e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2010
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number: 1-14267
REPUBLIC SERVICES,
INC.
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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65-0716904
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(State of
Incorporation)
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(I.R.S. Employer Identification
No.)
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18500 North Allied Way
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85054
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Phoenix, Arizona
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(Zip Code)
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(Address of Principal Executive
Offices)
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Registrants telephone number, including area code:
(480) 627-2700
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on which Registered
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Common Stock, par value $.01 per share
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The New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files) Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of June 30, 2010, the aggregate market value of the
shares of the Common Stock held by non-affiliates of the
registrant was $11.4 billion.
As of February 10, 2011, the registrant had outstanding
384,060,682 shares of Common Stock (excluding treasury
shares of 16,476,812).
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Registrants Proxy Statement relative to
the 2011 Annual Meeting of Stockholders are incorporated by
reference in Part III hereof.
Unless the context requires otherwise, all references in this
Form 10-K
to Republic, the company,
we, us and our refer to
Republic Services, Inc. and its consolidated subsidiaries.
PART I
ITEM 1. BUSINESS
Overview
We are the second largest provider of services in the domestic
non-hazardous solid waste industry as measured by revenue. We
provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers
through 348 collection companies in 40 states and Puerto
Rico. We own or operate 204 transfer stations, 193 active solid
waste landfills and 76 recycling facilities. We also operate
73 landfill gas and renewable energy projects. We were
incorporated as a Delaware corporation in 1996.
Based on analysts reports and industry trade publications,
we believe that the United States non-hazardous solid waste
services industry generates annual revenue of approximately
$54 billion, of which approximately 60% is generated by
publicly owned waste companies. We believe that we and one other
public waste company generated in excess of 60% of the publicly
owned companies total revenue. Additionally, industry data
indicates that the non-hazardous waste industry in the United
States remains fragmented as privately held companies and
municipal and other local governmental authorities generate
approximately 17% and 23%, respectively, of total industry
revenue. In general, growth in the solid waste industry is
linked to growth in the overall economy, including the level of
new household and business formation and changes in residential
and commercial construction activity.
Our operations are national in scope, but the physical
collection and disposal of waste is very much a local business;
therefore, the dynamics and opportunities differ in each of our
markets. By combining local operating management with
standardized business practices, we can drive greater overall
operating efficiency across the company, while maintaining
day-to-day
operating decisions at the local level, closest to the customer.
We implement this strategy through an organizational structure
that groups our operations within a corporate, region and area
structure. We manage our operations through four geographic
operating segments which are also our reportable segments:
Eastern, Midwestern, Southern and Western. The boundaries of our
operating segments may change from time to time. Each of our
regions is organized into several operating areas and each area
contains multiple operating locations. Each of our regions and
substantially all our areas provide collection, transfer,
recycling and disposal services. We believe this structure
facilitates the integration of our operations within each
region, which is a critical component of our operating strategy.
It also allows us to maximize the growth opportunities in each
of our markets and to operate the business efficiently, while
maintaining effective controls and standards over operational
and administrative matters, including financial reporting. See
Note 14, Segment Reporting, to our consolidated
financial statements in Item 8 of this
Form 10-K
for further discussion of our operating segments.
On December 5, 2008, we acquired all the issued and
outstanding shares of Allied Waste Industries, Inc. (Allied) in
a
stock-for-stock
transaction for an aggregate purchase price of
$12.1 billion, which included $5.4 billion of debt, at
fair value. The acquisition created a company with a strong,
national operating platform. The foundation of this platform is
our large network of disposal sites, which provides us with a
far stronger vertically integrated operating structure than
either company would have been able to achieve on its own. We
believe that our improved vertically integrated operations will
be a key driver of our future profitability.
We had revenue of $8.1 billion, $8.2 billion and
$3.7 billion and operating income of $1.5 billion,
$1.6 billion and $0.3 billion for the years ended
December 31, 2010, 2009 and 2008, respectively. In addition
to the Allied acquisition, a number of items impacted our 2010,
2009 and 2008 financial results. For a description of these
items, see Item 7, Managements Discussion and
Analysis of Financial Condition and Results of
Operations Overview and Consolidated Results of
Operations, included elsewhere in this
Form 10-K.
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During the past several years, we supported our internal growth
strategy with our presence in markets with higher than average
population growth. We believe our presence in these markets
positions us to experience growth at rates that are generally
higher than those of declining population growth.
We continue to focus on enhancing stockholder value by
implementing our operating and financial strategies. To ensure
that our goals relative to these strategies are achieved, we
have developed and implemented incentive programs that help
focus our entire company on realizing key performance metrics,
including increasing free cash flow, achieving targeted
earnings, maintaining and improving returns on invested capital,
and maintaining the integration synergies we have achieved. Our
operating and financial strategies are described further herein.
Operating
Strategy
We seek to leverage existing assets and revenue growth to
increase operating margins and enhance stockholder value. Our
operating strategy for accomplishing this goal includes the
following:
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using the extensive industry knowledge and experience of our
executive management team,
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using a decentralized management structure in overseeing
day-to-day
operations,
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using our strong, integrated operating platform, and
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implementing major initiatives aimed at improving the quality of
our service and our operating margins.
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Experienced
Executive Management Team
We believe that we have one of the most experienced executive
management teams in the solid waste industry.
Donald W. Slager became our CEO and remained our President on
January 1, 2011, after having served as our President and
Chief Operating Officer (COO) from the Allied acquisition in
December 2008 until then. Prior to the acquisition,
Mr. Slager worked for Allied from 1992 through 2008 and
served in various management positions, including President and
COO from 2004 through 2008 and Executive Vice President and COO
from 2003 to 2004. From 2001 to 2003, Mr. Slager served as
Senior Vice President, Operations. Mr. Slager held various
management positions at Allied from 1992 to 2003, and was
previously General Manager at National Waste Services, where he
served in various management positions since 1985.
Mr. Slager has over 30 years of experience in the
solid waste industry. Mr. Slager has been a member of our
Board of Directors since June 24, 2010.
Tod C. Holmes has served as our Chief Financial Officer since
August 1998. Mr. Holmes served as our Vice President of
Finance from June 1998 until August 1998 and as Vice President
of Finance of our former parent companys Solid Waste Group
from January 1998 until June 1998. From 1987 to 1998,
Mr. Holmes served in various management positions with
Browning-Ferris Industries, Inc., including Vice President,
Investor Relations from 1996 to 1998, Divisional Vice President,
Collection Operations from 1995 to 1996, Divisional Vice
President and Regional Controller Northern Region
from 1993 to 1995, and Divisional Vice President and Assistant
Corporate Controller from 1991 to 1993. Mr. Holmes has over
23 years of experience in the solid waste industry.
Kevin Walbridge has served as our Executive Vice
President Operations since October 1, 2010.
Mr. Walbridge served as our Senior Vice President of
Midwestern Operations from December 2008 until then, and served
as our Central Region Vice President from the time he joined us
in 1997 through December 2008. Before joining us,
Mr. Walbridge served as the Vice President
Operations/Co-Owner of National Serv All from 1996 to 1997, the
President of Waste Management of Alameda County from 1993 to
1996, and the Division President of Empire Waste Management
from 1985 to 1993. Mr. Walbridge has over 28 years of
experience in the solid waste industry.
Michael P. Rissman has served as our Executive Vice President,
General Counsel and Corporate Secretary since August 2009.
Previously, Mr. Rissman had served as acting General
Counsel and Corporate Secretary
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from March 2009. Mr. Rissman joined Allied as Vice
President and Deputy General Counsel in July 2007 and continued
in the same positions at Republic following the Allied
acquisition in December 2008. Prior to joining Allied,
Mr. Rissman was a partner at Mayer, Brown, Rowe &
Maw, LLP, in Chicago, where he worked from 1990 until coming to
Allied in 2007.
Our regional senior vice presidents have an average of
25 years of experience in the industry.
Decentralized
Management Structure
We rely on a decentralized management structure to minimize
administrative overhead costs and to more efficiently manage our
day-to-day
operations. Our local management has extensive industry
experience in growing, operating and managing solid waste
companies and has substantial experience in their local
geographic markets, allowing us to quickly respond to and meet
our customers needs and stay in touch with local
businesses and municipalities. Each regional management team
includes a senior vice president, vice president-controller,
vice president of human resources, vice president of sales, vice
president of operations support, director of safety, director of
engineering and environmental management, and director of market
planning and development. We believe that our strong regional
management teams allow us to more effectively and efficiently
drive our initiatives and help ensure consistency throughout the
organization. Our regional management teams and area presidents
have extensive authority, responsibility and autonomy for
operations within their respective geographic markets.
Compensation for area management teams is primarily based on
improving operating income, free cash flow and return on
invested capital generated in each managers geographic
area of responsibility. In addition, through long-term incentive
programs, including stock options, we believe we have achieved
one of the lowest turnover levels in the industry for our local
management teams. As a result of retaining experienced managers
with extensive knowledge of and involvement in their local
communities, we are proactive in anticipating customers
needs and adjusting to changes in our markets. We also seek to
implement the best practices of our various regions and areas
throughout our operations to continue improving operating
margins.
Strong,
Integrated Operating Platform
We believe that with the Allied acquisition we have created a
company with a strong, national operating platform. Most
previous attempts to consolidate the waste industry focused on a
roll up strategy often involving relatively young
companies solely focused on increasing revenue through
acquisitions. We believe that the combination of Republics
and Allieds mature and proven business practices has been
a critical component of our success and has driven the
realization of approximately $190 million in annual
run-rate synergies since completion of the acquisition. During
2011, we will continue to monitor the synergies we believe we
have achieved and we will implement additional initiatives aimed
at further improving operating margins.
Separate from acquisition related integration activities, we
seek to achieve a high rate of internalization by controlling
waste streams from the point of collection through disposal. Our
fully integrated markets generally have a lower cost of
operations and more favorable cash flows than our non-integrated
markets. Through acquisitions, landfill operating agreements and
other market development activities, we create market-specific,
integrated operations typically consisting of one or more
collection companies, transfer stations and landfills. We
consider acquiring companies that own or operate landfills with
significant permitted disposal capacity and appropriate levels
of waste volumes.
We also seek to acquire solid waste collection companies in
markets in which we own or operate landfills. In addition, we
generate internal growth in our disposal operations by
developing new landfills and expanding our existing landfills
from time to time in markets in which we have significant
collection operations or in markets that we determine lack
sufficient disposal capacity. During the years ended
December 31, 2010, 2009 and 2008, approximately 67%, 68%
and 58%, respectively, of the total waste volume that we
collected was disposed at landfill sites that we own or operate
(internalization). This increase in internalization from 2008 to
2009 is due to a higher concentration of integrated hauling and
landfill operations acquired in the Allied acquisition. In a
number of our larger markets, we and our competitors are
required to take waste to government-controlled disposal
facilities (flow-control). This provides us with an opportunity
to effectively
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compete in these markets without investing in landfill capacity.
By further integrating operations in existing markets, we may be
able to reduce our disposal costs.
We continue to invest in integrating and expanding our
information systems and technology platform. Our platform
consists of the best of the legacy systems from both Republic
and Allied. During 2009, we converted the entire company to a
single payable and general ledger system. During 2010, we
converted to a single operating system and we transitioned the
entire company to a single payroll and human resource system.
Our future technology related initiatives will include customer
relationship management, billing, productivity and maintenance
systems. We believe that the combination of these systems will
prove to be a competitive advantage for our company.
Major
Initiatives
During 2010, we believe we completed the most successful
integration and consolidation of two major companies in the
waste industry. The integration process allowed us to select the
best tools and systems and to adopt the best practices of these
two successful companies. During 2011, we will continue or begin
to implement the following major initiatives aimed at improving
profitability:
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Safety. Safety remains our highest priority for all
of our employees and the communities we serve. Our long-standing
commitment to safety is unwavering and is evident in our mission
statement. We will continue to improve the driver safety
training program and reward our people for operating in a safe
and conscientious manner in all our lines of business.
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Customer Experience. We strive to provide the
highest level of customer service. Our policy is to periodically
visit each commercial account to ensure customer service and
satisfaction. In addition to visiting existing customers, a
salesperson develops a base of prospective customers within each
market. We also have municipal marketing representatives that
are responsible for working with each municipality or community
to which we provide residential service to ensure customer
satisfaction. Additionally, the municipal representatives
organize and drive the effort to obtain new or renew municipal
contracts in their service areas.
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We will continue to reinvest in our existing fleet of vehicles,
equipment, landfills and other facilities to ensure the highest
level of service to our customers and the communities we serve.
In addition, we continue to focus on innovative waste disposal
processes and programs to help our customers achieve their goals
related to sustainability and environmentally sound waste
practices. We believe that these in turn will help us achieve
profitable growth.
During 2011, we will continue to exceed our customers
expectations through the consistent delivery of high quality
service and an expanded use of technology to make it easier to
do business with us. Our technology eventually will allow more
customers to access information and perform functions like
change service requests and make payments over the internet that
were previously done with the assistance of a customer service
representative. By increasing the ease of use and functionality
of our web-based market presence, we believe we will enhance
customer satisfaction and retention while we lower our costs.
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Economies of Scale, Cost Efficiencies and Asset
Utilization. We continue to identify and implement best
practices throughout our organization with the goal of
permanently improving overall operating and financial results.
These best practice initiatives focus on critical areas of our
operations such as landfill operations, truck routing,
recycling, maintenance and related service efficiencies,
purchasing and administrative activities. The consolidation of
acquired businesses into existing operations reduces costs by
decreasing capital and expenses used for truck routing,
personnel, equipment and vehicle maintenance, inventories and
back-office administration. Generally, we consolidate our
acquired administrative centers to reduce our general and
administrative costs. Our goal is to maintain our selling,
general and administrative costs at no more than 10.0% of
revenue, which we believe is appropriate given our existing
business platform.
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In addition, our procurement initiatives ensure that we
negotiate volume discounts for goods and services purchased.
Further, we have taken steps to maximize the utilization of our
assets. For example, to reduce the number of collection vehicles
and maximize the efficiency of our fleet and drivers, we use a
route optimization program to minimize drive times and improve
operating density. Additionally, in 2011 we will continue to
convert certain of our residential routes to single driver
side-load service, thereby increasing employee safety and
increasing route efficiency and service times. We continue to
invest in our material recovery facilities by converting certain
facilities from dual to single stream sorting and by updating
our technology and equipment, all resulting in higher levels of
productivity and recovered materials from a more efficient
collection and recovery process. By using assets more
efficiently, operating expenses can be reduced.
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Targeted Profitable Growth. Our growth strategy
focuses on increasing revenue, gaining market share and
enhancing stockholder value through internal growth in price and
volume as well as acquisitions. Our internal growth strategy
focuses on retaining existing customers and obtaining new
commercial, municipal and industrial customers through our
well-managed sales and marketing activities.
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Price Growth. We seek to secure price increases necessary
to offset increased costs, to improve our operating margins and
to obtain adequate returns on our substantial investments in
assets such as our landfills.
Volume Growth. Growth through increases in our customer
base and services provided is the most capital efficient means
for us to build our business. We seek to obtain long-term
contracts for collecting solid waste in markets with growing
populations. These include exclusive franchise agreements with
municipalities as well as commercial and industrial contracts.
By obtaining such long-term agreements, we have the opportunity
to grow our contracted revenue base at the same rate as the
underlying population growth in these markets. We believe it is
important to have secured exclusive, long-term franchise
agreements in growing market areas. We believe that this
positions us to experience internal growth rates that are
generally higher than our industrys overall growth rate.
In addition, we believe that by securing a base of long-term
recurring revenue in growing population markets, we are better
able to protect our market position from competition and our
business may be less susceptible to downturns in economic
conditions. Volume growth includes not only expanding landfill
and transfer station capacity and investing in trucks and
containers, but also includes investing in information tools and
training needed to ensure high productivity and quality service
throughout all functional areas of our business. We work to
increase collection and disposal volumes while ensuring that
prices charged for such services provide an appropriate return
on our capital investment.
Sales and Marketing Activities. We seek to manage
our sales and marketing activities to enable us to capitalize on
our leading position in many of the markets in which we operate.
We provide a National Accounts program in response to the needs
of our national clients, centralizing services to effectively
manage their needs, such as minimizing their procurement costs.
We currently have approximately 1,100 sales and marketing
employees in the field who are compensated using a commission
structure that is focused on generating high levels of quality
revenue. Generally, these employees directly solicit business
from existing and new business from prospective commercial,
industrial, municipal and residential customers. In training
sales personnel we emphasize increased price and cost structures
as well as the use of a customer relationship management system
that assists in tracking sales opportunities. It also tracks
renewal periods for potential commercial, industrial and
franchise contracts. We believe our National Accounts program
offers an opportunity for sales growth over the next several
years.
Development Activities. We seek to identify
opportunities to further our position as an integrated service
provider in markets where we are not fully integrated. Where
appropriate, we seek to obtain permits to build transfer
stations, recycling facilities, and landfills that would provide
vertically integrated waste services or expand the service areas
for our existing disposal sites. Development projects, while
generally less capital intensive than acquisitions, typically
require extensive permitting efforts that can take years to
complete with no assurance of success. We undertake development
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projects when we believe there is a reasonable probability of
success and where reasonably priced acquisition opportunities
are not available.
Acquisition Growth. Our acquisition growth strategy
focuses primarily on privately held solid waste and recycling
companies and the waste and recycling operations of municipal
and other local governmental authorities that complement our
existing business platform. We believe our ability to acquire
privately held companies is enhanced by increasing competition
in the solid waste industry, increasing capital requirements due
to changes in solid waste regulatory requirements, and the
limited number of exit strategies for privately held companies.
We also seek to acquire operations and facilities from
municipalities that are privatizing, as they seek to raise
capital and reduce risk. In addition, we will continue to
evaluate opportunities to acquire operations and facilities that
are being divested by other publicly owned waste companies. Our
acquisition growth strategy focuses primarily on the following:
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acquiring privately held businesses that position us for growth,
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acquiring well-managed companies and, when appropriate,
retaining local management, and
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acquiring operations and facilities from municipalities that are
privatizing and from publicly owned companies that are divesting
of assets.
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In addition, we have and may continue to exchange businesses
with other solid waste companies if by doing so there is a net
benefit to our business platform. These activities allow us to
increase revenue and market share, lower our cost of operations
as a percentage of revenue, and consolidate duplicative
facilities and functions to maximize cost efficiencies and
economies of scale.
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Durability. We believe our decentralized management
structure provides us with a competitive advantage by allowing
us to quickly respond to and meet customers needs and to
stay in touch with local businesses and municipalities. However,
functions such as fleet maintenance and customer service are
areas where we believe we can continue to build durable,
consistent processes across all operating divisions. Through
standardization of core functions, we believe we can minimize
variability in our maintenance facilities resulting in a safer
fleet of vehicles and lower costs. By automating the collection
process, we believe we can improve safety, increase productivity
and reduce labor costs, thereby increasing operating margins.
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For certain risks related to our operating strategy, see
Item 1A. Risk Factors.
Financial
Strategy
Key components of our financial strategy include generating and
growing free cash flow and sustaining or improving our return on
invested capital. Our definition of free cash flow, which is not
a measure determined in accordance with United States generally
accepted accounting principles (U.S. GAAP), is cash
provided by operating activities less purchases of property and
equipment, plus proceeds from sales of property and equipment as
presented in our consolidated statements of cash flows. We
believe that free cash flow is a driver of stockholder value and
provides useful information regarding the recurring cash
provided by our operations. Free cash flow also demonstrates our
ability to execute our financial strategy, which includes
reinvesting in capital assets to ensure a high level of customer
service, investing in capital assets to facilitate growth in our
customer base and services provided, maintaining our investment
grade credit ratings and reducing debt, paying cash dividends,
repurchasing our stock, and maintaining and improving our market
position through business optimization. Free cash flow is also a
key metric used to determine managements compensation.
We manage our free cash flow 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.
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We have used and will continue to use our cash flow to maximize
stockholder value as well as our return on invested capital. Our
Financial Strategy includes:
Market
Growth and Optimization
Within our markets, our goal is to deliver sustainable,
long-term profitable growth while efficiently operating our
assets to generate acceptable rates of return. We allocate
capital to businesses, markets and development projects to
support growth in order to achieve acceptable rates of return.
We develop previously non-permitted, non-contiguous landfill
sites (greenfield landfill sites). We also expand our existing
landfill sites, when possible. We supplement this organic growth
with acquisitions of operating assets, such as landfills,
transfer stations, material recovery facilities and tuck-in
acquisitions of collection and disposal operations in existing
markets. We continuously evaluate our existing operating assets
and their deployment within each market to determine if we have
optimized our position and to ensure appropriate investment of
capital. Where operations are not generating acceptable returns,
we examine opportunities to achieve greater efficiencies and
returns through the integration of additional assets. If such
enhancements are not possible, we may ultimately decide to
divest the existing assets and reallocate resources to other
markets.
Enhancing
Stockholder Value
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Dividends. In July 2003, our Board of Directors
initiated a quarterly cash dividend of $0.04 per share. Our
quarterly dividend has increased from time to time thereafter,
the latest increase occurring in the third quarter of 2010 to
$0.20 per share, representing a compound annual growth rate of
approximately 26%. We expect to continue paying quarterly cash
dividends and may consider additional increases of our quarterly
cash dividend if we believe it will enhance stockholder value.
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Share Repurchase. In November 2010, our board of
directors approved a share repurchase program pursuant to which
we may repurchase up to $400.0 million of our outstanding
shares of common stock. As of December 31, 2010, we used
$41.1 million under the program to repurchase
1.4 million shares at an average cost per share of $28.46.
We expect to use the remaining funds in this program to
repurchase shares during 2011. We intend to execute our
financial strategy while still maintaining flexibility to take
advantage of market growth opportunities and still maintaining
our investment grade credit ratings.
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Capital
Structure
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Debt. Following our December 5, 2008 Allied
acquisition, we initiated a debt reduction program which, to
date, has resulted in a net reduction in borrowings of
$1.3 billion funded by cash flow from operations and
proceeds from disposition of assets. We also refinanced
$1.5 billion in senior notes and $677.4 million in
tax-exempt financings which reduced the average coupon rate on
our senior notes and tax-exempt financings, on a weighted
average basis, by more than 125 basis points while
extending our debt maturities and thereby giving greater
stability to our capital structure. We anticipate taking further
advantage of capital market opportunities to mitigate our
financial risk by issuing new debt in 2011 and using the
proceeds to repay existing debt. Any early extinguishment of
debt may result in a charge in the period in which the debt is
repurchased and retired.
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Credit Ratings. We believe that a key component of
our financial strategy includes maintaining investment grade
ratings on our senior debt, which was rated BBB by
Standard & Poors, BBB by Fitch and Baa3 by
Moodys as of December 31, 2010. Such ratings have
allowed us, and should continue to allow us, to readily access
capital markets at competitive rates. Our cash utilization
strategy will continue to focus on maintaining our investment
grade credit ratings.
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For certain risks related to our financial strategy, see
Item 1A. Risk Factors.
Operations
Our operations primarily consist of the collection, transfer and
disposal of non-hazardous solid waste.
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Collection Services. We provide solid waste
collection services to commercial, industrial, municipal and
residential customers through 348 collection companies. In 2010,
76.2% of our revenue was derived from collection services.
Within the collection line of business, 35% of our revenue is
from services provided to municipal and residential customers,
40% is from services provided to commercial customers, and 25%
is from services provided to industrial and other customers.
Our residential collection operations involve the curbside
collection of refuse from small containers into collection
vehicles for transport to transfer stations or directly to
landfills. Residential solid waste collection services are
typically performed under contracts with municipalities, which
we generally secure by competitive bid and which give us
exclusive rights to service all or a portion of the homes in the
respective municipalities. These contracts or franchises usually
range in duration from one to five years, although some of our
exclusive franchises are for significantly longer periods.
Residential solid waste collection services may also be
performed on a subscription basis, in which individual
households contract directly with us. The fees received for
subscription residential collection are based primarily on
market factors, frequency and type of service, the distance to
the disposal facility and the cost of disposal. In general,
subscription residential collection fees are paid quarterly in
advance by the residential customers receiving the service.
In our commercial and industrial collection operations, we
supply our customers with waste containers of varying sizes. We
also rent compactors to large waste generators. Commercial
collection services are generally performed under one- to
three-year service agreements, and fees are determined by
considerations such as market factors, collection frequency,
type of equipment furnished, the type and volume or weight of
the waste collected, transportation costs, the distance to the
disposal facility and the cost of disposal.
We also provide waste collection services to industrial and
construction facilities on a contractual basis with terms
ranging from a single pickup to one year or longer. Our
construction services are provided to the commercial
construction and home building sectors. We collect the
containers or compacted waste and transport the waste either to
a landfill or a transfer station for disposal.
We also provide recycling services in certain markets. These
services include the curbside collection of residential
recyclable waste and the provision of a variety of recycling
services to commercial and industrial customers.
Transfer and Disposal Services. We own or operate
204 transfer stations. We deposit waste at these transfer
stations, as do other private haulers and municipal haulers, for
compaction and transfer to trailers for transport to disposal
sites or recycling facilities. In 2010, transfer and disposal
services accounted for 18.2% of our revenue.
As of December 31, 2010, we owned or operated 193 active
landfills, which had approximately 36,000 permitted acres and
total available permitted and probable expansion disposal
capacity of approximately 4.7 billion in-place cubic yards.
The in-place capacity of our landfills is subject to change
based on engineering factors, requirements of regulatory
authorities, our ability to continue to operate our landfills in
compliance with applicable regulations, and our ability to
successfully renew operating permits and obtain expansion
permits at our sites. Some of our landfills accept non-hazardous
special waste, including utility ash, asbestos and contaminated
soils.
Most of our active landfill sites have the potential for
expanded disposal capacity beyond the currently permitted
acreage. We monitor the availability of permitted disposal
capacity at each of our landfills and evaluate whether to pursue
an expansion at a given landfill based on estimated future waste
volumes and prices, market needs, remaining capacity and
likelihood of obtaining an expansion. To satisfy future disposal
demand, we are currently seeking to expand permitted capacity at
certain of our landfills. However, we cannot assure you that all
proposed or future expansions will be permitted as designed.
We also have responsibility for 129 closed landfills, for which
we have associated closure and post-closure obligations.
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Landfill Gas and Renewable Energy
Projects. During 2010, we brought two new landfill
gas to energy (LFGTE) projects on line, resulting in a total of
73 active LFGTE projects. These projects consist of the
following:
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51 electric plants fueled by landfill gas;
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14 medium British Thermal Unit (BTU) plants providing landfill
gas to industrial users to be burned as fuel;
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six high BTU plants that provide pipeline quality natural gas
that ultimately could be used to fuel our natural gas
fleet, and
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two projects that burn landfill gas to evaporate leachate.
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The beneficial use of landfill gas provides our economy and
environment with significant benefits, including:
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The use and destruction of methane, a potent greenhouse gas,
which reduces air pollution; and
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The use of landfill gas offsets the use of fossil fuels, thus
reducing our dependence on foreign oil and use of our natural
resources.
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Our 51 generating projects produce 321 megawatts of electricity
annually, which is enough power to supply the electric needs of
189,530 homes. Our 22 other LFGTE projects process and produce
55,950 cubic feet per minute of landfill gas annually, which
provides an energy benefit equivalent to heating 190,151 homes.
The environmental benefit of all of our projects removes the
equivalent of 950,434 tons of methane emissions and 2,346,535
tons of carbon dioxide emissions from the atmosphere. This is
equivalent to removing the emissions of approximately
3.9 million cars from our highways.
One of the two new projects, a medium BTU use project at our
Newton County Landfill, received the USEPA 2010 Project of the
Year award.
In 2010, we also began the design and construction of new
projects at nine landfills, which is comprised of seven electric
plants, one medium BTU plant and one high BTU plant. The high
BTU project, announced in the fall of 2010, will feature an
industry first process of producing high BTU pipeline quality
gas and using that gas to provide equivalent renewable
compressed natural gas (CNG) to a portion of our expanding fleet
of CNG refuse vehicles.
Recycling Facilities and Other Services. We
own or operate 76 materials recovery facilities and other
recycling operations. These facilities sort recyclable paper,
aluminum, glass and other materials. Most of these recyclable
materials are internally collected by our residential collection
operations. In some areas, we receive commercial and industrial
solid waste that is sorted at our facilities into recyclable
materials and non-recyclable waste. The recyclable materials are
salvaged, repackaged and sold to third parties, and the
non-recyclable waste is disposed of at landfills or incinerators.
Sales and
Marketing
We seek to provide quality services that will enable us to
maintain high levels of customer satisfaction. Our business is
derived from a broad customer base, which we believe will enable
us to experience stable growth. We focus our marketing efforts
on continuing and expanding our business with existing
customers, as well as attracting new customers.
We employ approximately 1,100 sales and marketing employees with
a sales and marketing strategy of providing high-quality,
comprehensive solid waste collection, recycling, transfer and
disposal services to our customers at competitive prices. We
target customers of all sizes, from small quantity generators to
large Fortune 500 companies and municipalities.
While most of our marketing activity is local in nature, we also
provide a National Accounts program in response to the needs of
national and regional customers. This National Accounts program
is designed to provide the best total solution to our
customers evolving waste management needs in an
environmentally responsible manner. We partner with national
clients to reach their sustainability goals, optimize waste
streams,
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balance equipment and service intervals, and provide customized
reporting. The National Accounts program centralizes services to
effectively manage customer needs, while helping minimize
procurement costs. With our extended geographic reach, this
program effectively serves our customers nationwide. As industry
leaders, our mission is to utilize our strengths and expertise
to exceed customer expectations by consistently delivering the
best national program available.
Historically we have not always changed the trade names of the
local businesses we acquired, and therefore we do not operate
nationally under any one mark or trade name. The majority of our
operations, however, are branded under either
Republic, Allied or BFI.
Customers
We provide services to a broad base of commercial, industrial,
municipal and residential customers. No single customer has
individually accounted for more than 3% of our consolidated
revenue or of our reportable segment revenue in any of the last
three years.
Competition
We operate in a highly competitive industry. However, entry into
our business and the ability to operate profitably require
substantial amounts of capital and managerial experience.
Competition in the non-hazardous solid waste industry comes from
a few other large, national publicly owned companies, including
Waste Management, Inc., several regional publicly and privately
owned solid waste companies, and thousands of small privately
owned companies. In any given market, competitors may have
larger operations and greater resources. In addition to national
and regional firms and numerous local companies, we compete with
municipalities that maintain waste collection or disposal
operations. These municipalities may have financial advantages
due to the availability of tax revenue and tax-exempt financing.
We compete for collection accounts primarily on the basis of
price and the quality of our services. From time to time, our
competitors may reduce the price of their services in an effort
to expand market share or to win a competitively bid municipal
contract. Our ability to maintain and increase prices in certain
markets may be impacted by the pricing policies of our
competitors. This may have an impact on our future revenue and
profitability.
Seasonality
and Severe Weather
Our operations can be adversely affected by periods of inclement
or severe 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 landfill sites and
other facilities. Our operations also can be favorably affected
by severe weather, which could increase the volume of waste in
situations where we are able to charge for our additional
services.
Regulation
Our facilities and operations are subject to a variety of
federal, state and local requirements that regulate the
environment, public health, safety, zoning and land use.
Operating and other permits, licenses and other approvals
generally are required for landfills and transfer stations,
certain solid waste collection vehicles, fuel storage tanks and
other facilities that we own or operate. These permits are
subject to denial, revocation, modification and renewal in
certain circumstances. Federal, state and local laws and
regulations vary, but generally govern wastewater or storm water
discharges, air emissions, the handling, transportation,
treatment, storage and disposal of hazardous and non-hazardous
waste, and the remediation of contamination associated with the
release or threatened release of hazardous substances. These
laws and regulations provide governmental authorities with
strict powers of enforcement, which include the ability to
revoke or decline to renew any of our operating permits, obtain
injunctions, or impose fines or penalties in the event of
violations, including
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criminal penalties. The U.S. Environmental Protection
Agency (EPA) and various other federal, state and local
authorities administer these regulations.
We strive to conduct our operations in compliance with
applicable laws, regulations and permits. However, in the
existing climate of heightened environmental concerns, from time
to time we have been issued citations or notices from
governmental authorities that have resulted in the need to
expend funds for remedial work and related activities at various
landfills and other facilities. We cannot assure you that
citations and notices will not be issued in the future despite
our regulatory compliance efforts. We have established final
capping, closure, post-closure and remediation reserves that we
believe, based on currently available information, will be
adequate to cover our current estimates of regulatory costs.
However, we cannot assure you that actual costs will not exceed
our reserves. Refer to the Contractual Obligations table within
Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations
contained elsewhere herein for further information.
Federal Regulation. The following summarizes
the primary federal environmental and occupational health and
safety-related statutes that affect our facilities and
operations:
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The Solid Waste Disposal Act, including the Resource
Conservation and Recovery Act (RCRA). RCRA establishes
a framework for regulating the handling, transportation,
treatment, storage and disposal of hazardous and non-hazardous
solid waste, and requires states to develop programs to ensure
the safe disposal of solid waste in sanitary landfills.
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Subtitle D of RCRA establishes a framework for regulating the
disposal of municipal solid waste. Regulations under Subtitle D
currently include minimum comprehensive solid waste management
criteria and guidelines, including location restrictions,
facility design and operating criteria, final capping, closure
and post-closure requirements, financial assurance standards,
groundwater monitoring requirements and corrective action
standards. All of the states in which we operate have
implemented permit programs pursuant to RCRA and Subtitle D.
These state permit programs may include landfill requirements
which are more stringent than those of Subtitle D. Our failure
to comply with the implementation of federal environmental
requirements by state and local authorities at any of our
locations may lead to temporary or permanent loss of an
operating permit, which would result in costs in connection with
securing new permits and reduced revenue from lost operational
time.
All of our planned landfill expansions and new landfill
development projects have been engineered to meet or exceed
Subtitle D requirements. Operating and design criteria for
existing operations have been modified to comply with these
regulations. Compliance with Subtitle D regulations has resulted
in increased costs and may in the future require substantial
additional expenditures in addition to other costs normally
associated with our waste management activities.
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The Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA). CERCLA, among other things,
provides for the cleanup of sites from which there is a release
or threatened release of a hazardous substance into the
environment. CERCLA may impose strict joint and several
liability for the costs of cleanup and for damages to natural
resources upon current owners and operators of a site, parties
who were owners or operators of a site at the time the hazardous
substances were disposed of, parties who transported the
hazardous substances to a site, and parties who arranged for the
disposal of the hazardous substances at a site. Under the
authority of CERCLA and its implementing regulations, detailed
requirements apply to the manner and degree of investigation and
remediation of facilities and sites where hazardous substances
have been or are threatened to be released into the environment.
Liability under CERCLA is not dependent on the existence or
disposal of only hazardous wastes, but also can be
based upon the existence of small quantities of more than 700
substances, characterized by the EPA as
hazardous many of which are found in common
household waste.
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Among other things, CERCLA authorizes the federal government to
investigate and remediate sites at which hazardous substances
have been or are threatened to be released into the environment
or to order persons potentially liable for the cleanup of the
hazardous substances to do so themselves. In addition, the
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EPA has established a National Priorities List of sites at which
hazardous substances have been or are threatened to be released
and which require investigation or cleanup.
CERCLA liability is strict liability. It can be founded upon the
release or threatened release, even as a result of
unintentional, non-negligent or lawful action, of hazardous
substances, including very small quantities of such substances.
Thus, even if we have never knowingly transported or received
hazardous waste, it is likely that hazardous substances have
been deposited or released at landfills or other
facilities that we presently or historically have owned or
operated, or at properties owned by third parties to which we
have transported waste. Therefore, we could be liable under
CERCLA for the cost of cleaning up such hazardous substances at
such sites and for damages to natural resources, even if those
substances were deposited at our facilities before we acquired
or operated them. The costs of a CERCLA cleanup can be very
expensive and can include the costs of disposing remediation
wastes at appropriately-licensed facilities. Given the
difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on our
business, financial condition, results of operations and cash
flows.
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The Federal Water Pollution Control Act of 1972 (the
Clean Water Act). This act regulates the discharge of pollutants
from a variety of sources, including solid waste disposal sites,
into streams, rivers and other waters of the United States.
Runoff from our landfills and transfer stations that is
discharged into surface waters through discrete conveyances must
be covered by discharge permits that generally require us to
conduct sampling and monitoring, and, under certain
circumstances, to reduce the quantity of pollutants in those
discharges. Storm water discharge regulations under the Clean
Water Act require a permit for certain construction activities
and for runoff from industrial operations and facilities, which
may affect our operations. If a landfill or transfer station
discharges wastewater through a sewage system to a publicly
owned treatment works, the facility must comply with discharge
limits imposed by that treatment works. In addition, states may
adopt groundwater protection programs under the Clean Water Act
or the Safe Drinking Water Act that could affect the manner in
which our solid waste landfills monitor and control their waste
management activities. Furthermore, in the event that
development at any of our facilities alters or affects wetlands,
we may be required to secure permits prior to such development
commencing. In these situations, permitting agencies may require
mitigation of wetland impacts.
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The Clean Air Act. The Clean Air Act imposes
limitations on emissions from various sources, including
landfills. In March 1996, the EPA promulgated regulations that
require large municipal solid waste landfills to install
landfill gas monitoring systems. These regulations apply to
landfills that commenced construction, reconstruction or
modification on or after May 30, 1991, and, principally, to
landfills that can accommodate 2.5 million cubic meters or
more of municipal solid waste. The regulations apply whether the
landfill is active or closed. The date by which each affected
landfill is required to have a gas collection and control system
installed and made operational varies depending on calculated
emission rates at the landfill. Efforts to curtail the emission
of greenhouse gases and to ameliorate the effect of climate
change may require our landfills to deploy more stringent
emission controls and monitoring systems, with resulting capital
or operating costs. In addition, our vehicle fleet may also
become subject to higher efficiency standards or other
carbon-emission restrictions. See Item 1A. Risk Factors
Regulation of greenhouse gas emissions
could impose costs on our operations, the magnitude of which we
cannot yet estimate. Many state regulatory agencies also
currently require monitoring systems for the collection and
control of certain landfill gas. Certain of these state agencies
are also implementing greenhouse gas control regulations that
would also apply to landfill gas emissions.
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The Occupational Safety and Health Act of 1970
(OSHA). OSHA authorizes the Occupational Safety and
Health Administration of the U.S. Department of Labor to
promulgate occupational safety and health standards. A number of
these standards, including standards for notices of hazardous
chemicals and the handling of asbestos, apply to our facilities
and operations.
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State and Local Regulation. Each state in
which we operate has its own laws and regulations governing
solid waste disposal, water and air pollution, and, in most
cases, releases and cleanup of hazardous substances and
liabilities for such matters. States also have adopted
regulations governing the design, operation, maintenance and
closure of landfills and transfer stations. Some counties,
municipalities and other local governments have
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adopted similar laws and regulations. Our facilities and
operations are likely to be subject to these types of
requirements. In addition, our operations may be affected by the
trend in many states toward requiring the development of solid
waste reduction and recycling programs. For example, several
states have enacted laws that require counties or municipalities
to adopt comprehensive plans to reduce, through solid waste
planning, composting, recycling or other programs, the volume of
solid waste deposited in landfills. Additionally, laws and
regulations restricting the disposal of certain waste in solid
waste landfills, including yard waste, newspapers, beverage
containers, unshredded tires, lead-acid batteries, electronic
wastes and household appliances, have been promulgated in
several states and are being considered in others. Legislative
and regulatory measures to mandate or encourage waste reduction
at the source and waste recycling also have been or are under
consideration by the U.S. Congress and the EPA.
To construct, operate and expand a landfill, we must obtain one
or more construction or operating permits, as well as zoning and
land use approvals. These permits and approvals may be
burdensome to obtain and to comply with, are often opposed by
neighboring landowners and citizens groups, may be subject
to periodic renewal, and are subject to denial, modification,
non-renewal and revocation by the issuing agency. Significant
compliance disclosure obligations often accompany these
processes. In connection with our acquisition of existing
landfills, we may be required to expend considerable time,
effort and money to bring the acquired facilities into
compliance with applicable requirements and to obtain the
permits and approvals necessary to increase their capacity.
Other Regulations. Many of our facilities own
and operate underground storage tanks that are generally used to
store petroleum-based products. These tanks are generally
subject to federal, state and local laws and regulations that
mandate their periodic testing, upgrading, closure and removal.
In the event of leaks or releases from these tanks, these
regulations require that polluted groundwater and soils be
remediated. We believe that all of our underground storage tanks
meet all applicable regulations. If underground storage tanks we
own or operate leak, we could be liable for response costs and,
if the leakage migrates onto the property of others, we could be
liable for damages to third parties. We are unaware of facts
indicating that issues of compliance with regulations related to
underground storage tanks will have a material adverse effect on
our consolidated financial condition, results of operations or
cash flows.
With regard to our solid waste transportation operations, we are
subject to the jurisdiction of the Surface Transportation Board
and are regulated by the Federal Highway Administration, Office
of Motor Carriers, and by regulatory agencies in states that
regulate such matters. Various state and local government
authorities have enacted or promulgated, or are considering
enacting or promulgating, laws and regulations that would
restrict the transportation of solid waste across state, county,
or other jurisdiction lines. In 1978, the U.S. Supreme
Court ruled that a law that restricts the importation of
out-of-state
solid waste is unconstitutional; however, states have attempted
to distinguish proposed laws from those involved in and
implicated by that ruling. In 1994, the Supreme Court ruled that
a flow control law, which attempted to restrict solid waste from
leaving its place of generation, imposes an impermissible burden
upon interstate commerce, and, therefore, is unconstitutional.
In 2007, the Supreme Court upheld the right of a local
government to direct the flow of solid waste to a publicly owned
and publicly operated waste facility. A number of county and
other local jurisdictions have enacted ordinances or other
regulations restricting the free movement of solid waste across
jurisdictional boundaries. Other governments may enact similar
regulations in the future. These regulations may, in some cases,
cause a decline in volumes of waste delivered to our landfills
or transfer stations and may increase our costs of disposal,
thereby adversely affecting our operations.
Liabilities Established for Landfill and Environmental
Costs. We have established reserves for landfill
and environmental costs, which include landfill site final
capping, closure and post-closure costs. We periodically
reassess such costs based on various methods and assumptions
regarding landfill airspace and the technical requirements of
Subtitle D of RCRA, and we adjust our rates used to expense
final capping, closure and post-closure costs accordingly. Based
on current information and regulatory requirements, we believe
that our recorded reserves for such landfill and environmental
expenditures are adequate. However, environmental laws may
change, and we cannot assure you that our recorded reserves will
be adequate to cover requirements under existing or new
environmental laws and regulations, future changes or
interpretations of existing laws and regulations, or adverse
environmental conditions previously unknown to us.
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Liability
Insurance and Bonding
The nature of our business exposes us to the risk of liabilities
arising out of our operations, including possible damages to the
environment. Such potential liabilities could involve, for
example, claims for remediation costs, personal injury, property
damage and damage to the environment in cases where we may be
held responsible for the escape of harmful materials; claims of
employees, customers or third parties for personal injury or
property damage occurring in the course of our operations; or
claims alleging negligence or other wrongdoing in the planning
or performance of work. We could also be subject to fines and
civil and criminal penalties in connection with alleged
violations of regulatory requirements. Because of the nature and
scope of the possible environmental damages, liabilities imposed
in environmental litigation can be significant. Our solid waste
operations have third party environmental liability insurance
with limits in excess of those required by permit regulations,
subject to certain limitations and exclusions. However, we
cannot assure you that such environmental liability insurance
would be adequate, in scope or amount, in the event of a major
loss, nor can we assure you that we would continue to carry
excess environmental liability insurance should market
conditions in the insurance industry make such coverage costs
prohibitive.
We have general liability, vehicle liability, employment
practices liability, pollution liability, directors and
officers liability, workers compensation and
employers liability coverage, as well as umbrella
liability policies to provide excess coverage over the
underlying limits contained in these primary policies. We also
carry property insurance. Although we try to operate safely and
prudently and we have, subject to limitations and exclusions,
substantial liability insurance, we cannot assure you that we
will not be exposed to uninsured liabilities that could have a
material adverse effect on our consolidated financial condition,
results of operations and cash flows.
Our insurance programs for workers compensation, general
liability, vehicle liability, and employee-related health care
benefits are effectively self-insured. Claims in excess of
self-insurance levels are insured subject to the excess policy
limits and exclusions. Accruals are based on claims filed and
actuarial estimates of claims development and claims incurred
but not reported. Due to the variable condition of the insurance
market, we have experienced, and may experience in the future,
increased self-insurance retention levels and increased
premiums. As we assume more risk for self-insurance through
higher retention levels, we may experience more variability in
our self-insurance reserves and expense.
In the normal course of business, we post performance bonds,
insurance policies, letters of credit, or cash or marketable
securities deposits in connection with municipal residential
collection contracts, closure and post-closure of landfills,
environmental remediation, environmental permits, and business
licenses and permits as a financial guarantee of our
performance. To date, we have satisfied financial responsibility
requirements by making cash or marketable securities deposits or
by obtaining bank letters of credit, insurance policies or
surety bonds.
Employees
As of December 31, 2010, we employed approximately
30,000 full-time employees, approximately 27% of whom were
covered by collective bargaining agreements. From time to time,
our operating locations may experience union organizing efforts.
We have not historically experienced any significant work
stoppages. We currently have no disputes or bargaining
circumstances that we believe could cause significant
disruptions in our business. Our management believes that we
have good relations with our employees.
Availability
of Reports and Other Information
Our corporate website is
http://www.republicservices.com.
We make available on this website, free of charge, access to our
Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
Proxy Statements on Schedule 14A and amendments to those
materials filed or furnished pursuant to Section 13(a) or
15(d) of the Securities and Exchange Act of 1934. We make such
materials available as soon as reasonably practicable after we
electronically submit them to the Securities and Exchange
Commission (SEC). Our corporate website also contains our
Corporate Governance Guidelines, Code of Ethics, Political
Contributions Policy and Charters of the Nominating and
Corporate Governance Committee, Audit Committee
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and Compensation Committee of the Board of Directors. In
addition, the SEC website is
http://www.sec.gov.
The SEC makes available on this website, free of charge,
reports, proxy and information statements, and other information
regarding issuers, such as us, that file electronically with the
SEC. Information on our website or the SEC website is not part
of this
Form 10-K.
We intend to satisfy the disclosure requirements under
Item 5.05 of
Form 8-K
and applicable New York Stock Exchange (NYSE) rules regarding
amendments to or waivers of our Code of Ethics by posting this
information on our website at www.republicservices.com.
This
Form 10-K
contains certain forward-looking information about us that is
intended to be covered by the safe harbor for
forward-looking statements provided by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are statements that are not historical facts. Words
such as expect, will, may,
anticipate, plan, estimate,
project, intend, should,
can, likely, could and
similar expressions are intended to identify forward-looking
statements. These statements include statements about our plans,
strategies and prospects. Forward-looking statements are not
guarantees of performance. These statements are based upon the
current beliefs and expectations of our management and are
subject to risk and uncertainties, including the risks set forth
below in these risk factors, which could cause actual results to
differ materially from those expressed in, or implied or
projected by, the forward-looking information and statements.
In light of these risks, uncertainties, assumptions and factors,
the results anticipated by the forward-looking statements
discussed in this
Form 10-K
may not occur. You should not place undue reliance on these
forward-looking statements, which speak only as of the date of
this
Form 10-K.
Except to the extent required by applicable law or regulation,
we undertake no obligation to update or publish revised
forward-looking statements to reflect events or circumstances
after the date of this
Form 10-K
or to reflect the occurrence of unanticipated events.
We
have substantial indebtedness, which may limit our financial
flexibility.
As of December 31, 2010, we had approximately
$7.0 billion in principal value of debt and capital leases
outstanding. This amount of indebtedness and our debt service
requirements may limit our financial flexibility to access
additional capital and make capital expenditures and other
investments in our business, to withstand economic downturns and
interest rate increases, to plan for or react to changes in our
business and our industry, and to comply with the financial and
other restrictive covenants of our debt instruments. Further,
our ability to comply with the financial and other covenants
contained in our debt instruments may be affected by changes in
economic or business conditions or other events that are beyond
our control. If we do not comply with these covenants and
restrictions, we may be required to take actions such as
reducing or delaying capital expenditures, reducing dividends or
stock repurchases, selling assets, restructuring or refinancing
all or part of our existing debt, or seeking additional equity
capital.
The
downturn in the U.S. economy may continue to have an adverse
impact on our operating results.
A weak economy generally results in decreases in the volumes of
waste generated. In 2010, weakness in the U.S. economy had
a negative effect on our revenue, operating results and
operating cash flows. The current and previous economic
slowdowns have negatively impacted the portion of our collection
business servicing the manufacturing and construction
industries. As a result of the global economic crisis, we may
experience the negative effects of increased competitive pricing
pressure and customer turnover as well. We cannot assure you
that worsening economic conditions or a prolonged or recurring
recession will not have a significant adverse impact on our
consolidated financial condition, results of operations or cash
flows. Furthermore, recovery in solid waste volumes historically
has lagged behind recovery in the general economy and we cannot
assure you that an improvement in general economic conditions
will result in an immediate, or any, improvement in our
consolidated financial condition, results of operations or cash
flows.
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The
downturn in the U.S. economy may expose us to credit risk for
amounts due from governmental agencies, large national accounts
and others.
The weak U.S. economy has reduced the amount of taxes
collected by various governmental agencies. We provide services
to a number of these agencies including numerous municipalities.
These governmental agencies may suffer financial difficulties
resulting from a decrease in tax revenue and may ultimately be
unable or unwilling to pay amounts owed to us. In addition, the
weak economy may cause other customers, including our large
national accounts, to suffer financial difficulties and
ultimately to be unable or unwilling to pay amounts owed to us.
This could have a negative impact on our consolidated financial
condition, results of operations and cash flows.
The
downturn in the U.S. economy and in the financial markets could
expose us to counter-party risk associated with our
derivatives.
To reduce our exposure to fluctuations in various commodities
and interest rates, we have entered into a number of derivative
agreements. These derivative agreements require us or the
counter-party to such agreements to make payments to the other
party if the price of certain commodities or interest rates vary
from a specified amount. Although we only enter these agreements
with investment grade-rated financial institutions, a continued
downturn in the U.S. economy or in the financial markets
could adversely impact the financial stability of the
counter-parties with which we do business, potentially limiting
their ability to fulfill their obligations under our derivative
agreements. This could have a negative impact on our
consolidated financial condition, results of operations and cash
flows.
The
waste industry is highly competitive and includes competitors
that may have greater financial and operational resources,
flexibility to reduce prices and other competitive advantages
that could make it difficult for us to compete
effectively.
We principally compete with large national waste management
companies, numerous municipalities, and numerous regional and
local companies for collection and disposal accounts.
Competition for collection accounts is primarily based on price
and the quality of services. Competition for disposal business
is primarily based on disposal costs, geographic location and
quality of operations. One of our competitors may have greater
financial and operational resources than we do. Further, many
counties and municipalities that operate their own waste
collection and disposal facilities have the benefits of tax
revenue or tax-exempt financing. Our ability to obtain solid
waste volume for our landfills may also be limited by the fact
that some major collection companies also own or operate
landfills to which they send their waste. In markets in which we
do not own or operate a landfill, our collection operations may
operate at a disadvantage to fully integrated competitors. As a
result of these factors, from time to time we may have
difficulty competing effectively in certain markets. If we were
to lower prices to address these competitive issues, it could
negatively impact our revenues and profitability.
Price
increases may not be adequate to offset the impact of increased
costs and may cause us to lose volume.
We seek to secure price increases necessary to offset higher
costs (including fuel and environmental costs), to maintain or
improve operating margins, and to obtain adequate returns on our
substantial investments in assets such as our landfills. From
time to time, our competitors may reduce their prices in an
effort to expand their market share. Contractual, general
economic or market-specific conditions also may limit our
ability to raise prices. For example, many of our contracts have
price adjustment provisions that are tied to an index such as
the Consumer Price Index. Particularly in a weak
U.S. economy such as the current one, our costs may
increase in excess of the increase, if any, in the Consumer
Price Index. This may continue to be the case even when the
U.S. economy recovers because a recovery in the solid waste
industry historically has lagged behind a recovery in the
general economy. As a result, we may be unable to offset
increases in costs, improve our operating margins and obtain
adequate investment returns through price increases. We may also
lose volume to lower-cost competitors.
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Increases
in the cost of fuel or petrochemicals will increase our
operating expenses, and we cannot assure you that we will be
able to recover fuel or oil cost increases from our
customers.
We depend on fuel purchased in the open market to operate our
collection and transfer trucks and other equipment used for
collection, transfer, and disposal. Fuel prices are
unpredictable and can fluctuate significantly based on events
beyond our control, including geopolitical developments, actions
by the Organization of the Petroleum Exporting Countries and
other oil and gas producers, supply and demand for oil and gas,
war, terrorism and unrest in oil-producing countries, and
regional production patterns. Due to contractual or market
factors, we may not be able to offset such volatility through
fuel surcharges. For example, our fuel costs were
$407.6 million in 2010, representing 5.0% of our revenue
compared to $349.8 million in 2009, representing 4.3% of
our revenue.
To manage our exposure to volatility in fuel prices, we have
entered into multiple swap agreements whereby we receive or make
payments to counter-parties should the price of fuel vary from a
specified amount. During 2010, approximately 7% of our fuel
volume purchases were hedged with swap agreements. Additionally,
we are able to collect fuel recovery fees from some customers.
For 2010, we were able to recover approximately 66% of our fuel
costs with fuel recovery fees.
Over the last several years, regulations have been adopted
mandating changes in the composition of fuels for motor
vehicles. In November 2010, EPA finalized its Renewable Fuel
Standard for 2011, which mandates increasing volumes of
renewable fuels and biofuels to be used in motor vehicles driven
in the U.S. These regulations will likely affect the type of
fuel our motor vehicle fleet uses and in the near-term increase
the cost of that fuel. Our operations also require the use of
products (such as liners at our landfills) whose costs may vary
with the price of petrochemicals. An increase in the price of
petrochemicals could increase the cost of those products, which
would increase our operating and capital costs. We are also
susceptible to increases in indirect fuel surcharges from our
vendors.
Fluctuations
in prices for recycled commodities that we sell to customers may
adversely affect our consolidated financial condition, results
of operations and cash flows.
We process recyclable materials such as paper, cardboard,
plastics, aluminum and other metals for sale to third parties.
Our results of operations may be affected by changing prices or
market requirements for recyclable materials. The resale and
purchase prices of, and market demand for, recyclable materials
can be volatile due to changes in economic conditions and
numerous other factors beyond our control. These fluctuations
may affect our consolidated financial condition, results of
operations and cash flows. We have in the past, and may in the
future, enter into swap agreements whereby we receive or make
payments to counter-parties if the price of commodities varies
from a specified amount or range.
Adverse
weather conditions may limit our operations and increase the
costs of collection and disposal.
Our collection and landfill operations could be adversely
impacted by extended periods of inclement weather, or by
increased severity of weather and climate extremes resulting in
the future from climate change, any of which could increase the
volume of waste collected under our existing contracts (without
corresponding compensation), interfere with collection and
landfill operations, delay the development of landfill capacity
or reduce the volume of waste generated by our customers. In
addition, adverse weather conditions may result in the temporary
suspension of our operations, which can significantly affect our
operating results in the affected regions during those periods.
We
currently have matters pending with the Internal Revenue Service
(the IRS), which could result in large cash
expenditures and could have a material adverse impact on our
operating results and cash flows.
During its examination of Allieds 2002 tax year, the IRS
asserted that a 2002 redemption of four partnership interests in
waste-to-energy
businesses should have been recharacterized as disguised sale
transactions. This issue is currently before the Appeals
Division of the IRS. The Company believes its position is
supported by relevant technical authorities and strong business
purpose and we intend to vigorously defend our position on
18
this matter. The potential tax and interest through
December 31, 2010 (to the extent unpaid) have been fully
reserved in our consolidated balance sheet. A disallowance would
not materially affect our consolidated results of operations;
however, a deficiency payment would adversely impact our cash
flow in the period the payment was made. The accrual of
additional interest charges through the time this matter is
resolved will affect our consolidated results of operations. In
addition, the successful assertion by the IRS of penalty and
penalty-related interest in connection with this matter could
have a material adverse impact on our consolidated financial
condition, results of operations and cash flows.
Additionally, during its examination of Allieds 2000
through 2007 tax years, the IRS proposed that certain landfill
costs be allocated to the collection and control of methane gas
that is naturally emitted from landfills. The IRS position
is that the methane gas emitted by a landfill constitutes a
joint product resulting from landfill operations and, therefore,
associated costs should not be expensed until the methane gas is
sold or otherwise disposed. We believe we have several
meritorious defenses, including the fact that methane gas is not
actively produced for sale by us but rather arises naturally in
the context of providing disposal services. Therefore, we
believe that the resolution of this issue will not have a
material adverse impact on our consolidated financial position,
results of operations or cash flows.
For additional information on these matters, see Note 10,
Income Taxes, to our consolidated financial statements in
Item 8. of this
Form 10-K.
We may
be unable to execute our financial strategy.
Our ability to execute our financial strategy depends on our
ability to maintain investment grade ratings on our senior debt.
The credit rating process is contingent upon a number of
factors, many of which are beyond our control. We cannot assure
you that we will be able to maintain our investment grade
ratings in the future. Our interest expense would increase and
our ability to obtain financing on favorable terms may be
adversely affected should we fail to maintain investment grade
ratings.
Our financial strategy is also dependent on our ability to
generate sufficient cash flow to reinvest in our existing
business, fund internal growth, acquire other solid waste
businesses, pay dividends, repurchase stock, reduce indebtedness
and minimize borrowings, and take other actions to enhance
stockholder value. We cannot assure you that: we will be
successful in executing our broad-based pricing program; we will
generate sufficient cash flow to execute our financial strategy;
we will be able to pay cash dividends at our present rate, we
will be able to increase the amount of such dividends, or we
will be able to continue our share repurchase program.
A
downgrade in our bond ratings could adversely affect our
liquidity by increasing the cost of debt and financial assurance
instruments.
While downgrades of our bond ratings may not have an immediate
impact on our cost of debt or liquidity, they may impact our
cost of debt and liquidity over the near to medium term. If the
rating agencies downgrade our debt, this may increase the
interest rate we must pay to issue new debt, and it may even
make it prohibitively expensive for us to issue new debt. If our
debt ratings are downgraded, future access to financial
assurance markets at a reasonable cost, or at all, also may be
adversely impacted.
The
solid waste industry is a capital-intensive industry and the
amount we spend on capital expenditures may exceed current
expectations, which could require us to obtain additional
funding for our operations or impair our ability to grow our
business.
Our ability to remain competitive and to grow and expand our
operations largely depends on our cash flow from operations and
access to capital. If our capital efficiency programs are unable
to offset the impact of inflation and business growth, it may be
necessary to increase the amount we spend. Additionally, if we
make acquisitions or further expand our operations, the amount
we expend on capital, capping, closure, post-closure and
environmental remediation expenditures will increase. Our cash
needs also will increase if the expenditures for capping,
closure, post-closure and remediation activities increase above
our current estimates, which may
19
occur over a long period due to changes in federal, state or
local government requirements and other factors beyond our
control. Increases in expenditures would negatively impact our
cash flows.
Over the last several years, regulations have been adopted
mandating the reduction of vehicle tail pipe emissions. In May
2010, the EPA and the National Highway Traffic Safety
Administration (NHTSA) finalized the first
U.S. standards for GHG emissions from conventional
automobiles, including large
pick-up
trucks. These regulations include increased fuel economy
requirements and apply to new motor vehicles covering model
years 2012 through 2016. We do not expect that this final rule
will lead to a material increase in our capital costs. Later in
2010 the EPA and the NHTSA proposed rules expanding the scope of
GHG emission standards for motor vehicles to include heavy duty
vehicles, including solid waste collection vehicles and tractor
trailers. These rules would similarly include increased fuel
economy standards for such vehicles and would apply to new
heavy-duty motor vehicles covering model years 2014 through
2018. Because the rule is still in the proposal stage, we cannot
predict its effect on us but it could increase our capital
costs. This also could cause an increase in vehicle operating
costs or a reduction in operating efficiency.
We may
be unable to obtain or maintain required permits or to expand
existing permitted capacity of our landfills, which could
decrease our revenue and increase our costs.
We cannot assure you that we will successfully obtain or
maintain the permits we require to operate our business because
permits to operate non-hazardous solid waste landfills and to
expand the permitted capacity of existing landfills have become
more difficult and expensive to obtain and maintain. Permits
often take years to obtain as a result of numerous hearings and
compliance requirements with regard to zoning, environmental and
other regulations. These permits are also often subject to
resistance from citizen or other groups and other political
pressures. Local communities and citizen groups, adjacent
landowners or governmental agencies may oppose the issuance of a
permit or approval we may need, allege violations of the permits
under which we currently operate or laws or regulations to which
we are subject, or seek to impose liability on us for
environmental damage. Responding to these challenges has, at
times, increased our costs and extended the time associated with
establishing new facilities and expanding existing facilities.
In addition, failure to receive regulatory and zoning approval
may prohibit us from establishing new facilities or expanding
existing facilities. Our failure to obtain the required permits
to operate our non-hazardous solid waste landfills could have a
material adverse impact on our consolidated financial condition,
results of operations and cash flows. In addition, we may have
to dispose collected waste at landfills operated by our
competitors or haul the waste long distances at a higher cost to
one of our other landfills, either of which could significantly
increase our waste disposal costs.
The waste industry is subject to extensive government
regulation, and existing or future regulations may restrict our
operations, increase our costs of operations or require us to
make additional capital expenditures.
If we
inadequately accrue for landfill capping, closure and
post-closure costs, our financial condition and results of
operations may be adversely affected.
A landfill must be closed and capped, and post-closure
maintenance commenced, once the permitted capacity of the
landfill is reached and additional capacity is not authorized.
We have significant financial obligations relating to capping,
closure and post-closure costs at our existing owned or operated
landfills, and will have material financial obligations with
respect to any future owned or operated landfills. We establish
accruals for the estimated costs associated with capping,
closure and post-closure financial obligations. We could
underestimate such accruals, and our financial obligations for
capping, closure or post-closure costs could exceed the amount
accrued or amounts otherwise receivable pursuant to trust funds
established for this purpose. Such a shortfall could result in
significant unanticipated charges to income. Additionally, if a
landfill is required to be closed earlier than expected or its
remaining airspace is reduced for any other reason, the accruals
for capping, closure and post-closure could be required to be
accelerated, which could have a material adverse impact on our
consolidated financial condition, results of operations and cash
flows.
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We
cannot assure you that we will continue to operate our landfills
at current volumes due to the use of alternatives to landfill
disposal caused by state requirements or voluntary
initiatives.
Most of the states in which we operate landfills require
counties and municipalities to formulate comprehensive plans to
reduce the volume of solid waste deposited in landfills through
waste planning, composting and recycling, or other programs.
Some state and local governments mandate waste reduction at the
source and prohibit the disposal of certain types of wastes,
such as yard waste, at landfills. Although such actions are
useful in protecting our environment, these actions, as well as
voluntary private initiatives by customers to reduce waste or
seek disposal alternatives, have reduced and will in the future
reduce the volume of waste going to landfills. Accordingly, we
cannot assure you that we will be able to operate our landfills
at their current volumes or charge current prices for landfill
disposal services due to the decrease in demand for such
services.
The
possibility of landfill and transfer station site development
projects, expansion projects or pending acquisitions not being
completed or certain other events could result in a material
charge to income.
We capitalize certain expenditures relating to development,
expansion and other projects. If a facility or operation is
permanently shut down or determined to be impaired, or a
development or expansion project is not completed or is
determined to be impaired, we will charge any unamortized
capitalized expenditures to income relating to such facility or
project that we are unable to recover through sale, transfer or
otherwise. In future periods, we may incur charges against
earnings in accordance with this policy, or other events may
cause impairments. Such charges could have a material adverse
impact on our consolidated financial condition, results of
operations and cash flows.
We are
subject to costly environmental regulations and flow-control
regulations that may affect our operating margins, restrict our
operations and subject us to additional liability.
Complying with laws and regulations governing the use,
treatment, storage, transfer and disposal of solid and hazardous
wastes and materials, air quality, water quality and the
remediation of contamination associated with the release of
hazardous substances is costly. Laws and regulations often
require us to enhance or replace our equipment and to modify
landfill operations or initiate final closure of a landfill. We
cannot assure you that we will be able to implement price
increases sufficient to offset the costs of complying with these
laws and regulations. In addition, environmental regulatory
changes could accelerate or increase expenditures for capping,
closure and post-closure, and environmental and remediation
activities at solid waste facilities and obligate us to spend
sums in addition to those presently accrued for such purposes.
Our collection, transfer, and landfill operations are, and may
in the future continue to be, affected by state or local laws or
regulations that restrict the transportation of solid waste
across state, county or other jurisdictional lines or that
direct the flow of waste to a specified facility. Such laws and
regulations could negatively affect our operations, resulting in
declines in landfill volumes and increased costs of alternate
disposal.
In addition to the costs of complying with environmental
regulations, we incur costs to defend against litigation brought
by government agencies and private parties who allege we are in
violation of our permits and applicable environmental laws and
regulations, or who assert claims alleging environmental damage,
personal injury or property damage. As a result, we may be
required to pay fines or implement corrective measures, or we
may have our permits and licenses modified or revoked. A
significant judgment against us, the loss of a significant
permit or license, or the imposition of a significant fine could
have a material adverse impact on our consolidated financial
condition, results of operations and cash flows. We establish
accruals for our estimates of the costs associated with our
environmental obligations. We could underestimate such accruals
and remediation costs could exceed amounts accrued. Such
shortfalls could result in significant unanticipated charges to
income.
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Regulation
of greenhouse gas emissions could impose costs on our
operations, the magnitude of which we cannot yet
estimate.
Efforts to curtail the emission of greenhouse gases (GHGs) and
to ameliorate the effects of climate change continue to be
debated on the federal, regional, and state level. Our landfill
operations emit methane, identified as a GHG, and our vehicle
fleets emit, among others, carbon dioxide, which has also been
identified as a GHG. Conventional wisdom now suggests that
passage of comprehensive, federal climate change legislation is
highly unlikely. Nonetheless, should comprehensive federal
climate change legislation be enacted, we expect it to impose
costs on our operations, the materiality of which we cannot
predict.
Absent comprehensive federal legislation to control GHG
emissions, EPA is moving ahead administratively under its
existing Clean Air Act authority. In October 2009, EPA published
a Proposed Prevention of Significant Deterioration and
Title V Greenhouse Gas Tailoring Rule (PSD tailoring rule).
EPA finalized the PSD tailoring rule on May 13, 2010. The
finalized PSD tailoring rule establishes new thresholds for GHG
emissions that define when Clean Air Act permits would be
required and would tailor these programs to limit
which facilities would be required to obtain permits. EPAs
legal authority to tailor this rule has been
challenged. As of January 2, 2011, some of our landfills
became subject to the PSD tailoring rule, which requires permit
amendments and could require additional emission controls for
GHGs when modifications are made to these landfills, which could
increase our costs.
On October 25, 2010, EPA and the Department of
Transportations National Highway Traffic Safety
Administration (NHTSA), proposed rules to reduce GHG emissions
from medium and heavy duty vehicles. These proposed rules, if
finalized, would impose higher fuel economy standards of heavy
duty vehicles. As such, the proposed rules could require us to
expend additional capital on our vehicle fleet.
In addition to the obligations imposed by the PSD tailoring
rule, as a result of EPA finding that six GHGs endanger public
health in December 2009 EPA may impose additional GHG emissions
controls on stationary sources. While EPA made its finding in
the context of regulating air emissions from motor vehicles, now
that it has made the endangerment finding, other provisions of
the Clean Air Act provide EPA with the authority to impose
further regulations upon stationary sources of GHG emissions,
including landfills. We cannot predict the requirements or
effective date of any additional stationary source rules that
might apply to landfills as a result of the endangerment finding
and, accordingly, we cannot assure you that further developments
in this area will not have a material effect on our landfill
operations or on our consolidated financial condition, results
of operations, or cash flows.
We may
have potential environmental liabilities that are not covered by
our insurance. Changes in insurance markets also may impact our
financial results.
We may incur liabilities for the deterioration of the
environment as a result of our operations. We maintain high
deductibles for our environmental liability insurance coverage.
If we were to incur substantial liability for environmental
damage, our insurance coverage may be inadequate to cover such
liability. This could have a material adverse impact on our
consolidated financial condition, results of operations and cash
flows.
Also, due to the variable condition of the insurance market, we
may experience future increases in self-insurance levels as a
result of increased retention levels and increased premiums. As
we assume more risk for self-insurance through higher retention
levels, we may experience more variability in our self-insurance
reserves and expense.
Despite
our efforts, we may incur additional hazardous substances
liability in excess of amounts presently known and
accrued.
We are a potentially responsible party at many sites under
CERCLA, which provides for the remediation of contaminated
facilities and imposes strict, joint and several liability for
the cost of remediation on current owners and operators of a
facility at which there has been a release or a threatened
release of a hazardous substance. CERCLA liability
also extends to parties who were site owners and operators at
the time hazardous substances were disposed, and on persons who
arrange for the disposal of such substances at the facility
(i.e.,
22
generators of the waste and transporters who selected the
disposal site). Hundreds of substances are defined as
hazardous under CERCLA and their presence, even in
minute amounts, can result in substantial liability.
Notwithstanding our efforts to comply with applicable
regulations and to avoid transporting and receiving hazardous
substances, we may have additional liability under CERCLA, or
similar state laws or RCRA, in excess of our current reserves
because such substances may be present in waste collected by us
or disposed of in our landfills, or in waste collected,
transported or disposed of in the past by companies we have
acquired. Actual costs for these liabilities could be
significantly greater than amounts presently accrued for these
purposes, which could have a material adverse impact on our
consolidated financial position, results of operations, and cash
flows.
Currently
pending or future litigation or governmental proceedings could
result in material adverse consequences, including judgments or
settlements.
We are, and from time to time become, involved in lawsuits,
regulatory inquiries, and governmental and other legal
proceedings arising out of the ordinary course of our business.
Many of these matters raise difficult and complicated factual
and legal issues and are subject to uncertainties and
complexities. The timing of the final resolutions to lawsuits,
regulatory inquiries, and governmental and other legal
proceedings is uncertain. Additionally, the possible outcomes or
resolutions to these matters could include adverse judgments or
settlements, either of which could require substantial payments,
adversely affecting our consolidated financial condition,
results of operations and cash flows.
We may
be unable to manage our growth effectively.
Our growth strategy places significant demands on our financial,
operational and management resources. To continue our growth, we
may need to add administrative and other personnel, and will
need to make additional investments in operations and systems.
We cannot assure you that we will be able to find and train
qualified personnel, or do so on a timely basis, or expand our
operations and systems to the extent, and in the time, required.
We may
be unable to execute our acquisition growth
strategy.
Our ability to execute our growth strategy depends in part on
our ability to identify and acquire desirable acquisition
candidates as well as our ability to successfully consolidate
acquired operations into our business. The consolidation of our
operations with those of acquired companies may present
significant challenges to our management. In addition,
competition among our competitors for acquisition candidates may
prevent us from acquiring certain acquisition candidates. As
such, we cannot assure you that:
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desirable acquisition candidates exist or will be identified;
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we will be able to acquire any of the candidates identified;
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we will effectively consolidate companies we acquire; or
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any acquisitions will be profitable or accretive to our earnings.
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If any of the aforementioned factors force us to alter our
growth strategy, our growth prospects could be adversely
affected.
Businesses
we acquire may have undisclosed liabilities.
In pursuing our acquisition strategy, our due diligence
investigations of the acquisition candidates may fail to
discover certain undisclosed liabilities of the acquisition
candidates. If we acquire a company having undisclosed
liabilities such as environmental, remediation or contractual,
as a successor owner we may be responsible for such undisclosed
liabilities. We expect to try to minimize our exposure to such
liabilities by conducting due diligence, by obtaining
indemnification from each of the sellers of the acquired
companies, by deferring payment of a portion of the purchase
price as security for the indemnification and by acquiring only
specified assets. However, we cannot assure you that we will be
able to obtain indemnification or that any
23
indemnification obtained will be enforceable, collectible or
sufficient in amount, scope or duration to fully offset any
undisclosed liabilities arising from our acquisitions.
Our
consolidated financial statements are based on estimates and
assumptions that may differ from actual results.
Our consolidated financial statements have been prepared in
accordance with U.S. GAAP and necessarily include amounts
based on estimates and assumptions made by management. Actual
results could differ from these amounts. Significant items
requiring management to make subjective or complex judgments
about matters that are inherently uncertain include the carrying
value of long-lived assets, the depletion and amortization of
landfill development costs, accruals for final capping, closure
and post-closure costs, valuation allowances for accounts
receivable and deferred tax assets, liabilities for potential
litigation, claims and assessments, and liabilities for
environmental remediation, employee benefit and pension plans,
deferred taxes, uncertain tax positions and self-insurance.
We cannot assure you that the liabilities recorded for landfill
and environmental costs will be adequate to cover the
requirements of existing environmental regulations, future
changes to or interpretations of existing regulations, or the
identification of adverse environmental conditions previously
unknown to management.
The
introduction of new accounting rules, laws or regulations could
adversely impact our results of operations.
Complying with new accounting rules, laws or regulations could
adversely impact our financial condition, results of operations
or cash flows, or cause unanticipated fluctuations in our
results of operations in future periods.
We may
be subject to workforce influences, including work stoppages,
which could increase our operating costs and disrupt our
operations.
As of December 31, 2010, approximately 27% of our workforce
was represented by various local labor unions. If our unionized
workers were to engage in strikes, work stoppages or other
slowdowns, we could experience a significant disruption of our
operations and an increase in our operating costs, which could
have an adverse impact on our consolidated financial condition,
results of operations and cash flows. Additional groups of
employees may seek union representation in the future and, if
successful, the negotiation of collective bargaining agreements
could divert management attention and result in increased
operating costs. If a greater percentage of our workforce
becomes unionized, our business and financial results could be
materially and adversely impacted due to the potential for
increased operating costs.
Our
obligation to fund multi-employer pension plans to which we
contribute may have an adverse impact on us.
We contribute to at least 28 multi-employer pension plans
covering at least 22% of our current employees. We do not
administer these plans and generally are not represented on the
boards of trustees of these plans. The Pension Protection Act
enacted in 2006 (the PPA) requires under-funded pension plans to
improve their funding ratios. Based on the information available
to us, we believe that some of the multi-employer plans to which
we contribute are either critical or
endangered as those terms are defined in the PPA. We
cannot determine at this time the amount of additional funding,
if any, we may be required to make to these plans and,
therefore, have not recorded any related liabilities. However,
plan assessments could have an adverse impact on our results of
operations or cash flows for a given period. Furthermore, under
current law, upon the termination of a multi-employer pension
plan, or in the event of a withdrawal by us (which we consider
from time to time) or a mass withdrawal of contributing
employers (each, a Withdrawal Event), we would be
required to make payments to the plan for our proportionate
share of the plans unfunded vested liabilities. We cannot
assure you that there will not be a Withdrawal Event with
respect to any of the multi-employer pension plans to which we
contribute or that, in the event of such a Withdrawal Event, the
amounts we would be
24
required to contribute would not have a material adverse impact
on our consolidated financial condition, results of operations
and cash flows.
The
costs of providing for pension benefits and related funding
requirements are subject to changes in pension fund values and
fluctuating actuarial assumptions, and may have a material
adverse impact on our results of operations and cash
flows.
We sponsor a defined benefit pension plan which is funded with
trustee assets invested in a diversified portfolio of debt and
equity securities. Our costs for providing such benefits and
related funding requirements are subject to changes in the
market value of plan assets. Our pension expenses and related
funding requirements are also subject to various actuarial
calculations and assumptions, which may differ materially from
actual results due to changing market and economic conditions,
interest rates and other factors. A significant increase in our
pension obligations and funding requirements could have a
material adverse impact on our consolidated financial condition,
results of operations and cash flows.
The
loss of key personnel could have a material adverse effect on
our consolidated financial condition, results of operations,
cash flows and growth prospects.
Our future success depends on the continued contributions of
several key employees and officers. The loss of the services of
key employees and officers, whether such loss is through
resignation or other causes, or the inability to attract
additional qualified personnel, could have a material adverse
effect on our financial condition, results of operations, cash
flows and growth prospects.
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ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
Our corporate office is located at 18500 North Allied Way,
Phoenix, Arizona 85054, where we currently lease approximately
145,000 square feet of office space. We also maintain
regional administrative offices in all of our regions.
Our principal property and equipment consists of land,
landfills, buildings, vehicles and equipment. We own or lease
real property in the states in which we conduct operations. At
December 31, 2010, we owned or operated 348 collection
companies, 204 transfer stations, 193 active solid waste
landfills and 76 recycling facilities in 40 states and
Puerto Rico. In aggregate, our active solid waste landfills
total approximately 97,000 acres, including approximately
36,000 permitted acres. We also own or have responsibilities for
129 closed landfills. We believe that our property and equipment
are adequate for our current needs.
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|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
We are subject to extensive and evolving laws and regulations
and have implemented our own safeguards to respond to regulatory
requirements. In the normal course of conducting our operations,
we become involved in legal proceedings. Some of these actions
may result in fines, penalties or judgments against us, which
may impact earnings and cash flows for a particular period.
Although we cannot predict the ultimate outcome of any legal
matter with certainty, except as described below or in
Note 10 to our consolidated financial statements, Income
Taxes, in the discussion of our outstanding tax dispute with
the IRS, we do not believe that the outcome of our pending legal
proceedings will have a material adverse impact on our
consolidated financial position, results of operations or cash
flows.
As used herein, legal proceedings refers to litigation
and similar claims against us and our subsidiaries, excluding:
(i) ordinary course accidents, general commercial liability
and workers compensation claims, which are covered by insurance
programs, subject to customary deductibles, and which, together
with self-insured employee health care costs, are discussed in
Note 7 to our consolidated financial statements, Other
Liabilities-Self-Insurance Reserves; (ii) tax-related
matters, which are discussed in Note 10 to our consolidated
financial
25
statements, Income Taxes; and (iii) environmental
remediation liabilities, which are discussed in Note 8 to
our consolidated financial statements, Landfill and
Environmental Costs. Please see our consolidated financial
statements included in this
Form 10-K
under Item 8 for information about these matters.
We accrue for legal proceedings when losses become probable and
reasonably estimable. We have recorded an aggregate accrual of
approximately $113 million relating to our outstanding
legal proceedings as of December 31, 2010, including those
described herein and others not specifically identified herein.
As of the end of each applicable reporting period, we review
each of our legal proceedings and, where it is probable that a
liability has been incurred, we accrue for all probable and
reasonably estimable losses. Where we are able to reasonably
estimate a range of losses we may incur with respect to such a
matter, we record an accrual for the amount within the range
that constitutes our best estimate. If we are able to reasonably
estimate a range but no amount within the range appears to be a
better estimate than any other, we use the amount that is the
low end of such range. If we used the high ends of such ranges,
our aggregate potential liability would have been approximately
$121 million higher than the amount recorded as of
December 31, 2010.
General
Legal Proceedings
Countywide
Matter
In a suit filed on October 8, 2008 in the Tuscarawas County
Ohio Court of Common Pleas, approximately 700 individuals and
businesses located in the area around Countywide sued Republic
Services, Inc. and Republic-Ohio for alleged negligence and
nuisance. Republic-Ohio has owned and operated Countywide since
February 1, 1999. Waste Management, Inc. and Waste
Management Ohio, Inc., previous owners and operators of
Countywide, have been named as defendants as well. Plaintiffs
allege that due to the acceptance of a specific waste stream and
operational issues and conditions, the landfill has generated
odors and other unsafe emissions that have impaired the use and
value of their property and may have adverse health effects. A
second almost identical lawsuit was filed by approximately 82
plaintiffs on October 13, 2009 in the Tuscarawas County
Ohio Court of Common Pleas against Republic Services, Inc.,
Republic-Ohio, Waste Management, Inc., and Waste Management
Ohio, Inc. The court has consolidated the two actions. We have
assumed both the defense and the liability of the Waste
Management entities in the consolidated action. The relief
requested on behalf of each plaintiff in the consolidated action
is: (1) an award of compensatory damages according to proof
in an amount in excess of $25,000 for each of the three counts
of the amended complaint; (2) an award of punitive damages
in the amount of two times compensatory damages, pursuant to
applicable statute, or in such amount as may be awarded at trial
for each of the three counts of the amended complaint;
(3) costs for medical screening and monitoring of each
plaintiff; (4) interest on the damages according to law;
(5) costs and disbursements of the lawsuit;
(6) reasonable fees for attorneys and expert witnesses; and
(7) any other and further relief as the court deems just,
proper and equitable. Plaintiffs filed an amended consolidated
complaint on September 9, 2010, which no longer asserts a
claim for medical monitoring. As a result of various dismissals
of plaintiffs, this case presently consists of approximately 600
plaintiffs. Discovery is ongoing. We will vigorously defend
against the plaintiffs allegations in the consolidated
action.
Luri
Matter
On August 17, 2007, a former employee, Ronald Luri, sued
Republic Services, Inc., Republic Services of Ohio Hauling LLC,
Republic Services of Ohio I LLC, Jim Bowen and Ron Krall in the
Cuyahoga County Common Pleas Court in Ohio. Plaintiff alleges
that he was unlawfully fired in retaliation for refusing to
discharge or demote three employees who were all over
50 years old. On July 3, 2008, a jury verdict was
awarded against us in the amount of $46.6 million,
including $43.1 million in punitive damages. On
September 24, 2008, the Court awarded pre-judgment interest
of $0.3 million and attorney fees and litigation costs of
$1.1 million. Post-judgment interest accrued at a rate of
8% for 2008 and 5% for 2009, and is accruing at a rate of 4% for
2010. Management anticipates that post-judgment interest could
accrue through the middle of 2011 for a total of
$7.7 million. We have filed a notice of appeal, and the
case has been fully briefed in the Court of Appeals. It is
reasonably possible that following all appeals a final judgment
of liability for compensatory and punitive damages may be
assessed against us related to this matter.
26
Litigation
Related to Fuel and Environmental Fees
On July 8, 2009, CLN Properties, Inc. and Maevers
Management Company, Inc. filed a complaint against Republic
Services, Inc. and Allied Waste Industries, Inc. in the United
States District Court in Arizona, in which plaintiffs complain
about fuel recovery fees and environmental recovery fees. The
complaint purports to be filed on behalf of a nationwide class
of similarly situated plaintiffs. The complaint asserts various
legal and equitable theories of recovery and alleges in essence
that the fees were not properly disclosed, were unfair, and were
contrary to contract. The District Court denied plaintiffs
motion for class certification on December 13, 2010.
Plaintiffs filed a motion for reconsideration of that ruling,
which the District Court also denied. Plaintiffs have not filed
a timely interlocutory appeal, but could file an appeal after
any judgment in this case. Based on the District Courts
opinion and the small amounts at issue with respect to the 10
remaining plaintiffs, we will no longer report on this case
after this
Form 10-K.
On July 23, 2009, Klinglers European Bake
Shop & Deli, Inc., filed a complaint against BFI Waste
Services, LLC in the Circuit Court of Jefferson County, Alabama,
in which plaintiff complains about fuel/environmental recovery
fees and administrative fees charged. The complaint purports to
be filed on behalf of a class of similarly situated plaintiffs
in Alabama. This complaint asserts various legal and equitable
theories of recovery and alleges in essence that the fees were
not properly disclosed, were unfair, and were contrary to
contract.
Class-certification-related
discovery is underway. Plaintiffs deadline for moving for
class certification is August 12, 2011.
The plaintiffs in both actions have not specified the amount of
damages sought. Although the range of reasonably possible loss
cannot be estimated, we do not believe that these matters will
have a material impact on our consolidated financial positions,
results of operations or cash flows. We will continue to
vigorously defend the claims in both lawsuits.
Proxy
Disclosure Matter
In late 2009, a stockholder sued Republic Services, Inc. in
Federal court in Delaware challenging our disclosures in our
2009 proxy statement with respect to the Executive Incentive
Plan (EIP) that was approved by our stockholders at the 2009
annual meeting. The lawsuit is styled as a combined proxy
disclosure claim and derivative action. We are a defendant only
with respect to the proxy disclosure claim, which seeks only to
require us to make additional disclosures regarding the EIP and
to hold a new stockholder vote prior to making any payments
under the EIP. The derivative claim is purportedly brought on
behalf of our company against all of our directors and the
individuals who were executive officers at the time of the 2009
annual meeting and alleges, among other things, breach of
fiduciary duty. That claim also seeks injunctive relief and
seeks to recoup on behalf of our company an unspecified amount
of the incentive compensation that may be paid to our executives
under the EIP, as well as the amount of any tax deductions that
may be lost if the EIP does not comply with Section 162(m)
of the Internal Revenue Code. Defendants motions to
dismiss plaintiffs complaint have been fully briefed. We
believe the lawsuit is without merit and is not material and
intend to vigorously defend against the plaintiffs
allegations.
Contracting
Matter
We discovered actions of non-compliance by one of our
subsidiaries with the subcontracting provisions of certain
government contracts in one of our markets. We reported the
discovery to, and have had further discussions with, law
enforcement and other authorities. Such non-compliance could
result in payments by us in the form of restitution, damages, or
penalties, or the loss of future business in the affected market
or other markets. Based on the information currently available
to us, including our expectation that our self-disclosure will
be viewed favorably by the applicable authorities, we presently
believe that the resolution of the matter, while it may have a
material impact on our results of operations or cash flows in
the period in which it is recognized or paid, will not have a
material adverse effect on our consolidated financial position.
27
Congress
Development Landfill Matters
Congress Development Co. (CDC) is a general partnership
that owns and operates the Congress Landfill. The general
partners in CDC are our subsidiary, Allied Waste Transportation,
Inc. (Allied Transportation), and an unaffiliated entity, John
Sexton Sand & Gravel Corporation (Sexton). Sexton was
the operator of the landfill through early 2007, when Allied
Transportation took over as the operator. The general partners
likely will be jointly and severally liable for the costs
associated with the following matters relating to the Congress
Landfill.
In a suit originally filed on December 23, 2009 in the
Circuit Court of Cook County, Illinois and subsequently amended
to add additional plaintiffs, approximately 2,300 plaintiffs
sued our subsidiaries Allied Transportation and Allied Waste
Industries, Inc., CDC and Sexton. The plaintiffs allege bodily
injury, property damage and inability to have normal use and
enjoyment of property arising from, among other things, odors
and other damages arising from landfill gas leaking, and they
base their claims on negligence, trespass, and nuisance.
Following the courts order in our favor striking the
plaintiffs allegations requesting actual damages in excess
of $50,000,000 and punitive damages in excess of $50,000,000,
the amount of damages being sought is unspecified. The court
entered an order dismissing Allied Waste Industries, Inc.
without prejudice on October 26, 2010. We intend to
vigorously defend against the plaintiffs allegations in
this action.
Livingston
Matter
On October 13, 2009, the Twenty-First Judicial District
Court, Parish of Livingston, State of Louisiana, issued its Post
Class Certification Findings of Fact and Conclusions of Law
in a lawsuit alleging nuisance from the activities of the CECOS
hazardous waste facility located in Livingston Parish,
Louisiana. The court granted class certification for all those
living within a six mile radius of the CECOS site between the
years 1977 and 1990. We have filed a notice of appeal with
respect to the class certification order and briefing is
complete. The parties are currently attempting to resolve the
matter through mediation. If the mediation does not resolve the
matter, we intend to continue to defend this lawsuit vigorously.
Legal
Proceedings Involving Governmental Authorities with Possible
Sanctions of $100,000 or More
Item 103 of the SECs
Regulation S-K
requires disclosure of certain environmental matters when a
governmental authority is a party to the proceedings and the
proceedings involve potential monetary sanctions unless we
reasonably believe that the monetary sanctions will not equal or
exceed $100,000. We are disclosing the following matters in
accordance with that requirement:
Forward
Matters
The District Attorney for San Joaquin County filed a civil
action against Forward, Inc. and Allied Waste Industries, Inc.
on February 14, 2008 in the Superior Court of California,
County of San Joaquin. The complaint seeks civil penalties
of $2,500 for each alleged violation, but no less than
$10.0 million, and an injunction against Forward and Allied
for alleged permit and regulatory violations at the Forward
Landfill. The District Attorney contends that the alleged
violations constitute unfair business practices under the
California Business and Professions Code section 17200, et
seq., by virtue of violations of Public Resources Code
Division 30, Part 4, Chapter 3, Article 1,
sections 44004 and 44014(b); California Code of Regulations
Title 27, Chapter 3, Subchapter 4, Article 6,
sections 20690(11) and 20919.5; and Health and Safety Code
sections 25200, 25100, et seq., and 25500, et seq. Although
the complaint is worded very broadly and does not identify
specific permit or regulatory violations, the District Attorney
has articulated three primary concerns in past communications,
alleging that the landfill: (1) used green waste containing
food as alternative daily cover, (2) exceeded its daily
solid waste tonnage receipt limitations under its solid waste
facility permit, and (3) received hazardous waste in
violation of its permit (i.e., auto shredder waste).
Additionally, the District Attorney alleges that landfill gas
measured by a monitoring probe at the property boundary has
exceeded an action level of five percent methane. We are
vigorously defending against the allegations.
On February 5, 2010, the U.S. Environmental Protection
Agency (EPA) Region IX delivered a Finding and Notice of
Violation to the Forward Landfill as a result of alleged
violations of the Title V permit issued under
28
the Clean Air Act. The facility is jointly regulated by the EPA
and the San Joaquin Valley Air Pollution Control District.
The alleged violations include operating gas collection
wellheads at greater than 15% oxygen, experiencing a subsurface
oxidation event on multiple occasions, and submitting inaccurate
compliance certifications. While a complaint has not yet been
filed, on December 15, 2010, the District issued a
60-day
Notice of Intent to Sue based on these allegations. We are
undergoing nonbinding mediation with the agencies as we continue
to vigorously defend against the allegations.
Imperial
Landfill Matter
On May 18, 2009, the Pennsylvania Department of
Environmental Protection (PADEP) and the Allegheny County Health
Department (ACHD) presented the Imperial Landfill a proposed
consent order and agreement for a series of alleged violations
related to landfill gas, leachate control, cover management, and
resulting nuisance odor complaints, primarily in late 2008 and
2009. On March 12, 2010, we signed a Consent Assessment of
Civil Penalties (CACP) with the PADEP in connection with
PADEPs allegations of violations at the landfill through
November 16, 2009. The total penalty amount in the CACP was
$650,000. On April 12, 2010, additional orders were issued
against us by both the PADEP and the ACHD for the allegedly
continuing failure to bring the landfills odor issues
under control. We have concluded settlements with both agencies.
On November 22, 2010, we finalized a Consent Order and
Agreement (COA) with the ACHD, in which we paid a penalty of
$225,000 for all violations up to the date of the COA and agreed
to certain operational requirements. The ACHD withdrew its April
12, 2010 Order. On December 22, 2010, we executed a COA
with the PADEP, pursuant to which we have paid a penalty of
$142,000 for all violations of which PADEP was aware from
November 17, 2009 through December 15, 2010. We also
agreed to certain operational requirements.
Sunshine
Canyon Matter
On November 17, 2009, the South Coast Air Quality
Management District (SCAQMD) issued a Petition for an Order for
Abatement (Petition) as a result of a series of odor complaints
and notices of violation alleged to be associated with the
operations at the Sunshine Canyon Landfill located in Sylmar,
California (Sunshine Canyon). The Petition described eight
notices of violation beginning in November 2008 and continuing
to November 2009. The SCAQMDs independent Hearing Board
held a series of public hearings between December 2009 and March
2010, after which it issued a final order (Order) that requires
certain operational changes aimed at odor control, and further
requires Sunshine Canyon to perform several studies regarding
odor control techniques, equipment and site meteorology. In July
2010, the Hearing Board approved an amended Order suspending
certain operational requirements contained in the initial Order
pending completion of additional odor control studies. While the
District prosecutors office has stated its intention to
assess a penalty on Sunshine Canyon, it has not indicated the
amount or type of such a penalty. In September 2010, the County
of Los Angeles Department of Public Works (Department) issued a
directive to Sunshine Canyon requiring the implementation of
certain corrective measures aimed at reducing odors. Sunshine
Canyon, the SCAQMD Hearing Board and SCAQMD staff are currently
attempting to resolve conflicting requirements between the
Countys directive and the Hearing Boards Order.
Lorain
County Landfill Matter
Since 2006, the Lorain County Landfill located in Lorain, Ohio
has agreed to two consensual Directors Final Findings and
Orders (DFFOs) issued by the Ohio Environmental Protection
Agency related to operational issues, including odor nuisances.
The Ohio Attorney Generals office has advised us that it
intends to initiate legal proceedings against our subsidiary,
Lorain County Landfill, LLC, and against Lorain County LFG Power
Station Energy Developments, Inc., which has operated and
maintained the landfills gas collection system, for
violations that are alleged to continue to occur in violation of
the DFFOs and are related to continuing alleged nuisance odors.
We are engaging in discussions with representatives of the
Attorney Generals office to attempt to amicably resolve
the States issues and to negotiate a consent order that
would be filed with the common pleas court. While the Attorney
Generals office has stated its intention to assess a
penalty on Lorain County Landfill, LLC (as well as Lorain County
LFG Power Station Energy Developments, Inc.), it has not
indicated
29
the amount or type of penalty it will seek. The Attorney
Generals office also has indicated it will seek injunctive
relief, but has not yet indicated what such injunctive relief
would entail. Discussions with the Attorney Generals
office are ongoing.
Queen
Creek Matter
The Maricopa County Air Quality Department issued a Notice of
Violation (NOV) to the Maricopa County Solid Waste Department
(Solid Waste Department) in March 2010 and to the Town of Queen
Creek (Queen Creek) and Allied Waste Industries
(Arizona), Inc. (Allied Waste) in October 2010 relating to the
Queen Creek Landfill (Landfill). The NOV alleges violations of
the Clean Air Act relating to the Landfill while it was in
operation. The Landfill was owned by Maricopa County and
operated by Allied Waste under contract with Queen Creek between
1996 and 2006, at which time it was closed. The NOV alleges the
failure to design, install and operate a landfill gas collection
control system, failure to timely apply for an air quality
permit, and failure to provide required reports relating to
landfill capacity, status and closure. Under the terms of
several intergovernmental agreements between Maricopa County and
Queen Creek, Maricopa County agreed to be responsible for the
activities that are the subject of the NOVs and to indemnify
Queen Creek and its contractors for Maricopa Countys
failure to meet its obligations under the agreements. The
Company will vigorously defend against the allegations and seek
indemnification from Maricopa County.
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ITEM 4.
|
REMOVED
AND RESERVED
|
PART II
ITEM 5. MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information, Holders and Dividends
The principal market for our common stock is the New York Stock
Exchange (NYSE), and it is traded under the symbol RSG. The
following table sets forth the range of the high and low sale
prices per share of our common stock on the NYSE and the cash
dividends declared per share of common stock for the periods
indicated:
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Dividends
|
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High
|
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Low
|
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Declared
|
|
Year Ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
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First Quarter
|
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$
|
29.55
|
|
|
$
|
25.15
|
|
|
$
|
0.19
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|
Second Quarter
|
|
|
31.92
|
|
|
|
27.65
|
|
|
|
0.19
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Third Quarter
|
|
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32.95
|
|
|
|
28.97
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|
|
|
0.20
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Fourth Quarter
|
|
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32.13
|
|
|
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27.70
|
|
|
|
0.20
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Year Ended December 31, 2009:
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First Quarter
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$
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26.81
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|
$
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15.05
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$
|
0.19
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Second Quarter
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24.45
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16.31
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|
|
0.19
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Third Quarter
|
|
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27.34
|
|
|
|
23.32
|
|
|
|
0.19
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Fourth Quarter
|
|
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29.82
|
|
|
|
25.44
|
|
|
|
0.19
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There were 844 holders of record of our common stock at
February 10, 2011, which does not include beneficial owners
for whom Cede & Co. or others act as nominees.
In February 2011, our board of directors declared a regular
quarterly dividend of $0.20 per share for stockholders of record
on April 1, 2011. We expect to continue to pay quarterly
cash dividends, and we may consider increasing our quarterly
cash dividends if we believe it will enhance stockholder value.
30
We have the ability under our credit facilities to pay dividends
and repurchase our common stock subject to our compliance with
the financial covenants in our credit facilities. As of
December 31, 2010 and throughout the entire year, we were
in compliance with the financial covenants in our credit
facilities.
Issuer
Purchases of Equity Securities
The following table provides information relating to our
purchases of shares of our common stock during the three months
ended December 31, 2010:
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Total Number of Shares
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Approximate Dollar
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Shares Purchased as
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Value of Shares that
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Total Number of
|
|
|
Average Price Paid
|
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Part of Publicly
|
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May Yet Be Purchased
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Shares Purchased (a)
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per Share (a)
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Announced Program (b)
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Under the Program (c)
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October 2010
|
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$
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|
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$
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November 2010
|
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965,431
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$
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28.25
|
|
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965,431
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$
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372,728,864
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December 2010
|
|
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499,409
|
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$
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28.93
|
|
|
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479,900
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$
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358,860,447
|
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|
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|
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1,464,840
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$
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28.48
|
|
|
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1,445,331
|
|
|
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|
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(a) |
|
Our board of directors has approved a share repurchase program
pursuant to which we may repurchase up to $400.0 million of
our outstanding shares of common stock through December 31,
2011 (the 2010 Program). The 2010 Program was publicly announced
on November 4, 2010. Share repurchases under the 2010
Program may be made through open market purchases or privately
negotiated transactions in accordance with applicable federal
securities laws. While the board of directors has approved the
2010 Program, the timing of any purchases, the prices and the
number of shares of common stock to be purchased will be
determined by our management, at its discretion, and will depend
upon market conditions and other factors. The 2010 Program may
be extended, suspended or discontinued at any time. |
|
(b) |
|
The total number of shares purchased during the fourth quarter
of 2010 includes: (i) 1,445,331 shares of common stock
purchased pursuant to the 2010 Program; and
(ii) 19,509 shares of common stock surrendered to
satisfy statutory minimum tax withholding obligations in
connection with the vesting of restricted stock issued to
employees. We expect to continue to satisfy minimum tax
withholding obligations in connection with the vesting of
outstanding restricted stock through the withholding of shares. |
|
(c) |
|
Shares that may be purchased under the program excludes
19,509 shares of common stock surrendered to satisfy
statutory minimum tax withholding obligations in connection with
the vesting of restricted stock issued to employees. |
Recent
Sales of Unregistered Securities
None
31
Performance
Graph
The following graph compares the performance of our common stock
to the Standard & Poors 500 Stock Index
(S&P 500 Index) and the Dow Jones Waste &
Disposal Services Index (DJW&DS Index). The graph covers
the period from December 31, 2005 to December 31, 2010
and assumes that the value of the investment in our common stock
and in each index was $100 at December 31, 2005 and that
all dividends were reinvested.
Comparison
of Five Year Cumulative Total Return
Assumes Initial Investment of $100
Indexed
Returns For Years Ending
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December 31,
|
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2005
|
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2006
|
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2007
|
|
2008
|
|
2009
|
|
2010
|
|
Republic Services, Inc.
|
|
$
|
100.00
|
|
|
$
|
109.91
|
|
|
$
|
129.38
|
|
|
$
|
104.98
|
|
|
$
|
123.88
|
|
|
$
|
134.12
|
|
S&P 500 Stock Index
|
|
|
100.00
|
|
|
|
115.80
|
|
|
|
122.16
|
|
|
|
76.96
|
|
|
|
97.33
|
|
|
|
111.99
|
|
DJW&DS Index
|
|
|
100.00
|
|
|
|
122.88
|
|
|
|
128.50
|
|
|
|
120.68
|
|
|
|
137.37
|
|
|
|
163.17
|
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32
|
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ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following Selected Financial Data should be read in
conjunction with our consolidated financial statements and notes
thereto as of December 31, 2010 and 2009 and for each of
the three years in the period ended December 31, 2010 and
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations included
elsewhere in this
Form 10-K.
The Allied acquisition was effective December 5, 2008 and
has been accounted for as an acquisition of Allied by Republic.
The consolidated financial statements include the operating
results of Allied from the date of the acquisition, and have not
been retroactively restated to include Allieds historical
financial position or results of operations. In accordance with
the purchase method of accounting, the purchase price paid has
been allocated to the assets and liabilities acquired based upon
their estimated fair values as of the acquisition date, with the
excess of the purchase price over the net assets acquired being
recorded as goodwill.
Our shares, per share data and weighted average common and
common equivalent shares outstanding have been retroactively
adjusted for all periods prior to 2007 to reflect a
3-for-2
stock split in the form of a stock dividend that was effective
on March 16, 2007.
See Notes 1, 2, 3, 8, 9, 10 and 12 of the notes to our
consolidated financial statements in Item 8 of this
Form 10-K
for a discussion of basis of presentation, significant
accounting policies, business acquisitions and divestitures,
restructuring charges, landfill and environmental costs, debt,
income taxes and stockholders equity and their effect on
comparability of
year-to-year
data. These historical results are not necessarily indicative of
the results to be expected in the future. Amounts are in
millions, except per share amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
8,106.6
|
|
|
$
|
8,199.1
|
|
|
$
|
3,685.1
|
|
|
$
|
3,176.2
|
|
|
$
|
3,070.6
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
4,764.8
|
|
|
|
4,844.2
|
|
|
|
2,416.7
|
|
|
|
2,003.9
|
|
|
|
1,924.4
|
|
Depreciation, amortization and depletion
|
|
|
833.7
|
|
|
|
869.7
|
|
|
|
354.1
|
|
|
|
305.5
|
|
|
|
296.0
|
|
Accretion
|
|
|
80.5
|
|
|
|
88.8
|
|
|
|
23.9
|
|
|
|
17.1
|
|
|
|
15.7
|
|
Selling, general and administrative
|
|
|
858.0
|
|
|
|
880.4
|
|
|
|
434.7
|
|
|
|
313.7
|
|
|
|
315.0
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
19.1
|
|
|
|
(137.0
|
)
|
|
|
89.8
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
11.4
|
|
|
|
63.2
|
|
|
|
82.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,539.1
|
|
|
|
1,589.8
|
|
|
|
283.2
|
|
|
|
536.0
|
|
|
|
519.5
|
|
Interest expense
|
|
|
(507.4
|
)
|
|
|
(595.9
|
)
|
|
|
(131.9
|
)
|
|
|
(94.8
|
)
|
|
|
(95.8
|
)
|
Loss on extinguishment of debt
|
|
|
(160.8
|
)
|
|
|
(134.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
0.7
|
|
|
|
2.0
|
|
|
|
9.6
|
|
|
|
12.8
|
|
|
|
15.8
|
|
Other income (expense), net
|
|
|
5.4
|
|
|
|
3.2
|
|
|
|
(1.6
|
)
|
|
|
14.1
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
877.0
|
|
|
|
865.0
|
|
|
|
159.3
|
|
|
|
468.1
|
|
|
|
443.7
|
|
Provision for income taxes
|
|
|
369.5
|
|
|
|
368.5
|
|
|
|
85.4
|
|
|
|
177.9
|
|
|
|
164.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
507.5
|
|
|
|
496.5
|
|
|
|
73.9
|
|
|
|
290.2
|
|
|
|
279.6
|
|
Less: Income attributable to noncontrolling interests
|
|
|
(1.0
|
)
|
|
|
(1.5
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
506.5
|
|
|
$
|
495.0
|
|
|
$
|
73.8
|
|
|
$
|
290.2
|
|
|
$
|
279.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Republic Services, Inc.
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.38
|
|
|
$
|
1.53
|
|
|
$
|
1.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
383.0
|
|
|
|
379.7
|
|
|
|
196.7
|
|
|
|
190.1
|
|
|
|
198.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Republic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services, Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.37
|
|
|
$
|
1.51
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding
|
|
|
385.1
|
|
|
|
381.0
|
|
|
|
198.4
|
|
|
|
192.0
|
|
|
|
200.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per common share
|
|
$
|
0.7800
|
|
|
$
|
0.7600
|
|
|
$
|
0.7200
|
|
|
$
|
0.5534
|
|
|
$
|
0.4000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Other Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
$
|
1,433.7
|
|
|
$
|
1,396.5
|
|
|
$
|
512.2
|
|
|
$
|
661.3
|
|
|
$
|
511.2
|
|
Capital expenditures
|
|
|
794.7
|
|
|
|
826.3
|
|
|
|
386.9
|
|
|
|
292.5
|
|
|
|
326.7
|
|
Proceeds from sales of property and equipment
|
|
|
37.4
|
|
|
|
31.8
|
|
|
|
8.2
|
|
|
|
6.1
|
|
|
|
18.5
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
88.3
|
|
|
$
|
48.0
|
|
|
$
|
68.7
|
|
|
$
|
21.8
|
|
|
$
|
29.1
|
|
Restricted cash and marketable securities
|
|
|
172.8
|
|
|
|
240.5
|
|
|
|
281.9
|
|
|
|
165.0
|
|
|
|
153.3
|
|
Total assets
|
|
|
19,461.9
|
|
|
|
19,540.3
|
|
|
|
19,921.4
|
|
|
|
4,467.8
|
|
|
|
4,429.4
|
|
Total debt
|
|
|
6,743.6
|
|
|
|
6,962.6
|
|
|
|
7,702.5
|
|
|
|
1,567.8
|
|
|
|
1,547.2
|
|
Total stockholders equity
|
|
|
7,848.9
|
|
|
|
7,567.1
|
|
|
|
7,282.5
|
|
|
|
1,303.8
|
|
|
|
1,422.1
|
|
ITEM 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with
our audited consolidated financial statements and the notes
thereto, included elsewhere herein. This discussion may contain
forward-looking statements that anticipate results based on
managements plans that are subject to uncertainty. We
discuss in more detail various factors that could cause actual
results to differ from expectations in Item 1A. Risk
Factors.
Overview
We are the second largest provider of services in the domestic
non-hazardous solid waste industry, as measured by revenue. We
provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers
through 348 collection companies in 40 states and Puerto
Rico. We own or operate 204 transfer stations, 193 active solid
waste landfills and 76 recycling facilities. We also operate
73 landfill gas and renewable energy projects. We completed
our acquisition of Allied Waste Industries, Inc. (Allied) in
December 2008. We believe that this acquisition creates a strong
operating platform that will allow us to continue to provide
quality service to our customers and superior returns to our
stockholders.
Despite the challenging economic environment, our business has
performed well during 2010 due in large part to the
indispensable nature of our services and the scalability of our
business. Revenue for the year ended December 31, 2010
decreased by 1.1% or $92.5 million to $8,106.6 million
as compared to $8,199.1 million during the comparable
period in 2009. Due to the Allied acquisition, the DOJ required
us to divest of certain assets and related liabilities. The
resulting divestitures, as well as other divestitures in the
normal course of business, decreased revenue by 1.1% for the
year ended December 31, 2010 from the year ended
December 31, 2009. Excluding divested revenue, core revenue
for the year ended December 31, 2010 was unchanged,
consisting of a 1.6% increase in core price, 1.4% increase in
commodity price and a 0.5% increase in fuel charges, offset by a
decrease of 3.5% in core volume due to the continued weak
economy. The core price increase, together with operating
efficiencies arising from the acquisition and cost control
measures taken by our operations management to scale the
business down for lower volumes, served to moderate profit
margin declines.
During 2010, we completed the integration of Allied operations
resulting in approximately $190 million of annual run-rate
synergy savings, of which $161 million relates to operating
synergies and $29 million relates to financing synergies,
exceeding our original estimate of approximately
$150 million by 26.7%. Since the acquisition in 2008, we
have repaid $1.3 billion of net borrowings through
December 31, 2010 and have refinanced $1.5 billion of
senior notes and $677.4 million of tax-exempt financings at
lower interest rates. Free cash flow generated from operations
allowed us to increase our regular quarterly dividend 5% in the
third quarter of 2010 and in November 2010, our board of
directors approved a share repurchase program pursuant to which
we may repurchase up to $400.0 million of our outstanding
shares of common stock.
34
2011
Guidance
Our objectives for 2011 remain consistent with previous years
and focus on enhancing stockholder value by increasing returns
on invested capital and through the efficient use of free cash
flow. Despite the challenging economy, we remain committed to
continuing our broad-based pricing program across all lines of
business to recover increasing costs and to expand our operating
margins.
Our guidance is based on current economic conditions and does
not assume any improvement or deterioration in the overall
economy in 2011. Specific guidance follows:
Revenue
We expect 2011 revenue to increase by approximately 0.5 to 1.5%.
This consists of the following:
|
|
|
|
|
Increase
|
|
|
(Decrease)
|
|
Core price
|
|
1.0 to 1.5%
|
Volume
|
|
0.0 to 0.5%
|
San Mateo and Toronto contract losses
|
|
(1.5)%
|
Fuel surcharges
|
|
0.5%
|
Commodities
|
|
0.5%
|
|
|
|
Total change
|
|
0.5 to 1.5%
|
|
|
|
Approximately 50% of our annual revenue is restricted as to the
amount of certain pricing changes. Such restrictions on price
increases include but are not limited to each of the following:
|
|
|
Price changes based upon fluctuation in a specific index as
defined in the contract;
|
|
|
Fixed price increases based on stated contract terms; or
|
|
|
Price changes based on a cost plus a specific profit margin or
other measurement.
|
Of these restricted pricing arrangements, approximately 70% are
based on a consumer price index, 20% are fixed arrangements and
the remainder are based upon a cost plus or other specific
arrangement. The consumer price index varies from a single
historical stated period of time or an average of trailing
historical rates over a stated period of time. In addition, many
pricing resets lag between the measurement period and the date
the revised pricing goes into effect. As a result, current
changes in a specific index, such as the consumer price index,
may not manifest themselves in our reported pricing for several
quarters into the future.
Property
and Equipment
In 2011, we anticipate receiving $750 million of property
and equipment. Purchases of property and equipment as reflected
on our consolidated statement of cash flows for 2011 are
expected to be $870 million and represent amounts paid
during 2011 for such expenditures. The difference between
property and equipment received and purchases of property and
equipment is adjustments for approximately $120 million of
property and equipment received during 2010 but paid for in 2011.
Recent
Developments
Subsequent to December 31, 2010, we: (i) entered into
certain interest rate locks with an aggregate notional amount in
excess of $550.0 million to manage exposure to fluctuations
in interest rates in anticipation of a planned issuance of
senior notes in the first half of 2011 and (ii) financed the
maturity of our $262.9 million 5.750% senior notes
with proceeds from our Credit Facilities.
35
Business
Acquisitions and Divestitures
We make decisions to acquire, invest in or divest of businesses
based on financial and strategic considerations. Businesses
acquired are accounted for under the purchase method of
accounting and are included in our consolidated financial
statements from the date of acquisition.
Acquisition
of Allied Waste Industries, Inc.
On December 5, 2008, we acquired all the issued and
outstanding shares of Allied in a
stock-for-stock
transaction for an aggregate purchase price of
$12.1 billion, which included $5.4 billion of debt, at
fair value. We completed the integration of the operations of
the two companies and converted to one operating system during
2010.
As a condition of the Allied acquisition, the DOJ required us to
divest of certain assets and related liabilities. We completed
all of the required divestitures during 2009.
Consolidated
Results of Operations
Years
Ended December 31, 2010, 2009 and 2008
The following table summarizes our operating revenue, costs and
expenses in millions of dollars and as a percentage of our
revenue for the years ended December 31, 2010, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
8,106.6
|
|
|
|
100.0
|
%
|
|
$
|
8,199.1
|
|
|
|
100.0
|
%
|
|
$
|
3,685.1
|
|
|
|
100.0
|
%
|
Cost of operations
|
|
|
4,764.8
|
|
|
|
58.8
|
|
|
|
4,844.2
|
|
|
|
59.1
|
|
|
|
2,416.7
|
|
|
|
65.6
|
|
Depreciation, amortization and depletion of property and
equipment
|
|
|
762.2
|
|
|
|
9.4
|
|
|
|
799.1
|
|
|
|
9.7
|
|
|
|
342.3
|
|
|
|
9.3
|
|
Amortization of other intangible assets and other assets
|
|
|
71.5
|
|
|
|
0.9
|
|
|
|
70.6
|
|
|
|
0.9
|
|
|
|
11.8
|
|
|
|
0.3
|
|
Accretion
|
|
|
80.5
|
|
|
|
1.0
|
|
|
|
88.8
|
|
|
|
1.1
|
|
|
|
23.9
|
|
|
|
0.7
|
|
Selling, general and administrative
|
|
|
858.0
|
|
|
|
10.6
|
|
|
|
880.4
|
|
|
|
10.7
|
|
|
|
434.7
|
|
|
|
11.8
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
19.1
|
|
|
|
0.2
|
|
|
|
(137.0
|
)
|
|
|
(1.7
|
)
|
|
|
89.8
|
|
|
|
2.4
|
|
Restructuring charges
|
|
|
11.4
|
|
|
|
0.1
|
|
|
|
63.2
|
|
|
|
0.8
|
|
|
|
82.7
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
1,539.1
|
|
|
|
19.0
|
%
|
|
$
|
1,589.8
|
|
|
|
19.4
|
%
|
|
$
|
283.2
|
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income was $877.0 million, $865.0 million and
$159.3 million for the years ended December 31, 2010,
2009 and 2008, respectively. Net income attributable to Republic
Services, Inc. was $506.5 million, or $1.32 per diluted
share, for the year ended December 31, 2010, compared to
$495.0 million, or $1.30 per diluted share in 2009 and
$73.8 million, or $0.37 per diluted share in 2008.
During each of the three years ended December 31, 2010,
2009 and 2008, we recorded a number of gains, charges
(recoveries) and other expenses that impacted our pre-tax
income, net income attributable to Republic
36
Services, Inc. (Net Income Republic) and diluted
earnings per share. These items primarily consist of the
following (in millions, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
Net
|
|
|
Diluted
|
|
|
|
|
|
Net
|
|
|
Diluted
|
|
|
|
|
|
Net
|
|
|
Diluted
|
|
|
|
Pre-tax
|
|
|
Income -
|
|
|
Earnings
|
|
|
Pre-tax
|
|
|
Income -
|
|
|
Earnings
|
|
|
Pre-tax
|
|
|
Income -
|
|
|
Earnings
|
|
|
|
Income
|
|
|
Republic
|
|
|
per Share
|
|
|
Income
|
|
|
Republic
|
|
|
per Share
|
|
|
Income
|
|
|
Republic
|
|
|
per Share
|
|
|
As reported
|
|
$
|
877.0
|
|
|
$
|
506.5
|
|
|
$
|
1.32
|
|
|
$
|
865.0
|
|
|
$
|
495.0
|
|
|
$
|
1.30
|
|
|
$
|
159.3
|
|
|
$
|
73.8
|
|
|
$
|
0.37
|
|
Loss on extinguishment of debt
|
|
|
160.8
|
|
|
|
98.6
|
|
|
|
0.26
|
|
|
|
134.1
|
|
|
|
83.3
|
|
|
|
0.22
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Costs to achieve synergies
|
|
|
33.3
|
|
|
|
20.3
|
|
|
|
0.05
|
|
|
|
41.8
|
|
|
|
25.6
|
|
|
|
0.06
|
|
|
|
2.9
|
|
|
|
1.7
|
|
|
|
0.01
|
|
Restructuring charges
|
|
|
11.4
|
|
|
|
7.0
|
|
|
|
0.02
|
|
|
|
63.2
|
|
|
|
38.6
|
|
|
|
0.10
|
|
|
|
82.7
|
|
|
|
49.9
|
|
|
|
0.25
|
|
Remediation (recoveries) charges
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6.8
|
)
|
|
|
(4.1
|
)
|
|
|
(0.01
|
)
|
|
|
156.8
|
|
|
|
94.6
|
|
|
|
0.48
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
19.1
|
|
|
|
25.4
|
|
|
|
0.06
|
|
|
|
(137.0
|
)
|
|
|
(73.8
|
)
|
|
|
(0.19
|
)
|
|
|
89.8
|
|
|
|
54.1
|
|
|
|
0.27
|
|
Tax effect of permanent items
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31.1
|
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
|
|
$
|
1,101.6
|
|
|
$
|
657.8
|
|
|
$
|
1.71
|
|
|
$
|
960.3
|
|
|
$
|
564.6
|
|
|
$
|
1.48
|
|
|
$
|
491.5
|
|
|
$
|
305.2
|
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt. During 2010, we
refinanced $677.4 million and repaid $97.8 million of
our tax-exempt financings resulting in a loss on extinguishment
of debt of $28.5 million related to the write-off of
unamortized debt discounts and professional fees to effectuate
these transactions.
Additionally, during 2010, we issued $850.0 million of
5.00% senior notes due 2020 and $650.0 million of
6.20% senior notes due 2040 (collectively, the Notes). We
used the net proceeds from the Notes as follows:
(i) $433.7 million to redeem the 6.125% senior
notes due 2014 at a premium of 102.042% ($425.0 million
principal outstanding); (ii) $621.8 million to redeem
the 7.250% senior notes due 2015 at a premium of 103.625%
($600.0 million principal outstanding); and (iii) the
remainder to reduce amounts outstanding under our Credit
Facilities and for general corporate purposes. We incurred a
loss on extinguishment of debt of $132.1 million for
premiums paid to repurchase debt, to write-off unamortized debt
discounts and for professional fees paid to effectuate the
repurchase of the senior notes. Separately, we incurred a loss
of $0.2 million in 2010 related to the write-off of
unamortized deferred issuance costs associated with the accounts
receivable securitization program.
During 2009, we issued $1,250.0 million of senior notes,
the proceeds of which were primarily used to purchase and retire
outstanding senior notes maturing in 2010 through 2034.
Additionally, we repurchased certain of our outstanding senior
notes in the secondary market.
Costs to achieve synergies. During the year ended
December 31, 2010, we incurred $33.3 million of
incremental costs to achieve our synergy plan that are recorded
in selling, general and administrative expenses versus
$41.8 million and $2.9 million for the comparable 2009
and 2008 periods, respectively. These incremental costs
primarily relate to a synergy incentive plan as well as other
integration costs. In 2011, we do not expect to incur any
additional costs to achieve synergies.
Restructuring charges. During the year ended
December 31, 2010, we incurred $11.4 million of
restructuring and integration charges related to the Allied
acquisition versus $63.2 million and $82.7 million for
the comparable 2009 and 2008 periods, respectively. These
charges consist of severance and other employee termination and
relocation benefits as well as consulting and professional fees.
Substantially all of these charges were recorded in our
corporate segment. In 2011, we do not expect to incur any
additional restructuring charges related to the Allied
acquisition.
Remediation (recoveries) charges. During 2009, we
recovered $(12.0) million of insurance proceeds related to
remediation costs at the Countywide facility, which were
partially offset by additional charges of $5.2 million at
our closed disposal facility in California. Remediation and
related charges of $156.8 million during 2008 were
attributable to changes to our cost estimates at the Countywide
facility, our closed disposal facility in California, and the
Sunrise Landfill in Nevada.
37
Loss (gain) on disposition of assets and impairments,
net. During the year ended December 31, 2010, we
recorded a net loss on the disposition of assets of
$4.0 million as a result of business divestures, including
transaction costs. Additionally, during 2010 we recorded an
impairment loss of $15.1 million related to certain
long-lived assets that are held and used.
During 2009, we recorded net gain on disposition of assets, net
of costs to sell of $(137.0) million related to the
mandatory disposition of assets as required by DOJ as well as
discretionary dispositions. During 2008, we recorded asset
impairments of $89.8 million primarily related to the
Countywide facility, our former corporate office in Florida and
impairment on sales of DOJ required divestitures.
Tax effect of permanent items in adjustments. During
2008, our effective tax rate was impacted by several expenses
associated with the acquisition that were not tax deductible.
In addition to the items discussed above, we incurred the
following charges during the year ended December 31, 2008:
|
|
|
|
|
Conforming adjustments for accounting
policies. During 2008, we recorded bad debt expense of
$14.2 million related to conforming Allieds
methodology for recording the allowance for doubtful accounts
for accounts receivable with our methodology and
$5.4 million to provide for specific bankruptcy exposures.
|
|
|
|
Legal reserves. During 2008, we incurred
$24.3 million of charges related to our estimates of the
outcome of various legal matters.
|
|
|
|
Landfill amortization. During 2008, we recorded
$2.8 million of incremental landfill amortization expense
as compared to the amortization expense Allied would have
recorded for the same period.
|
We believe that the presentation of adjusted pre-tax income,
adjusted net income attributable to Republic Services, Inc. and
adjusted diluted earnings per share, which are not measures
determined in accordance with U.S. GAAP, provide an
understanding of operational activities before the financial
impact of certain items. We use these measures, and believe
investors will find them helpful, in understanding the ongoing
performance of our operations separate from items that have a
disproportionate impact on our results for a particular period.
Comparable charges and costs have been incurred in prior
periods, and similar types of adjustments can reasonably be
expected to be recorded in future periods. Our definition of
adjusted pre-tax income, adjusted net income attributable to
Republic Services, Inc. and adjusted diluted earnings per share
may not be comparable to similarly titled measures presented by
other companies.
These gains and charges affected our consolidated statements of
income for the years ended December 31, 2010, 2009 and
2008, as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
$
|
-
|
|
|
$
|
(6.8
|
)
|
|
$
|
153.9
|
|
Selling, general and administrative
|
|
|
33.3
|
|
|
|
41.8
|
|
|
|
4.8
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
19.1
|
|
|
|
(137.0
|
)
|
|
|
89.8
|
|
Restructuring charges
|
|
|
11.4
|
|
|
|
63.2
|
|
|
|
82.7
|
|
Loss on extinguishment of debt
|
|
|
160.8
|
|
|
|
134.1
|
|
|
|
-
|
|
Other (income) expense, net
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charges, net
|
|
$
|
224.6
|
|
|
$
|
95.3
|
|
|
$
|
332.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
We generate revenue primarily from our solid waste collection
operations. Our remaining revenue is from other services,
including transfer stations, landfill disposal and recycling.
Our revenue from collection operations consists of fees we
receive from commercial, industrial, municipal and residential
customers. Our
38
residential and commercial collection operations in some markets
are based on long-term contracts with municipalities. Certain of
our municipal contracts have annual price escalation clauses
that are tied to changes in an underlying base index such as the
consumer price index. We generally provide commercial and
industrial collection services to customers under contracts with
terms up to three years. Our transfer station, landfill and, to
a lesser extent, our material recovery facilities generate
revenue 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. Other revenue consists primarily of
revenue from sales of recyclable materials and revenue from
National Accounts. National Accounts revenue included in other
revenue represents the portion of revenue generated from
nationwide contracts in markets outside our operating areas,
and, as such, the associated waste handling services are
subcontracted to local operators. Consequently, substantially
all of this revenue is offset with related subcontract costs,
which are recorded in cost of operations.
The following table reflects our revenue by service line for the
respective years ended December 31 (in millions of dollars and
as a percentage of our revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Collection:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
2,173.9
|
|
|
|
26.8
|
%
|
|
$
|
2,187.0
|
|
|
|
26.7
|
%
|
|
$
|
966.0
|
|
|
|
26.2
|
%
|
Commercial
|
|
|
2,486.8
|
|
|
|
30.7
|
|
|
|
2,553.4
|
|
|
|
31.1
|
|
|
|
1,161.4
|
|
|
|
31.5
|
|
Industrial
|
|
|
1,482.9
|
|
|
|
18.3
|
|
|
|
1,541.4
|
|
|
|
18.8
|
|
|
|
711.4
|
|
|
|
19.3
|
|
Other
|
|
|
29.6
|
|
|
|
0.4
|
|
|
|
26.9
|
|
|
|
0.3
|
|
|
|
23.2
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collection
|
|
|
6,173.2
|
|
|
|
76.2
|
|
|
|
6,308.7
|
|
|
|
76.9
|
|
|
|
2,862.0
|
|
|
|
77.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer and disposal
|
|
|
2,998.9
|
|
|
|
|
|
|
|
3,113.5
|
|
|
|
|
|
|
|
1,343.4
|
|
|
|
|
|
Less: Intercompany
|
|
|
(1,521.6
|
)
|
|
|
|
|
|
|
(1,564.1
|
)
|
|
|
|
|
|
|
(683.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer and disposal, net
|
|
|
1,477.3
|
|
|
|
18.2
|
|
|
|
1,549.4
|
|
|
|
18.9
|
|
|
|
659.9
|
|
|
|
17.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of materials
|
|
|
307.1
|
|
|
|
3.8
|
|
|
|
181.2
|
|
|
|
2.2
|
|
|
|
121.1
|
|
|
|
3.3
|
|
Other non-core
|
|
|
149.0
|
|
|
|
1.8
|
|
|
|
159.8
|
|
|
|
2.0
|
|
|
|
42.1
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
456.1
|
|
|
|
5.6
|
|
|
|
341.0
|
|
|
|
4.2
|
|
|
|
163.2
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
8,106.6
|
|
|
|
100.0
|
%
|
|
$
|
8,199.1
|
|
|
|
100.0
|
%
|
|
$
|
3,685.1
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects changes in our core adjusted
revenue for the years ended December 31, 2010, 2009 and
2008. We have presented the components of our revenue changes
for the year ended December 31, 2009 assuming the Allied
acquisition occurred on January 1, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Core price
|
|
|
1.6
|
%
|
|
|
3.0
|
%
|
|
|
4.4
|
%
|
Fuel surcharges
|
|
|
0.5
|
|
|
|
(2.5
|
)
|
|
|
1.8
|
|
Commodities
|
|
|
1.4
|
|
|
|
(1.7
|
)
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total price
|
|
|
3.5
|
|
|
|
(1.2
|
)
|
|
|
6.3
|
|
Volume
|
|
|
(3.5
|
)
|
|
|
(9.5
|
)
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total internal growth
|
|
|
-
|
|
|
|
(10.7
|
)
|
|
|
2.5
|
|
Acquisitions/divestitures, net
|
|
|
(1.1
|
)
|
|
|
(1.4
|
)
|
|
|
13.5
|
|
Intercompany eliminations
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1.1
|
)%
|
|
|
(12.4
|
)%
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany revenue relates to prior year transactions between
Republic and Allied that would have been eliminated if the
companies had merged on January 1, 2008. Certain prior year
amounts have been reclassified to conform to the current
years presentation.
39
Revenue
2010 versus 2009
The decrease in revenue in 2010 compared to 2009 is due to the
following:
|
|
|
|
|
Changes in core price increased revenue by 1.6% in 2010 compared
to 3.0% in 2009. The lower core price increase in 2010 compared
to 2009 is due primarily to the lower inflationary environment
which limits our price increases on index based contracts,
partially offset by our continued broad-based pricing
initiatives.
|
|
|
|
Changes in fuel surcharges increased revenue by 0.5% in 2010
compared to a decrease of 2.5% in 2009. Revenue benefited from
fuel surcharges resulting from higher fuel costs that were
passed along to our customers in 2010. The increase in fuel
surcharges in 2010 compared to 2009 is directly attributable to
an increase in fuel costs.
|
|
|
|
Changes in commodity prices increased revenue by 1.4% in 2010
compared to a decrease of 1.7% in 2009. Revenue benefited from
higher commodity prices for recovered materials in 2010 compared
to 2009.
|
|
|
|
Changes in core volume decreased revenue by 3.5% in 2010
compared to 9.5% in 2009. During 2010, we continued to
experience negative core growth in all lines of business,
especially in temporary roll-off within our industrial
collection business in the first half of 2010. Core volume
continued to decline throughout 2010, however, at a lower rate
than earlier in the year or in 2009.
|
|
|
|
Changes in acquisitions and divestitures, net decreased revenue
by 1.1% in 2010 compared to 1.4% in 2009. The DOJ required us to
divest of certain assets and related liabilities in connection
with the Allied acquisition. The resulting divestitures, as well
as other divestitures in the normal course of business,
decreased revenue by 1.1% in 2010 compared to 2009.
|
Revenue
2009 versus 2008
The increase in revenue in 2009 compared to 2008 is due to the
Allied acquisition in December 2008. Additionally:
|
|
|
|
|
Changes in core price increased revenue by 3.0% and 4.4% in 2009
and 2008, respectively, due to our broad-based pricing
initiative which we started during 2003.
|
|
|
|
Changes in fuel surcharges decreased revenue by 2.5% in 2009
compared to an increase of 1.8% in 2008. Revenue benefited from
fuel surcharges resulting from high fuel costs that were passed
along to our customers during 2008. The decline in fuel
surcharges in 2009 compared to 2008 is directly attributable to
a decline in fuel costs.
|
|
|
|
Changes in commodity prices decreased revenue by 1.7% in 2009
compared to an increase of 0.1% in 2008. During 2009, lower
market demand resulted in lower pricing for the commodities we
sell.
|
|
|
|
Changes in core volume decreased revenue by 9.5% and 3.8% in
2009 and 2008, respectively. During 2009, we experienced
negative core volume growth in all lines of business, especially
in our industrial collection and landfill businesses, as a
result of the challenging economic environment.
|
Cost
of Operations
Cost of operations includes labor and related benefits, which
consists of salaries and wages, health and welfare benefits,
incentive compensation and payroll taxes. It also includes
transfer and disposal costs representing tipping fees paid to
third party disposal facilities and transfer stations;
maintenance and repairs relating to our vehicles, equipment and
containers, including related labor and benefit costs;
transportation and subcontractor costs, which include costs for
independent haulers who transport our waste to disposal
facilities and costs for local operators who provide waste
handling services associated with our national accounts in
markets outside our standard operating areas; fuel, which
includes the direct cost of fuel used by our vehicles, net of
fuel credits; disposal franchise fees and taxes consisting of
landfill taxes, municipal franchise fees, host community fees
and royalties; landfill operating costs, which includes landfill
accretion, financial assurance, leachate
40
disposal and other landfill maintenance costs; risk management,
which includes casualty insurance premiums and claims; cost of
goods sold, which includes material costs paid to suppliers
associated with recycling commodities; and other, which includes
expenses such as facility operating costs, equipment rent and
gains or losses on sale of assets used in our operations.
The following table summarizes the major components of our cost
of operations for the years ended December 31, 2010, 2009
and 2008 (in millions of dollars and as a percentage of our
revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Labor and related benefits
|
|
$
|
1,534.4
|
|
|
|
18.9
|
%
|
|
$
|
1,561.0
|
|
|
|
19.0
|
%
|
|
$
|
707.0
|
|
|
|
19.2
|
%
|
Transfer and disposal costs
|
|
|
665.7
|
|
|
|
8.2
|
|
|
|
707.3
|
|
|
|
8.6
|
|
|
|
348.7
|
|
|
|
9.5
|
|
Maintenance and repairs
|
|
|
609.7
|
|
|
|
7.5
|
|
|
|
649.2
|
|
|
|
7.9
|
|
|
|
281.8
|
|
|
|
7.6
|
|
Transportation and subcontract costs
|
|
|
465.4
|
|
|
|
5.7
|
|
|
|
490.5
|
|
|
|
6.0
|
|
|
|
244.4
|
|
|
|
6.6
|
|
Fuel
|
|
|
407.6
|
|
|
|
5.0
|
|
|
|
349.8
|
|
|
|
4.3
|
|
|
|
235.3
|
|
|
|
6.4
|
|
Franchise fees and taxes
|
|
|
395.8
|
|
|
|
4.9
|
|
|
|
403.7
|
|
|
|
4.9
|
|
|
|
139.0
|
|
|
|
3.8
|
|
Landfill operating costs
|
|
|
136.2
|
|
|
|
1.7
|
|
|
|
117.8
|
|
|
|
1.4
|
|
|
|
190.5
|
|
|
|
5.2
|
|
Risk management
|
|
|
171.6
|
|
|
|
2.1
|
|
|
|
212.0
|
|
|
|
2.6
|
|
|
|
112.7
|
|
|
|
3.0
|
|
Cost of goods sold
|
|
|
103.9
|
|
|
|
1.3
|
|
|
|
63.3
|
|
|
|
0.8
|
|
|
|
50.3
|
|
|
|
1.4
|
|
Other
|
|
|
274.5
|
|
|
|
3.5
|
|
|
|
289.6
|
|
|
|
3.6
|
|
|
|
107.0
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of operations
|
|
$
|
4,764.8
|
|
|
|
58.8
|
%
|
|
$
|
4,844.2
|
|
|
|
59.1
|
%
|
|
$
|
2,416.7
|
|
|
|
65.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cost categories shown above may change from time to time and
may not be comparable to similarly titled categories used by
other companies. As such, care should be taken when comparing
our cost of operations by cost component to that of other
companies.
During the years ended December 31, 2010, 2009 and 2008,
approximately 67%, 68% and 58%, respectively, of the total waste
volume that we collected was disposed at landfill sites that we
own or operate (internalization). This increase in
internalization from 2008 to 2009 is due to a higher
concentration of integrated hauling and landfill operations
acquired in the Allied acquisition.
Cost of
Operations 2010 versus 2009
Our cost of operations, as a percentage of revenue, decreased
0.3% for the year ended December 31, 2010 compared to the
year ended December 31, 2009, primarily as a result of the
following:
|
|
|
|
|
Transfer and disposal, maintenance and repair, and
transportation and subcontract costs continue to decrease versus
the comparable 2009 period due to lower waste volumes and cost
control measures.
|
|
|
|
Risk management costs decreased during 2010 as we continued to
experience favorable actuarial developments primarily
attributable to our continued focus on safety.
|
Partially offset by:
|
|
|
|
|
Fuel expenses increased by $57.8 million, or 16.5%, year
over year. Average fuel costs per gallon for the year ended
December 31, 2010 were $2.99, an increase of $0.52 or
approximately 21% from the average price of $2.47 for the year
ended December 31, 2009.
|
|
|
|
Landfill operating costs increased by $18.4 million, or
15.6%, year over year. During the year ended December 31,
2009, we recovered $12.0 million of insurance proceeds
related to remediation costs at the Countywide facility which
reduced our landfill operating costs during that period. There
were no such recoveries during the comparable 2010 period. The
remainder of the increase in landfill operating costs is due to
adjustments recorded at several remediation reserve sites.
|
41
Cost of
Operations 2009 versus 2008
Our cost of operations, as a percentage of revenue, improved
6.5% to 59.1% for the year ended December 31, 2009 compared
to 65.6% for the year ended December 31, 2008, primarily as
a result of the following:
|
|
|
|
|
Transfer and disposal costs decreased as a percentage of revenue
primarily due to lower fuel and disposal costs. In addition,
transfer and disposal costs were also favorably impacted by
increased internalization of our waste streams into landfills
either owned or operated by us.
|
|
|
|
Fuel costs decreased approximately 35% from an average of $3.80
per gallon during 2008 to an average of $2.47 per gallon during
2009.
|
|
|
|
Landfill operating costs decreased 3.8% as a percentage of
revenue, primarily due to charges we recorded during 2008
consisting of $98.0 million related to estimated costs to
comply with Final Findings and Orders issued by the Ohio
Environmental Protection Agency and the Agreed Order on Consent
issued by the Environmental Protection Agency in response to
environmental conditions at the Countywide facility,
$21.9 million related to environmental conditions at our
closed disposal facility in California and $34.0 million
related to environmental conditions at the Sunrise Landfill.
These charges increased our 2008 cost of operations as a
percentage of revenue by 4.2% for the year ended
December 31, 2008.
|
|
|
|
Other cost of operations increased 0.7% as a percentage of
revenue primarily due to increases in occupancy and facility
expenses as well as equipment rental expense.
|
Depreciation,
Amortization and Depletion of Property and
Equipment
The following table summarizes depreciation, amortization and
depletion of property and equipment for the years ended
December 31, 2010, 2009 and 2008 (in millions of dollars
and as a percentage of revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Depreciation and amortization of property and equipment
|
|
$
|
511.6
|
|
|
|
6.3
|
%
|
|
$
|
520.6
|
|
|
|
6.3
|
%
|
|
$
|
222.6
|
|
|
|
6.0
|
%
|
Landfill depletion and amortization
|
|
|
250.6
|
|
|
|
3.1
|
|
|
|
278.5
|
|
|
|
3.4
|
|
|
|
119.7
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and depletion expense
|
|
$
|
762.2
|
|
|
|
9.4
|
%
|
|
$
|
799.1
|
|
|
|
9.7
|
%
|
|
$
|
342.3
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
Amortization and Depletion of Property and Equipment
2010 versus 2009
The decrease in landfill depletion and amortization in aggregate
dollars and as a percentage of revenue is due to a reduction of
amortization expense associated with lower landfill volumes and
assets divested as required by the DOJ. Depreciation and
amortization of property and equipment, as a percentage of
revenue, has remained consistent year over year.
Depreciation,
Amortization and Depletion of Property and Equipment
2009 versus 2008
The increase in depreciation, amortization and depletion
expenses as a percentage of revenue is primarily due to
increases in depreciation and depletion expense associated with
equipment and landfills acquired from Allied and recorded at
their fair values. We allocated $2.6 billion of fair value
to the landfills we acquired from Allied. The increase in the
landfill depletion and amortization in aggregate dollars is
directly attributable to this allocation of fair value.
Amortization
of Other Intangible and Other Assets
Expenses for amortization of intangible and other assets were
$71.5 million, $70.6 million and $11.8 million,
or, as a percentage of revenue, 0.9%, 0.9% and 0.3% for the
years ended December 31, 2010, 2009 and 2008, respectively.
Our other intangible and other assets primarily relate to
customer lists, franchise agreements, municipal contracts, trade
names, favorable lease assets and to a lesser extent non-compete
agreements. The
42
increase in such expenses in aggregate dollars and as a
percentage of revenue for the year ended December 31, 2009
versus 2008 is due to the amortization of intangible assets
recorded as a result of the Allied acquisition.
Accretion
Expense
Accretion expense was $80.5 million, $88.8 million and
$23.9 million, or, as a percentage of revenue, 1.0%, 1.1%
and 0.7% for the years ended December 31, 2010, 2009 and
2008, respectively. The decrease in accretion expense in 2010
compared to 2009 is primarily due to the decrease in our
weighted average credit-adjusted risk-free rate used to accrete
new layers of our capping, closure and post-closure liabilities
and the divestiture of several landfills. The increase in such
expenses in aggregate dollars in 2009 versus 2008 is primarily
due to an increase in asset retirement obligations associated
with the Allied acquisition. The asset retirement obligations
acquired from Allied are recorded using a discount rate of
9.75%, which is higher than the credit-adjusted, risk-free rate
we have used historically to record such obligations.
Selling,
General and Administrative Expenses
Selling, general and administrative expenses include salaries,
health and welfare benefits and incentive compensation for
corporate and field general management, field support functions,
sales force, accounting and finance, legal, management
information systems and clerical and administrative departments.
Other expenses include rent and office costs, fees for
professional services provided by third parties, marketing,
investor and community relations, directors and
officers insurance, general employee relocation, travel,
entertainment and bank charges, but excludes any such amounts
recorded as restructuring charges.
The following table provides the components of our selling,
general and administrative costs for the three years ended
December 31, 2010, 2009 and 2008 (in millions of dollars
and as a percentage of revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Salaries
|
|
$
|
538.6
|
|
|
|
6.6
|
%
|
|
$
|
548.1
|
|
|
|
6.7
|
%
|
|
$
|
237.6
|
|
|
|
6.4
|
%
|
Provision for doubtful accounts
|
|
|
23.6
|
|
|
|
0.3
|
|
|
|
27.3
|
|
|
|
0.3
|
|
|
|
36.5
|
|
|
|
1.0
|
|
Costs to achieve synergies
|
|
|
33.3
|
|
|
|
0.4
|
|
|
|
41.6
|
|
|
|
0.5
|
|
|
|
2.9
|
|
|
|
0.1
|
|
Other
|
|
|
262.5
|
|
|
|
3.3
|
|
|
|
263.4
|
|
|
|
3.2
|
|
|
|
157.7
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total selling, general and administrative expenses
|
|
$
|
858.0
|
|
|
|
10.6
|
%
|
|
$
|
880.4
|
|
|
|
10.7
|
%
|
|
$
|
434.7
|
|
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cost categories shown above may change from time to time and
may not be comparable to similarly titled categories used by
other companies. As such, care should be taken when comparing
our selling, general and administrative expenses by cost
component to that of other companies.
Selling,
General and Administrative Expenses 2010 versus
2009
Selling, general and administrative expenses decreased
$22.4 million for the year ended December 31, 2010
compared to 2009 and, as a percentage of revenue, remained
consistent with 2009. Selling, general and administrative
expenses includes an accrual for synergy bonus related to the
Allied acquisition of approximately $33 million in 2010 and
$34 million in 2009. In 2011, we do not expect to incur any
additional costs to achieve synergies.
Selling,
General and Administrative Expenses 2009 versus
2008
Selling, general and administrative expenses in 2009 include
$41.6 million of costs to achieve synergies related to the
Allied acquisition. These costs primarily consist of a synergy
related bonus of approximately $34 million accrued in 2009.
For the year ended December 31, 2008, we recorded
$14.2 million of bad debt expense related to conforming
Allieds methodology for recording the allowance for
doubtful accounts on accounts receivable with ours and
$5.4 million to provide for specific bankruptcy exposures.
We also recorded $24.3 million of settlement
43
charges related to our estimates of the outcome of various legal
matters and a charge of $2.9 million related to the synergy
related bonus.
Excluding charges for synergies, conforming accounting policies,
bankruptcies and certain legal matters, selling, general and
administrative expenses for the years ended December 31,
2010, 2009 and 2008 would have been $824.7 million,
$838.8 million and $387.9 million, or 10.2%, 10.2% and
10.5% as a percentage of revenue, respectively. With the
completion of the integration of Allied, our goal is to maintain
our selling, general and administrative costs at no more than
10.0% of revenue, which we believe is appropriate given our
existing business platform.
Loss
(gain) on Disposition of Assets and Impairments,
Net
Loss (gain) on disposition of assets and impairments, net of
costs to sell was $19.1 million, $(137.0) million and
$89.8 million for the years ended December 31, 2010,
2009 and 2008, respectively.
We divested certain assets throughout 2010 resulting in a net
loss on disposition of assets of $4.0 million, including
transaction costs. Additionally, we recorded an impairment loss
of $15.1 million related to certain long-lived assets that
are held and used.
During the year ended December 31, 2009, we divested of
certain assets as required by the DOJ as a condition of the
Allied acquisition and recorded a gain of $153.5 million.
Offsetting this gain was a loss of $10.2 million recognized
in connection with the divestiture of a hauling operation in
Miami-Dade County, Florida as well as $7.1 million of
additional asset impairments, primarily related to our former
corporate offices and other assets sold or held for sale.
During the year ended December 31, 2008, we recorded a
charge of $75.9 million related to the impairment of the
Countywide facility. This impairment relates to the anticipated
loss of permitted airspace associated with complying with
F&Os issued by the OEPA and the AOC issued by the EPA based
upon recent negotiations with the OEPA and the EPA. Also during
the year ended December 31, 2008, we recorded
$7.8 million of other impairment charges, consisting
primarily of charges related to our former corporate office in
South Florida.
Restructuring
Charges
During the year ended December 31, 2010, we incurred
$11.4 million of restructuring and integration charges
related to the integration of Allied, which consisted of charges
and adjustments for severance, employee termination and
relocation benefits. The remainder of the charges primarily
related to consulting and professional fees. Substantially all
of these charges were recorded in our corporate entities
segment. We do not expect to incur any significant additional
charges with respect to this plan. During the years ended
December 31, 2009 and 2008, we incurred $63.2 million
and $82.7 million, respectively, of such charges.
Interest
Expense
The following table provides the components of interest expense,
including accretion of debt discounts and accretion of discounts
primarily associated with environmental and self-funded risk
insurance liabilities assumed in the Allied acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest expense on debt and capital lease obligations
|
|
$
|
413.2
|
|
|
$
|
453.5
|
|
|
$
|
123.9
|
|
Accretion of debt discounts
|
|
|
52.4
|
|
|
|
92.1
|
|
|
|
10.1
|
|
Accretion of remediation and risk reserves
|
|
|
48.1
|
|
|
|
58.1
|
|
|
|
0.5
|
|
Less: capitalized interest
|
|
|
(6.3
|
)
|
|
|
(7.8
|
)
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
507.4
|
|
|
$
|
595.9
|
|
|
$
|
131.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in interest expense during the year ended
December 31, 2010 versus 2009 is due to refinancing our
higher interest rate debt during 2010 and in the second half of
2009 and the net reduction of borrowings.
44
The increase in interest expense during the year ended
December 31, 2009 versus 2008 is primarily due to the
additional debt we assumed as a result of the Allied
acquisition. Interest expense also increased as a result of
accreting discounts applied to debt or imputing interest on
environmental and risk reserves assumed from Allied.
The debt we assumed from Allied was recorded at fair value as of
December 5, 2008. We recorded a discount of
$624.3 million, which is amortized as interest expense over
the applicable terms of the related debt instruments or
written-off upon refinancing. The remaining unamortized
discounts on the outstanding debt assumed from Allied as of
December 31, 2010 are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
|
|
|
|
Amortization
|
|
|
|
Remaining
|
|
|
Over the Next
|
|
|
|
Discount
|
|
|
Twelve Months
|
|
|
$400.0 million 5.750% senior notes due February 2011
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
$275.0 million 6.375% senior notes due April 2011
|
|
|
1.8
|
|
|
|
1.8
|
|
$600.0 million 7.125% senior notes due May 2016
|
|
|
64.5
|
|
|
|
9.7
|
|
$750.0 million 6.875% senior notes due June 2017
|
|
|
86.1
|
|
|
|
10.4
|
|
$99.5 million 9.250% debentures due May 2021
|
|
|
6.1
|
|
|
|
0.4
|
|
$360.0 million 7.400% debentures due September 2035
|
|
|
92.4
|
|
|
|
0.9
|
|
Other, maturing 2014 through 2027
|
|
|
21.9
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
274.0
|
|
|
$
|
27.0
|
|
|
|
|
|
|
|
|
|
|
Loss
on Extinguishment of Debt
Loss on early extinguishment of debt was $160.8 million for
the year ended December 31, 2010, resulting from the
following:
|
|
|
|
|
During 2010, we refinanced $677.4 million and repaid
$97.8 million of our tax-exempt financings resulting in a
loss on extinguishment of debt of $28.5 million related to
charges for unamortized debt discounts and professional fees
paid to effectuate these transactions.
|
|
|
|
In March 2010, we issued $850.0 million of
5.000% senior notes due 2020 and $650.0 million of
6.200% senior notes due 2040. We used the net proceeds from
these senior notes as follows: (i) $433.7 million to
redeem the 6.125% senior notes due 2014 at a premium of
102.042% ($425.0 million principal outstanding);
(ii) $621.8 million to redeem the 7.250% senior
notes due 2015 at a premium of 103.625% ($600.0 million
principal outstanding); and (iii) the remainder to reduce
amounts outstanding under our Credit Facilities and for general
corporate purposes. We incurred a loss of $132.1 million
for premiums paid to repurchase debt, to write-off unamortized
debt discounts and for professional fees paid to effectuate the
repurchase of the senior notes.
|
|
|
|
Additionally in March 2010, we repaid all borrowings and
terminated our accounts receivable securitization program with
two financial institutions that allowed us to borrow up to
$300.0 million on a revolving basis under loan agreements
secured by receivables. We recorded a loss on extinguishment of
debt of $0.2 million related to the charges for unamortized
deferred issuance costs associated with this program.
|
Loss on early extinguishment of debt was $134.1 million for
the year ended December 31, 2009, resulting from the
following:
|
|
|
|
|
In September 2009, we issued $650.0 million of
5.500% senior notes due 2019 with an unamortized discount
of $4.5 million at December 31, 2009. A portion of the
net proceeds from these notes was used to purchase and retire
$325.5 million of our outstanding senior notes maturing in
2010 and 2011.
|
45
|
|
|
|
|
In November 2009, we issued $600.0 million of
5.250% Senior Notes due 2021. The net proceeds from these
notes as well as draws on our revolver were used to purchase and
retire our 7.875% Senior Notes due 2013 (redeemed at
102.625%), our 7.375% Senior Notes due 2014 (redeemed at
103.688%), and our 4.250% Senior Subordinated Convertible
Debentures due 2034 (redeemed at par).
|
|
|
|
In addition, during 2009 we repurchased and retired certain of
our senior notes in the secondary market.
|
In the future we may chose to voluntarily retire certain
portions of our outstanding debt before their maturity using
cash from operations or additional borrowings. We also may
explore opportunities in capital markets to fund redemptions.
The early extinguishment of debt may result in an impairment
charge in the period in which the debt is repurchased and
retired.
Income
Taxes
Our provision for income taxes was $369.5 million,
$368.5 million and $85.4 million for the years ended
December 31, 2010, 2009 and 2008, respectively. Our
effective income tax rate was 42.1%, 42.6% and 53.6% for the
years ended December 31, 2010, 2009 and 2008, respectively.
Our effective income tax rate is adversely impacted by expenses
incurred which are non-deductible for tax, disposition of assets
that have little or no basis for tax, and accruals for penalties
and interest on uncertain tax positions.
In the future we may choose to divest certain operating assets
that have little or no tax basis, thereby resulting in a higher
taxable gain than otherwise would be recognized. The higher
taxable gain will increase our effective rate in the quarter in
which the divestiture is consummated.
Reportable
Segments
Our operations are managed and reviewed through four geographic
regions that we designate as our reportable segments. Summarized
financial information concerning our reportable segments for the
years ended December 31, 2010, 2009 and 2008 is shown in
the following table (in millions of dollars and as a percentage
of revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depletion and
|
|
|
Amortization
|
|
|
|
|
|
Gain (Loss) on
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion Before
|
|
|
Expense
|
|
|
Depreciation,
|
|
|
Disposition of
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for
|
|
|
for Asset
|
|
|
Amortization,
|
|
|
Assets, Net
|
|
|
Operating
|
|
|
|
|
|
|
Net
|
|
|
Asset Retirement
|
|
|
Retirement
|
|
|
Depletion and
|
|
|
and Asset
|
|
|
Income
|
|
|
Operating
|
|
|
|
Revenue
|
|
|
Obligations
|
|
|
Obligations
|
|
|
Accretion
|
|
|
Impairment
|
|
|
(Loss)
|
|
|
Margin
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
2,075.5
|
|
|
$
|
208.8
|
|
|
$
|
(3.3
|
)
|
|
$
|
205.5
|
|
|
$
|
(15.0
|
)
|
|
$
|
488.4
|
|
|
|
23.5
|
%
|
Midwestern
|
|
|
1,766.9
|
|
|
|
214.2
|
|
|
|
(10.6
|
)
|
|
|
203.6
|
|
|
|
9.3
|
|
|
|
402.0
|
|
|
|
22.8
|
|
Southern
|
|
|
1,977.3
|
|
|
|
225.3
|
|
|
|
(3.8
|
)
|
|
|
221.5
|
|
|
|
1.8
|
|
|
|
482.8
|
|
|
|
24.4
|
|
Western
|
|
|
2,188.6
|
|
|
|
224.2
|
|
|
|
(6.0
|
)
|
|
|
218.2
|
|
|
|
(0.9
|
)
|
|
|
521.2
|
|
|
|
23.8
|
|
Corporate entities
|
|
|
98.3
|
|
|
|
51.9
|
|
|
|
13.5
|
|
|
|
65.4
|
|
|
|
(14.3
|
)
|
|
|
(355.3
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,106.6
|
|
|
$
|
924.4
|
|
|
$
|
(10.2
|
)
|
|
$
|
914.2
|
|
|
$
|
(19.1
|
)
|
|
$
|
1,539.1
|
|
|
|
19.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
2,115.0
|
|
|
$
|
215.5
|
|
|
$
|
(1.2
|
)
|
|
$
|
214.3
|
|
|
$
|
4.0
|
|
|
$
|
483.0
|
|
|
|
22.8
|
%
|
Midwestern
|
|
|
1,777.0
|
|
|
|
227.3
|
|
|
|
(1.4
|
)
|
|
|
225.9
|
|
|
|
27.1
|
|
|
|
367.3
|
|
|
|
20.7
|
|
Southern
|
|
|
2,046.2
|
|
|
|
241.9
|
|
|
|
(8.8
|
)
|
|
|
233.1
|
|
|
|
29.8
|
|
|
|
522.9
|
|
|
|
25.6
|
|
Western
|
|
|
2,170.0
|
|
|
|
228.5
|
|
|
|
6.4
|
|
|
|
234.9
|
|
|
|
88.1
|
|
|
|
582.0
|
|
|
|
26.8
|
|
Corporate entities
|
|
|
90.9
|
|
|
|
50.4
|
|
|
|
(0.1
|
)
|
|
|
50.3
|
|
|
|
(12.0
|
)
|
|
|
(365.4
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,199.1
|
|
|
$
|
963.6
|
|
|
$
|
(5.1
|
)
|
|
$
|
958.5
|
|
|
$
|
137.0
|
|
|
$
|
1,589.8
|
|
|
|
19.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
989.9
|
|
|
$
|
89.6
|
|
|
$
|
5.5
|
|
|
$
|
95.1
|
|
|
$
|
(82.0
|
)
|
|
$
|
(2.0
|
)
|
|
|
(0.2
|
)%
|
Midwestern
|
|
|
771.7
|
|
|
|
97.7
|
|
|
|
(0.9
|
)
|
|
|
96.8
|
|
|
|
(0.8
|
)
|
|
|
127.6
|
|
|
|
16.5
|
|
Southern
|
|
|
970.2
|
|
|
|
94.3
|
|
|
|
0.5
|
|
|
|
94.8
|
|
|
|
-
|
|
|
|
184.8
|
|
|
|
19.0
|
|
Western
|
|
|
942.6
|
|
|
|
84.7
|
|
|
|
(5.0
|
)
|
|
|
79.7
|
|
|
|
(1.2
|
)
|
|
|
155.1
|
|
|
|
16.5
|
|
Corporate entities
|
|
|
10.7
|
|
|
|
11.1
|
|
|
|
0.5
|
|
|
|
11.6
|
|
|
|
(5.8
|
)
|
|
|
(182.3
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,685.1
|
|
|
$
|
377.4
|
|
|
$
|
0.6
|
|
|
$
|
378.0
|
|
|
$
|
(89.8
|
)
|
|
$
|
283.2
|
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
Corporate entities include legal, tax, treasury, information
technology, risk management, human resources, corporate accounts
and other typical administrative functions. National Accounts
revenue included in corporate entities represents the portion of
revenue generated from nationwide contracts in markets outside
our operating areas, and, as such, the associated waste handling
services are subcontracted to local operators. Consequently,
substantially all of this revenue is offset with related
subcontract costs, which are recorded in cost of operations.
We completed the reorganization of our operating segments
related to the Allied acquisition in the first quarter of 2009,
and are providing internal and external reporting in accordance
with our reorganized structure. Significant changes in the
revenue and operating margins of our reportable segments
comparing 2010 to 2009 and 2009 to 2008 are discussed in the
following paragraphs. The results of our reportable segments
were also affected by the disposition of certain assets and
liabilities, as required by the DOJ, as well as in the normal
course of business. Additionally, for 2010 compared to 2009, the
decrease in revenue resulting from declines in volumes noted
below is attributable to the continued economic slowdown. The
increase in aggregate dollars in 2009 compared to 2008 for
revenue, depreciation, amortization, depletion and accretion,
and operating income (loss) for each of our reportable segments
is due to the Allied acquisition.
2010
compared to 2009
Eastern
Region
Revenue for the year ended December 31, 2010 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines in our collection and transfer station lines of
business while our landfill line of business reflected a modest
increase. The year ended December 31, 2010 includes revenue
of $20.8 million associated with divested locations. The
year ended December 31, 2009 includes revenue of
$61.9 million associated with divested locations. Excluding
the effect of the divested revenue, revenue increased
$1.6 million for the year ended December 31, 2010
versus 2009.
For the year ended December 31, 2010, operating margins
were 23.5% versus 22.8% in 2009. The increase in operating
margins is due primarily to lower labor, benefits, disposal,
transportation, repair and maintenance expenses as a result of
lower volumes and cost control measures as well as lower risk
insurance costs partially offset by the loss on the disposition
of assets of $15.0 million in 2010 compared to the gain of
$4.0 million in 2009, as well as higher fuel costs and
costs of commodities sold and an $12.0 million recovery of
insurance proceeds related to remediation costs at the
Countywide facility that reduced our landfill operating costs
during the third quarter of 2009.
Midwestern
Region
Revenue for the year ended December 31, 2010 benefited from
core price growth in all lines of business except landfill.
While price associated with municipal solid waste volumes
increased during 2010, this increase was offset by a higher mix
of special waste volumes. However, the increase in revenue from
core price, for the year ended December 31, 2010 was more
than offset by volume declines in our collection and transfer
station lines of business. Landfill volumes increased for the
year ended December 31, 2010 primarily due to special waste
event driven work. The year ended December 31, 2010
includes revenues of $22.5 million associated with divested
locations. The year ended December 31, 2009 includes
revenue of $31.5 million associated with divested
locations. Excluding the effect of the divested revenue, revenue
decreased $1.1 million for the year ended December 31,
2010 versus 2009.
For the year ended December 31, 2010, operating margins
were 22.8% versus 20.7% in 2009. The increase in operating
margins is due primarily to lower labor, benefits, disposal,
transportation, and repair and maintenance expenses as a result
of lower volumes and cost control measures as well as lower risk
insurance costs and a favorable adjustment to amortization
expense for asset retirement obligations of $10.6 million
in 2010 compared to a favorable adjustment of $1.4 million
in 2009 partially offset by the lower gain on the disposition of
assets of $9.3 million in 2010 compared to a gain of
$27.1 million in 2009, as well as higher fuel costs and
costs of commodities sold.
47
Southern
Region
Revenue for the year ended December 31, 2010 benefited from
core price growth in all lines of business except transfer
station. However, the increase in revenue from core price was
more than offset by volume declines, especially in our
collection and landfill lines of business. Contributing to the
decline in revenue for the year ended December 31, 2009 was
$30.4 million of revenue associated with divested
locations. Excluding the effect of the divested revenue, revenue
decreased $38.5 million for the year ended
December 31, 2010 versus 2009.
For the year ended December 31, 2010, operating margins
were 24.4% versus 25.6% in 2009. The decrease in operating
margins is due primarily to the gain on disposition of assets of
$1.8 million in the 2010 period compared to the gain of
$29.8 million in 2009 as well as higher fuel costs and
costs of commodities sold, partially offset by lower labor,
benefits, disposal and repair and maintenance expenses as a
result of lower volumes and cost control measures and lower risk
insurance costs.
Western
Region
Revenue for the year ended December 31, 2010 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines, especially in our collection and transfer
station lines of business. Landfill volumes in 2010 increased
primarily due to special waste event driven work. The year ended
December 31, 2009 includes revenues of $11.0 million
associated with divested locations. Excluding the divested
revenue, revenue increased $29.6 million for the year ended
December 31, 2010 versus 2009.
For the year ended December 31, 2010, operating margins
were 23.8% versus 26.8% in 2009. The decrease in operating
margins is primarily attributed to the loss on disposition of
assets of $0.9 million in 2010 compared to the gain of
$88.1 million in 2009 as well as higher fuel costs and
costs of commodities sold, partially offset by lower risk
insurance costs and a favorable adjustment to amortization
expense for asset retirement obligations of $6.0 million in
2010 compared to an unfavorable adjustment of $6.4 million
in 2009. Additionally, we recorded a $5.2 million
remediation charge in 2009 related to environmental conditions
at our closed disposal facility in California.
Corporate
Entities
The changes in net revenue relates to our National Accounts
program serviced by third parties. Included in our gain (loss)
on disposition of assets and impairments, net, for the years
ended December 31, 2010 and 2009 are transaction related
expenses from the disposition of assets in our other segments.
Additionally, during the year ended December 31, 2010, we
recorded an impairment loss of $14.4 million related to
certain long-lived assets that are held and used.
2009
compared to 2008
Eastern
Region
Revenue for the year ended December 31, 2009 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines in all lines of business, especially in our
industrial and landfill lines of business. We also experienced
declines in fuel surcharges.
In 2009, we realized a $4.0 million net gain from the
disposition of assets, which increased operating margins by
0.2%. We also recovered $12.0 million of insurance proceeds
related to remediation costs at the Countywide facility in Ohio,
which increased operating margins by 0.6%.
In 2008, we incurred a $99.9 million charge for
environmental conditions at the Countywide facility, which
reduced our operating margin for the year ended
December 31, 2008 by 10.1%. We incurred a
$75.9 million charge related to the anticipated loss of
permitted airspace at Countywide based upon negotiations with
the
48
OEPA and EPA, which reduced our operating margin by 7.7%. We
also incurred $11.0 million in legal settlement costs,
which decreased operating margins by 1.1%.
The remaining increase in operating margins is attributed to
lower fuel, disposal, and selling, general and administrative
expenses, partially offset by higher depreciation and
amortization costs resulting from assets acquired from Allied
and higher labor and facilities expense.
Midwestern
Region
Revenue for the year ended December 31, 2009 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines in all lines of business, especially in our
industrial and landfill lines of business. We also experienced
declines in fuel surcharges.
In 2009, we realized net gains from the disposition of assets of
$27.1 million, which increased operating margins by 1.5%.
Otherwise, the improvement in operating margin for the year
ended December 31, 2009 is primarily due to lower
transportation, fuel, and selling, general and administrative
expenses. The increase in operating margin was partially offset
by increased depreciation and amortization expense resulting
from assets acquired from Allied and higher facilities expense.
Southern
Region
Revenue for the year ended December 31, 2009 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines in all lines of business, especially in our
industrial and landfill lines of business. We also experienced
declines in fuel surcharges.
For the year ended December 31, 2009, we realized net gains
from the disposition of assets of $29.8 million, which
impacted operating margins by 1.5%. We also realized in 2009 an
$8.8 million favorable adjustment to amortization expense
for asset retirement obligations which increased our operating
margin by 0.4%. Otherwise the improvement in operating margin
for the year ended December 31, 2009, is primarily due to
lower disposal, transport and fuel costs, partially offset by
increased depreciation and amortization expense resulting from
assets acquired from Allied and higher facilities expense.
Western
Region
Revenue for the year ended December 31, 2009 benefited from
core price growth in all lines of business. However, the
increase in revenue from core price was more than offset by
volume declines in all lines of business, especially in our
industrial and landfill lines of business. We also experienced
declines in fuel surcharges.
For the year ended December 31, 2009, we realized gains
from the disposition of assets of $88.1 million, which
increased operating margins by 4.1%. Partially offsetting these
gains was an unfavorable adjustment to amortization expense for
asset retirement obligations of $6.4 million, reducing
operating margin by 0.3%, and remediation charges totaling
$5.2 million, reducing operating margin by 0.3% related to
environmental conditions at our closed disposal facility in
California. In addition, lower landfill revenue (which has
higher margins than our collection line of business) negatively
impacted 2009 margins.
In the second quarter of 2008, we incurred a $34.0 million
charge at the Sunrise Landfill and a $21.9 million charge
at our closed disposal facility in California for environmental
conditions at each of these locations. The charges reduced
operating margin by 5.9%. Margins were favorably impacted by
lower labor, fuel, transportation and selling, general and
administrative expenses, offset by increased depreciation and
amortization expense resulting from assets acquired from Allied
and higher facilities expense.
49
Corporate
Entities
The increase in net revenue relates to Allieds National
Accounts program. The increase in depreciation, amortization,
depletion and accretion expense, and the increase in the
operating loss are attributable to the Allied acquisition.
Included in our gain (loss) on disposition of assets and
impairments, net for the year ended December 31, 2009 are
transaction related expenses of $8.2 million from the
disposition of assets in the other segments and a
$3.7 million charge for the asset impairment associated
with our former corporate office in Florida.
Landfill
and Environmental Matters
Our landfill costs include daily operating expenses, costs of
capital for cell development, costs for final capping, closure
and post-closure, and the legal and administrative costs of
ongoing environmental compliance. 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 landfill development
costs as they are incurred. We use life cycle accounting and the
units-of-consumption
method to recognize certain direct landfill costs related to
landfill development. In life cycle accounting, certain direct
costs are capitalized and charged to depletion expense based on
the consumption of cubic yards of available airspace. These
costs include all costs to acquire and construct a site,
including excavation, natural and synthetic liners, construction
of leachate collection systems, installation of methane gas
collection and monitoring systems, installation of groundwater
monitoring wells, and other costs associated with the
acquisition and development of the site. Obligations associated
with final capping, closure and post-closure are capitalized and
amortized on a
units-of-consumption
basis as airspace is consumed.
Cost and airspace estimates are developed at least annually by
engineers. These estimates are used by our operating and
accounting personnel to adjust the rates we use to expense
capitalized costs. Changes in these estimates primarily relate
to changes in costs, available airspace, inflation and
applicable regulations. Changes in available airspace include
changes in engineering estimates, changes in design and changes
due to the addition of airspace lying in expansion areas that we
believe have a probable likelihood of being permitted.
Available
Airspace
The following tables reflect landfill airspace activity for
active landfills owned or operated by us for the years ended
December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Landfills
|
|
|
Permits
|
|
|
|
|
|
|
|
|
|
|
|
|
as of
|
|
|
New
|
|
|
Acquired,
|
|
|
Granted,
|
|
|
|
|
|
Changes in
|
|
|
Balance as of
|
|
|
|
December 31,
|
|
|
Expansions
|
|
|
Net of
|
|
|
Net of
|
|
|
Airspace
|
|
|
Engineering
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Undertaken
|
|
|
Divestitures
|
|
|
Closures
|
|
|
Consumed
|
|
|
Estimates
|
|
|
2010
|
|
|
Cubic yards (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
4,436.4
|
|
|
|
-
|
|
|
|
15.3
|
|
|
|
222.6
|
|
|
|
(84.3
|
)
|
|
|
5.5
|
|
|
|
4,595.5
|
|
Probable expansion airspace
|
|
|
212.5
|
|
|
|
29.8
|
|
|
|
-
|
|
|
|
(93.1
|
)
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
149.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cubic yards (in millions)
|
|
|
4,648.9
|
|
|
|
29.8
|
|
|
|
15.3
|
|
|
|
129.5
|
|
|
|
(84.3
|
)
|
|
|
5.4
|
|
|
|
4,744.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of sites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
192
|
|
|
|
|
|
|
|
3
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probable expansion airspace
|
|
|
12
|
|
|
|
2
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Landfills
|
|
|
Permits
|
|
|
|
|
|
Changes
|
|
|
Balance
|
|
|
|
as of
|
|
|
New
|
|
|
Acquired,
|
|
|
Granted,
|
|
|
|
|
|
in
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Expansions
|
|
|
Net of
|
|
|
Net of
|
|
|
Airspace
|
|
|
Engineering
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Undertaken
|
|
|
Divestitures
|
|
|
Closures
|
|
|
Consumed
|
|
|
Estimates
|
|
|
2009
|
|
|
Cubic yards (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
4,559.6
|
|
|
|
-
|
|
|
|
(176.8
|
)
|
|
|
134.2
|
|
|
|
(86.9
|
)
|
|
|
6.3
|
|
|
|
4,436.4
|
|
Probable expansion airspace
|
|
|
386.2
|
|
|
|
22.4
|
|
|
|
(62.2
|
)
|
|
|
(133.2
|
)
|
|
|
-
|
|
|
|
(0.7
|
)
|
|
|
212.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cubic yards (in millions)
|
|
|
4,945.8
|
|
|
|
22.4
|
|
|
|
(239.0
|
)
|
|
|
1.0
|
|
|
|
(86.9
|
)
|
|
|
5.6
|
|
|
|
4,648.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of sites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
213
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probable expansion airspace
|
|
|
23
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Permits
|
|
|
|
|
|
Changes
|
|
|
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
Granted,
|
|
|
|
|
|
in
|
|
|
Changes
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Allied
|
|
|
Net of
|
|
|
Airspace
|
|
|
Engineering
|
|
|
in
|
|
|
December 31,
|
|
|
|
2007
|
|
|
Acquisition
|
|
|
Closures
|
|
|
Consumed
|
|
|
Estimates
|
|
|
Design
|
|
|
2008
|
|
|
Cubic yards (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
1,537.3
|
|
|
|
3,061.1
|
|
|
|
22.5
|
|
|
|
(42.7
|
)
|
|
|
(18.6
|
)
|
|
|
-
|
|
|
|
4,559.6
|
|
Probable expansion airspace
|
|
|
192.0
|
|
|
|
214.1
|
|
|
|
(18.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
386.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cubic yards (in millions)
|
|
|
1,729.3
|
|
|
|
3,275.2
|
|
|
|
3.6
|
|
|
|
(42.7
|
)
|
|
|
(18.6
|
)
|
|
|
(1.0
|
)
|
|
|
4,945.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of sites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permitted airspace
|
|
|
58
|
|
|
|
157
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Probable expansion airspace
|
|
|
11
|
|
|
|
15
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in engineering estimates typically include modifications
to the available disposal capacity of a landfill based on a
refinement of the capacity calculations resulting from updated
information. Changes in design typically include significant
modifications to a landfills footprint or vertical slopes.
As of December 31, 2010, we owned or operated 193 active
solid waste landfills with total available disposal capacity
estimated to be 4.7 billion in-place cubic yards. Total
available disposal capacity represents the sum of estimated
permitted airspace plus an estimate of probable expansion
airspace. These estimates are developed at least annually by
engineers using information provided by annual aerial surveys.
As of December 31, 2010, total available disposal capacity
is estimated to be 4.6 billion in-place cubic yards of
permitted airspace plus 0.1 billion in-place cubic yards of
probable expansion airspace. Before airspace included in an
expansion area is determined to be probable expansion airspace
and, therefore, included in our calculation of total available
disposal capacity, it must meet all of our expansion criteria.
See Note 2, Summary of Significant Accounting Policies,
and Note 8, Landfill and Environmental Costs, to
our consolidated financial statements in Item 8 of this
Form 10-K
for further information. During 2010, total available airspace
increased by a net 0.1 billion cubic yards primarily due to
new expansions and net acquisitions offset by airspace consumed
and divestitures.
During 2009, total available airspace decreased by a net
0.3 billion cubic yards primarily due to divestitures,
closures and airspace consumed, partially offset by new
expansions.
During 2008, total available airspace increased by a net
3.2 billion cubic yards due to the Allied acquisition in
December, which contributed 157 active landfills representing
3.3 billion cubic yards of permitted and probable expansion
airspace. Excluding the Allied acquisition, total available
airspace related to Republics pre-acquisition operations
decreased by a net 0.1 billion cubic yards, primarily due
to airspace consumed, changes in engineering estimates and
changes in design. The decrease during 2008 due to changes in
engineering estimates is primarily due to a reduction of
remaining airspace at the Countywide facility.
51
At December 31, 2007, 11.1% of our total available
airspace, or 0.2 billion cubic yards, consisted of probable
expansion airspace at eleven of our landfills. At
December 31, 2010, 3.1% of our total available airspace, or
0.1 billion cubic yards, consisted of probable expansion
airspace at eight of our landfills. Between December 31,
2007 and December 31, 2010, we received permits for 19 of
our probable expansions, which demonstrates our continued
success in obtaining permits for expansion airspace.
As of December 31, 2010, eight of our landfills meet all of
our criteria for including their probable expansion airspace in
their total available disposal capacity. At projected annual
volumes, these landfills have an estimated remaining average
site life of 48 years, including probable expansion
airspace. The average estimated remaining life of all of our
landfills is 55 years. We have other expansion
opportunities that are not included in our total available
airspace because they do not meet all of our criteria for
probable expansion airspace.
The following table reflects the estimated operating lives of
our active landfill sites based on available and probable
disposal capacity using current annual volumes as of
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Sites
|
|
|
Sites
|
|
|
|
|
|
|
|
|
|
without
|
|
|
with
|
|
|
|
|
|
|
|
|
|
Probable
|
|
|
Probable
|
|
|
|
|
|
Percent
|
|
|
|
Expansion
|
|
|
Expansion
|
|
|
Total
|
|
|
of
|
|
|
|
Airspace
|
|
|
Airspace
|
|
|
Sites
|
|
|
Total
|
|
|
0 to 5 years
|
|
|
14
|
|
|
|
-
|
|
|
|
14
|
|
|
|
7.3
|
%
|
6 to 10 years
|
|
|
18
|
|
|
|
1
|
|
|
|
19
|
|
|
|
9.8
|
%
|
11 to 20 years
|
|
|
47
|
|
|
|
1
|
|
|
|
48
|
|
|
|
24.9
|
%
|
21 to 40 years
|
|
|
50
|
|
|
|
-
|
|
|
|
50
|
|
|
|
25.9
|
%
|
41+ years
|
|
|
56
|
|
|
|
6
|
|
|
|
62
|
|
|
|
32.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
185
|
|
|
|
8
|
|
|
|
193
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
Capping, Closure and Post-Closure Costs
As of December 31, 2010, accrued final capping, closure and
post-closure costs were $1,046.5 million, of which
$93.9 million is current and $952.6 million is
long-term as reflected in our consolidated balance sheets in
accrued landfill and environmental costs.
Remediation
and Other Charges for Landfill Matters
In December 2009, we finalized our purchase price allocation for
the environmental liabilities we assumed as part of the Allied
acquisition. These liabilities represent our estimate of costs
to remediate sites that were previously owned or operated by
Allied or sites at which Allied, or a predecessor company that
it had acquired, had been identified as a potentially
responsible party. The remediation of these sites is in various
stages of completion from having received an initial notice from
a regulatory agency and commencing investigation to being in the
final stages of post remedial monitoring. See also Note 2,
Summary of Significant Accounting Policies
Environmental Remediation Liabilities, for further
information. We have recorded these liabilities at their
estimated fair values using a discount rate of 9.75%. Discounted
liabilities are accreted to interest expense through the period
that they are paid.
The following is a discussion of certain of our significant
remediation matters:
Countywide Landfill. In September 2009, Republic
Services of Ohio II, LLC entered into Final Findings and Orders
with the Ohio Environmental Protection Agency that require us to
implement a comprehensive operation and maintenance program to
manage the remediation area at the Countywide Recycling and
Disposal Facility (Countywide). The remediation liability for
Countywide recorded as of December 31, 2010 is
$68.4 million, of which $7.1 million is expected to be
paid during 2011. We believe the reasonably possible range of
loss for remediation costs is $59 million to
$81 million.
52
West Contra Costa County Landfill. In 2006, we were
issued an Enforcement Order by the California Department of
Toxic Substance Control (DTSC) for the Class 1 Hazardous
waste cell at the West Contra Costa County Landfill (West
County). Subsequently, we entered into a Consent Agreement with
DTSC in 2007 at which time we agreed to undertake certain
remedial actions. The remediation liability for West County
recorded as of December 31, 2010 is $46.5 million, of
which $2.5 million is expected to be paid during 2011. We
believe the reasonably possible range of loss for remediation
costs is $36 million to $63 million.
Sunrise Landfill. In August 2008, Republic Services
of Southern Nevada (RSSN), signed a Consent Decree with the EPA,
the Bureau of Land Management and Clark County, Nevada related
to the Sunrise Landfill. Under the Consent Decree, RSSN has
agreed to perform certain remedial actions at the Sunrise
Landfill for which RSSN and Clark County were otherwise jointly
and severally liable. We also paid $1.0 million in
sanctions related to the Consent Decree. RSSN is currently
working with the Clark County Staff and Board of Commissioners
to develop a mechanism to fund the costs to comply with the
Consent Decree. However, we have not recorded any potential
recoveries. The remediation liability for Sunrise recorded as of
December 31, 2010 is $37.5 million, of which
$23.0 million is expected to be paid during 2011. We
believe the reasonably possible range of loss for remediation
costs is $29 million to $44 million.
Congress Landfill. In August 2010, Congress
Development Company agreed with the State of Illinois to have a
Final Consent Order (Final Order) entered by the Circuit Court
of Illinois, Cook County. Pursuant to the Final Order, we have
agreed to continue to implement certain remedial activities at
the Congress Landfill. The remediation liability recorded as of
December 31, 2010 is $82.6 million, of which
$8.4 million is expected to be paid during 2011. We believe
the reasonably possible range of loss for remediation costs is
$46 million to $146 million.
It is reasonably possible that we will need to adjust the
liabilities noted above to reflect the effects of new or
additional information, to the extent that such information
impacts the costs, timing or duration of the required actions.
Future changes in our estimates of the costs, timing or duration
of the required actions could have a material adverse effect on
our consolidated financial position, results of operations or
cash flows.
Investment
in Landfills
The following tables reflect changes in our investment in
landfills for the years ended December 31, 2010, 2009 and
2008 and the future expected investment as of December 31,
2010 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
|
|
|
|
|
|
Impairments,
|
|
|
Adjustments
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
Additions
|
|
|
Transfers
|
|
|
for
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
for Asset
|
|
|
Charged
|
|
|
and
|
|
|
Asset
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
to
|
|
|
Other
|
|
|
Retirement
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Additions
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Obligations
|
|
|
2010
|
|
|
Non-depletable landfill land
|
|
$
|
142.7
|
|
|
$
|
1.3
|
|
|
$
|
-
|
|
|
$
|
(1.7
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15.7
|
|
|
$
|
-
|
|
|
$
|
158.0
|
|
Landfill development costs
|
|
|
4,230.9
|
|
|
|
15.4
|
|
|
|
0.2
|
|
|
|
(13.9
|
)
|
|
|
31.5
|
|
|
|
-
|
|
|
|
337.6
|
|
|
|
(26.5
|
)
|
|
|
4,575.2
|
|
Construction-in-progress
- landfill
|
|
|
245.1
|
|
|
|
250.7
|
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(362.6
|
)
|
|
|
-
|
|
|
|
133.2
|
|
Accumulated depletion and amortization
|
|
|
(1,275.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
19.6
|
|
|
|
-
|
|
|
|
(258.9
|
)
|
|
|
-
|
|
|
|
10.1
|
|
|
|
(1,504.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in landfill land and development costs
|
|
$
|
3,343.3
|
|
|
$
|
267.4
|
|
|
$
|
0.1
|
|
|
$
|
4.1
|
|
|
$
|
31.5
|
|
|
$
|
(258.9
|
)
|
|
$
|
(9.3
|
)
|
|
$
|
(16.4
|
)
|
|
$
|
3,361.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
as of
|
|
|
Expected
|
|
|
Total
|
|
|
|
December 31,
|
|
|
Future
|
|
|
Expected
|
|
|
|
2010
|
|
|
Investment
|
|
|
Investment
|
|
|
Non-depletable landfill land
|
|
$
|
158.0
|
|
|
$
|
-
|
|
|
$
|
158.0
|
|
Landfill development costs
|
|
|
4,575.2
|
|
|
|
6,100.6
|
|
|
|
10,675.8
|
|
Construction-in-progress
landfill
|
|
|
133.2
|
|
|
|
-
|
|
|
|
133.2
|
|
Accumulated depletion and amortization
|
|
|
(1,504.6
|
)
|
|
|
-
|
|
|
|
(1,504.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in landfill land and development costs
|
|
$
|
3,361.8
|
|
|
$
|
6,100.6
|
|
|
$
|
9,462.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
Adjustments
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
Additions
|
|
|
Transfers
|
|
|
and Transfers
|
|
|
for
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
for Asset
|
|
|
Charged
|
|
|
and
|
|
|
to Assets
|
|
|
Asset
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
to
|
|
|
Other
|
|
|
Held for
|
|
|
Retirement
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Sale
|
|
|
Obligations
|
|
|
2009
|
|
|
Non-depletable landfill land
|
|
$
|
169.3
|
|
|
$
|
5.9
|
|
|
$
|
(2.6
|
)
|
|
$
|
(7.9
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(17.0
|
)
|
|
$
|
(5.0
|
)
|
|
$
|
-
|
|
|
$
|
142.7
|
|
Landfill development costs
|
|
|
4,126.3
|
|
|
|
11.7
|
|
|
|
(0.3
|
)
|
|
|
(3.2
|
)
|
|
|
32.5
|
|
|
|
-
|
|
|
|
132.6
|
|
|
|
(8.5
|
)
|
|
|
(60.2
|
)
|
|
|
4,230.9
|
|
Construction-in-progress
- landfill
|
|
|
76.2
|
|
|
|
278.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(109.5
|
)
|
|
|
(0.4
|
)
|
|
|
-
|
|
|
|
245.1
|
|
Accumulated depletion and amortization
|
|
|
(1,004.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1.2
|
|
|
|
-
|
|
|
|
(282.5
|
)
|
|
|
-
|
|
|
|
5.2
|
|
|
|
4.9
|
|
|
|
(1,275.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in landfill land and development costs
|
|
$
|
3,367.6
|
|
|
$
|
296.4
|
|
|
$
|
(2.9
|
)
|
|
$
|
(9.9
|
)
|
|
$
|
32.5
|
|
|
$
|
(282.5
|
)
|
|
$
|
6.1
|
|
|
$
|
(8.7
|
)
|
|
$
|
(55.3
|
)
|
|
$
|
3,343.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
|
|
|
|
|
|
|
|
|
Impairments
|
|
|
Adjustments
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
Additions
|
|
|
Additions
|
|
|
Transfers
|
|
|
and Transfers
|
|
|
for
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
for Asset
|
|
|
Charged
|
|
|
and
|
|
|
to Assets
|
|
|
Asset
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
Allied
|
|
|
Retirement
|
|
|
to
|
|
|
Other
|
|
|
Held for
|
|
|
Retirement
|
|
|
December 31,
|
|
|
|
2007
|
|
|
Additions
|
|
|
Acquisition
|
|
|
Obligations
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Sale
|
|
|
Obligations
|
|
|
2008
|
|
|
Non-depletable landfill land
|
|
$
|
52.7
|
|
|
$
|
0.2
|
|
|
$
|
115.7
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.7
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
169.3
|
|
Landfill development costs
|
|
|
1,809.1
|
|
|
|
3.6
|
|
|
|
2,610.8
|
|
|
|
20.5
|
|
|
|
-
|
|
|
|
74.8
|
|
|
|
(359.3
|
)
|
|
|
(33.2
|
)
|
|
|
4,126.3
|
|
Construction-in-progress-
landfill
|
|
|
66.4
|
|
|
|
105.1
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(74.0
|
)
|
|
|
(21.6
|
)
|
|
|
-
|
|
|
|
76.2
|
|
Accumulated depletion and amortization
|
|
|
(1,039.5
|
)
|
|
|
-
|
|
|
|
(1.2
|
)
|
|
|
-
|
|
|
|
(119.1
|
)
|
|
|
-
|
|
|
|
155.0
|
|
|
|
0.6
|
|
|
|
(1,004.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in landfill land and development costs
|
|
$
|
888.7
|
|
|
$
|
108.9
|
|
|
$
|
2,725.6
|
|
|
$
|
20.5
|
|
|
$
|
(119.1
|
)
|
|
$
|
1.5
|
|
|
$
|
(225.9
|
)
|
|
$
|
(32.6
|
)
|
|
$
|
3,367.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reflects our net investment in our
landfills, excluding non-depletable land, and our depletion,
amortization and accretion expense for the years ended
December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Number of landfills owned or operated
|
|
|
193
|
|
|
|
192
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment, excluding non-depletable land (in millions)
|
|
$
|
3,203.8
|
|
|
$
|
3,200.6
|
|
|
$
|
3,198.3
|
|
Total estimated available disposal capacity (in millions of
cubic yards)
|
|
|
4,744.6
|
|
|
|
4,648.9
|
|
|
|
4,945.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment per cubic yard
|
|
$
|
0.68
|
|
|
$
|
0.69
|
|
|
$
|
0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Landfill depletion and amortization expense (in millions)
|
|
$
|
250.6
|
|
|
$
|
278.5
|
|
|
$
|
119.7
|
|
Accretion expense (in millions)
|
|
|
80.5
|
|
|
|
88.8
|
|
|
|
23.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
331.1
|
|
|
|
367.3
|
|
|
|
143.6
|
|
Airspace consumed (in millions of cubic yards)
|
|
|
84.3
|
|
|
|
86.9
|
|
|
|
42.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depletion, amortization and accretion expense per cubic yard of
airspace consumed
|
|
$
|
3.93
|
|
|
$
|
4.23
|
|
|
$
|
3.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2010, our average
compaction rate was approximately 1,800 pounds per cubic yard
based on our three-year historical moving average as compared to
1,700 pounds per cubic yard for the year ended December 31,
2009 based on our three-year historical moving average. Our
compaction rates may improve as a result of the settlement and
decomposition of waste.
As of December 31, 2010, we expect to spend an estimated
additional $6.1 billion on existing landfills, primarily
related to cell construction and environmental structures, over
their expected remaining lives. Our total expected investment,
excluding non-depletable land, estimated to be
$9.3 billion, or $1.96 per cubic yard, is used in
determining our depletion and amortization expense based on
airspace consumed using the
units-of-consumption
method.
54
Property
and Equipment
The following tables reflect the activity in our property and
equipment accounts for the years ended December 31, 2010,
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
Adjustments
|
|
|
Impairments,
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
for
|
|
|
Transfers
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
Acquisitions,
|
|
|
for Asset
|
|
|
Asset
|
|
|
and
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Other
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Additions
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Obligations
|
|
|
Adjustments
|
|
|
2010
|
|
|
Other land
|
|
$
|
418.7
|
|
|
$
|
2.6
|
|
|
$
|
(9.4
|
)
|
|
$
|
(21.0
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1.0
|
|
|
$
|
391.9
|
|
Non-depletable landfill land
|
|
|
142.7
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
(1.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
15.7
|
|
|
|
158.0
|
|
Landfill development costs
|
|
|
4,230.9
|
|
|
|
15.4
|
|
|
|
0.2
|
|
|
|
(13.9
|
)
|
|
|
31.5
|
|
|
|
(26.5
|
)
|
|
|
337.6
|
|
|
|
4,575.2
|
|
Vehicles and equipment
|
|
|
3,792.4
|
|
|
|
522.6
|
|
|
|
(174.5
|
)
|
|
|
(2.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3.7
|
|
|
|
4,142.1
|
|
Buildings and improvements
|
|
|
741.6
|
|
|
|
24.4
|
|
|
|
(10.8
|
)
|
|
|
(2.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
15.7
|
|
|
|
768.5
|
|
Construction-in-progress
- landfill
|
|
|
245.1
|
|
|
|
250.7
|
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(362.6
|
)
|
|
|
133.2
|
|
Construction-in-progress
- other
|
|
|
23.0
|
|
|
|
31.6
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(27.6
|
)
|
|
|
27.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,594.4
|
|
|
$
|
848.6
|
|
|
$
|
(194.4
|
)
|
|
$
|
(41.0
|
)
|
|
$
|
31.5
|
|
|
$
|
(26.5
|
)
|
|
$
|
(16.5
|
)
|
|
$
|
10,196.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation, Amortization and Depletion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
Balance
|
|
|
Additions
|
|
|
|
|
|
|
|
|
for
|
|
|
Balance
|
|
|
|
as of
|
|
|
Charged
|
|
|
|
|
|
Acquisitions,
|
|
|
Asset
|
|
|
as of
|
|
|
|
December 31,
|
|
|
to
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Expense
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
2010
|
|
|
Landfill development costs
|
|
$
|
(1,275.4
|
)
|
|
$
|
(258.9
|
)
|
|
$
|
-
|
|
|
$
|
19.6
|
|
|
$
|
10.1
|
|
|
$
|
(1,504.6
|
)
|
Vehicles and equipment
|
|
|
(1,518.2
|
)
|
|
|
(478.7
|
)
|
|
|
162.2
|
|
|
|
14.1
|
|
|
|
-
|
|
|
|
(1,820.6
|
)
|
Buildings and improvements
|
|
|
(143.1
|
)
|
|
|
(35.2
|
)
|
|
|
3.7
|
|
|
|
2.2
|
|
|
|
-
|
|
|
|
(172.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,936.7
|
)
|
|
$
|
(772.8
|
)
|
|
$
|
165.9
|
|
|
$
|
35.9
|
|
|
$
|
10.1
|
|
|
$
|
(3,497.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
Adjustments
|
|
|
|
|
|
Impairments
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
for
|
|
|
Transfers
|
|
|
and Transfers
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
Acquisitions,
|
|
|
for Asset
|
|
|
Asset
|
|
|
and
|
|
|
to Assets
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Other
|
|
|
Held for
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Obligations
|
|
|
Adjustments
|
|
|
Sale
|
|
|
2009
|
|
|
Other land
|
|
$
|
464.4
|
|
|
$
|
10.1
|
|
|
$
|
(3.5
|
)
|
|
$
|
(48.3
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(0.4
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
418.7
|
|
Non-depletable landfill land
|
|
|
169.3
|
|
|
|
5.9
|
|
|
|
(2.6
|
)
|
|
|
(7.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(17.0
|
)
|
|
|
(5.0
|
)
|
|
|
142.7
|
|
Landfill development costs
|
|
|
4,126.3
|
|
|
|
11.7
|
|
|
|
(0.3
|
)
|
|
|
(3.2
|
)
|
|
|
32.5
|
|
|
|
(60.2
|
)
|
|
|
132.6
|
|
|
|
(8.5
|
)
|
|
|
4,230.9
|
|
Vehicles and equipment
|
|
|
3,432.3
|
|
|
|
509.1
|
|
|
|
(126.1
|
)
|
|
|
(7.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2.0
|
|
|
|
(17.4
|
)
|
|
|
3,792.4
|
|
Buildings and improvements
|
|
|
706.0
|
|
|
|
17.6
|
|
|
|
(12.1
|
)
|
|
|
(0.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
31.2
|
|
|
|
(0.3
|
)
|
|
|
741.6
|
|
Construction-in-progress
- landfill
|
|
|
76.2
|
|
|
|
278.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(109.5
|
)
|
|
|
(0.4
|
)
|
|
|
245.1
|
|
Construction-in-progress
- other
|
|
|
26.3
|
|
|
|
29.3
|
|
|
|
-
|
|
|
|
6.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(39.3
|
)
|
|
|
(0.2
|
)
|
|
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,000.8
|
|
|
$
|
862.5
|
|
|
$
|
(144.6
|
)
|
|
$
|
(60.8
|
)
|
|
$
|
32.5
|
|
|
$
|
(60.2
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
(35.4
|
)
|
|
$
|
9,594.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation, Amortization and Depletion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Impairments
|
|
|
|
|
|
|
Balance
|
|
|
Additions
|
|
|
|
|
|
|
|
|
for
|
|
|
and Transfers
|
|
|
Balance
|
|
|
|
as of
|
|
|
Charged
|
|
|
|
|
|
Acquisitions,
|
|
|
Asset
|
|
|
to Assets
|
|
|
as of
|
|
|
|
December 31,
|
|
|
to
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
Held for
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Expense
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Sale
|
|
|
2009
|
|
|
Landfill development costs
|
|
$
|
(1,004.2
|
)
|
|
$
|
(282.5
|
)
|
|
$
|
-
|
|
|
$
|
1.2
|
|
|
$
|
4.9
|
|
|
$
|
5.2
|
|
|
$
|
(1,275.4
|
)
|
Vehicles and equipment
|
|
|
(1,147.3
|
)
|
|
|
(490.3
|
)
|
|
|
107.5
|
|
|
|
4.7
|
|
|
|
-
|
|
|
|
7.2
|
|
|
|
(1,518.2
|
)
|
Buildings and improvements
|
|
|
(111.1
|
)
|
|
|
(36.9
|
)
|
|
|
1.4
|
|
|
|
(0.7
|
)
|
|
|
-
|
|
|
|
4.2
|
|
|
|
(143.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,262.6
|
)
|
|
$
|
(809.7
|
)
|
|
$
|
108.9
|
|
|
$
|
5.2
|
|
|
$
|
4.9
|
|
|
$
|
16.6
|
|
|
$
|
(2,936.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
|
|
|
Adjustments
|
|
|
|
|
|
Impairments
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
for
|
|
|
Transfers
|
|
|
and Transfers
|
|
|
Balance
|
|
|
|
as of
|
|
|
|
|
|
|
|
|
Acquisitions,
|
|
|
for Asset
|
|
|
Asset
|
|
|
and
|
|
|
to Assets
|
|
|
as of
|
|
|
|
December 31,
|
|
|
Capital
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
Retirement
|
|
|
Other
|
|
|
Held for
|
|
|
December 31,
|
|
|
|
2007
|
|
|
Additions
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Obligations
|
|
|
Adjustments
|
|
|
Sale
|
|
|
2008
|
|
|
Other land
|
|
$
|
105.7
|
|
|
$
|
1.4
|
|
|
$
|
(0.1
|
)
|
|
$
|
358.5
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(0.7
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
464.4
|
|
Non-depletable landfill land
|
|
|
52.7
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
115.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.7
|
|
|
|
-
|
|
|
|
169.3
|
|
Landfill development costs
|
|
|
1,809.1
|
|
|
|
3.6
|
|
|
|
-
|
|
|
|
2,610.8
|
|
|
|
20.5
|
|
|
|
(33.2
|
)
|
|
|
74.8
|
|
|
|
(359.3
|
)
|
|
|
4,126.3
|
|
Vehicles and equipment
|
|
|
1,965.1
|
|
|
|
232.8
|
|
|
|
(87.8
|
)
|
|
|
1,380.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.8
|
|
|
|
(61.0
|
)
|
|
|
3,432.3
|
|
Buildings and improvements
|
|
|
346.7
|
|
|
|
5.0
|
|
|
|
(7.5
|
)
|
|
|
379.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19.9
|
|
|
|
(38.0
|
)
|
|
|
706.0
|
|
Construction-in-progress
- landfill
|
|
|
66.4
|
|
|
|
105.1
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(74.0
|
)
|
|
|
(21.6
|
)
|
|
|
76.2
|
|
Construction-in-progress
- other
|
|
|
11.8
|
|
|
|
23.9
|
|
|
|
-
|
|
|
|
14.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(23.5
|
)
|
|
|
(0.1
|
)
|
|
|
26.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,357.5
|
|
|
$
|
372.0
|
|
|
$
|
(95.4
|
)
|
|
$
|
4,859.8
|
|
|
$
|
20.5
|
|
|
$
|
(33.2
|
)
|
|
$
|
-
|
|
|
$
|
(480.4
|
)
|
|
$
|
9,000.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation, Amortization and Depletion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Impairments
|
|
|
|
|
|
|
Balance
|
|
|
Additions
|
|
|
|
|
|
|
|
|
for
|
|
|
and Transfers
|
|
|
Balance
|
|
|
|
as of
|
|
|
Charged
|
|
|
|
|
|
Acquisitions,
|
|
|
Asset
|
|
|
to Assets
|
|
|
as of
|
|
|
|
December 31,
|
|
|
to
|
|
|
|
|
|
Net of
|
|
|
Retirement
|
|
|
Held for
|
|
|
December 31,
|
|
|
|
2007
|
|
|
Expense
|
|
|
Retirements
|
|
|
Divestitures
|
|
|
Obligations
|
|
|
Sale
|
|
|
2008
|
|
|
Landfill development costs
|
|
$
|
(1,039.5
|
)
|
|
$
|
(119.1
|
)
|
|
$
|
-
|
|
|
$
|
(1.2
|
)
|
|
$
|
0.6
|
|
|
$
|
155.0
|
|
|
$
|
(1,004.2
|
)
|
Vehicles and equipment
|
|
|
(1,052.7
|
)
|
|
|
(208.3
|
)
|
|
|
87.5
|
|
|
|
2.9
|
|
|
|
-
|
|
|
|
23.3
|
|
|
|
(1,147.3
|
)
|
Buildings and improvements
|
|
|
(101.0
|
)
|
|
|
(15.0
|
)
|
|
|
1.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.9
|
|
|
|
(111.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,193.2
|
)
|
|
$
|
(342.4
|
)
|
|
$
|
88.5
|
|
|
$
|
1.7
|
|
|
$
|
0.6
|
|
|
$
|
182.2
|
|
|
$
|
(2,262.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources
The major components of changes in cash flows for the years
ended December 31, 2010, 2009 and 2008 are discussed in the
following paragraphs. The following table summarizes our cash
flow from operating activities, investing activities and
financing activities for the years ended December 31, 2010,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Net cash provided by operating activities
|
|
$
|
1,433.7
|
|
|
$
|
1,396.5
|
|
|
$
|
512.2
|
|
Net cash used in investing activities
|
|
|
(690.5
|
)
|
|
|
(242.5
|
)
|
|
|
(934.7
|
)
|
Net cash used in financing activities
|
|
|
(702.9
|
)
|
|
|
(1,174.7
|
)
|
|
|
469.4
|
|
Cash
Flows Provided by Operating Activities
Certain of the more significant items affecting the comparison
of our operating cash flows for 2010 and 2009 are summarized
below:
Earnings increase. Our net income increased by
$11.0 million on a
year-over-year
basis.
Changes in assets and liabilities, net of effects from
business acquisitions and divestitures. Changes in
assets and liabilities decreased our cash flow from operations
by $360.9 million in 2010 versus a decrease of
$251.9 million in 2009, an increase of $109.0 million,
primarily as a result of the following:
|
|
|
|
|
During the fourth quarter of 2010, we recorded a tax receivable
of approximately $70 million primarily due to the effects
of current deductions for property placed into service during
the fourth quarter, referred to as Bonus
Depreciation. We expect a refund of approximately
$50 million in the first quarter of 2011.
|
|
|
|
During 2010, we paid $161.8 million to settle capping,
closure, post-closure and remediation obligations, an increase
of $4.7 million from $157.1 million we paid in 2009.
The increase in cash paid for capping, closure, post closure and
remediation activities is primarily due to the timing of
obligations.
|
56
|
|
|
|
|
During 2010, we paid $20.0 million for restructuring and
synergy related costs incurred in connection with the
restructuring plan related to the Allied acquisition, a decrease
of $46.5 million from $66.5 million we paid in 2009.
The decrease in cash expenditures is due to a decrease in
restructuring and synergy plan activities in 2010.
|
|
|
|
During 2010, we made income tax payments (net of refunds
received) of approximately $418 million, of which
approximately $111 million related to the settlement of
certain tax liabilities regarding BFI risk management companies.
During 2009, we made income tax payments (net of refunds
received) of approximately $444 million, of which
approximately $105 million related to taxes on our
divestitures.
|
|
|
|
Cash paid for interest was $53.8 million lower during 2010
versus 2009 due to reductions in debt balances and refinancing
of our higher interest rate debt in the second half of 2009 and
throughout 2010.
|
The most significant items affecting the comparison of our
operating cash flows for 2009 and 2008 are summarized below:
Earnings increase. Our net income increased by
$422.6 million on a
year-over-year
basis, primarily due to the Allied acquisition in December 2008,
which positively affected our cash flow from operations in 2009.
Changes in assets and liabilities, net of effects from
business acquisitions and divestitures. Changes in
assets and liabilities decreased our cash flow from operations
by $251.9 million in 2009 versus a decrease of
$78.9 million in 2008, primarily as a result of the
following:
|
|
|
|
|
During 2009, the cash we paid to settle our capping, closure,
post-closure and remediation obligations increased by
$85.9 million. The increase in cash paid for capping,
closure, post closure and remediation activities is primarily
due to the Allied acquisition.
|
|
|
|
During 2009, we paid $66.5 million for restructuring and
synergy related costs incurred in connection with the
restructuring plan related to the Allied acquisition.
|
|
|
|
During 2009, we made income tax payments (net of refunds
received) of approximately $444 million, of which
approximately $105 million related to taxes on our
divestitures. During 2008, we made income tax payments (net of
refunds received) of approximately $128 million. During
2008, approximately $32 million of federal tax payments
were deferred and paid in 2009 as a result of the Allied
acquisition.
|
Cash
Flows Used in Investing Activities
The most significant items affecting the comparison of our
investing cash flows for the periods presented are summarized
below:
Capital expenditures. Capital expenditures during
2010 were $794.7 million, compared with $826.3 million
in 2009 and $386.9 million in 2008. Capital expenditures in
2009 were higher than 2008 due to the Allied acquisition in
December 2008. During 2011, we expect our capital expenditures
to approximate $870 million. However, we expect property
and equipment received during 2011 to be $750 million,
which excludes $120 million of property and equipment
received during 2010 but paid during 2011.
Proceeds from sales of property and
equipment. Proceeds on sale of property and equipment
during 2010 were $37.4 million, compared with
$31.8 million in 2009 and $8.2 million in 2008.
Proceeds on sale of property and equipment in 2010 were higher
than 2009 due to the sale of our former headquarters building in
Florida. Proceeds on sale of property in 2009 were higher than
2008 due to the Allied acquisition in December 2008.
Cash used in acquisitions and development projects, net of
cash acquired. During 2010, we paid $58.9 million
for eight acquisitions, including a landfill development
project. Cash paid for acquisitions in 2008 includes the
retirement of Allieds credit facility, net of cash
acquired, and $13.4 million of cash paid for other
acquisitions.
57
Proceeds from divestitures. Proceeds from
divestitures (net of cash divested) and other sales of assets
were $60.0 million in 2010, $511.1 million in 2009 and
$3.3 million in 2008. During the year ended
December 31, 2010, we received $60.0 million in cash
proceeds, net of cash divested, primarily related to certain
hauling and transfer station assets sold in our Eastern Region.
Proceeds received in 2009 were primarily the result of divesting
certain assets as required by the DOJ as a condition of the
Allied acquisition.
Change in restricted cash and marketable
securities. Changes in our restricted cash and
marketable securities balances, which are largely related to the
issuance of tax-exempt bonds for our capital needs and amounts
held in trust as a guarantee of performance, contributed
$66.3 million and $41.6 million to our investing
activities in 2010 and 2009 compared to a $5.3 million use
of cash in 2008. Funds received from issuances of tax-exempt
bonds are deposited directly into trust accounts by the bonding
authority at the time of issuance. As we do not have the ability
to use these funds for general operating purposes, they are
classified as restricted cash in our consolidated balance
sheets. Proceeds from bond issuances into restricted trust
accounts represent cash used in investing activities in our
consolidated statements of cash flows. Reimbursements from the
trust for qualifying expenditures are presented as cash provided
by investing activities in our consolidated statements of cash
flows. During 2010 and 2009, our reimbursements from restricted
cash accounts exceeded funds received from the issuance of
tax-exempt bonds.
We intend to finance capital expenditures and acquisitions
through cash on hand, restricted cash held for capital
expenditures, cash flows from operations, our revolving credit
facilities, and tax-exempt bonds and other financings. We expect
to use primarily cash for future business acquisitions.
Cash
Flows Provided by (Used in) Financing Activities
The most significant items affecting the comparison of our cash
flows from financing activities for the periods presented are
summarized:
Net debt repayments or borrowings. Payments of notes
payable and long-term debt net of proceeds from notes payable
and long-term debt and issuance of senior notes were
$397.4 million in 2010 versus $865.9 million in 2009
and net borrowing of $712.8 million in 2008. During 2010 we
issued $850.0 million of 5.00% senior notes due 2020
and $650.0 million of 6.20% senior notes due 2040. We
used the net proceeds from the Notes as follows:
(i) $433.7 million to redeem the 6.125% senior
notes due 2014 at a premium of 102.042% ($425.0 million
principal outstanding); (ii) $621.8 million to redeem
the 7.250% senior notes due 2015 at a premium of 103.625%
($600.0 million principal outstanding); and (iii) the
remainder to reduce amounts outstanding under our Credit
Facilities and for general corporate purposes. During 2010, we
also we repaid all borrowings and terminated our accounts
receivable securitization program and we refinanced
$677.4 million and repaid $97.8 million of our
tax-exempt financings.
During 2009, we issued $650.0 million of 5.500% Senior
Notes due 2019 and $600.0 million of 5.250% Senior
Notes due 2021. The primary use of proceeds from the notes
together with draws on our Credit Facilities was to purchase and
retire: (i) $325.5 million of varied senior notes
maturing in 2010 and 2011 pursuant to our September 2009 tender
offer; (ii) $450.0 million of 7.875% of Senior Notes
due 2013; (iii) $400.0 million of 7.375% Senior
Notes due 2014; (iv) $230.0 million of
4.250% Senior Subordinated Convertible Debentures due 2034
and; (v) repurchase certain of our senior notes maturing in
2010 and 2011 in the secondary market. Additionally, our senior
unsecured notes bearing interest at a fixed rate of 7.125%
matured during 2009. We repaid the remaining principal balance
of $99.3 million in May 2009. Net borrowings reflected in
our cash flows provided by financing activities in 2008 were
primarily related to the Allied acquisition. We used proceeds
from our revolver to refinance extensions of credit under
Allieds senior credit facility, to pay fees and expenses
in connection therewith, and to pay fees and expenses incurred
in connection with the acquisition.
Premiums and fees paid to issue and retire senior
notes. Cash premiums and fees paid in connection with
the issuance of our 2020 and 2040 notes, premiums paid for note
redemptions and fees paid to issue tax-exempt indebtedness were
$56.6 million during 2010. In connection with the issuance
of our senior notes as well as purchasing and retiring certain
indebtedness in 2009, we incurred cash premiums and fees
totaling $61.6 million.
58
Purchase of common stock for treasury. From 2000
through 2008, our board of directors authorized the repurchase
of up to $2.6 billion of our common stock. As of
December 31, 2008, we had paid $2.3 billion to
repurchase 82.6 million shares of our common stock, of
which $138.4 million was paid during 2008 to repurchase
4.6 million shares. The stock repurchase program was
suspended in the second quarter of 2008 due to the pending
Allied acquisition. In November 2010, our board of directors
approved a share repurchase program pursuant to which we may
repurchase up to $400.0 million of our outstanding shares
of common stock through December 31, 2011. As of
December 31, 2010, we have repurchased 1.4 million
shares for $41.1 million at a weighted average cost per
share of $28.46. We expect to use the remaining funds under this
program to repurchase shares during 2011.
Cash dividends paid. We initiated a quarterly cash
dividend in July 2003. The dividend has been increased from time
to time thereafter. In July 2010, the board of directors
approved an increase in the quarterly dividend to $0.20 per
share. Dividends paid were $294.6 million,
$288.3 million and $128.3 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Financial
Condition
As of December 31, 2010, we had $88.3 million of cash
and cash equivalents, and $172.8 million of restricted cash
deposits and restricted marketable securities, including
$39.8 million of restricted cash held for capital
expenditures under certain debt facilities.
Our $1.0 billion revolving credit facility due April 2012
and our $1.75 billion revolving credit facility due
September 2013 (collectively, Credit Facilities) bear interest
at a Base Rate, or a Eurodollar Rate, plus an applicable margin
based on our Debt Ratings (all as defined in the agreements). As
of December 31, 2010 and 2009, the interest rate for our
borrowings under our Credit Facilities was 1.56% and 1.62%,
respectively. Our Credit Facilities are also subject to facility
fees based on applicable rates defined in the agreements and the
aggregate commitments, regardless of usage. Availability under
our Credit Facilities can be used for working capital, capital
expenditures, letters of credit and other general corporate
purposes. We had $75.0 million and $300.0 million of
Eurodollar Rate borrowings and nil and $15.4 million of
Base Rate borrowings as of December 31, 2010 and 2009,
respectively. We had $1,037.5 million and
$1,634.0 million of letters of credit utilizing
availability under our Credit Facilities, leaving
$1,637.5 million and $800.6 million of availability
under our Credit Facilities at December 31, 2010 and 2009,
respectively.
The agreements governing our Credit Facilities require us to
comply with certain financial and other covenants. We can pay
dividends and repurchase common stock if we are in compliance
with these covenants. Compliance with these covenants is a
condition for any incremental borrowings under our Credit
Facilities and failure to meet these covenants would enable the
lenders to require repayment of any outstanding loans (which
would adversely affect our liquidity). At December 31,
2010, our EBITDA to interest ratio was 4.64 compared to the 3.00
minimum required by the covenants, and our total debt to EBITDA
ratio was 2.85 compared to the 3.25 maximum allowed by the
covenants. At December 31, 2010, we were in compliance with
the covenants of the Credit Facilities, and we expect to be in
compliance during 2011.
EBITDA, which is a non-GAAP measure, is calculated as defined in
our Credit Facility agreements. In this context, EBITDA is used
solely to provide information regarding the extent to which we
are in compliance with debt covenants and is not comparable to
EBITDA used by other companies or used by us for other purposes.
In March 2010, we issued $850.0 million of
5.00% senior notes due 2020 (the 2020 Notes) and
$650.0 million of 6.20% senior notes due 2040 (the
2040 Notes, and, together with the 2020 Notes, the Notes). The
Notes are general senior unsecured obligations and mature on
March 1, 2020 (in the case of the 2020 Notes) and
March 1, 2040 (in the case of the 2040 Notes). Interest is
payable semi-annually on March 1 and September 1, beginning
September 1, 2010. The Notes are guaranteed by each of our
subsidiaries that also guarantees our Credit Facilities. These
guarantees are general senior unsecured obligations of our
subsidiary guarantors.
We used the net proceeds from the Notes as follows:
(i) $433.7 million to redeem the 6.125% senior
notes due 2014 at a premium of 102.042% ($425.0 million
principal outstanding); (ii) $621.8 million to redeem
the
59
7.250% senior notes due 2015 at a premium of 103.625%
($600.0 million principal outstanding); and (iii) the
remainder to reduce amounts outstanding under our Credit
Facilities and for general corporate purposes. We incurred a
loss of $132.1 million for premiums paid to repurchase
debt, charges for unamortized debt discounts and professional
fees paid to effectuate the repurchase of the senior notes.
In March 2010, we repaid all borrowings and terminated our
accounts receivable securitization program with two financial
institutions that allowed us to borrow up to $300.0 million
on a revolving basis under loan agreements secured by
receivables. We recorded a loss on extinguishment of debt of
$0.2 million related to unamortized deferred issuance costs
associated with terminating this program.
To manage risk associated with fluctuations in interest rates,
we have entered into interest rate swap agreements with
investment grade-rated financial institutions. Our outstanding
swap agreements have a total notional value of
$210.0 million and require us to pay interest at floating
rates based on changes in LIBOR and receive interest at a fixed
rate of 6.75%. Our swap agreements mature in August 2011.
At December 31, 2010, we had $1,151.8 million of
tax-exempt bonds and other tax-exempt financings outstanding.
Borrowings under these bonds and other financings bear interest
based on fixed or floating interest rates at prevailing market
rates ranging from 0.28% to 8.25% at December 31, 2010 and
have maturities ranging from 2012 to 2035. As of
December 31, 2010, we had $39.8 million of restricted
cash related to proceeds from tax-exempt bonds and other
tax-exempt financings. This restricted cash will be used to
reimburse capital expenditures under the terms of the agreements.
During the year ended December 31, 2010, we refinanced
$677.4 million and repaid $97.8 million of our
tax-exempt financings resulting in a loss on extinguishment of
debt of $28.5 million related to charges for unamortized
debt discounts and professional fees paid to effectuate these
transactions.
We intend to use excess cash on hand and cash from operating
activities to fund capital expenditures, acquisitions, dividend
payments, share repurchases and debt repayments. Debt repayments
may include purchases of our outstanding indebtedness in the
secondary market or otherwise. We believe that our excess cash,
cash from operating activities and proceeds from our revolving
credit facilities provide us with sufficient financial resources
to meet our anticipated capital requirements and maturing
obligations as they come due.
In the future we may choose to voluntarily retire certain
portions of our outstanding debt before their maturity dates
using cash from operations or additional borrowings. We may also
explore opportunities in capital markets to fund redemptions
should market conditions be favorable. Any early extinguishment
of debt may result in an impairment charge in the period in
which the debt is repurchased and retired. The loss on early
extinguishment of debt relates to premiums paid to effectuate
the repurchase and the relative portion of unamortized note
discounts and debt issue costs.
Fuel
Hedges
We use derivative instruments designated as cash flow hedges to
manage our exposure to changes in diesel fuel prices. We have
entered into multiple agreements related to forecasted diesel
fuel purchases. The agreements qualified for, and were
designated as, effective hedges of changes in the prices of
forecasted diesel fuel purchases (fuel hedges).
60
The following fuel hedges were outstanding during 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
|
|
|
|
|
|
(in Gallons
|
|
Contract Price
|
Inception Date
|
|
Commencement Date
|
|
Termination Date
|
|
per Month)
|
|
per Gallon
|
|
January 26, 2007
|
|
January 5, 2009
|
|
December 28, 2009
|
|
|
500,000
|
|
|
$2.83
|
January 26, 2007
|
|
January 4, 2010
|
|
December 27, 2010
|
|
|
500,000
|
|
|
2.81
|
November 5, 2007
|
|
January 5, 2009
|
|
December 30, 2013
|
|
|
60,000
|
|
|
3.28
|
March 17, 2008
|
|
January 5, 2009
|
|
December 31, 2012
|
|
|
50,000
|
|
|
3.72
|
March 17, 2008
|
|
January 5, 2009
|
|
December 31, 2012
|
|
|
50,000
|
|
|
3.74
|
September 22, 2008
|
|
January 1, 2009
|
|
December 31, 2011
|
|
|
150,000
|
|
|
4.16 - 4.17
|
July 10, 2009
|
|
January 1, 2010
|
|
December 31, 2010
|
|
|
100,000
|
|
|
2.84
|
July 10, 2009
|
|
January 1, 2011
|
|
December 31, 2011
|
|
|
100,000
|
|
|
3.05
|
July 10, 2009
|
|
January 1, 2012
|
|
December 31, 2012
|
|
|
100,000
|
|
|
3.20
|
If the national U.S. on-highway average price for a gallon
of diesel fuel (average price) as published by the Department of
Energy exceeds the contract price per gallon, we receive the
difference between the average price and the contract price
(multiplied by the notional gallons) from the counter-party. If
the national U.S. on-highway average price for a gallon of
diesel fuel is less than the contract price per gallon, we pay
the difference to the counter-party.
The fair values of our fuel hedges are obtained from third-party
counter-parties and are determined using standard option
valuation models with assumptions about commodity prices being
based on those observed in underlying markets (Level 2 in
the fair value hierarchy). The aggregated fair values of the
outstanding fuel hedges at December 31, 2010 and 2009 were
current assets of $1.6 million and $3.2 million,
respectively, and accrued liabilities of $1.9 million and
$4.9 million, respectively, and have been recorded in other
current assets and other accrued liabilities in our consolidated
balance sheets, respectively.
The effective portions of the changes in fair values as of
December 31, 2010 and 2009, net of tax, of
$0.2 million and $1.0 million, respectively, have been
recorded in stockholders equity as components of
accumulated other comprehensive income. The ineffective portions
of the changes in fair values as of December 31, 2010, 2009
and 2008 were immaterial and have been recorded in other income
(expense), net in our consolidated statements of income.
Realized (losses) gains of $(2.0) million,
$(7.3) million and $5.9 million related to these fuel
hedges are included in cost of operations in our consolidated
statements of income for the years ended December 31, 2010,
2009 and 2008, respectively.
During 2010, approximately 7% of our fuel volume purchases were
hedged with swap agreements. Additionally, we were able to
recover approximately 66% of our fuel costs with fuel recovery
fees from certain of our customers.
Recycling
Commodity Hedges
Revenue from sale of recycling commodities is primarily from
sales of old corrugated cardboard (OCC) and old newspaper (ONP).
We use derivative instruments such as swaps and costless collars
designated as cash flow hedges to manage our exposure to changes
in prices of these commodities. We have entered into multiple
agreements related to the forecasted OCC and ONP sales. The
agreements qualified for, and were designated as, effective
hedges of changes in the prices of certain forecasted commodity
sales (commodity hedges).
61
The following commodity swaps were outstanding during 2010 and
2009:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Contract Price
|
|
|
|
|
|
|
Transaction
|
|
(in Short Tons
|
|
Per Short
|
Inception Date
|
|
Commencement Date
|
|
Termination Date
|
|
Hedged
|
|
per Month)
|
|
Ton
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
$
|
105.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
102.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
106.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
103.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
106.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
106.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
110.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
103.00
|
|
December 8, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
ONP
|
|
|
2,000
|
|
|
|
76.00
|
|
December 10, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
2,000
|
|
|
|
82.00
|
|
December 11, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
2,000
|
|
|
|
82.00
|
|
January 5, 2010
|
|
January 1, 2010
|
|
December 31, 2011
|
|
ONP
|
|
|
2,000
|
|
|
|
84.00
|
|
January 6, 2010
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
1,000
|
|
|
|
90.00
|
|
January 27, 2010
|
|
February 1, 2010
|
|
January 31, 2012
|
|
OCC
|
|
|
1,000
|
|
|
|
90.00
|
|
September 23, 2010
|
|
January 1, 2011
|
|
December 31, 2011
|
|
ONP
|
|
|
1,000
|
|
|
|
95.00
|
|
September 28, 2010
|
|
January 1, 2011
|
|
December 31, 2011
|
|
ONP
|
|
|
1,000
|
|
|
|
95.00
|
|
October 11, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
1,500
|
|
|
|
115.00
|
|
If the price per short ton of the hedging instrument (average
price) as reported on the Official Board Market is less than the
contract price per short ton, we receive the difference between
the average price and the contract price (multiplied by the
notional short tons) from the counter-party. If the price of the
commodity exceeds the contract price per short ton, we pay the
difference to the counter-party.
The fair values of our commodity swaps are obtained from
third-party counter-parties and are determined using standard
option valuation models with assumptions about commodity prices
being based on those observed in underlying markets
(Level 2 in the fair value hierarchy).
On December 8, 2010, we entered into a two-year costless
collar agreement on forecasted sales of 10,000 short tons of OCC
a month. The agreement involves combining a purchased put option
giving us the right to sell 10,000 short tons of OCC monthly for
24 months at an established floor strike price with a
written call option obligating us to deliver 10,000 short tons
of OCC monthly for 24 months at an established cap strike
price. The puts and calls have the same settlement dates, are
net settled in cash on such date and have the same terms to
expiration. The contemporaneous combination of options resulted
in no net premium for us and represents a costless collar. Under
the agreement, we will not make or receive any payment, as long
as the settlement price is between the floor price and cap
price. However, if the settlement price is above the cap, we
would be required to pay the counterparty an amount equal to the
excess of the settlement price over the cap times the monthly
volumes hedged. Also, if the settlement price is below the
floor, the counterparty would be required to pay us the deficit
of the settlement price below the floor times the monthly
volumes hedged. The objective of this agreement is to reduce the
variability of the cash flows of the forecasted sales of OCC
between two designated strike prices.
The following costless collar hedges were outstanding at
December 31, 2010:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floor
|
|
Cap
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Strike Price
|
|
Strike Price
|
|
|
|
|
|
|
Transaction
|
|
(in Short Tons
|
|
Per Short
|
|
Per Short
|
Inception Date
|
|
Commencement Date
|
|
Termination Date
|
|
Hedged
|
|
per Month)
|
|
Ton
|
|
Ton
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
$
|
80.00
|
|
|
$
|
180.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
86.00
|
|
|
|
210.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
81.00
|
|
|
|
190.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
85.00
|
|
|
|
195.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
87.00
|
|
|
|
195.00
|
|
62
The costless collar hedges are recorded on the balance sheet at
fair value. The fair values of the costless collars are obtained
from the third-party counter-party and are determined using
standard option valuation models with assumptions about
commodity prices based upon forward commodity price curves in
underlying markets (Level 2 in the fair value hierarchy).
The aggregated fair values of the outstanding commodity hedges
at December 31, 2010 and 2009 were current assets of
$1.9 million and $1.8 million, respectively, and
current liabilities of $6.5 million and $0.8 million,
respectively, and have been recorded in other current assets and
other accrued liabilities in our consolidated balance sheets,
respectively.
The effective portions of the changes in fair values of our
commodity hedges as of December 31, 2010 and 2009, net of
tax, of $(2.6) million and $0.6 million have been
recorded in stockholders equity as a component of
accumulated other comprehensive income. The ineffective portions
of the changes in fair values as of December 31, 2010 and
2009 were immaterial and have been recorded in other income
(expense), net in our consolidated statements of income.
Approximately 20% of our 2010 tonnage sales volume of
commodities were subject to cash flow hedges.
Contractual
Obligations
The following table summarizes our contractual obligations as of
December 31, 2010 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes Payable,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Leases
|
|
|
Final Capping,
|
|
|
|
|
|
Unconditional
|
|
|
|
|
Year Ending
|
|
Operating
|
|
|
and Other Long-
|
|
|
Closure and
|
|
|
|
|
|
Purchase
|
|
|
|
|
December 31,
|
|
Leases
|
|
|
Term Debt
|
|
|
Post-Closure
|
|
|
Remediation
|
|
|
Commitments
|
|
|
Total
|
|
|
2011
|
|
$
|
34.6
|
|
|
$
|
872.0
|
|
|
$
|
93.9
|
|
|
$
|
88.1
|
|
|
$
|
219.8
|
|
|
$
|
1,308.4
|
|
2012
|
|
|
25.3
|
|
|
|
80.2
|
|
|
|
105.8
|
|
|
|
76.1
|
|
|
|
93.5
|
|
|
|
380.9
|
|
2013
|
|
|
20.5
|
|
|
|
40.6
|
|
|
|
98.9
|
|
|
|
61.9
|
|
|
|
70.4
|
|
|
|
292.3
|
|
2014
|
|
|
16.6
|
|
|
|
16.0
|
|
|
|
95.6
|
|
|
|
42.1
|
|
|
|
57.0
|
|
|
|
227.3
|
|
2015
|
|
|
14.2
|
|
|
|
25.7
|
|
|
|
95.4
|
|
|
|
29.5
|
|
|
|
25.6
|
|
|
|
190.4
|
|
Thereafter
|
|
|
65.0
|
|
|
|
6,008.6
|
|
|
|
4,559.9
|
|
|
|
430.9
|
|
|
|
257.7
|
|
|
|
11,322.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
176.2
|
|
|
$
|
7,043.1
|
|
|
$
|
5,049.5
|
|
|
$
|
728.6
|
|
|
$
|
724.0
|
|
|
$
|
13,721.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We intend to use excess cash on hand and cash from operating
activities to fund capital expenditures, acquisitions, dividend
payments, share repurchases and debt repayments. Debt repayments
may include purchases of our outstanding indebtedness in the
secondary market or otherwise. We believe that our excess cash,
cash from operating activities and proceeds from our revolving
credit facilities provide us with sufficient financial resources
to meet our anticipated capital requirements and maturing
obligations as they come due.
In the future we may choose to voluntarily retire certain
portions of our outstanding debt before their maturity dates
using cash from operations or additional borrowings. We also may
explore opportunities in the capital markets to fund redemptions
should market conditions be favorable.
The present value of capital lease obligations is included in
our consolidated balance sheets.
The estimated remaining final capping, closure and post-closure
and remediation expenditures presented above are not inflated
and not discounted and reflect the estimated future payments for
liabilities incurred and recorded as of December 31, 2010.
Unconditional purchase commitments consist primarily of
(i) disposal related agreements which include fixed or
minimum royalty payments, host agreements and
take-or-pay
and
put-or-pay
agreements and (ii) other obligations including committed
capital expenditures and consulting service agreements.
In addition to the above, we have unrecognized tax benefits at
December 31, 2010 of $222.8 million. Due to the
uncertainty with respect to the timing of future cash flows
associated with the unrecognized tax benefits at
63
December 31, 2010, we are unable to make reasonably
reliable estimates of the timing of any cash settlements.
We also have letters of credit of $1.1 billion, of which
$1.0 billion utilize availability under our Credit
Facilities at December 31, 2010.
Debt
covenants
Our Credit Facilities contain financial covenants. We can pay
dividends and repurchase common stock if we are in compliance
with these covenants. At December 31, 2010, we were in
compliance with all financial and other covenants under our
Credit Facilities. We were also in compliance with the
non-financial covenants in the indentures relating to our senior
notes as of December 31, 2010. We expect to be in
compliance with our covenants during 2011.
Failure to comply with the financial and other covenants under
our Credit Facilities, as well as the occurrence of certain
material adverse events, would constitute defaults and would
allow the lenders under our Credit Facilities to accelerate the
maturity of all indebtedness under the related agreements. This
could also have an adverse impact on the availability of
financial assurances. In addition, maturity acceleration on our
Credit Facilities constitutes an event of default under our
other debt instruments, including our senior notes, and,
therefore, our senior notes would also be subject to
acceleration of maturity. If such acceleration were to occur, we
would not have sufficient liquidity available to repay the
indebtedness. We would likely have to seek an amendment under
our Credit Facilities for relief from the financial covenants or
repay the debt with proceeds from the issuance of new debt or
equity, or asset sales, if necessary. We may be unable to amend
our Credit Facilities or raise sufficient capital to repay such
obligations in the event the maturities are accelerated.
Financial
assurance
We must provide financial assurance to governmental agencies and
a variety of other entities under applicable environmental
regulations relating to our landfill operations for capping,
closure and post-closure costs, and related to our performance
under certain collection, landfill and transfer station
contracts. We satisfy these financial assurance requirements by
providing surety bonds, letters of credit, insurance policies or
trust deposits. The amount of the financial assurance
requirements for capping, closure and post-closure costs is
determined by applicable state environmental regulations. The
financial assurance requirements for capping, closure and
post-closure costs may be associated with a portion of the
landfill or the entire landfill. Generally, states will require
a third-party engineering specialist to determine the estimated
capping, closure and post-closure costs that are used to
determine the required amount of financial assurance for a
landfill. The amount of financial assurance required can, and
generally will, differ from the obligation determined and
recorded under U.S. GAAP. The amount of the financial
assurance requirements related to contract performance varies by
contract.
Additionally, we must provide financial assurance for our
insurance program and collateral for certain performance
obligations. We do not expect a material increase in financial
assurance requirements during 2011, although the mix of
financial assurance instruments may change.
These financial instruments are issued in the normal course of
business and are not considered company indebtedness. Because we
currently have no liability for these financial assurance
instruments, they are not reflected in our consolidated balance
sheets. However, we record capping, closure and post-closure
liabilities and self-insurance liabilities as they are incurred.
The underlying obligations of the financial assurance
instruments, in excess of those already reflected in our
consolidated balance sheets, would be recorded if it is probable
that we would be unable to fulfill our related obligations. We
do not expect this to occur.
Off-Balance
Sheet Arrangements
We have no off-balance sheet debt or similar obligations, other
than financial assurance instruments and operating leases, that
are not classified as debt. We do not guarantee any third-party
debt.
64
Free Cash
Flow
We define free cash flow, which is not a measure determined in
accordance with U.S. GAAP, as cash provided by operating
activities less purchases of property and equipment, plus
proceeds from sales of property and equipment as presented in
our consolidated statements of cash flows.
Our free cash flow for the years ended December 31, 2010,
2009 and 2008 is calculated as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash provided by operating activities
|
|
$
|
1,433.7
|
|
|
$
|
1,396.5
|
|
|
$
|
512.2
|
|
Purchases of property and equipment
|
|
|
(794.7
|
)
|
|
|
(826.3
|
)
|
|
|
(386.9
|
)
|
Proceeds from sales of property and equipment
|
|
|
37.4
|
|
|
|
31.8
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
676.4
|
|
|
$
|
602.0
|
|
|
$
|
133.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For a discussion of the changes in the components of free cash
flow, you should read our discussion regarding Cash Flows
Provided By Operating Activities and Cash Flows Used In
Investing Activities contained elsewhere in this
Form 10-K.
Purchases of property and equipment as reflected in our
consolidated statements of cash flows and as presented in the
free cash flow table above represent amounts paid during the
period for such expenditures. A reconciliation of property and
equipment reflected in the consolidated statements of cash flows
to property and equipment received during the period for the
years ended December 31, 2010, 2009 and 2008 is as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Purchases of property and equipment per the consolidated
statements of cash flows
|
|
$
|
794.7
|
|
|
$
|
826.3
|
|
|
$
|
386.9
|
|
Adjustments for property and equipment received during the prior
period but paid for in the following period, net
|
|
|
53.9
|
|
|
|
36.3
|
|
|
|
(14.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment received during the period
|
|
$
|
848.6
|
|
|
$
|
862.6
|
|
|
$
|
372.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The adjustments noted above do not affect our net change in cash
and cash equivalents as reflected in our consolidated statements
of cash flows.
We believe that the presentation of free cash flow provides
useful information regarding our recurring cash provided by
operating activities after expenditures for property and
equipment received, plus proceeds from sales of property and
equipment. It also demonstrates our ability to execute our
financial strategy, which includes reinvesting in existing
capital assets to ensure a high level of customer service,
investing in capital assets to facilitate growth in our customer
base and services provided, maintaining our investment grade
rating and minimizing debt, paying cash dividends and
repurchasing common stock, and maintaining and improving our
market position through business optimization. In addition, free
cash flow is a key metric used to determine compensation. The
presentation of free cash flow has material limitations. Free
cash flow does not represent our cash flow 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
definition of free cash flow may not be comparable to similarly
titled measures presented by other companies.
Contingencies
For a description of our contingencies, see Note 10,
Income Taxes, and Note 16, Commitments and
Contingencies, to our consolidated financial statements
included under Item 8 of this
Form 10-K.
Critical
Accounting Judgments and Estimates
Our consolidated financial statements have been prepared in
accordance with U.S. GAAP and necessarily include certain
estimates and judgments made by management. The following is a
list of accounting policies
65
that we believe are the most critical in understanding our
consolidated financial position, results of operations or cash
flows and that may require management to make subjective or
complex judgments about matters that are inherently uncertain.
Such critical accounting policies, estimates and judgments are
applicable to all of our operating segments.
We have noted examples of the residual accounting and business
risks inherent in the accounting for these areas. Residual
accounting and business risks are defined as the inherent risks
that we face after the application of our policies and processes
that are generally outside of our control or ability to forecast.
Accounting
for the Allied Acquisition
Acquisitions of businesses are accounted for using the purchase
method of accounting. The purchase method of accounting requires
that the purchase price paid for an acquisition be allocated to
the assets acquired and liabilities assumed based on their
estimated fair values as of the effective date of the
acquisition, with the excess of the purchase price over the net
assets acquired being recorded as goodwill. The consolidated
financial statements of the acquirer include the operating
results of the acquired business from the date of the
acquisition, and are not retroactively restated to include the
historical position or the results of operations of the acquired
business. These estimates are revised during the allocation
period when the information necessary to finalize the fair value
estimates is received and analyzed, or if information regarding
contingencies becomes available to further define and quantify
the assets and liabilities acquired.
We have completed valuing all of the assets acquired and
liabilities assumed in the Allied acquisition. Adjustments, if
any, to our estimates of fair values and the resulting purchase
price allocation in future periods will be reflected in our
consolidated statement of income. The significant areas of
accounting where estimates of fair values are reflected in our
consolidated financial statements include landfills and other
property and equipment, other intangible assets, landfill asset
retirement obligations, legal and environmental reserves,
self-insurance reserves, income taxes, other non-current assets
and long-term obligations, and assets held for sale. Our
consolidated financial statements also include our estimates of
restructuring costs incurred through December 31, 2010, a
portion of which will be paid in future periods.
Residual risks:
|
|
|
The residual risks identified below related to critical
accounting judgments and estimates are relevant to the fair
value estimation processes for acquisitions. For discussion of
other significant residual risks inherent in the accounting for
acquisitions, see Item 1A. Risk Factors.
|
Landfill
Accounting
Landfill operating costs are treated as period expenses and are
not discussed further herein.
Our landfill assets and liabilities fall into the following two
categories, each of which requires accounting judgments and
estimates:
|
|
|
Landfill development costs that are capitalized as an asset.
|
|
|
Landfill retirement obligations relating to our capping, closure
and post-closure liabilities which result in a corresponding
landfill retirement asset.
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Landfill Development Costs
We use life-cycle accounting and the
units-of-consumption
method to recognize landfill development costs over the life of
the site. In life-cycle accounting, all costs to acquire and
construct a site are capitalized, and charged to expense based
on the consumption of cubic yards of available airspace.
Obligations associated with final capping, closure and
post-closure are also capitalized, and amortized on a
units-of-consumption
basis as airspace is consumed. Cost and airspace estimates are
developed at least annually by engineers.
Site permits. In order to develop, construct and
operate a landfill, we are required to obtain permits from
various regulatory agencies at the local, state and federal
levels. The permitting process requires an initial site study to
determine whether the location is feasible for landfill
operations. The initial studies are reviewed by
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our environmental management group and then submitted to the
regulatory agencies for approval. During the development stage
we capitalize certain costs that we incur after site selection
but prior to the receipt of all required permits if we believe
that it is probable that the site will be permitted.
Residual risks:
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Changes in legislative or regulatory requirements may cause
changes to the landfill site permitting process. These changes
could make it more difficult and costly to obtain and maintain a
landfill permit.
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Studies performed could be inaccurate, which could result in the
denial or revocation of a permit and changes to accounting
assumptions. Conditions could exist that were not identified in
the study, which may make the location not feasible for a
landfill and could result in the denial of a permit. Denial or
revocation of a permit could impair the recorded value of the
landfill asset.
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Actions by neighboring parties, private citizen groups or others
to oppose our efforts to obtain, maintain or expand permits
could result in denial, revocation or suspension of a permit,
which could adversely impact the economic viability of the
landfill and could impair the recorded value of the landfill. As
a result of opposition to our obtaining a permit, improved
technical information as a project progresses, or changes in the
anticipated economics associated with a project, we may decide
to reduce the scope of or abandon a project, which could result
in an asset impairment.
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Technical landfill design. Upon receipt of initial
regulatory approval, technical landfill designs are prepared.
The technical designs, which include the detailed specifications
to develop and construct all components of the landfill
including the types and quantities of materials that will be
required, are reviewed by our environmental management group.
The technical designs are submitted to the regulatory agencies
for approval. Upon approval of the technical designs, the
regulatory agencies issue permits to develop and operate the
landfill.
Residual risks:
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Changes in legislative or regulatory requirements may require
changes in the landfill technical design. These changes could
make it more difficult and costly to meet new design standards.
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Technical design requirements, as approved, may need
modifications at some future point in time.
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Technical designs could be inaccurate and could result in
increased construction costs, difficulty in obtaining a permit
or the use of rates to recognize the amortization of landfill
development costs and asset retirement obligations that are not
appropriate.
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Permitted and probable landfill disposal
capacity. Included in the technical designs are factors
that determine the ultimate disposal capacity of the landfill.
These factors include the area over which the landfill will be
developed, such as the depth of excavation, the height of the
landfill elevation and the angle of the side-slope construction.
The disposal capacity of the landfill is calculated in cubic
yards. This measurement of volume is then converted to a
disposal capacity expressed in tons based on a site-specific
expected density to be achieved over the remaining operating
life of the landfill.
Residual risks:
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Estimates of future disposal capacity may change as a result of
changes in legislative or regulatory design requirements.
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The density of waste may vary due to variations in operating
conditions, including waste compaction practices, site design,
climate and the nature of the waste.
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Capacity is defined in cubic yards but waste received is
measured in tons. The number of tons per cubic yard varies by
type of waste and our rate of compaction.
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Development costs. The types of costs that are
detailed in the technical design specifications generally
include excavation, natural and synthetic liners, construction
of leachate collection systems, installation of methane gas
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collection systems and monitoring probes, installation of
groundwater monitoring wells, construction of leachate
management facilities and other costs associated with the
development of the site. We review the adequacy of our cost
estimates on an annual basis by comparing estimated costs with
third-party bids or contractual arrangements, reviewing the
changes in year over year cost estimates for reasonableness, and
comparing our resulting development cost per acre with prior
period costs. These development costs, together with any costs
incurred to acquire, design and permit the landfill, including
capitalized interest, are recorded to the landfill asset on the
balance sheet as incurred.
Residual risk:
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Actual future costs of construction materials and third-party
labor could differ from the costs we have estimated because of
the availability of the required materials and labor. Technical
designs could be altered due to unexpected operating conditions,
regulatory changes or legislative changes.
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Landfill development asset amortization. In order to
match the expense related to the landfill asset with the revenue
generated by the landfill operations, we amortize the landfill
development asset over its operating life on a per-ton basis as
waste is accepted at the landfill. The landfill asset is fully
amortized at the end of a landfills operating life. The
per-ton rate is calculated by dividing the sum of the landfill
development asset net book value plus estimated future
development costs (as described above) for the landfill by the
landfills estimated remaining disposal capacity. The
expected future development costs are not inflated or
discounted, but rather expressed in nominal dollars. This rate
is applied to each ton accepted at the landfill to arrive at
amortization expense for the period.
Amortization rates are influenced by the original cost basis of
the landfill, including acquisition costs, which in turn is
determined by geographic location and market values. We secure
significant landfill assets through business acquisitions and
value them at the time of acquisition based on fair value.
Amortization rates are also influenced by site-specific
engineering and cost factors.
Residual risk:
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Changes in our future development cost estimates or our disposal
capacity will normally result in a change in our amortization
rates and will impact amortization expense prospectively. An
unexpected significant increase in estimated costs or reduction
in disposal capacity could affect the ongoing economic viability
of the landfill and result in asset impairment.
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On at least an annual basis, we update the estimates of future
development costs and remaining disposal capacity for each
landfill. These costs and disposal capacity estimates are
reviewed and approved by senior operations management annually.
Changes in cost estimates and disposal capacity are reflected
prospectively in the landfill amortization rates that are
updated annually.
Landfill
Asset Retirement Obligations
We have two types of retirement obligations related to
landfills: (1) capping and (2) closure and
post-closure.
Obligations associated with final capping activities that occur
during the operating life of the landfill are recognized on a
units-of-consumption
basis as airspace is consumed within each discrete capping
event. Obligations related to closure and post-closure
activities that occur after the landfill has ceased operations
are recognized on a
units-of-consumption
basis as airspace is consumed throughout the entire life of the
landfill. Landfill retirement obligations are capitalized as the
related liabilities are recognized and amortized using the
units-of-consumption
method over the airspace consumed within the capping event or
the airspace consumed within the entire landfill, depending on
the nature of the obligation. All obligations are initially
measured at estimated fair value. Fair value is calculated on a
present value basis using an inflation rate and our
credit-adjusted, risk-free rate in effect at the time the
liabilities were incurred. Future costs for final capping,
closure and post-closure are developed at least annually by
engineers, and are inflated to future value using estimated
future payment dates and inflation rate projections.
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Landfill capping. As individual areas within each
landfill reach capacity, we are required to cap and close the
areas in accordance with the landfill site permit. These
requirements are detailed in the technical design of the
landfill site process previously described.
Closure and post-closure. Closure costs are costs
incurred after a landfill site stops receiving waste, but prior
to being certified as closed. After the entire landfill site has
reached capacity and is certified closed, we are required to
maintain and monitor the site for a post-closure period, which
generally extends for 30 years. Costs associated with
closure and post-closure requirements generally include
maintenance of the site and the monitoring of methane gas
collection systems and groundwater systems, and other activities
that occur after the site has ceased accepting waste. Costs
associated with post-closure monitoring generally include
groundwater sampling, analysis and statistical reports,
third-party labor associated with gas system operations and
maintenance, transportation and disposal of leachate, and
erosion control costs related to the final cap.
The initial liabilities recorded as part of the Allied
acquisition were recorded using provisional amounts based upon
information available at that time. During 2009, we gathered and
assessed new information obtained about the facts and
circumstances surrounding our remediation sites, and as a result
increased the fair value of our closure and post-closure
reserves by $72.3 million. Any further adjustments to our
reserves resulting in changes in estimate or settlements will be
reflected in our consolidated statement of income in the periods
in which such adjustments become known.
Landfill retirement obligation liabilities and
assets. Estimates of the total future costs required to
cap, close and monitor the landfill as specified by each
landfill permit are updated annually. The estimates include
inflation, the specific timing of future cash outflows, and the
anticipated waste flow into the capping events. Our cost
estimates are inflated to the period of performance using an
estimate of inflation, which is updated annually and is based
upon the ten year average consumer price index (2.5% in both
2010 and 2009).
The present value of the remaining capping costs for specific
capping events and the remaining closure and post-closure costs
for the landfill are recorded as incurred on a per-ton basis.
These liabilities are incurred as disposal capacity is consumed
at the landfill.
Capping, closure and post-closure liabilities are recorded in
layers and discounted using our credit-adjusted risk-free rate
in effect at the time the obligation is incurred (5.5% in 2010
and 7.5% in 2009).
Retirement obligations are increased each year to reflect the
passage of time by accreting the balance at the weighted average
credit-adjusted risk-free rate that was used to calculate each
layer of the recorded liabilities. This accretion is charged to
operating expenses. Actual cash expenditures reduce the asset
retirement obligation liabilities as they are made.
Corresponding retirement obligation assets are recorded for the
same value as the additions to the capping, closure and
post-closure liabilities. The retirement obligation assets are
amortized to expense on a per-ton basis as disposal capacity is
consumed. The per-ton rate is calculated by dividing the sum of
each of the recorded retirement obligation assets net book
value and expected future additions to the retirement obligation
asset by the remaining disposal capacity. A per-ton rate is
determined for each separate capping event based on the disposal
capacity relating to that event. Closure and post-closure
per-ton rates are based on the total disposal capacity of the
landfill.
Residual risks:
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Changes in legislative or regulatory requirements, including
changes in capping, closure activities or post-closure
monitoring activities, types and quantities of materials used,
or term of post-closure care, could cause changes in our cost
estimates.
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Changes in the landfill retirement obligation due to changes in
the anticipated waste flow, changes in airspace compaction
estimates or changes in the timing of expenditures for closed
landfills and fully incurred but unpaid capping events are
recorded in results of operations prospectively. This could
result in unanticipated increases or decreases in expense.
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Actual timing of disposal capacity utilization could differ from
projected timing, causing differences in timing of when
amortization and accretion expense is recognized for capping,
closure and post-closure liabilities.
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Changes in inflation rates could impact our actual future costs
and our total liabilities.
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Changes in our capital structure or market conditions could
result in changes to the credit-adjusted risk-free rate used to
discount the liabilities, which could cause changes in future
recorded liabilities, assets and expense.
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Amortization rates could change in the future based on the
evaluation of new facts and circumstances relating to landfill
capping design, post-closure monitoring requirements, or the
inflation or discount rate.
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On an annual basis, we update our estimates of future capping,
closure and post-closure costs and of future disposal capacity
for each landfill. Revisions in estimates of our costs or timing
of expenditures are recognized immediately as increases or
decreases to the capping, closure and post-closure liabilities
and the corresponding retirement obligation assets. Changes in
the assets result in changes to the amortization rates which are
applied prospectively, except for fully incurred capping events
and closed landfills, where the changes are recorded immediately
in results of operations since the associated disposal capacity
has already been consumed.
In connection with the 2008 annual review of our calculations
with respect to landfill asset retirement obligations, we made a
change in estimate, which is considered to be a change in
accounting estimate that is effected by a change in accounting
principle. This change, which we believe is preferable, was made
to better align the estimated amount of waste placed in an area
to be capped (which is used to calculate our capping rates) with
the physical operation of our landfills. The expected costs
related to our capping events did not change and we will
continue to use separate rates for each capping event. This
change resulted in a $32.6 million decrease in our capping
asset retirement obligations and related assets. These assets
will be amortized to expense prospectively as a change in
estimate. This change in estimate will not have a material
impact on our consolidated financial position, results of
operations or cash flows.
Permitted and probable disposal capacity. As
described previously, disposal capacity is determined by the
specifications detailed in the landfill permit. We classify this
disposal capacity as permitted. We also include probable
expansion disposal capacity in our remaining disposal capacity
estimates, thus including additional disposal capacity being
sought through means of a permit expansion. Probable expansion
disposal capacity has not yet received final approval from the
applicable regulatory agencies, but we have determined that
certain critical criteria have been met and the successful
completion of the expansion is probable. We have developed six
criteria that must be met before an expansion area is designated
as probable expansion airspace. We believe that satisfying all
of these criteria demonstrates a high likelihood that expansion
airspace that is incorporated in our landfill costing will be
permitted. However, because some of these criteria are
judgmental, they may exclude expansion airspace that will
eventually be permitted or include expansion airspace that will
not be permitted. In either of these scenarios, our
amortization, depletion and accretion expense could change
significantly. Our internal criteria to classify disposal
capacity as probable expansion are as follows:
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We own the land associated with the expansion airspace or
control it pursuant to an option agreement;
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We are committed to supporting the expansion project financially
and with appropriate resources;
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There are no identified fatal flaws or impediments associated
with the project, including political impediments;
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Progress is being made on the project;
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The expansion is attainable within a reasonable time
frame; and
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We believe it is likely the expansion permit will be received.
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After successfully meeting these criteria, the disposal capacity
that will result from the planned expansion is included in our
remaining disposal capacity estimates. Additionally, for
purposes of calculating landfill
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amortization and capping, closure and post-closure rates, we
include the incremental costs to develop, construct, close and
monitor the related probable expansion disposal capacity.
Residual risk:
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We may be unsuccessful in obtaining permits for probable
expansion disposal capacity because of the failure to obtain the
final local, state or federal permits or due to other unknown
reasons. If we are unsuccessful in obtaining permits for
probable expansion disposal capacity, or the disposal capacity
for which we obtain approvals is less than what was estimated,
both our estimated total costs and disposal capacity will be
reduced, which generally increases the rates we charge for
landfill amortization and capping, closure and post-closure
accruals. An unexpected decrease in disposal capacity could also
cause an asset impairment.
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Environmental
Liabilities
We are subject to an array of laws and regulations relating to
the protection of the environment, and we remediate sites in the
ordinary course of our business. Under current laws and
regulations, we may be responsible for environmental remediation
at sites that we either own or operate, including sites that we
have acquired, or sites where we have (or a company that we have
acquired has) delivered waste. Our environmental remediation
liabilities primarily include costs associated with remediating
groundwater, surface water and soil contamination, as well as
controlling and containing methane gas migration and the related
legal costs. To estimate our ultimate liability at these sites,
we evaluate several factors, including the nature and extent of
contamination at each identified site, the required remediation
methods, the apportionment of responsibility among the
potentially responsible parties and the financial viability of
those parties. We accrue for costs associated with environmental
remediation obligations when such costs are probable and
reasonably estimable in accordance with accounting for loss
contingencies. We periodically review the status of all
environmental matters and update our estimates of the likelihood
of and future expenditures for remediation as necessary. Changes
in the liabilities resulting from these reviews are recognized
currently in earnings in the period in which the adjustment is
known. Adjustments to estimates are reasonably possible in the
near term and may result in changes to recorded amounts. We have
not reduced the liabilities we have recorded for recoveries from
other potentially responsible parties or insurance companies.
The environmental liabilities assumed from Allied relate to
impacts at both owned and unowned sites. In the case of owned
sites, we are actively working with the appropriate regulatory
entity under the applicable regulations (typically RCRA or
CERCLA) to characterize and remediate potential issues. At
unowned sites, we are working within the regulatory and
procedural framework established by CERCLA to characterize and
remediate potential issues, in conjunction with other
potentially liable parties at each location. Pursuant to the
purchase method of accounting, we have recorded the
environmental remediation liabilities assumed from Allied based
upon estimates of their fair value, using an estimate of future
cash flows or settlement. Previously, and consistent with our
method of accounting, Allied recorded remediation liabilities
based upon accounting for loss contingencies, however, amounts
recorded under this method are generally not at fair value.
Since the date of acquisition, our process for deriving fair
value for the environmental liabilities assumed from Allied
included first identifying the population of remediation sites
where we are either fully or partially responsible for
remediation or potential remediation. The population of
remediation sites was then stratified into categories based on
(i) the maturity of the issue relative to recognized stages
in the applicable regulation (typically CERCLA or RCRA) and
(ii) the extent of our participation in the remediation
activity. Using these categories, we applied one of the
following multiple estimation processes to quantify fair value:
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For sites with established responsibility but a high level of
uncertainty with the outcome of the remedial process, we
developed multiple remediation scenarios. We then probability
weighted the remediation scenarios to develop a fair value
estimate.
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For sites where the level of responsibility was less defined, we
developed a fair value estimate of the settlement costs based
upon market participant assessments from external legal counsel.
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For sites which we own and are in the earliest stages of the
remedial process, we identified the most applicable standard
remedial techniques and then probability weighted the use of
each technique to develop a fair value estimate.
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For the remaining sites with low levels of uncertainty, we
developed a primary remedial strategy and cost estimate to
determine the fair value of the liability.
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The initial liabilities recorded as part of the Allied
acquisition were recorded using provisional amounts based upon
information available at that time. During 2009, we gathered and
assessed new information obtained about the facts and
circumstances surrounding Allieds remediation sites. In
certain situations, we used external engineers and attorneys to
assist in the development of our fair value estimates. As a
result of the process, we increased the fair value of our
remediation reserves by $181.9 million. Any further
adjustments to our remediation reserves resulting from changes
in estimates or reserve settlements will be reflected currently
in earnings in the periods in which such adjustments become
known.
Residual risks:
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We cannot determine with precision the ultimate amounts of our
environmental remediation liabilities. Our estimates of these
liabilities require assumptions about future events that are
uncertain. Consequently, our estimates could change
substantially as additional information becomes available
regarding the nature or extent of contamination, the required
remediation methods, the final apportionment of responsibility
among the potentially responsible parties identified, the
financial viability of those parties, and the actions of
governmental agencies or private parties with interests in the
matter.
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Actual amounts could differ from the estimated liabilities as a
result of changes in estimated future litigation costs to pursue
the matter to ultimate resolution.
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An unanticipated environmental liability that arises could
result in a material charge to our consolidated statement of
income.
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Self-Insurance
Reserves and Related Costs
Our insurance programs for workers compensation, general
liability, vehicle liability and employee-related health care
benefits are effectively self-insured. Accruals for
self-insurance reserves are based on claims filed and estimates
of claims incurred but not reported. We maintain high
deductibles for commercial general liability, automobile
liability and workers compensation coverage, ranging from
$1.0 million to $3.0 million.
Residual risks:
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Incident rates, including frequency and severity, and other
actuarial assumptions could change causing our current and
future actuarially determined obligations to change, which would
be reflected in our consolidated statement of income in the
period in which such adjustment is known.
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It is possible that recorded reserves may not be adequate to
cover the future payment of claims. Adjustments, if any, to
estimates recorded resulting from ultimate claim payments would
be reflected in the consolidated statements of income in the
periods in which such adjustments are known.
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The settlement costs to discharge our obligations, including
legal and health care costs, could increase or decrease causing
current estimates of our self-insurance reserves to change.
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Loss
Contingencies
We are subject to various legal proceedings, claims and
regulatory matters, the outcomes of which are subject to
significant uncertainty. We determine whether to disclose or
accrue for loss contingencies based on an assessment of whether
the risk of loss is remote, reasonably possible or probable, and
whether it can be reasonably estimated. We analyze our
litigation and regulatory matters based on available information
to assess the potential liabilities. Managements
assessment is developed based on an analysis of possible
outcomes under various strategies. We record and disclose loss
contingencies pursuant to the applicable accounting guidance for
such matter.
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We record losses related to contingencies in cost of operations
or selling, general and administrative expenses, depending on
the nature of the underlying transaction leading to the loss
contingency.
Residual risks:
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Actual costs may vary from our estimates for a variety of
reasons, including differing interpretations of laws, opinions
on culpability and assessments of the amount of damages.
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Loss contingency assumptions involve judgments that are
inherently subjective and generally involve business matters
that are by their nature unpredictable. If a loss contingency
results in an adverse judgment or is settled for a significant
amount, it could have a material adverse impact on our
consolidated financial position, result of operations or cash
flows in the period in which such judgment or settlement occurs.
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Asset
Impairment
Valuation methodology. We evaluate our long-lived
assets (other than goodwill) for impairment whenever events or
changes in circumstances indicate the carrying amount of the
asset or asset group may not be recoverable based on projected
cash flows anticipated to be generated from the ongoing
operation of those assets or we intend to sell or otherwise
dispose of the assets.
Residual risk:
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If events or changes in circumstances occur, including
reductions in anticipated cash flows generated by our operations
or determinations to divest assets, certain assets could be
impaired which would result in a non-cash charge to earnings.
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Evaluation criteria. We test long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amounts of the assets may not be recoverable.
Examples of such events could include a significant adverse
change in the extent or manner in which we use a long-lived
asset, a change in its physical condition, or new circumstances
that could cause an expectation that it is more likely than not
that we would sell or otherwise dispose of a long-lived asset
significantly before the end of its previously estimated useful
life.
Residual risk:
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Our most significant asset impairment exposure, other than
goodwill (which is discussed below) relates to our landfills. A
significant reduction in our estimated disposal capacity as a
result of unanticipated events such as regulatory developments,
revocation of an existing permit or denial of an expansion
permit, or changes in our assumptions used to calculate disposal
capacity, could trigger an impairment charge.
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Recognition criteria. If such circumstances arise,
we recognize impairment for the difference between the carrying
amount and fair value of the asset if the net book value of the
asset exceeds the sum of the estimated undiscounted cash flows
expected to result from its use and eventual disposition. We
generally use the present value of the expected cash flows from
that asset to determine fair value.
Goodwill
Recoverability
We annually test goodwill for impairment at December 31 or when
an indicator of impairment exists. We test goodwill for
impairment using the two-step process. The first step is a
screen for potential impairment, while the second step measures
the amount of the impairment, if any. The first step of the
goodwill impairment test compares the fair value of a reporting
unit with its carrying amount, including goodwill.
We have defined our reporting units to be consistent with our
operating segments: Eastern, Midwestern, Southern, and Western.
In determining fair value, we primarily utilize discounted
future cash flows and operating results based on a comparative
multiple of earnings or revenues.
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Significant estimates used in our fair value calculation
utilizing discounted future cash flows include, but are not
limited to: (i) estimates of future revenue and expense
growth by reporting unit, which we estimate to range from 3% to
5%; (ii) future estimated effective tax rates, which we
estimate to be 40%; (iii) future estimated capital
expenditures as well as future required investments in working
capital; (iv) estimated discount rates, which we estimate
to range between 8% and 10%; and (v) the future terminal
value of the reporting unit, which is based on its ability to
exist into perpetuity. Significant estimates used in the fair
value calculation utilizing market value multiples include but
are not limited to: (i) estimated future growth potential
of the reporting unit; (ii) estimated multiples of revenue
or earnings a willing buyer is likely to pay; and
(iii) estimated control premium a willing buyer is likely
to pay.
In addition, we evaluate a reporting unit for impairment if
events or circumstances change between annual tests, indicating
a possible impairment. Examples of such events or circumstances
include: (i) a significant adverse change in legal factors
or in the business climate; (ii) an adverse action or
assessment by a regulator; (iii) a more likely than not
expectation that a reporting unit or a significant portion
thereof will be sold; (iv) continued or sustained losses at
a reporting unit; (v) a significant decline in our market
capitalization as compared to our book value; or (vi) the
testing for recoverability of a significant asset group within
the reporting unit.
We assign assets and liabilities from our corporate reporting
segment to our four operating segments to the extent that such
assets or liabilities relate to the cash flows of the reporting
unit and would be included in determining the reporting
units fair value.
In preparing our annual test for impairment as of
December 31, 2010, we determined that our indicated fair
value of equity exceeded our market capitalization. We
determined market capitalization as the fair value of our common
shares outstanding at the closing market price on
December 31, 2010. We believe one of the primary
reconciling differences between the indicated fair value of
equity and our market capitalization is due to a control
premium. We believe the control premium represents the value a
market participant could extract as savings and / or
synergies by obtaining control, and thereby eliminating
duplicative overhead and operating costs resulting from the
consolidation of routes and internalization of waste streams.
As of December 31, 2010, we determined that the indicated
fair value of our reporting units exceeded their carrying value
by a range of 120% to in excess of 170% and, as such, we noted
no indicators of impairment at our reporting units.
We will continuously monitor market trends in our business, the
related expected cash flows and our calculation of market
capitalization for purposes of identifying possible indicators
of impairment. If our book value per share exceeds our market
price per share or if we have other indicators of impairment, we
will be required to perform an interim step one impairment
analysis, which may lead to a step two analysis and possible
impairment of our goodwill. Additionally, we would then be
required to review our remaining long-lived assets for
impairment.
Our operating segments, which also represent our reporting
units, are comprised of several vertically integrated
businesses. When an individual business within an integrated
operating segment is divested, goodwill is allocated to that
business based on its fair value relative to the fair value of
its operating segment.
Residual risks:
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Future events could cause us to conclude that impairment
indicators exist and that goodwill associated with acquired
businesses is impaired.
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The valuation of identifiable goodwill requires significant
estimates and judgment about future performance, cash flows and
fair value. Our future results could be affected if these
current estimates of future performance and fair value change.
For example, a reduction in long-term growth assumptions could
reduce the estimated fair value of the operating segments to
below their carrying values, which could trigger an impairment
charge. Similarly, an increase in our discount rate could
trigger an impairment charge. Any resulting impairment charge
could have a material adverse impact on our financial condition
and results of operations.
|
74
Income
Taxes
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and income tax bases
of assets (other than non-deductible goodwill) and liabilities.
Deferred tax assets and liabilities are measured using the
income tax rate in effect during the year in which the
differences are expected to reverse.
We record net deferred tax assets to the extent we believe these
assets will more likely than not be realized. In making this
determination, we consider all available positive and negative
evidence, including scheduled reversals of deferred tax
liabilities, projected future taxable income, tax planning
strategies and recent financial operations. In the event we
determine that we would be able to realize our deferred income
tax assets in the future in excess of their net recorded amount,
we will make an adjustment to the valuation allowance which
would reduce our provision for income taxes.
Regarding the accounting for uncertainty in income taxes
recognized in the financial statements, we record a tax benefit
from an uncertain tax position when it is more likely than not
that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes,
based on the technical merits. We recognize interest and
penalties related to uncertain tax positions within the
provision for income taxes in our consolidated statements of
income. Accrued interest and penalties are included within other
accrued liabilities and deferred income taxes and other
long-term tax liabilities in our consolidated balance sheets.
Residual risks:
|
|
|
|
|
Income tax assets and liabilities established in purchase
accounting for acquisitions are based on assumptions that could
differ from the ultimate outcome of the tax matters. Such
adjustments would be charged or credited to earnings, unless
they meet certain remeasurement criteria and are allowed to be
adjusted to goodwill.
|
|
|
|
Changes in the estimated realizability of deferred tax assets
could result in adjustments to our provision for income taxes.
|
|
|
|
Valuation allowances for deferred tax assets and the
realizability of net operating loss carryforwards for tax
purposes are based on our judgment. If our judgments and
estimates concerning valuation allowances and the realizability
of net operating loss carryforwards are incorrect, our provision
for income taxes would change.
|
|
|
|
We are currently under examination or administrative review by
various state and federal taxing authorities for certain tax
years. The Internal Revenue Code (IRC) and income tax
regulations are a complex set of rules that we are required to
interpret and apply. Positions taken in tax years under
examination or subsequent years are subject to challenge.
Accordingly, we may have exposure for additional tax liabilities
arising from these audits if any positions taken by us or by
companies we have acquired are disallowed by the taxing
authorities.
|
|
|
|
We adjust our liabilities for uncertain tax positions when our
judgment changes as a result of the evaluation of new
information not previously available. Due to the complexity of
some of these uncertainties, their ultimate resolution may
result in payments that are materially different from our
current estimates of the tax liabilities. These differences will
be reflected as increases or decreases to our provision for
income taxes in the period in which they are determined.
|
Defined
Benefit Pension Plans
We currently have one qualified defined benefit pension plan,
the BFI Retirement Plan (the Plan). The Plan covers certain
employees in the United States, including some employees subject
to collective bargaining agreements. The Plans benefit
formula is based on a percentage of compensation as defined in
the Plan document. The benefits of approximately 97% of the
current plan participants were frozen upon Allieds
acquisition of BFI in 1999.
75
Our pension contributions are made in accordance with funding
standards established by the Employee Retirement Income Security
Act of 1974 and IRC, as amended by the Pension Protection Act of
2006.
The Plans assets are invested as determined by our
Retirement Benefits Committee. At December 31, 2010, the
plan assets were invested in fixed income bond funds, equity
funds and cash. We annually review and adjust the plans
asset allocation as deemed necessary. Our unfunded benefit
obligation for the Plan was $7.7 million as of
December 31, 2010 compared to $31.4 million as of
December 31, 2009.
Residual risk:
|
|
|
|
|
Changes in the plans investment mix and performance of the
equity and bond markets and fund managers could impact the
amount of pension income or expense recorded, the funded status
of the plan and the need for future cash contributions.
|
Assumptions. The benefit obligation and associated
income or expense related to the Plan are determined based on
assumptions concerning items such as discount rates, expected
rates of return and average rates of compensation increases. Our
assumptions are reviewed annually and adjusted as deemed
necessary.
We determine the discount rate based on a model which matches
the timing and amount of expected benefit payments to maturities
of high quality bonds priced as of the Plan measurement date.
Where that timing does not correspond to a published
high-quality bond rate, our model uses an expected yield curve
to determine an appropriate current discount rate. The yield on
the bonds is used to derive a discount rate for the liability.
If the discount rate were to increase by 1%, our benefit
obligation would decrease by approximately $33 million. If
the discount rate were to decrease by 1%, our benefit obligation
would increase by approximately $39 million.
In developing our expected rate of return assumption, we
evaluate long-term expected and historical returns on the Plan
assets, giving consideration to our asset mix and the
anticipated duration of the Plan obligations. The average rate
of compensation increase reflects our expectations of average
pay increases over the periods benefits are earned. Less than 3%
of participants in the Plan continue to earn service benefits.
Residual risks:
|
|
|
|
|
Our assumed discount rate is sensitive to changes in
market-based interest rates. A decrease in the discount rate
will increase our related benefit plan obligation.
|
|
|
|
Our annual pension expense would be impacted if the actual
return on plan assets were to vary from the expected return.
|
New
Accounting Standards
For a description of the new accounting standards that may
affect us, see Note 2, Summary of Significant Accounting
Policies, to our consolidated financial statements included
in Item 8 of this
Form 10-K.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest
Rate Risk
Our major market risk exposure of our financial instruments is
changing interest rates in the United States and fluctuations in
LIBOR. We intend to manage interest rate risk through the use of
a combination of fixed and floating rate debt. The carrying
value of our variable rate debt approximates fair value because
interest rates are variable and, accordingly, approximates
current market rates for instruments with similar risk and
maturities. The fair value of our debt is determined as of the
balance sheet date and is subject to change. The
76
table below provides information about certain of our
market-sensitive financial instruments and constitutes a
forward-looking statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of (Asset)/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability as of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
Total
|
|
|
2010
|
|
|
Fixed Rate Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding (in millions)
|
|
$
|
872.0
|
|
|
$
|
30.2
|
|
|
$
|
5.6
|
|
|
$
|
16.0
|
|
|
$
|
25.7
|
|
|
$
|
5,152.1
|
|
|
$
|
6,101.6
|
|
|
$
|
6,063.6
|
|
Average interest rates
|
|
|
6.4
|
%
|
|
|
5.4
|
%
|
|
|
7.6
|
%
|
|
|
6.1
|
%
|
|
|
5.8
|
%
|
|
|
6.1
|
%
|
|
|
6.1
|
%
|
|
|
|
|
Variable Rate Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount outstanding (in millions)
|
|
$
|
-
|
|
|
$
|
50.0
|
|
|
$
|
35.0
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
856.5
|
|
|
$
|
941.5
|
|
|
$
|
941.5
|
|
Average interest rates
|
|
|
-
|
%
|
|
|
1.6
|
%
|
|
|
1.3
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
1.2
|
%
|
|
|
1.2
|
%
|
|
|
|
|
Interest Rate Swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed to variable notional amount (in millions)
|
|
$
|
210.0
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
210.0
|
|
|
$
|
5.2
|
|
Average pay rate
|
|
|
2.6
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
2.6
|
%
|
|
|
|
|
Average receive rate
|
|
|
6.8
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
-
|
%
|
|
|
6.8
|
%
|
|
|
|
|
The fixed and variable rate debt amounts above exclude the
remaining non-cash discounts, premiums, adjustments to fair
value related to hedging transactions and adjustments to fair
value recorded in purchase accounting totaling
$274.0 million.
Fuel
Price Risk
Fuel costs represent a significant operating expense. When
economically practical, we may enter into new or renew
contracts, or engage in other strategies to mitigate market
risk. Where appropriate, we have implemented a fuel recovery fee
that is designed to recover our fuel costs. While we charge
these fees to a majority of our customers, we are unable to
charge such fees to all customers. Consequently, an increase in
fuel costs results in (1) an increase in our cost of
operations, (2) a smaller increase in our revenue (from the
fuel recovery fee) and (3) a decrease in our operating
margin percentage, because the increase in revenue is more than
offset by the increase in cost. Conversely, a decrease in fuel
costs results in (1) a decrease in our cost of operations,
(2) a smaller decrease in our revenue and (3) an
increase in our operating margin percentage.
At our current consumption levels, a one-cent change in the
price of diesel fuel changes our fuel costs by approximately
$1.5 million on an annual basis, which would be partially
offset by a smaller change in the fuel recovery fees charged to
our customers. Accordingly, a substantial rise or drop in fuel
costs could result in a material impact to our revenue and cost
of operations.
Our operations also require the use of certain
petrochemical-based products (such as liners at our landfills)
whose costs may vary with the price of petrochemicals. An
increase in the price of petrochemicals could increase the cost
of those products, which would increase our operating and
capital costs. We are also susceptible to increases in indirect
fuel surcharges from our vendors.
Commodities
Prices
We market recycled products such as cardboard and newspaper from
our material recycling facilities. As a result, changes in the
market prices of these items will impact our results of
operations. Revenue from sales of these products in 2010, 2009
and 2008 were approximately $307.1 million,
$181.2 million and $121.1 million, respectively.
77
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
78
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Republic Services,
Inc.:
We have audited the accompanying consolidated balance sheets of
Republic Services, Inc. as of December 31, 2010 and 2009,
and the related consolidated statements of income,
stockholders equity and comprehensive income, and cash
flows for each of the three years in the period ended December
31, 2010. These financial statements are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Republic Services, Inc. at
December 31, 2010 and 2009, and the consolidated results of
its operations and its cash flows for each of the three years in
the period ended December 31, 2010, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Republic Services, Inc.s internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 18, 2011
expressed an unqualified opinion thereon.
Phoenix, Arizona
February 18, 2011
79
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Stockholders of Republic Services,
Inc.:
We have audited Republic Services, Inc.s internal control
over financial reporting as of December 31, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Republic Services,
Inc.s management is responsible for maintaining effective
internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying Report of
Management on Republic Services, Inc.s Internal Control
over Financial Reporting. Our responsibility is to express an
opinion on the Companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Republic Services, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Republic Services, Inc. as of
December 31, 2010 and 2009, and the related consolidated
statements of income, stockholders equity and
comprehensive income, and cash flows for each of the three years
in the period ended December 31, 2010 of Republic Services,
Inc. and our report dated February 18, 2011 expressed an
unqualified opinion thereon.
Phoenix, Arizona
February 18, 2011
80
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
88.3
|
|
|
$
|
48.0
|
|
Accounts receivable, less allowance for doubtful accounts of
$50.9 and $55.2, respectively
|
|
|
828.9
|
|
|
|
865.1
|
|
Prepaid expenses and other current assets
|
|
|
207.4
|
|
|
|
156.5
|
|
Deferred tax assets
|
|
|
121.5
|
|
|
|
195.3
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,246.1
|
|
|
|
1,264.9
|
|
Restricted cash and marketable securities
|
|
|
172.8
|
|
|
|
240.5
|
|
Property and equipment, net
|
|
|
6,698.5
|
|
|
|
6,657.7
|
|
Goodwill, net
|
|
|
10,655.3
|
|
|
|
10,667.1
|
|
Other intangible assets, net
|
|
|
451.3
|
|
|
|
500.0
|
|
Other assets
|
|
|
237.9
|
|
|
|
210.1
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
19,461.9
|
|
|
$
|
19,540.3
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
606.5
|
|
|
$
|
592.8
|
|
Notes payable and current maturities of long-term debt
|
|
|
878.5
|
|
|
|
543.0
|
|
Deferred revenue
|
|
|
295.1
|
|
|
|
331.1
|
|
Accrued landfill and environmental costs, current portion
|
|
|
182.0
|
|
|
|
245.4
|
|
Accrued interest
|
|
|
93.1
|
|
|
|
96.2
|
|
Other accrued liabilities
|
|
|
621.3
|
|
|
|
740.2
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,676.5
|
|
|
|
2,548.7
|
|
Long-term debt, net of current maturities
|
|
|
5,865.1
|
|
|
|
6,419.6
|
|
Accrued landfill and environmental costs, net of current portion
|
|
|
1,416.6
|
|
|
|
1,383.2
|
|
Deferred income taxes and other long-term tax liabilities
|
|
|
1,044.8
|
|
|
|
1,040.5
|
|
Self-insurance reserves, net of current portion
|
|
|
304.5
|
|
|
|
302.0
|
|
Other long-term liabilities
|
|
|
305.5
|
|
|
|
279.2
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share; 50 shares
authorized; none issued
|
|
|
-
|
|
|
|
-
|
|
Common stock, par value $0.01 per share; 750 shares
authorized; 400.2 and 395.7 issued including shares held in
treasury, respectively
|
|
|
4.0
|
|
|
|
4.0
|
|
Additional paid-in capital
|
|
|
6,431.1
|
|
|
|
6,316.1
|
|
Retained earnings
|
|
|
1,890.3
|
|
|
|
1,683.1
|
|
Treasury stock, at cost (16.5 and 14.9 shares, respectively)
|
|
|
(500.8
|
)
|
|
|
(457.7
|
)
|
Accumulated other comprehensive income, net of tax
|
|
|
21.9
|
|
|
|
19.0
|
|
|
|
|
|
|
|
|
|
|
Total Republic Services, Inc. stockholders equity
|
|
|
7,846.5
|
|
|
|
7,564.5
|
|
Noncontrolling interests
|
|
|
2.4
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
7,848.9
|
|
|
|
7,567.1
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
19,461.9
|
|
|
$
|
19,540.3
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
8,106.6
|
|
|
$
|
8,199.1
|
|
|
$
|
3,685.1
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
4,764.8
|
|
|
|
4,844.2
|
|
|
|
2,416.7
|
|
Depreciation, amortization and depletion
|
|
|
833.7
|
|
|
|
869.7
|
|
|
|
354.1
|
|
Accretion
|
|
|
80.5
|
|
|
|
88.8
|
|
|
|
23.9
|
|
Selling, general and administrative
|
|
|
858.0
|
|
|
|
880.4
|
|
|
|
434.7
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
19.1
|
|
|
|
(137.0
|
)
|
|
|
89.8
|
|
Restructuring charges
|
|
|
11.4
|
|
|
|
63.2
|
|
|
|
82.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,539.1
|
|
|
|
1,589.8
|
|
|
|
283.2
|
|
Interest expense
|
|
|
(507.4
|
)
|
|
|
(595.9
|
)
|
|
|
(131.9
|
)
|
Loss on extinguishment of debt
|
|
|
(160.8
|
)
|
|
|
(134.1
|
)
|
|
|
-
|
|
Interest income
|
|
|
0.7
|
|
|
|
2.0
|
|
|
|
9.6
|
|
Other income (expense), net
|
|
|
5.4
|
|
|
|
3.2
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
877.0
|
|
|
|
865.0
|
|
|
|
159.3
|
|
Provision for income taxes
|
|
|
369.5
|
|
|
|
368.5
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
507.5
|
|
|
|
496.5
|
|
|
|
73.9
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(1.0
|
)
|
|
|
(1.5
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
506.5
|
|
|
$
|
495.0
|
|
|
$
|
73.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Republic Services, Inc.
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
383.0
|
|
|
|
379.7
|
|
|
|
196.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Republic Services,
Inc. stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding
|
|
|
385.1
|
|
|
|
381.0
|
|
|
|
198.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per common share
|
|
$
|
0.78
|
|
|
$
|
0.76
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic Services, Inc. Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Treasury
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Stock
|
|
|
Income (Loss),
|
|
|
Noncontrolling
|
|
|
|
Total
|
|
|
Income
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Shares
|
|
|
Amount
|
|
|
Net of Tax
|
|
|
Interests
|
|
|
Balance as of December 31, 2007
|
|
$
|
1,303.8
|
|
|
|
|
|
|
|
195.7
|
|
|
$
|
2.0
|
|
|
$
|
38.7
|
|
|
$
|
1,572.3
|
|
|
|
(10.3
|
)
|
|
$
|
(318.3
|
)
|
|
$
|
9.1
|
|
|
$
|
-
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
73.9
|
|
|
$
|
73.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the value of derivative instruments, net of tax of $5.4
|
|
|
(8.6
|
)
|
|
|
(8.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8.6
|
)
|
|
|
-
|
|
Employee benefit plan liability adjustments, net of tax of $1.9
|
|
|
(3.6
|
)
|
|
|
(3.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3.6
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(12.2
|
)
|
|
|
(12.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
61.7
|
|
|
$
|
61.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
|
|
(168.9
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(168.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuances of common stock other
|
|
|
27.7
|
|
|
|
|
|
|
|
1.5
|
|
|
|
-
|
|
|
|
27.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuances of common stock due to the Allied acquisition
|
|
|
6,113.7
|
|
|
|
|
|
|
|
195.8
|
|
|
|
1.9
|
|
|
|
6,111.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Equity issuance costs due to the Allied acquisition
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Acquisition of noncontrolling interest
|
|
|
1.0
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
|
Value of stock options issued to replace Allied stock options
|
|
|
61.2
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
61.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuances of restricted stock and deferred stock units
|
|
|
-
|
|
|
|
|
|
|
|
0.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
24.0
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjustment to deferred tax benefits for deferred stock units
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of common stock for treasury
|
|
|
(138.4
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4.6
|
)
|
|
|
(138.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
7,282.5
|
|
|
|
|
|
|
|
393.4
|
|
|
|
3.9
|
|
|
|
6,260.1
|
|
|
|
1,477.2
|
|
|
|
(14.9
|
)
|
|
|
(456.7
|
)
|
|
|
(3.1
|
)
|
|
|
1.1
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
496.5
|
|
|
$
|
496.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
495.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.5
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the value of derivative instruments, net of tax of $0.2
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
Employee benefit plan liability adjustments, net of tax of $12.8
|
|
|
22.2
|
|
|
|
22.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22.2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
22.1
|
|
|
|
22.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
518.6
|
|
|
$
|
518.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
|
|
(288.7
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(288.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuances of common stock
|
|
|
40.7
|
|
|
|
|
|
|
|
2.3
|
|
|
|
0.1
|
|
|
|
40.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
15.0
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15.4
|
|
|
|
(0.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of common stock for treasury
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2009
|
|
|
7,567.1
|
|
|
|
|
|
|
|
395.7
|
|
|
|
4.0
|
|
|
|
6,316.1
|
|
|
|
1,683.1
|
|
|
|
(14.9
|
)
|
|
|
(457.7
|
)
|
|
|
19.0
|
|
|
|
2.6
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
507.5
|
|
|
$
|
507.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
506.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.0
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the value of derivative instruments, net of tax of $4.1
|
|
|
(5.8
|
)
|
|
|
(5.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5.8
|
)
|
|
|
-
|
|
Employee benefit plan liability adjustments, net of tax of $6.1
|
|
|
8.7
|
|
|
|
8.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.7
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
2.9
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
510.4
|
|
|
$
|
510.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared
|
|
|
(298.8
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(298.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issuances of common stock
|
|
|
90.0
|
|
|
|
|
|
|
|
4.5
|
|
|
|
-
|
|
|
|
90.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
24.5
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25.0
|
|
|
|
(0.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of common stock for treasury
|
|
|
(43.1
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.6
|
)
|
|
|
(43.1
|
)
|
|
|
-
|
|
|
|
-
|
|
Distributions paid to noncontrolling interests
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
7,848.9
|
|
|
|
|
|
|
|
400.2
|
|
|
$
|
4.0
|
|
|
$
|
6,431.1
|
|
|
$
|
1,890.3
|
|
|
|
(16.5
|
)
|
|
$
|
(500.8
|
)
|
|
$
|
21.9
|
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
507.5
|
|
|
$
|
496.5
|
|
|
$
|
73.9
|
|
Adjustments to reconcile net income to cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property and equipment
|
|
|
511.6
|
|
|
|
520.6
|
|
|
|
222.6
|
|
Landfill depletion and amortization
|
|
|
250.6
|
|
|
|
278.5
|
|
|
|
119.7
|
|
Amortization of intangible and other assets
|
|
|
71.5
|
|
|
|
70.6
|
|
|
|
11.8
|
|
Accretion
|
|
|
80.5
|
|
|
|
88.8
|
|
|
|
23.9
|
|
Non-cash interest expense debt
|
|
|
52.4
|
|
|
|
92.1
|
|
|
|
10.1
|
|
Non-cash interest expense other
|
|
|
48.1
|
|
|
|
58.1
|
|
|
|
0.5
|
|
Restructuring related charges
|
|
|
(2.0
|
)
|
|
|
34.0
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
24.5
|
|
|
|
15.0
|
|
|
|
24.0
|
|
Deferred tax provision (benefit)
|
|
|
61.3
|
|
|
|
(24.6
|
)
|
|
|
(30.4
|
)
|
Provision for doubtful accounts, net of adjustments
|
|
|
23.6
|
|
|
|
27.3
|
|
|
|
36.5
|
|
Excess income tax benefit from stock option exercises
|
|
|
(3.5
|
)
|
|
|
(2.5
|
)
|
|
|
2.8
|
|
Asset impairments
|
|
|
15.1
|
|
|
|
7.1
|
|
|
|
89.8
|
|
Loss on extinguishment of debt
|
|
|
160.8
|
|
|
|
134.1
|
|
|
|
-
|
|
Gain on disposition of assets, net
|
|
|
(11.2
|
)
|
|
|
(147.1
|
)
|
|
|
(1.4
|
)
|
Other non-cash items
|
|
|
3.8
|
|
|
|
(0.1
|
)
|
|
|
7.3
|
|
Change in assets and liabilities, net of effects from business
acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
8.8
|
|
|
|
53.1
|
|
|
|
21.1
|
|
Prepaid expenses and other assets
|
|
|
(76.6
|
)
|
|
|
(11.9
|
)
|
|
|
15.8
|
|
Accounts payable
|
|
|
(34.9
|
)
|
|
|
(6.9
|
)
|
|
|
(164.5
|
)
|
Restructuring and synergy related expenditures
|
|
|
(20.0
|
)
|
|
|
(66.5
|
)
|
|
|
-
|
|
Capping, closure and post-closure expenditures
|
|
|
(111.3
|
)
|
|
|
(100.9
|
)
|
|
|
(27.9
|
)
|
Remediation expenditures
|
|
|
(50.5
|
)
|
|
|
(56.2
|
)
|
|
|
(43.3
|
)
|
Other liabilities
|
|
|
(76.4
|
)
|
|
|
(62.6
|
)
|
|
|
119.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
|
1,433.7
|
|
|
|
1,396.5
|
|
|
|
512.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(794.7
|
)
|
|
|
(826.3
|
)
|
|
|
(386.9
|
)
|
Proceeds from sales of property and equipment
|
|
|
37.4
|
|
|
|
31.8
|
|
|
|
8.2
|
|
Cash used in acquisitions and development projects, net of cash
acquired
|
|
|
(58.9
|
)
|
|
|
(0.1
|
)
|
|
|
(553.8
|
)
|
Cash proceeds from divestitures, net of cash divested
|
|
|
60.0
|
|
|
|
511.1
|
|
|
|
3.3
|
|
Change in restricted cash and marketable securities
|
|
|
66.3
|
|
|
|
41.6
|
|
|
|
(5.3
|
)
|
Other
|
|
|
(0.6
|
)
|
|
|
(0.6
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
(690.5
|
)
|
|
|
(242.5
|
)
|
|
|
(934.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and long-term debt
|
|
|
1,193.5
|
|
|
|
1,472.6
|
|
|
|
1,453.4
|
|
Proceeds from issuance of senior notes, net of discount
|
|
|
1,499.4
|
|
|
|
1,245.4
|
|
|
|
-
|
|
Payments of notes payable and long-term debt
|
|
|
(3,090.3
|
)
|
|
|
(3,583.9
|
)
|
|
|
(740.6
|
)
|
Premiums paid on extinguishment of debt
|
|
|
(30.4
|
)
|
|
|
(47.3
|
)
|
|
|
-
|
|
Fees paid to issue and retire senior notes and certain hedging
relationships
|
|
|
(26.2
|
)
|
|
|
(14.3
|
)
|
|
|
-
|
|
Issuances of common stock
|
|
|
86.5
|
|
|
|
39.6
|
|
|
|
24.6
|
|
Excess income tax benefit from stock option exercises
|
|
|
3.5
|
|
|
|
2.5
|
|
|
|
4.5
|
|
Payment for deferred stock units
|
|
|
-
|
|
|
|
-
|
|
|
|
(4.0
|
)
|
Equity issuance cost
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.8
|
)
|
Purchases of common stock for treasury
|
|
|
(43.1
|
)
|
|
|
(1.0
|
)
|
|
|
(138.4
|
)
|
Cash dividends paid
|
|
|
(294.6
|
)
|
|
|
(288.3
|
)
|
|
|
(128.3
|
)
|
Distributions paid to noncontrolling interests
|
|
|
(1.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by financing activities
|
|
|
(702.9
|
)
|
|
|
(1,174.7
|
)
|
|
|
469.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
40.3
|
|
|
|
(20.7
|
)
|
|
|
46.9
|
|
Cash and cash equivalents at beginning of period
|
|
|
48.0
|
|
|
|
68.7
|
|
|
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
88.3
|
|
|
$
|
48.0
|
|
|
$
|
68.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial
statements.
84
REPUBLIC
SERVICES, INC.
Republic Services, Inc. (a Delaware corporation) and its
subsidiaries (also referred to collectively as Republic, we, us,
our, or the Company in this report) is the second largest
provider of non-hazardous solid waste collection, transfer,
recycling and disposal services in the United States, as
measured by revenue. We manage and evaluate our operations
through four geographic regions Eastern, Midwestern,
Southern, and Western, which we have identified as our
reportable segments. We acquired Allied Waste Industries, Inc.
(Allied) on December 5, 2008, and have included all of the
operating results of Allied starting on that date in our
consolidated financial statements. See Note 3, Business
Acquisitions and Divestitures and Restructuring Charges, for
additional information.
The consolidated financial statements include the accounts of
Republic, its wholly owned and majority owned subsidiaries in
accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP). We account for
investments in entities in which we do not have a controlling
financial interest under either the equity method or cost method
of accounting, as appropriate. Our investments in variable
interest entities are not material to our consolidated financial
statements. All material intercompany accounts and transactions
have been eliminated in consolidation.
For comparative purposes, certain prior year amounts have been
reclassified to conform to the current year presentation. All
amounts are in millions, except per share amounts and unless
otherwise noted.
|
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Managements
Estimates and Assumptions
In preparing our financial statements, we make numerous
estimates and assumptions that affect the accounting,
recognition and disclosure of assets, liabilities,
stockholders equity, revenue and expenses. We must make
these estimates and assumptions because certain information that
we use is dependent on future events, cannot be calculated with
a high degree of precision from data available or simply cannot
be readily calculated based on generally accepted methodologies.
In some cases, these estimates are particularly difficult to
determine and we must exercise significant judgment. In
preparing our financial statements, the most difficult,
subjective and complex estimates and assumptions that deal with
the greatest amount of uncertainty relate to our accounting for
our long-lived assets, landfill development costs, and final
capping, closure and post-closure costs, our valuation
allowances for accounts receivable and deferred tax assets, our
liabilities for potential litigation, claims and assessments,
our liabilities for environmental remediation, employee benefit
plans, deferred taxes, uncertain tax positions and
self-insurance, and our estimates of the fair values of the
assets acquired and liabilities assumed in any acquisition. Each
of these items is discussed in more detail in the following
discussion. Our actual results may differ significantly from our
estimates.
Cash and
Cash Equivalents
We consider liquid investments with an original maturity at the
date of acquisition of three months or less to be cash
equivalents.
We may have net book credit balances in our primary disbursement
accounts at the end of a reporting period. We classify such
credit balances as accounts payable in our consolidated balance
sheets as checks presented for payment to these accounts are not
payable by our banks under overdraft arrangements, and, as such,
do not represent short-term borrowings. As of December 31,
2010 and 2009, there were net book credit balances of
$94.8 million and $89.9 million in our primary
disbursement accounts which were reclassified as accounts
payable on our consolidated balance sheets.
85
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Concentration
of Credit Risk
Financial instruments that potentially subject us to
concentrations of credit risk consist of cash and cash
equivalents, trade accounts receivable and derivative
instruments. We place our cash and cash equivalents with high
quality financial institutions. Such balances may be in excess
of FDIC insured limits. To manage the related credit exposure,
we continually monitor the credit worthiness of the financial
institutions where we have deposits. Concentrations of credit
risk with respect to trade accounts receivable are limited due
to the wide variety of customers and markets in which we provide
services, as well as the dispersion of our operations across
many geographic areas. We provide services to commercial,
industrial, municipal and residential customers in the United
States and Puerto Rico. We perform ongoing credit evaluations of
our customers, but do not require collateral to support customer
receivables. We establish an allowance for doubtful accounts
based on various factors including the credit risk of specific
customers, age of receivables outstanding, historical trends,
economic conditions and other information. No customer exceeded
5% of our outstanding accounts receivable balance at
December 31, 2010 or 2009.
Accounts
Receivable, Net of Allowance for Doubtful Accounts
Accounts receivable represent receivables from customers for
collection, transfer, recycling, disposal and other services.
Our receivables are recorded when billed or when the related
revenue is earned, if earlier, and represent claims against
third parties that will be settled in cash. The carrying value
of our receivables, net of the allowance for doubtful accounts,
represents their estimated net realizable value. Provisions for
doubtful accounts are evaluated on a monthly basis and are
recorded based on our historical collection experience, the age
of the receivables, specific customer information and economic
conditions. We also review outstanding balances on an
account-specific basis. In general, reserves are provided for
accounts receivable in excess of ninety days old. Past due
receivable balances are written-off when our collection efforts
have been unsuccessful in collecting amounts due.
The following table reflects the activity in our allowance for
doubtful accounts for the years ended December 31, 2010,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of year
|
|
$
|
55.2
|
|
|
$
|
65.7
|
|
|
$
|
14.7
|
|
Additions charged to expense
|
|
|
23.6
|
|
|
|
27.3
|
|
|
|
36.5
|
|
Accounts written-off
|
|
|
(27.9
|
)
|
|
|
(37.8
|
)
|
|
|
(12.7
|
)
|
Acquisitions
|
|
|
-
|
|
|
|
-
|
|
|
|
27.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
50.9
|
|
|
$
|
55.2
|
|
|
$
|
65.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, subsequent to the Allied acquisition, we recorded a
provision for doubtful accounts of $14.2 million to adjust
the allowance acquired from Allied to conform to Republics
accounting policies. We also recorded $5.4 million to
provide for specific bankruptcy exposures in 2008.
Restricted
Cash and Restricted Marketable Securities
As of December 31, 2010, we had $172.8 million of
restricted cash and restricted marketable securities. We obtain
funds through the issuance of tax-exempt bonds for the purpose
of financing qualifying expenditures at our landfills, transfer
stations, and collection and recycling facilities. The funds are
deposited directly into trust accounts by the bonding
authorities at the time of issuance. As the use of these funds
is contractually restricted, and we do not have the ability to
use these funds for general operating purposes, they are
classified as restricted cash in our consolidated balance sheets.
In the normal course of business, we may be required to provide
financial assurance to governmental agencies and a variety of
other entities in connection with municipal residential
collection contracts, closure or post-
86
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
closure of landfills, environmental remediation, environmental
permits, and business licenses and permits as a financial
guarantee of our performance. At several of our landfills, we
satisfy financial assurance requirements by depositing cash into
restricted trust funds or escrow accounts.
Property
and Equipment
Property and equipment are recorded at cost. Expenditures for
major additions and improvements to facilities are capitalized,
while maintenance and repairs are charged to expense as
incurred. When property is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in the
consolidated statements of income.
We revise the estimated useful lives of property and equipment
acquired through business acquisitions to conform with our
policies. Depreciation is provided over the estimated useful
lives of the assets involved using the straight-line method. We
assume no salvage value for our depreciable property and
equipment.
The
estimated useful lives of our property and equipment are as
follows:
|
|
|
|
|
Estimated
|
|
|
Useful
|
|
|
Lives
|
|
Buildings and improvements
|
|
7 - 40 years
|
Vehicles
|
|
5 - 12 years
|
Landfill equipment
|
|
7 - 10 years
|
Other equipment
|
|
3 - 15 years
|
Furniture and fixtures
|
|
5 - 12 years
|
Landfill development costs are also included in property and
equipment. Landfill development costs include direct costs
incurred to obtain landfill permits and direct costs incurred to
acquire, construct and develop sites as well as final capping,
closure and post-closure assets. These costs are amortized or
depleted based on consumed airspace. All indirect landfill
development costs are expensed as incurred. (For additional
information, see Note 8, Landfill and Environmental
Costs.)
Capitalized
Interest
We capitalize interest on landfill cell construction and other
construction projects if they meet the following criteria:
1. Total construction costs are $50,000 or greater,
2. The construction phase is one month or
longer, and
3. The assets have a useful life of one year or
longer.
Interest is capitalized on qualified assets while they undergo
activities to ready them for their intended use. Capitalization
of interest ceases once an asset is placed into service or if
construction activity is suspended for more than a brief period
of time. Our interest capitalization rate is based on our
weighted average cost of indebtedness. Interest capitalized was
$6.3 million, $7.8 million and $2.6 million for
the years ended December 31, 2010, 2009 and 2008,
respectively.
Fair
Value of Financial Instruments
Our financial instruments include cash and cash equivalents,
restricted cash and marketable securities, accounts receivable,
accounts payable, accrued liabilities, long-term debt and the
assets in our defined benefit plan. The
87
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
fair value hierarchy under U.S. GAAP distinguishes between
assumptions based on market data (observable inputs) and an
entitys own assumptions (unobservable inputs). The
hierarchy consists of three levels:
|
|
|
|
|
Level one Quoted market prices in active markets for
identical assets or liabilities;
|
|
|
Level two Inputs other than level one inputs that
are either directly or indirectly observable; and
|
|
|
Level three Unobservable inputs developed using
estimates and assumptions, which are developed by the reporting
entity and reflect those assumptions that a market participant
would use.
|
We have determined the estimated fair values of our financial
instruments using available market information and commonly
accepted valuation methodologies. However, considerable judgment
is required in interpreting market data to develop the estimates
of fair value. Accordingly, our estimates are not necessarily
indicative of the amounts that we, or holders of the
instruments, could realize in a current market exchange. The use
of different assumptions or valuation methodologies could have a
material effect on the estimated fair value amounts. The fair
value estimates are based on information available as of
December 31, 2010 and 2009. These amounts have not been
revalued since those dates, and current estimates of fair value
could differ significantly from the amounts presented.
The carrying value of cash and cash equivalents, restricted cash
and marketable securities, accounts receivable, accounts payable
and accrued liabilities approximate their respective fair values
due to the short-term maturities of these instruments. See
Note 9, Debt, and Note 15, Financial
Instruments, for the fair value disclosures related to our
long-term debt and financial instruments, respectively.
Derivative
Financial Instruments
We use derivative financial instruments to manage our risk
associated with changing interest rates and changing prices for
commodities we frequently purchase or sell by creating
offsetting market exposures. We use interest rate swap
agreements to manage risk associated with fluctuations in
interest rates. We have entered into multiple agreements
designated as cash flow hedges to mitigate some of our exposure
to changes in diesel fuel prices and prices of certain
commodities.
All derivatives are measured at fair value and recognized in the
balance sheet as assets or liabilities, as appropriate. For
derivatives designated as cash flow hedges, changes in fair
value of the effective portions of derivative instruments are
reported in stockholders equity as components of other
comprehensive income until the forecasted transaction occurs or
is not probable of occurring. When the forecasted transaction
occurs or is not probable of occurring, the realized net gain or
loss is then recognized in the consolidated statements of
income. Changes in fair value of the ineffective portions of
derivative instruments are recognized currently in earnings.
The fair values of our interest rate swap agreements and the
fair values of our diesel fuel and other commodity hedges are
obtained from third-party counter-parties and are determined
using standard valuation models with assumptions about prices
and other relevant information based on those observed in the
underlying markets (Level 2 in the fair value hierarchy).
The estimated fair values of derivatives used to hedge risks
fluctuate over time and should be viewed in relation to the
underlying hedged transactions.
Landfill
and Environmental Costs
Life
Cycle Accounting
We use life-cycle accounting and the
units-of-consumption
method to recognize certain landfill costs over the life of the
site. In life cycle accounting, all costs to acquire and
construct a site are capitalized, and charged to expense based
on the consumption of cubic yards of available airspace.
Costs and airspace estimates are developed at least annually by
engineers. We use these estimates to adjust the rates we use to
deplete capitalized costs. Changes in these estimates primarily
relate to changes in available
88
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
airspace, inflation and applicable regulations. Changes in
available airspace include but are not limited to changes due to
the addition of airspace lying in probable expansion areas,
airspace consumed and changes in engineering estimates.
Probable
Expansion Airspace
We classify landfill disposal capacity as either permitted
(having received the final permit from the applicable regulatory
agency) or as probable expansion airspace. Before airspace
included in an expansion area is determined to be probable
expansion airspace and, therefore, is included in our
calculation of total available disposal capacity, all of the
following criteria must be met:
|
|
|
|
|
We own the land associated with the expansion airspace or
control it pursuant to an option agreement,
|
|
|
We are committed to supporting the expansion project financially
and with appropriate resources,
|
|
|
There are no identified fatal flaws or impediments associated
with the project, including political impediments,
|
|
|
Progress is being made on the project,
|
|
|
The expansion is attainable within a reasonable time
frame, and
|
|
|
We believe it is likely the expansion permit will be received.
|
Upon meeting our expansion criteria, the rates used at each
applicable landfill to expense costs to acquire, construct, cap,
close and maintain a site during the post-closure period are
adjusted to include both the probable expansion airspace and the
additional costs to be capitalized or accrued associated with
that expansion airspace.
We have identified three steps that landfills generally follow
to obtain expansion permits. These steps are as follows:
1. Obtaining approval from local authorities,
2. Submitting a permit application to state
authorities, and
3. Obtaining permit approval from state authorities.
We continually monitor our progress toward obtaining permits for
each of our sites with probable airspace. If we determine that a
landfill expansion area no longer meets our criteria, the
probable expansion airspace is removed from the landfills
total available capacity and the rates used at the landfill to
deplete costs to acquire, construct, cap, close and maintain a
site during the post-closure period are adjusted accordingly. In
addition, any amounts capitalized for the probable expansion
airspace are charged to expense in the period in which it is
determined that the criteria are no longer met.
Capitalized
Landfill Costs
Capitalized landfill costs include expenditures for land,
permitting, cell construction and environmental structures.
Capitalized permitting and cell construction costs are limited
to direct costs relating to these activities, including legal,
engineering and construction costs associated with excavation,
natural and synthetic liners, construction of leachate
collection systems, installation of methane gas collection and
monitoring systems, installation of groundwater monitoring wells
and other costs associated with the development of the site.
Interest is capitalized on landfill construction projects while
the assets are undergoing activities to ready them for their
intended use. Capitalized landfill costs also include final
capping, closure and post-closure assets and are depleted as
airspace is consumed using the
units-of-consumption
method.
Costs related to acquiring land, excluding the estimated
residual value of unpermitted, non-buffer land, and costs
related to permitting and cell construction are depleted as
airspace is consumed using the
units-of-consumption
method.
89
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Capitalized landfill costs may also include an allocation of
purchase price paid for landfills. For landfills purchased as
part of a group of assets, the purchase price assigned to the
landfill is determined based on the estimated fair value of the
landfill relative to the fair value of other assets within the
acquired group. If the landfill meets our expansion criteria,
the purchase price is further allocated between permitted
airspace and expansion airspace based on the ratio of permitted
versus probable expansion airspace to total available airspace.
Landfill purchase price is amortized using the
units-of-consumption
method over the total available airspace including probable
expansion airspace where appropriate.
Final
Capping, Closure and Post-Closure Costs
We have future obligations for final capping, closure and
post-closure costs with respect to the landfills we own or
operate as set forth in applicable landfill permits. Final
capping, closure and post-closure costs include estimated costs
to be incurred for final capping and closure of landfills and
estimated costs for providing required post-closure monitoring
and maintenance of landfills. The permit requirements are based
on the Subtitle C and Subtitle D regulations of the Resource
Conservation and Recovery Act (RCRA), as implemented and applied
on a
state-by-state
basis. Obligations associated with monitoring and controlling
methane gas migration and emissions are set forth in applicable
landfill permits and these requirements are based on the
provisions of the Clean Air Act of 1970, as amended. Final
capping typically includes installing flexible membrane and
geosynthetic clay liners, drainage and compact soil layers, and
topsoil, and is constructed over an area of the landfill where
total airspace capacity has been consumed and waste disposal
operations have ceased. These final capping activities occur as
needed throughout the operating life of a landfill. Other
closure activities and post-closure activities occur after the
entire landfill ceases to accept waste and closes. These
activities involve methane gas control, leachate management and
groundwater monitoring, surface water monitoring and control,
and other operational and maintenance activities that occur
after the site ceases to accept waste. The post-closure period
generally runs for up to 30 years after final site closure
for municipal solid waste landfills and a shorter period for
construction and demolition landfills and inert landfills.
Estimates of future expenditures for final capping, closure and
post-closure are developed at least annually by engineers. These
estimates are reviewed by management and are used by our
operating and accounting personnel to adjust the rates used to
capitalize and amortize these costs. These estimates involve
projections of costs that will be incurred during the remaining
life of the landfill for final capping activities, after the
landfill ceases operations and during the legally required
post-closure monitoring period. We currently retain post-closure
responsibility for 129 closed landfills.
A liability for an asset retirement obligation is recognized in
the period in which it is incurred and is initially measured at
fair value. Absent quoted market prices, the estimate of fair
value is based on the best available information, including the
results of present value techniques. The offset to the liability
is capitalized as part of the carrying amount of the related
long-lived asset. Changes in the liabilities due to the passage
of time are recognized as operating expenses in the consolidated
statement of income and are referred to as accretion expense.
Changes in the liabilities due to revisions to estimated future
cash flows are recognized by increasing or decreasing the
liabilities with the offsets adjusting the carrying amounts of
the related long-lived assets, and may also require immediate
adjustments to amortization expense in the consolidated
statement of income.
Landfill asset retirement obligations include estimates of all
costs related to final capping, closure and post-closure. Costs
associated with daily maintenance activities during the
operating life of the landfill, such as leachate disposal,
groundwater and gas monitoring, and other pollution control
activities, are charged to expense as incurred. In addition,
costs historically accounted for as capital expenditures during
the operating life of a landfill, such as cell development
costs, are capitalized when incurred, and charged to expense
using life cycle accounting and the
units-of-consumption
method based on the consumption of cubic yards of available
airspace.
90
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
We define final capping as activities required to permanently
cover a portion of a landfill that has been completely filled
with waste. Final capping occurs in phases as needed throughout
the operating life of a landfill as specific areas are filled to
capacity and the final elevation for that specific area is
reached in accordance with the provisions of the operating
permit. We consider final capping events to be discrete
activities that are recognized as asset retirement obligations
separately from other closure and post-closure obligations.
These capping events generally occur during the operating life
of a landfill and can be associated with waste placed in an area
to be capped. As a result, we use a separate rate per ton for
recognizing the principal amount of the liability and related
asset associated with each capping event. We amortize the asset
recorded pursuant to this approach as waste volume related to
the capacity covered by the capping event is placed into the
landfill based on the consumption of cubic yards of available
airspace.
In connection with the 2008 annual review of our calculations
with respect to landfill asset retirement obligations, we made a
change in estimate, which is considered to be a change in
accounting estimate that is effected by a change in accounting
principle. This change, which we believe is preferable, was made
to better align the estimated amount of waste to be placed in an
area to be capped (which is used to calculate our capping rates)
with the physical operation of our landfills. The expected costs
related to our capping events did not change and we will
continue to use separate rates for each capping event. This
change resulted in a $32.6 million decrease in our capping
asset retirement obligations and related assets. These assets
will be amortized to expense prospectively. This change in
estimate did not have a material impact on our consolidated
financial position, results of operations or cash flows.
We recognize asset retirement obligations and the related
amortization expense for closure and post-closure (excluding
obligations for final capping) using the
units-of-consumption
method over the total remaining capacity of the landfill. The
total remaining capacity includes probable expansion airspace.
In general, we engage third parties to perform most of our final
capping, closure and post-closure activities. Accordingly, the
fair value of these activities is based on quoted and actual
prices paid for similar work. We also perform some of our final
capping, closure and post-closure activities using internal
resources. Where internal resources are expected to be used to
fulfill an asset retirement obligation, we add a profit margin
to the estimated cost of such services to better reflect their
fair value. If we perform these services internally, the added
profit margin is recognized as a component of operating income
in the period the obligation is settled.
An estimate of fair value should include the price that
marketplace participants are able to receive for bearing the
uncertainties in cash flows. However, when utilizing discounted
cash flow techniques, reliable estimates of market premiums may
not be obtainable. In this situation, it is not necessary to
consider a market risk premium in the determination of expected
cash flows. While the cost of asset retirement obligations
associated with final capping, closure and post-closure can be
quantified and estimated, there is not an active market that can
be utilized to determine the fair value of these activities. In
the waste industry, there generally is not a market for selling
the responsibility for final capping, closure and post-closure
independent of selling the landfill in its entirety.
Accordingly, we believe that it is not possible to develop a
methodology to reliably estimate a market risk premium and have
excluded a market risk premium from our determination of
expected cash flow for landfill asset retirement obligations.
Our estimates of costs to discharge asset retirement obligations
for landfills are developed in todays dollars. These costs
are inflated each year to reflect a normal escalation of prices
up to the year they are expected to be paid. We use a 2.5%
inflation rate, which is based on the ten-year historical moving
average increase of the U.S. Consumer Price Index, and is
the rate used by most waste industry participants.
These estimated costs are then discounted to their present value
using a credit-adjusted, risk-free interest rate. In general,
the credit-adjusted, risk-free interest rate we used for
liability recognition was 5.5% and 7.5% for the years ended
December 31, 2010 and 2009, respectively, which was based
on the estimated all-in yield we would have needed to offer to
sell thirty-year debt in the public market. However, as part of
the initial
91
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
application of purchase accounting, our capping, closure and
post-closure obligations acquired from Allied were recorded at
their fair values as of the acquisition date, and were
discounted using a rate of 9.75% due to market conditions at the
time of the acquisition.
Changes in asset retirement obligations due to the passage of
time are measured by recognizing accretion expense in a manner
that results in a constant effective interest rate being applied
to the average carrying amount of the liability. The effective
interest rate used to calculate accretion expense is our
credit-adjusted, risk-free interest rate in effect at the time
the liabilities were recorded.
Changes due to revisions of the estimates of the amount or
timing of the original undiscounted cash flows used to record a
liability are recognized by increasing or decreasing the
carrying amount of the asset retirement obligation liability and
the carrying amount of the related asset. Upward revisions in
the amount of undiscounted estimated cash flows used to record a
liability are discounted using the credit-adjusted, risk-free
interest rate in effect at the time of the change. Downward
revisions in the amount of undiscounted estimated cash flows
used to record a liability are discounted using the
credit-adjusted, risk-free rate that existed when the original
liability was recognized.
We review our calculations with respect to landfill asset
retirement obligations at least annually. If there is a
significant change in the facts and circumstances related to a
landfill during the year, we will review our calculations for
the landfill as soon as practical after the change has occurred.
Environmental
Operating Costs
In the normal course of business, we expense as incurred various
operating costs associated with environmental compliance. These
costs include, among other things, leachate treatment and
disposal, methane gas and groundwater monitoring and systems
maintenance, interim cap maintenance, costs associated with the
application of daily cover materials, and the legal and
administrative costs of ongoing environmental compliance.
Environmental
Liabilities
We are subject to an array of laws and regulations relating to
the protection of the environment, and we remediate sites in the
ordinary course of our business. Under current laws and
regulations, we may be responsible for environmental remediation
at sites that we either own or operate, including sites that we
have acquired, or sites where we have (or a company that we have
acquired has) delivered waste. Our environmental remediation
liabilities primarily include costs associated with remediating
groundwater, surface water and soil contamination, as well as
controlling and containing methane gas migration and the related
legal costs. To estimate our ultimate liability at these sites,
we evaluate several factors, including the nature and extent of
contamination at each identified site, the required remediation
methods, the apportionment of responsibility among the
potentially responsible parties and the financial viability of
those parties. We accrue for costs associated with environmental
remediation obligations when such costs are probable and
reasonably estimable in accordance with accounting for loss
contingencies. We periodically review the status of all
environmental matters and update our estimates of the likelihood
of and future expenditures for remediation as necessary. Changes
in the liabilities resulting from these reviews are recognized
currently in earnings in the period in which the adjustment is
known. Adjustments to estimates are reasonably possible in the
near term and may result in changes to recorded amounts. We have
not reduced the liabilities we have recorded for recoveries from
other potentially responsible parties or insurance companies.
The environmental liabilities assumed from Allied relate to
impacts at both owned and unowned sites. In the case of owned
sites, we are actively working with the appropriate regulatory
entity under the applicable regulations (typically RCRA or
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA)) to characterize and remediate potential
issues. At unowned sites, we are working within the regulatory
and procedural framework established by CERCLA to characterize
and remediate potential issues,
92
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
in conjunction with other potentially liable parties at each
location. Pursuant to the purchase method of accounting, we have
recorded the environmental remediation liabilities assumed from
Allied based upon estimates of their fair value, using an
estimate of future cash flows or settlement. Previously, and
consistent with our method of accounting, Allied recorded
remediation liabilities based upon accounting for loss
contingencies, however, amounts recorded under this method are
generally not at fair value.
Since the date of acquisition, our process for deriving fair
value for the environmental liabilities assumed from Allied
included first identifying the population of remediation sites
where we are either fully or partially responsible for
remediation or potential remediation. The population of
remediation sites was then stratified into categories based on
(i) the maturity of the issue relative to recognized stages
in the applicable regulation (typically CERCLA or RCRA) and
(ii) the extent of our participation in the remediation
activity. Using these categories, we applied one of the
following multiple estimation processes to quantify fair value:
|
|
|
|
|
For sites with established responsibility but a high level of
uncertainty with the outcome of the remedial process, we
developed multiple remediation scenarios. We then probability
weighted the remediation scenarios to develop a fair value
estimate.
|
|
|
For sites where the level of responsibility was less defined, we
developed a fair value estimate of the settlement costs based
upon market participant assessments from external legal counsel.
|
|
|
For sites which we own and are in the earliest stages of the
remedial process, we identified the most applicable standard
remedial techniques and then probability weighted the use of
each technique to develop a fair value estimate.
|
|
|
For the remaining sites with low levels of uncertainty, we
developed a primary remedial strategy and cost estimate to
determine the fair value of the liability.
|
The initial liabilities recorded as part of the Allied
acquisition were recorded using provisional amounts based upon
information available at that time. During 2009, we gathered and
assessed new information obtained about the facts and
circumstances surrounding Allieds remediation sites. In
certain situations, we used external engineers and attorneys to
assist in the development of our fair value estimates. As a
result of that process, we increased the fair value of our
remediation reserves assumed from Allied by $181.9 million.
Any further adjustments to our remediation reserves resulting in
changes in estimate or reserve settlements will be reflected
currently in earnings in the periods in which such adjustments
become known.
Goodwill
and Other Intangible Assets
We annually test goodwill at December 31 for impairment or when
an indicator of impairment exists. We test goodwill for
impairment using a two-step process. The first step is a screen
for potential impairment, while the second step measures the
amount of the impairment, if any. The first step of the goodwill
impairment test compares the fair value of a reporting unit with
its carrying amount, including goodwill.
We have defined our reporting units to be consistent with our
operating segments: Eastern, Midwestern, Southern, and Western.
In determining fair value, we primarily utilize discounted
future cash flows and operating results based on a comparative
multiple of earnings or revenues.
Significant estimates used in our fair value calculation
utilizing discounted future cash flows include, but are not
limited to: (i) estimates of future revenue and expense
growth by reporting unit, which we estimate to range from 3% to
5%; (ii) future estimated effective tax rates, which we
estimate to be 40%; (iii) future estimated capital
expenditures as well as future required investments in working
capital; (iv) estimated discount rates, which we estimate
to range between 8% and 10%; and (v) the future terminal
value of the reporting unit, which is based on its ability to
exist into perpetuity. Significant estimates used in the fair
value calculation utilizing market value multiples include but
are not limited to: (i) estimated future growth potential
of the reporting unit; (ii) estimated multiples of revenue
or earnings a willing buyer is likely to pay; and
(iii) estimated control premium a willing buyer is likely
to pay.
93
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
We evaluate a reporting unit for impairment if events or
circumstances change between annual tests, indicating a possible
impairment. Examples of such events or circumstances include:
(i) a significant adverse change in legal factors or in the
business climate; (ii) an adverse action or assessment by a
regulator; (iii) a more likely than not expectation that a
reporting unit or a significant portion thereof will be sold;
(iv) continued or sustained losses at a reporting unit;
(v) a significant decline in our market capitalization as
compared to our book value or (vi) the testing for
recoverability of a significant asset group within the reporting
unit.
We assign assets and liabilities from our corporate reporting
segment to our four operating segments to the extent that such
assets or liabilities relate to the cash flows of the reporting
unit and would be included in determining the reporting
units fair value.
In preparing our annual test for impairment as of
December 31, 2010, we determined that our indicated fair
value of equity exceeded our market capitalization. We
determined market capitalization as the fair value of our common
shares outstanding at the closing market price on
December 31, 2010. We believe one of the primary
reconciling differences between the indicated fair value of
equity and our market capitalization is due to a control
premium. We believe the control premium represents the value a
market participant could extract as savings
and/or
synergies by obtaining control, and thereby eliminating
duplicative overhead and operating costs resulting from the
consolidation of routes and internalization of waste streams.
As of December 31, 2010, we determined that the indicated
fair value of our reporting units exceeded their carrying value
by a range of 120% to in excess of 170% and, as such, we noted
no indicators of impairment at our reporting units.
We will continuously monitor market trends in our business, the
related expected cash flows and our calculation of market
capitalization for purposes of identifying possible indicators
of impairment. If our book value per share exceeds our market
price per share or if we have other indicators of impairment, we
will be required to perform an interim step one impairment
analysis, which may lead to a step two analysis and possible
impairment of our goodwill. Additionally, we would then be
required to review our remaining long-lived assets for
impairment.
Our operating segments, which also represent our reporting
units, are comprised of several vertically integrated
businesses. When an individual business within an integrated
operating segment is divested, goodwill is allocated to that
business based on its fair value relative to the fair value of
its operating segment.
Other intangible assets include values assigned to customer
relationships, long-term contracts, covenants not to compete and
trade names, and are amortized generally on a straight-line
basis over periods ranging from 2 to 23 years.
Asset
Impairments
We continually consider whether events or changes in
circumstances have occurred that may warrant revision of the
estimated useful lives of our long-lived assets (other than
goodwill) or whether the remaining balances of those assets
should be evaluated for possible impairment. Long-lived assets
include, for example, capitalized landfill costs, other property
and equipment, and identifiable intangible assets. Events or
changes in circumstances that may indicate that an asset may be
impaired include the following:
|
|
|
|
|
A significant decrease in the market price of an asset or asset
group,
|
|
|
A significant adverse change in the extent or manner in which an
asset or asset group is being used or in its physical condition,
|
|
|
A significant adverse change in legal factors or in the business
climate that could affect the value of an asset or asset group,
including an adverse action or assessment by a regulator,
|
|
|
An accumulation of costs significantly in excess of the amount
originally expected for the acquisition or construction of a
long-lived asset,
|
94
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
A current period operating or cash flow loss combined with a
history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with the
use of a long-lived asset or asset group,
|
|
|
A current expectation that, more likely than not, a long-lived
asset or asset group will be sold or otherwise disposed of
significantly before the end of its previously estimated useful
life, or
|
|
|
An impairment of goodwill at a reporting unit.
|
There are certain indicators listed above that require
significant judgment and understanding of the waste industry
when applied to landfill development or expansion. For example,
a regulator may initially deny a landfill expansion permit
application though the expansion permit is ultimately granted.
In addition, management may periodically divert waste from one
landfill to another to conserve remaining permitted landfill
airspace. Therefore, certain events could occur in the ordinary
course of business and not necessarily be considered indicators
of impairment due to the unique nature of the waste industry.
If indicators of impairment exist, the asset or asset group is
reviewed to determine whether its recoverability is impaired. We
assess the recoverability of the asset or asset group by
comparing its carrying value to an estimate (or estimates) of
its undiscounted future cash flows over its remaining life. If
the estimated undiscounted cash flows are not sufficient to
recover the carrying value of the asset or asset group, we
measure an impairment loss as the amount by which the carrying
amount of the asset exceeds its fair value. The loss is recorded
in the consolidated statement of income in the period in which
such impairment is identified. Estimating future cash flows
requires significant judgment, and our projections of future
cash flows and remaining useful lives may vary materially from
actual results.
Self-Insurance
Reserves
Our insurance programs for workers compensation, general
liability, vehicle liability and employee-related health care
benefits are effectively self-insured. Accruals for
self-insurance reserves are based on claims filed and estimates
of claims incurred but not reported. We consider our past claims
experience, including both frequency and settlement amount of
claims, in determining these estimates. It is possible that
recorded reserves may not be adequate to cover the future
payment of claims. Adjustments, if any, to estimates recorded
resulting from ultimate claim payments will be reflected in the
consolidated statements of income in the periods in which such
adjustments are known. In general, our self-insurance reserves
are recorded on an undiscounted basis. However, the
self-insurance liabilities we acquired in the Allied acquisition
have been recorded at estimated fair value, and, therefore, have
been discounted to present value based on our estimate of the
timing of the related cash flows.
As we are the primary obligor for payment of all claims, we
report our insurance claim liabilities on a gross basis in other
current and long-term liabilities and any associated recoveries
from our insurers are recorded in other assets.
Business
Combinations
We acquire businesses in the waste industry, including
non-hazardous waste collection, transfer, materials recovery
facilities and disposal operations, as part of our growth
strategy. Businesses are included in the consolidated financial
statements from the date of acquisition. For all acquisitions
completed prior to December 31, 2008 (prior to the
effective date of the new business combinations pronouncement),
the cost of the acquired businesses was allocated to the assets
acquired and the liabilities assumed based on estimates of fair
values thereof. These estimates were revised during the
allocation period as necessary if, and when, information
regarding contingencies becomes available to further define and
quantify assets acquired and liabilities assumed. The allocation
period generally does not exceed one year. To the extent
contingencies such as pre-acquisition environmental matters,
litigation and related legal fees were resolved or settled
during the allocation period or prior to December 31, 2008,
such items were included in the revised allocation of the
95
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
purchase price. After December 31, 2008 or the expiration
of the allocation period, whichever was later, the effect of
changes in such contingencies is included in results of
operations in the periods in which the adjustments are
determined.
For all acquisitions completed after December 31, 2008, we
recognize, separately from goodwill, the identifiable assets
acquired and liabilities assumed at their estimated
acquisition-date fair values. We measure and recognize goodwill
as of the acquisition date as the excess of: (i) the
aggregate of the fair value of consideration transferred, the
fair value of any noncontrolling interest in the acquiree (if
any) and the acquisition-date fair value of our previously held
equity interest in the acquiree (if any), over (ii) the
fair value of assets acquired and liabilities assumed. If
information about facts and circumstances existing as of the
acquisition date is incomplete by the end of the reporting
period in which a business combination occurs, we will report
provisional amounts for the items for which the accounting is
incomplete. The measurement or allocation period ends once we
receive the information we were seeking; however, this period
will not exceed one year from the acquisition date. Any material
adjustments recognized during the measurement period will be
reflected retrospectively in the consolidated financial
statements of the subsequent period. We will recognize
third-party transaction related costs as expense currently in
the period in which they are incurred.
Discontinued
Operations
We analyze our operations that have been divested or classified
as
held-for-sale
in order to determine if they qualify for discontinued
operations accounting. Only operations that qualify as a
component of an entity under U.S. GAAP can be included in
discontinued operations. In addition, only components where we
do not have significant continuing involvement with the divested
operations would qualify for discontinued operations accounting.
For our purposes, continuing involvement would include
continuing to receive waste at our landfill or recycling
facility from a divested hauling operation or transfer station
or continuing to dispose of waste at a divested landfill or
transfer station.
Costs
Associated with Exit Activities
We record costs associated with exit activities such as employee
termination benefits that represent a one-time benefit when
management approves and commits to a plan of termination, and
communicates the termination arrangement to the employees, or
over the future service period, if any. Other costs associated
with exit activities may include contract termination costs,
including costs related to leased facilities to be abandoned or
subleased, and facility and employee relocation costs.
In addition, we account for costs to exit an activity of an
acquired company and involuntary employee termination benefits
associated with acquired businesses in the purchase price
allocation of the acquired business if a plan to exit an
activity of an acquired company exists, and those costs have no
future economic benefit to us and will be incurred as a direct
result of the exit plan, or the exit costs represent amounts to
be incurred by us under a contractual obligation of the acquired
entity that existed prior to the acquisition date. We recognize
employee termination benefits as liabilities assumed as of the
acquisition date when management approves and commits to a plan
of termination, and communicates the termination arrangement to
the employees, if the future service period for these employees
is less than sixty days from their date of notification.
Contingent
Liabilities
We are subject to various legal proceedings, claims and
regulatory matters, the outcomes of which are subject to
significant uncertainty. In general, we determine whether to
disclose or accrue for loss contingencies based on an assessment
of whether the risk of loss is remote, reasonably possible or
probable and whether it can be reasonably estimated. We assess
our potential liability relating to litigation and regulatory
matters based on information available to us. Managements
assessment is developed based on an analysis of possible
outcomes under various strategies. We accrue for loss
contingencies when such amounts are probable and reasonably
96
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
estimable. If a contingent liability is only reasonably
possible, we disclose the potential range of the loss, if
estimable.
Contingent liabilities recorded in purchase accounting are
recorded at their fair values. These fair values may be
different from the values we would have otherwise recorded, had
the contingent liability not been assumed as part of an
acquisition of a business.
Accumulated
Other Comprehensive Income
Accumulated other comprehensive income is a component of
stockholders equity and includes the effective portion of
the net changes in fair value of our cash flow hedges which
consist of prices for diesel fuel and other commodities, net of
tax, and certain adjustments to liabilities associated with our
employee benefit plan liabilities, net of tax.
Revenue
Recognition
We generally provide services under contracts with
municipalities or individual customers. Municipal and commercial
contracts are generally long-term and often have renewal
options. Advance billings are recorded as deferred revenue, and
revenue is recognized over the period services are provided. No
single customer has individually accounted for more than 3% of
our consolidated revenue or of our reportable segment revenue in
any of the past three years.
We recognize revenue when all four of the following criteria are
met:
|
|
|
|
|
Persuasive evidence of an arrangement exists such as a service
agreement with a municipality, a hauling customer or a disposal
customer,
|
|
|
Services have been performed such as the collection and hauling
of waste or the disposal of waste at a disposal facility owned
or operated by us,
|
|
|
The price of the services provided to the customer is fixed or
determinable, and
|
|
|
Collectibility is reasonably assured.
|
Income
Taxes
We are subject to income taxes in the United States and Puerto
Rico. We record deferred income taxes to reflect the effects of
temporary differences between the carrying amounts of assets and
liabilities and their tax bases using enacted tax rates that we
expect to be in effect when the taxes are actually paid or
recovered.
We record net deferred tax assets to the extent we believe these
assets will more likely than not be realized. In making these
determinations, we consider all available positive and negative
evidence, including scheduled reversals of deferred tax
liabilities, tax planning strategies, projected future taxable
income and recent financial operating results. If we determine
that we would be able to realize a deferred income tax asset in
the future in excess of its net recorded amount, we would make
an adjustment to the valuation allowance which would reduce the
provision for income taxes.
A tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be
sustained upon examination, including resolutions of any related
appeals or litigation processes, based on the technical merits.
Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized.
We recognize interest and penalties related to uncertain tax
positions in the provision for income taxes in the accompanying
consolidated statements of income. Accrued interest and
penalties are included in other accrued liabilities, and
deferred income taxes and other long-term tax liabilities, in
the consolidated balance sheets.
97
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Defined
Benefit Pension Plan
We currently have one qualified defined pension plan, the BFI
Retirement Plan (the Plan). The Plan covers certain current and
former employees of Allied in the United States, including some
employees subject to collective bargaining agreements. The
Plans benefit formula is based on a percentage of
compensation as defined in the Plan document. However, the
benefits of approximately 97% of the current plan participants
were frozen upon Allieds acquisition of BFI in 1999.
Our pension contributions are made in accordance with funding
standards established by the Employee Retirement Income Security
Act of 1974 (ERISA) and the Internal Revenue Code (IRC), as
amended by the Pension Protection Act of 2006. The Plans
assets have been invested as determined by our Retirement
Benefits Committee. We annually review and adjust the
Plans asset allocation as deemed necessary.
The benefit obligation and associated income or expense related
to the Plan are determined using annually established
assumptions for discount rates, expected rates of return and
average rates for compensation increases. We determine the
discount rate based on a model that matches the timing and
amount of expected benefit payments to maturities of high
quality bonds priced as of the pension plan measurement date.
When that timing does not correspond to a published high-quality
bond rate, our model uses an expected yield curve to determine
an appropriate current discount rate. The yields on the bonds
are used to derive a discount rate for the liability. In
developing our expected rate of return assumption, we evaluate
long-term expected and historical actual returns on the plan
assets, giving consideration to our asset mix and the
anticipated duration of our plan obligations. The average rate
of compensation increase reflects our expectations of average
pay increases over the periods benefits are earned. Our
assumptions are reviewed annually and adjusted as deemed
necessary.
Equity-Based
Compensation Plans
We recognize equity-based compensation expense on the estimated
fair value of stock options and similar equity instruments
issued as compensation to employees over the requisite service
periods.
Cash flows resulting from tax benefits related to tax deductions
in excess of those recorded for compensation expense, resulting
from the exercise of stock options, are classified as cash flows
from financing activities. All other tax benefits related to
stock options have been presented as a component of cash flows
from operating activities.
We recognize compensation expense on a straight-line basis over
the requisite service period for each separately vesting portion
of the award, or to the employees retirement-eligible
date, if earlier.
The fair value of each option on the date of grant is estimated
using a lattice binomial option-pricing model based on certain
valuation assumptions. Expected volatilities are based on our
historical stock prices over the contractual terms of the
options and other factors. The risk-free interest rates are
based on the published U.S. Treasury yield curve in effect
at the time of the grant for instruments with a similar life.
The dividend yield reflects our dividend yield at the date of
grant. The expected life represents the period that the stock
options are expected to be outstanding, taking into
consideration the contractual terms of the options and our
employees historical exercise and post-vesting employment
termination behavior, weighted to reflect the job level
demographic profile of the employees receiving the option
grants. The estimated forfeiture rate used to record
compensation expense is based on historical forfeitures and is
adjusted periodically based on actual results.
Leases
We lease property and equipment in the ordinary course of our
business. Our most significant lease obligations are for
property and equipment specific to our industry, including real
property operated as a landfill or transfer station and
operating equipment. Our leases have varying terms. Some may
include renewal or
98
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
purchase options, escalation clauses, restrictions, penalties or
other obligations that we consider in determining minimum lease
payments. The leases are classified as either operating leases
or capital leases, as appropriate.
Operating
Leases
Many of our leases are operating leases. This classification
generally can be attributed to either (i) relatively low
fixed minimum lease payments (including, for example, real
property lease payments that are not fixed and vary based on the
volume of waste we receive or process), or (ii) minimum
lease terms that are much shorter than the assets economic
useful lives. Management expects that, in the normal course of
business, our operating leases will be renewed, replaced by
other leases, or replaced with fixed asset expenditures.
Capital
Leases
Assets acquired under capital leases are capitalized at the
inception of each lease and are amortized to depreciation
expense over the lesser of the useful life of the asset or the
lease term on either a straight-line or a
units-of-consumption
basis, depending on the asset leased. The present value of the
related lease payments is recorded as a debt obligation.
Related
Party Transactions
It is our policy that transactions with related parties must be
on terms that, on the whole, are no less favorable than those
that would be available from unaffiliated parties.
Recently
Issued Accounting Pronouncements
Fair
Value Measurements
In January 2010, the FASB issued guidance to amend the
disclosure requirements related to recurring and nonrecurring
fair value measurements. The guidance requires new disclosures
on the transfers of assets and liabilities between Level 1
and Level 2 of the fair value measurement hierarchy,
including the reasons and timing of the transfers, which we
adopted effective January 1, 2010. Additionally, the
guidance requires a rollforward of activities related to the
purchases, sales, issuance and settlements of assets and
liabilities measured using Level 3 fair value measurements.
This guidance is effective for fiscal years beginning after
December 15, 2010. The adoption of this guidance will
increase the level of disclosures in the financial statements
related to fair value measurements.
Consolidation
of Variable Interest Entities
In June 2009, the FASB issued an amendment to the accounting and
disclosure requirements for the consolidation of variable
interest entities (VIEs) and requires an enterprise to perform
an analysis to determine whether the enterprises variable
interest or interests give it a controlling financial interest
in a VIE. Under this new guidance, an enterprise has a
controlling financial interest when it has (i) the power to
direct the activities of a VIE that most significantly impact
the entitys economic performance and (ii) the
obligation to absorb losses of the entity or the right to
receive benefits from the entity that could potentially be
significant to the VIE. An enterprise is required to assess
whether it has an implicit financial responsibility to ensure
that a VIE operates as designed when determining whether it has
power to direct the activities of the VIE that most
significantly impact the entitys economic performance. It
also requires ongoing assessments of whether an enterprise is
the primary beneficiary of a VIE, requires enhanced disclosures
and eliminates the scope exclusion for qualifying
special-purpose entities. We adopted this new guidance on
January 1, 2010 and the adoption did not have a material
effect on our consolidated financial position or results of
operations.
99
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In January 2010, the FASB issued guidance to amend the
accounting and reporting requirements for decreases in ownership
of a subsidiary. This guidance requires that a decrease in the
ownership interest of a subsidiary that does not result in a
change of control be treated as an equity transaction. The
guidance also expands the disclosure requirements about the
deconsolidation of a subsidiary. We adopted this guidance
effective January 1, 2010 and it did not have a material
impact on our consolidated financial position or results of
operations.
Goodwill
Impairment Test
In December 2010, the FASB issued authoritative guidance which
modifies the requirements of Step 1 of the goodwill impairment
test for reporting units with zero or negative carrying amounts.
This guidance is effective for fiscal years beginning after
December 15, 2010, and we anticipate that it will not have
a material impact on our consolidated financial position or
results of operations.
|
|
3.
|
BUSINESS
ACQUISITIONS AND DIVESTITURES AND RESTRUCTURING
CHARGES
|
Acquisition
of Allied Waste Industries, Inc.
Rationale
for the Acquisition
We believe that the Allied acquisition results in a combined
company that has greater financial strength, operational
efficiencies, earning power and growth potential than either we
or Allied would have on our own. We believe that there is a
substantial strategic fit between the markets serviced by
Republic, which are located predominantly in high-growth Sunbelt
markets, and those served by Allied, which has a national
footprint. Since our collection markets are highly
complementary, the combined company is diversified across
geographic markets, customer segments and service offerings.
This balance will allow our combined company to capitalize on
attractive business opportunities, mitigate geographic risk, and
results in greater stability and predictability of revenue and
free cash flow. We also believe that the acquisition will result
in a number of important synergies, primarily from achieving
greater operating efficiencies, capturing inherent economies of
scale and leveraging corporate resources. Therefore, we believe
that the premium we paid to effectuate the acquisition was
reasonable.
Purchase
Price
The purchase price paid for Allied, which was acquired on
December 5, 2008, includes the value of Republics
common stock issued in exchange for Allieds outstanding
common stock, the conversion of Allieds outstanding stock
options and unvested restricted stock awards into
Republics equity-based awards, cash paid to retire
Allieds revolving credit facility, the fair value of
Allieds debt less cash assumed at closing and
Republics transaction costs.
100
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In summary, the purchase price paid for the Allied acquisition
and the allocation of the purchase price is as follows:
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Purchase price:
|
|
|
|
|
Value of Republic common stock issued in exchange for Allied
common stock outstanding
|
|
$
|
6,112.9
|
|
Value of Republic stock options issued to replace Allied stock
options
|
|
|
61.2
|
|
Cash paid to retire Allieds credit facility
|
|
|
671.8
|
|
Debt, fair value
|
|
|
5,356.2
|
|
Less: cash acquired
|
|
|
(131.3
|
)
|
Transaction costs
|
|
|
58.9
|
|
|
|
|
|
|
Total purchase price
|
|
|
12,129.7
|
|
|
|
|
|
|
Allocated as follows:
|
|
|
|
|
Current assets
|
|
|
909.9
|
|
Landfill development costs
|
|
|
2,600.0
|
|
Other property and equipment
|
|
|
2,262.3
|
|
Other assets
|
|
|
188.8
|
|
Current liabilities
|
|
|
(1,433.3
|
)
|
Capping, closure and post-closure liabilities
|
|
|
(885.4
|
)
|
Environmental liabilities
|
|
|
(390.0
|
)
|
Deferred income taxes and other long-term tax liabilities
|
|
|
(637.2
|
)
|
Other long-term liabilities
|
|
|
(231.8
|
)
|
|
|
|
|
|
Net book value of assets acquired and liabilities assumed
|
|
|
2,383.3
|
|
|
|
|
|
|
Excess purchase price to be allocated
|
|
$
|
9,746.4
|
|
|
|
|
|
|
Allocated as follows:
|
|
|
|
|
Goodwill
|
|
$
|
9,199.6
|
|
Other intangible assets:
|
|
|
|
|
Customer relationships
|
|
|
420.0
|
|
Franchise agreements
|
|
|
60.0
|
|
Other municipal agreements
|
|
|
30.0
|
|
Tradenames
|
|
|
30.0
|
|
Favorable lease agreements
|
|
|
5.8
|
|
Non-compete agreements
|
|
|
1.0
|
|
|
|
|
|
|
Total allocated
|
|
$
|
9,746.4
|
|
|
|
|
|
|
Adjustments in future periods, if any, made to assets acquired
and liabilities assumed will be recorded in our consolidated
statement of income.
The intangible assets identified that were determined to have
value as a result of our analysis of Allieds projected
revenue streams and their related profits include customer
relationships, franchise agreements, other municipal agreements,
non-compete agreements and trade names. The fair values for
these intangible assets are reflected in the previous table.
Other intangible assets were identified that are considered to
be components of either property and equipment or goodwill under
U.S. GAAP, including the value of the permitted and
probable airspace at Allieds landfills (property and
equipment), the going concern element of Allieds business
(goodwill) and its assembled workforce (goodwill). The going
concern element represents the ability of an established
business to earn a higher rate of return on an assembled
collection of net assets than would be expected if those assets
had to be acquired separately. A substantial portion of this
going concern element
101
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
acquired is represented by Allieds infrastructure of
market-based collection routes and its related integrated waste
transfer and disposal channels, whose value has been included in
goodwill.
All of the goodwill and other intangible assets resulting from
the Allied acquisition are not deductible for income tax
purposes.
Pro
Forma Information
The consolidated financial statements presented for Republic
include the operating results of Allied from December 5,
2008, the date of the acquisition. The following pro forma
information is presented assuming the acquisition had been
completed as of January 1, 2008. The unaudited pro forma
information presented has been prepared for illustrative
purposes and is not intended to be indicative of the results of
operations that would have actually occurred had the acquisition
been consummated at the beginning of the periods presented or of
future results of the combined operations. Furthermore, the pro
forma results do not give effect to all cost savings or
incremental costs that occur as a result of the integration and
consolidation of the acquisition (in millions, except share and
per share amounts).
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
|
(unaudited)
|
|
|
Revenue
|
|
$
|
9,362.2
|
|
Net income
|
|
|
285.7
|
|
Basic earnings per share
|
|
|
0.76
|
|
Diluted earnings per share
|
|
|
0.75
|
|
The unaudited pro forma financial information includes
adjustments for amortization of identifiable intangible assets,
accretion of discounts to fair value associated with debt,
environmental, self-insurance and other liabilities, accretion
of capping, closure and post-closure obligations and
amortization of the related assets, and provision for income
taxes.
Restructuring
Charges
As a result of the 2008 Allied acquisition, we committed to a
restructuring plan related to our corporate overhead and other
administrative and operating functions. The plan included
closing our corporate office in Florida, consolidating
administrative functions to Arizona, the former headquarters of
Allied, and reducing staffing levels. The plan also included
closing and consolidating certain operating locations and
terminating certain leases. During the years ended
December 31, 2010 and 2009, we incurred $11.4 million,
net of adjustments, and $63.2 million, respectively, of
restructuring and integration charges related to our integration
of Allied. These charges and adjustments primarily related to
severance and other employee termination and relocation benefits
and consulting and professional fees. Substantially all the
charges are recorded in our corporate segment. We do not expect
to incur additional charges to complete our plan. We expect that
the remaining charges will be paid during 2011.
102
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following tables reflect the activity during the years ended
December 31, 2010 and 2009 associated with the liabilities
(included in other accrued liabilities) incurred in connection
with the restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Additions
|
|
|
Payments
|
|
|
Adjustments
|
|
|
2010
|
|
|
Severance and other termination benefits
|
|
$
|
19.6
|
|
|
$
|
4.4
|
|
|
$
|
(17.4
|
)
|
|
$
|
(3.8
|
)
|
|
$
|
2.8
|
|
Relocation
|
|
|
5.2
|
|
|
|
-
|
|
|
|
(1.5
|
)
|
|
|
(2.6
|
)
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24.8
|
|
|
$
|
4.4
|
|
|
$
|
(18.9
|
)
|
|
$
|
(6.4
|
)
|
|
$
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Payments
|
|
|
Adjustments
|
|
|
2009
|
|
|
Severance and other termination benefits
|
|
$
|
12.5
|
|
|
$
|
31.4
|
|
|
$
|
(24.3
|
)
|
|
$
|
-
|
|
|
$
|
19.6
|
|
Relocation
|
|
|
17.9
|
|
|
|
2.6
|
|
|
|
(15.3
|
)
|
|
|
-
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30.4
|
|
|
$
|
34.0
|
|
|
$
|
(39.6
|
)
|
|
$
|
-
|
|
|
$
|
24.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Liabilities Related to Allied
The following tables reflect the activity during the years ended
December 31, 2010 and 2009 associated with the liabilities
(included in other accrued liabilities) incurred in connection
with termination benefits for employees who were employed by
Allied at the date of the acquisition and notified that their
employment was terminated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Payments
|
|
|
Adjustments
|
|
|
2010
|
|
|
Severance and other termination benefits
|
|
$
|
2.4
|
|
|
$
|
(1.1
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Payments
|
|
|
2009
|
|
|
Severance and other termination benefits
|
|
$
|
22.6
|
|
|
$
|
6.7
|
|
|
$
|
(26.9
|
)
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The initial legal contingencies recorded as part of the Allied
acquisition were estimated using provisional amounts based upon
information available at that time. During 2009, we gathered and
assessed new information obtained about the facts and
circumstances surrounding various Allied legal matters, and as a
result increased the legal reserves by $53.9 million. Any
further adjustments to our Allied legal matter reserves
resulting from changes in estimates or reserve settlements will
be reflected in our consolidated statement of income in the
periods in which such adjustments become known.
During 2009, we recorded additional liabilities for unfavorable
contract and lease exit costs of $22.6 million and
$7.7 million, respectively.
The
underlying lease agreements and contracts have remaining
non-cancellable
103
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
terms ranging from 1 to 21 years. The following table
reflects activity during the years ended December 31, 2010
and 2009 associated with unfavorable contracts and lease exit
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
Payments /
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Amortization
|
|
|
Adjustments
|
|
|
2010
|
|
|
Unfavorable contracts
|
|
$
|
49.0
|
|
|
$
|
(10.1
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
37.6
|
|
Lease exit costs
|
|
|
6.4
|
|
|
|
(1.4
|
)
|
|
|
-
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
55.4
|
|
|
$
|
(11.5
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
42.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
Payments /
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Amortization
|
|
|
2009
|
|
|
Unfavorable contracts
|
|
$
|
33.3
|
|
|
$
|
22.6
|
|
|
$
|
(6.9
|
)
|
|
$
|
49.0
|
|
Lease exit costs
|
|
|
-
|
|
|
|
7.7
|
|
|
|
(1.3
|
)
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
33.3
|
|
|
$
|
30.3
|
|
|
$
|
(8.2
|
)
|
|
$
|
55.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Acquisitions
In addition to the Allied acquisition, we acquired various other
solid waste businesses and development projects during the years
ended December 31, 2010 and 2008. We did not make any
material acquisitions in 2009. The aggregate cash used in
acquisitions for these transactions was $58.9 million and
$13.4 million, respectively. In summary, the purchase price
paid for these acquisitions (excluding Allied) and the
allocation of the purchase price as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2008
|
|
|
Purchase price:
|
|
|
|
|
|
|
|
|
Cash used in acquisitions, net of cash acquired
|
|
$
|
58.9
|
|
|
$
|
13.4
|
|
Fair value of operations surrendered
|
|
|
44.0
|
|
|
|
-
|
|
Holdbacks
|
|
|
0.6
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
103.5
|
|
|
$
|
13.4
|
|
|
|
|
|
|
|
|
|
|
Allocated as follows:
|
|
|
|
|
|
|
|
|
Working capital surplus
|
|
|
5.1
|
|
|
|
0.4
|
|
Property and equipment
|
|
|
40.8
|
|
|
|
5.7
|
|
Other liabilities, net
|
|
|
(6.1
|
)
|
|
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
Net book value of assets acquired and liabilities assumed
|
|
|
39.8
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
Excess purchase price to be allocated
|
|
$
|
63.7
|
|
|
$
|
8.6
|
|
|
|
|
|
|
|
|
|
|
Allocated as follows:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
41.8
|
|
|
$
|
1.7
|
|
Other intangible assets
|
|
|
21.9
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
Total allocated
|
|
$
|
63.7
|
|
|
$
|
8.6
|
|
|
|
|
|
|
|
|
|
|
Substantially all of the intangible assets recorded for these
acquisitions are deductible for tax purposes.
104
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Divestitures
In 2010, we divested of solid waste businesses in our Eastern
and Midwestern regions and recognized a net loss of
$4.0 million.
In October 2009, we divested a hauling operation in our Southern
region and recognized a loss of $10.2 million.
As a condition of the Allied acquisition, the Department of
Justice (DOJ) required us to divest of certain assets and
related liabilities. During 2009, we completed our required
divestitures and recognized a net gain of $153.5 million.
|
|
4.
|
PROPERTY
AND EQUIPMENT, NET
|
A summary of property and equipment as of December 31 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Other land
|
|
$
|
391.9
|
|
|
$
|
418.7
|
|
Non-depletable landfill land
|
|
|
158.0
|
|
|
|
142.7
|
|
Landfill development costs
|
|
|
4,575.2
|
|
|
|
4,230.9
|
|
Vehicles and equipment
|
|
|
4,142.1
|
|
|
|
3,792.4
|
|
Buildings and improvements
|
|
|
768.5
|
|
|
|
741.6
|
|
Construction-in-progress -
landfill
|
|
|
133.2
|
|
|
|
245.1
|
|
Construction-in-progress -
other
|
|
|
27.2
|
|
|
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,196.1
|
|
|
|
9,594.4
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation, depletion and amortization:
|
|
|
|
|
|
|
|
|
Landfill development costs
|
|
|
(1,504.6
|
)
|
|
|
(1,275.4
|
)
|
Vehicles and equipment
|
|
|
(1,820.6
|
)
|
|
|
(1,518.2
|
)
|
Buildings and improvements
|
|
|
(172.4
|
)
|
|
|
(143.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,497.6
|
)
|
|
|
(2,936.7
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
6,698.5
|
|
|
$
|
6,657.7
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS, NET
|
Goodwill,
Net
A summary of the activity and balances in our goodwill accounts,
net, by operating segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
to
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Acquisitions
|
|
|
Divestitures
|
|
|
Acquisitions
|
|
|
2010
|
|
|
Eastern
|
|
$
|
2,818.5
|
|
|
$
|
0.1
|
|
|
$
|
(24.0
|
)
|
|
$
|
(2.7
|
)
|
|
$
|
2,791.9
|
|
Midwestern
|
|
|
2,118.2
|
|
|
|
32.3
|
|
|
|
(18.9
|
)
|
|
|
(2.0
|
)
|
|
|
2,129.6
|
|
Southern
|
|
|
2,724.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.9
|
)
|
|
|
2,721.8
|
|
Western
|
|
|
3,005.7
|
|
|
|
9.4
|
|
|
|
-
|
|
|
|
(3.1
|
)
|
|
|
3,012.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,667.1
|
|
|
$
|
41.8
|
|
|
$
|
(42.9
|
)
|
|
$
|
(10.7
|
)
|
|
$
|
10,655.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
Adjustments
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
|
December 31,
|
|
|
|
|
|
to
|
|
|
to Assets
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Divestitures
|
|
|
Acquisitions
|
|
|
Held for Sale
|
|
|
2009
|
|
|
Eastern
|
|
$
|
2,772.5
|
|
|
$
|
(11.2
|
)
|
|
$
|
45.0
|
|
|
$
|
12.2
|
|
|
$
|
2,818.5
|
|
Midwestern
|
|
|
2,083.8
|
|
|
|
-
|
|
|
|
34.7
|
|
|
|
(0.3
|
)
|
|
|
2,118.2
|
|
Southern
|
|
|
2,715.6
|
|
|
|
(61.8
|
)
|
|
|
48.6
|
|
|
|
22.3
|
|
|
|
2,724.7
|
|
Western
|
|
|
2,949.6
|
|
|
|
-
|
|
|
|
56.1
|
|
|
|
-
|
|
|
|
3,005.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,521.5
|
|
|
$
|
(73.0
|
)
|
|
$
|
184.4
|
|
|
$
|
34.2
|
|
|
$
|
10,667.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to acquisitions for the year ended December 31,
2010 primarily related to deferred tax asset adjustments
resulting from the exercise of legacy Allied stock options,
which were recorded to goodwill in purchase accounting.
Adjustments to acquisitions for the year ended December 31,
2009 includes a $9.7 million adjustment for deferred taxes
pertaining to prior years acquisitions.
Other
Intangible Assets, Net
Other intangible assets, net, include values assigned to
customer relationships, franchise agreements, other municipal
agreements, non-compete agreements and trade names, and are
amortized over periods ranging from 2 to 23 years. A
summary of the activity and balances in other intangible assets
accounts by intangible asset type is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Intangible Assets
|
|
|
Accumulated Amortization
|
|
|
Net
|
|
|
|
Balance at
|
|
|
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
Balance at
|
|
|
Additions
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
Intangibles at
|
|
|
|
December 31,
|
|
|
|
|
|
to
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Charged
|
|
|
to
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Acquisitions
|
|
|
Acquisitions
|
|
|
2010
|
|
|
2009
|
|
|
to Expense
|
|
|
Acquisitions
|
|
|
2010
|
|
|
2010
|
|
|
Customer relationships, franchise and other municipal agreements
|
|
$
|
521.1
|
|
|
$
|
16.0
|
|
|
$
|
-
|
|
|
$
|
537.1
|
|
|
$
|
(70.5
|
)
|
|
$
|
(60.2
|
)
|
|
$
|
-
|
|
|
$
|
(130.7
|
)
|
|
$
|
406.4
|
|
Trade names
|
|
|
30.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30.0
|
|
|
|
(6.5
|
)
|
|
|
(6.0
|
)
|
|
|
-
|
|
|
|
(12.5
|
)
|
|
|
17.5
|
|
Non-compete agreements
|
|
|
7.4
|
|
|
|
5.9
|
|
|
|
(0.4
|
)
|
|
|
12.9
|
|
|
|
(6.5
|
)
|
|
|
(1.0
|
)
|
|
|
0.3
|
|
|
|
(7.2
|
)
|
|
|
5.7
|
|
Other intangible assets
|
|
|
62.9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62.9
|
|
|
|
(37.9
|
)
|
|
|
(3.3
|
)
|
|
|
-
|
|
|
|
(41.2
|
)
|
|
|
21.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
621.4
|
|
|
$
|
21.9
|
|
|
$
|
(0.4
|
)
|
|
$
|
642.9
|
|
|
$
|
(121.4
|
)
|
|
$
|
(70.5
|
)
|
|
$
|
0.3
|
|
|
$
|
(191.6
|
)
|
|
$
|
451.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Intangible Assets
|
|
|
Accumulated Amortization
|
|
|
Net
|
|
|
|
Balance at
|
|
|
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
Balance at
|
|
|
Additions
|
|
|
Adjustments
|
|
|
Balance at
|
|
|
Intangibles at
|
|
|
|
December 31,
|
|
|
|
|
|
to
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Charged
|
|
|
to
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Acquisitions
|
|
|
2009
|
|
|
2008
|
|
|
to Expense
|
|
|
Acquisitions
|
|
|
2009
|
|
|
2009
|
|
|
Customer relationships, franchise and other municipal agreements
|
|
$
|
520.8
|
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
$
|
521.1
|
|
|
$
|
(10.9
|
)
|
|
$
|
(59.6
|
)
|
|
$
|
-
|
|
|
$
|
(70.5
|
)
|
|
$
|
450.6
|
|
Trade names
|
|
|
30.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30.0
|
|
|
|
(0.5
|
)
|
|
|
(6.0
|
)
|
|
|
-
|
|
|
|
(6.5
|
)
|
|
|
23.5
|
|
Non-compete agreements
|
|
|
7.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7.4
|
|
|
|
(5.6
|
)
|
|
|
(0.9
|
)
|
|
|
-
|
|
|
|
(6.5
|
)
|
|
|
0.9
|
|
Other intangibles assets
|
|
|
57.2
|
|
|
|
-
|
|
|
|
5.7
|
|
|
|
62.9
|
|
|
|
(34.3
|
)
|
|
|
(3.6
|
)
|
|
|
-
|
|
|
|
(37.9
|
)
|
|
|
25.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
615.4
|
|
|
$
|
0.2
|
|
|
$
|
5.8
|
|
|
$
|
621.4
|
|
|
$
|
(51.3
|
)
|
|
$
|
(70.1
|
)
|
|
$
|
-
|
|
|
$
|
(121.4
|
)
|
|
$
|
500.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Based on the amortizable assets recorded in the balance sheet at
December 31, 2010, amortization expense for each of the
next five years is estimated to be as follows:
|
|
|
|
|
2011
|
|
$
|
71.4
|
|
2012
|
|
|
61.9
|
|
2013
|
|
|
61.0
|
|
2014
|
|
|
54.5
|
|
2015
|
|
|
54.3
|
|
Prepaid
Expenses and Other Current Assets
A summary of prepaid expenses and other current assets as of
December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Inventories
|
|
$
|
31.3
|
|
|
$
|
33.7
|
|
Prepaid expenses
|
|
|
55.9
|
|
|
|
59.3
|
|
Other non-trade receivables
|
|
|
45.4
|
|
|
|
57.1
|
|
Income tax receivables
|
|
|
69.8
|
|
|
|
-
|
|
Other current assets
|
|
|
5.0
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
207.4
|
|
|
$
|
156.5
|
|
|
|
|
|
|
|
|
|
|
Other current assets include the fair value of fuel and
commodity hedges of $3.5 million and $5.0 million at
December 31, 2010 and 2009, respectively. Other non-trade
receivables include the fair value of interest rate swaps of
$5.2 million at December 31, 2010. Our interest rate
swaps expire in August 2010, and, as result, we reclassified
their fair value from other assets to other non-trade
receivables.
Other
Assets
A summary of other assets as of December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred financing costs
|
|
$
|
41.1
|
|
|
$
|
32.4
|
|
Deferred compensation plan
|
|
|
27.4
|
|
|
|
15.2
|
|
Notes and other receivables
|
|
|
34.0
|
|
|
|
45.1
|
|
Other
|
|
|
135.4
|
|
|
|
117.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
237.9
|
|
|
$
|
210.1
|
|
|
|
|
|
|
|
|
|
|
Notes and other receivables include the fair value of interest
rate swaps of $9.9 million at December 31, 2009.
107
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Other
Accrued Liabilities
A summary of other accrued liabilities as of December 31 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Accrued payroll and benefits
|
|
$
|
158.4
|
|
|
$
|
169.6
|
|
Accrued fees and taxes
|
|
|
111.8
|
|
|
|
114.4
|
|
Self-insurance reserves, current portion
|
|
|
112.7
|
|
|
|
110.9
|
|
Accrued dividends
|
|
|
76.7
|
|
|
|
72.4
|
|
Income taxes payable
|
|
|
-
|
|
|
|
70.0
|
|
Restructuring liabilities
|
|
|
3.9
|
|
|
|
24.8
|
|
Accrued professional fees and legal settlement reserves
|
|
|
53.1
|
|
|
|
59.0
|
|
Other
|
|
|
104.7
|
|
|
|
119.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
621.3
|
|
|
$
|
740.2
|
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities includes the fair value of fuel and
commodity hedges of $8.4 million and $5.7 million at
December 31, 2010 and 2009, respectively.
Other
Long-Term Liabilities
A summary of other long-term liabilities as of December 31 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred compensation liability
|
|
$
|
27.7
|
|
|
$
|
15.7
|
|
Pension and other postretirement liabilities
|
|
|
14.4
|
|
|
|
38.1
|
|
Contingent legal liabilities
|
|
|
105.8
|
|
|
|
112.0
|
|
Ceded insurance reserves
|
|
|
54.5
|
|
|
|
48.9
|
|
Other
|
|
|
103.1
|
|
|
|
64.5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
305.5
|
|
|
$
|
279.2
|
|
|
|
|
|
|
|
|
|
|
Self-Insurance
Reserves
In general, our self-insurance reserves are recorded on an
undiscounted basis. However, our estimate of the self-insurance
liabilities assumed in the Allied acquisition have been recorded
at fair value, and, therefore, have been discounted to present
value using a rate of 9.75%. Discounted reserves are accreted to
interest expense through the period that they are paid.
Our liabilities for unpaid and incurred but not reported claims
at December 31, 2010 (which includes claims for
workers compensation, general liability, vehicle liability
and employee health care benefits) were $417.2 million
under our current risk management program and are included in
other accrued liabilities and self-insurance reserves, net of
current portion in our consolidated balance sheets. While the
ultimate amount of claims incurred is dependent on future
developments, we believe recorded reserves are adequate to cover
the future payment of claims. However, it is possible that
recorded reserves may not be adequate to cover the future
payment of claims. Adjustments, if any, to estimates recorded
resulting from ultimate claim payments will be reflected in our
consolidated statements of income in the periods in which such
adjustments are
108
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
known. The
following table summarizes the activity in our self-insurance
reserves for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of year
|
|
$
|
412.9
|
|
|
$
|
408.1
|
|
|
$
|
178.0
|
|
Additions charged to expense
|
|
|
364.9
|
|
|
|
481.3
|
|
|
|
203.0
|
|
Payments
|
|
|
(368.9
|
)
|
|
|
(489.7
|
)
|
|
|
(180.9
|
)
|
Allied acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
206.8
|
|
Accretion expense
|
|
|
8.3
|
|
|
|
13.2
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
417.2
|
|
|
|
412.9
|
|
|
|
408.1
|
|
Less: Current portion
|
|
|
(112.7
|
)
|
|
|
(110.9
|
)
|
|
|
(173.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
304.5
|
|
|
$
|
302.0
|
|
|
$
|
234.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
LANDFILL
AND ENVIRONMENTAL COSTS
|
As of December 31, 2010, we owned or operated 193 active
solid waste landfills with total available disposal capacity of
approximately 4.7 billion in-place cubic yards.
Additionally, we currently have post-closure responsibility for
129 closed landfills.
Accrued
Landfill and Environmental Costs
A summary of our landfill and environmental liabilities as of
December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Landfill final capping, closure and post-closure liabilities
|
|
$
|
1,046.5
|
|
|
$
|
1,074.5
|
|
Remediation
|
|
|
552.1
|
|
|
|
554.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,598.6
|
|
|
|
1,628.6
|
|
Less: Current portion
|
|
|
(182.0
|
)
|
|
|
(245.4
|
)
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
1,416.6
|
|
|
$
|
1,383.2
|
|
|
|
|
|
|
|
|
|
|
Final
Capping, Closure and Post-Closure Costs
The following table summarizes the activity in our asset
retirement obligation liabilities, which include liabilities for
final capping, closure and post-closure, for the years ended
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Asset retirement obligation liabilities, beginning of year
|
|
$
|
1,074.5
|
|
|
$
|
1,040.6
|
|
|
$
|
277.7
|
|
Non-cash additions
|
|
|
31.4
|
|
|
|
32.5
|
|
|
|
20.5
|
|
Acquisitions and divestitures, net
|
|
|
(3.0
|
)
|
|
|
72.3
|
|
|
|
813.1
|
|
Asset retirement obligation adjustments
|
|
|
(27.9
|
)
|
|
|
(57.4
|
)
|
|
|
(32.6
|
)
|
Payments
|
|
|
(111.3
|
)
|
|
|
(100.9
|
)
|
|
|
(27.9
|
)
|
Accretion expense
|
|
|
80.5
|
|
|
|
88.8
|
|
|
|
23.9
|
|
Other adjustments
|
|
|
2.3
|
|
|
|
(1.4
|
)
|
|
|
(34.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation liabilities, end of period
|
|
|
1,046.5
|
|
|
|
1,074.5
|
|
|
|
1,040.6
|
|
Less: Current portion
|
|
|
(93.9
|
)
|
|
|
(137.5
|
)
|
|
|
(130.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
952.6
|
|
|
$
|
937.0
|
|
|
$
|
910.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The initial liabilities recorded as part of the Allied
acquisition were developed using provisional amounts based upon
information available at that time. During 2009, we gathered and
assessed new information about
109
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
the facts and circumstances surrounding our sites, and, as a
result, increased the fair value of our closure and post-closure
reserves by $72.3 million. The amounts we have recorded for
these obligations are not comparable to the amounts Allied
recorded. As part of the initial application of purchase
accounting, we have recorded these obligations at their
estimated fair values, inflated them to the expected payment
date and then discounted the obligations using our
credit-adjusted, risk-free rate at the time of the acquisition
of 9.75%. Any further adjustments to our final capping, closure
and post-closure liabilities will be reflected prospectively in
our consolidated statement of income in the periods in which
such adjustments become known.
We review our landfill asset retirement obligations annually. As
a result, we recorded a net decrease in amortization expense of
$10.2 million and $5.1 million for the years ended
December 31, 2010 and 2009, respectively, and a net
increase in amortization expense of $0.6 million for the
year ended December 31, 2008, primarily related to changes
in estimates and assumptions concerning the cost and timing of
future final capping, closure and post-closure activities.
The fair value of assets that are legally restricted for
purposes of settling final capping, closure and post-closure
obligations was approximately $59.1 million at
December 31, 2010 and is included in restricted cash in our
consolidated balance sheet.
The expected future payments for final capping, closure and
post-closure as of December 31, 2010 are as follows:
|
|
|
|
|
2011
|
|
$
|
93.9
|
|
2012
|
|
|
105.8
|
|
2013
|
|
|
98.9
|
|
2014
|
|
|
95.6
|
|
2015
|
|
|
95.4
|
|
Thereafter
|
|
|
4,559.9
|
|
|
|
|
|
|
|
|
$
|
5,049.5
|
|
|
|
|
|
|
The estimated remaining final capping, closure and post-closure
expenditures presented above are not inflated and not discounted
and reflect the estimated future payments for liabilities
incurred and recorded as of December 31, 2010.
Environmental
Remediation Liabilities
We accrue for remediation costs when they become probable and
can be reasonably estimated. We believe that the amounts accrued
for remediation costs are adequate. There can sometimes be a
range of reasonable estimates of the costs associated with
remediation of a site. In these cases, we use the amount within
the range that constitutes our best estimate. If no amount
within the range appears to be a better estimate than any other,
we use the amount that is at the low end of such range. It is
reasonably possible that we will need to adjust the liabilities
recorded for remediation to reflect the effects of new or
additional information, to the extent such information impacts
the costs, timing or duration of the required actions. If we
used the reasonably possible high ends of our ranges, our
aggregate potential remediation liability at December 31,
2010 would be approximately $155 million higher than the
amounts recorded. Future changes in our estimates of the cost,
timing or duration of the required actions could have a material
adverse effect on our consolidated financial position, results
of operations or cash flows.
110
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table summarizes the activity in our environmental
remediation liabilities for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Remediation liabilities, beginning of year
|
|
$
|
554.1
|
|
|
$
|
389.9
|
|
|
$
|
67.5
|
|
Other adjustments
|
|
|
1.5
|
|
|
|
181.9
|
|
|
|
208.1
|
|
Additions charged to expense
|
|
|
17.9
|
|
|
|
4.9
|
|
|
|
155.9
|
|
Payments
|
|
|
(50.5
|
)
|
|
|
(56.2
|
)
|
|
|
(43.3
|
)
|
Accretion expense
|
|
|
29.1
|
|
|
|
33.6
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remediation liabilities, end of period
|
|
|
552.1
|
|
|
|
554.1
|
|
|
|
389.9
|
|
Less: Current portion
|
|
|
(88.1
|
)
|
|
|
(107.9
|
)
|
|
|
(102.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
464.0
|
|
|
$
|
446.2
|
|
|
$
|
287.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The expected undiscounted future payments for remediation costs
as of December 31, 2010 are as follows:
|
|
|
|
|
2011
|
|
$
|
88.1
|
|
2012
|
|
|
76.1
|
|
2013
|
|
|
61.9
|
|
2014
|
|
|
42.1
|
|
2015
|
|
|
29.5
|
|
Thereafter
|
|
|
430.9
|
|
|
|
|
|
|
|
|
$
|
728.6
|
|
|
|
|
|
|
The following is a discussion of certain of our significant
remediation matters:
Countywide Landfill. In September 2009, Republic
Services of Ohio II, LLC entered into Final Findings and Orders
with the Ohio Environmental Protection Agency that require us to
implement a comprehensive operation and maintenance program to
manage the remediation area at the Countywide Recycling and
Disposal Facility (Countywide). The remediation liability for
Countywide recorded as of December 31, 2010 is
$68.4 million, of which $7.1 million is expected to be
paid during 2011. We believe the reasonably possible range of
loss for remediation costs is $59 million to
$81 million.
West Contra Costa County Landfill. In 2006, we were
issued an Enforcement Order by the California Department of
Toxic Substance Control (DTSC) for the Class 1 Hazardous
waste cell at the West Contra Costa County Landfill (West
County). Subsequently, we entered into a Consent Agreement with
DTSC in 2007 at which time we agreed to undertake certain
remedial actions. The remediation liability for West County
recorded as of December 31, 2010 is $46.5 million, of
which $2.5 million is expected to be paid during 2011. We
believe the reasonably possible range of loss for remediation
costs is $36 million to $63 million.
Sunrise Landfill. In August 2008, Republic Services
of Southern Nevada (RSSN), signed a Consent Decree with the EPA,
the Bureau of Land Management and Clark County, Nevada related
to the Sunrise Landfill. Under the Consent Decree, RSSN has
agreed to perform certain remedial actions at the Sunrise
Landfill for which RSSN and Clark County were otherwise jointly
and severally liable. We also paid $1.0 million in
sanctions related to the Consent Decree. RSSN is currently
working with the Clark County Staff and Board of Commissioners
to develop a mechanism to fund the costs to comply with the
Consent Decree. However, we have not recorded any potential
recoveries. The remediation liability for Sunrise recorded as of
December 31, 2010 is $37.5 million, of which
$23.0 million is expected to be paid during 2011. We
believe the reasonably possible range of loss for remediation
costs is $29 million to $44 million.
Congress Landfill. In August 2010, Congress
Development Company agreed with the State of Illinois to have a
Final Consent Order (Final Order) entered by the Circuit Court
of Illinois, Cook County. Pursuant to the
111
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Final Order, we have agreed to continue to implement certain
remedial activities at the Congress Landfill. The remediation
liability recorded as of December 31, 2010 is
$82.6 million, of which $8.4 million is expected to be
paid during 2011. We believe the reasonably possible range of
loss for remediation costs is $46 million to
$146 million.
It is reasonably possible that we will need to adjust the
liabilities noted above to reflect the effects of new or
additional information, to the extent that such information
impacts the costs, timing or duration of the required actions.
Future changes in our estimates of the costs, timing or duration
of the required actions could have a material adverse effect on
our consolidated financial position, results of operations or
cash flows.
Our notes payable, capital leases and long-term debt at
December 31, 2010 and 2009 are listed in the following
table, and are presented net of unamortized discounts and
premiums, adjustments to fair value related to hedging
transactions and the unamortized portion of adjustments to fair
value recorded in purchase accounting. The debt we acquired as
part of the Allied acquisition was recorded at fair value as of
the acquisition date.
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
$1.0 billion Revolver due 2012, Eurodollar and Base Rate
borrowings
|
|
$
|
50.0
|
|
|
$
|
-
|
|
$1.75 billion Revolver due 2013, Eurodollar and Base Rate
borrowings
|
|
|
25.0
|
|
|
|
315.4
|
|
Receivables secured loans
|
|
|
-
|
|
|
|
300.0
|
|
Senior notes, fixed interest rate of 6.500%, due November 2010
|
|
|
-
|
|
|
|
216.5
|
|
Senior notes, fixed interest rate of 5.750%, due February 2011
|
|
|
261.7
|
|
|
|
252.5
|
|
Senior notes, fixed interest rate of 6.375%, due April 2011
|
|
|
215.1
|
|
|
|
209.1
|
|
Senior notes, fixed interest rate of 6.750%, due August 2011
|
|
|
392.0
|
|
|
|
396.4
|
|
Senior notes, fixed interest rate of 6.125%, due February 2014
|
|
|
-
|
|
|
|
379.3
|
|
Senior notes, fixed interest rate of 7.250%, due March 2015
|
|
|
-
|
|
|
|
540.2
|
|
Senior notes, fixed interest rate of 7.125%, due May 2016
|
|
|
535.5
|
|
|
|
526.7
|
|
Senior notes, fixed interest rate of 6.875%, due June 2017
|
|
|
663.9
|
|
|
|
654.4
|
|
Senior notes, fixed interest rate of 5.500%, due September 2019
|
|
|
645.8
|
|
|
|
645.5
|
|
Senior notes, fixed interest rate of 5.000%, due March 2020
|
|
|
849.9
|
|
|
|
-
|
|
Senior notes, fixed interest rate of 5.250%, due November 2021
|
|
|
600.0
|
|
|
|
600.0
|
|
Debentures, fixed interest rate of 9.250%, due May 2021
|
|
|
93.4
|
|
|
|
93.1
|
|
Senior notes, fixed interest rate of 6.086%, due March 2035
|
|
|
249.8
|
|
|
|
249.4
|
|
Debentures, fixed interest rate of 7.400%, due September 2035
|
|
|
267.6
|
|
|
|
266.8
|
|
Senior notes, fixed interest rate of 6.200%, due March 2040
|
|
|
649.5
|
|
|
|
-
|
|
Tax-exempt bonds and other tax-exempt financings; fixed and
floating interest rates ranging from 0.28% to 8.25%; maturities
ranging from 2012 to 2035
|
|
|
1,151.8
|
|
|
|
1,223.7
|
|
Other debt unsecured and secured by real property, equipment and
other assets; interest rates ranging from 5.00% to 11.90%
maturing through 2042
|
|
|
92.6
|
|
|
|
93.6
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
6,743.6
|
|
|
|
6,962.6
|
|
Less: Current portion
|
|
|
(878.5
|
)
|
|
|
(543.0
|
)
|
|
|
|
|
|
|
|
|
|
Long-term portion
|
|
$
|
5,865.1
|
|
|
$
|
6,419.6
|
|
|
|
|
|
|
|
|
|
|
112
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Credit
Facilities
The $1.0 billion revolving credit facility due April 2012
and the $1.75 billion revolving credit facility due
September 2013 (collectively, Credit Facilities) bear interest
at a Base Rate, or a Eurodollar Rate, plus an applicable margin
based on our Debt Ratings (all as defined in the agreements). As
of December 31, 2010 and 2009, the interest rate for our
borrowings under our Credit Facilities was 1.56% and 1.62%,
respectively. Our Credit Facilities are also subject to facility
fees based on applicable rates defined in the agreements and the
aggregate commitments, regardless of usage. Availability under
our Credit Facilities can be used for working capital, capital
expenditures, letters of credit and other general corporate
purposes. The agreements governing our Credit Facilities require
us to maintain certain financial and other covenants. We may pay
dividends and repurchase common stock provided that we are in
compliance with these covenants. We had $75.0 million and
$300.0 million of Eurodollar Rate borrowings and nil and
$15.4 million of Base Rate borrowings as of
December 31, 2010 and 2009, respectively. We had
$1,037.5 million and $1,634.0 million of letters of
credit utilizing availability under our Credit Facilities,
leaving $1,637.5 million and $800.6 million of
availability under our Credit Facilities at December 31,
2010 and 2009, respectively. We were in compliance with the
covenants under our Credit Facilities at December 31, 2010.
Receivables
Secured Loans
In March 2010, we repaid all borrowings and terminated our
accounts receivable securitization program with two financial
institutions that allowed us to borrow up to $300.0 million
on a revolving basis under loan agreements secured by
receivables. During the first quarter of 2010, we recorded a
loss on extinguishment of debt of $0.2 million to write-off
unamortized deferred issuance costs associated with this program.
Senior
Notes and Debentures
In November 2010, our 6.50% senior notes matured. We used
cash on hand and incremental borrowings under our Credit
Facilities to repay $221.6 million of principal due on
these notes.
In March 2010, we issued $850.0 million of
5.00% senior notes due 2020 (the 2020 Notes), with an
unamortized discount of $0.1 million at December 31,
2010, and $650.0 million of 6.20% senior notes due
2040 (the 2040 Notes, and, together with the 2020 Notes, the
Notes), with an unamortized discount of $0.5 million at
December 31, 2010. The Notes are general senior unsecured
obligations and mature on March 1, 2020 (in the case of the
2020 Notes) and March 1, 2040 (in the case of the 2040
Notes). Interest is payable semi-annually on March 1 and
September 1. The Notes are guaranteed by each of our
subsidiaries that also guarantees our Credit Facilities. These
guarantees are general senior unsecured obligations of our
subsidiary guarantors.
We used the net proceeds from the Notes as follows:
(i) $433.7 million to redeem the 6.125% senior
notes due 2014 at a premium of 102.042% ($425.0 million
principal outstanding); (ii) $621.8 million to redeem
the 7.250% senior notes due 2015 at a premium of 103.625%
($600.0 million principal outstanding); and (iii) the
remainder to reduce amounts outstanding under our Credit
Facilities and for general corporate purposes. During the first
quarter of 2010, we incurred a loss of $132.1 million for
premiums paid to repurchase debt, to write-off unamortized debt
discounts and for professional fees paid to effectuate the
repurchase of the senior notes.
In December 2009 we used cash on hand and incremental borrowings
under our Credit Facilities to redeem $400.0 million of our
7.375% senior notes due 2014. The senior notes were
redeemed at a price equal to 103.688% of the principal amount of
the notes, plus accrued and unpaid interest. We incurred a loss
of $46.0 million for premiums paid to repurchase debt, to
write-off unamortized debt discounts and for professional fees
paid to effectuate the repurchase of the senior notes.
113
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In November 2009, we issued $600.0 million of
5.250% senior notes due 2021. The notes are general senior
unsecured obligations and mature on November 15, 2021.
Interest is payable semi-annually on May 15 and
November 15, beginning May 15, 2010. These senior
notes are guaranteed by each of our subsidiaries that also
guarantees our Credit Facilities. These guarantees are general
senior unsecured obligations of the subsidiary guarantors. We
used the net proceeds from the notes, cash on hand or
incremental borrowings under our Credit Facilities as follows:
(i) to redeem $450.0 million of our 7.875% Senior
Notes due 2013 at 102.625%, and (ii) to redeem
$230.0 million of our 4.250% Senior Convertible
Debentures due 2034 at par. We incurred a loss of
$51.9 million for premiums paid to repurchase debt, to
write-off unamortized debt discounts and for professional fees
paid to effectuate the repurchase of the senior notes.
In September 2009, we issued $650.0 million of
5.500% senior notes due 2019 with an unamortized discount
of $4.2 million and $4.5 million at December 31,
2010 and 2009, respectively. The notes are general senior
unsecured obligations and mature on September 15, 2019.
Interest is payable semi-annually on March 15 and
September 15, beginning March 15, 2010. The notes are
guaranteed by each of our subsidiaries that also guarantee our
Credit Facilities. These guarantees are general senior unsecured
obligations of subsidiary guarantors. We used the net proceeds
from the notes, cash on hand or incremental borrowings under our
Credit Facilities as follows: (i) to tender for
$325.5 million of certain outstanding senior notes maturing
in 2010 and 2011 that were issued by us or one of our
subsidiaries; (ii) approximately $250 million to
reduce amounts outstanding under our Credit Facility, and
(iii) approximately $105 million to remit estimated
tax payments related to our divestiture of assets in connection
with the Allied acquisition. We incurred a loss of
$31.8 million for premiums paid to repurchase debt, to
write-off unamortized debt discounts and for professional fees
paid to effectuate the repurchase of the senior notes.
During 2009 we repurchased a portion of our senior notes
maturing in 2010 and 2011 in the secondary market. As a result,
we incurred additional losses on extinguishment of debt of
$4.4 million related to premiums paid to repurchase debt,
charges for unamortized debt discounts and professional fees
paid to effectuate the repurchase. Also during 2009, we
completed the required divestitures under the consent decree
with the DOJ. Proceeds from the sales of the divested assets
were primarily used to reduce amounts outstanding under our
Credit Facilities. Additionally, our senior unsecured notes
bearing interest at a fixed rate of 7.125% matured during 2009.
We repaid the remaining principal balance of $99.3 million
in May 2009.
As of December 31, 2010 and 2009, the following are our
other senior notes and debentures:
|
|
|
|
|
Senior notes totaling $261.7 million and
$252.5 million, respectively, net of unamortized adjustment
to fair value of $1.2 million and $10.3 million,
respectively. These notes mature in 2011 and bear interest at a
fixed rate of 5.750% which is payable semi-annually in February
and August. These senior notes have a make-whole call provision
that is exercisable at any time at a stated redemption price.
|
|
|
|
Senior notes totaling $215.1 million and
$209.1 million, respectively, net of unamortized adjustment
to fair value of $1.8 million and $7.9 million,
respectively, which is being amortized over the remaining term
of the notes. These notes mature in 2011 and bear interest at a
fixed rate of 6.375% which is payable semi-annually in April and
October. These senior notes have a make-whole call provision
that is exercisable at any time at a stated redemption price.
|
|
|
|
Senior notes totaling $392.0 million and
$396.4 million, respectively, net of unamortized discount
of $0.2 million and $0.5 million, respectively, which
is being amortized over the remaining term of the notes and the
fair value of our interest rate swaps of $5.2 million and
$9.9 million, respectively. These notes mature in 2011 and
bear interest at a fixed rate of 6.750% which is payable
semi-annually in February and August.
|
|
|
|
Senior notes totaling $535.5 million and
$526.7 million, respectively, net of unamortized adjustment
to fair value of $64.5 million and $73.3 million,
respectively, which is being amortized over the remaining term
of the notes. These notes mature in 2016 and bear interest at a
fixed rate of 7.125%
|
114
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
which is payable semi-annually in May and November. These senior
notes have a make-whole call provision that is exercisable at
any time prior to May 15, 2011 at the stated redemption
price. These notes may also be redeemed on or after May 15,
2011 at the stated redemption price.
|
|
|
|
|
|
Senior notes totaling $663.9 million and
$654.4 million, respectively, net of unamortized adjustment
to fair value of $86.1 million and $95.6 million,
respectively, which is being amortized over the remaining term
of the notes. These notes mature in 2017 and bear interest at a
fixed rate of 6.875% which is payable semi-annually in June and
December. These senior notes have a make-whole call provision
that is exercisable at any time prior to June 1, 2012 at a
stated redemption price. These notes may also be redeemed on or
after June 1, 2012 at the stated redemption price.
|
|
|
|
Debentures totaling $93.4 million and $93.1 million,
respectively, net of unamortized adjustment to fair value of
$6.1 million and $6.4 million, respectively, which is
being amortized over the remaining term of the notes. These
notes mature in 2021 and bear interest at a fixed rate of 9.250%
which is payable semi-annually in May and November. These
debentures are not redeemable prior to maturity and are not
subject to any sinking fund requirements.
|
|
|
|
Senior notes totaling $249.8 million and
$249.4 million, respectively, net of unamortized discount
of $25.8 million and $26.3 million, respectively.
During March 2005, we exchanged $275.7 million of our
outstanding 7.125% notes due in 2009 for these
6.086% senior notes due in 2035. We paid $27.6 million
in connection with the exchange, which is being amortized over
the remaining term of the notes.
|
|
|
|
Debentures totaling $267.6 million and $266.8 million,
respectively, net of unamortized adjustment to fair value of
$92.4 million and $93.2 million, respectively, which
is being amortized over the remaining term of the notes. These
notes mature in 2035 and bear interest at a fixed rate of 7.400%
which is payable semi-annually in March and September. These
debentures are not subject to any sinking fund requirements and
may be redeemed in whole or in part, at our option at any time.
The redemption price is equal to the greater of the principal
amount of the debentures and the present value of the future
principal and interest payments discounted at a rate specified
under the terms of the indenture.
|
Tax-Exempt
Financings
As of December 31, 2010 and 2009, we had
$1,151.8 million and $1,223.7 million, respectively,
of fixed and variable rate tax-exempt financings outstanding
with maturities ranging from 2012 to 2035. At December 31,
2010 and 2009, the total of the unamortized adjustment to fair
value recorded in purchase accounting for the assumed tax-exempt
financings from the Allied acquisition was $21.9 million
and $49.0 million, respectively, which is being amortized
to interest expense over the remaining terms of the debt.
During the year ended December 31, 2010, we refinanced
$677.4 million and repaid $97.8 million of our
tax-exempt financings resulting in a loss on extinguishment of
debt of $28.5 million to write-off unamortized debt
discounts and for professional fees paid to effectuate these
transactions.
Approximately two-thirds of our tax-exempt financings are
remarketed quarterly, weekly or daily by a remarketing agent to
effectively maintain a variable yield. Certain of these variable
rate tax-exempt financings are credit enhanced with letters of
credit having terms in excess of one year issued by banks with
credit ratings of AA or better. The holders of the bonds can put
them back to the remarketing agent at the end of each interest
period. To date, the remarketing agents have been able to
remarket our variable rate unsecured tax-exempt bonds. These
bonds have been classified as long term because of our ability
and intent to refinance these bonds using availability under our
revolving Credit Facilities, if necessary.
115
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As of December 31, 2010, we had $170.0 million of
restricted cash, of which $39.8 million represented
proceeds from the issuance of tax-exempt bonds and other
tax-exempt financings and will be used to fund capital
expenditures under the terms of the agreements. Restricted cash
also includes amounts held in trust as a financial guarantee of
our performance.
Other
Debt
Other debt primarily includes capital lease liabilities of
$91.8 million and $91.9 million as of
December 31, 2010 and 2009, respectively, with maturities
ranging from 2011 to 2042.
Future
Maturities of Debt
Aggregate maturities of notes payable, capital leases and other
long-term debt as of December 31, 2010, excluding non-cash
discounts, premiums, adjustments to fair value related to
hedging transactions and adjustments to fair value recorded in
purchase accounting totaling $299.5 million, are as follows:
|
|
|
|
|
2011
|
|
$
|
872.0
|
|
2012
|
|
|
80.2
|
|
2013
|
|
|
40.6
|
|
2014
|
|
|
16.0
|
|
2015
|
|
|
25.7
|
|
Thereafter
|
|
|
6,008.6
|
|
|
|
|
|
|
|
|
$
|
7,043.1
|
|
|
|
|
|
|
Fair
Value of Debt
The fair value of our fixed rate senior notes using quoted
market rates is $6.0 billion and $5.7 billion at
December 31, 2010 and 2009, respectively. The carrying
value of these fixed rate unsecured notes is $5.4 billion
and $5.0 billion at December 31, 2010 and 2009,
respectively. The carrying amounts of our remaining notes
payable and tax-exempt financing approximate fair value because
interest rates are variable and, accordingly, approximate
current market rates for instruments with similar risk and
maturities. The fair value of our debt is determined as of the
balance sheet date and is subject to change.
Guarantees
Substantially all of our subsidiaries have guaranteed our
obligations under the Credit Facilities.
Substantially all of our subsidiaries guarantee each series of
senior notes issued by our parent company, Republic Services,
Inc. Our parent company and substantially all of our
subsidiaries guarantee each series of senior notes issued by our
subsidiary Allied Waste North America, Inc. (AWNA notes) and
each series of senior notes issued by our subsidiary
Browning-Ferris Industries, LLC (successor to Browning-Ferris
Industries, Inc.) (BFI notes). All of these guarantees would be
automatically released upon the release of our subsidiaries from
their guarantee obligations under the Credit Facilities, except
the guarantee of Allied in the case of the AWNA notes, and the
guarantees of Allied and Allied Waste North America, Inc. in the
case of the BFI notes.
We have guaranteed some of the tax-exempt bonds of our
subsidiaries. If a subsidiary fails to meet its obligations
associated with tax-exempt bonds as they come due, we will be
required to perform under the related guarantee agreement. No
additional liability has been recorded for these guarantees
because the underlying obligations are reflected in our
consolidated balance sheets.
116
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Interest
Paid
Interest paid was $417.8 million, $471.6 million and
$93.7 million for the years ended December 31, 2010,
2009 and 2008, respectively.
The components
of interest expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest expense on debt and capital lease obligations
|
|
$
|
413.2
|
|
|
$
|
453.5
|
|
|
$
|
123.9
|
|
Accretion of debt discounts
|
|
|
52.4
|
|
|
|
92.1
|
|
|
|
10.1
|
|
Accretion of remediation and risk reserves
|
|
|
48.1
|
|
|
|
58.1
|
|
|
|
0.5
|
|
Less: capitalized interest
|
|
|
(6.3
|
)
|
|
|
(7.8
|
)
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
$
|
507.4
|
|
|
$
|
595.9
|
|
|
$
|
131.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Swap Agreements
Our ability to obtain financing through the capital markets is a
key component of our financial strategy. Historically, we have
managed risk associated with executing this strategy,
particularly as it relates to fluctuations in interest rates, by
using a combination of fixed and floating rate debt. We also
entered into interest rate swap agreements to manage risk
associated with fluctuations in interest rates. The swap
agreements have a total notional value of $210.0 million
and mature in August 2011. This maturity is identical to our
unsecured notes that also mature in 2011. Under the swap
agreements, we pay interest at floating rates based on changes
in LIBOR and receive interest at fixed rates of 6.75%. We have
designated these agreements as hedges of changes in the fair
value of our fixed-rate debt. We have determined that these
agreements qualify for the short-cut method and, therefore,
changes in the fair value of the agreements are assumed to be
perfectly effective in hedging changes in the fair value of our
fixed rate debt due to changes in interest rates.
As of December 31, 2010 and 2009, interest rate swap
agreements are reflected at their fair value of
$5.2 million and $9.9 million, respectively, and are
included in other assets and as an adjustment to long-term debt
in our consolidated balance sheets. During the years ended
December 31, 2010, 2009 and 2008, we recorded net interest
income of $8.5 million, $8.7 million and
$3.8 million, respectively, related to our interest rate
swap agreements, which is included in interest expense in our
consolidated statements of income.
The following table summarizes the impact of changes in the fair
value of our derivatives and the underlying hedged items on our
results of operations for the years ended December 31,
2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction to Interest Expense
|
|
|
Due to Periodic Settlements
|
|
|
of Active Swap Agreements
|
|
|
Year Ended December 31,
|
Consolidated Statement of Income
Classification
|
|
2010
|
|
2009
|
|
2008
|
|
Interest expense
|
|
$
|
8.5
|
|
|
$
|
8.7
|
|
|
$
|
3.8
|
|
From time to time, we enter into treasury and interest rate
locks for the purpose of managing exposure to fluctuations in
interest rates in anticipation of future debt issuances. During
the first quarter of 2010, we entered into interest rate lock
agreements having an aggregate notional amount of
$500.0 million to hedge interest rates in connection with
the issuance of our $850.0 million 5.00% senior notes
and our $650.0 million 6.20% senior notes. Upon
issuance of the notes, we terminated the interest rate locks and
paid $7.0 million to the counterparties. The effective
portion of the interest rate locks, recorded as a component of
accumulated other comprehensive income, was $2.0 million,
net of $1.5 million of tax (related to the 2020 Notes), and
$1.7 million, net of tax of $1.2 million (related to
the 2040 Notes). The effective portion of the interest rate
locks will be amortized as an increase to interest expense over
the life of the issued debt, of which $0.3 million
117
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
is scheduled to be amortized over the next twelve months as a
yield adjustment to the 2020 and 2040 Notes. This transaction
was accounted for as a cash flow hedge.
In September 2009, we entered into treasury lock agreements
having an aggregate notional amount of $500.0 million to
hedge interest rates on 10 year U.S. Treasury Notes in
connection with the issuance of our $650.0 million
5.500% Senior Notes. Upon issuance of the notes we
terminated the treasury locks and paid approximately
$2.5 million to the counterparties. This amount, net of
tax, was recorded as a component of accumulated other
comprehensive income and is being amortized as an increase to
interest expense over the life of the issued debt. This
transaction was recorded as a cash flow hedge.
As of December 31, 2010 and 2009, there were no treasury
lock cash flow hedges outstanding.
The components of the provision for income taxes for the years
ended December 31, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
253.9
|
|
|
$
|
337.3
|
|
|
$
|
98.1
|
|
State
|
|
|
50.2
|
|
|
|
49.1
|
|
|
|
11.1
|
|
Federal and state deferred provision (benefit)
|
|
|
61.4
|
|
|
|
(24.6
|
)
|
|
|
(30.4
|
)
|
Non-current tax provision
|
|
|
4.0
|
|
|
|
6.7
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
369.5
|
|
|
$
|
368.5
|
|
|
$
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliations of the statutory federal income tax rate to
our effective tax rate for the years ended December 31, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
|
|
5.4
|
|
|
|
3.4
|
|
|
|
3.5
|
|
Non-deductible expenses
|
|
|
2.1
|
|
|
|
2.6
|
|
|
|
3.9
|
|
Non-deductible merger related compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
7.7
|
|
Uncertain tax position taxes and interest
|
|
|
0.3
|
|
|
|
0.8
|
|
|
|
4.2
|
|
Other, net
|
|
|
(0.7
|
)
|
|
|
0.8
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
42.1
|
%
|
|
|
42.6
|
%
|
|
|
53.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our effective income tax rate is adversely impacted by expenses
incurred which are non-deductible for tax purposes, disposition
of assets that have little or no basis for tax, and accruals for
penalties and interest on uncertain tax positions. During the
years ended December 31, 2010 and 2009, we incurred charges
of $13.1 million and $13.5 million, respectively, for
dispositions of goodwill that had no corresponding tax basis.
During the year ended December 31, 2008, we incurred
expenses that were not tax deductible as a result of the Allied
acquisition, including a tax charge of $12.3 million
related to non-deductible compensation payouts. In addition, for
the year ended December 31, 2008, lower pre-tax earnings
contributed to the increase in our effective tax rate.
118
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The components of the net deferred income tax asset and
liability at December 31, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax liabilities relating to:
|
|
|
|
|
|
|
|
|
Differences between book and tax basis of property
|
|
$
|
(721.7
|
)
|
|
$
|
(616.6
|
)
|
Difference between book and tax basis of intangible assets
|
|
|
(702.0
|
)
|
|
|
(704.3
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
(1,423.7
|
)
|
|
$
|
(1,320.9
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax assets relating to:
|
|
|
|
|
|
|
|
|
Difference between book and tax basis of other assets
|
|
$
|
68.1
|
|
|
$
|
68.5
|
|
Accruals not currently deductible
|
|
|
312.8
|
|
|
|
309.9
|
|
Environmental reserves
|
|
|
346.3
|
|
|
|
298.4
|
|
Deferred taxes on uncertain tax positions
|
|
|
76.1
|
|
|
|
83.2
|
|
Net operating loss carryforwards, state taxes
|
|
|
127.5
|
|
|
|
135.3
|
|
Other
|
|
|
2.3
|
|
|
|
21.8
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
933.1
|
|
|
|
917.1
|
|
Valuation allowance
|
|
|
(120.1
|
)
|
|
|
(126.5
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
813.0
|
|
|
|
790.6
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(610.7
|
)
|
|
$
|
(530.3
|
)
|
|
|
|
|
|
|
|
|
|
Changes in the deferred tax valuation allowance for the years
ended December 31, 2010, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Valuation allowance, beginning of year
|
|
$
|
126.5
|
|
|
$
|
156.4
|
|
|
$
|
27.5
|
|
Additions charged to income
|
|
|
8.3
|
|
|
|
5.2
|
|
|
|
0.7
|
|
Acquisitions
|
|
|
-
|
|
|
|
(2.5
|
)
|
|
|
139.7
|
|
Usage
|
|
|
(10.4
|
)
|
|
|
(9.3
|
)
|
|
|
(11.5
|
)
|
Expirations of state net operating losses
|
|
|
(0.3
|
)
|
|
|
(17.8
|
)
|
|
|
-
|
|
Other, net
|
|
|
(4.0
|
)
|
|
|
(5.5
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance, end of year
|
|
$
|
120.1
|
|
|
$
|
126.5
|
|
|
$
|
156.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have state net operating loss carryforwards with an estimated
tax effect of $127.5 million available at December 31,
2010. These state net operating loss carryforwards expire at
various times between 2011 and 2023. We believe that it is more
likely than not that the benefit from certain state net
operating loss carryforwards will not be realized. In
recognition of this risk, at December 31, 2010, we have
provided a valuation allowance of $110.1 million for
certain state net operating loss carryforwards. In assessing the
realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized after the initial
recognition of the deferred tax asset. We also provide valuation
allowances, as needed, to offset portions of deferred tax assets
due to uncertainty surrounding the future realization of such
deferred tax assets. We adjust the valuation allowance in the
period management determines it is more likely than not that
deferred tax assets will or will not be realized. At
December 31, 2010, we have provided a valuation allowance
of $10.0 million for certain deferred tax assets.
We made income tax payments (net of refunds received) of
approximately $418 million, $444 million, and
$128 million for the years ended December 31, 2010,
2009 and 2008, respectively. During 2008,
119
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
approximately $32 million of federal tax payments were
deferred and paid in 2009 as a result of the Allied acquisition.
The following table summarizes the activity in our gross
unrecognized tax benefits for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of year
|
|
$
|
242.2
|
|
|
$
|
611.9
|
|
|
$
|
23.2
|
|
Additions due to the Allied acquisition
|
|
|
-
|
|
|
|
13.3
|
|
|
|
582.9
|
|
Additions based on tax positions related to current year
|
|
|
2.8
|
|
|
|
3.9
|
|
|
|
10.6
|
|
Reductions for tax positions related to the current year
|
|
|
-
|
|
|
|
-
|
|
|
|
(5.1
|
)
|
Additions for tax positions of prior years
|
|
|
7.5
|
|
|
|
5.6
|
|
|
|
2.0
|
|
Reductions for tax positions of prior years
|
|
|
(7.4
|
)
|
|
|
(24.1
|
)
|
|
|
(1.3
|
)
|
Reductions for tax positions resulting from lapse of statute of
limitations
|
|
|
(10.4
|
)
|
|
|
(0.5
|
)
|
|
|
(0.4
|
)
|
Settlements
|
|
|
(11.9
|
)
|
|
|
(367.9
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
222.8
|
|
|
$
|
242.2
|
|
|
$
|
611.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New accounting guidance for business combinations became
effective for our 2009 financial statements. This new guidance
changed the treatment of acquired uncertain tax liabilities.
Under previous guidance, changes in acquired uncertain tax
liabilities were recognized through goodwill. Under the new
guidance, subsequent changes in acquired unrecognized tax
liabilities are recognized through the income tax provision. As
of December 31, 2010, $206.5 million of the
$222.8 million of unrecognized tax benefits related to tax
positions taken by Allied prior to the 2008 acquisition.
Included in the balance at December 31, 2010 and 2009 are
approximately $209.1 million and $217.6 million of
unrecognized tax benefits (net of the federal benefit on state
issues) that, if recognized, would affect the effective income
tax rate in future periods.
During 2010, the IRS concluded its examination of our 2005 and
2007 tax years. The conclusion of this examination reduced our
gross unrecognized tax benefits by approximately
$1.9 million. We also resolved various state matters during
2010 that, in the aggregate, reduced our gross unrecognized tax
benefits by approximately $10.0 million.
During 2009, we settled our outstanding tax dispute related to
Allieds risk management companies (see Risk
Management Companies) with both the Department of Justice
(DOJ) and the Internal Revenue Service (IRS). This settlement
reduced our gross unrecognized tax benefits by approximately
$299.6 million. During 2009, we also settled with the IRS,
through an accounting method change, our outstanding tax dispute
related to intercompany insurance premiums paid to Allieds
captive insurance company. This settlement reduced our gross
unrecognized tax benefits by approximately $62.6 million.
In addition to these federal matters, we also resolved various
state matters that, in the aggregate, reduced our gross
unrecognized tax benefits during 2009 by approximately
$5.8 million.
We recognize interest and penalties as incurred within the
provision for income taxes in our consolidated statements of
income. Related to the unrecognized tax benefits previously
noted, we accrued interest of $19.2 million during 2010
and, in total as of December 31, 2010, have recognized a
liability for penalties of $1.2 million and interest of
$99.9 million. During 2009, we accrued interest of
$24.5 million and, in total at December 31, 2009, had
recognized a liability for penalties of $1.5 million and
interest of $92.3 million. During 2008, we accrued
penalties of $0.2 million and interest of $5.2 million
and, in total at December 31, 2008, had recognized a
liability for penalties of $88.1 million and interest of
$180.0 million.
120
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The increase in accrued interest during the year ended
December 31, 2010 was due to the additional accrual of
interest on existing uncertain tax positions. The decrease in
accrued interest and penalties between 2009 and 2008 was driven
mainly by the settlements discussed previously.
Gross unrecognized tax benefits that we expect to settle in the
following twelve months cannot be reasonably estimated. It is
likely, however, that the amount of unrecognized tax benefits
will increase or decrease in the next twelve months.
We and our subsidiaries are subject to income tax in the
U.S. and Puerto Rico, as well as income tax in multiple
state jurisdictions. We also have acquired Allieds open
tax periods as a result of the December 2008 acquisition. Allied
is currently under examination or administrative review by
various state and federal taxing authorities for certain tax
years, including federal income tax audits for calendar years
2000 through 2007.
Prior to the 2008 acquisition, the IRS had commenced an
examination of our 2005 through 2007 tax years. During 2010,
this examination was completed. Currently, the IRS is examining
our 2008 tax year. We are also under state examination in
various jurisdictions for various tax years. These state audits
are ongoing.
We are subject to numerous federal, foreign, state and local tax
rules and regulations. Our compliance with such rules and
regulations is periodically audited by tax authorities. These
authorities may challenge the positions taken in our tax
filings. As such, to provide for certain potential tax
exposures, we maintain liabilities for uncertain tax positions
for our estimate of the final outcome of the examinations.
We believe that the liabilities for uncertain tax positions
recorded are adequate. However, a significant assessment against
us in excess of the liabilities recorded could have a material
adverse effect on our consolidated financial position, results
of operations or cash flows.
Risk
Management Companies
Prior to Allieds acquisition of Browning-Ferris Industries
(BFI) in July 1999, certain BFI operating companies, as part of
a risk management initiative to manage and reduce costs
associated with certain liabilities, contributed assets and
existing environmental and self-insurance liabilities to six
fully consolidated BFI risk management companies (RMCs) in
exchange for stock representing a minority ownership interest in
the RMCs. Subsequently, the BFI operating companies sold that
stock in the RMCs to third parties at fair market value which
resulted in a capital loss for tax purposes.
In 2001, the IRS designated this type of transaction and other
similar transactions as a potentially abusive tax
shelter under IRS regulations. During 2002, the IRS
disallowed all of the previously claimed capital loss.
Subsequent to the IRS disallowance, we challenged the issue at
both IRS appeals and in federal court. In December 2009, we
reached a settlement with both the DOJ and the IRS for all tax
years impacted by the issue. Under the settlement, the company
resolved all remaining liability (including federal and state
tax, penalty and interest) for approximately $125 million.
During 2010, we paid approximately $111 million related to
this settlement and expect to pay the remaining amounts in 2011
and 2012. While the final settlement amount was less than the
amount previously accrued for this matter, the accrual and the
adjustment thereto were reflected in our allocation of purchase
price associated with the Allied acquisition and had no impact
on our consolidated statement of income.
Exchange
of Partnership Interests
In April 2002, Allied exchanged minority partnership interests
in four
waste-to-energy
facilities for majority partnership interests in equipment
purchasing businesses, which are now wholly owned subsidiaries.
In November 2008, the IRS issued a formal disallowance to Allied
contending that the exchange was instead a sale on which a
corresponding gain should have been recognized. We believe our
position is supported by relevant technical authorities and
strong business purpose and we intend to vigorously defend our
position on
121
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
this matter. Although we intend to vigorously defend our
position on this matter, if the exchange is treated as a sale,
we estimate it could have a potential federal and state cash tax
impact of approximately $156 million plus accrued interest
through December 31, 2010 of approximately
$71 million. In addition, the IRS has asserted a penalty of
20% of the additional income tax due. At December 31, 2010,
the amount of the asserted penalty and penalty-related interest
was approximately $49 million. The potential tax and
interest (but not penalty or penalty-related interest) of a full
adjustment for this matter have been fully reserved in our
consolidated balance sheet at December 31, 2010. The
successful assertion by the IRS of penalty and penalty-related
interest in connection with this matter could have a material
adverse impact on our consolidated results of operations and
cash flows.
Methane
Gas
As part of its examination of Allieds 2000 through 2008
federal income tax returns, the IRS reviewed Allieds
treatment of costs associated with its landfill operations. As a
result of this review, the IRS has proposed that certain
landfill costs be allocated to the collection and control of
methane gas that is naturally produced within the landfill. The
IRS position is that the methane gas produced by a
landfill is a joint product resulting from operation of the
landfill and, therefore, these costs should not be expensed
until the methane gas is sold or otherwise disposed.
We have protested this matter to the Appeals Office of the IRS.
We believe we have several meritorious defenses, including the
fact that methane gas is not actively produced for sale by us
but rather arises naturally in the context of providing disposal
services. Therefore, we believe that the subsequent resolution
of this issue will not have a material adverse impact on our
consolidated financial position, results of operations or cash
flows.
|
|
11.
|
EMPLOYEE
BENEFIT PLANS
|
Stock-Based
Compensation
In July 1998, we adopted the 1998 Stock Incentive Plan (1998
Plan) to provide for grants of options to purchase shares of
common stock, restricted stock and other equity-based
compensation to our employees and non-employee directors who are
eligible to participate in the 1998 Plan. The 1998 Plan expired
on June 30, 2008. In February 2007, our board of directors
approved the 2007 Stock Incentive Plan (2007 Plan) to replace
the 1998 Plan when it expired. The 2007 Plan was approved by our
stockholders in May 2007. We believe that such awards better
align the interests of our employees with those of our
stockholders. There were 3.9 million shares reserved for
future grants under the 2007 Plan as of December 31, 2010.
Options granted under the 1998 Plan and the 2007 Plan are
non-qualified and are granted at a price equal to the fair
market value of our common stock at the date of grant.
Generally, options granted have a term of seven to ten years
from the date of grant, and vest in increments of 25% per year
over a four year period beginning on the first anniversary date
of the grant. Options granted to non-employee directors have a
term of ten years and are fully vested at the grant date.
In December 2008, the Board of Directors amended and restated
the Republic Services, Inc. 2006 Incentive Stock Plan (formerly
known as the Allied Waste Industries, Inc. 2006 Incentive Stock
Plan (the 2006 Plan)). Allieds stockholders approved the
2006 Plan in May 2006. The 2006 Plan was amended and restated in
December 2008 to reflect that Republic Services, Inc. is the new
sponsor of the Plan, that any references to shares of common
stock is to shares of common stock of Republic Services, Inc.,
and to adjust outstanding awards and the number of shares
available under the Plan to reflect the acquisition. The 2006
Plan, as amended and restated, provides for the grant of
non-qualified stock options, incentive stock options, shares of
restricted stock, shares of phantom stock, stock bonuses,
restricted stock units, stock appreciation rights, performance
awards, dividend equivalents, cash awards, or other stock-based
awards. Awards granted under the
122
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2006 Plan prior to December 5, 2008 became fully vested and
nonforfeitable upon the closing of the acquisition. Awards may
be granted under the 2006 Plan, as amended and restated, after
December 5, 2008 only to employees and consultants of
Allied Waste Industries, Inc. and its subsidiaries who were not
employed by Republic Services, Inc. prior to such date. At
December 31, 2010, there were approximately
15.3 million shares of common stock reserved for future
grants under the 2006 Plan.
Stock
Options
We use a binomial option-pricing model to value our stock option
grants. We recognize compensation expense on a straight-line
basis over the requisite service period for each separately
vesting portion of the award, or to the employees
retirement eligible date, if earlier. Expected volatility is
based on the weighted average of the most recent one-year
volatility and a historical rolling average volatility of our
stock over the expected life of the option. The risk-free
interest rate is based on Federal Reserve rates in effect for
bonds with maturity dates equal to the expected term of the
option. We use historical data to estimate future option
exercises, forfeitures and expected life of the options. When
appropriate, separate groups of employees that have similar
historical exercise behavior are considered separately for
valuation purposes.
The
weighted-average estimated fair values of stock options granted
during the years ended December 31, 2010, 2009 and 2008
were $5.28, $3.79 and $4.36 per option, respectively, which were
calculated using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Expected volatility
|
|
28.6%
|
|
28.7%
|
|
27.3%
|
Risk-free interest rate
|
|
2.4%
|
|
1.4%
|
|
1.7%
|
Dividend yield
|
|
2.9%
|
|
3.1%
|
|
2.9%
|
Expected life (in years)
|
|
4.3
|
|
4.2
|
|
4.2
|
Contractual life (in years)
|
|
7
|
|
7
|
|
7
|
Expected forfeiture rate
|
|
3.0%
|
|
3.0%
|
|
3.0%
|
123
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table summarizes the stock option activity for the
years ended December 31, 2008, 2009 and 2010:
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|
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|
|
Weighted Average
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual Term
|
|
|
Intrinsic
|
|
|
|
of Shares
|
|
|
Price per Share
|
|
|
(Years)
|
|
|
Value
|
|
|
Outstanding at December 31, 2007
|
|
|
7.7
|
|
|
$
|
19.84
|
|
|
|
|
|
|
|
|
|
Granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted as replacement options for Allieds outstanding
stock options
|
|
|
7.6
|
|
|
|
25.77
|
|
|
|
|
|
|
|
|
|
Granted other
|
|
|
5.2
|
|
|
|
25.46
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1.4
|
)
|
|
|
15.93
|
|
|
|
|
|
|
$
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(0.4
|
)
|
|
|
42.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
18.7
|
|
|
|
23.57
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
0.3
|
|
|
|
21.03
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2.1
|
)
|
|
|
18.12
|
|
|
|
|
|
|
$
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(1.8
|
)
|
|
|
28.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
15.1
|
|
|
|
23.69
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3.1
|
|
|
|
27.48
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(3.9
|
)
|
|
|
21.73
|
|
|
|
|
|
|
$
|
34.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(0.7
|
)
|
|
|
27.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
13.6
|
|
|
$
|
24.97
|
|
|
|
4.5
|
|
|
$
|
68.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2010
|
|
|
8.7
|
|
|
$
|
24.44
|
|
|
|
3.9
|
|
|
$
|
48.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted in 2008 primarily include stock options
granted as part of our annual grant to employees in February
2008, as part of our new annual grant program in December 2008
and as grants of replacement options for Allieds
outstanding stock options as of the effective date of the
acquisition, in accordance with the terms of the merger
agreement. In December 2008, we replaced Allieds
outstanding, vested and unvested stock options with Republic
stock options with similar terms and conditions, and recorded a
credit to additional-paid-in-capital of $61.2 million as
part of the purchase price paid for the acquisition.
Additionally, as of the effective date of the Allied
acquisition, all of Republics unvested stock options
outstanding were vested in accordance with the change in control
provisions of the 1998 and 2007 Plans. We recorded compensation
expense of $6.5 million in December 2008 to recognize the
immediate vesting of the stock options.
During the years ended December 31, 2010, 2009 and 2008,
compensation expense for stock options was $12.8 million,
$7.8 million and $14.0 million, respectively.
As of December 31, 2010, total unrecognized compensation
expense related to outstanding stock options was
$10.1 million, which will be recognized over a weighted
average period of 1.9 years. The total fair value of stock
options that vested in 2010, 2009 and 2008 was
$4.0 million, $3.9 million and $21.5 million,
respectively.
124
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
We classified excess tax benefits of $3.5 million,
$2.5 million and $4.5 million as cash flows from
financing activities for the years ended December 31, 2010,
2009 and 2008, respectively. All other tax benefits related to
stock options have been presented as a component of cash flows
from operating activities.
Other
Stock Awards
The following table summarizes the restricted stock unit and
restricted stock activity for the years ended December 31,
2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Units and
|
|
|
Weighted-Average
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Shares of
|
|
|
Grant Date
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Restricted Stock
|
|
|
Fair Value per
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
(In Thousands)
|
|
|
Share
|
|
|
Term (Years)
|
|
|
Value
|
|
|
Unissued at December 31, 2007
|
|
|
399.2
|
|
|
$
|
26.84
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
467.1
|
|
|
|
27.21
|
|
|
|
|
|
|
|
|
|
Vested and issued
|
|
|
(443.8
|
)
|
|
|
29.67
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(186.3
|
)
|
|
|
25.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unissued at December 31, 2008
|
|
|
236.2
|
|
|
|
23.50
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
516.0
|
|
|
|
23.92
|
|
|
|
|
|
|
|
|
|
Vested and issued
|
|
|
(67.0
|
)
|
|
|
23.28
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(32.0
|
)
|
|
|
23.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unissued at December 31, 2009
|
|
|
653.2
|
|
|
|
23.85
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
367.9
|
|
|
|
29.14
|
|
|
|
|
|
|
|
|
|
Vested and issued
|
|
|
(171.8
|
)
|
|
|
22.63
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unissued at December 31, 2010
|
|
|
849.3
|
|
|
$
|
26.39
|
|
|
|
0.6
|
|
|
$
|
25.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and unissued at December 31, 2010
|
|
|
248.0
|
|
|
$
|
26.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2010, we awarded 92,894
restricted stock units to our non-employee directors under our
2007 Plan, of which 88,732 vested immediately. The remaining
restricted stock units awarded during the year ended
December 31, 2010 vest in three equal annual installments
beginning on the anniversary date of the original grant. The
directors receive the underlying shares only after their board
service ends or a change in control occurs. During the year
ended December 31, 2010, we awarded 210,437 restricted
stock units to executives and other officers that vest in four
equal annual installments beginning on the anniversary date of
the original grant. The restricted stock units do not carry any
voting or dividend rights, except the right to receive
additional restricted stock units in lieu of dividends.
Additionally, during the year ended December 31, 2010, we
awarded 64,579 shares of restricted stock to an executive
that vest in four equal annual installments beginning on the
anniversary date of the original grant. During the vesting
period, the participant has voting rights and receives dividends
declared and paid on the restricted stock, but the restricted
stock may not be sold, assigned, transferred or otherwise
encumbered. Granted but unvested restricted stock awards are
forfeited if the participant resigns employment with us for
other than good reason.
During the year ended December 31, 2009 and 2008 we awarded
320,354 and 36,000 restricted stock units, respectively, to our
non-employee directors under our 1998 Plan. These restricted
stock units vest immediately, but the directors receive the
underlying shares only after their board service ends or a
change in control
125
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
occurs, as defined by the 1998 Plan. The restricted stock units
do not carry any voting or dividend rights, except the right to
receive additional stock units in lieu of dividends.
During the year ended December 31, 2009, we awarded
195,611 shares of restricted stock to executives and other
officers and directors, of which 110,669 of the shares vested
May 14, 2010 and 38,670 of the shares awarded vest
effective January 31, 2012. Additionally,
26,914 shares awarded vest in four equal annual
installments beginning on the anniversary date of the original
grant. The remaining 15,904 shares awarded vested during
2009 and 3,454 shares vested during 2010. During the
vesting period, the participants have voting rights and receive
dividends declared and paid on the shares, but the shares may
not be sold, assigned, transferred or otherwise encumbered.
Granted but unvested shares are forfeited if the participant
resigns employment with us for other than good reason.
During the year ended December 31, 2008, we awarded
426,670 shares of restricted stock to our executive
officers, of which 236,170 were granted as part of our 2007
Stock Incentive Plan. As of the effective date of the Allied
acquisition, all of Republics remaining unvested
restricted stock outstanding was vested in accordance with the
change in control provisions of the 1998 Plan.
The fair value of restricted stock and restricted stock units is
based on the closing market price on the date of the grant. The
compensation expense related to restricted stock units and
restricted stock is amortized ratably over the vesting period.
As of the effective date of the Allied acquisition, all of
Republics outstanding and unvested restricted stock was
vested in accordance with the change in control provisions of
the 1998 and 2007 Plans. We recorded compensation expense of
$5.3 million in December 2008 to recognize the immediate
vesting of the restricted stock. In addition, the restricted
stock units were vested and a cash payment was made totaling
$4.0 million based on the fair value of the restricted
stock units as of the date of vesting.
During the years ended December 31, 2010, 2009 and 2008,
compensation expense related to restricted stock units and
restricted shares totaled $11.7 million, $7.2 million
and $10.0 million, respectively.
Defined
Benefit Pension Plan
We currently have one qualified defined benefit pension plan,
the BFI Retirement Plan (the Plan). The Plan covers certain
employees in the United States, including some employees subject
to collective bargaining agreements.
The Plan benefits are frozen. Interest credits continue to be
earned by participants in the Plan, and participants whose
collective bargaining agreements provide for additional benefit
accruals under the Plan continue to receive those credits in
accordance with the terms of their bargaining agreements. The
Plan was converted from a traditional defined benefit plan to a
cash balance plan in 1993.
Prior to the conversion of the cash balance design, benefits
payable as a single life annuity under the Plan were based on
the participants highest five years of earnings out of the
last ten years of service. Upon conversion to the cash balance
plan, the existing accrued benefits were converted to a lump-sum
value using the actuarial assumptions in effect at the time.
Participants cash balance accounts are increased until
retirement by certain benefit and interest credits under the
terms of their bargaining agreements. Participants may elect
early retirement with the attainment of age 55 and
completion of 10 years of credited service at reduced
benefits. Participants with 35 years of service may retire
at age 62 without any reduction in benefits.
BFI Post
Retirement Healthcare Plan
The BFI Post Retirement Healthcare Plan provides continued
medical coverage for certain current and former employees
following their retirement, including some employees subject to
collective bargaining agreements. Eligibility for this plan is
limited to certain employees who had ten or more years of
service and were age 55
126
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
or older as of December 31, 1998, and certain employees in
California who were hired on or before December 31, 2005
and who retire on or after age 55 with at least thirty
years of service.
Multi-Employer
Pension Plans
We contribute to 28 multi-employer pension plans under
collective bargaining agreements covering union-represented
employees. Approximately 22% of our total current employees are
participants in such multi-employer plans. These plans generally
provide retirement benefits to participants based on their
service to contributing employers. We do not administer these
multi-employer plans. In general, these plans are managed by a
board of trustees with the unions appointing certain trustees
and other contributing employers of the plan appointing certain
members. We generally are not represented on the board of
trustees.
Based on the information available to us, we believe that some
of the multi-employer plans to which we contribute are either
critical or endangered as those terms
are defined in the Pension Protection Act enacted in 2006 (the
PPA). The PPA requires underfunded pension plans to improve
their funding ratios within prescribed intervals based on the
level of their underfunding. Until the plan trustees develop the
funding improvement plans or rehabilitation plans as required by
the PPA, we are unable to determine the amount of assessments we
may be subject to, if any. Accordingly, we cannot determine at
this time the impact that the PPA may have on our consolidated
financial position, results of operations or cash flows.
Furthermore, under current law regarding multi-employer benefit
plans, a plans termination, our voluntary withdrawal
(which we consider from time to time), or the mass withdrawal of
all contributing employers from any under-funded, multi-employer
pension plan would require us to make payments to the plan for
our proportionate share of the multi-employer plans
unfunded vested liabilities. It is possible that there may be a
mass withdrawal of employers contributing to these plans or
plans may terminate in the near future. We could have
adjustments to our estimates for these matters in the near term
that could have a material effect on our consolidated financial
condition, results of operations or cash flows.
Our pension expense for multi-employer plans was
$46.9 million, $43.0 million and $21.8 million
for the years ended December 31, 2010, 2009 and 2008,
respectively.
Supplemental
Executive Retirement Plan
Our Supplemental Executive Retirement Plan (SERP) provides
retirement benefits to certain of Allieds employees and
former employees. SERP participants whose employment with us has
been severed as a result of the acquisition received cash
settlements six months following their respective separation
dates. Benefits for SERP participants who remain with Republic
were frozen as of the effective date of the acquisition.
However, these active participants will continue to accrue
interest credits at the annual rate of 6.0% until they are
eligible for retirement. SERP participants who retired prior to
the acquisition will continue to receive their benefits in
accordance with the original plan provisions which allow for a
maximum of ten years of retirement benefits equal to 60% of each
participants respective average base salary during the
three consecutive full calendar years of employment immediately
preceding their date of retirement. At December 31, 2010,
there were one retired and two active participants in the plan.
As the SERP is frozen, no assumptions are made about future
compensation levels, and as such, there is no difference between
the projected benefit and the accumulated benefit obligation.
We also assumed post-retirement medical obligations associated
with the SERP totaling $1.8 million as of the acquisition
date. Medical liabilities were $1.4 million at
December 31, 2010 and 2009 and are included in the post
retirement healthcare amounts in the table below.
We are required to separately recognize the overfunded or
underfunded status of our pension and other post retirement
employee benefit plans as an asset or liability. The funded
status represents the difference between the projected benefit
obligation (PBO) and the fair value of the plan assets. The PBO
is the present value of
127
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
benefits earned to date by plan participants, including the
effect of assumed future salary increases, if any. The PBO is
equal to the accumulated benefit obligation as the present value
of these liabilities is not affected by assumed future salary
increases. We use a measurement date that coincides with our
year end of December 31.
The following table presents the accumulated benefit obligation
and reconciliations of the changes in the projected benefit
obligations, the plan assets and the accounting funded status of
our defined benefit pension plan, SERP and post retirement
healthcare plans for the years ended December 31, 2010 and
2009.
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|
|
|
Defined Benefit
|
|
|
Postretirement
|
|
|
|
|
|
|
Pension Plan
|
|
|
Healthcare Plans
|
|
|
SERP
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Accumulated Benefit Obligation
|
|
$
|
371.6
|
|
|
$
|
364.7
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4.7
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Projected Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
364.7
|
|
|
$
|
361.2
|
|
|
$
|
2.4
|
|
|
$
|
3.2
|
|
|
$
|
4.7
|
|
|
$
|
12.7
|
|
Service cost
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest cost
|
|
|
20.5
|
|
|
|
20.2
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
0.5
|
|
Amendments
|
|
|
1.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Actuarial loss (gain)
|
|
|
2.2
|
|
|
|
(1.8
|
)
|
|
|
0.1
|
|
|
|
(0.5
|
)
|
|
|
0.1
|
|
|
|
0.1
|
|
Benefits paid
|
|
|
(17.2
|
)
|
|
|
(15.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(10.6
|
)
|
Curtailment loss (gain)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
$
|
371.6
|
|
|
$
|
364.7
|
|
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
$
|
4.8
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
333.3
|
|
|
$
|
293.9
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Actual return on plan assets
|
|
|
37.8
|
|
|
|
54.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Employer contributions
|
|
|
10.0
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
10.6
|
|
Benefits paid
|
|
|
(17.2
|
)
|
|
|
(15.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(10.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
363.9
|
|
|
$
|
333.3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded status
|
|
$
|
7.7
|
|
|
$
|
31.4
|
|
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
$
|
4.8
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the statement of financial position
consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
0.2
|
|
Noncurrent liabilities
|
|
|
7.7
|
|
|
|
31.4
|
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
7.7
|
|
|
$
|
31.4
|
|
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
$
|
4.8
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to determine benefit
obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.25
|
%
|
|
|
5.75
|
%
|
|
|
5.25
|
%
|
|
|
5.75
|
%
|
|
|
5.25
|
%
|
|
|
5.75
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
128
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The amounts included in accumulated other comprehensive income
on the consolidated statement of financial position that have
not yet been recognized as components of net periodic benefit
cost at December 31, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement
|
|
|
|
|
Pension
|
|
Healthcare
|
|
|
|
|
Benefits
|
|
Plan
|
|
SERP
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Accumulated other comprehensive loss (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
$
|
(40.2
|
)
|
|
$
|
(29.4
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
The components of the net periodic benefit cost are summarized
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
|
|
|
Postretirement
|
|
|
|
|
|
|
Pension Plan
|
|
|
Healthcare Plans
|
|
|
SERP
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest cost
|
|
|
20.5
|
|
|
|
20.2
|
|
|
|
1.8
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
0.3
|
|
|
|
0.5
|
|
|
|
0.1
|
|
Expected return on plan assets
|
|
|
(23.6
|
)
|
|
|
(21.4
|
)
|
|
|
(1.7
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Curtailment recognition
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
2.0
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
(2.9
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
0.3
|
|
|
$
|
2.5
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions used to determine net periodic
benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
6.50
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
6.50
|
%
|
|
|
5.75
|
%
|
|
|
5.75
|
%
|
|
|
6.50
|
%
|
Expected return on plan assets
|
|
|
7.25
|
%
|
|
|
7.25
|
%
|
|
|
7.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
We determine the discount rate used in the measurement of our
obligations based on a model that matches the timing and amount
of expected benefit payments to maturities of high quality bonds
priced as of the pension plan measurement date. Where that
timing does not correspond to a published high-quality bond
rate, our model uses an expected yield curve to determine an
appropriate current discount rate. The yields on the bonds are
used to derive a discount rate for the liability. The term of
our obligation, based on the expected retirement dates of our
workforce, is approximately ten years.
In developing our expected rate of return assumption, we have
evaluated the actual historical performance and long-term return
projections of the Plan assets, which give consideration to the
asset mix and the anticipated timing of the pension plan
outflows. We employ a total return investment approach whereby a
mix of equity and fixed income investments are used to maximize
the long-term return of plan assets for what we consider a
prudent level of risk. The intent of this strategy is to
minimize plan expenses by outperforming plan liabilities over
the long run. Risk tolerance is established through careful
consideration of plan liabilities, plan funded status and our
financial condition. The investment portfolio contains a
diversified blend of equity and fixed income investments.
Furthermore, equity investments are diversified across
U.S. and
non-U.S. stocks
as well as growth, value, and small and large capitalizations.
Derivatives may be used to gain market exposure in an efficient
and timely manner. However, derivatives may not be used to
leverage the portfolio beyond the market value of the underlying
investments. Investment risk is measured and monitored on an
ongoing basis through annual liability measurements, periodic
asset and liability studies, and quarterly investment portfolio
reviews.
A one percentage point increase in the assumed health care cost
trend rate would not have a material impact on the service and
interest costs and would increase our postretirement benefit
obligation by $0.1 million at December 31, 2010. A one
percentage point decrease in the assumed health care cost trend
rate would
129
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
decrease the service and interest costs by less than
$0.1 million and would decrease our postretirement benefit
obligation by $0.1 million at December 31, 2010.
Our pension contributions are made in accordance with funding
standards established by Employee Retirement Income Security Act
of 1974 and the Internal Revenue Code, as amended by the PPA. We
made a $10.0 million voluntary contribution to the Plan in
2010. No contributions were made in either 2009 or 2008, and we
do not anticipate making any contributions during 2011.
Estimated future benefit payments for the next ten years under
the Plan, the postretirement healthcare plan and the SERP are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
|
|
|
Postretirement
|
|
|
|
|
|
|
Pension Plan
|
|
|
Healthcare Plans
|
|
|
SERP
|
|
|
2011
|
|
$
|
40.0
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
2012
|
|
|
20.0
|
|
|
|
0.2
|
|
|
|
0.3
|
|
2013
|
|
|
21.3
|
|
|
|
0.2
|
|
|
|
0.3
|
|
2014
|
|
|
22.3
|
|
|
|
0.2
|
|
|
|
0.3
|
|
2015
|
|
|
23.0
|
|
|
|
0.2
|
|
|
|
0.3
|
|
2016 through 2020
|
|
|
125.2
|
|
|
|
1.3
|
|
|
|
5.2
|
|
The following table summarizes our target asset allocation for
2011 and actual asset allocation at December 31, 2010 and
2009 for our defined benefit pension plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Target
|
|
|
Actual
|
|
|
Actual
|
|
|
|
Asset
|
|
|
Asset
|
|
|
Asset
|
|
|
|
Allocation
|
|
|
Allocation
|
|
|
Allocation
|
|
|
Debt securities
|
|
|
60
|
%
|
|
|
57
|
%
|
|
|
48
|
%
|
Equity securities
|
|
|
40
|
|
|
|
42
|
|
|
|
51
|
|
Cash
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The investment strategy for pension plan assets is to maintain a
broadly diversified portfolio designed to achieve our target of
an average long-term rate of return of 7.25%. While we believe
we can achieve a long-term average return of 7.25%, we cannot be
certain that the portfolio will perform to our expectations.
Assets are strategically allocated among debt and equity
portfolios in order to achieve a diversification level that
dampens fluctuations in investment returns. Asset allocation
target ranges and strategies are reviewed periodically with the
assistance of an independent external consulting firm.
The pension assets are valued at fair value. The following is a
description of the valuation methodologies used for the
investments measured at fair value, including the general
classification of such instruments pursuant to the valuation
hierarchy.
|
|
|
|
|
Money market accounts are valued at the net asset value of
shares held by the Plan at year end. These investments are
classified as Level 2 investments.
|
|
|
|
Registered Investment Companies are mutual funds and other
commingled funds registered with the Securities and Exchange
Commission. Mutual funds are traded actively on public
exchanges. The share prices for mutual funds are published at
the close of each business day. Holdings of mutual funds are
classified as Level 1 investments. Other registered
commingled funds are not publicly traded, but underlying assets
(stocks and bonds) held in these funds are traded on active
markets and the prices for these assets are readily observable.
Holdings in other registered commingled funds are classified as
Level 2 investments.
|
130
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
Limited partnerships invest in privately-held companies or
privately held real estate assets. Due to the private nature of
the partnership investments, pricing inputs are not readily
observable. Asset valuations are developed by the general
partners that manage the partnerships. These valuations are
based on property appraisals, application of public market
multiples to private company cash flows, utilization of market
transactions that provide valuation information for comparable
companies and other methods. Holdings of limited partnership
interests are classified as Level 3 investments.
|
The following table summarizes, by level, within the fair value
hierarchy, the investments of the Plan at fair value as of
December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Other
|
|
|
Significant
|
|
|
|
Total as of
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Money market account
|
|
$
|
4.6
|
|
|
$
|
-
|
|
|
$
|
4.6
|
|
|
$
|
-
|
|
Registered Investment Companies
|
|
|
358.8
|
|
|
|
151.9
|
|
|
|
206.9
|
|
|
|
-
|
|
Limited partnerships
|
|
|
0.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
363.9
|
|
|
$
|
151.9
|
|
|
$
|
211.5
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Other
|
|
|
Significant
|
|
|
|
Total as of
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Money market account
|
|
$
|
1.8
|
|
|
$
|
-
|
|
|
$
|
1.8
|
|
|
$
|
-
|
|
Registered Investment Companies
|
|
|
330.9
|
|
|
|
215.8
|
|
|
|
115.1
|
|
|
|
-
|
|
Limited partnerships
|
|
|
0.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
333.3
|
|
|
$
|
215.8
|
|
|
$
|
116.9
|
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the changes in the fair value of
the Plans investment in Level 3 assets for the year
ended December 31, 2010:
|
|
|
|
|
|
|
Limited
|
|
|
|
Partnerships
|
|
|
|
(Level 3)
|
|
|
Balance, beginning of the year
|
|
$
|
0.6
|
|
Purchases, sales, issuances and settlements, (net)
|
|
|
(0.1
|
)
|
|
|
|
|
|
Balance, end of the year
|
|
$
|
0.5
|
|
|
|
|
|
|
Defined
Contribution Plans
We maintain the Republic Services 401(k) Plan (401(k) Plan),
which is a defined contribution plan covering all eligible
employees. Under the provisions of the 401(k) Plan, participants
may direct us to defer a portion of their compensation to the
401(k) Plan, subject to Internal Revenue Code limitations. We
provide for an employer matching contribution equal to 100% of
the first 3% of eligible compensation and 50% of the next
131
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2% of eligible compensation contributed by each employee, which
is funded in cash. All contributions vest immediately.
In conjunction with the Allied acquisition, we acquired the
Allied 401(k) Plan. Participants in the Allied 401(k) Plan are
eligible for the same employer matching contribution as those
under the 401(k) Plan effective January 1, 2009. Effective
July 1, 2009, the 401(k) Plan and the Allied 401(k) Plan
were merged to form the Republic Services, Inc. 401(k) Plan.
Total expense recorded for matching 401(k) contributions in
2010, 2009 and 2008 was $32.8 million, $30.5 million
and $16.8 million, respectively.
Employee
Stock Purchase Plan
Employees of Republic are eligible to participate in an employee
stock purchase plan. The plan allows participants to purchase
the Companys common stock for 95% of its quoted market
price on the last day of each calendar quarter. For the years
ended December 31, 2010, 2009 and 2008, issuances under
this plan totaled 123,523 shares, 49,918 shares and
84,918 shares, respectively. At December 31, 2010,
shares reserved for issuance to employees under this plan
totaled 1.3 million and Republic held employee
contributions of approximately $0.9 million for the
purchase of common stock.
Incentive
Compensation Plans
Our compensation program includes a management incentive plan,
which uses certain performance metrics such as free cash flow,
earnings per share and return on invested capital to measure
performance. In addition, in connection with the Allied
acquisition, our board of directors has approved a synergy
incentive plan that provides compensation that depends on our
achieving targeted synergies of approximately $150 million
by the end of 2010. Incentive awards are payable in cash.
From 2000 through 2008, our board of directors authorized the
repurchase of up to $2.6 billion of our common stock. As of
December 31, 2008, we had paid $2.3 billion to
repurchase 82.6 million shares of our common stock, of
which 4.6 million shares were acquired during the year
ended December 31, 2008 for $138.4 million. During the
second quarter of 2008, we suspended our share repurchase
program as a result of the pending Allied acquisition.
In November 2010, our board of directors approved a share
repurchase program pursuant to which we may repurchase up to
$400.0 million of our outstanding shares of common stock.
As of December 31, 2010, we used $41.1 million under
the program to repurchase 1.4 million shares at an average
cost per share of $28.46. We expect to use the remaining funds
in this program to repurchase shares during 2011.
We initiated a quarterly cash dividend in July 2003. The
dividend has been increased from time to time thereafter. In
July 2010, the board of directors approved an increase in the
quarterly dividend to $0.20 per share. Cash dividends declared
were $298.8 million, $288.7 million and
$168.9 million for the years ended December 31, 2010,
2009 and 2008, respectively. As of December 31, 2010, we
recorded a quarterly dividend payable of $76.7 million to
stockholders of record at the close of business on
January 3, 2011.
Basic earnings per share is computed by dividing net income by
the weighted average number of common shares (including
restricted stock and vested but unissued restricted stock units)
outstanding during the period. Diluted earnings per share is
based on the combined weighted average number of common shares
and common share equivalents outstanding which include, where
appropriate, the assumed exercise of employee stock
132
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
options, unvested restricted stock awards and unvested
restricted stock units. In computing diluted earnings per share,
we utilize the treasury stock method.
Earnings per share for the years ended December 31, 2010,
2009 and 2008 are calculated as follows (in thousands, except
per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
506,500
|
|
|
$
|
495,000
|
|
|
$
|
73,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
382,985
|
|
|
|
379,749
|
|
|
|
196,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
506,500
|
|
|
$
|
495,000
|
|
|
$
|
73,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
382,985
|
|
|
|
379,749
|
|
|
|
196,703
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
|
|
1,895
|
|
|
|
1,172
|
|
|
|
1,646
|
|
Unvested restricted stock awards and restricted stock units
|
|
|
231
|
|
|
|
40
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding
|
|
|
385,111
|
|
|
|
380,961
|
|
|
|
198,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive securities not included in the diluted earnings per
share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
|
|
2,825
|
|
|
|
9,836
|
|
|
|
2,179
|
|
133
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Our operations are managed and evaluated through four regions:
Eastern, Midwestern, Southern and Western. These four regions
are presented below as our reportable segments. These reportable
segments provide integrated waste management services consisting
of collection, transfer and disposal of domestic non-hazardous
solid waste. Summarized financial information concerning our
reportable segments for the respective years ended
December 31, 2010, 2009 and 2008 is shown in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization,
|
|
|
Operating
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Intercompany
|
|
|
Net
|
|
|
Depletion and
|
|
|
Income
|
|
|
Capital
|
|
|
|
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Revenue
|
|
|
Accretion
|
|
|
(Loss)
|
|
|
Expenditures
|
|
|
Total Assets
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
2,429.3
|
|
|
$
|
(353.8
|
)
|
|
$
|
2,075.5
|
|
|
$
|
205.5
|
|
|
$
|
488.4
|
|
|
$
|
175.3
|
|
|
$
|
4,437.1
|
|
Midwestern
|
|
|
2,167.4
|
|
|
|
(400.5
|
)
|
|
|
1,766.9
|
|
|
|
203.6
|
|
|
|
402.0
|
|
|
|
210.7
|
|
|
|
3,718.0
|
|
Southern
|
|
|
2,289.0
|
|
|
|
(311.7
|
)
|
|
|
1,977.3
|
|
|
|
221.5
|
|
|
|
482.8
|
|
|
|
190.4
|
|
|
|
4,869.7
|
|
Western
|
|
|
2,684.6
|
|
|
|
(496.0
|
)
|
|
|
2,188.6
|
|
|
|
218.2
|
|
|
|
521.2
|
|
|
|
222.3
|
|
|
|
5,518.5
|
|
Corporate entities
|
|
|
115.7
|
|
|
|
(17.4
|
)
|
|
|
98.3
|
|
|
|
65.4
|
|
|
|
(355.3
|
)
|
|
|
(4.0
|
)
|
|
|
918.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,686.0
|
|
|
$
|
(1,579.4
|
)
|
|
$
|
8,106.6
|
|
|
$
|
914.2
|
|
|
$
|
1,539.1
|
|
|
$
|
794.7
|
|
|
$
|
19,461.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
2,485.9
|
|
|
$
|
(370.9
|
)
|
|
$
|
2,115.0
|
|
|
$
|
214.3
|
|
|
$
|
483.0
|
|
|
$
|
199.1
|
|
|
$
|
4,495.1
|
|
Midwestern
|
|
|
2,185.4
|
|
|
|
(408.4
|
)
|
|
|
1,777.0
|
|
|
|
225.9
|
|
|
|
367.3
|
|
|
|
208.7
|
|
|
|
3,605.9
|
|
Southern
|
|
|
2,371.7
|
|
|
|
(325.5
|
)
|
|
|
2,046.2
|
|
|
|
233.1
|
|
|
|
522.9
|
|
|
|
168.5
|
|
|
|
4,867.6
|
|
Western
|
|
|
2,652.4
|
|
|
|
(482.4
|
)
|
|
|
2,170.0
|
|
|
|
234.9
|
|
|
|
582.0
|
|
|
|
180.5
|
|
|
|
5,461.2
|
|
Corporate entities
|
|
|
123.6
|
|
|
|
(32.7
|
)
|
|
|
90.9
|
|
|
|
50.3
|
|
|
|
(365.4
|
)
|
|
|
69.5
|
|
|
|
1,110.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,819.0
|
|
|
$
|
(1,619.9
|
)
|
|
$
|
8,199.1
|
|
|
$
|
958.5
|
|
|
$
|
1,589.8
|
|
|
$
|
826.3
|
|
|
$
|
19,540.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern
|
|
$
|
1,144.4
|
|
|
$
|
(154.5
|
)
|
|
$
|
989.9
|
|
|
$
|
95.1
|
|
|
$
|
(2.0
|
)
|
|
$
|
95.7
|
|
|
$
|
4,608.5
|
|
Midwestern
|
|
|
965.0
|
|
|
|
(193.3
|
)
|
|
|
771.7
|
|
|
|
96.8
|
|
|
|
127.6
|
|
|
|
86.7
|
|
|
|
4,222.8
|
|
Southern
|
|
|
1,095.7
|
|
|
|
(125.5
|
)
|
|
|
970.2
|
|
|
|
94.8
|
|
|
|
184.8
|
|
|
|
120.2
|
|
|
|
4,951.4
|
|
Western
|
|
|
1,161.1
|
|
|
|
(218.5
|
)
|
|
|
942.6
|
|
|
|
79.7
|
|
|
|
155.1
|
|
|
|
75.6
|
|
|
|
5,705.4
|
|
Corporate entities
|
|
|
13.8
|
|
|
|
(3.1
|
)
|
|
|
10.7
|
|
|
|
11.6
|
|
|
|
(182.3
|
)
|
|
|
8.7
|
|
|
|
433.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,380.0
|
|
|
$
|
(694.9
|
)
|
|
$
|
3,685.1
|
|
|
$
|
378.0
|
|
|
$
|
283.2
|
|
|
$
|
386.9
|
|
|
$
|
19,921.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany revenue reflects transactions within and between
segments that are generally made on a basis intended to reflect
the market value of such services.
Depreciation, amortization, depletion and accretion includes net
decreases in amortization expense of $10.2 and $5.1 million
recorded during 2010 and 2009, respectively, and a net increase
of $0.6 million in 2008, related to changes in estimates
and assumptions concerning the cost and timing of future final
capping, closure and post-closure activities.
The following items are included in the above segment
information:
|
|
|
|
|
Eastern Region. For the year ended
December 31, 2010, operating income includes a
$15.0 million loss from the disposition of assets. For the
year ended December 31, 2009, operating income includes a
$4.0 million net gain from the disposition of assets and
$12.0 million of insurance proceeds related to remediation
costs at the Countywide facility. For the year ended
December 31, 2008, operating loss includes a
$99.9 million charge for environmental conditions and a
$75.9 million charge related to the anticipated loss of
permitted airspace at the Countywide facility.
|
134
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
Midwestern Region. For the year ended
December 31, 2010, operating income includes a
$9.3 million net gain from the disposition of assets. For
the year ended December 31, 2009, operating income includes
a $27.1 million net gain from the disposition of assets.
|
|
|
|
Southern Region. For the year ended
December 31, 2009, operating income includes a
$29.8 million net gain from the disposition of assets.
|
|
|
|
Western Region. For the year ended
December 31, 2009, operating income includes an
$88.1 million net gain from the disposition of assets and
remediation charges totaling $5.2 million related to
environmental conditions at our closed disposal facility in
California. For the year ended December 31, 2008, operating
income includes charges totaling $55.9 million, consisting
of $34.0 million at the Sunrise landfill and
$21.9 million at our closed disposal facility in California
for environmental conditions at each of these locations.
|
|
|
|
Corporate Entities. Corporate functions
include legal, tax, treasury, information technology, risk
management, human resources, corporate accounts and other
typical administrative functions. For the year ended
December 31, 2010, operating income includes an impairment
loss of $14.4 million related to certain long-lived assets
that are held and used. Included in our gain (loss) on
disposition of assets and impairments, net for the year ended
December 31, 2009 are transaction related expenses of
$8.2 million from the disposition of assets in the other
segments and a $3.7 million charge for the asset impairment
associated with our former corporate office in Florida. Capital
expenditures for corporate entities primarily include vehicle
inventory acquired but not yet assigned to operating locations
and facilities.
|
The following table shows our total reported revenue by service
line for the respective years ended December 31.
Intercompany revenue has been eliminated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Collection:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
2,173.9
|
|
|
|
26.8
|
%
|
|
$
|
2,187.0
|
|
|
|
26.7
|
%
|
|
$
|
966.0
|
|
|
|
26.2
|
%
|
Commercial
|
|
|
2,486.8
|
|
|
|
30.7
|
|
|
|
2,553.4
|
|
|
|
31.1
|
|
|
|
1,161.4
|
|
|
|
31.5
|
|
Industrial
|
|
|
1,482.9
|
|
|
|
18.3
|
|
|
|
1,541.4
|
|
|
|
18.8
|
|
|
|
711.4
|
|
|
|
19.3
|
|
Other
|
|
|
29.6
|
|
|
|
0.4
|
|
|
|
26.9
|
|
|
|
0.3
|
|
|
|
23.2
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total collection
|
|
|
6,173.2
|
|
|
|
76.2
|
|
|
|
6,308.7
|
|
|
|
76.9
|
|
|
|
2,862.0
|
|
|
|
77.7
|
|
Transfer and disposal
|
|
|
2,998.9
|
|
|
|
|
|
|
|
3,113.5
|
|
|
|
|
|
|
|
1,343.4
|
|
|
|
|
|
Less: Intercompany
|
|
|
(1,521.6
|
)
|
|
|
|
|
|
|
(1,564.1
|
)
|
|
|
|
|
|
|
(683.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer and disposal, net
|
|
|
1,477.3
|
|
|
|
18.2
|
|
|
|
1,549.4
|
|
|
|
18.9
|
|
|
|
659.9
|
|
|
|
17.9
|
|
Sale of materials
|
|
|
307.1
|
|
|
|
3.8
|
|
|
|
181.2
|
|
|
|
2.2
|
|
|
|
121.1
|
|
|
|
3.3
|
|
Other non-core
|
|
|
149.0
|
|
|
|
1.8
|
|
|
|
159.8
|
|
|
|
2.0
|
|
|
|
42.1
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
456.1
|
|
|
|
5.6
|
|
|
|
341.0
|
|
|
|
4.2
|
|
|
|
163.2
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
8,106.6
|
|
|
|
100.0
|
%
|
|
$
|
8,199.1
|
|
|
|
100.0
|
%
|
|
$
|
3,685.1
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue consists primarily of sales of recycled materials
and revenue from National Accounts acquired from Allied.
National Accounts revenue included in other revenue represents
the portion of revenue generated from nationwide contracts in
markets outside our operating areas, and, as such, the
associated waste handling services are subcontracted to local
operators. Consequently, substantially all of this revenue is
offset with related subcontract costs which are recorded in cost
of operations.
135
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
15.
|
FINANCIAL
INSTRUMENTS
|
Fuel
Hedges
We have entered into multiple swap agreements designated as cash
flow hedges to mitigate some of our exposure related to changes
in diesel fuel prices. The swaps qualified for, and were
designated as, effective hedges of changes in the prices of
forecasted diesel fuel purchases (fuel hedges).
The following fuel hedges were outstanding during 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
|
|
|
|
|
|
|
(in Gallons
|
|
Contract Price
|
|
Inception Date
|
|
Commencement Date
|
|
Termination Date
|
|
per Month)
|
|
per Gallon
|
|
|
January 26, 2007
|
|
January 5, 2009
|
|
December 28, 2009
|
|
500,000
|
|
$
|
2.83
|
|
January 26, 2007
|
|
January 4, 2010
|
|
December 27, 2010
|
|
500,000
|
|
|
2.81
|
|
November 5, 2007
|
|
January 5, 2009
|
|
December 30, 2013
|
|
60,000
|
|
|
3.28
|
|
March 17, 2008
|
|
January 5, 2009
|
|
December 31, 2012
|
|
50,000
|
|
|
3.72
|
|
March 17, 2008
|
|
January 5, 2009
|
|
December 31, 2012
|
|
50,000
|
|
|
3.74
|
|
September 22, 2008
|
|
January 1, 2009
|
|
December 31, 2011
|
|
150,000
|
|
|
4.16 - 4.17
|
|
July 10, 2009
|
|
January 1, 2010
|
|
December 31, 2010
|
|
100,000
|
|
|
2.84
|
|
July 10, 2009
|
|
January 1, 2011
|
|
December 31, 2011
|
|
100,000
|
|
|
3.05
|
|
July 10, 2009
|
|
January 1, 2012
|
|
December 31, 2012
|
|
100,000
|
|
|
3.20
|
|
If the national U.S. on-highway average price for a gallon
of diesel fuel (average price) as published by the Department of
Energy exceeds the contract price per gallon, we receive the
difference between the average price and the contract price
(multiplied by the notional gallons) from the counter-party. If
the national U.S. on-highway average price for a gallon of
diesel fuel is less than the contract price per gallon, we pay
the difference to the counter-party.
The fair values of our fuel hedges are obtained from third-party
counter-parties and are determined using standard option
valuation models with assumptions about commodity prices being
based on those observed in underlying markets (Level 2 in
the fair value hierarchy). The aggregated fair values of our
outstanding fuel hedges at December 31, 2010 and 2009 were
current assets of $1.6 million and $3.2 million,
respectively, and current liabilities of $1.9 million and
$4.9 million, respectively, and have been recorded in other
current assets and other accrued liabilities in our consolidated
balance sheets, respectively.
The effective portions of the changes in fair values as of
December 31, 2010 and 2009, net of tax, of
$0.2 million and $1.0 million, respectively, have been
recorded in stockholders equity as components of
accumulated other comprehensive income. The ineffective portions
of the changes in fair values as of December 31, 2010, 2009
and 2008 were immaterial and have been recorded in other income
(expense), net in our consolidated statements of income.
Realized (losses) gains of $(2.0) million,
$(7.3) million and $5.9 million related to these fuel
hedges are included in cost of operations in our consolidated
statements of income for the years ended December 31, 2010,
2009 and 2008, respectively.
136
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table summarizes the impact of our fuel hedges on
our results of operations and comprehensive income for the years
ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on
|
|
|
Amount of
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
|
|
|
Gain
|
|
|
|
|
|
|
|
|
|
|
|
(Ineffective
|
|
|
or (Loss)
|
|
|
|
|
|
|
|
|
|
Location of Gain
|
|
Portion
|
|
|
Recognized in
|
|
|
|
|
|
|
|
|
|
(Loss) Recognized
|
|
and
|
|
|
OCI on
|
|
|
|
Amount of
|
|
in Income on
|
|
Amount Excluded
|
|
|
Derivatives
|
|
|
|
Realized Gain
|
|
Derivative
|
|
from
|
|
|
(Effective
|
|
|
|
or
|
|
(Ineffective Portion
|
|
Effectiveness
|
Derivatives in
|
|
Portion)
|
|
|
|
(Loss)
|
|
and Amount
|
|
Testing)
|
Cash Flow
|
|
Year Ended
|
|
Statement of
|
|
Year Ended
|
|
Excluded from
|
|
Year Ended
|
Hedging
|
|
December 31,
|
|
Income
|
|
December 31,
|
|
Effectiveness
|
|
December 31,
|
Relationships
|
|
2010
|
|
2009
|
|
2008
|
|
Classification
|
|
2010
|
|
2009
|
|
2008
|
|
Testing)
|
|
2010
|
|
2009
|
|
2008
|
|
Fuel hedges
|
|
$
|
0.8
|
|
|
$
|
6.1
|
|
|
$
|
(13.9
|
)
|
|
Cost of operations
|
|
$
|
(2.0
|
)
|
|
$
|
(7.3
|
)
|
|
$
|
5.9
|
|
|
Other income, net
|
|
$
|
-
|
|
|
$
|
0.2
|
|
|
$
|
(0.5
|
)
|
Recycling
Commodity Hedges
Our revenue from sale of recycling commodities is primarily from
sales of old corrugated cardboard (OCC) and old newspaper (ONP).
We use derivative instruments such as swaps and costless collars
designated as cash flow hedges to manage our exposure to changes
in prices of these commodities. We have entered into multiple
agreements related to the forecasted OCC and ONP sales. The
agreements qualified for, and were designated as, effective
hedges of changes in the prices of certain forecasted commodity
sales (commodity hedges).
The following commodity swaps were outstanding during 2010 and
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Contract Price
|
|
|
|
|
|
|
Transaction
|
|
(in Short Tons
|
|
Per Short
|
Inception Date
|
|
Commencement Date
|
|
Termination Date
|
|
Hedged
|
|
per Month)
|
|
Ton
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
$
|
105.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
102.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
106.00
|
|
May 16, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
103.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
106.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
106.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
OCC
|
|
|
1,000
|
|
|
|
110.00
|
|
April 28, 2008
|
|
January 1, 2009
|
|
December 31, 2010
|
|
ONP
|
|
|
1,000
|
|
|
|
103.00
|
|
December 8, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
ONP
|
|
|
2,000
|
|
|
|
76.00
|
|
December 10, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
2,000
|
|
|
|
82.00
|
|
December 11, 2009
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
2,000
|
|
|
|
82.00
|
|
January 5, 2010
|
|
January 1, 2010
|
|
December 31, 2011
|
|
ONP
|
|
|
2,000
|
|
|
|
84.00
|
|
January 6, 2010
|
|
January 1, 2010
|
|
December 31, 2011
|
|
OCC
|
|
|
1,000
|
|
|
|
90.00
|
|
January 27, 2010
|
|
February 1, 2010
|
|
January 31, 2012
|
|
OCC
|
|
|
1,000
|
|
|
|
90.00
|
|
September 23, 2010
|
|
January 1, 2011
|
|
December 31, 2011
|
|
ONP
|
|
|
1,000
|
|
|
|
95.00
|
|
September 28, 2010
|
|
January 1, 2011
|
|
December 31, 2011
|
|
ONP
|
|
|
1,000
|
|
|
|
95.00
|
|
October 11, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
1,500
|
|
|
|
115.00
|
|
If the price per short ton of the hedging instrument (average
price) as reported on the Official Board Market is less than the
contract price per short ton, we receive the difference between
the average price and the contract
137
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
price (multiplied by the notional short tons) from the
counter-party. If the price of the commodity exceeds the
contract price per short ton, we pay the difference to the
counter-party.
The fair values of our commodity swaps are obtained from
third-party counter-parties and are determined using standard
option valuation models with assumptions about commodity prices
being based on those observed in underlying markets
(Level 2 in the fair value hierarchy).
On December 8, 2010, we entered into a two-year costless
collar agreement on forecasted sales of 10,000 short tons of OCC
a month. The agreement involves combining a purchased put option
giving us the right to sell 10,000 short tons of OCC monthly for
24 months at an established floor strike price with a
written call option obligating us to deliver 10,000 short tons
of OCC monthly for 24 months at an established cap strike
price. The puts and calls have the same settlement dates, are
net settled in cash on such dates and have the same terms to
expiration. The contemporaneous combination of options resulted
in no net premium for us and represents a costless collar. Under
the agreement, no payment would be made or received by us, as
long as the settlement price is between the floor price and cap
price. However, if the settlement price is above the cap, we
would be required to pay the counterparty an amount equal to the
excess of the settlement price over the cap times the monthly
volumes hedged. Also, if the settlement price is below the
floor, the counterparty would be required to pay us the deficit
of the settlement price below the floor times the monthly
volumes hedged. The objective of this agreement is to reduce the
variability of the cash flows of the forecasted sales of OCC
between two designated strike prices.
The following costless collar hedges were outstanding at
December 31, 2010:
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Floor
|
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Cap
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|
Notional Amount
|
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Strike Price
|
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|
Strike Price
|
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|
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|
|
|
|
Transaction
|
|
(in Short Tons
|
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|
Per Short
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|
|
Per Short
|
|
Inception Date
|
|
Commencement Date
|
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Termination Date
|
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Hedged
|
|
per Month)
|
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|
Ton
|
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|
Ton
|
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|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
$
|
80.00
|
|
|
$
|
180.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
86.00
|
|
|
|
210.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
81.00
|
|
|
|
190.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
85.00
|
|
|
|
195.00
|
|
December 8, 2010
|
|
January 1, 2011
|
|
December 31, 2012
|
|
OCC
|
|
|
2,000
|
|
|
|
87.00
|
|
|
|
195.00
|
|
The costless collar hedges are recorded on the balance sheet at
fair value. The fair values of the costless collars are obtained
from the third-party counter-party and are determined using
standard option valuation models with assumptions about
commodity prices based upon forward commodity price curves in
underlying markets (Level 2 in the fair value hierarchy).
The aggregated fair values of the outstanding commodity hedges
at December 31, 2010 and 2009 were current assets of
$1.9 million and $1.8 million, respectively, and
current liabilities of $6.5 million and $0.8 million,
respectively, and have been recorded in other current assets and
other accrued liabilities in our consolidated balance sheets,
respectively.
The effective portions of the changes in fair values of our
commodity hedges as of December 31, 2010 and 2009, net of
tax, of $(2.6) million and $0.6 million have been
recorded in stockholders equity as a component of
accumulated other comprehensive income. The ineffective portions
of the changes in fair values as of December 31, 2010 and
2009 were immaterial and have been recorded in other income
(expense), net in our consolidated statements of income.
138
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following table summarizes the impact of our commodity
hedges on our results of operations and comprehensive income for
the years ended December 31, 2010, 2009 and 2008:
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Amount of Gain
|
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or (Loss)
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|
Recognized in
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|
|
Income on
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|
Amount of
|
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|
|
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|
|
Derivative
|
|
|
Gain
|
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|
|
|
|
|
|
|
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|
(Ineffective
|
|
|
or (Loss)
|
|
|
|
|
|
|
|
|
|
Location of Gain
|
|
Portion
|
|
|
Recognized in
|
|
|
|
|
|
|
|
|
|
(Loss) Recognized
|
|
and
|
|
|
OCI on
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|
|
Amount of
|
|
in Income on
|
|
Amount Excluded
|
|
|
Derivatives
|
|
|
|
Realized
|
|
Derivative
|
|
from
|
|
|
(Effective
|
|
|
|
Gain or
|
|
(Ineffective Portion
|
|
Effectiveness
|
Derivatives in
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|
Portion)
|
|
|
|
(Loss)
|
|
and Amount
|
|
Testing)
|
Cash Flow
|
|
Year Ended
|
|
Statement of
|
|
Year Ended
|
|
Excluded from
|
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Year Ended
|
Hedging
|
|
December 31,
|
|
Income
|
|
December 31,
|
|
Effectiveness
|
|
December 31,
|
Relationships
|
|
2010
|
|
2009
|
|
2008
|
|
Classification
|
|
2010
|
|
2009
|
|
2008
|
|
Testing)
|
|
2010
|
|
2009
|
|
2008
|
|
Recycling commodity hedges
|
|
$
|
(3.2
|
)
|
|
$
|
(4.7
|
)
|
|
$
|
5.3
|
|
|
Revenue
|
|
$
|
(2.6
|
)
|
|
$
|
5.1
|
|
|
$
|
-
|
|
|
Other income, net
|
|
$
|
(0.1
|
)
|
|
$
|
(0.1
|
)
|
|
$
|
0.2
|
|
Fair
Value Measurements
In measuring fair values of assets and liabilities, we use
valuation techniques that maximize the use of observable inputs
(Level 1) and minimize the use of unobservable inputs
(Level 3). Also, we use market data or assumptions that we
believe market participants would use in pricing an asset or
liability, including assumptions about risk when appropriate.
As of December 31, 2010 and 2009, our assets and
liabilities that are measured at fair value on a recurring basis
include the following:
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|
Fair Value Measurements Using
|
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|
|
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Quoted
|
|
|
Significant
|
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|
|
|
|
|
|
|
|
Prices in
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Other
|
|
|
Significant
|
|
|
|
Total as of
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
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|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
2010
|
|
|
(Level 1)
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|
(Level 2)
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(Level 3)
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|
|
Assets:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and marketable securities
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|
$
|
172.8
|
|
|
$
|
172.8
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Fuel hedges - other current assets
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|
|
1.6
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|
|
|
-
|
|
|
|
1.6
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|
|
|
-
|
|
Commodity hedges - other current assets
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|
|
1.9
|
|
|
|
-
|
|
|
|
1.9
|
|
|
|
-
|
|
Interest rate swaps - other non-trade receivables
|
|
|
5.2
|
|
|
|
-
|
|
|
|
5.2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
181.5
|
|
|
$
|
172.8
|
|
|
$
|
8.7
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel hedges - other accrued liabilities
|
|
$
|
1.9
|
|
|
$
|
-
|
|
|
$
|
1.9
|
|
|
$
|
-
|
|
Commodity hedges - other accrued liabilities
|
|
|
6.5
|
|
|
|
-
|
|
|
|
6.5
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
8.4
|
|
|
$
|
-
|
|
|
$
|
8.4
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
Total as of
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
December 31, 2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash and marketable securities
|
|
$
|
240.5
|
|
|
$
|
240.5
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Fuel hedges - other current assets
|
|
|
3.2
|
|
|
|
-
|
|
|
|
3.2
|
|
|
|
-
|
|
Commodity hedges - other current assets
|
|
|
1.8
|
|
|
|
-
|
|
|
|
1.8
|
|
|
|
-
|
|
Interest rate swaps - other assets
|
|
|
9.9
|
|
|
|
-
|
|
|
|
9.9
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
255.4
|
|
|
$
|
240.5
|
|
|
$
|
14.9
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel hedges - other accrued liabilities
|
|
$
|
4.9
|
|
|
$
|
-
|
|
|
$
|
4.9
|
|
|
$
|
-
|
|
Commodity hedges - other accrued liabilities
|
|
|
0.8
|
|
|
|
-
|
|
|
|
0.8
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
5.7
|
|
|
$
|
-
|
|
|
$
|
5.7
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
COMMITMENTS
AND CONTINGENCIES
|
General
Legal Proceedings
We are subject to extensive and evolving laws and regulations
and have implemented our own safeguards to respond to regulatory
requirements. In the normal course of conducting our operations,
we become involved in legal proceedings. Some of these actions
may result in fines, penalties or judgments against us, which
may impact earnings and cash flows for a particular period.
Although we cannot predict the ultimate outcome of any legal
matter with certainty, except as described below or in
Note 10, Income Taxes, in the discussion of our
outstanding tax dispute with the IRS, we do not believe that the
outcome of our pending legal proceedings will have a material
adverse impact on our consolidated financial position, results
of operations or cash flows.
As used herein, legal proceedings refers to litigation and
similar claims against us and our subsidiaries, excluding:
(i) ordinary course accidents, general commercial liability
and workers compensation claims, which are covered by insurance
programs, subject to customary deductibles, and which, together
with self-insured employee health care costs, are discussed in
Note 7, Other Liabilities-Self-Insurance Reserves;
(ii) tax-related matters, which are discussed in
Note 10, Income Taxes; and (iii) environmental
remediation liabilities, which are discussed in Note 8,
Landfill and Environmental Costs.
We accrue for legal proceedings when losses become probable and
reasonably estimable. We have recorded an aggregate accrual of
approximately $113 million relating to our outstanding
legal proceedings as of December 31, 2010, including those
described herein and others not specifically identified herein.
As of the end of each applicable reporting period, we review
each of our legal proceedings and, where it is probable that a
liability has been incurred, we accrue for all probable and
reasonably estimable losses. Where we are able to reasonably
estimate a range of losses we may incur with respect to such a
matter, we record an accrual for the amount within the range
that constitutes our best estimate. If we are able to reasonably
estimate a range but no amount within the range appears to be a
better estimate than any other, we use the amount that is the
low end of such range. If we used the high ends of such ranges,
our aggregate potential liability would have been approximately
$121 million higher than the amount recorded as of
December 31, 2010.
140
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Countywide
Matters
In September 2009, Republic Services of Ohio II, LLC
(Republic-Ohio) entered into Final Findings and Orders with the
Ohio Environmental Protection Agency that require us to
implement a comprehensive operation and maintenance program to
manage the remediation area at the Countywide Recycling and
Disposal Facility (Countywide). The remediation liability for
Countywide recorded as of December 31, 2010 is
$68.4 million, of which $7.1 million is expected to be
paid during 2011. The reasonably possible range of loss for
remediation costs is $59 million to $81 million.
In a suit filed on October 8, 2008 in the Tuscarawas County
Ohio Court of Common Pleas, approximately 700 individuals and
businesses located in the area around Countywide sued Republic
Services, Inc. and Republic-Ohio for alleged negligence and
nuisance. Republic-Ohio has owned and operated Countywide since
February 1, 1999. Waste Management, Inc. and Waste
Management Ohio, Inc., previous owners and operators of
Countywide, have been named as defendants as well. Plaintiffs
allege that due to the acceptance of a specific waste stream and
operational issues and conditions, the landfill has generated
odors and other unsafe emissions that have impaired the use and
value of their property and may have adverse health effects. A
second almost identical lawsuit was filed by approximately 82
plaintiffs on October 13, 2009 in the Tuscarawas County
Ohio Court of Common Pleas against Republic Services, Inc.,
Republic-Ohio, Waste Management, Inc., and Waste Management
Ohio, Inc. The court has consolidated the two actions. We have
assumed both the defense and the liability of the Waste
Management entities in the consolidated action. The relief
requested on behalf of each plaintiff in the consolidated action
is: (1) an award of compensatory damages according to proof
in an amount in excess of $25,000 for each of the three counts
of the amended complaint; (2) an award of punitive damages
in the amount of two times compensatory damages, pursuant to
applicable statute, or in such amount as may be awarded at trial
for each of the three counts of the amended complaint;
(3) costs for medical screening and monitoring of each
plaintiff; (4) interest on the damages according to law;
(5) costs and disbursements of the lawsuit;
(6) reasonable fees for attorneys and expert witnesses; and
(7) any other and further relief as the court deems just,
proper and equitable. Plaintiffs filed an amended consolidated
complaint on September 9, 2010, which no longer asserts a
claim for medical monitoring. As a result of various dismissals
of plaintiffs, this case presently consists of approximately 600
plaintiffs. Discovery is ongoing. We will vigorously defend
against the plaintiffs allegations in the consolidated
action.
Luri
Matter
On August 17, 2007, a former employee, Ronald Luri, sued
Republic Services, Inc., Republic Services of Ohio Hauling LLC,
Republic Services of Ohio I LLC, Jim Bowen and Ron Krall in the
Cuyahoga County Common Pleas Court in Ohio. Plaintiff alleges
that he was unlawfully fired in retaliation for refusing to
discharge or demote three employees who were all over
50 years old. On July 3, 2008, a jury verdict was
awarded against us in the amount of $46.6 million,
including $43.1 million in punitive damages. On
September 24, 2008, the Court awarded pre-judgment interest
of $0.3 million and attorney fees and litigation costs of
$1.1 million. Post-judgment interest accrued at a rate of
8% for 2008 and 5% for 2009, and is accruing at a rate of 4% for
2010. Management anticipates that post-judgment interest could
accrue through the middle of 2011 for a total of
$7.7 million. We have filed a notice of appeal, and the
case has been fully briefed in the Court of Appeals. It is
reasonably possible that following all appeals a final judgment
of liability for compensatory and punitive damages may be
assessed against us related to this matter.
Litigation
Related to Fuel and Environmental Fees
On July 8, 2009, CLN Properties, Inc. and Maevers
Management Company, Inc. filed a complaint against Republic
Services, Inc. and Allied Waste Industries, Inc. in the United
States District Court in Arizona, in which plaintiffs complain
about fuel recovery fees and environmental recovery fees. The
complaint purports to
141
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
be filed on behalf of a nationwide class of similarly situated
plaintiffs. The complaint asserts various legal and equitable
theories of recovery and alleges in essence that the fees were
not properly disclosed, were unfair, and were contrary to
contract. The District Court denied plaintiffs motion for
class certification on December 13, 2010. Plaintiffs filed
a motion for reconsideration of that ruling, which the District
Court also denied. Plaintiffs have not filed a timely
interlocutory appeal, but could file an appeal after any
judgment in this case. Based on the strength of the District
Courts opinion and the small amounts at issue with respect
to the 10 remaining plaintiffs, we will no longer report on this
case after this
Form 10-K.
On July 23, 2009, Klinglers European Bake
Shop & Deli, Inc., filed a complaint against BFI Waste
Services, LLC in the Circuit Court of Jefferson County, Alabama,
in which plaintiff complains about fuel/environmental recovery
fees and administrative fees charged. The complaint purports to
be filed on behalf of a class of similarly situated plaintiffs
in Alabama. This complaint asserts various legal and equitable
theories of recovery and alleges in essence that the fees were
not properly disclosed, were unfair, and were contrary to
contract.
Class-certification-related
discovery is underway. Plaintiffs deadline for moving for
class certification is August 12, 2011.
The plaintiffs in both actions have not specified the amount of
damages sought. Although the range of reasonably possible loss
cannot be estimated, we do not believe that these matters will
have a material impact on our consolidated financial positions,
results of operations or cash flows. We will continue to
vigorously defend the claims in both lawsuits.
Contracting
Matter
We discovered actions of non-compliance by one of our
subsidiaries with the subcontracting provisions of certain
government contracts in one of our markets. We reported the
discovery to, and expect further discussions with, law
enforcement authorities and other authorities. Such
non-compliance could result in payments by us in the form of
restitution, damages, or penalties, or the loss of future
business in the affected market or markets. Based on the
information currently available to us, including our expectation
that our self-disclosure will be viewed favorably by the
applicable authorities, we presently believe that the resolution
of the matter, while it may have a material impact on our
results of operations or cash flows in the period in which it is
recognized or paid, will not have a material adverse effect on
our consolidated financial position.
Congress
Development Landfill Matters
Congress Development Co. (CDC) is a general partnership
that owns and operates the Congress Landfill. The general
partners in CDC are our subsidiary, Allied Waste Transportation,
Inc. (Allied Transportation), and an unaffiliated entity, John
Sexton Sand & Gravel Corporation (Sexton). Sexton was
the operator of the landfill through early 2007, when Allied
Transportation took over as the operator. The general partners
likely will be jointly and severally liable for the costs
associated with the following matters relating to the Congress
Landfill.
In August 2010, Congress Development Company agreed with the
State of Illinois to have a Final Consent Order (Final Order)
entered by the Circuit Court of Illinois, Cook County. Pursuant
to the Final Order, we have agreed to continue to implement
certain remedial activities at the Congress Landfill. The
remediation liability recorded as of December 31, 2010 is
$82.6 million, of which $8.4 million is expected to be
paid during 2011. The reasonably possible range of loss for
remediation costs is $46 million to $146 million.
In a suit originally filed on December 23, 2009 in the
Circuit Court of Cook County, Illinois and subsequently amended
to add additional plaintiffs, approximately 2,300 plaintiffs
sued our subsidiaries Allied Transportation and Allied Waste
Industries, Inc., CDC and Sexton. The plaintiffs allege bodily
injury, property damage and inability to have normal use and
enjoyment of property arising from, among other things, odors
and other damages arising from landfill gas leaking, and they
base their claims on negligence, trespass, and nuisance.
142
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Following the courts order in our favor striking the
plaintiffs allegations requesting actual damages in excess
of $50,000,000 and punitive damages in excess of $50,000,000,
the amount of damages being sought is unspecified. The court
entered an order dismissing Allied Waste Industries, Inc.
without prejudice on October 26, 2010. We intend to
vigorously defend against the plaintiffs allegations in
this action.
Livingston
Matter
On October 13, 2009, the Twenty-First Judicial District
Court, Parish of Livingston, State of Louisiana, issued its Post
Class Certification Findings of Fact and Conclusions of Law
in a lawsuit alleging nuisance from the activities of the CECOS
hazardous waste facility located in Livingston Parish,
Louisiana. The court granted class certification for all those
living within a six mile radius of the CECOS site between the
years 1977 and 1990. We have filed a notice of appeal with
respect to the class certification order and briefing is
complete. The parties have held one mediation session and expect
to continue that session in April 2011. If the mediation is not
successful, we intend to continue to defend this lawsuit
vigorously.
Lease
Commitments
We and our subsidiaries lease real property, equipment and
software under various operating leases with terms from one
month to twenty years. Rent expense during the years ended
December 31, 2010, 2009 and 2008 was $51.6 million,
$60.1 million and $19.3 million, respectively.
Future minimum lease obligations under non-cancelable operating
leases with initial terms in excess of one year at
December 31, 2010 are as follows:
|
|
|
|
|
2011
|
|
$
|
34.6
|
|
2012
|
|
|
25.3
|
|
2013
|
|
|
20.5
|
|
2014
|
|
|
16.6
|
|
2015
|
|
|
14.2
|
|
Thereafter
|
|
|
65.0
|
|
|
|
|
|
|
|
|
$
|
176.2
|
|
|
|
|
|
|
Unconditional
Purchase Commitments
Royalties
We have entered into agreements to pay royalties to prior
landowners, lessors or host communities, based on waste tonnage
disposed at specified landfills. These royalties are generally
payable quarterly and amounts incurred, but not paid, are
accrued in our consolidated balance sheets. Royalties are
accrued as tonnage is disposed of in the landfills.
Disposal
Agreements
We have several agreements expiring at various dates through
2029 that require us to dispose of a minimum number of tons at
third-party disposal facilities. Under these
put-or-pay
agreements, we are required to pay for
agreed-upon
minimum volumes regardless of the actual number of tons placed
at the facilities.
Future minimum payments under unconditional purchase
commitments, consisting primarily of (i) disposal related
agreements which include fixed or minimum royalty payments, host
agreements, and
take-or-pay
and
143
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
put-or-pay
agreements, and (ii) other obligations including committed
capital expenditures and consulting service agreements at
December 31, 2010 are as follows:
|
|
|
|
|
2011
|
|
$
|
219.8
|
|
2012
|
|
|
93.5
|
|
2013
|
|
|
70.4
|
|
2014
|
|
|
57.0
|
|
2015
|
|
|
25.6
|
|
Thereafter
|
|
|
257.7
|
|
|
|
|
|
|
|
|
$
|
724.0
|
|
|
|
|
|
|
Restricted
Cash and Other Financial Guarantees
We must provide financial assurance to governmental agencies and
a variety of other entities under applicable environmental
regulations relating to our landfill operations for capping,
closure and post-closure costs, and our performance under
certain collection, landfill and transfer station contracts. We
satisfy our financial assurance requirements by providing surety
bonds, letters of credit, insurance policies or trust deposits.
The amount of the financial assurance requirements for capping,
closure and post-closure costs is determined by applicable state
environmental regulations, which vary by state. The financial
assurance requirements for capping, closure and post-closure
costs can either be for costs associated with a portion of the
landfill or the entire landfill. Generally, states will require
a third-party engineering specialist to determine the estimated
capping, closure and post-closure costs that are used to
determine the required amount of financial assurance for a
landfill. The amount of financial assurance required can, and
generally will, differ from the obligation determined and
recorded under GAAP. The amount of the financial assurance
requirements related to contract performance varies by contract.
Additionally, we are required to provide financial assurance for
our self-insurance program and collateral for certain
performance obligations.
We had the following financial instruments and collateral in
place to secure our financial assurances at December 31:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Letters of credit
|
|
$
|
1,077.0
|
|
|
$
|
1,673.5
|
|
Surety bonds
|
|
|
2,622.3
|
|
|
|
2,211.0
|
|
The letters of credit utilize $1,037.5 million and
$1,634.0 million as of December 31, 2010 and 2009,
respectively, of availability under our Credit Facilities.
Surety bonds expire on various dates through 2038.
These financial instruments are issued in the normal course of
business and are not debt. Because we currently have no
liability for this financial assurance, it is not reflected in
our consolidated balance sheets. However, we have recorded
capping, closure and post-closure obligations and self-insurance
reserves as they are incurred. The underlying financial
assurance obligations, in excess of those already reflected in
our consolidated balance sheets, would be recorded if it is
probable that we would be unable to fulfill our related
obligations. We do not expect this to occur.
Our restricted cash deposits include, among other things,
restricted cash held for capital expenditures under certain debt
facilities, and restricted cash pledged to regulatory agencies
and governmental entities as financial guarantees of our
performance related to our final capping, closure and
post-closure obligations at our landfills
144
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
at December 31. The following table summarizes our
restricted cash and marketable securities as of December 31:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Financing proceeds
|
|
$
|
39.8
|
|
|
$
|
93.1
|
|
Capping, closure and post-closure obligations
|
|
|
61.8
|
|
|
|
62.4
|
|
Self-insurance
|
|
|
63.8
|
|
|
|
65.1
|
|
Other
|
|
|
7.4
|
|
|
|
19.9
|
|
|
|
|
|
|
|
|
|
|
Total restricted cash and marketable securities
|
|
$
|
172.8
|
|
|
$
|
240.5
|
|
|
|
|
|
|
|
|
|
|
We own a 19.9% interest in a company that, among other
activities, issues financial surety bonds to secure capping,
closure and post-closure obligations for companies operating in
the solid waste industry. We account for this investment under
the cost method of accounting. There have been no identified
events or changes in circumstances that may have a significant
adverse effect on the fair value of the investment. This
investee company and the parent company of the investee had
written surety bonds for us relating to our landfill operations
for capping, closure and post-closure, of which
$855.0 million and $775.2 million were outstanding as
of December 31, 2010 and 2009, respectively. Our
reimbursement obligations under these bonds are secured by an
indemnity agreement with the investee and letters of credit
totaling $45.0 million and $67.4 million as of
December 31, 2010 and 2009, respectively.
Off-Balance
Sheet Arrangements
We have no off-balance sheet debt or similar obligations, other
than operating leases and the financial assurances discussed
above, which are not classified as debt. We have no transactions
or obligations with related parties that are not disclosed,
consolidated into or reflected in our reported financial
position or results of operations. We have not guaranteed any
third-party debt.
Guarantees
We enter into contracts in the normal course of business that
include indemnification clauses. Indemnifications relating to
known liabilities are recorded in the consolidated financial
statements based on our best estimate of required future
payments. Certain of these indemnifications relate to contingent
events or occurrences, such as the imposition of additional
taxes due to a change in the tax law or adverse interpretation
of the tax law, and indemnifications made in divestiture
agreements where we indemnify the buyer for liabilities that
relate to our activities prior to the divestiture and that may
become known in the future. We do not believe that these
contingent obligations will have a material effect on our
consolidated financial position, results of operations or cash
flows.
We have entered into agreements with property owners to
guarantee the value of property that is adjacent to certain of
our landfills. These agreements have varying terms. We do not
believe that these contingent obligations will have a material
effect on our consolidated financial position, results of
operations or cash flows.
Other
Matters
Our business activities are conducted in the context of a
developing and changing statutory and regulatory framework.
Governmental regulation of the waste management industry
requires us to obtain and retain numerous governmental permits
to conduct various aspects of our operations. These permits are
subject to revocation, modification or denial. The costs and
other capital expenditures which may be required to obtain or
retain the applicable permits or comply with applicable
regulations could be significant. Any revocation, modification
or denial of permits could have a material adverse effect on us.
145
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
17.
|
SELECTED
QUARTERLY FINANCIAL DATA (unaudited)
|
The following tables summarize our unaudited consolidated
quarterly results of operations as reported for 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,957.7
|
|
|
$
|
2,066.4
|
|
|
$
|
2,061.7
|
|
|
$
|
2,020.8
|
|
Operating income
|
|
|
381.3
|
|
|
|
400.8
|
|
|
|
367.6
|
|
|
|
389.4
|
|
Net income
|
|
|
65.2
|
|
|
|
159.9
|
|
|
|
134.5
|
|
|
|
147.9
|
|
Net income attributable to Republic Services, Inc.
|
|
|
65.0
|
|
|
|
159.7
|
|
|
|
134.2
|
|
|
|
147.6
|
|
Diluted earnings per common share
|
|
|
0.17
|
|
|
|
0.42
|
|
|
|
0.35
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
2,060.5
|
|
|
$
|
2,066.1
|
|
|
$
|
2,073.5
|
|
|
$
|
1,999.0
|
|
Operating income (loss)
|
|
|
353.0
|
|
|
|
520.7
|
|
|
|
386.9
|
|
|
|
329.2
|
|
Net income (loss)
|
|
|
113.4
|
|
|
|
226.2
|
|
|
|
121.0
|
|
|
|
35.9
|
|
Net income attributable to Republic Services, Inc.
|
|
|
113.0
|
|
|
|
225.9
|
|
|
|
120.5
|
|
|
|
35.6
|
|
Diluted earnings per common share
|
|
|
0.30
|
|
|
|
0.59
|
|
|
|
0.32
|
|
|
|
0.09
|
|
During 2010 and 2009, we recorded a number of gains, charges
(recoveries) and expenses that impacted our net income during
each of the quarters as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Total
|
|
|
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
$
|
132.3
|
|
|
$
|
-
|
|
|
$
|
19.4
|
|
|
$
|
9.1
|
|
|
$
|
160.8
|
|
Costs to achieve synergies
|
|
|
9.1
|
|
|
|
8.5
|
|
|
|
7.4
|
|
|
|
8.3
|
|
|
|
33.3
|
|
Restructuring charges
|
|
|
5.6
|
|
|
|
1.4
|
|
|
|
2.6
|
|
|
|
1.8
|
|
|
|
11.4
|
|
Loss (gain) on disposition of assets and impairments, net
|
|
|
0.5
|
|
|
|
1.1
|
|
|
|
25.5
|
|
|
|
(8.0
|
)
|
|
|
19.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Total
|
|
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
31.8
|
|
|
$
|
102.3
|
|
|
$
|
134.1
|
|
Costs to achieve synergies
|
|
|
12.9
|
|
|
|
10.1
|
|
|
|
8.9
|
|
|
|
9.9
|
|
|
|
41.8
|
|
Restructuring charges
|
|
|
31.3
|
|
|
|
12.3
|
|
|
|
12.3
|
|
|
|
7.3
|
|
|
|
63.2
|
|
Remediation (recoveries) charges
|
|
|
-
|
|
|
|
-
|
|
|
|
(8.9
|
)
|
|
|
2.1
|
|
|
|
(6.8
|
)
|
Loss (gain) on disposition of assets and impairments, net
|
|
$
|
4.9
|
|
|
$
|
(150.1
|
)
|
|
$
|
0.9
|
|
|
$
|
7.3
|
|
|
$
|
(137.0
|
)
|
Costs to achieve synergies relate to those incremental costs
incurred primarily for our synergy incentive plan as well as
other integration costs. We also recorded losses on early
extinguishment of debt associated with premiums paid to
repurchase debt, charges for unamortized debt discounts and
professional fees paid to effectuate the repurchases.
146
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
18.
|
CONDENSED
CONSOLIDATING FINANCIAL STATEMENTS
|
We are the primary obligor under certain of the Senior Notes
issued by us. However, we have no independent assets or
operations, and therefore substantially all of our subsidiaries
have jointly and severally guaranteed these notes. All of the
subsidiary guarantors are 100% direct or indirect wholly owned
subsidiaries of the parent, and all guarantees are full,
unconditional and joint and several with respect to principal,
interest and liquidated damages, if any. As such, we present
condensed consolidating balance sheets as of December 31,
2010 and 2009, and condensed consolidating statements of income
and cash flows for the years ended December 31, 2010, 2009
and 2008 for each of Republic Services, Inc. (Parent), guarantor
subsidiaries and the other non-guarantor subsidiaries with any
consolidating adjustments.
Condensed
Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14.5
|
|
|
$
|
71.1
|
|
|
$
|
2.7
|
|
|
$
|
-
|
|
|
$
|
88.3
|
|
Accounts receivable, net
|
|
|
-
|
|
|
|
800.6
|
|
|
|
28.3
|
|
|
|
-
|
|
|
|
828.9
|
|
Prepaid expenses and other current assets
|
|
|
112.0
|
|
|
|
74.8
|
|
|
|
20.6
|
|
|
|
-
|
|
|
|
207.4
|
|
Deferred tax assets
|
|
|
111.2
|
|
|
|
-
|
|
|
|
10.3
|
|
|
|
-
|
|
|
|
121.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
237.7
|
|
|
|
946.5
|
|
|
|
61.9
|
|
|
|
-
|
|
|
|
1,246.1
|
|
Restricted cash and marketable securities
|
|
|
39.8
|
|
|
|
47.0
|
|
|
|
86.0
|
|
|
|
-
|
|
|
|
172.8
|
|
Property and equipment, net
|
|
|
47.2
|
|
|
|
6,280.6
|
|
|
|
370.7
|
|
|
|
-
|
|
|
|
6,698.5
|
|
Goodwill, net
|
|
|
-
|
|
|
|
10,655.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,655.3
|
|
Other intangible assets, net
|
|
|
21.8
|
|
|
|
429.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
451.3
|
|
Investment and net advances to affiliate
|
|
|
13,513.9
|
|
|
|
40.9
|
|
|
|
149.1
|
|
|
|
(13,703.9
|
)
|
|
|
-
|
|
Other assets
|
|
|
88.2
|
|
|
|
94.7
|
|
|
|
55.0
|
|
|
|
-
|
|
|
|
237.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
13,948.6
|
|
|
$
|
18,494.5
|
|
|
$
|
722.7
|
|
|
$
|
(13,703.9
|
)
|
|
$
|
19,461.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
89.7
|
|
|
$
|
500.2
|
|
|
$
|
16.6
|
|
|
$
|
-
|
|
|
$
|
606.5
|
|
Notes payable and current maturities of long-term debt
|
|
|
392.2
|
|
|
|
484.5
|
|
|
|
1.8
|
|
|
|
-
|
|
|
|
878.5
|
|
Deferred revenue
|
|
|
-
|
|
|
|
291.6
|
|
|
|
3.5
|
|
|
|
-
|
|
|
|
295.1
|
|
Accrued landfill and environmental costs, current portion
|
|
|
-
|
|
|
|
182.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
182.0
|
|
Accrued interest
|
|
|
61.4
|
|
|
|
31.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93.1
|
|
Other accrued liabilities
|
|
|
222.3
|
|
|
|
200.5
|
|
|
|
198.5
|
|
|
|
-
|
|
|
|
621.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
765.6
|
|
|
|
1,690.5
|
|
|
|
220.4
|
|
|
|
-
|
|
|
|
2,676.5
|
|
Long-term debt, net of current maturities
|
|
|
4,090.8
|
|
|
|
1,760.0
|
|
|
|
14.3
|
|
|
|
-
|
|
|
|
5,865.1
|
|
Accrued landfill and environmental costs, net of current portion
|
|
|
-
|
|
|
|
1,148.1
|
|
|
|
268.5
|
|
|
|
-
|
|
|
|
1,416.6
|
|
Deferred income taxes and other long-term tax liabilities
|
|
|
1,053.3
|
|
|
|
-
|
|
|
|
(8.5
|
)
|
|
|
-
|
|
|
|
1,044.8
|
|
Self-insurance reserves, net of current portion
|
|
|
-
|
|
|
|
97.7
|
|
|
|
206.8
|
|
|
|
-
|
|
|
|
304.5
|
|
Other long-term liabilities
|
|
|
192.4
|
|
|
|
58.6
|
|
|
|
54.5
|
|
|
|
-
|
|
|
|
305.5
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
4.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.0
|
|
Other equity
|
|
|
7,842.5
|
|
|
|
13,739.6
|
|
|
|
(35.7
|
)
|
|
|
(13,703.9
|
)
|
|
|
7,842.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Republic Services, Inc. stockholders equity
|
|
|
7,846.5
|
|
|
|
13,739.6
|
|
|
|
(35.7
|
)
|
|
|
(13,703.9
|
)
|
|
|
7,846.5
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
2.4
|
|
|
|
-
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
7,846.5
|
|
|
|
13,739.6
|
|
|
|
(33.3
|
)
|
|
|
(13,703.9
|
)
|
|
|
7,848.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
13,948.6
|
|
|
$
|
18,494.5
|
|
|
$
|
722.7
|
|
|
$
|
(13,703.9
|
)
|
|
$
|
19,461.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
101.8
|
|
|
$
|
(62.6
|
)
|
|
$
|
8.8
|
|
|
$
|
-
|
|
|
$
|
48.0
|
|
Accounts receivable, net
|
|
|
-
|
|
|
|
391.6
|
|
|
|
473.5
|
|
|
|
-
|
|
|
|
865.1
|
|
Prepaid expenses and other current assets
|
|
|
23.7
|
|
|
|
15.8
|
|
|
|
117.0
|
|
|
|
-
|
|
|
|
156.5
|
|
Deferred tax assets
|
|
|
93.1
|
|
|
|
92.0
|
|
|
|
10.2
|
|
|
|
-
|
|
|
|
195.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
218.6
|
|
|
|
436.8
|
|
|
|
609.5
|
|
|
|
-
|
|
|
|
1,264.9
|
|
Restricted cash and marketable securities
|
|
|
67.6
|
|
|
|
85.5
|
|
|
|
87.4
|
|
|
|
-
|
|
|
|
240.5
|
|
Property and equipment, net
|
|
|
45.6
|
|
|
|
6,270.1
|
|
|
|
342.0
|
|
|
|
-
|
|
|
|
6,657.7
|
|
Goodwill, net
|
|
|
-
|
|
|
|
10,667.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,667.1
|
|
Other intangible assets, net
|
|
|
28.9
|
|
|
|
471.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500.0
|
|
Investment and net advances to affiliate
|
|
|
10,877.3
|
|
|
|
212.6
|
|
|
|
145.7
|
|
|
|
(11,235.6
|
)
|
|
|
-
|
|
Other assets
|
|
|
58.3
|
|
|
|
102.1
|
|
|
|
49.7
|
|
|
|
-
|
|
|
|
210.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,296.3
|
|
|
$
|
18,245.3
|
|
|
$
|
1,234.3
|
|
|
$
|
(11,235.6
|
)
|
|
$
|
19,540.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
114.0
|
|
|
$
|
441.4
|
|
|
$
|
37.4
|
|
|
$
|
-
|
|
|
$
|
592.8
|
|
Notes payable and current maturities of long-term debt
|
|
|
-
|
|
|
|
243.0
|
|
|
|
300.0
|
|
|
|
-
|
|
|
|
543.0
|
|
Deferred revenue
|
|
|
-
|
|
|
|
326.7
|
|
|
|
4.4
|
|
|
|
-
|
|
|
|
331.1
|
|
Accrued landfill and environmental costs, current portion
|
|
|
-
|
|
|
|
245.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
245.4
|
|
Accrued interest
|
|
|
33.5
|
|
|
|
62.3
|
|
|
|
0.4
|
|
|
|
-
|
|
|
|
96.2
|
|
Other accrued liabilities
|
|
|
273.5
|
|
|
|
231.1
|
|
|
|
235.6
|
|
|
|
-
|
|
|
|
740.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
421.0
|
|
|
|
1,549.9
|
|
|
|
577.8
|
|
|
|
-
|
|
|
|
2,548.7
|
|
Long-term debt, net of current maturities
|
|
|
2,902.2
|
|
|
|
3,502.4
|
|
|
|
15.0
|
|
|
|
-
|
|
|
|
6,419.6
|
|
Accrued landfill and environmental costs, net of current portion
|
|
|
0.5
|
|
|
|
306.2
|
|
|
|
1,076.5
|
|
|
|
-
|
|
|
|
1,383.2
|
|
Deferred income taxes and other long-term tax liabilities
|
|
|
280.6
|
|
|
|
765.8
|
|
|
|
(5.9
|
)
|
|
|
-
|
|
|
|
1,040.5
|
|
Self-insurance reserves, net of current portion
|
|
|
-
|
|
|
|
129.3
|
|
|
|
172.7
|
|
|
|
-
|
|
|
|
302.0
|
|
Other long-term liabilities
|
|
|
127.5
|
|
|
|
102.0
|
|
|
|
49.7
|
|
|
|
-
|
|
|
|
279.2
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
4.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.0
|
|
Other equity
|
|
|
7,560.5
|
|
|
|
11,887.1
|
|
|
|
(651.5
|
)
|
|
|
(11,235.6
|
)
|
|
|
7,560.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Republic Services, Inc. stockholders equity
|
|
|
7,564.5
|
|
|
|
11,887.1
|
|
|
|
(651.5
|
)
|
|
|
(11,235.6
|
)
|
|
|
7,564.5
|
|
Noncontrolling interests
|
|
|
-
|
|
|
|
2.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
7,564.5
|
|
|
|
11,889.7
|
|
|
|
(651.5
|
)
|
|
|
(11,235.6
|
)
|
|
|
7,567.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
11,296.3
|
|
|
$
|
18,245.3
|
|
|
$
|
1,234.3
|
|
|
$
|
(11,235.6
|
)
|
|
$
|
19,540.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
7,877.1
|
|
|
$
|
298.5
|
|
|
$
|
(69.0
|
)
|
|
$
|
8,106.6
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
3.1
|
|
|
|
4,607.2
|
|
|
|
223.5
|
|
|
|
(69.0
|
)
|
|
|
4,764.8
|
|
Depreciation, amortization and depletion
|
|
|
21.6
|
|
|
|
796.9
|
|
|
|
15.2
|
|
|
|
-
|
|
|
|
833.7
|
|
Accretion
|
|
|
-
|
|
|
|
38.1
|
|
|
|
42.4
|
|
|
|
-
|
|
|
|
80.5
|
|
Selling, general and administrative
|
|
|
198.5
|
|
|
|
645.1
|
|
|
|
14.4
|
|
|
|
-
|
|
|
|
858.0
|
|
(Gain) loss on disposition of assets and impairments, net
|
|
|
1.6
|
|
|
|
17.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19.1
|
|
Restructuring charges
|
|
|
-
|
|
|
|
11.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(224.8
|
)
|
|
|
1,760.9
|
|
|
|
3.0
|
|
|
|
-
|
|
|
|
1,539.1
|
|
Interest expense
|
|
|
(207.7
|
)
|
|
|
(300.6
|
)
|
|
|
0.9
|
|
|
|
-
|
|
|
|
(507.4
|
)
|
Loss on extinguishment of debt
|
|
|
(4.7
|
)
|
|
|
(155.9
|
)
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
(160.8
|
)
|
Interest income
|
|
|
(6.3
|
)
|
|
|
(5.1
|
)
|
|
|
12.1
|
|
|
|
-
|
|
|
|
0.7
|
|
Other (expense) income, net
|
|
|
(7.5
|
)
|
|
|
12.6
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
5.4
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
437.2
|
|
|
|
21.0
|
|
|
|
3.4
|
|
|
|
(461.6
|
)
|
|
|
-
|
|
Intercompany interest income (expense)
|
|
|
569.6
|
|
|
|
(626.1
|
)
|
|
|
56.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
555.8
|
|
|
|
706.8
|
|
|
|
76.0
|
|
|
|
(461.6
|
)
|
|
|
877.0
|
|
Provision for income taxes
|
|
|
49.3
|
|
|
|
292.2
|
|
|
|
28.0
|
|
|
|
-
|
|
|
|
369.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
506.5
|
|
|
|
414.6
|
|
|
|
48.0
|
|
|
|
(461.6
|
)
|
|
|
507.5
|
|
Less: net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
506.5
|
|
|
$
|
414.6
|
|
|
$
|
47.0
|
|
|
$
|
(461.6
|
)
|
|
$
|
506.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenue
|
|
|
-
|
|
|
|
7,932.6
|
|
|
|
340.1
|
|
|
|
(73.6
|
)
|
|
|
8,199.1
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
3.8
|
|
|
|
4,689.9
|
|
|
|
224.1
|
|
|
|
(73.6
|
)
|
|
|
4,844.2
|
|
Depreciation, amortization and depletion
|
|
|
14.6
|
|
|
|
834.8
|
|
|
|
20.3
|
|
|
|
-
|
|
|
|
869.7
|
|
Accretion
|
|
|
0.1
|
|
|
|
30.1
|
|
|
|
58.6
|
|
|
|
-
|
|
|
|
88.8
|
|
Selling, general and administrative
|
|
|
184.9
|
|
|
|
681.5
|
|
|
|
14.0
|
|
|
|
-
|
|
|
|
880.4
|
|
(Gain) loss on disposition of assets and impairments, net
|
|
|
12.0
|
|
|
|
(149.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(137.0
|
)
|
Restructuring charges
|
|
|
-
|
|
|
|
63.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(215.4
|
)
|
|
|
1,782.1
|
|
|
|
23.1
|
|
|
|
-
|
|
|
|
1,589.8
|
|
Interest expense
|
|
|
(99.7
|
)
|
|
|
(493.8
|
)
|
|
|
(2.4
|
)
|
|
|
-
|
|
|
|
(595.9
|
)
|
Loss on extinguishment of debt
|
|
|
(7.0
|
)
|
|
|
(127.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(134.1
|
)
|
Interest income
|
|
|
(2.4
|
)
|
|
|
(2.1
|
)
|
|
|
6.5
|
|
|
|
-
|
|
|
|
2.0
|
|
Other (expense) income, net
|
|
|
(0.7
|
)
|
|
|
1.9
|
|
|
|
2.0
|
|
|
|
-
|
|
|
|
3.2
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
453.4
|
|
|
|
56.4
|
|
|
|
6.0
|
|
|
|
(515.8
|
)
|
|
|
-
|
|
Intercompany interest income (expense)
|
|
|
514.0
|
|
|
|
(588.3
|
)
|
|
|
74.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
642.2
|
|
|
|
629.1
|
|
|
|
109.5
|
|
|
|
(515.8
|
)
|
|
|
865.0
|
|
Provision for income taxes
|
|
|
147.2
|
|
|
|
183.0
|
|
|
|
38.3
|
|
|
|
-
|
|
|
|
368.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
495.0
|
|
|
|
446.1
|
|
|
|
71.2
|
|
|
|
(515.8
|
)
|
|
|
496.5
|
|
Less: net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
(1.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
495.0
|
|
|
$
|
444.6
|
|
|
$
|
71.2
|
|
|
$
|
(515.8
|
)
|
|
$
|
495.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
3,590.7
|
|
|
$
|
99.9
|
|
|
$
|
(5.5
|
)
|
|
$
|
3,685.1
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
|
|
7.6
|
|
|
|
2,332.5
|
|
|
|
82.1
|
|
|
|
(5.5
|
)
|
|
|
2,416.7
|
|
Depreciation, amortization and depletion
|
|
|
7.4
|
|
|
|
342.3
|
|
|
|
4.4
|
|
|
|
-
|
|
|
|
354.1
|
|
Accretion
|
|
|
-
|
|
|
|
19.7
|
|
|
|
4.2
|
|
|
|
-
|
|
|
|
23.9
|
|
Selling, general and administrative
|
|
|
135.2
|
|
|
|
294.8
|
|
|
|
4.7
|
|
|
|
-
|
|
|
|
434.7
|
|
(Gain) loss on disposition of assets and impairments, net
|
|
|
5.7
|
|
|
|
84.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89.8
|
|
Restructuring charges
|
|
|
-
|
|
|
|
82.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(155.9
|
)
|
|
|
434.6
|
|
|
|
4.5
|
|
|
|
-
|
|
|
|
283.2
|
|
Interest expense
|
|
|
(93.2
|
)
|
|
|
(42.8
|
)
|
|
|
4.1
|
|
|
|
-
|
|
|
|
(131.9
|
)
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest income
|
|
|
4.0
|
|
|
|
4.3
|
|
|
|
1.3
|
|
|
|
-
|
|
|
|
9.6
|
|
Other (expense) income, net
|
|
|
(0.6
|
)
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.6
|
)
|
Equity in earnings of subsidiaries, net of tax
|
|
|
258.5
|
|
|
|
3.0
|
|
|
|
(2.5
|
)
|
|
|
(259.0
|
)
|
|
|
-
|
|
Intercompany interest income (expense)
|
|
|
-
|
|
|
|
(7.4
|
)
|
|
|
7.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
12.8
|
|
|
|
390.7
|
|
|
|
14.8
|
|
|
|
(259.0
|
)
|
|
|
159.3
|
|
Provision for income taxes
|
|
|
(61.0
|
)
|
|
|
140.1
|
|
|
|
6.3
|
|
|
|
-
|
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
73.8
|
|
|
|
250.6
|
|
|
|
8.5
|
|
|
|
(259.0
|
)
|
|
|
73.9
|
|
Less: net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Republic Services, Inc.
|
|
$
|
73.8
|
|
|
$
|
250.5
|
|
|
$
|
8.5
|
|
|
$
|
(259.0
|
)
|
|
$
|
73.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
506.5
|
|
|
$
|
414.6
|
|
|
$
|
48.0
|
|
|
$
|
(461.6
|
)
|
|
$
|
507.5
|
|
Equity in earnings of subsidiaries, net of taxes
|
|
|
(437.2
|
)
|
|
|
(21.0
|
)
|
|
|
(3.4
|
)
|
|
|
461.6
|
|
|
|
-
|
|
Other adjustments
|
|
|
291.8
|
|
|
|
660.1
|
|
|
|
(25.7
|
)
|
|
|
-
|
|
|
|
926.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
|
|
361.1
|
|
|
|
1,053.7
|
|
|
|
18.9
|
|
|
|
-
|
|
|
|
1,433.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
-
|
|
|
|
(771.1
|
)
|
|
|
(23.6
|
)
|
|
|
-
|
|
|
|
(794.7
|
)
|
Proceeds from sales of property and equipment
|
|
|
-
|
|
|
|
37.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37.4
|
|
Cash used in acquisitions and development projects, net of cash
acquired
|
|
|
-
|
|
|
|
(58.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(58.9
|
)
|
Cash proceeds from divestitures, net of cash divested
|
|
|
-
|
|
|
|
60.0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60.0
|
|
Change in restricted cash and marketable securities
|
|
|
27.9
|
|
|
|
37.0
|
|
|
|
1.4
|
|
|
|
-
|
|
|
|
66.3
|
|
Other
|
|
|
-
|
|
|
|
(0.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.6
|
)
|
Change in investment and net advances to affiliate
|
|
|
(1,449.0
|
)
|
|
|
(300.0
|
)
|
|
|
-
|
|
|
|
1,749.0
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by investing activities
|
|
|
(1,421.1
|
)
|
|
|
(996.2
|
)
|
|
|
(22.2
|
)
|
|
|
1,749.0
|
|
|
|
(690.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and long-term debt
|
|
|
1,193.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,193.5
|
|
Proceeds from issuance of senior notes, net of discount
|
|
|
1,499.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,499.4
|
|
Payments of notes payable and long-term debt
|
|
|
(1,446.3
|
)
|
|
|
(1,342.4
|
)
|
|
|
(301.6
|
)
|
|
|
-
|
|
|
|
(3,090.3
|
)
|
Premiums paid on extinguishment of debt
|
|
|
-
|
|
|
|
(30.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(30.4
|
)
|
Fees paid to issue and retire senior notes and certain hedging
relationships
|
|
|
(26.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26.2
|
)
|
Issuances of common stock
|
|
|
86.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86.5
|
|
Excess income tax benefit from stock option exercises
|
|
|
3.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.5
|
|
Purchases of common stock for treasury
|
|
|
(43.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(43.1
|
)
|
Cash dividends paid
|
|
|
(294.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(294.6
|
)
|
Distributions paid to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.2
|
)
|
|
|
-
|
|
|
|
(1.2
|
)
|
Change in investment and net advances from parent
|
|
|
-
|
|
|
|
1,449.0
|
|
|
|
300.0
|
|
|
|
(1,749.0
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities
|
|
|
972.7
|
|
|
|
76.2
|
|
|
|
(2.8
|
)
|
|
|
(1,749.0
|
)
|
|
|
(702.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(87.3
|
)
|
|
|
133.7
|
|
|
|
(6.1
|
)
|
|
|
-
|
|
|
|
40.3
|
|
Cash and cash equivalents at beginning of period
|
|
|
101.8
|
|
|
|
(62.6
|
)
|
|
|
8.8
|
|
|
|
-
|
|
|
|
48.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14.5
|
|
|
$
|
71.1
|
|
|
$
|
2.7
|
|
|
$
|
-
|
|
|
$
|
88.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
495.0
|
|
|
|
446.1
|
|
|
$
|
71.2
|
|
|
$
|
(515.8
|
)
|
|
$
|
496.5
|
|
Equity in earnings of subsidiaries, net of taxes
|
|
|
(453.4
|
)
|
|
|
(56.4
|
)
|
|
|
(6.0
|
)
|
|
|
515.8
|
|
|
|
-
|
|
Other adjustments
|
|
|
72.2
|
|
|
|
779.7
|
|
|
|
48.1
|
|
|
|
-
|
|
|
|
900.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities
|
|
|
113.8
|
|
|
|
1,169.4
|
|
|
|
113.3
|
|
|
|
-
|
|
|
|
1,396.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(15.0
|
)
|
|
|
(790.7
|
)
|
|
|
(20.6
|
)
|
|
|
-
|
|
|
|
(826.3
|
)
|
Proceeds from sales of property and equipment
|
|
|
-
|
|
|
|
31.8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31.8
|
|
Cash used in acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
Cash proceeds from divestitures, net of cash divested
|
|
|
-
|
|
|
|
511.1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
511.1
|
|
Change in restricted cash and marketable securities
|
|
|
28.4
|
|
|
|
17.4
|
|
|
|
(4.2
|
)
|
|
|
-
|
|
|
|
41.6
|
|
Other
|
|
|
-
|
|
|
|
(0.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.6
|
)
|
Change in investment and net advances to affiliate
|
|
|
(483.8
|
)
|
|
|
(8.0
|
)
|
|
|
-
|
|
|
|
491.8
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities
|
|
|
(470.4
|
)
|
|
|
(239.1
|
)
|
|
|
(24.8
|
)
|
|
|
491.8
|
|
|
|
(242.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and long-term debt
|
|
|
1,378.6
|
|
|
|
-
|
|
|
|
94.0
|
|
|
|
-
|
|
|
|
1,472.6
|
|
Proceeds from issuance of senior notes, net of discount
|
|
|
1,245.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,245.4
|
|
Payments of notes payable and long-term debt
|
|
|
(1,969.3
|
)
|
|
|
(1,420.6
|
)
|
|
|
(194.0
|
)
|
|
|
-
|
|
|
|
(3,583.9
|
)
|
Premiums paid on extinguishment of debt
|
|
|
(4.4
|
)
|
|
|
(42.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(47.3
|
)
|
Fees paid to issue and retire senior notes and certain hedging
relationships
|
|
|
(11.9
|
)
|
|
|
(2.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(14.3
|
)
|
Issuances of common stock
|
|
|
39.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39.6
|
|
Excess income tax benefit from stock option exercises
|
|
|
2.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.5
|
|
Purchases of common stock for treasury
|
|
|
(1.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.0
|
)
|
Cash dividends paid
|
|
|
(288.3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(288.3
|
)
|
Change in investment and net advances from parent
|
|
|
-
|
|
|
|
483.8
|
|
|
|
8.0
|
|
|
|
(491.8
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by financing activities
|
|
|
391.2
|
|
|
|
(982.1
|
)
|
|
|
(92.0
|
)
|
|
|
(491.8
|
)
|
|
|
(1,174.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
34.6
|
|
|
|
(51.8
|
)
|
|
|
(3.5
|
)
|
|
|
-
|
|
|
|
(20.7
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
67.2
|
|
|
|
(10.8
|
)
|
|
|
12.3
|
|
|
|
-
|
|
|
|
68.7
|
|
Cash and cash equivalents at end of period
|
|
$
|
101.8
|
|
|
$
|
(62.6
|
)
|
|
$
|
8.8
|
|
|
$
|
-
|
|
|
$
|
48.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
REPUBLIC
SERVICES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Condensed
Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
73.8
|
|
|
$
|
250.6
|
|
|
$
|
8.5
|
|
|
$
|
(259.0
|
)
|
|
$
|
73.9
|
|
Equity in earnings of subsidiaries, net of taxes
|
|
|
(258.5
|
)
|
|
|
(3.0
|
)
|
|
|
2.5
|
|
|
|
259.0
|
|
|
|
-
|
|
Other adjustments
|
|
|
(18.9
|
)
|
|
|
589.6
|
|
|
|
(132.4
|
)
|
|
|
-
|
|
|
|
438.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by operating activities
|
|
|
(203.6
|
)
|
|
|
837.2
|
|
|
|
(121.4
|
)
|
|
|
-
|
|
|
|
512.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(4.0
|
)
|
|
|
(379.1
|
)
|
|
|
(3.8
|
)
|
|
|
-
|
|
|
|
(386.9
|
)
|
Proceeds from sales of property and equipment
|
|
|
-
|
|
|
|
8.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8.2
|
|
Cash used in acquisitions, net of cash acquired
|
|
|
-
|
|
|
|
(553.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(553.8
|
)
|
Cash proceeds from divestitures, net of cash divested
|
|
|
-
|
|
|
|
3.3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.3
|
|
Change in restricted cash and marketable securities
|
|
|
(0.2
|
)
|
|
|
3.7
|
|
|
|
(8.8
|
)
|
|
|
-
|
|
|
|
(5.3
|
)
|
Other
|
|
|
-
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.2
|
)
|
Change in investment and net advances to affiliate
|
|
|
(213.0
|
)
|
|
|
(146.5
|
)
|
|
|
-
|
|
|
|
359.5
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) investing activities
|
|
|
(217.2
|
)
|
|
|
(1,064.4
|
)
|
|
|
(12.6
|
)
|
|
|
359.5
|
|
|
|
(934.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable and long-term debt
|
|
|
1,453.4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,453.4
|
|
Payments of notes payable and long-term debt
|
|
|
(740.6
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(740.6
|
)
|
Issuances of common stock
|
|
|
24.6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24.6
|
|
Excess income tax benefit from stock option exercises
|
|
|
4.5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.5
|
|
Payment for deferred stock units
|
|
|
(4.0
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4.0
|
)
|
Equity issuance costs
|
|
|
(1.8
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.8
|
)
|
Purchases of common stock for treasury
|
|
|
(138.4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(138.4
|
)
|
Cash dividends paid
|
|
|
(128.3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(128.3
|
)
|
Change in investment and net advances from parent
|
|
|
-
|
|
|
|
213.0
|
|
|
|
146.5
|
|
|
|
(359.5
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) financing activities
|
|
|
469.4
|
|
|
|
213.0
|
|
|
|
146.5
|
|
|
|
(359.5
|
)
|
|
|
469.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
48.6
|
|
|
|
(14.2
|
)
|
|
|
12.5
|
|
|
|
-
|
|
|
|
46.9
|
|
Cash and cash equivalents at beginning of period
|
|
|
18.6
|
|
|
|
3.4
|
|
|
|
(0.2
|
)
|
|
|
-
|
|
|
|
21.8
|
|
Cash and cash equivalents at end of period
|
|
$
|
67.2
|
|
|
$
|
(10.8
|
)
|
|
$
|
12.3
|
|
|
$
|
-
|
|
|
$
|
68.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to December 31, 2010, we: (i) entered into
certain interest rate locks with an aggregate notional amount in
excess of $550.0 million to manage exposure to fluctuations
in interest rates in anticipation of a planned issuance of
senior notes in the first half of 2011 and (ii) financed
the maturity of our $262.9 million 5.750% senior notes
with proceeds from our Credit Facilities.
154
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS
AND PROCEDURES
REPORT OF
MANAGEMENT ON REPUBLIC SERVICES, INC.S INTERNAL CONTROL
OVER FINANCIAL REPORTING
We, as members of management of Republic Services, Inc. are
responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Exchange Act
Rules 13a-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of our assets; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our
management and directors; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, our internal control
systems and procedures may not prevent or detect misstatements.
An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Because of
the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
We, under the supervision of and with the participation of our
management, including the Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, assessed the
effectiveness of our internal control over financial reporting
as of December 31, 2010, based on criteria for effective
internal control over financial reporting described in
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this assessment, we concluded that
we maintained effective internal control over financial
reporting as of December 31, 2010, based on the specified
criteria.
Our internal control over financial reporting has been audited
by Ernst & Young LLP, an independent registered public
accounting firm, as stated in their attestation report which is
included herein.
Disclosure
Controls and Procedures
We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e),
and
15d-15(e))
as of the end of the period covered by this Annual Report. Based
upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by
this Annual Report.
Changes
in Internal Control Over Financial Reporting
Based on an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, there has been no change in
our internal control over financial reporting during our last
fiscal quarter identified in connection with that evaluation,
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
155
ITEM 9B. OTHER
INFORMATION
None.
Part III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item is incorporated by reference
to the material appearing under the headings Election of
Directors, Biographical Information Regarding
Directors/Nominees and Executive Officers, Board of
Directors and Corporate Governance Matters,
Section 16(a) Beneficial Ownership Reporting
Compliance and Executive Officers in the Proxy
Statement for the 2011 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE
COMPENSATION
Information required by this item is incorporated by reference
to the material appearing under the headings Executive
Compensation and Director Compensation in the
Proxy Statement for the 2011 Annual Meeting of Stockholders.
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference
to the material appearing under the headings Security
Ownership of Five Percent Stockholders and Security
Ownership of the Board of Directors and Management in the
Proxy Statement for the 2011 Annual Meeting of Stockholders.
The following table sets forth certain information regarding
equity compensation plans as of December 31, 2010 (number
of securities in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Available
|
|
|
|
Number of
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Securities
|
|
|
|
|
|
Under Equity
|
|
|
|
to be
|
|
|
Weighted Average
|
|
|
Compensation
|
|
|
|
Issued Upon
|
|
|
Exercise Price of
|
|
|
Plans (excluding
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
securities
|
|
|
|
Outstanding Options
|
|
|
Options
|
|
|
reflected in
|
|
Plan Category
|
|
and Rights (b)
|
|
|
and Rights (c)
|
|
|
the first column) (d)
|
|
|
Equity compensation plans approved by security holders (a)
|
|
|
14.5
|
|
|
$
|
24.98
|
|
|
|
20.5
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14.5
|
|
|
$
|
24.98
|
|
|
|
20.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes our Amended and Restated 1998 Stock Incentive Plan,
2006 Incentive Stock Plan and 2007 Stock Incentive Plan (the
Plans). Also includes our 2009 Employee Stock Purchase Plan
(ESPP). |
|
(b) |
|
Includes 13,638,111 stock options, 849,250 shares
underlying restricted stock and restricted stock units, and
31,374 shares underlying purchase rights that accrue under
the ESPP. |
|
(c) |
|
Excludes restricted stock and restricted stock units as these
awards do not have exercise prices. |
|
(d) |
|
The shares remaining available for future issuances include
19,182,511 shares under our Plans and 1,354,862 shares
under our ESPP. |
156
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Information required by this item is incorporated by reference
to the material appearing under the heading Board of
Directors and Corporate Governance Matters in the Proxy
Statement for the 2011 Annual Meeting of Stockholders.
ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
Information required by this item is incorporated by reference
to the material appearing under the heading Audit and
Related Fees in the Proxy Statement for the 2011 Annual
Meeting of Stockholders.
Part IV
ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this
report:
Our consolidated financial statements are set forth under
Item 8 of this report on
Form 10-K.
|
|
2.
|
Financial
Statement Schedules
|
All schedules are omitted as the required information is not
applicable or the information is presented in the consolidated
financial statements and notes thereto in Item 8.
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed with the Commission, as
indicated in the description of each, File
No. 1-14267
in the case of Republic and File
No. 1-14705
and
No. 0-19285
in the case of Allied.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 22, 2008, by
and among Republic Services, Inc., RS Merger Wedge, Inc. and
Allied Waste Industries, Inc. (incorporated by reference to
Exhibit 2.1 of the Companys Current Report on
Form 8-K
dated June 23, 2008).
|
|
2
|
.2
|
|
First Amendment to Agreement and Plan of Merger, dated as of
July 31, 2008, by and among Republic Services, Inc., RS
Merger Wedge, Inc. and Allied Waste Industries, Inc.
(incorporated by reference to Exhibit 2.1 of the
Companys Current Report on
Form 8-K
dated August 6, 2008).
|
|
2
|
.3
|
|
Second Amendment to Agreement and Plan of Merger, dated as of
December 5, 2008, by and among Republic Services, Inc., RS
Merger Wedge, Inc. and Allied Waste Industries, Inc.
(incorporated by reference to Exhibit 2.1 of the
Companys Current Report on
Form 8-K
dated December 10, 2008).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3.1 of the Companys Quarterly
Report on
Form 10-Q
for the period ended June 30, 1998).
|
|
3
|
.2
|
|
Certificate of Amendment to Amended and Restated Certificate of
Incorporation of Republic Services, Inc. (incorporated by
reference to Exhibit 4.2 of the Companys Registration
Statement on
Form S-8,
Registration
No. 333-81801,
filed with the Commission on June 29, 1999).
|
|
3
|
.3
|
|
Amended and Restated Bylaws of Republic Services, Inc.
(incorporated by reference to Exhibit 3.3 of the
Companys Current Report on
Form 8-K
dated January 10, 2011).
|
157
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.1
|
|
Republic Services, Inc. Common Stock Certificate (incorporated
by reference to Exhibit 4.4 of the Companys
Registration Statement on
Form S-8,
Registration
No. 333-81801,
filed with the Commission on June 29, 1999).
|
|
4
|
.2
|
|
Indenture, dated as of August 15, 2001, by and between
Republic Services, Inc. and The Bank of New York, as trustee,
including the form of notes (incorporated by reference to
Exhibit 4.1 of the Companys Current Report on
Form 8-K
dated August 16, 2001).
|
|
4
|
.3
|
|
First Supplemental Indenture, dated as of August 15, 2001,
to the Indenture dated as of August 15, 2001, by and
between Republic Services, Inc. and The Bank Of New York, as
trustee, including the form of 6.75% Senior Notes due 2011
(incorporated by reference to Exhibit 4.2 of the
Companys Current Report on
Form 8-K
dated August 16, 2001).
|
|
4
|
.4
|
|
Second Supplemental Indenture, dated as of March 21, 2005,
to the Indenture dated as of August 15, 2001, by and
between Republic Services, Inc. and The Bank of New York, as
trustee, including the form of 6.086% Notes due 2035
(incorporated by reference to Exhibit 4.1 of the
Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2005).
|
|
4
|
.5
|
|
Third Supplemental Indenture, dated as of December 5, 2008,
to the Indenture dated as of August 15, 2001, by and among
Republic Services, Inc., Allied Waste Industries, Inc., the
guarantors party thereto and The Bank of New York Mellon (f/k/a
The Bank of New York), as trustee (incorporated by reference to
Exhibit 4.8 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
4
|
.6
|
|
Indenture, dated as of September 8, 2009, by and between
Republic Services, Inc. and The Bank of New York Mellon
Trust Company, N.A., as trustee (incorporated by reference
to Exhibit 4.1 of the Companys Current Report on
Form 8-K
dated September 9, 2009).
|
|
4
|
.7
|
|
First Supplemental Indenture, dated as of September 8,
2009, to the Indenture dated as of September 8, 2009, by
and among Republic Services, Inc., the guarantors named therein
and The Bank of New York Mellon Trust Company, N.A., as
trustee, including the form of 5.500% Notes due 2019
(incorporated by reference to Exhibit 4.2 of the
Companys Current Report on
Form 8-K
dated September 9, 2009).
|
|
4
|
.8
|
|
Indenture, dated as of November 25, 2009, by and between
Republic Services, Inc. and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.1 of the
Companys Current Report on
Form 8-K
dated November 25, 2009).
|
|
4
|
.9
|
|
First Supplemental Indenture, dated as of November 25,
2009, to the Indenture dated as of November 25, 2009, by
and among Republic Services, Inc., the guarantors named therein
and U.S. Bank National Association, as trustee, including the
form of 5.25% Notes due 2021 (incorporated by reference to
Exhibit 4.2 of the Companys Current Report on
Form 8-K
dated November 25, 2009).
|
|
4
|
.10
|
|
Second Supplemental Indenture, dated as of March 4, 2010,
to the Indenture dated as of November 25, 2009, by and
among Republic Services, Inc., the guarantors named therein and
U.S. Bank National Association, as trustee, including the form
of 5.00% Notes due 2020 (incorporated by reference to
Exhibit 4.1 of the Companys Current Report on
Form 8-K
dated March 4, 2010).
|
|
4
|
.11
|
|
Third Supplemental Indenture, dated as of March 4, 2010, to
the Indenture dated as of November 25, 2009, by and among
Republic Services, Inc., the guarantors named therein and U.S.
Bank National Association, as trustee, including the form of
6.20% Notes due 2040 (incorporated by reference to
Exhibit 4.2 of the Companys Current Report on
Form 8-K
dated March 4, 2010).
|
158
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.12
|
|
Amended and Restated Credit Agreement, dated as of
April 26, 2007, by and among Republic Services, Inc., Bank
of America N.A., as administrative agent, and the several
financial institutions party thereto (incorporated by reference
to Exhibit 4.1 of the Companys Current Report on
Form 8-K
dated May 2, 2007).
|
|
4
|
.13
|
|
Amendment No. 1, dated as of September 18, 2008, to
the Amended and Restated Credit Agreement dated as of
April 26, 2007, by and among Republic Services, Inc., Bank
of America, N.A., as administrative agent, and each of the
lenders signatory thereto (incorporated by reference to
Exhibit 4.2 of the Companys Current Report on
Form 8-K
dated September 24, 2008).
|
|
4
|
.14
|
|
Amendment No. 2, dated as of April 27, 2010, to the
Amended and Restated Credit Agreement, dated as of
April 26, 2007, by and among Republic Services, Inc., the
guarantors named therein, Bank of America, N.A., as
administrative agent, and the other lenders party thereto
(incorporated by reference to Exhibit 4.2 of the
Companys Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010).
|
|
4
|
.15
|
|
Credit Agreement, dated as of September 18, 2008, by and
among Republic Services, Inc., Bank of America, N.A., as
administrative agent, swing line lender and l/c issuer, JPMorgan
Chase Bank, N.A., as syndication agent, Barclays Bank PLC, BNP
Paribas and The Royal Bank of Scotland PLC, as co-documentation
agents, and the other lenders party thereto (incorporated by
reference to Exhibit 4.5 to the Companys Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2010).
|
|
4
|
.16
|
|
Amendment No. 1, dated as of April 27, 2010, to the
Credit Agreement, dated as of September 18, 2008, by and
among Republic Services, Inc., the guarantors named therein,
Bank of America, N.A., as administrative agent, and the
other lenders party thereto (incorporated by reference to
Exhibit 4.1 of the Companys Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010).
|
|
4
|
.17
|
|
Letter Agreement, dated as of December 2, 2008, by and
among Republic Services, Inc., Blackstone Capital
Partners III Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners III L.P. and Blackstone Family
Investment Partnership III L.P. (incorporated by reference
to Exhibit 4.12 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
4
|
.18
|
|
Restated Indenture, dated as of September 1, 1991, by and
between Browning-Ferris Industries, Inc. and First City,
Texas-Houston, National Association, as trustee (incorporated by
reference to Exhibit 4.22 of Allieds Registration
Statement on
Form S-4
(No. 333-61744)).
|
|
4
|
.19
|
|
First Supplemental Indenture, dated as of July 30, 1999, to
the Indenture dated as of September 1, 1991, by and among
Allied Waste Industries, Inc., Allied Waste North America, Inc.,
Browning-Ferris Industries, Inc. and Chase Bank of Texas,
National Association, as trustee (incorporated by reference to
Exhibit 4.23 of Allieds Registration Statement on
Form S-4
(No. 333-61744)).
|
|
4
|
.20
|
|
First [sic] Supplemental Indenture, dated as of
December 31, 2004, to the Indenture dated as of
September 1, 1991, by and among Browning-Ferris Industries,
Inc., BBCO, Inc. and JP Morgan Chase Bank, National Association
as trustee (incorporated by reference to Exhibit 4.33 of
Allieds Annual Report on
Form 10-K
for the year ended December 31, 2004).
|
|
4
|
.21
|
|
Third Supplemental Indenture, dated as of December 5, 2008,
to the Indenture dated as of September 1, 1991, by and
among Allied Waste Industries, Inc., Allied Waste North America,
Inc., Browning-Ferris Industries, LLC (successor to
Browning-Ferris Industries, Inc.), BBCO, Inc., Republic
Services, Inc., the guarantors party thereto and The Bank of New
York Mellon Trust Company, N.A., as trustee (incorporated
by reference to Exhibit 4.1 of the Companys Current
Report on
Form 8-K
dated December 10, 2008).
|
159
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.22
|
|
Senior Indenture, dated as of December 23, 1998, by and
among Allied Waste North America, Inc., the guarantors party
thereto and U.S. Bank Trust National Association, as
trustee (incorporated by reference to Exhibit 4.1 of
Allieds Registration Statement on
Form S-4
(No. 333-70709)).
|
|
4
|
.23
|
|
Eleventh Supplemental Indenture, dated as of November 10,
2003, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste North America, Inc., Allied
Waste Industries, Inc., the guarantors party thereto and U.S.
Bank National Association, as trustee, including the form of 6
1/2% Senior
Notes due 2010 (incorporated by reference to Exhibit 10.5
of Allieds Quarterly Report on
Form 10-Q
for the period ended September 30, 2003).
|
|
4
|
.24
|
|
Twelfth Supplemental Indenture, dated as of January 27,
2004, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste North America, Inc., Allied
Waste Industries, Inc., the guarantors party thereto and U.S.
Bank National Association, as trustee, including the form of 5
3/4% Senior
Notes due 2011 (incorporated by reference to Exhibit 10.58
of Allieds Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
4
|
.25
|
|
Fifteenth Supplemental Indenture, dated as of April 20,
2004, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste North America, Inc., Allied
Waste Industries, Inc., the guarantors party thereto and U.S.
Bank National Association, as trustee, including the form of
63/8% Senior
Notes due 2011 (incorporated by reference to Exhibit 10.23
of Allieds Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
4
|
.26
|
|
Seventeenth Supplemental Indenture, dated as of May 17,
2006, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste North America, Inc., Allied
Waste Industries, Inc., the guarantors party thereto and U.S.
Bank National Association, as trustee, including the form of
71/8% Senior
Notes due 2016 (incorporated by reference to Exhibit 1.01
of Allieds Current Report on
Form 8-K
dated May 17, 2006).
|
|
4
|
.27
|
|
Eighteenth Supplemental Indenture, dated as of March 12,
2007, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste North America, Inc., Allied
Waste Industries, Inc., the guarantors party thereto and U.S.
Bank National Association, as trustee, including the form of
67/8% Senior
Notes due 2017 (incorporated by reference to Exhibit 1.01
of Allieds Current Report on
Form 8-K
dated March 13, 2007).
|
|
4
|
.28
|
|
Nineteenth Supplemental Indenture, dated as of December 2,
2008, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste Industries, Inc., Allied Waste
North America, Inc., the guarantors party thereto and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.27 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
4
|
.29
|
|
Twentieth Supplemental Indenture, dated as of December 5,
2008, to the Senior Indenture dated as of December 23,
1998, by and among Allied Waste Industries, Inc., Allied Waste
North America, Inc., Republic Services, Inc., the guarantors
party thereto and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.2 of the
Companys Current Report on
Form 8-K
dated December 10, 2008).
|
|
4
|
.30
|
|
Twenty-First Supplemental Indenture, dated as of
December 15, 2008, to the Senior Indenture dated as of
December 23, 1998, by and among Allied Waste Industries,
Inc., Allied Waste North America, Inc., Republic Services, Inc.,
the guarantors party thereto and U.S. Bank National Association,
as trustee (incorporated by reference to Exhibit 4.1 of the
Companys Current Report on
Form 8-K
dated December 19, 2008).
|
160
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.31
|
|
Registration Rights Agreement, dated as of November 10,
2003, by and among Allied Waste Industries, Inc., the guarantors
party thereto and the initial purchasers, relating to
$350.0 million aggregate principal amount of 6
1/2% Senior
Notes due 2010 (incorporated by reference to Exhibit 10.4
of Allieds Quarterly Report on
Form 10-Q
for the period ended September 30, 2003).
|
|
4
|
.32
|
|
Registration Rights Agreement, dated as of April 20, 2004,
by and among Allied Waste Industries, Inc., the guarantors party
thereto and the initial purchasers, relating to
$275.0 million aggregate principal amount of
63/8% Senior
Notes due 2011 (incorporated by reference to Exhibit 10.20
of Allieds Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
4
|
.33
|
|
Registration Rights Agreement, dated as of May 17, 2006, by
and among Allied Waste North America, Inc., Allied Waste
Industries, Inc., the guarantors party thereto and the initial
purchasers, relating to $600.0 million aggregate principal
amount of
71/8% Senior
Notes due 2016 (incorporated by reference to Exhibit 1.02
of Allieds Current Report on
Form 8-K
dated May 17, 2006).
|
|
4
|
.34
|
|
The Company is a party to other agreements for unregistered
long-term debt securities, which do not exceed 10% of the
Companys total assets. The Company agrees to furnish a
copy of such agreements to the Commission upon request.
|
|
10
|
.1+
|
|
Republic Services, Inc. 1998 Stock Incentive Plan, as amended
and restated March 6, 2002 (incorporated by reference to
Exhibit 10.1 of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2002).
|
|
10
|
.2+
|
|
Form of Stock Option Agreement under the Republic Services, Inc.
1998 Stock Incentive Plan (incorporated by reference to
Exhibit 10.2 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.3+
|
|
Form of Director Stock Option Agreement under the Republic
Services, Inc. 1998 Stock Incentive Plan (incorporated by
reference to Exhibit 10.3 of the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.4+
|
|
Form of Executive Restricted Stock Agreement under the Republic
Services, Inc. 1998 Stock Incentive Plan
(1-year
vesting) (incorporated by reference to Exhibit 10.4 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.5+
|
|
Form of Executive Restricted Stock Agreement under the Republic
Services, Inc. 1998 Stock Incentive Plan
(4-year
vesting) (incorporated by reference to Exhibit 10.5 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.6+
|
|
Form of Non-Employee Director Stock Unit Agreement under the
Republic Services, Inc. 1998 Stock Incentive Plan (incorporated
by reference to Exhibit 10.6 of the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.7+
|
|
Republic Services, Inc. 2007 Stock Incentive Plan (incorporated
by reference to Exhibit 10.1 of the Companys
Quarterly Report on
Form 10-Q
for the period ended June 30, 2007).
|
|
10
|
.8+
|
|
Amendment to the Republic Services, Inc. 2007 Stock Incentive
Plan (incorporated by reference to Exhibit 10.8 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.9+
|
|
Form of Stock Option Agreement under the Republic Services, Inc.
2007 Stock Incentive Plan (incorporated by reference to
Exhibit 10.9 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.10+
|
|
Form of Restricted Stock Agreement under the Republic Services,
Inc. 2007 Stock Incentive Plan (incorporated by reference to
Exhibit 10.10 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
161
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.11+
|
|
Form of Non-Employee Director Restricted Stock Units Agreement
(3-year
vesting) under the Republic Services, Inc. 2007 Stock Incentive
Plan (incorporated by reference to Exhibit 10.11 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.12+
|
|
Form of Non-Employee Director Restricted Stock Units Agreement
(immediate vesting) under the Republic Services, Inc. 2007 Stock
Incentive Plan (incorporated by reference to Exhibit 10.12
of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.13+
|
|
Form of Restricted Stock Unit Award Agreement under the Republic
Services, Inc. 2007 Stock Incentive Plan (incorporated by
reference to Exhibit 10.1 of the Companys Current
Report on
Form 8-K
dated January 4, 2010).
|
|
10
|
.14+
|
|
Republic Services, Inc. Executive Incentive Plan, effective
January 1, 2003 (incorporated by reference to
Exhibit 10.9 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
10
|
.15+
|
|
First Amendment, effective January 30, 2007, to the
Republic Services, Inc. Executive Incentive Plan, effective
January 1, 2003 (incorporated by reference to
Exhibit 10.14 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.16+
|
|
Republic Services, Inc. Deferred Compensation Plan, as amended
and restated effective January 1, 2010 (incorporated by
reference to Exhibit 4.4 of the Companys Registration
Statement on
Form S-8,
Registration
No. 333-170174,
filed with the Commission on October 27, 2010).
|
|
10
|
.17+*
|
|
Amendment No. 1 to Republic Services, Inc. Deferred
Compensation Plan, effective January 6, 2011.
|
|
10
|
.18+
|
|
Republic Services, Inc. Executive Incentive Plan, effective
May 14, 2009 (incorporated by reference to Appendix A
of the Companys Proxy Statement on Schedule 14A filed
on April 3, 2009).
|
|
10
|
.19+
|
|
Republic Services, Inc. Synergy Incentive Plan, effective
May 14, 2009 (under the Republic Services, Inc. Executive
Incentive Plan) (incorporated by reference to Appendix B of
the Companys Proxy Statement on Schedule 14A filed on
April 3, 2009).
|
|
10
|
.20+
|
|
Consulting Agreement, dated as of December 3, 2008, by and
between Harris W. Hudson and Republic Services, Inc.
(incorporated by reference to Exhibit 10.18 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008)
|
|
10
|
.21+
|
|
Second Amended and Restated Employment Agreement, effective as
of the effective time of the merger, by and between James E.
OConnor and Republic Services, Inc. (incorporated by
reference to Exhibit 10.1 of the Companys Current
Report on
Form 8-K
dated February 24, 2009).
|
|
10
|
.22+
|
|
Amended and Restated Employment Agreement, effective
May 14, 2009, by and between James E. OConnor
and Republic Services, Inc. (incorporated by reference to
Exhibit 10.5 of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2009).
|
|
10
|
.23+
|
|
Retirement Agreement, dated June 25, 2010, by and between
James E. OConnor and Republic Services, Inc. (incorporated
by reference to Exhibit 10.1 of the Companys Current
Report on
Form 8-K
dated June 28, 2010).
|
|
10
|
.24+
|
|
Amended and Restated Employment Agreement, dated as of
February 21, 2007, by and between Michael Cordesman and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.2 of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2007).
|
|
10
|
.25+
|
|
First Amendment, dated as of December 1, 2008, to the
Amended and Restated Employment Agreement dated as of
February 21, 2007 by and between Michael Cordesman and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K
dated December 5, 2008).
|
162
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.26+
|
|
Amended and Restated Employment Agreement, dated as of
February 21, 2007, by and between Tod C. Holmes and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.3 of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2007).
|
|
10
|
.27+
|
|
Amended and Restated Employment Agreement, effective
May 14, 2009, by and between Tod C. Holmes and Republic
Services, Inc. (incorporated by reference to Exhibit 10.4
of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2009).
|
|
10
|
.28+
|
|
Amended and Restated Employment Agreement, dated as of
February 21, 2007, by and between David A. Barclay and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.4 of the Companys Quarterly Report on
Form 10-Q
for the period ended March 31, 2007).
|
|
10
|
.29+
|
|
First Amendment, dated as of December 1, 2008, to the
Amended and Restated Employment Agreement dated as of
February 21, 2007 by and between David A. Barclay and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.2 of the Companys Current Report on
Form 8-K
dated December 5, 2008).
|
|
10
|
.30+
|
|
Consulting Agreement, dated as of December 15, 2008, by and
between David A. Barclay and Republic Services, Inc.
(incorporated by reference to Exhibit 10.25 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.31+
|
|
Executive Employment Agreement, dated as of March 2, 2007,
by and between Donald W. Slager and Allied Waste Industries,
Inc. (incorporated by reference to Exhibit 10.3 of
Allieds Quarterly Report on
Form 10-Q
for the period ended June 30, 2008).
|
|
10
|
.32+
|
|
First Amendment, dated as of December 31, 2008, to
Executive Employment Agreement dated as of March 2, 2007 by
and between Donald W. Slager and Allied Waste Industries, Inc.
(incorporated by reference to Exhibit 10.1 of the
Companys Current Report on
Form 8-K
dated January 7, 2009).
|
|
10
|
.33+
|
|
Employment Agreement, dated January 31, 2009, by and
between Republic Services, Inc. and Donald W. Slager
(incorporated by reference to Exhibit 10.1 of the
Companys Current Report on
Form 8-K
dated February 5, 2009).
|
|
10
|
.34+
|
|
Amended and Restated Employment Agreement, dated June 25,
2010, by and between Donald W. Slager and Republic Services,
Inc. (incorporated by reference to Exhibit 10.2 of the
Companys Current Report on
Form 8-K
dated June 28, 2010).
|
|
10
|
.35+
|
|
Employment Agreement, dated December 5, 2008, between
Michael Rissman and Republic Services, Inc. (now superseded)
(incorporated by reference to Exhibit 10.1 of
Republics Current Report on
Form 8-K
filed on February 12, 2010).
|
|
10
|
.36+
|
|
Memorandum dated February 9, 2010, terminating Employment
Agreement, dated December 5, 2008, between Michael Rissman
and Republic Services, Inc.( incorporated by reference to
Exhibit 10.2 of Republics Current Report on
Form 8-K
filed on February 12, 2010).
|
|
10
|
.37+
|
|
Offer Letter dated August 17, 2009 to Michael Rissman from
Republic Services, Inc. regarding general counsel position
(incorporated by reference to Exhibit 10.3 of
Republics Current Report on
Form 8-K
filed on February 12, 2010).
|
|
10
|
.38+
|
|
Non-Solicitation, Confidentiality and Arbitration Agreement,
dated February 9, 2010, between Michael Rissman and
Republic Services, Inc. (incorporated by reference to
Exhibit 10.4 of Republics Current Report on
Form 8-K
filed on February 12, 2010).
|
|
10
|
.39+*
|
|
Offer Letter, dated June 28, 2010, as amended and restated
December 29, 2010, by and between Kevin C. Walbridge and
Republic Services, Inc.
|
|
10
|
.40+*
|
|
Relocation Expense Reimbursement Agreement, dated
October 25, 2010, by and between Kevin C. Walbridge and
Republic Services, Inc.
|
163
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.41+
|
|
Employment Agreement, effective December 5, 2008, by and
between Kevin C. Walbridge and Republic Services, Inc.
(incorporated by reference to Exhibit 10.4 of
Republics Current Report on
Form 8-K
dated June 28, 2010).
|
|
10
|
.42+
|
|
Amended and Restated Allied Waste Industries, Inc. 1991
Incentive Stock Plan (incorporated by reference to
Exhibit 3 of Allieds Definitive Proxy Statement in
accordance with Schedule 14A dated April 18, 2001).
|
|
10
|
.43+
|
|
First Amendment to the Allied Waste Industries, Inc. 1991
Incentive Stock Plan, dated as of August 8, 2001
(incorporated by reference to Exhibit 4.14 of Allieds
Annual Report on
Form 10-K
for the year ended December 31, 2001).
|
|
10
|
.44+
|
|
Second Amendment to the Allied Waste Industries, Inc. 1991
Incentive Stock Plan, dated as of December 12, 2002
(incorporated by reference to Exhibit 10.49 of
Allieds Annual Report on
Form 10-K
for the year ended December 31, 2002).
|
|
10
|
.45+
|
|
Third Amendment to the Allied Waste Industries, Inc. 1991
Incentive Stock Plan, effective February 5, 2004
(incorporated by reference to Exhibit 10.6 of Allieds
Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
10
|
.46+
|
|
Fourth Amendment to the Allied Waste Industries, Inc. 1991
Incentive Stock Plan, effective February 5, 2004
(incorporated by reference to Exhibit 10.7 of Allieds
Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
10
|
.47+
|
|
Amended and Restated Allied Waste Industries, Inc. 1991
Incentive Stock Plan, effective February 5, 2004
(incorporated by reference to Exhibit 10.8 of Allieds
Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
10
|
.48+
|
|
First Amendment to the Amended and Restated Allied Waste
Industries, Inc. 1991 Incentive Stock Plan, as amended and
restated effective February 5, 2004 (incorporated by
reference to Exhibit 10.03 of Allieds Current Report
on
Form 8-K
dated December 10, 2004).
|
|
10
|
.49+
|
|
Form of Nonqualified Stock Option Agreement under the Amended
and Restated Allied Waste Industries, Inc. 1991 Incentive Stock
Plan (incorporated by reference to Exhibit 10.01 of
Allieds Current Report on
Form 8-K
dated December 10, 2004).
|
|
10
|
.50+
|
|
Form of Nonqualified Stock Option Agreement under the Amended
and Restated Allied Waste Industries, Inc. 1991 Incentive Stock
Plan (incorporated by reference to Exhibit 10.01 of
Allieds Current Report on
Form 8-K
dated January 5, 2006).
|
|
10
|
.51+
|
|
Amendment to Certain Allied Waste Industries, Inc. Equity Award
Agreements (Global Employees) under the Allied Waste
Industries, Inc. 1991 Incentive Stock Plan and the Allied Waste
Industries, Inc. 2006 Incentive Stock Plan (incorporated by
reference to Exhibit 10.38 of the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.52+
|
|
Allied Waste Industries, Inc. 2005 Non-Employee Director Equity
Compensation Plan (incorporated by reference to
Exhibit 10.7 of Allieds Quarterly Report on
Form 10-Q
for the period ended June 30, 2005).
|
|
10
|
.53+
|
|
First Amendment to the Allied Waste Industries, Inc. 2005
Non-Employee Director Equity Compensation Plan (incorporated by
reference to Exhibit 10.02 of Allieds Current Report
on
Form 8-K
dated February 14, 2006).
|
|
10
|
.54+
|
|
Amended and Restated Allied Waste Industries, Inc. 2005
Non-Employee Director Equity Compensation Plan, effective
January 1, 2008 (incorporated by reference to
Exhibit 10.123 of Allieds Annual Report on
Form 10-K
for the year ended December 31, 2007).
|
164
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.55+
|
|
Republic Services, Inc. 2005 Non-Employee Director Equity
Compensation Plan (f/k/a Amended and Restated Allied Waste
Industries, Inc. 2005 Non-Employee Director Equity Compensation
Plan), as amended and restated effective December 5, 2008
(incorporated by reference to Exhibit 10.42 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.56+
|
|
Form of Stock Option Agreement under the Allied Waste
Industries, Inc. 2005 Non-Employee Director Equity Compensation
Plan (incorporated by reference to Exhibit 10.4 of
Allieds Quarterly Report on
Form 10-Q
for the period ended March 31, 2005).
|
|
10
|
.57+
|
|
Form of Restricted Stock Agreement under the Allied Waste
Industries, Inc. 2005 Non-Employee Director Equity Compensation
Plan (incorporated by reference to Exhibit 10.2 of
Allieds Quarterly Report on
Form 10-Q
for the period ended March 31, 2005).
|
|
10
|
.58+
|
|
Amendment to Certain Allied Waste Industries, Inc. Equity Award
Agreements (Global Directors) under the Allied Waste
Industries, Inc. 1994 Non-Employee Director Stock Option Plan
and the Allied Waste Industries, Inc. 2005 Non-Employee Director
Equity Compensation Plan (incorporated by reference to
Exhibit 10.45 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.59+
|
|
Allied Waste Industries, Inc. 2006 Incentive Stock Plan
(incorporated by reference to Exhibit 10.2 of Allieds
Quarterly Report on
Form 10-Q
for the period ended June 30, 2006).
|
|
10
|
.60+
|
|
First Amendment to the Allied Waste Industries, Inc. 2006
Incentive Stock Plan, dated as of July 27, 2006
(incorporated by reference to Exhibit 10.1 of Allieds
Quarterly Report on
Form 10-Q
for the period ended September 30, 2006).
|
|
10
|
.61+
|
|
Amended and Restated Allied Waste Industries, Inc. 2006
Incentive Stock Plan, dated as of July 27, 2006
(incorporated by reference to Exhibit 10.2 of Allieds
Quarterly Report on
Form 10-Q
for the period ended September 30, 2006).
|
|
10
|
.62+
|
|
First Amendment, dated as of December 5, 2006, to the
Amended and Restated Allied Waste Industries, Inc. 2006
Incentive Stock Plan, dated as of July 27, 2006
(incorporated by reference to Exhibit 10.47 of
Allieds Annual Report on
Form 10-K
for the year ended December 31, 2006).
|
|
10
|
.63+
|
|
Amended and Restated Allied Waste Industries, Inc. 2006
Incentive Stock Plan, effective October 24, 2007
(incorporated by reference to Exhibit 10.122 of
Allieds Annual Report on
Form 10-K
for the year ended December 31, 2007).
|
|
10
|
.64+
|
|
Republic Services, Inc. 2006 Incentive Stock Plan (f/k/a Amended
and Restated Allied Waste Industries, Inc. 2006 Incentive Stock
Plan), as amended and restated effective December 5, 2008
(incorporated by reference to Exhibit 10.51 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
10
|
.65+
|
|
Form of Nonqualified Stock Option Agreement under the Allied
Waste Industries, Inc. 2006 Incentive Stock Plan (incorporated
by reference to Exhibit 10.3 of Allieds Quarterly
Report on
Form 10-Q
for the period ended September 30, 2006).
|
|
10
|
.66+
|
|
Allied Waste Industries, Inc. Supplemental Executive Retirement
Plan, effective August 1, 2003 (incorporated by reference
to Exhibit 10.10 of Allieds Quarterly Report on
Form 10-Q
for the period ended March 31, 2004).
|
|
10
|
.67+
|
|
Allied Waste Industries, Inc. Supplemental Executive Retirement
Plan, restated effective January 1, 2006 (incorporated by
reference to Exhibit 10.03 of Allieds Current Report
on
Form 8-K
dated February 14, 2006).
|
|
10
|
.68+
|
|
Amended and Restated Schedule A, dated as of April 11,
2007, to the Allied Waste Industries, Inc. Supplemental
Executive Retirement Plan (incorporated by reference to
Exhibit 10.55 of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
165
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.69+
|
|
Participation Agreement, effective July 1, 2006, by and
between Allied Waste Industries, Inc. and CoreTrust Purchasing
Group LLC, the exclusive agent, for the purchase by Allied of
certain goods and services (incorporated by reference to
Exhibit 10.4 of Allieds Quarterly Report on
Form 10-Q
for the period ended June 30, 2006).
|
|
10
|
.70
|
|
Amended and Restated Executive Employment Agreement, dated as of
June 22, 2008, by and between Allied Waste Industries, Inc.
and Timothy R. Donovan, as assumed by Republic Services, Inc. at
the effective time of the merger (incorporated by reference to
Exhibit 10.6 of Allieds Quarterly Report on
Form 10-Q
for the period ended June 30, 2008).
|
|
10
|
.71+
|
|
Form of Indemnity Agreement between Allied Waste Industries,
Inc. and legacy Allied directors (incorporated by reference to
Exhibit 10.19 of Allieds Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004).
|
|
10
|
.72+
|
|
Republic Services, Inc. Executive Separation Policy
(incorporated by reference to Exhibit 10.66 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009).
|
|
10
|
.73+
|
|
Standstill Agreement, dated November 3, 2010, by and among
Republic Services, Inc., Cascade Investment, L.L.C., and the
Bill & Melinda Gates Foundation Trust (incorporated by
reference to Exhibit 10.1 of the Companys Current
Report on
Form 8-K
dated November 5, 2010).
|
|
18
|
.1
|
|
Preferability Letter of Ernst & Young LLP
(incorporated by reference to Exhibit 18.1 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008).
|
|
21
|
.1*
|
|
Subsidiaries of the Company.
|
|
23
|
.1*
|
|
Consent of Ernst & Young LLP.
|
|
31
|
.1*
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer.
|
|
31
|
.2*
|
|
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer.
|
|
32
|
.1*
|
|
Section 1350 Certification of Chief Executive Officer.
|
|
32
|
.2*
|
|
Section 1350 Certification of Chief Financial Officer.
|
|
101*
|
|
|
The following financial statements from the Republic Services,
Inc. Annual Report on
Form 10-K
for the year ended December 31, 2010, formatted in XBRL
(Extensible Business Reporting Language): (i) the
consolidated Balance Sheets, (ii) the consolidated
Statements of Income, (iii) the Consolidated Statements of
Stockholders Equity and Comprehensive Income,
(iv) the Consolidated Statements of Cash Flows, and
(v) The Notes to the Consolidated Financial Statements,
tagged as blocks of text.
|
|
|
|
* |
|
Filed herewith |
|
+ |
|
Indicates a management or compensatory plan or arrangement. |
166
Signatures
Pursuant to the requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant, has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
REPUBLIC SERVICES, INC.
Date: February 18, 2011
Donald W. Slager
President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Donald
W. Slager
Donald
W. Slager
|
|
President, Chief Executive Officer and
Director
(Principal Executive Officer)
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Tod
C. Holmes
Tod
C. Holmes
|
|
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Charles
F. Serianni
Charles
F. Serianni
|
|
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 18, 2011
|
|
|
|
|
|
/s/ James
E. OConnor
James
E. OConnor
|
|
Chairman of the Board of Directors
|
|
February 18, 2011
|
|
|
|
|
|
/s/ John
W. Croghan
John
W. Croghan
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ James
W. Crownover
James
W. Crownover
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ William
J. Flynn
William
J. Flynn
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ David
I. Foley
David
I. Foley
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Michael
Larson
Michael
Larson
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Nolan
Lehmann
Nolan
Lehmann
|
|
Director
|
|
February 18, 2011
|
167
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ W.
Lee Nutter
W.
Lee Nutter
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Ramon
A. Rodriguez
Ramon
A. Rodriguez
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Allan
C. Sorensen
Allan
C. Sorensen
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ John
M. Trani
John
M. Trani
|
|
Director
|
|
February 18, 2011
|
|
|
|
|
|
/s/ Michael
W. Wickham
Michael
W. Wickham
|
|
Director
|
|
February 18, 2011
|
168