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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2004 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
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Commission file number: 1-14267
REPUBLIC SERVICES, INC.
(Exact name of Registrant as Specified in its Charter)
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Delaware |
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65-0716904 |
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(State of Incorporation) |
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(I.R.S. Employer Identification No.) |
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Republic Services, Inc.
110 S.E. 6th Street, 28th Floor
Fort Lauderdale, Florida
(Address of Principal Executive Offices) |
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33301
(Zip Code) |
Registrant’s telephone number, including area
code: (954) 769-2400
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on which Registered |
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Common Stock, par value $.01 per share |
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The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K. x
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the
Act). Yes x No o
As of June 30, 2004, the aggregate market value of the
shares of the Common Stock held by non-affiliates of the
registrant was approximately $4,395,636,476.
As of February 18, 2005, the registrant had outstanding
149,670,988 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III Portions of the Registrant’s Proxy Statement
relative to the 2005 Annual Meeting of Stockholders.
INDEX
TO FORM 10-K
PART I
Company Overview
We are a leading provider of services in the domestic
non-hazardous solid waste industry. We provide non-hazardous
solid waste collection services for commercial, industrial,
municipal and residential customers through 140 collection
companies in 22 states. We also own or operate
96 transfer stations, 58 solid waste landfills and
35 recycling facilities.
As of December 31, 2004, our operations were organized into
five regions whose boundaries may change from time to time:
Eastern, Central, Southern, Southwestern and Western. Each
region is organized into several operating areas and each area
contains a group of operating locations. Each of our regions and
substantially all our areas provide collection, transfer,
recycling and disposal services. We believe that this
organizational structure facilitates the integration of our
operations within each region, which is a critical component of
our operating strategy. See Note 10 of the Notes to
Consolidated Financial Statements for further discussion of
operating segments.
We had revenue of $2,708.1 million and
$2,517.8 million and operating income of
$452.3 million and $412.7 million for the years ended
December 31, 2004 and 2003, respectively. The
$190.3 million, or 7.6%, increase in revenue from 2003 to
2004 is primarily attributable to the successful execution of
our operating and growth strategies described below. The
$39.6 million, or 9.6%, increase in operating income from
2003 to 2004 is partially due to higher self-insurance expense
during 2003 related to existing claims and was attributable to
the expansion of our operations and various changes in estimates
as a result of continued negative trends through the 2003 policy
year. The remaining increase in operating income is due to the
successful execution of our operating and growth strategies
described below.
Our presence in high growth markets throughout the Sunbelt,
including California, Florida, Georgia, Nevada, North Carolina,
South Carolina and Texas, and in other domestic markets that
have experienced higher than average population growth during
the past several years, supports our internal growth strategy.
We believe that our presence in these markets positions our
company to experience growth at rates that are generally higher
than the industry’s overall growth rate.
We continue to focus on enhancing stockholder value by
implementing our financial, operating and growth strategies as
described below.
Industry Overview
Based on analysts’ reports and industry trade publications,
we believe that the United States non-hazardous solid waste
services industry generates annual revenue of approximately
$44.0 billion, of which approximately 50% is generated by
publicly-owned waste companies, 21% is generated by
privately-held waste companies, and 29% is generated by
municipal and other local governmental authorities. Three
companies generate the substantial majority of the
publicly-owned companies’ total revenue. However, according
to industry data, the domestic non-hazardous waste industry
remains highly fragmented as privately-held companies and
municipal and other local governmental authorities generate
approximately 50% of total industry revenue. In general, growth
in the solid waste industry is linked to growth in the overall
economy, including the level of new household and business
formation.
The solid waste industry experienced a period of rapid
consolidation in the late 1990’s. During that time we were
able to grow significantly through acquisitions. However,
acquisitions in the industry have slowed considerably since late
1999. Despite this, we believe that the opportunity to grow
through acquisitions still exists, albeit at a slower pace than
experienced in previous years, as a result of the following
factors:
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Subtitle D Regulation. Subtitle D of the Resource
Conservation and Recovery Act of 1976, as currently in effect,
and similar state regulations have significantly increased the
amount of capital, technical expertise, operating costs and
financial assurance obligations required to own and operate a |
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landfill and other solid waste facilities. Many of the smaller
participants in our industry have found these costs difficult,
if not impossible, to bear. Large publicly-owned companies, like
our company, have greater access to, and a lower cost of, the
capital necessary to finance such increased capital expenditures
and costs relative to many of the privately-owned companies in
the industry. Additionally, the required permits for landfill
development, expansion or construction have become more
difficult, time-consuming and costly to acquire. Consequently,
many smaller, independent operators have decided to either close
their operations or sell them to larger operators that have
greater access to capital. |
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Integration of Solid Waste Businesses. By being able to
control the waste stream in a market through the collection,
transfer and disposal process, integrated solid waste companies
gain a further competitive advantage over non-integrated
operators. The ability of the integrated companies to both
collect and dispose of solid waste, coupled with access to
significant capital resources necessary for acquisitions, has
created an environment in which large publicly-owned, integrated
companies can operate more cost effectively and competitively
than non-integrated operators. |
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Municipal Privatization. The trend toward consolidation
in the solid waste services industry is further supported by the
increasing tendency of a number of municipalities to privatize
their waste disposal operations. Privatization of municipal
waste operations is often an attractive alternative to funding
the changes required by Subtitle D. |
These developments, as well as the fact that there are a limited
number of viable exit strategies for many of the owners and
principals of numerous privately-held companies in the industry,
have contributed to the overall consolidation trend in the solid
waste industry.
Financial Strategy
A key component of our financial strategy is our ability to
generate free cash flow. Our definition of free cash flow, which
is not a measure determined in accordance with generally
accepted accounting principles, is cash provided by operating
activities less purchases of property and equipment plus
proceeds from the sale of property and equipment as presented in
our consolidated statement of cash flows. We believe that free
cash flow provides useful information regarding the recurring
cash provided by our operating activities after expenditures for
property and equipment. It also demonstrates our ability to
execute our financial strategy. Consequently, we have developed
incentive programs and we conduct monthly field operating
reviews that help focus our entire company on the importance of
increasing free cash flow.
Free cash flow does not represent our cash flow available for
discretionary expenditures because it excludes certain
expenditures that are required or that we have committed to such
as debt service requirements and dividend payments. Our
definition of free cash flow may not be comparable to similarly
titled measures presented by other companies.
We manage our free cash flow primarily by ensuring that capital
expenditures and operating asset levels are appropriate in light
of our existing business and growth opportunities and by closely
managing our working capital, which consists primarily of
accounts receivable and accounts payable.
We have used and will continue to use our cash flow to maximize
stockholder value as well as our return on investment. This
includes the following:
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Customer Service. We will continue to reinvest in
our existing fleet of vehicles, equipment, landfills and
facilities to ensure a high level of service to our customers. |
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Internal Growth. Growth through increases in our
customer base and services provided is the most capital
efficient means for us to build our business. This includes not
only expanding landfill and transfer capacity and investing in
trucks and containers, but also includes investing in
information tools and training needed to ensure high
productivity and quality service throughout all functional areas
of our business. |
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Strategic Acquisitions. We have and will continue
to pursue strategic acquisitions that augment our existing
business platform. |
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Share Repurchases. If we are unable to identify
opportunities that satisfy our growth strategy, we intend to
continue to use our free cash flow to repurchase shares of our
common stock at prices that provide value to our stockholders.
As of December 31, 2004, we had repurchased a total of
35.2 million shares, or approximately 20% of our common
stock outstanding at the commencement of our share repurchase
program in 2000, for $750.4 million. In October 2004, our
board of directors authorized the repurchase of up to an
additional $275.0 million of our common stock, of which
$274.6 million remained available at December 31,
2004. We believe that our share repurchase program will continue
to enhance stockholder value. |
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Dividends. In July 2003, our board of directors
initiated a quarterly cash dividend of $.06 per share.
Effective October 2004, our quarterly cash dividend was
increased to $.12 per share. We may consider increasing our
quarterly cash dividend if we believe it will enhance
stockholder value. |
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Minimize Borrowings. To the extent that the
opportunities to enhance stockholder value mentioned above are
not available, we also intend to continue to use our free cash
flow to minimize our borrowings. |
Another key component of our financial strategy includes
maintaining an investment grade rating on our senior debt. This
has allowed us to secure favorable, long-term, fixed-rate
financing that reduces our exposure to changing interest rates.
This has also allowed us, and will continue to allow us, to
readily access capital markets.
For certain risks related to our financial strategy, see
“Risk Factors.”
Operating Strategy
We seek to leverage existing assets and revenue growth to
increase operating margins and enhance stockholder value. Our
operating strategy to accomplish this goal is to:
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utilize the extensive industry knowledge and experience of our
executive management, |
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utilize a decentralized management structure in overseeing
day-to-day operations, |
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integrate waste operations, |
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improve operating margins through economies of scale, cost
efficiencies and asset utilization, |
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achieve high levels of customer satisfaction, and |
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utilize systems to improve consistency in financial and
operational performance. |
For certain risks related to our operating strategy, see
“Risk Factors.”
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Experienced Executive Management Team. We believe
that we have one of the most experienced executive management
teams in the solid waste industry. |
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James E. O’Connor, who has served as our Chief Executive
Officer since December 1998, also became our Chairman in January
2003. He worked at Waste Management, Inc. from 1972 to 1978 and
from 1982 to 1998. During that time, he served in various
management positions, including Senior Vice President in 1997
and 1998, and Area President of Waste Management of Florida,
Inc. from 1992 to 1997. Mr. O’Connor has over
30 years of experience in the solid waste industry. |
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Michael J. Cordesman, who has served as our Chief Operating
Officer since March 2002 and also as our President since
February 2003, has over 24 years of experience in the solid
waste industry. He joined us in June 2001 as our Eastern Region
Vice President. From 1999 to 2001, Mr. Cordesman served as
Vice President of the Central Region for Superior Services Inc.
From 1980 to 1999, he served in various positions with Waste
Management, including Vice President of the Mid-Atlantic Region
from 1992 to 1999. |
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The other corporate officers with responsibility for our
operations have an average of over 23 years of management
experience in the solid waste industry. Our five regional vice
presidents and our 23 area presidents have an average of
24 years of experience in the industry. |
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In addition, Harris W. Hudson, who has served as our Vice
Chairman since our initial public offering, has over
40 years of experience in the solid waste industry,
including 11 years with Waste Management and 19 years
with private waste collection companies. |
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Decentralized Management Structure. We maintain a
relatively small corporate headquarters staff, relying on a
decentralized management structure to minimize administrative
overhead costs and to manage our day-to-day operations more
efficiently. Our local management has extensive industry
experience in growing, operating and managing solid waste
companies and has substantial experience in their local
geographic markets. In early 2001, we added a sales, maintenance
and operations manager to each of our regional management teams,
which previously consisted of a regional vice president and a
regional controller. We believe that strengthening our regional
management teams allows us to more effectively and efficiently
drive our company’s initiatives and helps ensure
consistency throughout our organization. Our regional management
teams and our area presidents have extensive authority,
responsibility and autonomy for operations within their
respective geographic markets. Compensation for regional and
area management teams is primarily based on the improvement in
operating income produced and the free cash flow and return on
invested capital generated in each manager’s geographic
area of responsibility. In addition, through long-term incentive
programs, including stock options, we believe we have one of the
lowest turnover levels in the industry for our local management
teams. As a result of retaining experienced managers with
extensive knowledge of and involvement in their local
communities, we are proactive in anticipating our
customers’ needs and adjusting to changes in our markets.
We also seek to implement the best practices of our various
regions and areas throughout our operations to improve operating
margins. |
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Integrated Operations. We seek to achieve a high
rate of internalization by controlling waste streams from the
point of collection through disposal. We expect that our fully
integrated markets generally will have a lower cost of
operations and more favorable cash flows than our non-integrated
markets. Through acquisitions and other market development
activities, we create market-specific, integrated operations
typically consisting of one or more collection companies,
transfer stations and landfills. We consider acquiring companies
that own or operate landfills with significant permitted
disposal capacity and appropriate levels of waste volume. We
also seek to acquire solid waste collection companies in markets
in which we own or operate landfills. In addition, we generate
internal growth in our disposal operations by developing new
landfills and expanding our existing landfills from time to time
in markets in which we have significant collection operations or
in markets that we determine lack sufficient disposal capacity.
During the three months ended December 31, 2004,
approximately 54% of the total volume of waste that we collected
was disposed of at landfills we own or operate. In a number of
our larger markets, we and our competitors are required to take
waste to government-controlled disposal facilities. This
provides us with an opportunity to effectively compete in these
markets without investing in landfill capacity. Because we do
not have landfill facilities or government-controlled disposal
facilities for all markets in which we provide collection
services, we believe that through landfill and transfer station
acquisitions and development we have the opportunity to increase
our waste internalization rate and further integrate our
operations. By further integrating operations in existing
markets through acquisitions and development of landfills and
transfer stations, we may be able to reduce our disposal costs. |
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Economies of Scale, Cost Efficiencies and Asset
Utilization. To improve operating margins, our
management focuses on achieving economies of scale and cost
efficiencies. The consolidation of acquired businesses into
existing operations reduces costs by decreasing capital and
expenses used for routing, personnel, equipment and vehicle
maintenance, inventories and back-office administration.
Generally, we consolidate our acquired administrative centers to
reduce our general and administrative costs. Our goal is to
maintain our selling, general and administrative costs in the
range of 10% of revenue, which we feel is appropriate given our
existing business platform. In addition, our size allows |
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our company to negotiate volume discounts for certain purchases,
including waste disposal rates at landfills operated by third
parties. Furthermore, we have taken steps to increase
utilization of our assets. For example, to reduce the number of
collection vehicles and maximize the efficiency of our fleet, we
have instituted a grid productivity program which allows us to
benchmark the performance of all of our drivers. In our larger
markets, we also use a route optimization program to minimize
drive times and improve operating density. By using assets more
efficiently, operating expenses can be significantly reduced. |
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High Levels of Customer Satisfaction. Our goal of
maintaining high levels of customer satisfaction complements our
operating strategy. Our personalized sales process is oriented
towards maintaining relationships and ensuring that service is
being properly provided. |
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Utilize Systems to Improve Consistency in Financial and
Operational Reporting. We continue to focus on systems
and training initiatives that complement our operating strategy.
These initiatives include contact management, billing,
productivity, maintenance and general ledger systems. These
systems provide us with detailed information, prepared in a
consistent manner, that will allow us to quickly analyze and act
upon trends in our business. |
For certain risks related to our operating strategy, see
“Risk Factors.”
Growth Strategy
Our growth strategy focuses on increasing revenue, gaining
market share and enhancing stockholder value through internal
growth and acquisitions. For certain risks related to our growth
strategy, see “Risk Factors.”
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Internal Growth. Our internal growth strategy
focuses on retaining existing customers and obtaining
commercial, municipal and industrial customers through our
well-managed sales and marketing activities. |
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Pricing Activities. We seek to secure price increases
necessary to offset increased costs. During the fourth quarter
of 2003, we implemented a broad-based pricing initiative across
all lines of our business. |
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Long-Term Contracts. We seek to obtain long-term
contracts for collecting solid waste in high-growth markets.
These include exclusive franchise agreements with municipalities
as well as commercial and industrial contracts. By obtaining
such long-term agreements, we have the opportunity to grow our
contracted revenue base at the same rate as the underlying
population growth in these markets. For example, we have secured
exclusive, long-term franchise agreements in high-growth markets
such as Los Angeles, Orange and Contra Costa Counties in
California, Las Vegas, Nevada, Arlington, Texas, and many areas
of Florida. We believe that this positions our company to
experience internal growth rates that are generally higher than
our industry’s overall growth rate. In addition, we believe
that by securing a base of long-term recurring revenue in growth
markets, we are better able to protect our market position from
competition and our business may be less susceptible to
downturns in economic conditions. |
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Sales and Marketing Activities. We seek to manage our
sales and marketing activities to enable our company to
capitalize on our leading positions in many of the markets in
which we operate. We currently have approximately 500 sales and
marketing employees in the field, who are compensated using a
commission structure that is focused on generating high levels
of quality revenue. For the most part, these employees directly
solicit business from existing and prospective commercial,
industrial, municipal and residential customers. We emphasize
our rate and cost structures when we train new and existing
sales personnel. In addition, we utilize a contact management
system that assists our sales people in tracking leads. It also
tracks renewal periods for potential commercial, industrial and
franchise contracts. |
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Development Activities. We seek to identify opportunities
to further our position as an integrated service provider in
markets where we provide services for a portion of the waste
stream. Where appropriate, we seek to obtain permits to build
transfer stations and/or landfills that would provide |
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vertically integrated waste services or expand the service area
for our existing disposal sites. Development projects, while
generally less capital intensive, typically require extensive
permitting efforts that can take years to complete with no
assurance of success. We undertake development projects when we
believe there is a reasonable probability of success and where
reasonably priced acquisition opportunities are not available. |
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Acquisition Growth. During the late 1990’s,
the solid waste industry experienced a period of rapid
consolidation. We were able to grow significantly through
acquisitions during this period. However, the rate of
consolidation in the industry has slowed considerably. Despite
this, we continue to look to acquire businesses that complement
our existing business platform. Our acquisition growth strategy
focuses on privately-held solid waste companies and municipal
and other local governmental authorities. We believe that our
ability to acquire privately-held companies is enhanced by
increasing competition in the solid waste industry, increasing
capital requirements as a result of changes in solid waste
regulatory requirements, and the limited number of exit
strategies for these privately-held companies’ owners and
principals. We also seek to acquire operations and facilities
from municipalities that are privatizing, which occur for many
of the same reasons that privately-held companies sell their
solid waste businesses. In addition, we will continue to
evaluate opportunities to acquire operations and facilities that
may be divested by other publicly-owned waste companies. In sum,
our acquisition growth strategy focuses on: |
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acquiring businesses that position our company for growth in
existing and new markets, |
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acquiring well-managed companies and, when appropriate,
retaining local management, |
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acquiring operations and facilities from municipalities that are
privatizing and publicly-owned companies that are divesting of
assets. |
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For certain risks involved with our acquisition growth strategy,
see “Risk Factors — We may be unable to execute
our acquisition growth strategy,” “— We may
be unable to manage our growth effectively,” and
“— Businesses we acquire may have undisclosed
liabilities.” |
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Acquire Businesses Positioning the Company for Growth. In
making acquisitions, we principally target high quality
businesses that will allow our company to be, or provide our
company favorable prospects of becoming, a leading provider of
integrated solid waste services in markets with favorable
demographic growth. Generally, we have acquired, and will
continue to seek to acquire, solid waste collection, transfer
and disposal companies that: |
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have strong operating margins, |
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are in growth markets, |
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are among the largest or have a significant presence in their
local markets, and |
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have long-term contracts or franchises with municipalities and
other customers. |
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Once we have a base of operations in a particular market, we
focus on acquiring trucks and routes of smaller businesses that
also operate in that market and surrounding markets, which are
typically referred to as “tuck-in” acquisitions. We
seek to consolidate the operations of such tuck-in businesses
into our existing operations in that market. We also seek to
acquire landfills, transfer stations and collection companies
that operate in markets that we are already servicing in order
to fully integrate our operations from collection to disposal.
In addition, we have in the past and may continue in the future
to exchange businesses with other solid waste companies if by
doing so there is a net benefit to our business platform. These
activities allow us to increase our revenue and market share,
lower our cost of operations as a percentage of revenue, and
consolidate duplicative facilities and functions to maximize
cost efficiencies and economies of scale. |
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Acquire Well-Managed Companies. We also seek to acquire
businesses that have experienced management teams that are
willing to join the management of our company. We generally seek
to maintain continuity in management of larger acquired
companies in order to capitalize on their local |
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market knowledge, community relations and name recognition, and
to instill their entrepreneurial drive at all levels of our
operations. By furnishing the local management of such acquired
companies with our financial and marketing resources and
technical expertise, we believe that the acquired companies are
better able to secure additional municipal franchises and other
contracts. |
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Privatize Municipal Operations and Acquire Divested
Operations. We also seek to acquire solid waste collection
operations, transfer stations and landfills that municipalities
and other governmental authorities are privatizing. Many
municipalities are seeking to outsource or sell these types of
solid waste operations, as they lack the capital, technical
expertise and/or operational resources necessary to comply with
increasingly stringent regulatory standards and/or to compete
effectively with private-sector companies. In addition, we have
acquired, and will continue to seek to acquire, operations and
facilities that may be divested by other publicly-owned waste
companies. |
Operations
Our operations primarily consist of the collection, transfer and
disposal of non-hazardous solid waste.
Collection Services. We provide solid waste collection
services to commercial, industrial, municipal and residential
customers in 22 states through 140 collection companies. In
2004, 74.3% of our revenue was derived from collection services
consisting of approximately 32.5% from services provided to
municipal and residential customers, 36.6% from services
provided to commercial customers, and 30.9% from services
provided to industrial and other customers.
Our residential collection operations involve the curbside
collection of refuse from small containers into collection
vehicles for transport to transfer stations or directly to
landfills. Residential solid waste collection services are
typically performed under contracts with municipalities, which
we generally secure by competitive bid and which give our
company exclusive rights to service all or a portion of the
homes in their respective jurisdictions. These contracts or
franchises usually range in duration from one to five years,
although some of our exclusive franchises are for significantly
longer periods. Residential solid waste collection services may
also be performed on a subscription basis, in which individual
households contract directly with our company. The fees received
for subscription residential collection are based primarily on
market factors, frequency and type of service, the distance to
the disposal facility and cost of disposal. In general,
subscription residential collection fees are paid quarterly in
advance by the residential customers receiving the service.
In our commercial and industrial collection operations, we
supply our customers with waste containers of varying sizes. We
also rent compactors to large waste generators. Commercial
collection services are generally performed under one- to
three-year service agreements, and fees are determined by such
considerations as:
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market factors, |
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collection frequency, |
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type of equipment furnished, |
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the type and volume or weight of the waste collected, |
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the distance to the disposal facility and |
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the cost of disposal. |
We rent waste containers to construction sites and also provide
waste collection services to industrial and construction
facilities on a contractual basis with terms generally ranging
from a single pickup to one year or longer. We collect the
containers or compacted waste and transport the waste either to
a landfill or a transfer station for disposal.
Also, we currently provide recycling services in certain markets
primarily to comply with local laws or obligations under our
franchise agreements. These services include the curbside
collection of residential recyclable waste and the provision of
a variety of recycling services to commercial and industrial
customers.
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Transfer and Disposal Services. We own or operate 96
transfer stations. We deposit waste at these stations, as do
other private haulers and municipal haulers, for compaction and
transfer to trailers for transport to disposal sites or
recycling facilities. As of December 31, 2004, we owned or
operated 58 landfills, which had approximately 8,904
permitted acres and total available permitted and probable
expansion disposal capacity of approximately 1.7 billion
in-place cubic yards. The in-place capacity of our landfills is
subject to change based on engineering factors, requirements of
regulatory authorities and the ability to expand our sites
successfully. Some of our landfills accept non-hazardous special
waste, including utility ash, asbestos and contaminated soils.
See “— Properties.”
Most of our existing landfill sites have the potential for
expanded disposal capacity beyond the currently permitted
acreage. We monitor the availability of permitted disposal
capacity at each of our landfills and evaluate whether to pursue
expansion at a given landfill based on estimated future waste
volumes and prices, market needs, remaining capacity and
likelihood of obtaining an expansion. To satisfy future disposal
demand, we are currently seeking to expand permitted capacity at
certain of our landfills, although no assurances can be made
that all future expansions will be permitted as designed.
Other Services. We have 35 materials recovery facilities
and other recycling operations, which are generally required to
fulfill our obligations under long-term municipal contracts for
residential collection services. These facilities sort
recyclable paper, aluminum, glass and other materials. Most of
these recyclable materials are internally collected by our
residential collection operations. In some areas, we receive
commercial and industrial solid waste that is sorted at our
facilities into recyclable materials and non-recyclable waste.
The recyclable materials are salvaged, repackaged and sold to
third parties and the non-recyclable waste is disposed of at
landfills or incinerators. Wherever possible, our strategy is to
reduce our exposure to fluctuations in recyclable commodity
prices by utilizing third party recycling facilities, thereby
minimizing our recycling investment.
We provide remediation and other heavy construction services
primarily through our subsidiary located in Missouri.
We also have a Texas-based compost, mulch and soil business at
which yard, mill and other waste is processed, packaged and sold
as various products.
Sales and Marketing
We seek to provide quality services that will enable our company
to maintain high levels of customer satisfaction. We derive our
business from a broad customer base which we believe will enable
our company to experience stable growth. We focus our marketing
efforts on continuing and expanding business with existing
customers, as well as attracting new customers.
We employ approximately 500 sales and marketing employees. Our
sales and marketing strategy is to provide high-quality,
comprehensive solid waste collection, recycling, transfer and
disposal services to our customers at competitive prices. We
target potential customers of all sizes, from small quantity
generators to large “Fortune 500” companies and
municipalities.
Most of our marketing activity is local in nature. However, in
2000 we initiated a national accounts program in response to our
customers’ needs.
We generally do not change the tradenames of the local
businesses we acquire, and therefore we do not operate
nationally under any one mark or tradename. Rather, we rely on
the goodwill associated with the acquired companies’ local
tradenames as used in each geographic market in which we operate.
Customers
We provide services to commercial, industrial, municipal and
residential customers. No one customer has individually
accounted for more than 10% of our consolidated revenue or of
our reportable segment revenue in any of the last three years.
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Competition
We operate in a highly competitive industry. Entry into our
business and the ability to operate profitably in the industry
requires substantial amounts of capital and managerial
experience.
Competition in the non-hazardous solid waste industry comes from
a few large, national publicly-owned companies, including Waste
Management and Allied Waste Industries, several regional
publicly- and privately-owned solid waste companies, and
thousands of small privately-owned companies. Some of our
competitors have significantly larger operations, and may have
significantly greater financial resources, than we do. In
addition to national and regional firms and numerous local
companies, we compete with municipalities that maintain waste
collection or disposal operations. These municipalities may have
financial advantages due to the availability of tax revenues and
tax-exempt financing.
We compete for collection accounts primarily on the basis of
price and the quality of our services. From time to time, our
competitors may reduce the price of their services in an effort
to expand market share or to win a competitively bid municipal
contract. This may have an impact on our future revenue and
profitability.
In each market in which we own or operate a landfill, we compete
for landfill business on the basis of disposal costs,
geographical location and quality of operations. Our ability to
obtain landfill business may be limited by the fact that some
major collection companies also own or operate landfills to
which they send their waste. There also has been an increasing
trend at the state and local levels to mandate waste reduction
at the source and to prohibit the disposal of certain types of
waste, such as yard waste, at landfills. This may result in the
volume of waste going to landfills being reduced in certain
areas, which may affect our ability to operate our landfills at
their full capacity and/or affect the prices that we can charge
for landfill disposal services. In addition, most of the states
in which we operate landfills have adopted plans or requirements
that set goals for specified percentages of certain solid waste
items to be recycled.
Regulation
Our facilities and operations are subject to a variety of
federal, state and local requirements that regulate the
environment, public health, safety, zoning and land use.
Operating and other permits, licenses and other approvals are
generally required for landfills and transfer stations, certain
solid waste collection vehicles, fuel storage tanks and other
facilities that we own or operate, and these permits are subject
to revocation, modification and renewal in certain
circumstances. Federal, state and local laws and regulations
vary, but generally govern wastewater or stormwater discharges,
air emissions, the handling, transportation, treatment, storage
and disposal of hazardous and non-hazardous waste, and the
remediation of contamination associated with the release or
threatened release of hazardous substances. These laws and
regulations provide governmental authorities with strict powers
of enforcement, which include the ability to obtain injunctions
and/or impose fines or penalties in the case of violations,
including criminal penalties. The U.S. Environmental
Protection Agency and various other federal, state and local
environmental, public and occupational health and safety
agencies and authorities administer these regulations, including
the Occupational Safety and Health Administration of the
U.S. Department of Labor.
We strive to conduct our operations in compliance with
applicable laws and regulations. However, in the existing
climate of heightened environmental concerns, from time to time,
we have been issued citations or notices from governmental
authorities that have resulted in the need to expend funds for
remedial work and related activities at various landfills and
other facilities. There is no assurance that citations and
notices will not be issued in the future despite our regulatory
compliance efforts. We have established remediation reserves
that we believe, based on currently available information, will
be adequate to cover our current estimates of regulatory costs.
However, we cannot assure you that actual costs will not exceed
our reserves.
Federal Regulation. The following summarizes the primary
environmental, public and occupational health and safety-related
statutes of the United States that affect our facilities and
operations:
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(1) The Solid Waste Disposal Act, as amended, including
the Resource Conservation and Recovery Act. RCRA and its
implementing regulations establish a framework for regulating
the handling, |
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transportation, treatment, storage and disposal of hazardous and
non-hazardous solid waste, and require states to develop
programs to ensure the safe disposal of solid waste in sanitary
landfills. |
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Subtitle D of RCRA establishes a framework for regulating the
disposal of municipal solid waste. Regulations under Subtitle D
currently include minimum comprehensive solid waste management
criteria and guidelines, including location restrictions,
facility design and operating criteria, closure and post-closure
requirements, financial assurance standards, groundwater
monitoring requirements and corrective action standards, many of
which had not commonly been in effect or enforced in the past in
connection with municipal solid waste landfills. Each state was
required to submit to the U.S. EPA a permit program
designed to implement Subtitle D regulations by April 9,
1993. All of the states in which we operate have implemented
permit programs pursuant to RCRA and Subtitle D. These state
permit programs may include landfill requirements which are more
stringent than those of Subtitle D. |
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All of our planned landfill expansions or new landfill
development projects have been engineered to meet or exceed
Subtitle D requirements. Operating and design criteria for
existing operations have been modified to comply with these new
regulations. Compliance with Subtitle D regulations has resulted
in increased costs and may in the future require substantial
additional expenditures in addition to other costs normally
associated with our waste management activities. |
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(2) The Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended. CERCLA,
among other things, provides for the cleanup of sites from which
there is a release or threatened release of a hazardous
substance into the environment. CERCLA may impose strict joint
and several liability for the costs of cleanup and for damages
to natural resources upon current owners and operators of the
site, parties who were owners or operators of the site at the
time the hazardous substances were disposed of, parties who
transported the hazardous substances to the site and parties who
arranged for the disposal of the hazardous substances at the
site. Under the authority of CERCLA and its implementing
regulations, detailed requirements apply to the manner and
degree of investigation and remediation of facilities and sites
where hazardous substances have been or are threatened to be
released into the environment. Liability under CERCLA is not
dependent upon the existence or disposal of only “hazardous
wastes” but can also be based upon the existence of small
quantities of more than 700 “substances” characterized
by the U.S. EPA as “hazardous,” many of which may
be found in common household waste. |
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Among other things, CERCLA authorizes the federal government to
investigate and remediate sites at which hazardous substances
have been or are threatened to be released into the environment
or to order (or offer an opportunity to) persons potentially
liable for the cleanup of the hazardous substances to do so. In
addition, the U.S. EPA has established a National
Priorities List of sites at which hazardous substances have been
or are threatened to be released and which require investigation
or cleanup. |
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Liability under CERCLA is not dependent upon the intentional
disposal of hazardous waste or hazardous substances. It can be
founded upon the release or threatened release, even as a result
of unintentional, non-negligent or lawful action, of thousands
of hazardous substances, including very small quantities of such
substances. Thus, even if our landfills have never knowingly
received hazardous waste as such, it is possible that one or
more hazardous substances may have been deposited or
“released” at our landfills or at other properties
which we currently own or operate or may have owned or operated.
Therefore, we could be liable under CERCLA for the cost of
cleaning up such hazardous substances at such sites and for
damages to natural resources, even if those substances were
deposited at our facilities before we acquired or operated them.
The costs of a CERCLA cleanup can be very expensive. Given the
difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on our
business and financial condition. For a further discussion, see
“— Liability Insurance and Bonding.” |
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(3) The Federal Water Pollution Control Act of 1972, as
amended. This Act regulates the discharge of pollutants from
a variety of sources, including solid waste disposal sites, into
streams, rivers and other waters of the United States. Point
source runoff from our landfills and transfer stations that is
discharged into surface waters must be covered by discharge
permits that generally require us to conduct |
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sampling and monitoring, and under certain circumstances, reduce
the quantity of pollutants in those discharges. Storm water
discharge regulations under this Act require a permit for
certain construction activities and discharges from industrial
operations and facilities, which may affect our operations. If a
landfill or transfer station discharges wastewater through a
sewage system to a publicly-owned treatment works, the facility
must comply with discharge limits imposed by that treatment
works. In addition, states may adopt groundwater protection
programs under this Act or the Safe Drinking Water Act that
could affect solid waste landfills. Furthermore, development
which alters or affects wetlands must generally be permitted
prior to such development commencing, and certain mitigation
requirements may be required by the permitting agencies. |
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(4) The Clean Air Act, as amended. The Clean Air Act
imposes limitations on emissions from various sources, including
landfills. In March 1996, the U.S. EPA promulgated
regulations that require large municipal solid waste landfills
to install landfill gas monitoring systems. These regulations
apply to landfills that commenced construction, reconstruction
or modification on or after May 30, 1991, and, principally,
to landfills that can accommodate 2.5 million cubic meters
or more of municipal solid waste. The regulations apply whether
the landfill is active or closed. The date by which each
affected landfill is required to have a gas collection and
control system installed and made operational varies depending
upon calculated emission rates at the landfill. Many state
regulatory agencies also currently require monitoring systems
for the collection and control of certain landfill gas. We do
not expect that compliance with any new state regulations will
have a material effect on us. |
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(5) The Occupational Safety and Health Act of 1970, as
amended. This Act authorizes the Occupational Safety and
Health Administration of the U.S. Department of Labor to
promulgate occupational safety and health standards. A number of
these standards, including standards for notices of hazardous
chemicals and the handling of asbestos, apply to our facilities
and operations. |
State Regulation. Each state in which we operate has its
own laws and regulations governing solid waste disposal, water
and air pollution, and, in most cases, releases and cleanup of
hazardous substances and liability for such matters. States also
have adopted regulations governing the design, operation,
maintenance and closure of landfills and transfer stations. Our
facilities and operations are likely to be subject to these
types of requirements. In addition, our solid waste collection
and landfill operations may be affected by the trend in many
states toward requiring the development of solid waste reduction
and recycling programs. For example, several states have enacted
laws that require counties or municipalities to adopt
comprehensive plans to reduce, through solid waste planning,
composting, recycling or other programs, the volume of solid
waste deposited in landfills. Additionally, laws and regulations
restricting the disposal of certain waste in solid waste
landfills, including yard waste, newspapers, beverage
containers, unshredded tires, lead-acid batteries and household
appliances, have been promulgated in several states and are
being considered in others. Legislative and regulatory measures
to mandate or encourage waste reduction at the source and waste
recycling also are or have been under consideration by the
U.S. Congress and the U.S. EPA, respectively.
In order to construct, expand and operate a landfill, one or
more construction or operating permits, as well as zoning and
land use approvals, must be obtained. These are difficult and
time-consuming to obtain, are often opposed by neighboring
landowners and citizens’ groups, may be subject to periodic
renewal and are subject to modification and revocation by the
issuing agency. In connection with our acquisition of existing
landfills, it may be and on occasion has been necessary for our
company to expend considerable time, effort and money to bring
the acquired facilities into compliance with applicable
requirements and to obtain the permits and approvals necessary
to increase their capacity.
Many of our facilities own and operate underground storage tanks
which are generally used to store petroleum-based products.
These tanks are generally subject to federal, state and local
laws and regulations that mandate their periodic testing,
upgrading, closure and removal, and that, in the event of leaks,
require that polluted groundwater and soils be remediated. We
believe that all of our underground storage tanks currently
meet, in all material respects, all applicable regulations. If
underground storage tanks we own or operate leak, and the
leakage migrates onto the property of others, we could be liable
for response costs and other damages to third parties. We are
unaware of facts indicating that issues of compliance with
regulations
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related to underground storage tanks will have a material
adverse effect on our financial condition, results of operations
or cash flows.
Finally, with regard to our solid waste transportation
operations, we are subject to the jurisdiction of the Surface
Transportation Board and are regulated by the Federal Highway
Administration, Office of Motor Carriers, and by regulatory
agencies in states that regulate such matters. Various states
have enacted or promulgated, or are considering enacting or
promulgating, laws and regulations that would restrict the
interstate transportation and processing of solid waste. In
1978, the U.S. Supreme Court ruled that a law that
restricts the importation of out-of-state solid waste was
unconstitutional; however, states have attempted to distinguish
proposed laws from that involved in and implicated by that
ruling. In 1994, the Supreme Court ruled that a flow control
law, which attempted to restrict solid waste from leaving its
place of generation, imposed an impermissible burden upon
interstate commerce, and, therefore, was unconstitutional;
however, states have also attempted to distinguish proposed laws
from that involved in and implicated by that ruling. In response
to these Supreme Court rulings, the U.S. Congress has
considered passing legislation authorizing states and local
governments to restrict the free movement of solid waste in
interstate commerce. If federal legislation authorizing state
and local governments to restrict the free movement of solid
waste in interstate commerce is enacted, such legislation could
adversely affect our operations.
We have established a reserve for landfill and environmental
costs, which includes landfill site final capping, closure and
post-closure costs. We periodically reassess such costs based on
various methods and assumptions regarding landfill airspace and
the technical requirements of Subtitle D of RCRA and adjust our
rates used to expense final capping, closure and post-closure
costs accordingly. Based on current information and regulatory
requirements, we believe that our reserves for such landfill and
environmental expenditures are adequate. However, environmental
laws may change, and there can be no assurance that our reserves
will be adequate to cover requirements under existing or new
environmental laws and regulations, future changes or
interpretations of existing laws and regulations, or the
identification of adverse environmental conditions previously
unknown to us. See “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Landfill and Environmental Matters”
and “Risk Factors — Compliance with environmental
regulation may impede our growth.”
Liability Insurance and Bonding
The nature of our business exposes our company to the risk of
liabilities arising out of our operations, including possible
damages to the environment. Such potential liabilities could
involve, for example, claims for remediation costs, personal
injury, property damage and damage to the environment in cases
where we may be held responsible for the escape of harmful
materials; claims of employees, customers or third parties for
personal injury or property damage occurring in the course of
our operations; or claims alleging negligence in the planning or
performance of work. We could also be subject to fines and civil
and criminal penalties in connection with alleged violations of
regulatory requirements. Because of the nature and scope of the
possible environmental damages, liabilities imposed in
environmental litigation can be significant. Our solid waste
operations have third party environmental liability insurance
with limits in excess of those required by permit regulations,
subject to certain limitations and exclusions. However, we
cannot assure you that the limits of such environmental
liability insurance would be adequate in the event of a major
loss, nor can we assure you that we would continue to carry
excess environmental liability insurance should market
conditions in the insurance industry make such coverage costs
prohibitive.
We have general liability, vehicle liability, employment
practices liability, pollution liability, directors and officers
liability, worker’s compensation and employer’s
liability coverage, as well as umbrella liability policies to
provide excess coverage over the underlying limits contained in
these primary policies. We also carry property insurance.
Although we try to operate safely and prudently and while we
have, subject to limitations and exclusions, substantial
liability insurance, no assurance can be given that we will not
be exposed to uninsured liabilities which could have a material
adverse effect on our financial condition, results of operations
or cash flows.
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Our insurance programs for worker’s compensation, general
liability, vehicle liability and employee-related health care
benefits are effectively self-insured. Claims in excess of
self-insurance levels are fully insured subject to policy
limits. Accruals are based on claims filed and actuarial
estimates of claims development and claims incurred but not
reported. Due to the variable condition of the insurance market,
we have experienced, and may continue to experience in the
future, increased self-insurance retention levels and increased
premiums. As we assume more risk for self-insurance through
higher retention levels, we may experience more variability in
our self-insurance reserves and expense.
In the normal course of business, we may be required to post
performance bonds, insurance policies, letters of credit and/or
cash or marketable securities deposits in connection with
municipal residential collection contracts, the operation,
closure or post-closure of landfills, certain remediation
contracts, certain environmental permits, and certain business
licenses and permits. Bonds issued by surety companies operate
as a financial guarantee of our performance. To date, we have
satisfied financial responsibility requirements by making cash
or marketable securities deposits or by obtaining bank letters
of credit, insurance policies or surety bonds.
Employees
As of December 31, 2004, we employed approximately
13,400 full-time employees, approximately 3,100 of whom
were covered by collective bargaining agreements. Our management
believes that we have good relations with our employees.
Compensation
We believe that our compensation program effectively aligns our
field and corporate management team with the company’s
overall goal of generating increasing amounts of free cash flow
while achieving targeted earnings and returns on invested
capital. This is done by utilizing simple and measurable metrics
on which incentive pay is based. At the field level, these
metrics are based upon free cash flow, earnings and return on
invested capital for each manager’s geographic area of
responsibility. Great effort is taken to ensure that these
individual goals agree to the overall goals of the company.
Incentive compensation at the corporate level is based on the
obtainment of our company’s overall goals. In addition,
certain field and corporate employees also participate in a
long-term incentive program. We believe this program aligns our
company’s short- and long-term goals and helps ensure that
the long-term success of our company is not sacrificed for the
obtainment of short-term goals.
Corporate History
We were incorporated as a Delaware corporation in 1996 by our
former parent company, AutoNation, Inc. In 1998, AutoNation
separated its non-hazardous solid waste services division from
its other businesses and we completed an initial public offering
of shares of our common stock. In 1999, AutoNation sold
substantially all of its remaining interest in our company in a
secondary public offering.
Availability of Reports and Other Information
Our corporate website is http://www.republicservices.com. We
make available on this website, free of charge, access to our
Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, Proxy
Statement on Schedule 14A and amendments to those materials
filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities and Exchange Act of 1934 as soon as reasonably
practicable after we electronically submit such material to the
Securities and Exchange Commission. Our corporate website also
contains our Corporate Governance Guidelines, Code of Ethics and
Charters of the Nominating and Corporate Governance Committee,
Audit Committee and Compensation Committee of the Board of
Directors. In addition, the Commission’s website is
http://www.sec.gov. The Commission makes available on this
website, free of charge, reports, proxy and information
statements, and other information regarding issuers, such as us,
that file electronically with the Commission. Information on our
website or the Commission’s website is not part of this
document.
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Risk Factors
This Annual Report on Form 10-K includes
“forward-looking statements” within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended, including, in particular, certain statements about our
plans, strategies and prospects. Although we believe that our
plans, intentions and expectations reflected in or suggested by
such forward-looking statements are reasonable, we cannot assure
you that such plans, intentions or expectations will be
achieved. Important factors that could cause our actual results
to differ materially from our forward-looking statements include
those set forth in this Risk Factors section. All
forward-looking statements attributable to us or any persons
acting on our behalf are expressly qualified in their entirety
by the cautionary statements set forth below. Unless the context
requires otherwise, all references to the “company,”
“we,” “us” or “our” include
Republic Services, Inc. and its subsidiaries.
If any of the following risks, or other risks not presently
known to us or that we currently believe to not be significant,
develop into actual events, then our business, financial
condition, results of operations, cash flows or prospects could
be materially adversely affected.
We operate in a highly competitive industry and may be unable
to compete effectively.
We operate in a highly competitive business environment. Some of
our competitors have significantly larger operations and may
have significantly greater financial resources than we do. In
addition, the solid waste industry is constantly changing as a
result of consolidation which may create additional competitive
pressures in our business environment.
We also compete with municipalities that maintain their own
waste collection or disposal operations. These municipalities
may have a financial advantage over us as a result of the
availability of tax revenue and tax-exempt financing.
We compete for collection accounts primarily on the basis of
price and the quality of services. From time to time our
competitors may reduce the price of their services in an effort
to expand their market share or to win a competitively bid
municipal contract.
In each market in which we own or operate a landfill, we compete
for solid waste volume on the basis of disposal or
“tipping” fees, geographical location and quality of
operations. Our ability to obtain solid waste volume for our
landfills may be limited by the fact that some major collection
companies also own or operate landfills to which they send their
waste. In markets in which we do not own or operate a landfill,
our collection operations may operate at a disadvantage to fully
integrated competitors.
As a result of these factors, we may have difficulty competing
effectively from time to time.
Economic conditions could adversely affect our business,
operations and internal growth.
In the past, economic slowdowns have negatively impacted the
portion of our collection business servicing the manufacturing
sector and the non-residential construction industry. Landfill
volumes attributable to manufacturing and construction activity
were also impacted. A slowdown in the economy in any of the
markets we service could adversely affect volumes, pricing and
operating margins in our collection, transfer and disposal
operations.
An increase in the price of fuel may adversely affect our
business.
Our operations are dependent upon fuel, which we generally
purchase in the open market on a daily basis. During 2003 and
2004, we experienced increases in the cost of fuel. A portion of
this increase was passed on to our customers. However, because
of the competitive nature of the waste industry, there can be no
assurances that we will be able to pass on current or any future
increases in fuel prices to our customers. Due to political
instability in oil-producing countries, fuel prices may continue
to increase significantly in 2005. A significant increase in
fuel costs could adversely affect our business.
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We may be unable to execute our financial strategy.
Our ability to execute our financial strategy is dependent upon
our ability to maintain an investment grade rating on our senior
debt. The credit rating process is contingent upon a number of
factors, many of which are beyond our control.
Our financial strategy is also dependent upon our ability to
generate sufficient cash flow to reinvest in our existing
business, to fund our internal growth, to acquire other solid
waste businesses, repurchase shares of our common stock, pay
dividends, minimize our borrowings and take other actions to
enhance stockholder value. We cannot assure you that we will be
successful in executing our broad-based pricing program, that we
will generate sufficient cash flow to execute our financial
strategy, that we will continue to repurchase our common stock,
or that we will be able to pay cash dividends or increase the
amount of our dividends.
We may be unable to execute our acquisition growth
strategy.
Our ability to execute our growth strategy depends in part on
our ability to identify and acquire desirable acquisition
candidates as well as our ability to successfully consolidate
acquired operations into our business. The consolidation of our
operations with the operations of acquired companies, including
the consolidation of systems, procedures, personnel and
facilities, the relocation of staff, and the achievement of
anticipated cost savings, economies of scale and other business
efficiencies, presents significant challenges to our management,
particularly if several acquisitions occur at the same time. In
short, we cannot assure you that:
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desirable acquisition candidates exist or will be identified, |
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we will be able to acquire any of the candidates identified, |
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we will effectively consolidate companies which are acquired and
fully or timely realize the expected cost savings, economies of
scale or business efficiencies, or |
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any acquisitions will be profitable or accretive to our earnings. |
Additional factors may negatively impact our acquisition growth
strategy. Our acquisition strategy may require spending
significant amounts of capital. If we are unable to obtain
additional needed financing on acceptable terms, we may need to
reduce the scope of our acquisition growth strategy, which could
have a material adverse effect on our growth prospects. The
intense competition among our competitors pursuing the same
acquisition candidates may increase purchase prices for solid
waste businesses and increase our capital requirements and/or
prevent us from acquiring certain acquisition candidates. If any
of the aforementioned factors force us to alter our growth
strategy, our financial condition, results of operations and
growth prospects could be adversely affected.
We may be unable to manage our growth effectively.
Our growth strategy places significant demands on our financial,
operational and management resources. In order to continue our
growth, we will need to add administrative and other personnel,
and make additional investments in operations and systems. We
cannot assure you that we will be able to find and train
qualified personnel, or do so on a timely basis, or expand our
operations and systems to the extent, and in the time, required.
Businesses we acquire may have undisclosed liabilities.
In pursuing our acquisition strategy, our investigations of the
acquisition candidates may fail to discover certain undisclosed
liabilities of the acquisition candidates. If we acquire a
company having undisclosed liabilities, as a successor owner we
may be responsible for such undisclosed liabilities. We
typically try to minimize our exposure to such liabilities by
obtaining indemnification from each seller of the acquired
companies, by deferring payment of a portion of the purchase
price as security for the indemnification and by acquiring only
specified assets. However, we cannot assure you that we will be
able to obtain indemnifications or that they will be
enforceable, collectible or sufficient in amount, scope or
duration to fully offset any undisclosed liabilities arising
from our acquisitions.
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Our financial statements are based upon estimates and
assumptions that may differ from actual results.
Our financial statements have been prepared in accordance with
U.S. generally accepted accounting principles and necessarily
include amounts based on estimates and assumptions made by us.
Actual results could differ from these amounts. Significant
items subject to such estimates and assumptions include the
carrying value of long-lived assets, the depletion and
amortization of landfill development costs, accruals for final
capping, closure and post-closure costs, valuation allowances
for accounts receivable, liabilities for potential litigation,
claims and assessments, and liabilities for environmental
remediation, deferred taxes and self-insurance.
We cannot assure you that our reserves for landfill and
environmental costs will be adequate to cover the requirements
of existing environmental regulations, future changes or
interpretations of existing regulations, or the identification
of adverse environmental conditions previously unknown to us.
Changes in insurance markets may impact our financial
results.
Due to the variable condition of the insurance market, we have
experienced, and may continue to experience in the future,
increased self-insurance retention levels and increased
premiums. As we assume more risk for self-insurance through
higher retention levels, we may experience more variability in
our self-insurance reserves and expense.
We depend on key personnel.
Our future success depends on the continued contributions of
several key employees and officers. We do not maintain key man
life insurance policies on any of our officers. The loss of the
services of key employees and officers, whether such loss is
through resignation or other causes, or the inability to attract
additional qualified personnel, could have a material adverse
effect on our financial condition, results of operations and
growth prospects.