landÑll and other solid waste facilities. Many of the smaller participants in our industry have found these
costs diÇcult, 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 Ñnance such increased capital expenditures and
costs relative to many of the privately-owned companies in the industry. Additionally, the required
permits for landÑll development, expansion or construction have become more diÇcult, 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.
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 signiÑcant capital resources necessary for
acquisitions, has created an environment in which large publicly-owned, integrated companies can
operate more cost eÅectively and competitively than non-integrated operators.
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 Ñnancial strategy is our ability to generate free cash Öow. Our deÑnition of free
cash Öow, 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 Öows. We believe that free cash
Öow 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 Ñnancial strategy.
Consequently, we have developed incentive programs and we conduct monthly Ñeld operating reviews that
help focus our entire company on the importance of increasing free cash Öow.
Free cash Öow does not represent our cash Öow 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 deÑnition of free cash Öow may not be comparable to similarly
titled measures presented by other companies.
We manage our free cash Öow 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 Öow to maximize stockholder value as well as our return
on investment. This includes the following:
‚ Customer Service. We will continue to reinvest in our existing Öeet of vehicles, equipment, landÑlls
and facilities to ensure a high level of service to our customers.
‚ Internal Growth. Growth through increases in our customer base and services provided is the most
capital eÇcient means for us to build our business. This includes not only expanding landÑll and
transfer capacity and investing in trucks and containers, but also includes investing in information tools