The increase in aggregate dollars in all periods presented is primarily a result of the expansion of our
operations through internal growth and acquisitions.
The increase in cost of operations as a percentage of revenue from 2002 to 2003 and the decrease in cost
of operations as a percentage of revenue from 2003 to 2004 is primarily attributable to higher self-insurance
expense in 2003. Self-insurance expense was $165.3 million, $189.5 million and $138.1 million for the years
ended December 31, 2004, 2003 and 2002, respectively. The increase in self-insurance expense in 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.
Excluding self-insurance expense, cost of operations as a percentage of revenue increased during the year
ended December 31, 2004 versus the comparable 2003 period. This increase is primarily attributable to
increased fuel prices, labor costs and subcontracting costs associated with the long-haul transport of waste by
third-party vendors. Excluding self-insurance expense, cost of operations as a percentage of revenue decreased
in 2003 versus the comparable 2002 period due to the elimination of closure and post-closure expense as a
component of cost of operations in accordance with SFAS 143 in 2003 and the termination of our operating
lease facility in July 2002. This decrease was partially oÅset by increased fuel prices, an increase in waste taxes
levied on landÑll volumes in certain states, an increase in revenue generated by lines of business that produce
lower operating margins and an increase in the long-haul transport of waste by third-party vendors.
To date in 2005, we have experienced a signiÑcant increase in fuel prices. We believe that cost of
operations as a percentage of revenue may continue to remain high depending upon the cost of fuel, health
insurance, risk insurance and other key components of our cost structure and general economic conditions.
Depreciation, Amortization and Depletion of Property and Equipment. Depreciation, amortization and
depletion expenses for property and equipment were $252.4 million, $233.8 million and $193.5 million, or, as a
percentage of revenue, 9.3%, 9.3% and 8.2%, for the years ended December 31, 2004, 2003 and 2002,
respectively. The increase in aggregate dollars from 2003 to 2004 is primarily due to the expansion of our
operations through internal growth and acquisitions. The increase in aggregate dollars and as a percentage of
revenue from 2002 to 2003 is primarily due to an increase in landÑll amortization associated with the adoption
of SFAS 143. The remaining increase from 2002 to 2003 is due to increased depreciation expense resulting
from capital expenditures, acquisitions and the purchase of equipment originally placed into service pursuant
to an operating lease.
Amortization of Intangible Assets. Intangible assets consist primarily of cost in excess of fair value of
net assets acquired, but also includes values assigned to long-term contracts, covenants not to compete and
customer relationships. Expenses for amortization of intangible assets were $7.0 million, $5.3 million and
$6.1 million, or, as a percentage of revenue, .3%, .2% and .2%, for the years ended December 31, 2004, 2003
and 2002, respectively. The increase in such expenses in aggregate dollars and as a percentage of revenue from
2003 to 2004 is primarily due to amortization expense on amounts that were recorded in other intangible assets
during the three months ended September 30, 2004 resulting from an extensive internal review of all recent
acquisitions. The increase in amortization of intangible assets in aggregate dollars is also due to the
amortization of intangible assets associated with businesses acquired during 2004.
Accretion expense. Accretion expense was $13.7 million and $12.7 million or, as a percentage of