We believe that selling, general and administrative expenses in the range of 10% of revenue are
appropriate for 2005 given our business platform.
Other Charges (Income). During the fourth quarter of 2002, we recorded a $5.6 million gain on the sale
of certain assets for amounts exceeding estimates originally made and recorded as other charges during the
fourth quarter of 2001.
Operating Income. Operating income was $452.3 million, $412.7 million and $459.5 million, or, as a
percentage of revenue, 16.7%, 16.4% and 19.4%, for the years ended December 31, 2004, 2003 and 2002,
respectively.
Interest Expense. We incurred interest expense on our unsecured notes and tax-exempt bonds. Interest
expense was $76.7 million, $78.0 million and $77.0 million for the years ended December 31, 2004, 2003 and
2002, respectively. In May 2004, $225.0 million of our public notes matured and were repaid resulting in a
reduction in interest expense, which was partially oÅset by increases in interest expense resulting from
additional tax-exempt Ñnancing obtained during 2004. The increase in interest expense from 2002 to 2003 is
due to higher debt balances resulting from additional tax-exempt Ñnancings partially oÅset by lower interest
rates.
Capitalized interest was $2.1 million, $3.3 million and $2.5 million for the years ended December 31,
2004, 2003 and 2002, respectively.
Interest Income and Other Income (Expense), Net. Interest income and other income, net of other
expense, was $8.1 million, $12.7 million and $4.0 million for the years ended December 31, 2004, 2003 and
2002, respectively. The variances during the periods are primarily due to Öuctuations in cash, restricted cash
and marketable securities balances and net gains on the disposition of assets during 2003. In May 2004, we
used a portion of our outstanding cash and restricted cash and marketable securities balances to repay
$225.0 million of public notes.
Income Taxes. Our provision for income taxes was $145.8 million, $132.0 million and $146.9 million for
the years ended December 31, 2004, 2003 and 2002, respectively. Our eÅective income tax rate was 38.0% for
the years ended December 31, 2004, 2003 and 2002.
Cumulative EÅect of Changes in Accounting Principles. During the Ñrst quarter of 2003, we adopted
SFAS 143. SFAS 143 required us to change the methodology we used to record Ñnal capping, closure and
post-closure costs related to our landÑlls. As of January 1, 2003, we recorded an after-tax expense of
$20.8 million, or $33.6 million on a pre-tax basis, as a cumulative eÅect of a change in accounting principle
resulting from the adoption of SFAS 143. In addition, we also recorded an after-tax expense of $17.0 million,
or $27.4 million on a pre-tax basis, as a cumulative eÅect of a change in accounting principle for our methane
gas collection systems. This change in accounting principle for methane gas collection systems was prompted
by a thorough evaluation of our landÑll accounting policy in connection with the adoption of SFAS 143 and is
consistent with the methodology used by other participants in the waste industry.
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