During 2004, we generated free cash Öow of $388.2 million (consisting of cash provided by operating
activities of $666.3 million, less purchases of property and equipment of $283.8 million, plus proceeds from the
sale of property and equipment of $5.7 million), which substantially exceeded our objective. Our free cash
Öow was positively impacted by lower than expected cash taxes due to bonus depreciation and our change in
tax method related to certain landÑll costs.
In April 2004, our board of directors increased our share repurchase authorization from $200.0 million to
$275.0 million. During 2004, we used our free cash Öow to repurchase approximately 9.6 million shares of our
common stock for $266.1 million. Also, during the third quarter of 2004, our board of directors increased our
quarterly dividend to $.12 per share.
2005 Financial Objectives
Our Ñnancial objectives for 2005 assume no deterioration or improvement in the overall economy from
that experienced during the fourth quarter 2004. SpeciÑc guidance is as follows:
‚ We expect to generate free cash Öow in excess of $260 million.
‚ We anticipate using our free cash Öow to continue to repurchase shares of our common stock under our
$275.0 million share repurchase program approved by our board of directors in October 2004 and to
continue to pay quarterly cash dividends.
‚ We anticipate diluted earnings per share of $1.65 to $1.70.
‚ We are targeting internal growth from core operations to be in the range of 4.0% to 4.5%, with 2.5%
attributable to price increases and 1.5% to 2.0% attributable to volume growth.
‚ We anticipate purchasing approximately $300 million of property and equipment.
We expect our free cash Öow during 2005 to be lower than 2004 and 2003 because of higher tax payments
due to the reversal of bonus depreciation, higher purchases of property and equipment and several one-time
items that beneÑted previous periods, including utilization of a tax receivable and the collection of a note
receivable during 2004, and an increase in self-insurance reserves during 2003.
2005 Business Initiatives
Our business initiatives for 2005 are generally a continuation of those initiated in the prior three years and
are dependent on further standardizing our business processes and improving our systems. Ensuring that our
people understand our initiatives and processes and are trained on our new systems is essential to the overall
success of our initiatives. Our business initiatives for 2005 are as follows:
‚ Pricing initiatives. During the fourth quarter of 2003, we implemented a broad-based pricing
initiative across all lines of our business. The purpose of this initiative is to recover increasing costs and
improve operating margins. We realized the beneÑt of this initiative during 2004 and expect a similar
beneÑt during 2005.
‚ Improve the quality of our revenue. The Ñrst step in this process was completed in 2001 and included
installing a standardized billing and operating system. This system enables us to, among other things,
stratify our customers to determine how our rates compare to current market pricing. During 2002, we
implemented the second generation of this software which we call RSI 1.0. RSI 1.0, our company's
core business system, provides a variety of functionalities including customer service, dispatch, billing,
sales analysis, account retention and route productivity analysis. During 2005, we will begin to develop
the next generation of our billing and operating system. This system will provide additional functional-
ity to our operating locations and further standardize our billing and operating processes.
We currently monitor our return on investment by market place and have instituted a return on
investment pricing model. This model will eventually allow us to track our return on investment by
customer.
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