ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our Consolidated Financial Statements and
their Notes contained in this Annual Report on Form 10-K.
Overview of Our Business
We are a leading provider of non-hazardous solid waste collection and disposal services in the United
States. We provide 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 landÑlls and 35 recycling facilities.
We generate revenue primarily from our solid waste collection operations. Our remaining revenue is from
other services including landÑll disposal, recycling, compost, mulch and soil operations.
The following table reÖects our revenue by source for the years ended December 31, 2004, 2003 and 2002
(in millions):
Years Ended December 31,
2004 2003 2002
Collection:
Residential ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 655.2 24.2% $ 601.2 23.9% $ 530.7 22.4%
Commercial ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 737.9 27.2 706.0 28.0 696.7 29.5
Industrial ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 558.1 20.6 523.0 20.8 501.6 21.2
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 62.2 2.3 50.9 2.0 50.8 2.1
Total collection ÏÏÏÏÏÏÏÏÏÏ 2,013.4 74.3 1,881.1 74.7 1,779.8 75.2
Transfer and disposal ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,031.0 967.5 854.1
Less: IntercompanyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (519.8) (493.7) (428.5)
Transfer and disposal, net ÏÏÏÏÏÏÏÏÏ 511.2 18.9 473.8 18.8 425.6 18.0
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 183.5 6.8 162.9 6.5 159.7 6.8
Revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,708.1 100.0% $2,517.8 100.0% $2,365.1 100.0%
Our revenue from collection operations consists of fees we receive from commercial, industrial, municipal
and residential customers. Our residential and commercial collection operations in some markets derive
revenue from long-term contracts with municipalities. We generally provide industrial and commercial
collection services to individual customers under contracts with terms up to three years. Our revenue from
landÑll services is from disposal or tipping fees charged to third parties. In general, we integrate our recycling
operations with our collection operations and obtain revenue from the sale of recyclable materials. 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.
The cost of our collection operations is primarily variable and includes transfer, disposal, labor, self-
insurance, fuel and equipment maintenance costs. We try to be more eÇcient by controlling the movement of
waste streams from the point of collection through disposal. During the three months ended December 31,
2004, approximately 54% of the total volume of waste we collected was disposed of at landÑlls we own or
operate.
Our landÑll costs include daily operating expenses, costs of capital for cell development, costs for Ñnal
capping, closure and post-closure, and the legal and administrative costs of ongoing environmental compli-
ance. Daily operating expenses include leachate treatment and disposal, methane gas and groundwater
monitoring and system maintenance, interim cap maintenance and costs associated with the application of
daily cover materials. We expense all indirect landÑll development costs as they are incurred. We use life cycle
accounting and the units-of-consumption method to recognize certain direct landÑll costs related to cell
development. In life cycle accounting, certain direct costs are capitalized, and charged to expense based upon
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