to do so, the Board of Directors of the
Company may, without shareholder approval, issue shares of a class or series of
Preferred Stock with voting and conversion rights which could adversely affect
the voting power or dividend rights of the holders of Common Stock and may have
the effect of delaying, deferring or preventing a change in control of the
Company.
CERTAIN STATUTORY AND OTHER PROVISIONS
STATUTORY PROVISIONS
The North Carolina Business Corporation Act contains a "Shareholder
Protection Act" which, with certain exceptions discussed below, requires
approval of certain business combinations between a North Carolina corporation
and any beneficial holder of more than 20% of the voting shares of the
corporation by the holders of at least 95% of the voting shares of the
corporation. Business combinations subject to this approval requirement include
any merger or consolidation of the corporation with or into any other
corporation, the sale or lease of all or any substantial part of the
corporation's assets to, or any payment, sale or lease to the corporation or any
subsidiary thereof in exchange for securities of the corporation of any assets
(except assets having an aggregate fair market value of less than $5 million) of
any other entity. The principal exception to the special voting requirement
applies to business combinations that satisfy various complex statutory
provisions, including provisions relating to the fairness of the price and the
constituency of the Board of Directors. In addition, the special voting
requirement shall not be applicable to any corporation if (i) the corporation
was not a public corporation at the time such other entity acquired in excess of
10% of the voting shares; (ii) the corporation adopted an amendment to its
bylaws or provided in its original articles of incorporation providing that the
provisions shall not apply to it in accordance with the statute; or (iii) the
business combination in question was the subject of an existing agreement of the
corporation on April 23, 1987. In addition, corporations with fewer than 2,000
shareholders of record and those whose stock is not listed on a national
securities exchange are exempt from the special voting requirement. The Company
has not "opted out" of the Shareholder Protection Act.
Certain North Carolina public corporations are also subject to "The North
Carolina Control Share Acquisition Act". This law provides that shares acquired
in a transaction that would cause the acquiring person's voting strength to meet
or exceed any of three thresholds (20%, 33.3% or a majority) of voting power
have no voting rights unless granted by a majority vote of all the outstanding
shares of the corporation (not including interested shares) entitled to vote for
the election of directors. "Interested shares" means the shares of a corporation
beneficially owned by (i) any person who has acquired or proposes to acquire
control shares in a control share acquisition; (ii) any officer of the
corporation; or (iii) any employee of the covered corporation who is also a
director of the corporation. This provision empowers an acquiring person to
require the North Carolina corporation to hold a special meeting of shareholders
to consider the matter within 50 days of its request. The Company has not "opted
out" of The North Carolina Control Share Acquisition Act.
These provisions were designed to deter certain takeovers of North Carolina
corporations.
TRANSFER AGENT AND REGISTRAR
The transfer agent for the Common Stock will be Continental Stock Transfer
& Trust Company, New York, New York.
43

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 11,205,357 shares
of Common Stock outstanding. All of the shares offered hereby will be freely
saleable in the public market after completion of this offering, unless acquired
by affiliates of the Company. All of the shares outstanding prior to completion
of this offering are subject to contractual restrictions which prohibit the
shareholder from selling or otherwise disposing of shares for a period of 180
days after the date of this Prospectus without the consent of Alex. Brown & Sons
Incorporated. The Selling Shareholders may not sell or otherwise dispose of any
of their remaining shares for a period of 180 days after the date of this
Prospectus without the prior written consent of Alex. Brown & Sons Incorporated.
After this 180-day period expires, 519,252 of the currently outstanding shares
will be freely saleable in the public market, and 8,536,105 shares will be
eligible for resale in the public market under Rule 144 promulgated under the
Securities Act. Upon the expiration of the 180-day period, shares of Common
Stock then held by affiliates of the Company will be subject to certain volume
and other limitations discussed below under Rule 144.
The Company has agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock for a period of 180 days after the date of this
Prospectus, except as consideration for business acquisitions or upon exercise
of currently outstanding stock options, without the prior written consent of
Alex. Brown & Sons Incorporated.
In general, under Rule 144 as amended effective April 29, 1997, a person
(or persons whose shares are aggregated), including persons who may be deemed
affiliates of the Company, who has beneficially owned his or her shares for at
least one year is entitled to sell within any three-month period that number of
shares which does not exceed the greater of 1% of the outstanding shares of the
Common Stock (112,054 shares after completion of this offering) or the average
weekly trading volume during the four calendar weeks preceding each such sale.
Sales under Rule 144 also are subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. Under Rule 144(k), a person (or persons whose shares are aggregated)
who is not or has not been deemed an "affiliate" of the Company for at least
three months and who has beneficially owned his or her shares for at least two
years would be entitled to sell such shares under Rule 144 without regard to the
limitations discussed above.
There has been no public market for the Common Stock prior to this offering
and no assurance can be given that an active public market for the Common Stock
will develop or be sustained after completion of this offering. Sales of
substantial amounts of the Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock
and could impair the Company's ability to raise capital or effect acquisitions
through the issuance of Common Stock.
44

<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated and Deutsche Morgan Grenfell Inc., have
severally agreed to purchase from the Company and the Selling Shareholders the
following respective number of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Alex. Brown & Sons Incorporated..................................................................................
Deutsche Morgan Grenfell Inc.....................................................................................
Total.................................................................................................. 2,150,000
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of the Common Stock offered hereby,
if any of such shares are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain other dealers. After commencement of the initial public
offering, the offering price and other selling terms may be changed by the
Representatives of the Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 322,500
additional shares of Common Stock at the initial public offering price less the
underwriting discounts, and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares offered by the
Company hereunder, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters. The Underwriters may exercise such option
only to cover overallotments made in connection with the sale of the Common
Stock offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 2,150,000 shares are being
offered.
To facilitate the offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with the offering, thereby creating a short position
in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the syndicate of Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Company has agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock for a period of 180 days after the date of this
Prospectus, except as consideration for business acquisitions or upon exercise
of currently outstanding stock options, without the prior written consent of
Alex. Brown & Sons Incorporated. All shareholders, directors and officers of the
Company have agreed not to sell, contract to sell or otherwise dispose of any
shares of Common Stock for a period of 180 days and all Selling Shareholders in
this offering have agreed not to sell, contract to sell or otherwise dispose
45

<PAGE>

of any shares of Common Stock for a period of 180 days, in either case without
the prior written consent of Alex. Brown & Sons Incorporated. See "Shares
Eligible For Future Sale".

The Representatives of the Underwriters have advised the Company that they
do not intend to confirm sales to any account over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined by negotiations between the Company and the
Representatives of the Underwriters. Among the factors to be considered in such
negotiations are prevailing market conditions, the results of operations of the
Company in recent periods, the market capitalizations and stages of development
of other companies which the Company and the Representatives believe to be
comparable to the Company, estimates of the business potential of the Company,
the present state of the Company's development and other factors deemed
relevant.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company and the Selling Shareholders by Wyrick
Robbins Yates & Ponton LLP, Raleigh, North Carolina. Certain legal matters
related to this offering will be passed upon for the Underwriters by Piper &
Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The financial statements as of December 31, 1996 and 1995 and for each of
the three years in the period ended December 31, 1996 included herein and in the
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and in the Registration
Statement, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part) on
Form S-1 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in the
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and such exhibits and schedules which may be obtained
from the Commission at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's web-site is
http:\\www.sec.gov.
46

<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report........................................................................................... F-2
Balance Sheets as of December 31, 1995 and 1996, and March 31, 1997 (unaudited)........................................ F-3
Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996, and the Three Months Ended March 31,
1996 and 1997 (unaudited)............................................................................................ F-4
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996, and the Three Months Ended March 31,
1996 and 1997 (unaudited)............................................................................................ F-5
Notes to Financial Statements.......................................................................................... F-6
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT
WASTE INDUSTRIES, INC.:
We have audited the accompanying balance sheets of Waste Industries, Inc.
(the "Company") as of December 31, 1995 and 1996 and the related statements of
operations and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1996
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Raleigh, North Carolina
May 5, 1997
F-2

<PAGE>
WASTE INDUSTRIES, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, 1997
DECEMBER 31, PRO FORMA
1995 1996 ACTUAL (NOTE 1)
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 2,071,010 $ 1,803,438 $ 578,034 $ 578,034
Accounts receivable -- trade, less allowance for uncollectible
accounts (1995 -- $487,000; 1996 -- $616,000;
1997 -- $659,000).......................................... 7,789,421 9,236,071 8,948,079 8,948,079
Inventories................................................... 1,537,527 1,973,810 1,124,680 1,124,680
Prepaid expenses and other current assets..................... 323,798 414,533 485,629 485,629
Total current assets..................................... 11,721,756 13,427,852 11,136,422 11,136,422
PROPERTY AND EQUIPMENT, net (Notes 2 and 3)..................... 33,742,448 39,841,929 43,169,474 43,169,474
RECEIVABLES -- AFFILIATED COMPANIES (Note 7).................... 1,113,534 1,175,205 1,178,115 1,178,115
INTANGIBLE ASSETS (Notes 2 and 4)............................... 3,815,986 3,698,963 4,242,268 4,242,268
OTHER NONCURRENT ASSETS......................................... 279,013 923,926 934,420 934,420
TOTAL ASSETS.................................................... $ 50,672,737 $ 59,067,875 $60,660,699 $60,660,699
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Notes 2 and 4).......... $ 1,274,147 $ 155,492 $ 102,367 $ 102,367
Accounts payable -- trade..................................... 4,668,916 5,637,730 4,984,512 4,984,512
Accrued expenses and other liabilities (Note 8)............... 2,950,440 3,300,354 2,713,773 2,713,773
Accrued distributions (Note 6)................................ -- 1,820,000 973,000 2,453,000
Notes payable to shareholders................................. 318,884 -- -- --
Deferred revenue.............................................. 708,405 913,389 948,538 948,538
Total current liabilities................................ 9,920,792 11,826,965 9,722,190 11,202,190
LONG-TERM DEBT, net of current maturities (Notes 2 and 4)....... 27,193,392 33,070,228 34,853,139 34,853,139
COMMITMENTS AND CONTINGENCIES (Notes 5, 7 and 9)
SHAREHOLDERS' EQUITY (Notes 6, 7 and 11):
Preferred stock............................................... -- -- -- --
Common stock (Adjusted -- Note 6)............................. 91,648 91,989 91,989 91,989
Additional capital............................................ 1,367,629 -- -- --
Retained earnings............................................. 12,614,570 14,319,583 16,240,253 14,760,253
Shareholders' loans (Note 7).................................. (515,294) (240,890) (246,872) (246,872)
Total shareholders' equity............................... 13,558,553 14,170,682 16,085,370 14,605,370
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...................... $ 50,672,737 $ 59,067,875 $60,660,699 $60,660,699
</TABLE>

See Notes to Financial Statements.
F-3

<PAGE>
WASTE INDUSTRIES, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES....................................... $66,836,800 $82,688,189 $92,886,657 $20,566,047 $24,124,394
OPERATING COSTS AND EXPENSES:
Cost of operations (Notes 5, 7 and 9)........ 37,853,324 50,395,070 59,337,276 13,104,771 14,838,115
Selling, general and administrative
(Note 8).................................. 15,143,383 15,467,274 16,328,694 3,606,229 4,587,790
Depreciation and amortization................ 7,615,395 8,216,715 8,471,415 1,982,020 2,319,377
Total operating costs and expenses...... 60,612,102 74,079,059 84,137,385 18,693,020 21,745,282
OPERATING INCOME............................... 6,224,698 8,609,130 8,749,272 1,873,027 2,379,112
OTHER EXPENSE (INCOME):
Interest expense (Note 4).................... 1,920,008 2,121,679 2,395,281 497,096 609,763
Interest income.............................. (180,360 ) (318,104 ) (188,563 ) (25,041) (47,541)
Other (Note 7)............................... (107,549 ) (154,869 ) (506,332 ) (146,269) (103,780)
Total other expense (income)............ 1,632,099 1,648,706 1,700,386 325,786 458,442
NET INCOME -- Historical Basis................. $ 4,592,599 $ 6,960,424 $ 7,048,886 $ 1,547,241 $ 1,920,670
PRO FORMA INCOME BEFORE INCOME TAXES (Note
12).......................................... $ 4,592,599 $ 6,960,424 $ 7,048,886 $ 1,547,241 $ 1,920,670
PRO FORMA INCOME TAXES (Note 12)............... 1,865,000 2,790,000 2,845,000 625,000 775,000
PRO FORMA NET INCOME (Note 12)................. $ 2,727,599 $ 4,170,424 $ 4,203,886 $ 922,241 $ 1,145,670
PRO FORMA PRIMARY EARNINGS PER COMMON SHARE
(Adjusted -- Notes 6
and 12)...................................... $ 0.28 $ 0.43 $ 0.43 $ 0.10 $ 0.12
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Adjusted --
Note 6)...................................... 9,596,265 9,599,203 9,820,853 9,604,657 9,820,853
</TABLE>

See Notes to Financial Statements.
F-4

<PAGE>
WASTE INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES:
Net income -- historical basis................. $ 4,592,599 $ 6,960,424 $ 7,048,886 $ 1,547,241 $ 1,920,670
Adjustments to reconcile net income --
historical basis
to net cash provided by operating
activities:
Depreciation and amortization............... 7,615,395 8,216,715 8,521,900 1,982,020 2,319,377
Gain on sale of property and equipment...... (61,124) (38,999) (175,171) 1,757 (50,416)
Changes in assets and liabilities, net of
effects
from acquisitions of related businesses:
Accounts receivable -- trade.............. 601,996 (1,071,172) (1,446,650) (1,720,132) 289,672
Inventories............................... (334,147) (581,863) (436,283) 300,748 849,130
Prepaid and other current assets.......... (365,012) 440,568 (90,735) (200,971) (71,096)
Accounts payable -- trade................. 315,615 1,194,074 968,814 2,850,581 (653,218)
Accrued expenses and other liabilities.... 477,103 589,958 349,914 (613,813) (586,581)
Deferred revenue.......................... 91,040 77,756 204,984 280,858 35,149
Net cash provided by operating
activites.............................. 12,933,465 15,787,461 14,945,659 4,428,289 4,052,687
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment... 1,151,612 1,190,004 715,180 216,531 178,129
Purchases of property and equipment............ (10,563,294) (8,141,576) (14,411,360) (5,860,216) (5,497,489)
Acquisition of related business................ (317,500) (1,685,000) (268,927) -- (781,680)
Advances to (borrowings from) affiliates....... (1,509,752) 179,135 (61,671) (382,658) (2,910)
Collections on other long-term receivables..... 3,730 2,145 2,317 -- --
Other noncurrent assets........................ (200,609) (100,818) (769,145) (33,763) (50,940)
Net cash used in investing activities.. (11,435,813) (8,556,110) (14,793,606) (6,060,106) (6,154,890)
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt....... 5,530,000 5,380,000 35,618,225 2,818,225 1,802,113
Principal payments on long-term debt........... (5,971,614) (6,885,033) (31,102,209) (1,720,422) (72,327)
Proceeds from issuance of notes payable to
shareholders................................ -- 286,620 -- -- --
Repayments of notes payable to shareholders.... (11,908) -- (318,884) (318,884) --
Repayments of notes receivable from
shareholders................................ -- 820,376 274,404 245,575 (5,982)
Advances to shareholders....................... (101,255) -- -- -- --
Proceeds from exercise of stock options........ 345,293 -- 44,756 44,756 --
Changes in partners' capital................... 390,714 (900,233) (1,816,215) (45,695) --
Cash distributions to shareholders............. (1,626,355) (5,901,461) (3,119,702) (749,179) (847,005)
Net cash used in financing activities.. (1,445,125) (7,199,731) (419,625) 274,376 876,799
NET INCREASE (DECREASE).......................... 52,527 31,620 (267,572) (1,357,441) (1,225,404)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD... 1,986,863 2,039,390 2,071,010 2,071,010 1,803,438
CASH AND CASH EQUIVALENTS, END OF PERIOD......... $ 2,039,390 $ 2,071,010 $ 1,803,438 $ 713,569 $ 578,034
</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
<TABLE>
<S> <C> <C> <C> <C> <C>
Cash paid for interest........................... $ 1,941,760 $ 2,045,375 $ 1,931,808 $ 84,603 $ 513,069
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS:
During 1994 the Company refinanced a capital lease obligation of $443,984. The
net book value of the equipment which was disposed of was $469,435. A loss of
$25,451 was recognized on the transaction.
At December 31, 1996, the Company accrued $1,820,000 of distributions to
shareholders as partial reimbursement for 1996 taxes owed.
See Notes to Financial Statements.
F-5

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
BUSINESS OPERATIONS -- Waste Industries, Inc. (the "Company") is a regional
solid waste services company providing solid waste collection, transfer,
recycling, processing and disposal services to customers in North Carolina and
South Carolina and waste collection services in Virginia.
In April 1996, the Company exchanged 2,118,457 shares of its common stock
on a share-for-share basis for all of the outstanding common stock of the
following companies affiliated through common ownership: Waste Enterprises,
Inc., Waste Industries South, Inc., Waste Industries West, Inc., Waste
Industries East, Inc., Kabco, Inc., Conway 378, Inc. and AmLease, Inc. As a
result, common stock increased by $18,208, treasury stock decreased by $85,098
and additional capital decreased by $103,306. Simultaneously, certain real
estate properties previously leased to the Company by Property Management Group
("PMG"), a partnership of certain shareholders of the Company, were transferred
to the Company. In connection with this transfer, a distribution of $1,686,021
was made to PMG. As a result, retained earnings decreased by $404,171 and
additional capital decreased by $1,281,850.

The controlling shareholder of the Company owned a controlling interest in
each of the companies and partnership that were combined. Additionally, the
Company's other shareholders held substantially the same pro rata ownership in
each of these companies and partnership. Accordingly, the assets and liabilities
transferred are accounted for at historical cost in a manner similar to that in
pooling of interests accounting. The Company's financial statements have been
restated to include the accounts and operations for all periods prior to the
merger.

SIGNIFICANT ACCOUNTING POLICIES -- The significant accounting policies are
summarized below:

a. UNAUDITED AND PRO FORMA FINANCIAL STATEMENTS -- In the opinion of
management, the statements of operations and cash flows for the three months
ended March 31, 1996 and 1997 and the balance sheet as of March 31, 1997 include
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations and cash flows
for the periods then ended in accordance with generally accepted accounting
principles. Pro forma amounts give effect to the liability for shareholder
distributions of approximately $1,480,000, which represent the Company's
undistributed taxable earnings for 1997 as a result of the Company's termination
of its S Corporation election May 9, 1997.

b. CASH AND CASH EQUIVALENTS -- For the purposes of presentation in the
financial statements, cash equivalents include highly liquid investments with
original maturities of three months or less.

c. INVENTORIES -- Inventories consist of (i) trucks and containers held for
sale and (ii) operating materials and supplies held for use and are stated at
the lower of cost or market using the specific-identification method of costing.

d. PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation expense is calculated on the straight-line method. Estimated useful
lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment............................................................... 3 to 10 years
Furniture, fixtures and vehicles...................................................... 3 to 10 years
Building.............................................................................. 30 years
</TABLE>

Maintenance and repair costs are charged to expense as incurred.

e. INTANGIBLE ASSETS -- Intangible assets primarily consist of goodwill,
customer lists and noncompete and consulting agreements acquired in business
combinations. Intangible assets are net of accumulated amortization and consist
of the following:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Goodwill.................................................................. $2,794,277 $2,878,089
Customer lists............................................................ 228,950 184,269
Noncompete and consulting agreements...................................... 792,759 636,605
Intangible assets......................................................... $3,815,986 $3,698,963
</TABLE>

F-6

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES -- Continued

Customer lists are amortized using the straight-line method over 5 to 10
years. Noncompete and consulting agreements are amortized using the
straight-line method over the lives of the agreements. Goodwill is amortized
using the straight-line method, generally over 15 to 20 years.

Should events or circumstances occur subsequent to the acquisition of a
business which bring into question the realizable value or impairment of the
related goodwill, the Company will evaluate the remaining useful life and
balance of goodwill and make appropriate adjustments in accordance with
Statement of Financial Accounting Standards No. 121.

f. OTHER NONCURRENT ASSETS -- Included in other noncurrent assets are debt
issue costs relating to the new borrowings (see Note 4). Debt issue costs are
amortized to interest expense using the effective interest method over the life
of the related debt.
g. LONG-LIVED ASSETS -- As required, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF." Accordingly,
long-lived assets are reviewed for impairment on a market-by-market basis
whenever events or changes in the circumstances indicate that the carrying
amount of an asset may not be recoverable. If an evaluation is required, the
projected future undiscounted future cash flows attributable to each market
would be compared to the carrying value of the long-lived assets (including an
allocation of goodwill, if appropriate) of that market if a write-down to fair
value is required. The Company also evaluates the remaining useful lives to
determine whether events and circumstances warrant revised estimates of such
lives.

h. PRO FORMA PRIMARY EARNINGS PER SHARE -- Pro forma primary earnings per
share computations are based on the weighted-average common stock outstanding
and include the dilutive effect of stock options using the treasury stock method
(using the estimated offering price of $11.50 per share). Common stock
outstanding used to compute the weighted-average shares was retroactively
adjusted for the exchange of shares resulting from the merger of affiliated
companies, for the conversion of nonvoting to voting stock, and for the
1-for-2.5 reverse stock split as discussed in Note 6. Fully diluted earnings per
share are not presented as potentially dilutive securities, in the aggregate,
dilute primary earnings per share by less than three percent.

i. STOCK OPTION PLAN -- The Company accounts for employee stock
compensation in accordance with Accounting Principles Board Opinion ("APB") No.
25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES." Under APB No. 25, the total
compensation expense is equal to the difference between the award's exercise
price and the intrinsic value at the measurement date, which is the first date
that both the exercise price and number of shares to be issued is known.
SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION," is effective
January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are, however, permitted to continue to apply APB
No. 25. The Company will continue to apply APB No. 25 to its stock-based
compensation awards to employees and will disclose the required pro forma effect
on net income and earnings per share.
j. DEFERRED REVENUE -- Deferred revenue consists of collection fees billed
in advance. Revenue is recognized as services are provided.
k. INCOME TAXES -- The Company has elected S Corporation status, whereby
the corporation is exempt from all federal and state income taxes and its
individual shareholders are taxed on their pro rata share of corporate taxable
income.
l. USE OF ESTIMATES -- In preparing financial statements that conform with
generally accepted accounting principles, management must use estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and amounts of revenue and expenses reflected during the reporting
period. Actual results could differ from those estimates.
m. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED -- In February
1997, SFAS No. 128, "EARNINGS PER SHARE," was issued. This Statement establishes
standards for computing and presenting earnings per share (EPS) and applies
F-7

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES -- Continued
to entities with publicly held common stock or potential common stock. This
Statement simplifies the standards for computing earnings per share previously
found in APB No. 15, "EARNINGS PER SHARE," and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. The adoption of this Statement will not have a
material impact on the Company's financial statements.

In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
("SOP") 96-1, ENVIRONMENTAL REMEDIATION LIABILITIES. SOP 96-1 provides
authoritative guidance on specific accounting issues that are present in the
recognition, measurement, display and disclosure of environmental remediation
liabilities. The provisions of this SOP are effective for fiscal years beginning
after December 15, 1996. The Company's management does not believe the adoption
of this statement will have a material impact on the Company's financial
statements.

n. RECLASSIFICATIONS -- Certain 1994 and 1995 financial statement amounts
have been reclassified to conform with the 1996 presentation.
2. ACQUISITIONS
During 1995 and 1996, the Company acquired the net assets of various waste
collection and disposal services businesses to expand its operations. The assets
acquired were accounted for by the purchase method of accounting and include the
following:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Property and equipment.............................................................................. $1,156,312 $150,620
Noncompete and consulting agreements................................................................ 274,000 105,000
Customer lists and goodwill......................................................................... 468,841 255,472
Total assets acquired........................................................................ 1,899,153 511,092
Less obligations financed under notes payable....................................................... 214,153 242,165
Net acquisition cost................................................................................ $1,685,000 $268,927
</TABLE>

Related to the above acquisitions, the Company entered into noncompete
agreements with the former owners of these businesses. These amounts are being
amortized on a straight-line basis over the lives of the agreements (5 years).
F-8

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1995 and
1996 and March 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996 1997
<S> <C> <C> <C>
Land and buildings...................................... $ 7,159,065 $ 7,842,952 $ 7,897,958
Machinery and equipment................................. 64,193,419 76,508,723 80,890,731
Furniture, fixtures and vehicles........................ 1,611,249 1,857,843 2,062,794
Total property and equipment..................... 72,963,733 86,209,518 90,851,483
Less accumulated depreciation........................... 39,221,285 46,367,589 47,682,009
Property and equipment, net............................. $ 33,742,448 $ 39,841,929 $43,169,474
</TABLE>

4. NOTES PAYABLE
Notes payable consist of the following at December 31, 1995 and 1996 and
March 31, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996 1997
<S> <C> <C> <C>
Bank notes payable...................................... $ 28,179,402 $ 32,800,000 $34,602,113
Other:
Other installment notes payable, interest ranging from
1% to 7%........................................... 254,804 392,387 353,393
Present value of noncompete agreement liabilities with
the former shareholders of related businesses
acquired, due in various monthly installments through
1997.................................................. 33,333 33,333 --
Total notes payable.............................. 28,467,539 33,225,720 34,955,506
Less current portion.................................... 1,274,147 155,492 1,904,480
Long-term portion....................................... $ 27,193,392 $ 33,070,228 $33,051,026
</TABLE>

On April 3, 1996, the Company entered into agreements with two lenders
under which the Company may borrow up to $75,000,000. One lender authorized the
Company to borrow up to $25,000,000 under a senior unsecured promissory note and
an additional $25,000,000 under an uncommitted, senior unsecured promissory note
("shelf note"). The committed note matures on April 3, 2006 and bear an interest
rate of 7.28%. The other lender authorized the Company to borrow $20,000,000 and
$5,000,000 under two separate unsecured notes which mature on April 1, 2006 and
April 1, 1998, respectively. Both notes bear interest at the monthly London
Interbank Offered Rate (7.3125% at December 31, 1996). The Company used a
portion of these new borrowings in 1996 to repay $26,305,889 of existing bank
debt.

The note agreements provide for certain covenants and restrictions
regarding, among other things, consolidated debt and senior debt to earnings
before interest, depreciation and amortization ratios, minimum net worth and
consolidated net income requirements, as well as liens, debt and capital
expenditure limitations, as defined. At December 31, 1996, the Company was in
compliance with all covenants.
The repayment term under the note agreements is ten years; interest only is
payable for the first three years, with principal payments beginning in April
1999 and continuing for the following seven years.
F-9

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)

4. NOTES PAYABLE -- Continued

Annual aggregate principal maturities for the other notes payable for the
five fiscal years succeeding December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $ 155,492
1998........................................................... 94,182
1999........................................................... 837,349
2000........................................................... 4,744,841
2001 and thereafter............................................ 27,393,856
Total.......................................................... $33,225,720
</TABLE>

5. LEASES
OPERATING LEASES -- The future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year at December 31, 1996 follow:
<TABLE>
<S> <C>
1997............................................................ $1,505,658
1998............................................................ 1,199,891
1999............................................................ 1,060,798
2000............................................................ 645,894
2001............................................................ 213,660
Thereafter...................................................... 1,873,980
$6,499,881
</TABLE>

The total rental expense for all operating leases for the years ended
December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Buildings and sites................... $315,835 $ 420,091 $ 439,761
Trucks and equipment.................. 211,744 824,461 1,474,321
Total................................. $527,579 $1,244,552 $1,914,082
</TABLE>

Rental expense is included in cost of operations in the statements of
operations.
F-10

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
6. SHAREHOLDERS' EQUITY
Shareholders' equity consists of the following for the years ended December
31, 1994, 1995 and 1996:

<TABLE>
<CAPTION>
SHARES
$ ADDITIONAL RETAINED TREASURY
AUTHORIZED OUTSTANDING AMOUNT CAPITAL EARNINGS STOCK
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1994........................... 4,020,395 1,585,889 $60,309 $ 1,006,358 $ 8,589,363 $(85,098)
Net income................................ -- -- -- -- 4,592,599 --
Change in partners' capital............... -- -- -- 1,032,648 -- --
Exercise of stock options................. -- 1,381,168 13,131 332,162 -- --
Distributions............................. -- -- -- -- (1,626,355) --
Balance,
December 31, 1994......................... 4,020,395 2,967,057 73,440 2,371,168 11,555,607 (85,098)
Net income................................ -- -- -- -- 6,960,424 --
Change in partners' capital............... -- -- -- (900,233) -- --
Distributions............................. -- -- -- -- (5,901,461) --
Balance,
December 31, 1995......................... 4,020,395 2,967,057 73,440 1,470,935 12,614,570 (85,098)
Retroactive effect of conversion of
nonvoting common stock................. -- 14,273,001 -- -- -- --
Retroactive effect of 1-for-2.5 reverse
stock split............................ -- (9,794,162) -- -- -- --
Effect of merger of affiliates............ 75,979,605 2,118,457 18,208 (103,306) -- 85,098
Net income................................ -- -- -- -- 7,048,886 --
Change in partners' capital............... -- -- -- (1,412,044) (404,171) --
Exercise of stock options................. -- 35,804 341 44,415 -- --
Distributions............................. -- -- -- -- (4,939,702) --
Balance,
December 31, 1996......................... 80,000,000 9,600,157 91,989 -- 14,319,583 --
Net income (unaudited)...................... -- -- -- -- 1,920,670 --
Distributions (unaudited)................... -- -- -- -- (1,480,000) --
Balance,
March 31, 1997 (pro forma unaudited)...... 80,000,000 9,600,157 $91,989 $ -- $14,760,253 $ --
</TABLE>

In April 1997, the Company's Board of Directors authorized a 1-for-2.5
reverse stock split and the conversion of all nonvoting common shares to voting
common shares. The Board of Directors also approved an increase in the
authorized capital of common stock from 4,020,395 shares to 80,000,000 shares
and canceled the nonvoting common shares outstanding. The common stock
previously had a par value of $.0380286 per share and was converted to no par
common stock. All share and per share information in the financial statements
has been adjusted to give retroactive effect to the reverse stock split and
conversion of nonvoting stock.
In April 1997, the Company's Board of Directors also authorized 10,000,000
shares of $0.01 par value preferred stock. Such shares have not been issued. The
Board of Directors can establish the series, the designation and number of
shares to be issued and the rights, preferences, privileges and restrictions of
the shares of each series, and to determine the voting powers, if any, of such
shares.
Shareholder loans at December 31, 1995 and 1996 and March 31, 1997 include
$66,502, $33,169 and $33,169, respectively, for advances made to shareholders
initiated during the exercise of stock options (see Note 11). These notes bear
interest at annual rates of 7.5% and are payable in various installments.

Change in partners' capital consists of cash contributions from, or
distributions to, PMG.

F-11

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
6. SHAREHOLDERS' EQUITY -- Continued
At December 31, 1996, the Company accrued $1,820,000 of distributions to
shareholders as partial reimbursement for 1996 taxes owed.
7. RELATED PARTY TRANSACTIONS
OPERATING LEASES -- The Company leases equipment from officers of the
Company and from other partnerships and corporations controlled by these
officers. All of these leases are operating leases. Related party rental expense
was $8,300, $6,600 and $13,794 in 1994, 1995 and 1996, respectively, and is
included in cost of operations in the accompanying statements of operations.
MANAGEMENT AND ACCOUNTING SERVICES -- The Company provides management and
accounting services to other companies affiliated by common shareholder
interests (other affiliated companies). Agreements state that management and
accounting services shall be provided to such companies on an approximate cost
reimbursement basis, plus a specified percentage of net income these affiliated
companies generate. Management and accounting revenue earned from providing
services to these other affiliated companies was $26,994, $84,004 and $88,202 in
1994, 1995 and 1996, respectively, and are included in other income (expense) in
the accompanying statements of operations.
EQUIPMENT SALES AND SERVICES -- The Company sells and leases equipment and
vehicles and provides technical advice to affiliated and nonaffiliated
companies. Revenue generated from such activities is not material.
RECEIVABLES -- AFFILIATED COMPANIES -- At December 31, 1995 and 1996,
accounts receivable due from parties related by common shareholder interests
were $468,824 and $524,029, respectively. Notes receivable from other affiliated
companies were $644,710 at December 31, 1995 and 1996. The notes bear interest
at annual rates ranging from 5.5% to 7.19% and are payable on demand. These
amounts, including unpaid interest thereon of $-0- and $6,466 at December 31,
1995 and 1996, respectively, are included in receivables -- affiliated companies
in the accompanying balance sheets.
SHAREHOLDER LOANS -- Shareholder loans, included in shareholders' equity of
the accompanying balance sheets, are notes receivable (including unpaid interest
thereon) from shareholders of $448,792, $207,721 and $213,703 at December 31,
1995 and 1996 and March 31, 1997, respectively. The notes bear interest at an
annual rate of 7% and are payable on demand. Shareholder loans at December 31,
1995 and 1996 and March 31, 1997 include $66,502, $33,169 and $33,169,
respectively, for advances made to shareholders initiated during the exercise of
stock options (see Note 11). These notes bear interest at annual rates of 7.5%
and are payable in various installments.
GUARANTEES -- In November 1986, the Company guaranteed a $600,000 note due
to a shareholder by certain officers of the Company. This note was executed in
connection with the redemption of preferred stock. In addition, the Company
guarantees operating lease payments of $541 per month for an affiliate.
8. BENEFIT PLANS
401(K) PROFIT SHARING AND RETIREMENT PLAN -- The Company has a 401(k)
Profit Sharing Retirement Plan and Trust ("401(k)" or the "Plan") for the
benefit of its full time employees who have more than one year of service and
are over 21 years of age. The plan also benefits employees of certain related
parties through separate funding arrangements. Contributions to this retirement
plan are made by employees under a 401(k) pre-tax contribution plan and by the
Company through 401(k) matching contributions and discretionary profit sharing
contributions. The discretionary profit sharing contribution is made annually as
determined by management based on the Company's financial performance. The
Company's matching contributions to the 401(k) plan were $29,161, $50,812 and
$158,804 for December 31, 1994, 1995 and 1996, respectively. The Company's
profit sharing contributions were $253,485, $461,244 and $333,936 for December
31, 1994, 1995 and 1996, respectively. Contributions by the Company are included
in operating costs and expenses in the accompanying statements of operations.
SELF-INSURED MEDICAL PLAN -- The Company has a self-insured plan for
employee medical benefits. The plan covers all full-time employees of the
Company beginning on the first day of the month on, or following, their 90th day
of employment.
F-12

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
8. BENEFIT PLANS -- Continued
The Company pays premiums for its employees to the plan and withholds from
employees additional amounts for elected covered dependents. As claims are
processed by the plan's third-party administrator, the insurance carrier
requests funds from the Company. The Company maintains stop loss coverage for
the plan. The Company's expense relating to the plan for 1994, 1995 and 1996 was
$47,932, $56,005 and $49,933, respectively.
9. CONTINGENCIES
Certain claims and lawsuits arising in the ordinary course of business have
been filed or are pending against the Company. In the opinion of management, all
such matters have been adequately provided for, are adequately covered by
insurance, or are of such kind that if disposed of unfavorably, would not have a
material adverse effect on the Company's financial position or results of
operations.
10. LETTERS OF CREDIT

At December 31, 1996 and March 31, 1997, the Company has entered into
irrevocable letters of credit totaling approximately $362,170 and $745,888,
respectively. According to the terms of the $5,000,000 unsecured note, the
availability of funds on that note are reduced by the amount of outstanding
letters of credit (see Note 4 to financial statements).

11. STOCK OPTION PLAN
In July 1988, the Company's Board of Directors (the "Board") authorized an
Employee Non-Qualified Stock Option Plan ("the Plan"). The number of authorized
shares is determined periodically by the Company's Board. At December 31, 1996,
1,400,000 shares of common stock were authorized for issuance under the Plan.
Options are granted to key employees at prices as determined by the Board and
may be exercisable in one or more installments. Additionally, terms and
conditions of stock awards granted under the Plan may differ from one grant to
another. Options have been retroactively adjusted for the exchange of shares
resulting from the merger of affiliated companies on April 1, 1996, for the
stock dividend of nine nonvoting shares for each voting share in 1995, and for
the 1-for-2.5 reverse stock split and the conversion of all nonvoting shares to
common shares, each to be effective prior to consummation of this offering. A
summary of the status of the Plan as of December 31, 1994, 1995 and 1996 and
changes during the years ending on those dates is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
<S> <C> <C>
Balance, January 1, 1994...................................................... 1,416,972 $ 0.28
Exercised..................................................................... (1,381,168) (0.24)
Balance, December 31, 1994.................................................... 35,804 1.25
Granted -- May 5, 1995........................................................ 6,000 2.88
Balance, December 31, 1995.................................................... 41,804 1.48
Exercised..................................................................... (35,804) (1.25)
Granted -- April 1, 1996...................................................... 520,000 5.13
Balance, December 31, 1996.................................................... 526,000 5.10
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED EXERCISABLE
RANGE OF NUMBER AVERAGE REMAINING WEIGHTED WEIGHTED
EXERCISE OF SHARES CONTRACTUAL AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE OF SHARES EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$1.25-$5.31 6,000 3 $ 2.88 -- --
$5.13 120,000 4.25 $ 5.13 -- --
$5.13 400,000 4.25 $ 5.13 400,000 $ 5.13
</TABLE>

F-13

<PAGE>
WASTE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED AS TO MARCH 31, 1997 INFORMATION)
11. STOCK OPTION PLAN -- Continued
The Company applies ABP No. 25 and related Interpretations in accounting
for the Plan. Accordingly, no compensation cost has been recognized for the
Plan. Had compensation cost for the Plan been determined based on the fair value
at the grant dates for awards under the Plan consistent with the method of SFAS
No. 123, the Company's net income -- historical basis, pro forma net income and
pro forma primary earnings per share for the years ended December 31, 1995 and
1996 and for the three-months ended March 31, 1996 and 1997, would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996 1996 1997
<S> <C> <C> <C> <C>
Net Income -- Historical Basis:
As reported................................... $6,960,424 $7,048,886 $1,547,241 $1,920,670
Pro forma..................................... 6,957,424 6,808,886 1,487,241 1,860,670
Pro Forma Net Income:
As reported................................... 4,170,424 4,203,886 922,241 1,145,670
Pro forma..................................... 4,167,424 3,963,886 862,241 1,085,670
Pro Forma Primary Earnings Per Share:
As reported................................... $ 0.43 $ 0.43 $ 0.10 $ 0.12
Pro forma..................................... $ 0.43 $ 0.41 $ 0.09 $ 0.11
</TABLE>

As permitted under SFAS No. 123, the fair value of options granted under
the Company's plan during 1995 and 1996 was estimated on the Black-Scholes
option pricing model without considering volatility of the underlying stock and
using the following assumptions:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Weighted-average grant-date fair value of options granted............................ $5.11 $5.13
Weighted-average expected lives (years).............................................. 3.67 2.83
Risk-free interest rate.............................................................. 6.25% 6.25%
</TABLE>

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that expected in future years.
12. SUBSEQUENT EVENTS
In May 1997, the Company obtained an additional $5 million under the BB&T
working capital facility. This additional capacity has a 60-day term and bears
interest at a rate of 7.44%. The Company intends to use these borrowings for
acquisitions of related businesses and general corporate purposes.
On April 30, 1997, the Company purchased equipment and customer contracts
related to the solid waste collection business of Browning-Ferris Industries of
South Atlantic, Inc. ("BFISA") in and around Charleston, South Carolina. The
purchase price for these assets was approximately $4.8 million.
On March 21, 1997, the Company purchased equipment and customer contracts
related to the solid waste collection business of BFISA in and around Raleigh
and Durham, North Carolina. The purchase price for these assets was
approximately $782,000.
For each of the fiscal years presented, the Company was an S Corporation
and, accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for each of
the fiscal years presented assuming the tax rate that would have been applied
had the Company been taxed as a C Corporation.

UNAUDITED -- On May 15, 1997, the Company purchased equipment and customer
contracts related to the commercial, industrial and residential solid waste
collection business of two subsidiaries of Waste Management, Inc. in and around
Chattanooga, Tennessee. The purchase price for these assets was $11.2 million in
cash.

F-14

<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 6
Use of Proceeds...................................... 11
Dividend Policy and Prior S Corporation Status....... 11
Dilution............................................. 12
Capitalization....................................... 13
Selected Consolidated Financial and Operating Data... 14
Management's Discussion and Analysis of Financial
Condition and Results of
Operations......................................... 15
Business............................................. 21
Management........................................... 35
Certain Transactions................................. 41
Principal and Selling Shareholders................... 42
Description of Capital Stock......................... 43
Shares Eligible for Future Sale...................... 44
Underwriting......................................... 45
Legal Matters........................................ 46
Experts.............................................. 46
Available Information................................ 46
Index to Financial Statements........................ F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,150,000 SHARES

(Waste Logo appears here)

WASTE INDUSTRIES, INC.
COMMON STOCK
PROSPECTUS
ALEX. BROWN & SONS
INCORPORATED
DEUTSCHE MORGAN GRENFELL
, 1997

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred in connection with the sale of
Common Stock being registered (all amounts are estimated except the SEC
registration fee, the NASD filing fee and the Nasdaq listing fee). The Company
will bear all expenses incurred in connection with the sale of the Common Stock
being registered hereby, and the Selling Shareholders will not bear any portion
of such expenses other than underwriters' discounts and commissions relating to
the shares to be sold by each Selling Shareholder.
<TABLE>
<S> <C>
SEC registration fee...................................................................... $ 9,366
NASD filing fee........................................................................... 3,591
The Nasdaq Stock Market listing fee....................................................... 45,514
Printing fees and expenses................................................................ 75,000
Legal fees and expenses................................................................... 150,000
Accounting fees and expenses.............................................................. 150,000
Blue sky fees and expenses................................................................ N/A
Stock certificates and transfer agent and custodian fees.................................. 10,000
Miscellaneous............................................................................. 6,529
Total................................................................................... $450,000
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Incorporation and Bylaws include provisions to
(i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the fullest extent permitted
by Section 55-8-30(e) of the North Carolina Business Corporation Act (the
"Business Corporation Act"), and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by Sections 55-8-50
through 55-8-58 of the Business Corporation Act, including circumstances in
which indemnification is otherwise discretionary. Pursuant to Sections 55-8-51
and 55-8-57 of the Business Corporation Act, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Business
Corporation Act. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its shareholders, for any transaction from which
the director deprived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
shareholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its shareholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its shareholders, for improper
transactions between the director and the Registrant and for improper
distributions to shareholders and loans to directors and officers. These
provisions do not affect a director's responsibilities under any other laws,
such as the federal securities laws or state or federal environmental laws.
The Registrant's Bylaws require the Registrant to indemnify its directors
and officers against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of the Registrant and,
with respect to any proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The Registrant's Bylaws also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
II-1

<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 31, 1991, the Registrant has issued and sold the following
unregistered securities (adjusted to give effect to all stock splits, including
the 1-for-2.5 reverse split to be effected prior to the completion of this
offering):
On January 1, 1994, the Company issued an aggregate of 107,180 shares of
its voting Common Stock to twelve investors (including three directors and nine
employees).
On May 1, 1995, the Company issued an aggregate of 2,254,910 shares of its
nonvoting Common Stock to a total of 15 existing shareholders (including four
directors and 11 employees).
On January 1, 1996, The Company issued 2,778 shares of its voting Common
Stock and 25,006 of its nonvoting Common Stock to a total of six individuals
(including two existing shareholders, two directors and two employees).
On April 1, 1996, the Company issued 22,263 shares of its voting Common
Stock and 1,933,758 shares of its nonvoting Common Stock to (i) two grantor
trusts established by the Company's Chairman and Chief Executive Officer for his
adult children, and (ii) a total of 17 individuals (including four directors of
the Company and 13 existing shareholders of affiliated companies), in exchange
for all of the outstanding shares of such affiliated companies. All of these
companies were merged with and into the Company effective on such date (the
"Merged Affiliates"). Pursuant to and effective upon the date of these mergers,
each outstanding share of the voting and nonvoting Common Stock of the Merged
Affiliates was converted into the right to receive an equal number of shares of
the Company's voting and nonvoting Common Stock, respectively.

On April 1, 1996, the Company issued options to purchase an aggregate of
approximately 526,000 shares of Common Stock to employees and directors of the
Company. The Company has issued an aggregate of 35,804 shares upon exercise of
these options during such time period.

The sales of the above securities were deemed to be exempt from
registration under the Act in reliance upon Section 4(2) of the Act or
Regulation D or Rule 701 promulgated thereunder as transactions by an issuer not
involving a public offering. Recipients of the securities in each such
transaction represented their intentions to acquire such securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the instruments
issued in such transactions. All recipients had adequate access to information
about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1+ Form of Underwriting Agreement.
3.1+ Form of Articles of Incorporation, as proposed to become effective prior to effectiveness of this
registration statement.
3.2+ Bylaws.
5.1 Opinion of Wyrick Robbins Yates & Ponton LLP.
10.1+ 1997 Stock Plan.
10.2+ Credit Agreement with Branch Banking and Trust Company dated April 3, 1996.
10.3+ Note Purchase and Private Shelf Agreement with The Prudential Insurance Company of America dated April 3,
1996.
11.1 Computation re Earnings per Share.
21.1+ List of Subsidiaries.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit 5.1).
24.1+ Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>

+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES.

Schedule II -- Valuation and Qualifying Accounts.

No other schedules have been included because the information required to
be set forth therein is not applicable.

II-2

<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted for directors, officers, and controlling persons of the
Registrant pursuant to provisions described in Item 14 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be new registration statement relating to the
securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Raleigh, State of North Carolina, on this 27th day of May 1997.

WASTE INDUSTRIES, INC.
By: /s/ LONNIE C. POOLE, JR.*
LONNIE C. POOLE, JR.
CHAIRMAN

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ LONNIE C. POOLE, JR.* Director, Chairman and Chief Executive Officer May 27, 1997
LONNIE C. POOLE, JR. (Principal Executive Officer)
/s/ ROBERT H. HALL Director, Vice President, Chief Financial Officer May 27, 1997
ROBERT H. HALL and Treasurer (Principal Financial and
Accounting Officer)
/s/ JIM W. PERRY* Director May 27, 1997
JIM W. PERRY
/s/ J. GREGORY POOLE, JR.* Director May 27, 1997
J. GREGORY POOLE, JR.
</TABLE>

<TABLE>
<S> <C>
*By: /s/ ROBERT H. HALL May 27, 1997
ROBERT H. HALL
ATTORNEY-IN-FACT
</TABLE>

II-4

<PAGE>

WASTE INDUSTRIES, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
ADDITIONS
(1)
CHARGED (2)
BALANCE AT TO COSTS CHARGED
BEGINNING AND TO OTHER DEDUCTIONS- BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITE-OFFS END OF PERIOD
<S> <C> <C> <C> <C> <C>
Allowance for Uncollectible Accounts:
1994....................................................... $ 156,000 $284,000 $ 195,000 $ 245,000
1995....................................................... 245,000 453,000 211,000 487,000
1996....................................................... 487,000 464,000 335,000 616,000
</TABLE>

II-5

May 27, 1997

Waste Industries, Inc.
3949 Browning Place
Raleigh, North Carolina 27609

Re: Registration Statement on Form S-1

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 filed by Waste
Industries, Inc., a North Carolina corporation (the "Company"), with the
Securities and Exchange Commission on April 22, 1997 and amended on May 12, 1997
and on or about May 27, 1997 (the "Registration Statement"), in connection with
the registration under the Securities Act of 1933, as amended, of 2,472,500
shares of the Company's Common Stock, no par value per share (the "Shares"),
which includes an over-allotment option for 322,500 shares granted to the
underwriters, as described in the Registration Statement. The Shares are to be
sold to the underwriters for resale to the public as described in the
Registration Statement and pursuant to the Underwriting Agreement filed as an
exhibit thereto. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the original of all documents submitted to us as copies
thereof.

As our legal counsel, we have examined the proceedings taken, and are
familiar with the proceedings proposed to be taken, in connection with the sale
and issuance of the Shares.

It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, including the proceedings being taken in order to permit such
transaction to be carried out in accordance with applicable state securites
laws, the Shares when issued and sold in the manner referred to in the
Registration Statement and in accordance with the resolutions adopted by the
Board of Directors of the Company, will be legally and validly issued, fully
paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name whenever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.

Very truly yours,

/s/ WYRICK ROBBINS YATES & PONTON LLP

<PAGE>
EXHIBIT 11.1
WASTE INDUSTRIES, INC.
COMPUTATION RE: EARNINGS PER SHARE

<TABLE>
<CAPTION>
PRO FORMA (1)
YEAR ENDED DECEMBER 31,
1994 1995 1996
<S> <C> <C> <C>
Net Income.......................................................................... $2,727,599 $4,170,424 $4,203,886
Weighted average number of common shares issued and outstanding..................... 9,564,353 9,564,353 9,600,157
Common stock equivalents --
Options for common stock.......................................................... 35,804 39,721 396,000
Weighted average common stock equivalents........................................... 9,600,157 9,604,074 9,996,157
Less treasury shares assumed to be repurchased...................................... (3,892) (4,871) (175,304)
Weighted average shares outstanding................................................. 9,596,265 9,599,203 9,820,853
Net income per share................................................................ $0.28 $0.43 $0.43
</TABLE>

(1) The pro forma number of shares reflect the (i) exchange by the Company of
its common stock on a share-for-share basis for all of the outstanding
common stock of the following companies affiliated through common ownership:
Waste Enterprises, Inc., Waste Industries South, Inc., Waste Industries
West, Inc., Waste Industries East, Inc., Kabco, Inc., Conway 378, Inc. and
AmLease, Inc. in April 1996 (ii) stock dividend of nine nonvoting common
shares for each voting common share in 1995 and (iii) a 1-for-2.5 reverse
stock split and the conversion of all nonvoting common shares to common
shares in 1997.
Note: Fully diluted earnings per share are not presented as potentially dilutive
securities, in the aggregate, dilute primary earnings per share by less
than three percent.

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

Waste Industries, Inc.:

We consent to the use in this Amendment No. 2 to Registration Statement No.
333-25631 of Waste Industries, Inc. of our report dated May 5, 1997, appearing
in the Prospectus, which is a part of this Registration Statement, and to the
references to us under the headings "Selected Consolidated Financial and
Operating Data" and "Experts" in such Prospectus.

Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Waste Industries, Inc.,
as listed in Item 16. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Raleigh, North Carolina
May 27, 1997

<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 1,803,438 578,034
<SECURITIES> 0 0
<RECEIVABLES> 9,852,071 9,607,079
<ALLOWANCES> (616,000) (659,000)
<INVENTORY> 1,973,810 1,124,680
<CURRENT-ASSETS> 13,427,852 11,136,422
<PP&E> 86,209,518 90,851,483
<DEPRECIATION> 46,367,589 47,682,009
<TOTAL-ASSETS> 59,067,875 60,660,699
<CURRENT-LIABILITIES> 11,826,965 9,722,190
<BONDS> 33,070,228 34,853,139
0 0
0 0
<COMMON> 91,989 91,989
<OTHER-SE> 14,078,693 15,993,381
<TOTAL-LIABILITY-AND-EQUITY> 59,067,875 60,660,699
<SALES> 92,886,657 24,124,394
<TOTAL-REVENUES> 92,886,657 24,124,394
<CGS> 59,337,276 14,838,115
<TOTAL-COSTS> 84,137,385 21,745,282
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,395,281 609,763
<INCOME-PRETAX> 7,048,886 1,920,670
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 7,048,886 1,920,670
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,048,886 1,920,670
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>