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.
Seasonality
Our operations can be adversely aÅected by periods of inclement weather which could increase the
volume of waste collected under our existing contracts (without corresponding compensation), delay the
collection and disposal of waste, reduce the volume of waste delivered to our disposal sites, or delay the
construction or expansion of our landÑll sites and other facilities.
New Accounting Pronouncements
On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (revised 2004), ""Share-Based Payment,'' which is a revision of SFAS 123,
""Accounting for Stock-Based Compensation.'' SFAS 123(R) supersedes APB Opinion No. 25, ""Accounting
for Stock Issued to Employees,'' and amends SFAS 95, ""Statement of Cash Flows.'' Generally, the approach
in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer an alternative.
SFAS 123(R) must be adopted by public companies no later than July 1, 2005. Early adoption will be
permitted in periods in which Ñnancial statements have not been issued. We expect to adopt SFAS 123(R) on
July 1, 2005.
SFAS 123(R) permits public companies to adopt its requirements using one of two methods:
1. A ""modiÑed-prospective'' method in which compensation cost is recognized beginning with the
eÅective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after
the eÅective date and (b) based on the requirements of SFAS 123 for all awards granted to employees
prior to the eÅective date of SFAS 123(R) that remain unvested on the eÅective date.
2. A ""modiÑed-retrospective'' method which includes the requirements of the modiÑed-prospective
method described above, but also permits entities to restate based on the amounts previously reÖected in
their SFAS 123 pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of
the year of adoption.
The Company plans to adopt SFAS 123(R) using the modiÑed-prospective method.
As permitted by SFAS 123, the company currently accounts for share-based payments to employees
using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee
stock options. Accordingly, the adoption of SFAS 123(R)'s fair value method may have a signiÑcant impact
on our result of operations, although it will have no impact on our overall Ñnancial position. The impact of
adoption of SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based
payments granted in the future. SFAS 123(R) requires the beneÑts of tax deductions in excess of recognized
compensation cost to be reported as a Ñnancing cash Öow, rather than as an operating cash Öow as required
under current literature. This requirement will reduce net operating cash Öows and increase net Ñnancing cash
Öows in periods after adoption. While the Company cannot estimate what those amounts will be in the future
(because they depend on, among other things, when employees exercise stock options), the amount of
operating cash Öows recognized in prior periods for such excess tax deductions were $10.6 million,
$6.7 million, and $4.0 million in 2004, 2003 and 2002, respectively.
49