REPUBLIC SERVICES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission file number: 1-14267

REPUBLIC SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 65-0716904
(State of Incorporation) (I.R.S. Employer Identification No.)

REPUBLIC SERVICES, INC. 33301
110 S.E. 6TH STREET, 28TH FLOOR (Zip Code)
FORT LAUDERDALE, FLORIDA
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (954) 769-2400

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on which Registered
COMMON STOCK, PAR VALUE THE NEW YORK STOCK EXCHANGE
$.01 PER SHARE

Securities registered pursuant to Section 12(g) of the Act: NONE

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 [X] No [ ]

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 registrant's 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. [X]

As of March 26, 2002, the registrant had outstanding 167,040,469 shares of
Common Stock. At such date, the aggregate market value of the shares of the
Common Stock held by non-affiliates of the registrant was approximately
$3,229,925,626.

DOCUMENTS INCORPORATED BY REFERENCE

Part IV Portions of previously filed reports and registration statements.
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INDEX
TO FORM 10-K

PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

We are a leading provider of services in the domestic non-hazardous solid
waste industry. We provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers through 146
collection companies in 22 states. We also own or operate 89 transfer stations,
54 solid waste landfills and 26 recycling facilities.

We had revenue of $2,257.5 million and $2,103.3 million and operating
income of $283.5 million and $434.0 million for the years ended December 31,
2001 and 2000, respectively. The $154.2 million, or 7.3%, increase in revenue
from 2000 to 2001 is primarily attributable to the successful execution of the
operating and growth strategies described below. The $150.5 million decrease in
operating income is primarily due to a charge of $132.0 million on a pre-tax
basis, or $86.1 million on an after-tax basis, recorded in the fourth quarter of
2001 for completed and planned divestitures and closings of certain core and
non-core businesses, asset impairments, downsizing our compost, mulch and soil
business and related inventory adjustments, an increase in insurance reserves
and an increase in bad debt expense related to the economic slowdown. The
economic slowdown also contributed to the decrease in operating income from 2000
to 2001.

Our presence in high growth markets throughout the Sunbelt, including
Florida, Georgia, Nevada, California and Texas, and in other domestic markets
that have experienced higher than average population growth during the past
several years supports our internal growth strategy. We believe that our
presence in these markets positions our company to experience growth at rates
that are generally higher than the industry's overall growth rate.

While we believe that we are well positioned to continue to increase our
revenue and operating income in the longer-term, the economic slowdown has had a
negative impact on certain aspects of our business. However, the aspects of our
business that we believe are "recession resilient" have continued to perform
well. This includes residential and commercial collection operations which are
flat rate businesses and are not subject to the volatility we experience in our
industrial collection and disposal business. We continue to focus on enhancing
stockholder value by implementing our financial, operating and growth strategies
as described below.

INDUSTRY OVERVIEW

Based on analysts' reports and industry trade publications, we believe that
the United States non-hazardous solid waste services industry generated revenue
of approximately $43 billion in 1999, of which approximately 47% was generated
by publicly-owned waste companies, 29% was generated by privately-held waste
companies and 24% was generated by municipal and other local governmental
authorities. Only three companies generated the substantial majority of the
publicly-owned companies' total revenue in 1999. However, according to industry
data, the domestic non-hazardous waste industry remains highly fragmented as
privately-held companies and municipal and local governmental authorities
generated total annual revenue of approximately $23 billion. In general, growth
in the solid waste industry is proportional to growth in the overall economy.

The solid waste industry has experienced a period of rapid consolidation.
During this time we were able to grow significantly through acquisitions.
However, growth in the industry by virtue of acquisitions has slowed
considerably. Despite this, we believe that the opportunity to grow through
acquisitions still exists, albeit at a slower pace than experienced in previous
years, as a result of the following factors:

Subtitle D Regulation. Subtitle D of the Resource Conservation and
Recovery Act of 1976, as currently in effect, and similar state regulations
have significantly increased the amount of capital, technical expertise,
operating costs and financial assurance obligations required to own and
operate a landfill and other solid waste facilities. Many of the smaller
participants in our industry have found these costs difficult, if not
impossible, to bear. Large publicly-owned companies, like our company, have
greater

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access to, and a lower cost of, the capital necessary to finance such
increased capital expenditures and costs relative to many of the
privately-owned companies in the industry. Additionally, the required
permits for landfill development, expansion or construction have become
more difficult, time consuming and costly to acquire. Consequently, many
smaller, independent operators have decided to either close their
operations or sell them to larger operators with greater access to capital.

Integration of Solid Waste Businesses. By being able to control the
waste stream in a market through the collection, transfer and disposal
process, integrated solid waste companies gain a further competitive
advantage over non-integrated operators. The ability of the integrated
companies to both collect and dispose of solid waste, coupled with access
to significant capital resources necessary for acquisitions, has created an
environment in which large publicly-owned integrated companies can operate
more cost effectively and competitively than non-integrated operators.

Municipal Privatization. The trend toward consolidation in the solid
waste services industry is further supported by the increasing tendency of
a number of municipalities to privatize their waste disposal operations.
Privatization of municipal waste operations is often an attractive
alternative to funding the changes required by Subtitle D.

These developments, as well as the fact that there are a limited number of
viable exit strategies for many of the owners and principals of numerous
privately-held companies in the industry, have contributed to the overall
consolidation trend in the solid waste industry.

FINANCIAL STRATEGY

A key component of our financial strategy is our ability to generate free
cash flow. We use a simple definition -- free cash flow is net income, plus
depreciation, depletion and amortization, less capital expenditures, plus or
minus net changes in assets and liabilities. Certain analysts that follow the
waste industry add deferred income taxes and proceeds from the sale of equipment
to our definition of free cash flow. We believe that free cash flow is the best
measure of our financial performance because strong, sustainable free cash flow
is indicative of high quality earnings. Consequently, we have developed
incentive programs and monthly field operating reviews that help focus our
entire company on the importance of growing free cash flow.

We manage our free cash flow primarily by ensuring that capital
expenditures are appropriate in light of our internal and acquisition growth and
by closely managing our assets and liabilities, the most critical of which are
accounts receivable and accounts payable.

We have used and will continue to use our cash flow to maximize stockholder
value as well as our return on investment. This includes the following:

- CUSTOMER SERVICE. We will continue to reinvest in our existing fleet of
vehicles, equipment, landfills and facilities to ensure a high level of
service to our customers.

- INTERNAL GROWTH. Growth through increases in our customer base and
services provided is the most cost-effective means for us to build our
business. This includes not only 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.

- STRATEGIC ACQUISITIONS. We have and will continue to pursue strategic
acquisitions that augment our existing business platform. For example,
our acquisition of Richmond Sanitary Services during 2001 complemented
our business platform by providing us with a vertically integrated
business in a growth market.

- SHARE REPURCHASE. If we are unable to identify opportunities that
satisfy our growth strategy, we intend to use our free cash flow to
repurchase shares of our common stock at prices that provide value to our
stockholders. As of December 31, 2001, we repurchased 9.2 million shares
of our common stock, or approximately 5.4% of our shares outstanding at
yearend, for $150.1 million. Our board of directors

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has authorized the repurchase of up to an additional $125.0 million of
our common stock. We believe that our share repurchase program will
continue to enhance stockholder value.

- MINIMIZE BORROWINGS. To the extent that the opportunities to enhance
stockholder value mentioned above are not available, we also intend to
continue to use our free cash flow to minimize our borrowings under our
revolving credit facility.

Another key component of our financial strategy includes maintaining an
investment grade rating on our senior debt. This has allowed us to secure
favorable, long-term fixed rate financing that reduces our exposure to changing
interest rates. This has also allowed us, and will continue to allow us, to
readily access capital markets.

For certain risks related to our financial strategy, see "Risk Factors."

OPERATING STRATEGY

We seek to leverage existing assets and revenue growth to increase
operating margins and enhance stockholder value. Our operating strategy to
accomplish this goal is to:

- utilize the extensive industry knowledge and experience of our executive
management,

- utilize a decentralized management structure in overseeing day-to-day
operations,

- integrate waste operations,

- improve operating margins through economies of scale, cost efficiencies
and asset utilization,

- achieve high levels of customer satisfaction, and

- utilize systems to improve consistency in financial and operational
performance.

For certain risks related to our operating strategy, see "Risk Factors."

- EXPERIENCED EXECUTIVE MANAGEMENT TEAM. We believe that we have one of
the most experienced executive management teams in the solid waste
industry.

H. Wayne Huizenga, who has served as our Chairman since our initial
public offering in July 1998, has over 27 years of experience in the solid
waste industry. After several years of owning and operating private waste
hauling companies in Florida, he co-founded Waste Management in 1971. From
1971 to 1984, he served in various executive capacities with Waste
Management, including President and Chief Operating Officer. By then, Waste
Management, Inc. had become the world's largest integrated solid waste
services company.

Harris W. Hudson, who has served as our Vice Chairman since our
initial public offering, has over 37 years of experience in the solid waste
industry. Mr. Hudson worked closely with Mr. Huizenga, from 1964 until
1982, at Waste Management and at the private waste hauling firms they
operated prior to the formation of Waste Management. In 1982, Mr. Hudson
retired as Vice President of Waste Management of Florida, Inc., a
subsidiary of Waste Management. In 1983, Mr. Hudson founded Hudson
Management Corporation, a solid waste collection company in Florida, and
served as its Chairman and Chief Executive Officer until it merged with
AutoNation in August 1995. By that time, Hudson Management had grown to
over $50.0 million in annual revenue, becoming one of Florida's largest
privately-held solid waste collection companies based on revenue. From
August 1995 until our initial public offering, Mr. Hudson served in various
capacities with AutoNation, including Chairman of its Solid Waste Group.

James E. O'Connor, who has served as our Chief Executive Officer since
December 1998, also worked at Waste Management from 1972 to 1978 and from
1982 to 1998. During that time, he served in various management positions,
including Senior Vice President in 1997 and 1998, and Area President of
Waste Management of Florida, Inc., from 1992 to 1997. Mr. O'Connor has over
27 years of experience in the solid waste industry.

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The other corporate officers with responsibility for our operations
have an average of over 19 years of management experience in the solid
waste industry. Our five regional vice presidents have an average of 23
years of experience in the industry, and our 22 area presidents have an
average of 22 years of experience in the industry.

- DECENTRALIZED MANAGEMENT STRUCTURE. We maintain a relatively small
corporate headquarters staff, relying on a decentralized management
structure to minimize administrative overhead costs and to manage our
day-to-day operations more efficiently. Our local management has
extensive industry experience in growing, operating and managing solid
waste companies and has substantial experience in their local geographic
markets. In early 2001, we added a sales, maintenance and operations
manager to each of our regional management teams, which previously
consisted of a regional vice president and a regional controller. We
believe that strengthening our regional management teams allows us to
more effectively and efficiently drive our company's initiatives and
helps ensure consistency throughout our organization. Our regional
management teams and our area presidents have extensive authority,
responsibility and autonomy for operations within their respective
geographic markets. Compensation for regional and area management teams
is primarily based on the improvement in operating income produced and
the cash flow generated in each manager's geographic area of
responsibility. In addition, through long-term incentive programs,
including stock options, we believe we have 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
our 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 improve operating margins.

- INTEGRATED OPERATIONS. We seek to achieve a high rate of internalization
by controlling waste streams from the point of collection through
disposal. We expect that our fully integrated markets generally will have
a lower cost of operations and more favorable cash flows than our
non-integrated markets. Through acquisitions 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 volume. 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 three months
ended December 31, 2001, approximately 52% of the total volume of waste
that we collected was disposed of at landfills we own or operate. In a
number of our larger markets, we and our competitors are required to take
waste to government-controlled disposal facilities. This provides us with
an opportunity to effectively compete in these markets without investing
in landfill capacity. Because we do not have landfill facilities or
government-controlled disposal facilities for all markets in which we
provide collection services, we believe that through landfill and
transfer station acquisitions and development we have the opportunity to
increase our waste internalization rate and further integrate our
operations. By further integrating operations in existing markets through
acquisitions and development of landfills and transfer stations, we are
able to reduce our disposal costs.

- ECONOMIES OF SCALE, COST EFFICIENCIES AND ASSET UTILIZATION. To improve
operating margins, our management focuses on achieving economies of scale
and cost efficiencies. The consolidation of acquired businesses into
existing operations reduces costs by decreasing capital and expenses used
for 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 in
the range of 10% of revenue which we feel is appropriate given our
existing business platform. In addition, our size allows our company to
negotiate volume discounts for certain purchases, including waste
disposal rates at landfills operated by third parties. Furthermore, we
have taken steps to increase utilization of our

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assets. For example, to reduce the number of collection vehicles and
maximize the efficiency of our fleet, we have instituted a grid
productivity program which allows us to benchmark the performance of all
of our drivers. In our larger markets, we also routinely use a route
optimization program to minimize drive time and improve operating
density. By using assets more efficiently, operating expenses can be
significantly reduced.

- HIGH LEVELS OF CUSTOMER SATISFACTION. Our goal of maintaining high
levels of customer satisfaction complements our operating strategy. Our
personalized sales process is oriented towards maintaining relationships
and ensuring that service is being properly provided.

- UTILIZE SYSTEMS TO IMPROVE CONSISTENCY IN FINANCIAL AND OPERATIONAL
REPORTING. We continue to focus on systems and training initiatives that
complement our operating strategy. These initiatives include contact
management, billing, productivity, maintenance and general ledger
systems. These systems provide us with detailed information, prepared in
a consistent manner, that will allow us to quickly analyze and act upon
trends in our business.

GROWTH STRATEGY

Our strategy focuses on increasing revenue, gaining market share and
enhancing stockholder value through internal growth and acquisitions. For
certain risks related to our growth strategy, see "Risk Factors."

- INTERNAL GROWTH. Our internal growth strategy focuses on retaining
existing customers and obtaining commercial, municipal and industrial
customers through our well-managed sales and marketing activities.

Long-Term Contracts. We seek to obtain long-term contracts for
collecting solid waste in high-growth markets. 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. For example, we have
secured exclusive, long-term franchise agreements in high-growth markets
such as Los Angeles, Orange and Contra Costa Counties in California, Las
Vegas, Nevada, Arlington, Texas and many areas of Florida. We believe that
this positions our company to experience internal growth rates that are
generally higher than our industry's overall growth rate. In addition, we
believe that by securing a base of long-term recurring revenue in growth
markets, we are better able to protect our market position from
competition and our business may be less susceptible to downturns in
economic conditions.

Sales and Marketing Activities. We seek to manage our sales and
marketing activities to enable our company to capitalize on our leading
positions in many of the markets in which we operate. We currently have
approximately 500 sales and marketing employees in the field, who are
compensated using a commission structure that is focused on generating
high levels of quality revenue. For the most part, these employees
directly solicit business from existing and prospective commercial,
industrial, municipal and residential customers. We emphasize our rate and
cost structures when we train new and existing sales personnel. In
addition, we utilize a contact management system that assists our sales
people in tracking leads. It also tracks renewal periods for existing and
potential commercial, industrial and franchise contracts.

- ACQUISITION GROWTH. During the past several years, the solid waste
industry experienced a period of rapid consolidation. We were able to
grow significantly through acquisitions during this period. However, the
rate of consolidation in the industry has slowed considerably. Despite
this, we continue to look to acquire businesses that complement our
existing business platform. Our acquisition growth strategy focuses on
the approximately $23 billion of revenue generated by privately-held
solid waste companies and municipal and local governmental authorities in
1999. We believe that our ability to acquire privately-held companies is
enhanced by increasing competition in the solid waste industry,
increasing capital requirements as a result of changes in solid waste
regulatory requirements, and the limited number of exit strategies for
these privately-held companies' owners and principals. We also

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seek to acquire operations and facilities from municipalities that are
privatizing, which occurs for many of the same reasons that
privately-held companies sell their solid waste businesses. In addition,
we will continue to evaluate opportunities to acquire operations and
facilities that may be divested by other publicly-owned waste companies.
In sum, our acquisition growth strategy focuses on:

- acquiring businesses that position our company for growth in existing
and new markets,

- acquiring well-managed companies and, when appropriate, retaining
local management,

- acquiring operations and facilities from municipalities that are
privatizing and publicly-owned companies that are divesting of assets.

For certain risks involved with our acquisition growth strategy, see
"Risk Factors -- We may be unable to execute our acquisition growth
strategy," "-- We may be unable to manage our growth effectively," and
"-- Businesses we acquire may have undisclosed liabilities."

Acquire Businesses Positioning the Company for Growth. In making
acquisitions, we principally target high quality businesses that will
allow our company to be, or provide our company favorable prospects of
becoming, a leading provider of integrated solid waste services in markets
with favorable demographic growth. For example, during 2001 we acquired
Richmond Sanitary Services, located in Northern California. Richmond
complemented our business platform by providing us with a vertically
integrated business in a growth market. Generally, we have acquired, and
will continue to seek, solid waste collection, transfer and disposal
companies that:

- have strong operating margins,

- are in growth markets,

- are among the largest or have a significant presence in their local
markets, and

- have long-term contracts or franchises with municipalities and other
customers.

Once we have a base of operations in a particular market, we focus on
acquiring trucks and routes of smaller businesses that also operate in
that market and surrounding markets, which are typically referred to as
"tuck-in" acquisitions. We seek to consolidate the operations of such
tuck-in businesses into our existing operations in that market. We also
seek to acquire landfills, transfer stations and collection companies that
operate in markets that we are already servicing in order to fully
integrate our operations from collection to disposal. In addition, we have
in the past and may continue in the future 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 our 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.

Acquire Well-Managed Companies. We also seek to acquire businesses
that have experienced management teams that are willing to join the
management of our company. We generally seek to maintain continuity in
management of larger acquired companies in order to capitalize on their
local market knowledge, community relations and name recognition, and to
instill their entrepreneurial drive at all levels of our operations. By
furnishing the local management of such acquired companies with our
financial and marketing resources and technical expertise, we believe that
the acquired companies are better able to secure additional municipal
franchises and other contracts.

Privatize Municipal Operations and Acquire Divested Operations. We
also seek to acquire solid waste collection operations, transfer stations
and landfills that municipalities and other governmental authorities are
privatizing. Many municipalities are seeking to outsource or sell these
types of solid waste operations, as they lack the capital, technical
expertise and/or operational resources necessary to comply with
increasingly stringent regulatory standards and/or to compete effectively
with private-sector companies. In addition, we have acquired, and will
continue to seek to acquire, operations and facilities that may be
divested by other publicly-owned waste companies.

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OPERATIONS

Our operations primarily consist of the collection and disposal of
non-hazardous solid waste.

Collection Services. We provide solid waste collection services to
commercial, industrial, municipal and residential customers in 22 states through
146 collection companies. In 2001, 76% of our revenue was derived from
collection services consisting of approximately 28% from services provided to
municipal and residential customers, 40% from services provided to commercial
customers and 32% from services provided to industrial 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 our company exclusive rights to service
all or a portion of the homes in their respective jurisdictions. These contracts
or franchises usually range in duration from one to five years, although some of
our exclusive franchises are for as long as 33 years. Residential solid waste
collection services may also be performed on a subscription basis, in which
individual households contract directly with our company. 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 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. 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 such considerations
as:

- market factors,

- collection frequency,

- type of equipment furnished,

- type and volume or weight of the waste collected,

- distance to the disposal facility, and

- cost of disposal.

We rent waste containers to construction sites and also provide waste
collection services to industrial and construction facilities on a contractual
basis with terms generally ranging from a single pickup to one year or longer.
We collect the containers or compacted waste and transport the waste either to a
landfill or a transfer station for disposal.

We own or operate 89 transfer stations. We deposit waste at these stations,
as do other private haulers and municipal haulers, for compaction and transfer
to trailers for transport to disposal sites or recycling facilities.

Also, we currently provide recycling services in certain markets primarily
to comply with local laws or obligations under our franchise agreements. These
services include the curbside collection of residential recyclable waste and the
provision of a variety of recycling services to commercial and industrial
customers.

Disposal Services. As of December 31, 2001, we owned or operated 54
landfills, which had approximately 7,450 permitted acres and total available
permitted disposal capacity of approximately 1.7 billion in-place cubic yards.
The in-place capacity of our landfills is subject to change based on engineering
factors, requirements of regulatory authorities and the ability to expand our
sites successfully. Some of our landfills accept non-hazardous special waste,
including utility ash, asbestos and contaminated soils. See "-- Properties."

Most of our existing 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 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,

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we are currently seeking to expand permitted capacity at certain of our
landfills, although no assurances can be made that all future expansions will be
permitted as designed.

Other Services. We have 26 materials recovery facilities and other
recycling operations, which are generally required to fulfill our obligations
under long-term municipal contracts for residential collection services. These
facilities primarily 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. Wherever possible, our strategy is to reduce our exposure to
fluctuations in recyclable commodity prices by utilizing third party facilities,
thereby minimizing our recycling investment.

We provide remediation and other heavy construction services primarily
through our subsidiary located in Missouri. During early 1998 this subsidiary
was awarded a contract by the Army Corps of Engineers to dredge a portion of the
Blue River. Revenue from this contract, which was completed in December 1999,
was approximately $52 million. In March 2001, we agreed to act as a
subcontractor on the next phase of the Blue River project. Revenue from this
contract, which is scheduled to be completed in December 2002, is expected to be
approximately $17 million of which approximately $13 million has already been
recorded.

We also have a compost, mulch and soil business at which yard, mill and
other waste is processed, packaged and sold as various products.

SALES AND MARKETING

We seek to provide quality services that will enable our company to
maintain high levels of customer satisfaction. We derive our business from a
broad customer base which we believe will enable our company to experience
stable growth. We focus our marketing efforts on continuing and expanding
business with existing customers, as well as attracting new customers.

We employ approximately 500 sales and marketing employees. Our sales and
marketing strategy is to provide high-quality, comprehensive solid waste
collection, recycling, transfer and disposal services to our customers at
competitive prices. We target potential customers of all sizes, from small
quantity generators to large "Fortune 500" companies and municipalities.

Most of our marketing activity is local in nature. However, in 2000 we
initiated a national accounts program in response to our customers' needs. We
will continue to develop this program in 2002. We generally do not change the
tradenames of the local businesses we acquire, and therefore we do not operate
nationally under any one mark or tradename. Rather, we rely on the goodwill
associated with the acquired companies' local tradenames as used in each
geographic market in which we operate.

CUSTOMERS

We provide services to commercial, industrial, municipal and residential
customers. No one customer has individually accounted for more than 10% of our
consolidated revenue in any of the last three years. Our largest customer in
2001 comprised less than 1% of our consolidated revenue and our largest
municipal franchise comprised less than 4%.

COMPETITION

We operate in a highly competitive industry. Entry into our business and
the ability to operate profitably in the industry requires substantial amounts
of capital and managerial experience.

Competition in the non-hazardous solid waste industry comes from a few
large, national publicly-owned companies, including Waste Management and Allied
Waste Industries, several regional publicly- and privately-owned solid waste
companies, and thousands of small privately-owned companies. Some of our
competitors have significantly larger operations, and may have significantly
greater financial resources, than

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we do. 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 revenues 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. This may have an impact on our future revenue and
profitability.

In each market in which we own or operate a landfill, we compete for
landfill business on the basis of disposal costs, geographical location and
quality of operations. Our ability to obtain landfill business may be limited by
the fact that some major collection companies also own or operate landfills to
which they send their waste. There also has been an increasing trend at the
state and local levels to mandate waste reduction at the source and to prohibit
the disposal of certain types of wastes, such as yard wastes, at landfills. This
may result in the volume of waste going to landfills being reduced in certain
areas, which may affect our ability to operate our landfills at their full
capacity and/or affect the prices that we can charge for landfill disposal
services. In addition, most of the states in which we operate landfills have
adopted plans or requirements that set goals for specified percentages of
certain solid waste items to be recycled.

REGULATION

Our facilities and operations are subject to a variety of federal, state
and local requirements which regulate public health, safety, the environment,
zoning and land use. Operating and other permits are generally required for
landfills and transfer stations, certain waste collection vehicles, fuel storage
tanks and other facilities that we own or operate, and these permits are subject
to revocation, modification and renewal in certain circumstances. Federal, state
and local regulations vary, but generally govern wastewater or stormwater
discharges, air emissions, the treatment, storage, transportation and disposal
of hazardous and non-hazardous wastes, and the remediation of contamination
associated with the release of hazardous substances. These regulations provide
governmental authorities with strict powers of enforcement, which include the
ability to obtain injunctions and/or impose fines or penalties in the case of
violations, including criminal penalties. The U.S. Environmental Protection
Agency and various other federal, state and local environmental, public and
occupational health and safety agencies and authorities, including the
Occupational Safety and Health Administration of the U.S. Department of Labor,
administer these regulations.

We strive to conduct our operations in compliance with applicable laws and
regulations. However, in the existing climate of heightened environmental
concerns, from time to time, we have been issued citations or notices from
governmental authorities which have resulted in the need to expend funds for
remedial work and related activities at various landfills and other facilities.
There is no assurance that citations and notices will not be issued in the
future despite our regulatory compliance efforts. We have established a reserve
which we believe, based on currently available information, will be adequate to
cover any potential regulatory costs. However, we cannot assure you that actual
costs will not exceed our reserve.

Federal Regulation. The following summarizes the primary environmental,
public and occupational safety-related federal statutes of the United States
affecting our facilities and operations:

(1) The Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act. RCRA and its implementing regulations
establish a framework for regulating the handling, transportation,
treatment, storage and disposal of hazardous and non-hazardous solid
wastes, and require states to develop programs to ensure the safe disposal
of solid wastes in sanitary landfills.

Subtitle D of the RCRA establishes a framework for regulating the
disposal of municipal solid wastes. Regulations under Subtitle D currently
include minimum comprehensive solid waste management criteria and
guidelines, including location restrictions, facility design and operating
criteria, closure and post-closure requirements, financial assurance
standards, groundwater monitoring requirements and corrective action
standards, many of which had not commonly been in effect or enforced in the
past in connection with municipal solid waste landfills. Each state was
required to submit a permit program designed to implement Subtitle D
regulations to the EPA by April 9, 1993. All of the states in which we

9

operate have implemented permit programs pursuant to the RCRA and Subtitle
D. These state permit programs may include landfill requirements which are
more stringent than those of Subtitle D.

All of our planned landfill expansions or 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 new regulations. Compliance with the 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.

(2) The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980. 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 or joint and
several liability for the costs of cleanup and for damages to natural
resources upon current owners and operators of the site, parties who were
owners or operators of the site at the time the hazardous substances were
disposed of, parties who transported the hazardous substance to the site
and parties who arranged for disposal at the site. Under the authority of
this Act 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 this Act is not dependent upon the
existence or disposal of "hazardous wastes" but can also be based upon the
existence of small quantities of more than 700 "substances" characterized
by the EPA as "hazardous," many of which may be found in common household
waste.

Among other things, this Act 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 (or offer
an opportunity to) persons potentially liable for the cleanup of the
hazardous substances to do so. In addition, the 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.

Liability under CERCLA is not dependent upon the intentional disposal
of hazardous wastes. It can be founded upon the release or threatened
release, even as a result of unintentional, non-negligent or lawful action,
of thousands of hazardous substances, including very small quantities of
such substances. Thus, even if our landfills have never knowingly received
hazardous wastes as such, it is possible that one or more hazardous
substances may have been deposited or "released" at our landfills or at
other properties which we may have owned or operated. 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. Given
the difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on our business and
financial condition. For a further discussion, see "-- Liability Insurance
and Bonding."

(3) The Federal Water Pollution Control Act of 1972. This Act
regulates the discharge of pollutants from a variety of sources, including
solid waste disposal sites, into streams, rivers and other waters. Point
source runoff from our landfills and transfer stations that is discharged
into surface waters must be covered by discharge permits that generally
require us to conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those discharges. Storm
water discharge regulations under this Act require a permit for certain
construction activities and discharges 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 this Act or the Safe Drinking Water Act that could affect
solid waste landfills. Furthermore, development which alters or affects
"wetlands" must generally be permitted prior to such development
commencing, and certain mitigation requirements may be required by the
permitting agencies.

(4) The Clean Air Act. The Clean Air Act imposes limitations on
emissions from various sources, including landfills. In March 1996, the EPA
enacted rules that require large municipal solid waste
10

landfills to install landfill gas monitoring systems. These regulations
apply to landfills that have been operating since November 1987, and 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 must have the required gas collection and
control system is dependent upon the adoption of state regulations and the
date that the EPA approves the state program. Many state regulatory
agencies currently require monitoring systems for the collection and
control of landfill gas. We do not expect that compliance with any new
state regulations will have a material effect on us.

(5) The Occupational Safety and Health Act of 1970. This act
authorizes the Occupational Safety and Health Administration 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.

State 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 liability for such
matters. States also have adopted regulations governing the design, operation,
maintenance and closure of landfills and transfer stations. Our facilities and
operations are likely to be subject to these types of requirements. In addition,
our solid waste collection and landfill operations may be affected by the trend
in many states toward requiring the development of waste reduction and recycling
programs. For example, several states have enacted laws that require counties or
municipalities to adopt comprehensive plans to reduce, through waste planning,
composting, recycling or other programs, the volume of solid waste deposited in
landfills. Additionally, laws and regulations restricting the disposal of
certain wastes, including yard waste, newspapers, beverage containers,
unshredded tires, lead-acid batteries and household appliances in solid waste
landfills 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 are under consideration by
Congress and the EPA, respectively.

In order to construct, expand and operate a landfill, one or more
construction or operating permits, as well as zoning approvals, must be
obtained. These are difficult and time-consuming to obtain, are often opposed by
neighboring landowners and citizens' groups, may be subject to periodic renewal
and are subject to modification and revocation by the issuing agency. In
connection with our acquisition of existing landfills, it may be and on occasion
has been necessary for our company 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.

Many of our facilities own and operate underground storage tanks which 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 and that, in the event of
leaks, require that polluted groundwater and soils be remediated. We believe
that all of our underground storage tanks currently meet all applicable
regulations. If underground storage tanks we own or operate leak, and the
leakage migrates onto the property of others, we could be liable for response
costs and other 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 business or financial condition.

Finally, 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 each state. Various states have enacted, or are
considering enacting, laws and regulations that would restrict the interstate
transportation and processing of solid waste. In 1978, the United States Supreme
Court held similar laws and regulations unconstitutional; however, states have
attempted to distinguish proposed laws and regulations from the laws and
regulations involved in that ruling. In 1994, the Supreme Court ruled that state
and local flow control laws and ordinances, which attempt to restrict waste from
leaving its place of generation, were an impermissible burden on interstate
commerce, and therefore, were unconstitutional; however, states have also
attempted to distinguish proposed laws and regulations from the laws and
regulations involved in that ruling. In response to these Supreme Court rulings,
Congress has considered passing legislation authorizing states and local
governments to restrict the free

11

movement of solid waste in interstate commerce. If federal legislation
authorizing state and local governments to restrict the free movement of solid
waste in interstate commerce is enacted, such legislation could adversely affect
our operations.

We have established a reserve for landfill and environmental costs, which
includes landfill site 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 the RCRA and adjust our rates
used to expense closure and post-closure costs accordingly. Based on current
information and regulatory requirements, we believe that our reserves for such
environmental and landfill expenditures are adequate. However, environmental
laws may change, and there can be no assurance that our reserves will be
adequate to cover requirements under existing or new environmental regulations,
future changes or interpretations of existing regulations or the identification
of adverse environmental conditions previously unknown to us. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Landfill and Environmental Matters" and "Risk
Factors -- Compliance with environmental regulation may impede our growth."

LIABILITY INSURANCE AND BONDING

The nature of our business exposes our company 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 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 the limits of
such environmental liability insurance would be adequate 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, worker's
compensation and employer's 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 while we have, subject to limitations and
exclusions, substantial liability insurance, no assurance can be given that we
will not be exposed to uninsured liabilities which could have a material adverse
effect on our financial condition, results of operations or cash flows.

Our insurance programs for worker's compensation, general liability,
vehicle liability and employee-related health care benefits are effectively
self-insured. Claims in excess of self-insurance levels are fully insured.
Accruals are based on claims filed and estimates of claims incurred but not
reported.

In the normal course of business, we may be required to post performance
bonds, insurance policies, letters of credit and/or cash deposits in connection
with municipal residential collection contracts, the operation, closure or
post-closure of landfills, certain remediation contracts, certain environmental
permits, and certain business licenses and permits. Bonds issued by surety
companies operate as a financial guarantee of our performance. To date, we have
satisfied financial responsibility requirements by making cash deposits or by
obtaining bank letters of credit, insurance policies or surety bonds.

EMPLOYEES

As of December 31, 2001, we employed approximately 12,700 full-time
employees, approximately 3,200 of whom were covered by collective bargaining
agreements. Our management believes that we have good relations with our
employees.

12

COMPENSATION

We believe that our compensation program effectively aligns our field and
corporate management team with the company's overall goal of generating
increasing amounts of free cash flow while achieving targeted earnings and
returns on invested capital. This is done by utilizing simple and measurable
metrics on which incentive pay is based. At the field level, these metrics are
based upon free cash flow, earnings and return on invested capital for each
manager's geographic area of responsibility. Great effort is taken to ensure
that these individual goals agree to the overall goals of the company. Incentive
compensation at the corporate level is based on the obtainment of our company's
overall goals. In addition, certain field and corporate employees also
participate in a long-term incentive program. We believe this program aligns our
company's short- and long-term goals and helps ensure that the long-term success
of our company is not sacrificed for the obtainment of short-term goals.

CORPORATE HISTORY

We were incorporated as a Delaware corporation in 1996 by our former parent
company, AutoNation. In 1995, H. Wayne Huizenga, Harris W. Hudson and their
associates made an investment in AutoNation, then known as Republic Waste
Industries, Inc., and AutoNation subsequently acquired businesses in several
industries, including automotive dealerships and car rental businesses in
addition to over 100 non-hazardous solid waste companies. In 1998, AutoNation
separated its non-hazardous solid waste services division from its other
businesses by forming our company and we completed an initial public offering of
shares of our common stock. In 1999, AutoNation sold substantially all of its
remaining interest in our company in a secondary public offering.

RISK FACTORS

This Annual Report on Form 10-K includes "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including, in particular, certain statements about our plans,
strategies and prospects. Although we believe that our plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, we cannot assure you that such plans, intentions or expectations
will be achieved. Important factors that could cause our actual results to
differ materially from our forward-looking statements include those set forth in
this Risk Factors section. All forward-looking statements attributable to us or
any persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth below. Unless the context requires
otherwise, all references to the "company," "we," "us" or "our" include Republic
Services, Inc. and its subsidiaries.

If any of the following risks, or other risks not presently known to us or
that we currently believe to not be significant, develop into actual events,
then our business, financial condition, results of operations, cash flows or
prospects could be materially adversely affected.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY AND MAY BE UNABLE TO COMPETE
EFFECTIVELY.

We operate in a highly competitive business environment. Some of our
competitors have significantly larger operations and may have significantly
greater financial resources than we do. In addition, the solid waste industry is
constantly changing as a result of rapid consolidation which may create
additional competitive pressures in our business environment.

We also compete with municipalities that maintain their own waste
collection or disposal operations. These municipalities may have a financial
advantage over us as a result of the availability of tax revenue and tax-exempt
financing.

We compete for collection accounts primarily on the basis of price and the
quality of services. From time to time our competitors may reduce the price of
their services in an effort to expand their market share or to win a
competitively bid municipal contract.

In each market in which we own or operate a landfill, we compete for solid
waste volume on the basis of disposal or "tipping" fees, geographical location
and quality of operations. Our ability to obtain solid waste
13

volume for our landfills may 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, we may have difficulty competing effectively
from time to time.

ECONOMIC CONDITIONS MAY CONTINUE TO ADVERSELY AFFECT OUR BUSINESS, OPERATIONS
AND INTERNAL GROWTH.

During 2001, commodity prices were lower primarily due to the economic
slowdown. This reduction in commodity prices negatively impacted our operating
margins. The economic slowdown also negatively impacted the portion of our
business servicing the manufacturing sector and the non-residential construction
industry. Landfill volumes attributable to manufacturing and construction
activity began to weaken. Furthermore, the portion of our business that services
the residential construction industry was negatively impacted toward the latter
part of 2001. A continued slowdown in the economy could further adversely affect
volumes, pricing and operating margins in our collection, transfer and disposal
operations.

The waste business is labor intensive. During 2000, the nation experienced
record lows in unemployment. This tight labor market resulted in higher labor
costs for our company as we competed for a dwindling number of available
workers. While we do not anticipate a significant reduction in available
workers, our labor costs could increase in the future as we attempt to attract
and retain experienced employees in tight labor markets.

WE MAY BE UNABLE TO EXECUTE OUR FINANCIAL STRATEGY.

Our ability to execute our financial strategy is dependent upon our ability
to maintain an investment grade rating on our senior debt. The credit rating
process is contingent upon a number of factors, many of which are beyond our
control.

Our financial strategy is also dependent upon our ability to generate
sufficient cash flow to reinvest in our existing business, to fund our internal
growth, to acquire other solid waste businesses, repurchase shares of our common
stock and/or minimize our borrowings. We cannot assure you that we will generate
sufficient cash flow to execute our financial strategy or that we will be able
to repurchase our common stock at prices that are accretive to earnings per
share.

WE MAY BE UNABLE TO EXECUTE OUR ACQUISITION GROWTH STRATEGY.

Our ability to execute our growth strategy still 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 the operations of acquired companies,
including the consolidation of systems, procedures, personnel and facilities,
the relocation of staff, and the achievement of anticipated cost savings,
economies of scale and other business efficiencies, presents significant
challenges to our management, particularly if several acquisitions occur at the
same time. In short, we cannot assure you that:

- desirable acquisition candidates exist or will be identified,

- we will be able to acquire any of the candidates identified,

- we will effectively consolidate companies which are acquired and fully or
timely realize the expected cost savings, economies of scale or business
efficiencies, or

- any acquisitions will be profitable or accretive to our earnings.

Additional factors may negatively impact our acquisition growth strategy.
Our acquisition strategy requires spending significant amounts of capital. If we
are unable to obtain additional needed financing on acceptable terms, we may
need to reduce the scope of our acquisition growth strategy, which could have a
material adverse effect on our growth prospects. The intense competition among
our competitors pursuing the same acquisition candidates may increase purchase
prices for solid waste businesses and increase our capital requirements and/or
prevent us from acquiring certain acquisition candidates. If any of the
aforementioned

14

factors force us to alter our growth strategy, our financial condition, results
of operations and growth prospects could be adversely affected.

WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.

Our growth strategy places significant demands on our financial,
operational and management resources. In order to continue our growth, we will
need to add administrative and other personnel, and 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.

BUSINESSES WE ACQUIRE MAY HAVE UNDISCLOSED LIABILITIES.

In pursuing our acquisition strategy, our investigations of the acquisition
candidates may fail to discover certain undisclosed liabilities of the
acquisition candidates. If we acquire a company having undisclosed liabilities,
as a successor owner we may be responsible for such undisclosed liabilities. We
typically try to minimize our exposure to such liabilities by obtaining
indemnification from each seller 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 indemnifications or that they will be enforceable, collectible or
sufficient in amount, scope or duration to fully offset any undisclosed
liabilities arising from our acquisitions.

WE DEPEND ON KEY PERSONNEL.

Our future success depends on the continued contributions of several key
employees and officers. We do not maintain key man life insurance policies on
any of our 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 and growth prospects.

COMPLIANCE WITH ENVIRONMENTAL REGULATION MAY IMPEDE OUR GROWTH.

We may need to spend considerable time, effort and capital to keep our
facilities in compliance with federal, state and local requirements regulating
health, safety, environment, zoning and land use. In addition, some of our waste
operations that cross state boundaries could be adversely affected if the
federal government, or the state or locality in which these waste operations are
located, imposes discriminatory fees on, or otherwise limits or prohibits, the
transportation or disposal of solid waste. If environmental laws become more
stringent, our environmental capital expenditures and costs for environmental
compliance may increase in the future. In addition, due to the possibility of
unanticipated events or regulatory developments, the amounts and timing of
future environmental expenditures could vary substantially from those we
currently anticipate. Because of the nature of our operations, we have in the
past, currently are, and may in the future be named as a potentially responsible
party in connection with the investigation or remediation of environmental
conditions. We cannot assure you that the resolution of any such investigations
will not have a material adverse effect on our financial condition, results of
operations or cash flows. A significant judgment or fine against our company, or
our loss of significant permits or licenses, could have a material adverse
effect on our financial condition, results of operations, cash flows or
prospects.

REGULATORY APPROVAL TO DEVELOP OR EXPAND OUR LANDFILLS AND TRANSFER STATIONS MAY
BE DELAYED OR DENIED.

Our plans include developing new landfills and transfer stations, as well
as expanding the disposal and transfer capacities of certain of our landfills
and transfer stations, respectively. Various parties, including citizens' groups
and local politicians, sometimes challenge these projects. 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 approval may prohibit us from establishing new
facilities and expanding existing facilities.

15

OUR FINANCIAL STATEMENTS ARE BASED UPON ESTIMATES AND ASSUMPTIONS THAT MAY
DIFFER FROM ACTUAL RESULTS.

Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and necessarily include
amounts based on estimates and assumptions made by us. Actual results could
differ from these amounts. Significant items subject to such estimates and
assumptions include the carrying value of long-lived assets, the depletion and
amortization of landfill development costs, accruals for closure and
post-closure costs, valuation allowances for accounts receivable, liabilities
for potential litigation, claims and assessments, and liabilities for
environmental remediation, deferred taxes and self-insurance.

We currently accrue for landfill closure and post-closure costs based on
consumption of landfill airspace. As of December 31, 2001, assuming that all
available landfill capacity is used, we expect to expense approximately $490.4
million of landfill closure and post-closure costs over the remaining lives of
these facilities. We cannot assure you that our reserves for landfill and
environmental costs will be adequate to cover the requirements of existing
environmental regulations, future changes or interpretations of existing
regulations, or the identification of adverse environmental conditions
previously unknown to us.

AN INCREASE IN THE PRICE OF FUEL MAY ADVERSELY AFFECT OUR BUSINESS.

Our operations are dependent upon fuel, which we purchase in the open
market on a daily basis. During 2000, we experienced a significant increase in
the cost of fuel. A portion of this increase was passed on to our customers.
However, because of the competitive nature of the waste industry, there can be
no assurances that we will be able to pass on future fuel price increases to our
customers. Accordingly, a significant increase in fuel costs could adversely
affect our business.

SEASONAL CHANGES MAY ADVERSELY AFFECT OUR BUSINESS AND OPERATIONS.

Our operations may be adversely affected by periods of inclement weather
which could delay the collection and disposal of waste, reduce the volume of
waste generated, or delay the construction or expansion of our landfill sites
and other facilities.

WE MAY BE UNABLE TO EXTEND THE MATURITY OF OUR REVOLVING SHORT-TERM CREDIT
FACILITY.

We have a revolving short-term credit facility in the principal amount of
$300.0 million which expires in July 2002. We anticipate extending the maturity
of this credit facility until July 2003. However, we cannot assure you that we
will receive such extension and, if so, whether such extension will be on terms
as favorable to us as those currently contained in the credit facility.

THE OUTCOME OF AN AUDIT BY THE INTERNAL REVENUE SERVICE MAY ADVERSELY AFFECT OUR
COMPANY.

Through the date of our initial public offering in July 1998, we filed
consolidated federal income tax returns with AutoNation. The Internal Revenue
Service is auditing AutoNation's consolidated tax returns for fiscal years 1995
through 1999. In accordance with the tax sharing agreement we have with
AutoNation, we may be liable for certain assessments imposed by the Internal
Revenue Service for the periods through June 1998 resulting from this audit. No
assurance can be given with respect to the outcome of this audit or the effect
it may have on us, or that our reserves with respect thereto are adequate. A
significant assessment against us could have a material adverse effect on our
financial position, results of operations or cash flows.

16

ITEM 2. PROPERTIES

Our corporate headquarters are located in Ft. Lauderdale, Florida in leased
premises. As of December 31, 2001, we operated approximately 5,300 collection
vehicles. Certain of our property and equipment are subject to operating leases
or liens securing payment of portions of our indebtedness. We also lease certain
of our offices and equipment. We believe that our facilities are sufficient for
our current needs.

The following table provides certain information regarding the 54 landfills
owned or operated by us as of December 31, 2001:

- ---------------

(1) Operated but not owned by us.

17

ITEM 3. LEGAL PROCEEDINGS

We are and will continue to be involved in various administrative and legal
proceedings in the ordinary course of business. We can give you no assurance
regarding the outcome of these proceedings or the effect their outcomes may
have, or that our insurance coverages or reserves are adequate. A significant
judgment against our company, the loss of significant permits or licenses, or
the imposition of a significant fine could have a material adverse effect on our
financial position, results of operations or prospects.

In September 1999, several lawsuits were filed by certain shareholders
against our company and certain of our officers and directors in the United
States District Court for the Southern District of Florida. The plaintiffs in
these lawsuits claimed, on behalf of a purported class of purchasers of our
company's common stock between January 28, 1999 and August 28, 1999, that the
defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 by, among other things, allegedly making materially false and misleading
statements regarding our company's growth and the assets acquired from Waste
Management. The Court subsequently consolidated these lawsuits into an action
entitled In Re: Republic Services, Inc. Securities Litigation. The plaintiffs
filed a consolidated complaint in February 2000 which was subsequently dismissed
by the Court without prejudice in February 2001. A motion to the Court by the
plaintiffs to reconsider this decision was thereafter denied and the Court
dismissed with prejudice the plaintiffs' consolidated complaint in October 2001.
No appeal of this dismissal was filed by the plaintiffs and the litigation was
concluded in our favor.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to our stockholders during the fourth quarter of
2001.

18

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET INFORMATION, HOLDERS AND DIVIDENDS

Our common stock began trading on the New York Stock Exchange on July 1,
1998.

The following table sets forth the range of the high and low sales prices
of our common stock for the periods indicated:

On March 26, 2002 the last reported sales price of our common stock was
$19.35.

There were approximately 97 record holders of our common stock at March 26,
2002.

We did not pay in 2000 and 2001, nor do we intend to pay in the foreseeable
future, cash dividends on our common stock. We intend to retain all earnings for
use in the operation and expansion of our business. However, if we are unable to
expand our business by acquiring businesses that satisfy our acquisition growth
strategy, we intend to use a portion of our future earnings to repurchase our
common stock.

During 2000, our board of directors authorized the repurchase of up to
$150.0 million of our common stock. During 2001, our board of directors
authorized the repurchase of up to an additional $125.0 million of our common
stock. As of December 31, 2001, we paid $150.1 million to repurchase
approximately 9.2 million shares of our stock of which approximately 5.6 million
shares were acquired during 2001 for $99.2 million.

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ITEM 6. SELECTED FINANCIAL DATA (IN MILLIONS, EXCEPT PER SHARE DATA)

The following Selected Financial Data should be read in conjunction with
our Consolidated Financial Statements and notes thereto as of December 31, 2001
and 2000 and for each of the three years in the period ended December 31, 2001
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K. The selected
statements of operations data and the other operating data for the years 1998
and 1997 and the selected balance sheet data at December 31, 1999 and 1998 were
derived from our Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, independent certified public accountants. Certain amounts
in the historical Consolidated Financial Statements have been reclassified to
conform to the 2001 presentation. See Notes 1, 3 and 7 of the Notes to our
Consolidated Financial Statements for a discussion of basis of presentation,
business combinations and stockholders' equity and their effect on comparability
of year-to-year data.

- ---------------

(a) Prior to our initial public offering on July 1, 1998, we had 100 shares of
common stock outstanding, all of which were owned by AutoNation. Historical
share and per share data have been retroactively adjusted for the
recapitalization of our 100 shares of common stock into 95.7 million shares
of common stock in July 1998.
(b) Adjusted basic and diluted earnings per share excludes an $86.1 million
after-tax charge we recorded in the fourth quarter of 2001 related to the
completed and planned divestitures and closings of certain core and non-core
businesses, asset impairments, downsizing our compost, mulch and soil
business and related inventory adjustments, an increase in insurance
reserves and an increase in bad debt expense related to the economic
slowdown.
(c) EBITDA represents operating income plus depreciation, amortization and
depletion. While EBITDA data should not be construed as a substitute for
operating income, net income or cash flows from operations in analyzing our
operating performance, financial position and cash flows, we have included
EBITDA data, which is not a measure of financial performance under generally
accepted accounting principles, because we believe that this data is
commonly used by certain investors to evaluate a company's performance in
the solid waste industry. Due to the fact that not all companies calculate
non-GAAP measures in the same manner, the EBITDA presentation herein may not
be comparable to similarly titled measures reported by other companies.
(d) EBITDA margin represents EBITDA divided by revenue.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion in conjunction with our
Consolidated Financial Statements and their Notes contained in this Annual
Report on Form 10-K.

2001 FINANCIAL OBJECTIVES

In January 2001, we publicly announced our objectives for the year. These
objectives included the following:

- Increasing free cash flow by 18% to $145 million, or over 60% of net
income.

- Growing revenue by 5%, with 2% from price and 3% from volume.

- Increasing earnings per share by 6% to $1.36. This objective assumed a
V-shaped recovery in the economy during the second half of the year.

- Using free cash flow to enhance shareholder value by completing strategic
acquisitions and repurchasing up to $100.0 million of our stock.

- Maintaining our strong balance sheet evidenced by a debt to total
capitalization ratio in the mid to low 40% range.

2001 BUSINESS PERFORMANCE

Revenue and operating margins were pressured by falling commodity prices
during the first quarter. Our internal growth for the quarter, excluding the
impact of commodity prices, was 4.3% with 2.2% coming from price and 2.1% from
volume. Higher fuel costs also pressured margins during the quarter. In
addition, we strengthened our regional management structure by adding sales,
maintenance and operational personnel during this period. This increase in staff
resulted in increased selling, general and administrative costs placing further
downward pressure on operating margins.

During the second quarter of 2001, revenue and operating margins were
negatively impacted by continued weakness in commodity prices. In addition, we
began to see a slowdown in the manufacturing sector, particularly in the
Midwestern and Mid-Atlantic states. Our internal growth for the quarter,
excluding the negative impact of commodity prices and the positive impact of
non-core operations, was 5.0% with 2.0% coming from price and 3.0% coming from
volume. Higher labor costs also pressured margins during the quarter.

During the second quarter, we acquired Richmond Sanitary Services, located
in Northern California. Richmond complemented our business platform by providing
us with a vertically integrated business in a growth market.

During the third quarter of 2001, the economic slowdown began to impact our
industrial business servicing the non-residential construction industry.
Landfill volumes attributable to manufacturing and construction activity began
to weaken. In addition, the slowdown we began to experience in the second
quarter in the manufacturing sector became more acute as we began to see
significant shift reductions and plant closings in the Southeastern United
States, particularly in the textile and home furnishing industries in the
Carolinas. These conditions were reflected in our internal growth numbers. Our
internal growth for the quarter, excluding the negative impact of commodity
prices and the positive impact of non-core operations, was 2.1% with 1.6% coming
from price and .5% coming from volume. This rate of internal growth was
approximately half of what we experienced in prior quarters of 2001. While we
continued to be successful in attracting municipal customers, these customers
generally produce less revenue and lower margins than other types of customers.

Also during the third quarter, operating margins continued to be pressured
by lower commodity prices and higher labor costs. Selling, general and
administrative costs were also higher due to the previously

21

discussed strengthening of our regional management structure and due to an
increase in bad debt expense attributable to the economic slowdown.

During the third quarter, we sold $450.0 million of unsecured notes with a
coupon rate of 6 3/4% that mature in 2011. This transaction allowed us to secure
long-term financing at, what we believe, is a very favorable rate.

During the fourth quarter of 2001, we continued to see a weakening in waste
volumes from the manufacturing sector. We also continued to see a slowdown in
commercial construction and special waste activity which resulted in both volume
reductions and price sensitivity for these services. Furthermore, we began to
see a softening in residential construction activity. As a result, internal
growth for the quarter, excluding the negative impact of commodity prices and
the positive impact of non-core operations, was 2.6% with 1.8% coming from price
and .8% coming from volume. Internal growth for all of 2001, excluding the
negative impact of commodity prices and the positive impact of non-core
operations, was 3.4% with 1.9% coming from price and 1.5% coming from volume.

Operating margins also weakened during the fourth quarter for the reasons
mentioned above. We continued to see medical costs escalate and we began to
experience higher costs for risk insurance. We also continued to experience
higher labor costs and selling, general and administrative costs due to the
strengthening of our regional management structure. In addition, bad debt
expense continued to increase as a result of the economic slowdown.

During the fourth quarter of 2001, we recorded a charge of $86.1 million on
an after-tax basis, or $132.0 million on a pre-tax basis. Included in this
charge are the completed and planned divestitures and closings of certain core
and non-core businesses, asset impairments, downsizing our compost, mulch and
soil business and related inventory adjustments, an increase in insurance
reserves and an increase in bad debt expense related to the economic slowdown.
On a reported basis, including the impact of the charge, our earnings per share
for 2001 were $.73.

On an adjusted basis, before considering the impact of the charge we
recorded during the fourth quarter, our earnings per share were $1.24. While we
did not achieve our announced earnings per share objective for 2001 for reasons
primarily attributable to the economic slowdown, our free cash flow was $147.0
million or 69% of adjusted net income. Our disciplined approach to managing
capital expenditures and our focus on monetizing accounts receivable helped us
to exceed our free cash flow objective. Our debt to total capitalization as of
December 31, 2001 was 41.3%.

During 2001, we used our free cash flow to repurchase 5.6 million shares of
our common stock for $99.2 million. In addition, we acquired Richmond Sanitary
Services, a fully integrated waste disposal company located in Northern
California.

2002 FINANCIAL OBJECTIVES

Our financial objectives for 2002 assume no deterioration or improvement in
the overall economy from that experienced during the fourth quarter 2001.
Specific guidance is as follows:

- Our goal is to generate $147.0 million in free cash flow. This includes
the net impact of the change in accounting for goodwill. The comparable
amount in 2001, assuming the change in accounting for goodwill was
effective January 1, 2001, would have been $132.0 million.

- We anticipate using our free cash flow to repurchase shares of our common
stock under our $125.0 million share repurchase program approved by our
board of directors in October 2001.

- We anticipate earnings per share of $1.37 to $1.39. This includes the
expected decrease in goodwill amortization resulting from the change in
accounting for goodwill.

- We anticipate internal growth from core operations to be 1.5% to 2.0%,
approximately 1.0% attributable to price and .5% to 1.0% attributable to
volume.

22

BUSINESS INITIATIVES

Our business initiatives for 2002 are generally a continuation of those
initiated in 2001 and are dependent on standardizing our business processes and
improving our systems. Ensuring that our people understand our initiatives and
processes and are trained in our new systems is essential to the overall success
of our initiatives. Our business initiatives for 2002 are as follows:

- Improve our revenue. The first step in this process was completed in
2001 and included installing a standardized billing and operating system.
This system enables us to, among other things, stratify our customers to
determine how our rates compare to current market pricing. During 2002,
we expect to implement the second generation of this software which we
call RSI 1.0. RSI 1.0 will be our company's core business system
providing a variety of functionalities including customer service,
dispatch, billing, sales analysis and route productivity analysis.

We are in the process of instituting a return on investment pricing
model. This model will eventually allow us to track our return on
investment by customer.

During 2001, we also implemented a customer relationship management
system. This system will improve the productivity of our sales force by
helping to establish marketing priorities and track sales leads. It also
tracks renewal periods for existing and potential commercial, industrial
and franchise contracts. Our focus during 2002 will be to ensure our
sales force is properly trained on this system and using it as intended.

- Improve the productivity of our operations. We have instituted a grid
productivity program that enables us to benchmark the performance of our
drivers. In addition, in our larger markets, we routinely use a route
optimization program to minimize drive times and improve operational
density. During 2001, we completed a disposal optimization review. This
review determines which local disposal option maximizes our return on
invested capital and cash flow.

- Improve fleet management and procurement. In February 2002, we selected
Dossier as our fleet management and procurement system. Among other
features, this system will track parts inventories, generate automatic
quantity order points and log all maintenance work. It will allow us to
capture and review information to ensure our preventive maintenance
programs comply with manufacturers' warranties. In addition, the purchase
order module within this system will allow us to cross-reference
purchasing information with our inventory. We expect to have Dossier
implemented at all of our hauling operations by the end of 2002, and we
expect to roll this system out to our landfill operations in 2003.

- Enhance operational and financial reporting systems. We currently have
several initiatives underway aimed at improving our operational and
financial reporting systems. The overall goal of these initiatives is to
provide us with detailed information, prepared in a consistent manner,
that will allow us to quickly analyze and act upon trends in our
business.

The most significant of these systems is our enterprise-wide general
ledger package. By February 2002, we successfully converted 40% of our
locations to Lawson general ledger software. We expect to have the entire
company converted to Lawson by the third quarter of 2002.

All of the system initiatives mentioned above will provide us with more
consistent and detailed information, thus allowing us to make quicker and
more informed business decisions. In addition, during 2001 all of our
software applications were standardized and centralized at our data
center in Fort Lauderdale, Florida. This standardization and
centralization provides us with consolidated information concerning our
operations across a variety of operational and financial disciplines. It
also significantly enhances our ability to execute our disaster recovery
plan, if necessary.

- Expand our safety training programs. As part of our ongoing emphasis on
safe work practices and in light of the recent increase in insurance
costs, we are expanding our safety training programs in 2002. We have
signed a multi-year agreement with DuPont Safety Resources to assist us
in successfully completing this initiative.

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OUR BUSINESS

We are a leading provider of non-hazardous solid waste collection and
disposal services in the United States. We provide solid waste collection
services for commercial, industrial, municipal and residential customers through
146 collection companies in 22 states. We also own or operate 89 transfer
stations, 54 solid waste landfills and 26 recycling facilities.

We generate revenue primarily from our solid waste collection operations,
and our remaining revenue is from landfill disposal services and other services,
including recycling and compost, mulch and soil operations.

The following table reflects our total revenue by source for the years
ended December 31, 2001, 2000 and 1999 (in millions):

Certain amounts for 2000 and 1999 in the table above have been reclassified
to conform to the 2001 presentation.

Our revenue from collection operations consists of fees we receive from
commercial, industrial, municipal and residential customers. Our residential and
commercial collection operations in some markets are based on long-term
contracts with municipalities. We generally provide industrial and commercial
collection operations to individual customers under contracts with terms up to
three years. Our revenue from landfill operations is from disposal or tipping
fees charged to third parties. In general, we integrate our recycling operations
with our collection operations and obtain revenue from the sale of recyclable
materials. No one customer has individually accounted for more than 10% of our
consolidated revenue in any of the last three years. During 2001, our largest
customer comprised less than 1% of our consolidated revenue and our largest
municipal franchise comprised less than 4%.

The cost of our collection operations is primarily variable and includes
disposal, labor, fuel and equipment maintenance costs. We try to be more
efficient by controlling the movement of waste streams from the point of
collection through disposal. During the three months ended December 31, 2001,
approximately 52% of the total volume of waste we collected was disposed of at
landfills we own or operate.

Our landfill cost of operations includes daily operating expenses, costs of
capital for cell development, accruals for closure and post-closure costs, and
the legal and administrative costs of ongoing environmental compliance. 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. In life cycle accounting, certain direct costs are
capitalized or accrued and charged to expense based upon the consumption of
cubic yards of available airspace. These costs include all costs to acquire,
construct, close and maintain a site during the post-closure period.

Cost and airspace estimates are developed annually by independent engineers
together with our engineers. These estimates are used by our operating and
accounting personnel to annually adjust our rates used to expense capitalized
costs and accrue closure and post-closure costs. Changes in these estimates

24

primarily relate to changes in available airspace, inflation rates and
applicable regulations. Changes in available airspace include changes in design
and changes due to the addition of airspace lying in expansion areas deemed
likely to be permitted.

CRITICAL ACCOUNTING POLICIES AND DISCLOSURES

Our Consolidated Financial Statements have been prepared using accounting
principles generally accepted in the United States and necessarily include
certain estimates and judgments made by management. In 1999, we significantly
expanded our accounting disclosures in a number of areas that require subjective
or complex judgments including landfill accounting, fixed assets and the
activity in various balance sheet accounts such as closure and post-closure
accruals, insurance reserves and allowance for doubtful accounts. As part of our
continuing commitment to reliable and transparent financial reporting that
allows the users of our financial statements to make more informed decisions, we
have prepared the following list of accounting policies that we believe are the
most critical in understanding our company's financial condition, results of
operations and cash flows, and may require management to make subjective or
complex judgments about matters that are inherently uncertain.

BUSINESS COMBINATIONS

We make decisions to acquire or invest in businesses based on financial and
strategic considerations. We have included businesses that we acquired and which
have been accounted for under the purchase method of accounting in our
consolidated financial statements from the date of acquisition.

We acquired various solid waste businesses during the year ended December
31, 2001, which were accounted for under the purchase method of accounting. The
aggregate purchase price we paid for these transactions was $287.7 million. The
aggregate purchase price paid, less cash and restricted cash acquired plus debt
assumed, was $247.5 million.

In July 1999, we entered into a definitive agreement with Allied Waste
Industries to acquire certain solid waste assets. In 2000, we had completed the
purchase of these assets for approximately $105.5 million in cash, $85.8 million
of which were acquired during 2000. In October 1999, we entered into a
definitive agreement with Allied for the simultaneous purchase and sale of
certain other solid waste assets. In 2000, we and Allied had completed the
purchase and sale of these assets for which annual revenue was approximately
$145.0 million. Our net proceeds from the cash portion of the exchange of assets
were $30.7 million. All of these transactions have been accounted for under the
purchase method of accounting.

In September 1998, we signed an agreement with Waste Management to acquire
assets and to enter into disposal agreements at various Waste Management
facilities. By June 1999, we had completed the purchase of the assets for
approximately $479.6 million in cash plus properties, $292.7 million of which
were acquired during the six months ended June 30, 1999. The assets purchased
included 16 landfills, 11 transfer stations and 136 commercial collection routes
across the United States, and were accounted for under the purchase method of
accounting.

In addition to the acquisitions from Allied and Waste Management, we also
acquired various other solid waste businesses during the years ended December
31, 2000 and 1999, which were accounted for under the

30

purchase method of accounting. The aggregate purchase price we paid in these
transactions was $102.5 million and $430.8 million in cash, respectively.

Cost in excess of fair value of net assets acquired for 2001 acquisitions
totaled approximately $223.3 million. As of December 31, 2001 we had intangible
assets, net of accumulated amortization, of $1,551.6 million, which consist
primarily of the cost in excess of fair value of net assets acquired. We
amortize cost in excess of the fair value of net assets acquired over forty
years on a straight-line basis. As of December 31, 2001, the amortization
expense associated with these intangible assets on an annualized basis is
approximately $48.5 million. We believe the forty-year life assigned to the cost
in excess of the fair value of net assets acquired is reasonable as the
businesses we acquired are generally well-established companies which have been
in existence for many years and have stable, long-term customer relationships.

During 2001, $62.6 million of the total purchase price paid for
acquisitions and contingent payments to former owners was allocated to landfill
airspace. As of December 31, 2001, we had $958.8 million of landfill development
costs which includes purchase price allocated to landfill airspace as well as
other capitalized landfill costs. If multiple entities are included in an
acquisition, purchase price is allocated to airspace based upon the discounted
expected future cash flows of the landfill relative to the other assets within
the acquired group and is adjusted for other non-depletable landfill assets and
liabilities acquired (primarily closure and post-closure liabilities). Landfill
purchase price is amortized using the units-of-consumption method over total
available airspace which includes likely to be permitted airspace where
appropriate.

Cost in excess of fair value of net assets acquired for 2000 acquisitions
totaled approximately $253.4 million. As of December 31, 2000, we had intangible
assets, net of accumulated amortization, of $1,435.0 million, which consist
primarily of the cost in excess of fair value of net assets acquired. In
addition, during 2000, $30.9 million of the total purchase price paid for
acquisitions was allocated to landfill airspace.

Cost in excess of fair value of net assets acquired for 1999 acquisitions
totaled approximately $419.3 million. As of December 31, 1999, we had intangible
assets, net of accumulated amortization, of $1,297.3 million, which consist
primarily of the cost in excess of fair value of net assets acquired. In
addition, during 1999, $328.8 million of the total purchase price paid for
acquisitions was allocated to landfill airspace.

See Note 3, Business Combinations, of the Notes to our Consolidated
Financial Statements, for further discussion of business combinations.

BACKGROUND

In May 1998, AutoNation announced its intention to separate our company,
which at the time was a wholly-owned subsidiary of AutoNation, from AutoNation,
and for our company to complete an initial public offering of common stock. As a
result, we entered into certain agreements with AutoNation providing for the
separation and governing various interim and ongoing relationships between our
company and AutoNation. In addition, our outstanding shares of common stock held
by AutoNation were recapitalized into 95.7 million shares.

In July 1998, we completed an initial public offering resulting in net
proceeds of approximately $1.4 billion. In addition, in July 1998 we repaid in
full amounts due to AutoNation as of June 30, 1998 through the issuance of 16.5
million shares of our common stock and through the payment of all proceeds from
our initial public offering.

In May 1999, we completed a secondary offering in which AutoNation sold
substantially all of our common stock it owned. We received no proceeds in the
secondary offering.

AutoNation provided our company with the services of a number of its
executives and employees. In consideration for these services, AutoNation
allocated to our company a portion of its general and administrative costs
related to these services. In January 1999, we entered into a services agreement
with AutoNation under which AutoNation agreed to continue to provide various
general and administrative services to our company in exchange for a monthly fee
of $0.9 million. The services agreement expired on June 30, 1999. Our management
believes that the amounts allocated to our company and/or charged under

31

the services agreement were no less favorable to our company than costs we would
have incurred to obtain such services on our own or from unaffiliated third
parties.

We recorded other charges of $6.9 million for the year ended December 31,
1999. These costs relate to our separation from AutoNation. They consist of $2.0
million of compensation expense related to the granting of certain replacement
employee stock options at exercise prices below the quoted market price of our
common stock at the date of grant. See Note 8, Stock Options, of the Notes to
our Consolidated Financial Statements for further information. They also consist
of $4.9 million of other additional charges directly related to our separation.

The 1999 historical consolidated financial information included in this
Annual Report on Form 10-K does not necessarily reflect what our financial
position and results of operations would have been had we been operated as a
separate, stand-alone entity during this period.

CONSOLIDATED RESULTS OF OPERATIONS

Years Ended December 31, 2001, 2000 and 1999

Our net income was $125.5 million for the year ended December 31, 2001, as
compared to $221.0 million in 2000 and $200.8 million in 1999. Our operating
results for the years ended December 31, 2001, 2000 and 1999 include other
charges described below.

The following table summarizes our costs and expenses in millions of
dollars and as a percentage of our revenue for 1999 through 2001:

Revenue. Revenue was $2,257.5 million, $2,103.3 million and $1,869.3
million for the years ended December 31, 2001, 2000 and 1999, respectively.
Revenue increased by $154.2 million, or 7.3%, from 2000 to 2001. Revenue
increased by $234.0 million, or 12.5%, from 1999 to 2000. The following table
reflects the components of our revenue growth for the years ended December 31,
2001, 2000 and 1999:

Price growth for the year ended December 31, 2001 was negatively impacted
by declining commodity prices. Excluding the negative effect of commodity
prices, price growth was 1.9% for the year ended December 31, 2001. In addition,
non-core operations increased volume growth during the year ended December 31,
2001. Excluding the positive impact of non-core operations, volume growth was
1.5% for the year ended December 31, 2001. As such, adjusted internal growth for
the year ended December 31, 2001 was 3.4%.

32

During the first and second quarters of 2001, our revenue was negatively
impacted by continued weakness in commodity prices. In addition, during the
second quarter of 2001, we began to see a slowdown in revenue from the
manufacturing sector, particularly in the Midwestern and Mid-Atlantic states.

During the third quarter of 2001, the economic slowdown began to impact our
industrial business servicing the non-residential construction industry.
Landfill volumes attributable to manufacturing and construction activity began
to weaken. In addition, the slowdown we began to experience in the second
quarter in the manufacturing sector became more acute as we began to see
significant shift reductions and plant closings in the Southeastern United
States, particularly in the textile and home furnishing industries in the
Carolinas. These conditions were reflected in our internal growth numbers, which
were approximately half of what we experienced in prior quarters.

During the fourth quarter of 2001, we continued to see a weakening in waste
volumes from the manufacturing sector. We also continued to see a slowdown in
commercial construction and special waste activity which resulted in both volume
reductions and price sensitivity for these services. Furthermore, we began to
see a softening in residential construction activity.

Our price and volume growth rates may decline in 2002 depending upon the
severity and duration of the economic slowdown.

Cost of Operations. Cost of operations was $1,422.5 million, $1,271.3
million and $1,131.9 million, or, as a percentage of revenue, 63.0%, 60.5% and
60.5%, for the years ended December 31, 2001, 2000 and 1999, respectively. The
increase in aggregate dollars from 1999 to 2000 is a result of the expansion of
our operations through acquisitions and internal growth. Cost of operations as a
percentage of revenue remained constant from 1999 to 2000 because improved
operating efficiencies and an increase in higher margin landfill operations
primarily due to acquisitions were offset by higher fuel and labor costs.

The increase in aggregate dollars from 2000 to 2001 is primarily a result
of the expansion of our operations through acquisitions and internal growth.
During the fourth quarter of 2001, we recorded a charge of $86.1 million on an
after-tax basis, or $132.0 million on a pre-tax basis. Of this pre-tax amount,
$24.2 million was recorded to cost of operations which relates primarily to the
downsizing of our compost, mulch and soil business and related inventory
adjustments and an increase in insurance reserves.

Excluding the impact of this charge, cost of operations for 2001 was
$1,398.3 million or 61.9% as a percent of revenue. The increase in cost of
operations as a percentage of revenue from 2000 to 2001 is primarily a result of
the economic slowdown, lower commodity prices, higher labor costs and higher
costs for risk and health insurance partially offset by improved operating
efficiencies and revenue mix. In addition, during 2001 we continued to be
successful in attracting municipal customers; however, these customers generally
produce less revenue and lower margins than other customers. We believe that
cost of operations as a percentage of revenue may continue to remain high or
increase further depending upon the severity and duration of the economic
slowdown.

Depreciation, Amortization and Depletion of Property and Equipment.
Depreciation, amortization and depletion expenses for property and equipment
were $168.3 million, $157.0 million and $130.3 million, or, as a percentage of
revenue, 7.4%, 7.5% and 7.0%, for the years ended December 31, 2001, 2000 and
1999, respectively. The increase in aggregate dollars for all periods presented
and the increase as a percentage of revenue from 1999 to 2000 are primarily due
to acquisitions and capital expenditures. The decrease as a percentage of
revenue from 2000 to 2001 is primarily due to lower depletion expense at our
landfills resulting from higher compaction and more cost efficient cell
construction.

Amortization of Intangible Assets. Expenses for amortization of intangible
assets were $47.1 million, $40.4 million and $32.9 million, or, as a percentage
of revenue, 2.1%, 1.9% and 1.7% for the years ended December 31, 2001, 2000 and
1999, respectively. The increase in aggregate dollars and as a percentage of
revenue is primarily due to an increase in the aggregate dollar amount of
acquisitions accounted for using the purchase method of accounting.

33

Intangible assets consist primarily of cost in excess of fair value of net
assets acquired, but also includes values assigned to long-term contracts and
covenants not to compete. Commencing January 1, 2002, cost in excess of fair
value of net assets acquired is no longer required to be amortized.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $236.5 million, $193.9 million and $176.7 million,
or, as a percentage of revenue, 10.5%, 9.2% and 9.5%, for the years ended
December 31, 2001, 2000 and 1999, respectively. The increases in aggregate
dollars are primarily a result of the expansion of our operations through
acquisitions and internal growth. The decrease in selling, general and
administrative expenses as a percentage of revenue from 1999 to 2000 is
primarily due to applying our existing overhead structure over an expanding
revenue base. Included in selling, general and administrative expenses are fees
paid to AutoNation under the services agreement of $5.3 million for the year
ended December 31, 1999. See Note 12, Related Party Transactions, of the Notes
to our Consolidated Financial Statements for further information.

During the fourth quarter of 2001, we recorded a charge of $86.1 million on
an after-tax basis, or $132.0 million on a pre-tax basis. Of this pre-tax
amount, $8.2 million was recorded to selling, general and administrative
expenses which relates primarily to an increase in bad debt expense resulting
from the economic slowdown. Excluding the impact of this charge, selling,
general and administrative expenses for 2001 are $228.3 million or 10.1% as a
percent of revenue. The increase in selling, general and administrative expenses
as a percentage of revenue is primarily due to the strengthening of our regional
management structure and various systems and training initiatives. We believe
that selling, general and administrative expenses in the range of 10% of revenue
is appropriate for 2002 given our business platform. However, selling, general
and administrative expenses as a percentage of revenue may increase depending
upon the severity and duration of the economic slowdown.

Other Charges. During the fourth quarter of 2001, we recorded a charge of
$86.1 million on an after-tax basis, or $132.0 million on a pre-tax basis. Of
this pre-tax amount, $99.6 million was recorded to other charges which relates
primarily to completed and planned divestitures and closings of certain core and
non-core businesses and asset impairments.

Other charges were $6.7 million for the year ended December 31, 2000. These
charges relate primarily to the early closure of a landfill in south Texas.

We recorded other charges of $6.9 million for the year ended December 31,
1999. These charges relate to our separation from AutoNation. They include $2.0
million of compensation expense related to the granting of certain replacement
employee stock options at exercise prices below the quoted market price of our
common stock at the date of grant. See Note 8, Stock Options, of the Notes to
our Consolidated Financial Statements for further information. They also include
$4.9 million of other additional charges directly related to our separation.

Operating Income. Operating income was $283.5 million, $434.0 million and
$390.6 million, or, as a percentage of revenue, 12.6%, 20.6% and 20.9%, for the
years ended December 31, 2001, 2000 and 1999, respectively. Excluding the impact
of the charge we recorded in the fourth quarter of 2001, our operating income
was $415.5 or 18.4% as a percentage of revenue.

Interest Expense. We incurred interest expense on our revolving credit
facility, unsecured notes and tax-exempt bonds. Interest expense was $80.1
million, $81.6 million and $64.2 million for the years ended December 31, 2001,
2000 and 1999, respectively. The increase in interest expense from 1999 to 2000
is primarily due to an increase in average debt balances. The increase is also
due to a general market increase in interest rates starting in the third quarter
of 1999. The decrease in interest expense from 2000 to 2001 is due to a general
market decrease in interest rates and an increase in tax-exempt financings which
generally bear interest at lower rates than our revolving credit facility and
unsecured notes. The decrease in interest expense is also due to interest rate
swap agreements that we entered into in September 2001.

Capitalized interest was $3.3 million, $2.9 million and $5.6 million for
the years ended December 31, 2001, 2000 and 1999, respectively.

34

Interest and Other Income (Expense), Net. Interest and other income, net
of other expense, was $5.9 million, $4.0 million and $.1 million for the years
ended December 31, 2001, 2000 and 1999, respectively. The variances during the
periods are primarily due to fluctuations in cash balances on hand and related
interest income and net gains on the disposition of assets during 2000 and 2001.
The amount recorded for the year ended December 31, 1999 includes a $2.9 million
loss on the sale of our collection and disposal business in Costa Rica.

Income Taxes. Our provision for income taxes was $83.8 million, $135.4
million and $125.7 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Our effective income tax rate was 40.0%, 38.0%, and 38.5% for the
years ended December 31, 2001, 2000 and 1999, respectively. The increase in our
effective tax rate from 2000 to 2001 is the result of certain non-tax deductible
items included in the charge that we recorded during the fourth quarter of 2001.
Excluding the impact of this charge, our effective tax rate for 2001 was 38.0%.

ADJUSTED CONSOLIDATED RESULTS OF OPERATIONS

Our adjusted net income was $211.6 million, or $1.24 per share, for the
year ended December 31, 2001. Our adjusted operating results exclude an $86.1
million after-tax charge we recorded during the fourth quarter of 2001. This
charge relates primarily to completed and planned divestitures and closings of
certain core and non-core businesses, asset impairments, downsizing our compost,
mulch and soil business and related inventory adjustments, an increase in
insurance reserves and an increase in bad debt expense associated with the
economic slowdown.

The following table reflects our consolidated results of operations as
reported in our Consolidated Statements of Operations for the year ended
December 31, 2001, adjusted to exclude the charge we recorded in the fourth
quarter of 2001 (in millions, except per share data):

The unaudited adjusted consolidated statement of operations is provided for
informational purposes only and does not project our company's results of
operations for any future date or period.

We recorded a $24.2 million charge to cost of operations during the fourth
quarter of 2001. This charge included a $13.3 million write-down associated with
the downsizing of our composting, mulch and soil business. The remainder of this
charge consists primarily of an increase in insurance reserves.

35

We recorded an $8.2 million charge to selling, general and administrative
expenses. This charge primarily relates to an increase in bad debt reserves
associated with the economic slowdown.

We also recorded $99.6 million to other charges. This amount relates
primarily to the completed or planned divestitures of certain core and non-core
operations and asset impairments pursuant to a plan adopted by us during the
fourth quarter of 2001.

This plan includes divesting several collection and transfer station
operations resulting in a loss of approximately $52.0 million. These operations
generated approximately 1% of our consolidated revenue during 2001. The sale of
a portion of these operations during 2001 generated cash proceeds of
approximately $2.6 million. The sale of the remaining operations is expected to
generate cash proceeds of approximately $35.0 million.

Our plans also include closing three of our smaller landfills. These
landfills generated less than .2% of our consolidated revenue during 2001. In
addition, we recorded an asset impairment for a fourth landfill. In total, we
recorded a loss of approximately $31.0 million associated with the early closure
of landfills or impairment charges.

The remaining amount recorded to other charges during the fourth quarter is
primarily for the planned disposition of excess assets. Approximately $1.0
million of the charge we recorded during the fourth quarter relates to ongoing
future lease commitments and other obligations associated with planned
divestitures.

LANDFILL AND ENVIRONMENTAL MATTERS

Among our most significant investments and most valuable assets are our
landfills. The additional disclosures included in this section provide the users
of our financial statements with a clearer understanding of our investment in
our landfills and various accounting principles that are unique to landfill
operations.

Available Airspace

The following tables reflect landfill airspace activity for landfills owned
or operated by us for the years ended December 31, 1999, 2000 and 2001:

During 2000, we actively pursued obtaining landfill permits which resulted
in adding over twice as much permitted airspace during the year than was
consumed.

As of December 31, 2001, we owned or operated 54 solid waste landfills with
total available disposal capacity estimated to be 1.7 billion in-place cubic
yards. Total available disposal capacity represents the sum of estimated
permitted airspace plus an estimate of airspace deemed by us to be likely to be
permitted. These estimates are developed annually by independent engineers
together with our engineers utilizing information provided by annual aerial
surveys. As of December 31, 2001, total available disposal capacity is estimated
to be 1.3 billion in-place cubic yards of permitted airspace plus .4 billion
in-place cubic yards of expansion airspace which has been determined by us as
likely to be permitted. Before airspace included in an expansion area is
determined as likely to be permitted and, therefore, included in our calculation
of total available disposal capacity, it must meet our expansion criteria. See
Note 4, Landfill and Environmental Costs, of the Notes to our Consolidated
Financial Statements for further information.

As of December 31, 2001, 20 of our landfills meet the criteria for
including expansion airspace in their total available disposal capacity. At
projected annual volumes, these 20 landfills have an estimated remaining average
site life of 33 years, including the expansion airspace. The average estimated
remaining life of all of our landfills is 35 years.

As of December 31, 2001, nine of our landfills that meet the criteria for
including expansion airspace had obtained approval from local authorities and
are proceeding into the state permitting process. Also, as of December 31, 2001,
five of our 20 landfills that meet the criteria for including expansion airspace
had submitted permit applications to state authorities. The remaining six
landfills that meet the criteria for including expansion airspace are in the
process of obtaining approval from local authorities and have not identified any
fatal flaws or impediments associated with the expansions at either the local or
state level.

We have never been denied an expansion permit for a landfill that included
likely to be permitted airspace in its total available disposal capacity,
although no assurances can be made that all future expansions will be permitted
as designed.

37

Closure and Post-Closure Costs

The following table reflects our closure and post-closure expense per cubic
yard of airspace consumed for the years ended December 31, 2001, 2000 and 1999:

As of December 31, 2001, accrued closure and post-closure costs were $239.5
million. The current portion of these costs of $21.1 million is reflected in our
Consolidated Balance Sheets in other current liabilities. The long-term portion
of these costs of $218.4 million is reflected in our Consolidated Balance Sheets
in accrued landfill and environmental costs. As of December 31, 2001, assuming
that all available landfill capacity is used, we expect to expense approximately
$490.4 million of additional closure and post-closure costs over the remaining
lives of our facilities.

Our estimates for closure and post-closure do not take into account
discounts for the present value of total estimated costs. If total estimated
costs were discounted to present value, they would be lower.

Investment in Landfills

The following tables reflect changes in our investment in landfills for the
years ended December 31, 1999, 2000 and 2001 and the future expected investment
as of December 31, 2001 (in millions):

The following table reflects our net investment in our landfills, excluding
non-depletable land, and our amortization and depletion expense for the years
ended December 31, 2001, 2000 and 1999:

As of December 31, 2001, we expect to spend an estimated additional $891.1
million on existing landfills, primarily related to cell construction and
environmental structures, over their expected remaining lives. Our total
expected gross investment, excluding non-depletable land, estimated to be $1.7
billion, or $.97 per cubic yard, is used in determining our depletion and
amortization expense based upon airspace consumed using the units-of-consumption
method. Our estimates for expected future investment in landfills do not take
into account discounts for the present value of total estimated costs. For
further information, see "Closure and Post-Closure Costs."

We accrue costs related to environmental remediation activities through a
charge to income in the period such liabilities become probable and can be
reasonably estimated. We also accrue costs related to environmental remediation
activities associated with properties acquired through business combinations as
a charge to cost in excess of fair value of net assets acquired or landfill
purchase price allocated to airspace, as appropriate. No material amounts were
charged to expense during the years ended December 31, 2001, 2000 and 1999.

FINANCIAL CONDITION

One of our key financial objectives is to maintain a simple, cost-effective
and transparent capital structure.

At December 31, 2001, we had $16.1 million of cash and cash equivalents. We
also had $142.3 million of restricted cash, of which $115.2 million relates to
proceeds from tax-exempt bonds and other tax-exempt

39

financing that will be used to fund capital expenditures. At December 31, 2001,
we had $283.2 million of tax-exempt bonds and other tax-exempt financing
outstanding at favorable interest rates.

In July 1998, we entered into a $1.0 billion unsecured revolving credit
facility with a group of banks. $500.0 million of the credit facility expires in
July 2002 and the remaining $500.0 million expires in July 2003. Borrowings
under the credit facility bear interest at LIBOR-based rates. We use our
operating cash flow and proceeds from our credit facilities to finance our
working capital, capital expenditures, acquisitions, share repurchases and other
requirements. As of December 31, 2001, we had $691.4 million of availability
under our credit facility. As a result of our strong financial position and
liquidity, in February 2002 we reduced the short-term and long-term portion of
our credit facility by $200.0 million and $50.0 million, respectively.

In May 1999, we sold $600.0 million of unsecured notes in the public
market. $225.0 million of these notes bear interest at 6 5/8% per annum and
mature in 2004. The remaining $375.0 million bear interest at 7 1/8% per annum
and mature in 2009. Interest on these notes is payable semi-annually in May and
November. The $225.0 million and $375.0 million in notes were offered at a
discount of $1.0 million and $.5 million, respectively. Proceeds from the notes
were used to repay our revolving credit facility.

In December 1999, we entered into a $100.0 million operating lease facility
established to finance the acquisition of operating equipment consisting
primarily of revenue-producing vehicles. As of December 31, 2001, $79.0 million
was outstanding under this facility.

In August 2001, we sold $450.0 million of unsecured notes in the public
market. The notes bear interest at 6 3/4% per annum and mature in 2011. Interest
on these notes is payable semi-annually in February and August. The notes were
offered at a discount of $2.6 million. Proceeds from the notes were used to
repay our revolving credit facility.

In order to manage risk associated with fluctuations in interest rates, in
September 2001, we entered into interest rate swap agreements with investment
grade rated financial institutions. The swap agreements have a total notional
value of $225.0 million and require our company to pay interest at floating
rates based upon changes in LIBOR and receive interest at a fixed rate of
6 5/8%. The swap agreements terminate in May 2004.

At December 31, 2001, we had $283.2 million of tax-exempt bonds and other
tax-exempt financings outstanding of which approximately $156.1 million was
obtained during fiscal 2001. Borrowings under these bonds and other financings
bear interest based on floating interest rates at the prevailing market ranging
from 1.35% to 5.12% at December 31, 2001 and have maturities ranging from 2002
to 2031. As of December 31, 2001, we had $115.2 million of restricted cash
related to proceeds from tax-exempt bonds and other tax-exempt financings. This
restricted cash will be used to fund capital expenditures under the terms of the
agreements.

We plan to extend to July 2003 the maturity of our revolving short-term
credit facility prior to its expiration in July 2002. We believe that such an
extension would provide us with sufficient financial resources to meet our
anticipated capital requirements and obligations as they come due. We believe
that we would be able to raise additional debt or equity financing, if
necessary, to fund special corporate needs or to complete acquisitions. However,
we cannot assure you that we would be able to obtain additional financing under
favorable terms or to extend the existing short-term credit facility on the same
terms.

SELECTED BALANCE SHEET ACCOUNTS

In 1999, we were the first in our industry to provide the users of our
financial statements with additional disclosures regarding selected balance
sheet accounts. These additional disclosures include schedules that show the
activity in our available airspace, investment in landfills, property and
equipment, and other selected balance sheet accounts. We believe that these
disclosures permit the readers of our financial statements to gain a better
understanding of our company's financial condition, results of operations and
cash flows.

40

The following tables reflect the activity in our allowance for doubtful
accounts, accrued closure and post-closure, accrued self-insurance and amounts
due to former owners during the years ended December 31, 1999, 2000 and 2001 (in
millions):

Our expense related to doubtful accounts as a percentage of revenue for
2000 and 2001 was .6% and 1.0%, respectively. This increase is due to the
economic slowdown that we experienced during 2001.

Our expense for self-insurance as a percentage of revenue for 2000 and 2001
was 4.3% and 4.9%, respectively. This increase is primarily due to an overall
increase in insurance costs that we experienced during 2001.

Additions to accrued liabilities related to acquisitions are periodically
reviewed during the year subsequent to the acquisition. During such reviews,
accrued liabilities which are considered to be in excess of amounts required for
a specific acquisition are reversed and charged against goodwill (cost in excess
of fair value of net assets acquired) or landfill purchase price allocated to
airspace, as appropriate.

As of December 31, 2001, accounts receivable were $232.9 million, net of
allowance for doubtful accounts of $19.0 million, resulting in days sales
outstanding of 38 days, or 26 days net of deferred revenue. In addition, at
December 31, 2001, our trade receivables in excess of 90 days old totaled $18.8
million or 7.5% of gross receivables outstanding.

41

PROPERTY AND EQUIPMENT

The following tables reflect the activity in our property and equipment
accounts for the years ended December 31, 1999, 2000 and 2001 (in millions):

The tables above exclude $59.2 million of operating equipment consisting
primarily of revenue-producing vehicles which were added during the year ended
December 31, 2000 and are subject to our operating lease facility.

LIQUIDITY AND CAPITAL RESOURCES

The major components of changes in cash flows for the years ended December
31, 2001, 2000 and 1999 are discussed below.

Cash Flows From Operating Activities. Cash flows provided by operating
activities were $459.2 million, $461.8 million and $323.8 million for the years
ended December 31, 2001, 2000 and 1999, respectively. The changes in cash
provided by operating activities during the periods are due to the expansion of
our business and timing of receipts and payments from accounts receivable and
accounts payable, respectively.

We use cash flow from operations to fund capital expenditures,
acquisitions, share repurchases and debt repayments.

Cash Flows Used In Investing Activities. Cash flows used in investing
activities consist primarily of cash used for business acquisitions and capital
additions. Cash used to acquire businesses, net of cash acquired, was $261.2
million, $188.1 million and $777.9 million during the years ended December 31,
2001, 2000 and 1999, respectively. Capital additions were $249.3 million, $208.0
million and $294.5 million during the years ended December 31, 2001, 2000 and
1999, respectively.

We intend to finance capital expenditures and acquisitions through cash on
hand, cash flows from operations, our revolving credit facility, tax-exempt
bonds and other financings. We expect to use primarily cash for future business
acquisitions.

Cash Flows Provided By (Used In) Financing Activities. Cash flows provided
by (used in) financing activities during the years ended December 31, 2001, 2000
and 1999 included commercial bank borrowings and repayments of debt in all three
years, proceeds from our sale of unsecured notes in 1999 and 2001, and proceeds
from issuances of tax-exempt bonds in 2000 and 2001. In May 1999, we sold
unsecured notes with a face value of $600.0 million at a discounted price of
$598.5 million. In August 2001, we sold unsecured notes with a face value of
$450.0 million at a discounted price of $447.4 million. Proceeds from the notes
were used to repay our revolving credit facility.

43

In December 1999, we entered into a $100.0 million operating lease facility
established to finance the acquisition of operating equipment consisting
primarily of revenue-producing vehicles. At December 31, 2001, $79.0 million was
outstanding under this facility.

During fiscal 2000, we announced that our board of directors authorized the
repurchase of up to $150.0 million of our common stock. During fiscal 2001, we
announced that our board of directors authorized the repurchase of up to an
additional $125.0 million of our common stock. As of December 31, 2001, we paid
$150.1 million to repurchase approximately 9.2 million shares of our stock. We
intend to finance future stock repurchases through cash on hand, cash flow from
operations, our revolving credit facility and other financings.

We used proceeds from our revolving credit facility, unsecured notes and
tax-exempt bonds to fund capital expenditures and acquisitions and to repay
debt.

CREDIT RATING

Our company has received investment grade credit ratings. As of December
31, 2001, our senior debt was rated Baa3 by Moody's, BBB by Standard & Poor's
and BBB+ by Fitch.

One of our key financial objectives is to maintain our investment grade
credit rating on our senior debt. We believe that frequent communication with
our rating agencies and providing them with detailed information concerning our
financial and operational performance is critical in achieving this objective.

The following table summarizes certain financial ratios as of and for the
years ended December 31, 2001, 2000 and 1999 that we believe are important to
our credit rating agencies:

- ---------------

(a) Adjusted results for 2001 exclude an $86.1 million after-tax charge we
recorded in the fourth quarter of 2001 related to the completed and planned
divestitures and closings of certain core and non-core businesses, asset
impairments, downsizing our compost, mulch and soil business and related
inventory adjustments, an increase in insurance reserves and an increase in
bad debt expense related to the economic slowdown.

(b) EBITDA represents operating income plus depreciation, amortization and
depletion. While EBITDA data should not be construed as a substitute for
operating income, net income or cash flows from operations in analyzing our
operating performance, financial position and cash flows, we have included
EBITDA data, which is not a measure of financial performance under generally
accepted accounting principles, because we believe that this data is
commonly used by certain credit rating agencies to evaluate a company's
financial performance. Due to the fact that not all companies calculate
non-GAAP measures in the same manner, the EBITDA presentation herein may not
be comparable to similarly titled measures reported by other companies.

We believe that our investment grade rating from our credit rating agencies
and the financial ratios above are indicative of the financial strength of our
company.

OPERATING LEASE FACILITY

One of our key financial objectives is to maintain a simple, cost-effective
and transparent capital structure.

As we previously disclosed in our quarterly and annual filings with the
Securities and Exchange Commission, in December 1999, we entered into a $100.0
million facility established to finance the acquisition of operating equipment
consisting primarily of revenue-producing vehicles. The facility has a term of
three years with two consecutive one-year renewals and was entered into
primarily because its implicit interest rate

44

was over ten basis points less than our revolving credit facility at the time.
The facility meets the criteria of an operating lease under generally accepted
accounting principles. Accordingly we have not recorded this facility as debt
nor have we recorded the related operating equipment as assets on our balance
sheets. However, we have included the cost of operating equipment acquired under
the facility as capital expenditures for purposes of calculating our free cash
flow.

As of December 31, 2001, $79.0 million was outstanding under this facility.
If this facility were treated as debt as of December 31, 2001, our debt to total
capitalization would increase from 41.3% to 42.8%. As a result of our success in
obtaining financing in the public markets, including tax-exempt bonds, we do not
anticipate using this form of financing again in the foreseeable future.

FUEL HEDGE

Our results of operations are impacted by changes in the price of diesel
fuel. Because the market for derivatives in diesel fuel is limited, we have
entered into heating oil option agreements to manage a portion of our exposure
to fluctuations in diesel prices. We have minimized our credit risk by entering
into derivatives with a group of financial institutions having investment grade
ratings. Our derivative instruments qualify for hedge accounting treatment under
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended. In order to qualify for hedge
accounting, certain criteria must be met including a requirement that both at
inception of the hedge, and on an ongoing basis, the hedging relationship is
expected to be highly effective in offsetting cash flows attributable to the
hedged risk during the term of the hedge.

Under these option agreements, we receive or make payments based on the
difference between actual average heating oil prices and predetermined fixed
prices. These option agreements protect us from fuel prices rising above a
predetermined fixed price in the option agreements, but also limit our ability
to benefit from price decreases below the predetermined fixed price in the
option agreements.

During June 2001, we entered into option agreements for approximately 14.3
million gallons of heating oil. These option agreements settle each month in
equal notional amounts through December 2002. The option agreements were
structured as zero-cost collars indexed to the price of heating oil. The fair
value of these option agreements at December 31, 2001 was determined by third
parties to be a loss of approximately $2.8 million ($1.7 million net of tax). In
accordance with SFAS 133, $1.6 million, representing the effective portion of
the change in fair value during the period has been recorded in stockholders'
equity as a component of accumulated other comprehensive loss, net of tax. The
ineffective portion of the change in fair value was a loss of approximately $.1
million for the year ended December 31, 2001 and has been included in other
income (expense), net in the accompanying consolidated statements of operations.
Realized losses of $.6 million for the year ended December 31, 2001 related to
these option agreements are included in cost of operations in our Consolidated
Statements of Operations.

FUTURE OBLIGATIONS

The following table summarizes our significant future obligations as of
December 31, 2001:

45

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market risk
exposure 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 and through interest rate swaps. All items
described below are non-trading.

The fair value of variable rate debt approximates the carrying value since
interest rates are variable and, thus, approximate current market rates.

SEASONALITY

Our operations can be adversely affected by periods of inclement weather
which could delay the collection and disposal of waste, reduce the volume of
waste generated or delay the construction or expansion of our landfill sites and
other facilities.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141"), and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). Under SFAS 141, the use of the
poolings-of-interests method of accounting for business combinations initiated
after June 30, 2001 is prohibited. This statement also changes the criteria for
the recognition of acquired intangible assets. The provisions of SFAS 141 apply
to all business combinations accounted for using the purchase method of
accounting completed after June 30, 2001. SFAS 142 is effective for fiscal years
beginning after December 15, 2001. Under the provisions of SFAS 142, most of our
intangible assets will no longer be subject to amortization. However, we will be
required to change our methodology for evaluating impairments to intangible
assets that are not subject to amortization. The adoption of SFAS 141 had no
impact on our consolidated financial position or results of operations. We are
currently evaluating the provisions of SFAS 142 and have not yet determined the
effects of these changes on our consolidated financial position and results of
operations.

In June 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations." This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002,
and will require our company to change the accounting methodology we currently
use to record closure and post-closure liabilities related to our landfills. The
more significant of these changes includes measuring all future obligations at
fair value and discounting obligations to reflect today's dollars. This
statement requires a cumulative effect approach to recognizing transition
amounts for existing retirement obligations. We are currently evaluating the
effect of adoption of this statement, and have not determined whether the impact
of adoption will be material to our consolidated financial position or results
of operations.

In August 2001, the Financial Accounting Standards Board issued Statement
No. 144, "Accounting for the Impairment of Long-Lived Assets." This statement
supersedes Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" and APB Opinion No. 30,
"Reporting the Results of Operations -- Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." This statement establishes a single accounting model
for assets to be disposed of by sale and resolves certain SFAS 121
implementation

46

issues. SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and is generally to be applied prospectively.
We do not expect the adoption of this statement to have a material effect on our
consolidated financial position or results of operations.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

Certain statements and information included herein, including projections
of future cash flow, net income, earnings per share, the existence of our
ability to achieve revenue growth, including pricing, volume and acquisition
growth, in the future, constitute "forward-looking statements" within the
meaning of the Federal Private Securities Litigation Reform Act of 1995. These
statements include, among other things, the discussions of our financial,
operating and growth strategies and expectations concerning market position,
future operations, margins, revenue, profitability, liquidity and capital
resources, implementation of new systems, as well as statements concerning the
integration of the operations of acquired businesses and achievement of
financial benefits and operational efficiencies in connection therewith. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of our company to be materially different from any future results, performance,
or achievements expressed or implied, in or by such forward-looking statements.
Such factors include, among other things, whether our estimates and underlying
assumptions concerning our selected balance sheet accounts, closure and
post-closure costs, available airspace, and projected costs and expenses related
to our landfills and property and equipment, labor and fuel rates, and
inflationary and general economic trends turn out to be correct or appropriate,
and various factors that will impact our actual business and financial
performance such as competition in the solid waste industry; general economic
conditions including but not limited to inflation, changes in fuel, labor and
other variable costs and changes in commodity prices, which are generally not
within our control; our ability to maintain our investment grade rating and to
generate sufficient cash flow; our dependence on acquisitions for growth; our
ability to manage growth; our dependence on large, long-term collection
contracts; risk associated with undisclosed liabilities of acquired businesses;
our dependence on key personnel; compliance with and future changes in
environmental regulations; our ability to obtain approval from regulatory
agencies in connection with expansions at our landfills; the ability to extend
the maturity of our short-term credit facility; our ability to purchase our
common stock at prices that are accretive to earnings per share; the outcome of
the IRS audit; and other factors contained in this section and under the section
entitled "BUSINESS -- Risk Factors." We assume no duty to update the
forward-looking statements.

47

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

48

MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY

The Company's management is responsible for the preparation, integrity and
objectivity of the Consolidated Financial Statements and other financial
information presented in this Annual Report on Form 10-K. The Consolidated
Financial Statements have been prepared using accounting principals generally
accepted in the United States and necessarily include certain estimates and
judgments made by management.

The Company's management maintains a system of internal control that is
designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by management and by
internal auditors who conduct an extensive program of audits throughout the
Company. The Company selects and trains qualified people who are provided with
and expected to adhere to the Company's written standards of business conduct.
These standards, which set forth the highest principles of business ethics and
conduct, are a key element of the Company's control system.

The Consolidated Financial Statements have been audited by the Company's
independent certified public accountants, Arthur Andersen LLP. During their
audits, the independent auditors were given unrestricted access to all financial
records and related data, including minutes of all meetings of the Board of
Directors and all committees of the Board of Directors. In addition, the
independent auditors obtained a sufficient understanding of the internal control
structure in order to plan and complete the annual audit of the Company's
financial statements. The independent auditors were also informed of the more
significant estimates and judgments used by management in preparing the
Consolidated Financial Statements.

The Audit and Nominating Committee of the Board of Directors, which
consists solely of outside directors, meets regularly with management, the
internal auditors and the independent auditors to review accounting, reporting,
auditing and internal control matters. The Committee has direct and private
access to both internal and independent auditors, and to all members of the
Company's management team.

The Company is dedicated to the highest standards of integrity and
financial reporting. This dedication is evidenced in the increased financial
disclosures that were included in the Company's filings with the Securities and
Exchange Commission starting in 1999. These additional disclosures include:

- Information concerning the Company's ability to generate free cash flow,

- Detailed policies concerning landfill accounting,

- Detail of the activity in airspace available at the Company's landfills,

- Detail of the activity in the Company's investment in its landfills,

- Detail of the activity in selected balance sheet accounts including
property and equipment, and

- Information concerning the Company's credit rating.

/s/ JAMES E. O'CONNOR /s/ CHARLES F. SERIANNI
- ----------------------------------------------------- -----------------------------------------------------
James E. O'Connor Charles F. Serianni
President and Chief Executive Officer Chief Accounting Officer

/s/ TOD C. HOLMES /s/ JERRY S. CLARK
- ----------------------------------------------------- -----------------------------------------------------
Tod C. Holmes Jerry S. Clark
Senior Vice President and Vice President and Controller
Chief Financial Officer

49

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To Republic Services, Inc.:

We have audited the accompanying consolidated balance sheets of Republic
Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of operations, stockholders'
equity and other comprehensive income, and cash flows for each of the years in
the three-year period ended December 31, 2001. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the 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 financial position of Republic Services, Inc. and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
January 30, 2002.

50

REPUBLIC SERVICES, INC.

CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)

The accompanying notes are an integral part of these statements.

51

REPUBLIC SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT EARNINGS PER SHARE DATA)

The accompanying notes are an integral part of these statements.

52

REPUBLIC SERVICES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(IN MILLIONS)

The accompanying notes are an integral part of these statements.

53

REPUBLIC SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

The accompanying notes are an integral part of these statements.

54

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABLES IN MILLIONS, EXCEPT PER SHARE DATA)

1. BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements include the accounts of
Republic Services, Inc. and its subsidiaries (the "Company"). The Company
provides non-hazardous solid waste collection and disposal services in the
United States. All material intercompany transactions have been eliminated.

The historical Consolidated Financial Statements through the date of the
secondary offering in May 1999 reflect the accounts of the Company as a
subsidiary of AutoNation, Inc., formerly known as Republic Industries, Inc.
(together with its subsidiaries, "AutoNation"), subject to corporate general and
administrative expense allocations or charges under the Services Agreement as
described in Note 12, Related Party Transactions. The services agreement expired
in June 1999. As such, the historical financial information presented in these
Consolidated Financial Statements for 1999 does not necessarily reflect the
financial position or results of operations of the Company as a separate,
stand-alone entity.

All historical share and per share data of the Company's common stock, par
value $.01 per share ("Common Stock") for the year ended December 31, 1998 have
been retroactively adjusted for the recapitalization of AutoNation's 100 shares
of Common Stock previously outstanding into 95.7 million shares of Common Stock
in July 1998.

In July 1998, the Company completed an initial public offering of its
Common Stock ("Initial Public Offering") resulting in net proceeds of
approximately $1.4 billion. In addition, in July 1998 the Company repaid in full
all amounts due to AutoNation as of June 30, 1998 through the issuance of 16.5
million shares of Common Stock and through the payment of all proceeds from the
Initial Public Offering.

In May 1999, the Company completed a secondary offering, in which
AutoNation sold substantially all of the Common Stock it owned in the Company.
The Company received no proceeds in the secondary offering.

During the fourth quarter of 2001, the Company recorded a charge of $86.1
million on an after-tax basis, or $132.0 million on a pre-tax basis, related to
completed and planned divestitures and closings of certain core and non-core
businesses, asset impairments, downsizing its compost, mulch and soil business
and related inventory adjustments, an increase in insurance reserves and an
increase in bad debt expense related to the economic slowdown.

The Company recorded a $24.2 million charge to cost of operations in the
accompanying Consolidated Financial Statements during the fourth quarter of
2001. This charge included a $13.3 million write-down associated with the
downsizing of the Company's composting, mulch and soil operation business. The
remainder of this charge consists primarily of an increase in insurance
reserves.

The Company recorded an $8.2 million charge to selling, general and
administrative expenses in the accompanying Consolidated Financial Statements.
This charge primarily relates to an increase in bad debt reserves associated
with the economic slowdown.

The Company also recorded $99.6 million to other charges in the
accompanying Consolidated Financial Statements. This amount relates primarily to
the completed or planned divestitures of certain core and non-core operations
and asset impairments pursuant to a plan adopted by management during the fourth
quarter of 2001.

This plan includes divesting several collection and transfer station
operations resulting in a loss of approximately $52.0 million. These operations
generated approximately 1% of the Company's consolidated revenue during 2001.
The sale of a portion of these operations during 2001 generated cash proceeds of
approximately $2.6 million. The sale of the remaining operations is expected to
generate cash proceeds of approximately $35.0 million.

55

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's plans also include closing three of its smaller landfills.
These landfills generated less than .2% of the Company's consolidated revenue
during 2001. In addition, the Company recorded an asset impairment for a fourth
landfill. In total, the Company recorded a loss of approximately $31.0 million
associated with the early closure of landfills or impairment charges.

The remaining amount recorded to other charges during the fourth quarter is
primarily for losses on the planned disposition of excess assets. Approximately
$1.0 million of the charge the Company recorded during the fourth quarter
relates to ongoing future lease commitments and other obligations associated
with planned divestitures.

Other charges of $6.7 million for the year ended December 31, 2000 are
included in the Consolidated Financial Statements. These costs are primarily
related to the early closure of a landfill in south Texas.

Other charges of $6.9 million for the year ended December 31, 1999 are
included in selling, general and administrative expenses in the Consolidated
Financial Statements. These costs relate to the Company's separation from
AutoNation and consist of approximately $2.0 million of compensation expense
related to the granting of certain replacement employee stock options at
exercise prices below the quoted market price of the Company's Common Stock at
the date of grant (see Note 8, Stock Options) and approximately $4.9 million of
additional charges directly related to the separation.

Certain amounts in the 2000 and 1999 Consolidated Financial Statements have
been reclassified to conform to the 2001 presentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States and necessarily include
amounts based on estimates and assumptions made by management. Actual results
could differ from these amounts. Significant items subject to such estimates and
assumptions include the depletion and amortization of landfill development
costs, accruals for closure and post-closure costs, valuation allowances for
accounts receivable, liabilities for potential litigation, claims and
assessments, and liabilities for environmental remediation, deferred taxes and
self-insurance.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of prepaid expenses and other current assets is as follows:

Inventories consist primarily of compost, mulch, and soil materials,
equipment parts, and supplies that are valued under a method that approximates
the lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. All expenditures for
maintenance and repairs are charged to expense as incurred. Expenditures for
major additions and improvements to facilities are capitalized.

56

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Expenditures for rebuilding certain heavy equipment are capitalized if the
annual adjusted depreciation expense after the rebuild is not in excess of
annual depreciation expense on a new piece of similar equipment and certain
other criteria are met. Rebuilds for heavy equipment not meeting this criteria
and rebuilds on the Company's vehicles 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 Operations.

The Company revises the estimated useful lives of property and equipment
acquired through business acquisitions to conform with its policies regarding
property and equipment. Depreciation is provided over the estimated useful lives
of the assets involved using the straight-line method. The estimated useful
lives are twenty to forty years for buildings and improvements, five to ten
years for vehicles, seven to ten years for most landfill equipment, five to
fifteen years for all other equipment, and five to ten years for furniture and
fixtures.

Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain landfill permits
and direct costs incurred to construct and develop sites. All indirect landfill
development costs are expensed as incurred. (For further information, see Note
4, Landfill and Environmental Costs.)

The Company capitalizes interest on landfill cell construction and other
construction projects in accordance with Statement of Financial Accounting
Standards No. 34, "Capitalization of Interest Cost." Construction projects must
meet the following criteria before interest is capitalized:

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. The interest capitalization rate is based upon the
Company's weighted average cost of indebtedness. Interest capitalized was $3.3
million, $2.9 million and $5.6 million for the years ended December 31, 2001,
2000 and 1999, respectively.

A summary of property and equipment is as follows:

57

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the property and equipment in
assessing their recoverability. The Company measures impairment loss as the
amount by which the carrying amount of the asset exceeds the fair value of the
asset.

Included in other charges of $99.6 million for the year ended December 31,
2001 in the accompanying Consolidated Financial Statements are write-downs to
fixed assets of $35.6 million for completed and planned divestitures and
closings of certain core and non-core businesses, and asset impairments.

During the year ended December 31, 2000, the Company recorded a $6.7
million pre-tax charge primarily related to the early closure of a landfill in
south Texas.

INTANGIBLE ASSETS

Intangible assets consist primarily of the cost of acquired businesses in
excess of the fair value of net assets acquired and other intangible assets. The
cost in excess of the fair value of net assets acquired is amortized over forty
years on a straight-line basis. Other intangible assets include values assigned
to long-term contracts and covenants not to compete and are amortized generally
over periods ranging from 3 to 25 years. Accumulated amortization of intangible
assets was $167.2 million and $129.9 million at December 31, 2001 and 2000,
respectively.

The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
assessing their recoverability. The Company measures impairment loss as the
amount by which the carrying amount of the asset exceeds the fair value of the
asset.

Included in other charges of $99.6 million for the year ended December 31,
2001 in the accompanying Consolidated Financial Statements are write-downs to
intangible assets of $54.2 million for completed and planned divestitures of
certain core businesses.

ACCRUED LIABILITIES

A summary of accrued liabilities is as follows:

58

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER CURRENT LIABILITIES

A summary of other current liabilities is as follows:

REVENUE RECOGNITION

Revenue consists primarily of collection fees from commercial, industrial,
residential and municipal customers and transfer and landfill disposal fees
charged to third parties. Collection, transfer and disposal, and other services
accounted for approximately 76%, 17% and 7%, respectively, of consolidated
revenue for the year ended December 31, 2001. Advance billings are recorded as
deferred revenue, and revenue is recognized over the period in which services
are provided. No one customer has individually accounted for more than 10% of
the Company's consolidated revenues in any of the past three years. In addition,
the Company's largest customer in 2001 comprised less than 1% of consolidated
revenue and its largest municipal franchise comprised less than 4%.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.

COMPREHENSIVE INCOME

During the year ended December 31, 2001, the Company recorded unrealized
losses of $2.8 million ($1.7 million, net of tax) relating to the change in fair
value of its fuel hedge option agreements in accordance with Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), as amended. (For further information, see
Note 10, Fuel Hedge.) Of this amount, $1.6 million, net of tax, was recorded to
other comprehensive loss for the year ended and as of December 31, 2001. The
Company had no other components of other comprehensive income (loss) for the
periods presented.

STATEMENTS OF CASH FLOWS

The Company considers all unrestricted highly liquid investments with
purchased maturities of three months or less to be cash equivalents. The effect
of non-cash transactions related to business combinations, as discussed in Note
3, Business Combinations, and other non-cash transactions are excluded from the
accompanying Consolidated Statements of Cash Flows.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, restricted cash,
receivables, accounts payable and accrued liabilities approximate fair value due
to the short maturity of these instruments. The fair value of the Company's
fixed rate unsecured notes using an estimate of interest rates currently
available to the Company is $1,080.4 million at December 31, 2001. The carrying
value of the unsecured notes is $1,046.4 million at

59

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2001. The carrying amounts of the Company's remaining notes payable
and long-term debt approximate fair value because interest rates are primarily
variable and, accordingly, approximate current market rates.

CONCENTRATION OF CREDIT RISK

The Company provides services to commercial, industrial, municipal and
residential customers in the United States. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which services are provided as well as their dispersion across
many geographic areas in the United States. The Company performs ongoing credit
evaluations of its customers, but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based on various factors including the credit risk of specific customers, age of
receivables outstanding, historical trends and other information. Reserves for
specific accounts receivable are provided when a receivable is believed to be
uncollectible or generally when a receivable is in excess of 90 days old.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141"), and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). Under SFAS 141, the use of the
poolings-of-interests method of accounting for business combinations initiated
after June 30, 2001 is prohibited. This statement also changes the criteria for
the recognition of acquired intangible assets. The provisions of SFAS 141 apply
to all business combinations accounted for using the purchase method of
accounting completed after June 30, 2001. SFAS 142 is effective for fiscal years
beginning after December 15, 2001. Under the provisions of SFAS 142, most of the
Company's intangible assets will no longer be subject to amortization. However,
the Company will be required to change its methodology for evaluating
impairments to intangible assets that are not subject to amortization. The
adoption of SFAS 141 had no impact on the Company's consolidated financial
position and results of operations. The Company is currently evaluating the
provisions of SFAS 142 and has not yet determined the effects of these changes
on its consolidated financial position and results of operations.

In June 2001, the Financial Accounting Standards Board issued Statement No.
143, "Accounting for Asset Retirement Obligations." This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002,
and will require the Company to change the accounting methodology it currently
uses to record closure and post-closure liabilities related to its landfills.
The more significant of these changes includes measuring all future obligations
at fair value and discounting obligations to reflect today's dollars. This
statement requires a cumulative effect approach to recognizing transition
amounts for existing retirement obligations. The Company is currently evaluating
the effect of adopting this statement, and has not determined whether the impact
of adoption will be material to its consolidated financial position or results
of operations.

In August 2001, the Financial Accounting Standards Board issued Statement
No. 144, "Accounting for the Impairment of Long-Lived Assets" ("SFAS 144"). This
statement supersedes Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121") and
APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." This statement establishes a
single accounting model for assets to be disposed of by sale and resolves
certain SFAS 121 implementation issues. SFAS 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001, and is
generally to be applied prospectively. The Company does not expect the adoption
of this statement to have a material effect on its consolidated financial
position or results of operations.

60

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. BUSINESS COMBINATIONS

Businesses acquired and accounted for under the purchase method of
accounting are included in the Consolidated Financial Statements from the date
of acquisition.

The Company acquired various solid waste businesses during the year ended
December 31, 2001, which were accounted for under the purchase method of
accounting. The aggregate purchase price paid for these transactions was $287.7
million. The aggregate purchase price paid, less cash and restricted cash
acquired plus debt assumed, was $247.5 million.

In July 1999, the Company entered into a definitive agreement with Allied
Waste Industries, Inc. ("Allied") to acquire certain solid waste assets. In
2000, the Company had completed the purchase of these assets for approximately
$105.5 million in cash, $85.8 million of which were acquired during 2000. In
October 1999, the Company entered into a definitive agreement with Allied for
the simultaneous purchase and sale of certain other solid waste assets for which
annual revenue was approximately $145.0 million. In 2000, the Company and Allied
completed the purchase and sale of these assets. Net proceeds from the cash
portion of the exchange of assets were $30.7 million. All of these transactions
have been accounted for under the purchase method of accounting.

In September 1998, the Company signed an agreement with Waste Management,
Inc. ("Waste Management") to acquire assets and to enter into disposal
agreements at various Waste Management facilities. By June 1999, the Company had
completed the purchase of the assets for approximately $479.6 million in cash
plus properties, $292.7 million of which were acquired during 1999. The assets
purchased included 16 landfills, 11 transfer stations and 136 commercial
collection routes across the United States, and were accounted for under the
purchase method of accounting.

In addition to the acquisitions from Allied and Waste Management, the
Company also acquired various other solid waste businesses during the years
ended December 31, 2000 and 1999, which were accounted for under the purchase
method of accounting. The aggregate purchase price the Company paid in these
transactions was $102.5 million and $430.8 million in cash, respectively.

During 2001, 2000 and 1999, $62.6 million, $30.9 million and $328.8
million, respectively, of the total purchase price paid for acquisitions and
contingent payments to former owners was allocated to landfill airspace. These
allocations were based on the discounted expected future cash flow of each
landfill relative to other assets within the acquired group and were adjusted
for other non-depletable landfill assets and liabilities acquired (primarily
closure and post-closure liabilities). Landfill purchase price is amortized
using the units-of-consumption method over total available airspace, which
includes likely to be permitted airspace where appropriate.

61

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting:

As of December 31, 2001, the Company had converted $59.5 million of the
restricted cash acquired in 2001 to cash.

The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions during 2001 accounted for under the
purchase method of accounting had occurred at the beginning of the periods
presented are as follows:

The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of the beginning of the
periods presented.

4. LANDFILL AND ENVIRONMENTAL COSTS

ACCRUED LANDFILL AND ENVIRONMENTAL COSTS

A summary of accrued landfill and environmental costs is as follows:

62

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LIFE CYCLE ACCOUNTING

The Company uses 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, construct, close and maintain a site during
the post-closure period are capitalized or accrued and charged to expense based
upon the consumption of cubic yards of available airspace. Costs and airspace
estimates are developed annually by independent engineers together with the
Company's engineers. These estimates are used by the Company's operating and
accounting personnel to annually adjust the Company's rates used to expense
capitalized costs and accrue closure and post-closure costs. Changes in these
estimates primarily relate to changes in available airspace, inflation rates and
applicable regulations. Changes in available airspace include changes due to the
addition of airspace lying in expansion areas deemed likely to be permitted.

TOTAL AVAILABLE DISPOSAL CAPACITY

As of December 31, 2001, the Company owned or operated 54 solid waste
landfills with total available disposal capacity of approximately 1.7 billion
in-place cubic yards. Total available disposal capacity represents the sum of
estimated permitted airspace plus an estimate of airspace which is likely to be
permitted.

LIKELY TO BE PERMITTED EXPANSION AIRSPACE

Before airspace included in an expansion area is determined as likely to be
permitted and, therefore, included in the Company's calculation of total
available disposal capacity, the following criteria must be met:

1. The land associated with the expansion airspace is either owned by the
Company or is controlled by the Company pursuant to an option agreement;

2. The Company is committed to supporting the expansion project financially
and with appropriate resources;

3. There are no identified fatal flaws or impediments associated with the
project, including political impediments;

4. Progress is being made on the project;

5. The expansion is attainable within a reasonable time frame; and

6. The Company believes it is likely the expansion permit will be received.

Upon meeting the Company's expansion criteria, the rates used at each
applicable landfill to expense costs to acquire, construct, close and maintain a
site during the post-closure period are adjusted to include likely to be
permitted airspace and all additional costs to be capitalized or accrued
associated with the expansion airspace.

The Company has identified three sequential 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 with state authorities; and

3. Obtaining permit approval from state authorities.

Once a landfill meets the Company's expansion criteria, management
continuously monitors each site's progress in obtaining the expansion permit. If
at any point it is determined that an expansion area no longer meets the
required criteria, the likely to be permitted airspace is removed from the
landfill's total available capacity and the rates used at the landfill to
expense costs to acquire, construct, close and maintain a site during the
post-closure period are adjusted accordingly. The Company has never been denied
an expansion
63

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

permit for a landfill that included likely to be permitted airspace in its total
available disposal capacity, although no assurances can be made that all future
expansions will be permitted as designed.

CAPITALIZED LANDFILL COSTS

Capitalized landfill costs include expenditures for land, permitting costs,
cell construction costs and environmental structures. Capitalized permitting and
cell construction costs are limited to direct costs relating to these
activities, including legal, engineering and construction associated with
excavation, liners and site berms. Interest is capitalized on landfill
construction projects while the assets are undergoing activities to ready them
for their intended use.

Costs related to acquiring land, excluding the estimated residual value of
unpermitted land, and costs related to permitting and cell construction are
depleted as airspace is consumed using the units-of-consumption method.
Environmental structures, which include leachate collection systems, methane
collection systems and groundwater monitoring wells, are charged to expense over
the shorter of their useful life or the life of the landfill.

Capitalized landfill costs may also include an allocation of purchase price
paid for landfills. For landfills purchased as part of a group of several
assets, the purchase price assigned to the landfill is determined based upon the
discounted expected future cash flows of the landfill relative to the other
assets within the acquired group. If the landfill meets the Company's expansion
criteria, the purchase price is further allocated between permitted airspace and
expansion airspace based upon the ratio of permitted versus likely to be
permitted airspace to total available airspace. Landfill purchase price is
amortized using the units-of-consumption method over the total available
airspace including likely to be permitted airspace where appropriate.

CLOSURE AND POST-CLOSURE COSTS

Landfill site closure and post-closure costs include estimated costs to be
incurred for final closure of the landfills and estimated costs for providing
required post-closure monitoring and maintenance of landfills. These costs are
accrued and charged to cost of operations based upon consumed airspace in
relation to total available disposal capacity using the units-of-consumption
method. The Company estimates future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
the technical standards of the Environmental Protection Agency's Subtitle D
regulations and applicable state and local regulations. These estimates do not
take into account discounts for the present value of total estimated costs.
Accruals for closure and post-closure costs totaled approximately $22.9 million,
$23.4 million and $17.9 million during the years ended December 31, 2001, 2000
and 1999, respectively, and are included in accrued landfill and environmental
costs in the accompanying Consolidated Balance Sheets.

A number of the Company's landfills were acquired from other entities and
recorded using the purchase method of accounting. Accordingly, the Company
assessed and recorded a closure and post-closure liability as of the date the
landfill was acquired based upon the estimated total closure and post-closure
costs and the percentage of total available disposal capacity utilized as of
such date. Thereafter, the difference between the closure and post-closure costs
accrued and the total estimated closure and post-closure costs to be incurred
are accrued and charged to expense as airspace is consumed. Estimated aggregate
closure and post-closure costs will be fully accrued for the Company's landfills
at the time such facilities cease to accept waste and are closed. As of December
31, 2001, assuming that all available landfill capacity is used, the Company
expects to expense approximately $490.4 million of such costs over the remaining
lives of these facilities.

64

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The expected future payments for closure and post-closure costs as of
December 31, 2001 are as follows:

ENVIRONMENTAL COSTS

In the normal course of business, the Company is subject to ongoing
environmental investigations by certain regulatory agencies, as well as other
claims and disputes that could result in litigation. Environmental costs are
accrued by the Company through a charge to income in the period such liabilities
become probable and can be reasonably estimated. No material amounts were
charged to expense during the years ended December 31, 2001, 2000 and 1999.

5. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt are as follows:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate maturities of notes payable and long-term debt as of December 31,
2001 are as follows:

As of December 31, 2001, the Company had approximately $691.4 million of
availability under its revolving credit facility.

As of December 31, 2001, the Company had $142.3 million of restricted cash
of which $115.2 million were proceeds from the issuance of tax-exempt bonds and
other tax-exempt financing and will be used to fund capital expenditures.
Restricted cash also includes amounts held in trust as a financial guarantee of
the company's performance.

The Company made interest payments on notes payable and long-term debt of
approximately $70.4 million, $83.4 million and $53.7 million (net of capitalized
interest of $3.3 million, $2.9 million and $5.6 million) for the years ended
December 31, 2001, 2000 and 1999, respectively.

In August 2001, the Company sold $450.0 million of public notes, which have
a fixed coupon rate of 6 3/4% and mature in 2011. Proceeds from these notes were
used to repay the Company's revolving credit facility.

The Company's ability to obtain financing through the capital markets is a
key component of its financial strategy. Historically, the Company has 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. During 2001, the Company also entered into interest rate swap
agreements to manage risk associated with fluctuations in interest rates and to
take advantage of favorable floating interest rates. The swap agreements have a
total notional value of $225.0 million and mature in 2004, which is identical to
the Company's public notes that were sold in 1999. Under the swap agreements,
the Company pays interest at floating rates based on changes in LIBOR and
receives interest at a fixed rate of 6 5/8%. The Company has designated these
agreements as hedges in changes in the fair value of the Company's fixed-rate
debt and accounts for them in accordance with SFAS 133.

As of December 31, 2001, interest rate swap agreements are reflected at
fair market value of $.2 million and are included in other current liabilities
and as an adjustment to long-term debt in the accompanying Consolidated Balance
Sheets. During the year ended December 31, 2001, the Company recorded net
interest income of $1.3 million related to its interest rate swap agreements
which is included in interest expense in the accompanying Consolidated
Statements of Operations.

The unsecured revolving credit facility requires the Company to maintain
certain financial ratios and comply with certain financial covenants. At
December 31, 2001, the Company was in compliance with the financial covenants
under these agreements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The components of the provision for income taxes are as follows:

A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is shown below:

Components of deferred income taxes in the accompanying Consolidated
Balance Sheets are as follows:

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. The Company adjusts the valuation allowance in the
period management determines it is more likely than not that deferred tax assets
will or will not be realized.

The Company made income tax payments of approximately $109.3 million, $89.3
million and $100.3 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. STOCKHOLDERS' EQUITY

In April 1998, the Company declared a $2.0 billion dividend to AutoNation
that it paid in the form of notes payable ("Company Notes").

In June 1998, the Company received a dividend of certain assets from a
former subsidiary totaling approximately $437.3 million. In June 1998, the
Company prepaid a portion of the amounts outstanding under the Company Notes
totaling $565.4 million using this dividend, cash and certain other assets.

In July 1998, the Company amended and restated its Certificate of
Incorporation to authorize capital stock consisting of (a) 50,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), and (b)
750,000,000 shares of Common Stock of which 250,000,000 shares were authorized
as Class A Common Stock, 125,000,000 shares were authorized as Class B Common
Stock and 375,000,000 shares may be designated by the Company's Board of
Directors as either Class A Common Stock or Class B Common Stock. In addition,
all 100 shares of common stock previously held by AutoNation were converted into
95.7 million shares of Class B Common Stock. The Class A Common Stock and Class
B Common Stock were identical in all respects, except holders of Class A Common
Stock were entitled to one vote per share while holders of Class B Common Stock
were entitled to five votes per share on all matters submitted to a vote of the
stockholders, including the election of directors.

In July 1998, the Company repaid amounts due to AutoNation totaling $395.4
million through the issuance of approximately 16.5 million shares of Class A
Common Stock.

In July 1998, the Company completed the Initial Public Offering of
approximately 63.2 million shares of its Class A Common Stock resulting in net
proceeds of approximately $1.4 billion. All of the proceeds from the Initial
Public Offering were used to repay remaining amounts due under the Company
Notes.

In March 1999, AutoNation converted all 95.7 million shares of its Class B
Common Stock into Class A Common Stock on a one-for-one basis. In May 1999, the
Company completed a secondary offering, in which AutoNation sold substantially
all of the Class A Common Stock it owned in the Company. The Company received no
proceeds in the secondary offering. In June 1999, the Company amended its
Certificate of Incorporation to eliminate the classifications of Common Stock.

During 2000, the Company announced that the Board of Directors authorized
the repurchase of up to $150.0 million of its Common Stock. In 2001, the Company
announced that its Board of Directors authorized the repurchase of up to an
additional $125.0 million of its Common Stock. As of December 31, 2001, the
Company had paid $150.1 million to repurchase 9.2 million shares of its Common
Stock.

8. STOCK OPTIONS

In July 1998, the Company adopted the 1998 Stock Incentive Plan ("Stock
Incentive Plan") to provide for grants of options to purchase shares of Common
Stock to employees, non-employee directors and independent contractors of the
Company who are eligible to participate in the Stock Incentive Plan. Options
granted under the Stock Incentive Plan are non-qualified and are granted at a
price equal to the fair market value of the Company's Common Stock at the date
of grant. Generally, options granted have a term of 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 vest immediately at the date of grant.
The Company has reserved 20.0 million shares of Common Stock for issuance
pursuant to options granted under the Stock Incentive Plan. As of December 31,
2001, there were 4.4 million stock options reserved for future grants under the
Stock Incentive Plan.

Prior to the Initial Public Offering, employees of the Company were granted
stock options under AutoNation stock option plans. As of March 2, 1999, options
to purchase approximately 8.0 million shares of AutoNation common stock held by
the Company's employees were canceled by AutoNation, and the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's Compensation Committee granted Replacement Options on a one-for-one
basis ("Replacement Options"). The Replacement Options retained the vesting and
exercise rights of the original options, subject to certain exercise limitations
for individuals who signed stock option repricing agreements with AutoNation.
The exercise prices for individual Replacement Options were established to
maintain the unrealized gain or loss on each option for AutoNation stock that
was canceled. Compensation expense related to the granting of certain
replacement options at exercise prices below the fair market value of the Common
Stock at the date of grant was approximately $2.0 million and has been included
in selling, general and administrative expenses in the Company's Consolidated
Statement of Operations for the year ended December 31, 1999.

The following table summarizes stock option activity from the Initial
Public Offering through December 31, 2001:

The following table summarizes information about the Company's outstanding
and exercisable stock options at December 31, 2001:

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income. Had compensation cost for stock option
grants under the Company's Stock Incentive Plan been determined pursuant to SFAS
No. 123, "Accounting for Stock-Based Compensation", the Company's net income
would have decreased accordingly. Using the Black-Scholes option pricing model,
the Company's pro forma net income and pro forma weighted average

69

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value of options granted, with related assumptions, assuming the
Replacement Options were outstanding during the periods presented, are as
follows:

9. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of common shares 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 options. In computing diluted earnings per
share, the Company utilizes the treasury stock method.

Earnings per share is calculated as follows:

10. FUEL HEDGE

The Company's results of operations are impacted by changes in the price of
diesel fuel. Because the market for derivatives in diesel fuel is limited, the
Company has entered into heating oil option agreements to manage a portion of
its exposure to fluctuations in diesel prices. The Company has minimized its
credit risk by entering into derivatives with a group of financial institutions
having investment grade ratings. The Company's derivative instruments qualify
for hedge accounting treatment under SFAS 133. In order to qualify for hedge
accounting, certain criteria must be met including a requirement that both at
inception of the hedge, and on an ongoing basis, the hedging relationship is
expected to be highly effective in offsetting cash flows attributable to the
hedged risk during the term of the hedge.

Under these option agreements, the Company receives or makes payments based
on the difference between actual average heating oil prices and predetermined
fixed prices. These option agreements provide the Company protection from fuel
prices rising above a predetermined fixed price in the option agreements but

70

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

also limit the Company's ability to benefit from price decreases below the
predetermined fixed price in the option agreements.

In accordance with SFAS 133, to the extent the option agreements are
effective in hedging changes in diesel fuel prices, unrealized gains and losses
on these option agreements are recorded, net of tax, in stockholders' equity as
a component of accumulated other comprehensive income or loss. To the extent the
change in the fuel option agreements does not perfectly offset the change in
value of diesel fuel purchases being hedged, SFAS 133 requires the ineffective
portion of the hedge to immediately be recognized as other income or expense.
The effectiveness of these option agreements as a hedge against future purchases
of diesel fuel is periodically evaluated. If the option agreements were to
become other than highly effective, the unrealized accumulated gains and or
losses would be immediately recognized in income. Realized gains and losses on
these option agreements are recognized as a component of fuel expense in the
period in which the corresponding fuel is purchased.

During June 2001, the Company entered into option agreements for
approximately 14.3 million gallons of heating oil. These option agreements
settle each month in equal notional amounts through December 2002. The option
agreements were structured as zero-cost collars indexed to the price of heating
oil. The fair value of these option agreements at December 31, 2001 was
determined by third parties to be a loss of approximately $2.8 million ($1.7
million net of tax). In accordance with SFAS 133, $1.6 million, representing the
effective portion of the change in fair value during the period net of tax, has
been recorded in stockholders' equity as a component of accumulated other
comprehensive loss. The ineffective portion of the change in fair value was a
loss of approximately $.1 million for the year ended December 31, 2001, and has
been included in other income (expense), net in the accompanying Consolidated
Statements of Operations. Realized losses of $.6 million for the year ended
December 31, 2001 related to these option agreements are included in cost of
operations in the Company's Consolidated Statement of Operations.

11. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

The Company is a party to various general legal proceedings which have
arisen in the ordinary course of business. While the results of these matters
cannot be predicted with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows. However, unfavorable resolution could affect the
consolidated financial position, results of operations or cash flows for the
quarterly periods in which they are resolved.

In September 1999, several lawsuits were filed by certain shareholders
against the Company and certain of its officers and directors in the United
States Court for the Southern District of Florida. The plaintiffs in these
lawsuits claimed, on behalf of a purported class of purchasers of the Company's
Common Stock between January 28, 1999 and August 28, 1999, that the defendants
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by,
among other things, allegedly making materially false and misleading statements
regarding the Company's growth and the assets acquired from Waste Management.
The Court subsequently consolidated these lawsuits into an action entitled In
Re: Republic Services, Inc. Securities Litigation. The plaintiffs filed a
consolidated complaint in February 2000 which was subsequently dismissed by the
Court without prejudice in February 2001. A motion to the Court by the
plaintiffs to reconsider this decision was thereafter denied and the Court
dismissed with prejudice the plaintiffs' consolidated complaint in October 2001.
No appeal of this dismissal was filed by the plaintiffs and the litigation was
concluded in the Company's favor.

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REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LEASE COMMITMENTS

During December 1999, the Company entered into a $100.0 million operating
lease facility established to finance the acquisition of operating equipment
(primarily revenue-producing vehicles). At December 31, 2001, $79.0 million was
outstanding under the lease facility. In addition, the Company and its
subsidiaries lease real property, equipment and software under various other
operating leases with terms from one to twenty-five years. Rent expense during
the year ended December 31, 2001 was approximately $27.5 million.

Future minimum lease obligations under non-cancelable real property,
equipment and software leases with initial terms in excess of one year at
December 31, 2001 are as follows:

LIABILITY INSURANCE

The Company carries general liability, vehicle liability, employment
practices liability, pollution liability, directors and officers liability,
worker's compensation and employer's liability coverage, as well as umbrella
liability policies to provide excess coverage over the underlying limits
contained in these primary policies. The Company also carries property
insurance.

The Company's insurance programs for worker's compensation, general
liability, vehicle liability and employee-related health care benefits are
effectively self-insured. Claims in excess of self-insurance levels are fully
insured. Accruals are based on claims filed and estimates of claims incurred but
not reported.

The Company's liabilities for unpaid and incurred but not reported claims
at December 31, 2001 was $57.6 million under its current risk management program
and are included in other current and other liabilities in the accompanying
Consolidated Balance Sheets. While the ultimate amount of claims incurred are
dependent on future developments, in management's opinion, recorded reserves are
adequate to cover the future payment of claims. However, it is reasonably
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 results of operations in the periods in
which such adjustments are known.

OTHER MATTERS

In the normal course of business, the Company is required to post
performance bonds, insurance policies, letters of credit and/or cash deposits as
a financial guarantee of the Company's performance. To date, the Company has
satisfied financial responsibility requirements for regulatory agencies by
making cash deposits, obtaining bank letters of credit or by obtaining surety
bonds. At December 31, 2001, surety bonds totaling $666.5 million and letters of
credit totaling $308.6 million were outstanding, which expire through 2007. In
addition, at December 31, 2001, the Company had $142.3 million of restricted
cash deposits held as financial guarantees as well as funds restricted for
capital expenditures under certain debt facilities.

The Company's business activities are conducted in the context of a
developing and changing statutory and regulatory framework. Governmental
regulation of the waste management industry requires the Company to obtain and
retain numerous governmental permits to conduct various aspects of its
operations. These
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REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 the Company.

Through the date of the Company's Initial Public Offering in July 1998, the
Company filed consolidated federal income tax returns with AutoNation. The
Internal Revenue Service is auditing AutoNation's consolidated tax returns for
fiscal years 1995 through 1999. In accordance with the Company's tax sharing
agreement with AutoNation, the Company may be liable for certain assessments
imposed by the Internal Revenue Service for the periods through June 1998,
resulting from this audit. Management believes that the tax liabilities recorded
are adequate. However, a significant assessment in excess of liabilities
recorded against the Company could have a material adverse effect on the
Company's financial position, results of operations or cash flows.

12. RELATED PARTY TRANSACTIONS

The following is a summary of agreements and transactions that the Company
is involved in with related parties. It is the Company's 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. It
is management's belief that all of these transactions met that standard at the
time such transactions were effected.

In June 1998, the Company and AutoNation entered into a services agreement
(the "Services Agreement") pursuant to which AutoNation provided to the Company
certain accounting, auditing, cash management, corporate communications,
corporate development, financial and treasury, human resources and benefit plan
administration, insurance and risk management, legal, purchasing and tax
services. The Services Agreement expired June 30, 1999. In exchange for the
provision of such services, fees were payable by the Company to AutoNation in
the amount of $1.25 million per month. Effective January 1, 1999, such fees
payable by the Company to AutoNation were reduced to $.9 million per month.
Charges under the Services Agreement for the year ended December 31, 1999 were
$5.3 million, and are included in selling, general and administrative expenses.

In July 1998, the Company signed a lease with a subsidiary of AutoNation
for 10,800 square feet of office space at AutoNation's corporate headquarters in
Fort Lauderdale, Florida. The annual lease rate is $220,320 ($20.40 per square
foot), and the Company pays for certain common area maintenance charges.

Effective January 1999, the Company amended the lease to increase the space
it rented to 14,443 square feet at an annual rate of $294,637 ($20.40 per square
foot). The lease had an initial term of one year which the Company renewed in
July 1999 for an additional one year term through June 2000. The rent includes
utilities, security, parking, building maintenance and cleaning services.

Effective April 4, 2000, the Company amended the lease further to increase
the space it is renting to 29,217 square feet at an annual rate of $20.40 per
square foot through December 31, 2000, $23.54 per square foot from January 1,
2001 through December 31, 2001 and thereafter increasing each year by 3% per
square foot over the prior year's rate. The lease runs through February 28,
2003. The Company may terminate the lease on 18 months written notice.

Pro Player Stadium is a professional sports stadium in South Florida that
is owned and controlled by H. Wayne Huizenga, the Chairman of the Company's
Board of Directors. One of the Company's subsidiaries collected solid waste
from, and leased roll-off waste containers to, Pro Player Stadium pursuant to
standard agreements under which Pro Player Stadium paid an aggregate of $303,297
in 2001. During 2001, one of the Company's subsidiaries collected solid waste
from the National Car Rental Center, an arena in Broward

73

REPUBLIC SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

County, Florida, which was operated by a subsidiary of Boca Resorts until July
2001. For these services, the Company's subsidiary was paid an aggregate of
$93,488. Mr. Huizenga is the Chairman of and controls Boca Resorts, and Harris
W. Hudson, the Vice Chairman of the Company's Board of Directors, is a director
of Boca Resorts. The Company expects to continue to provide these services in
2002 on the same terms.

In March 2000, the Company sold a Lear Jet 55 to AutoNation for
approximately $4.7 million. In January 2001, the Company purchased the Lear Jet
55 from AutoNation for approximately $4.7 million which the Company believes
approximated its fair market value.

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 2001 and 2000:

The Company's operating results for 2001 were affected by a charge of $86.1
million on an after-tax basis, or $132.0 million on a pre-tax basis, recorded
during the fourth quarter of 2001 related to completed and planned divestitures
and closings of certain core and non-core businesses, asset impairments,
downsizing its compost, mulch and soil business and related inventory
adjustments, an increase in insurance reserves and an increase in bad debt
expense related to the economic slowdown.

The Company's operating results for 2000 were affected by a $6.7 million
non-recurring charge that was recorded during the third quarter. This charge
related primarily to the early closure of a landfill in south Texas.

74

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

75

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of our company are as follows:

H. Wayne Huizenga, age 64, was named Chairman of the board of directors in
May 1998. He also served as our Chief Executive Officer from May 1998 until
December 1998. Mr. Huizenga has also served as Chairman of the board of
directors of AutoNation, Inc. (formerly known as Republic Industries, Inc.),
which owns the nation's largest chain of franchised automotive dealerships,
since August 1995. From August 1995 to September 1999, Mr. Huizenga served as
Chief Executive Officer or Co-Chief Executive Officer of AutoNation. Since
September 1996, Mr. Huizenga has served as Chairman of the board of directors of
Boca Resorts, Inc. (formerly known as Florida Panthers Holdings, Inc.), an owner
and operator of luxury resort hotels. Since January 1995, Mr. Huizenga has
served as the Chairman of the board of directors of Extended Stay America, Inc.,
an operator of extended stay lodging facilities. Since June 1998, Mr. Huizenga
has served as a director of NationsRent, Inc., a national equipment rental
company that markets products and services primarily to a broad range of
construction and industrial customers. Since June 2000, Mr. Huizenga has served
as a director of ANC Rental Corporation, which owns and operates Alamo
Rent-A-Car, National Car Rental and CarTemps USA. Since May 2000, Mr. Huizenga
has been Vice Chairman of the board of directors of Zixit Corporation, which
develops and markets products and services that enhance privacy, security and
convenience over the internet. From September 1994 until October 1995, Mr.
Huizenga served as the Vice Chairman of Viacom Inc., a diversified entertainment
and communications company. During this period, Mr. Huizenga also served as the
Chairman of the board of directors of Blockbuster Entertainment Group, a
division of Viacom. From April 1987 through September 1995, Mr. Huizenga served
as the Chairman of the board of directors and Chief Executive Officer of
Blockbuster, during which time he helped build Blockbuster from a 19-store chain
into the world's largest video rental company. In September 1994, Blockbuster
merged into Viacom. In 1971, Mr. Huizenga co-founded Waste Management, Inc.,
which he helped build into the world's largest integrated solid waste services
company, and he served in various capacities, including President, Chief
Operating Officer and director, from its inception until 1984. Mr. Huizenga also
owns the Miami Dolphins and Pro Player Stadium in South Florida.

Harris W. Hudson, age 59, was named Vice Chairman, Secretary and a director
in May 1998. Mr. Hudson has served as a director of AutoNation since August 1995
and as Vice Chairman of AutoNation since October 1996. He served as Chairman of
AutoNation's Solid Waste Group from October 1996 until July 1998. From August
1995 until October 1996, Mr. Hudson served as President of AutoNation. From 1983
until 1995, Mr. Hudson served as Chairman of the board of directors, Chief
Executive Officer and President of Hudson Management, a solid waste collection
company that he founded, which AutoNation acquired in August 1995. From 1964 to
1982, Mr. Hudson served as Vice President of Waste Management of Florida, Inc.,
a subsidiary of Waste Management, and its predecessor. Mr. Hudson also serves as
a director of Boca Resorts, Inc.

James E. O'Connor, age 52, was named Chief Executive Officer and a director
in December 1998. From 1972 to 1978 and from 1982 to 1998, Mr. O'Connor served
in various positions with Waste Management, including Senior Vice President from
1997 to 1998, Area President of Waste Management of Florida, Inc. from 1992 to
1997, Senior Vice President of Waste Management -- North America from 1991 to
1992 and Vice President -- Southeastern Region from 1987 to 1991.

John W. Croghan, age 71, was named a director in July 1998. Mr. Croghan was
President and General Partner of Lincoln Partners, a partnership of Lincoln
Capital Management Inc. He was a founder and, through 1997, the Chairman of
Lincoln Capital Management, an investment management firm. He is a director of
Schwarz Paper Company and the Chicago Mercantile Exchange.

Ramon A. Rodriguez, age 56, was named a director in March 1999. Mr.
Rodriguez has served as President and Chief Executive Officer of Madsen, Sapp,
Mena, Rodriguez & Co., P.A., a certified public

76

accounting firm, since 1971. He is also a member of the board of directors of
DME Corporation and of Swantech, LLC.

Allan C. Sorensen, age 63, was named a director in November 1998. Mr.
Sorensen is a co-founder and Vice Chairman of the board of directors of Interim
Health Care, Inc., which Interim Services, Inc., now known as Spherion
Corporation, spun-off in October 1997. Prior to that, Mr. Sorensen served as a
director and in various capacities including President, Chief Executive Officer
and Chairman of Interim Services from 1967 to 1997. He was a member of the board
of directors of H&R Block, Inc. from 1979 until 1993 when Interim Services was
spun off in an initial public offering.

Tod C. Holmes, age 53, was named Senior Vice President and Chief Financial
Officer in August 1998. Mr. Holmes served as our Vice President -- Finance from
July 1998 until August 1998 and as Vice President of Finance of AutoNation's
Solid Waste Group from January 1998 until June 1998. From 1987 to 1998, Mr.
Holmes served in various 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.

David A. Barclay, age 39, was named Senior Vice President, General Counsel
and Assistant Secretary in August 1998. Mr. Barclay served as Senior Vice
President and General Counsel of AutoNation's Solid Waste Group from March 1998
until July 1998. Prior to that, from January 1997 to February 1998, Mr. Barclay
was Vice President and Associate General Counsel of AutoNation. From June 1995
to January 1997, Mr. Barclay was Vice President, General Counsel and Secretary
of Discovery Zone, Inc. Discovery Zone filed a voluntary petition under the
federal bankruptcy laws in March 1996. Mr. Barclay served in various positions
with Blockbuster, including Senior Corporate Counsel from 1993 to 1995 and
Corporate Counsel from 1991 to 1993. Prior to joining Blockbuster, Mr. Barclay
was an attorney in private practice in Miami, Florida.

Michael J. Cordesman, age 54, was named Vice President and Chief Operating
Officer in March 2002. Mr. Cordesman was named our Eastern Region Vice President
in June 2001 and continues to serve in that capacity. From 1999 to 2001, Mr.
Cordesman served as Vice President of the Central Region for Superior Services,
Inc. From 1989 until 1999, Mr. Cordesman served in various positions with Waste
Management including Vice President of the Mid-Atlantic Region from 1992 until
1999.

Mr. Hudson is married to Mr. Huizenga's sister. Otherwise, there is no
family relationship between any of our directors and executive officers.

77

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following tables set forth compensation information regarding our Chief
Executive Officer and our other three most highly compensated executive officers
during the year ended December 31, 2001:

- ---------------

(1) Except as otherwise disclosed, the aggregate total value of perquisites,
other personal benefits, securities or property or other annual compensation
did not equal or exceed the lesser of $50,000 or ten percent of the annual
salary and bonus for any person named in the table during 1999, 2000 or
2001.
(2) The options listed in this column for 1999 include options to acquire 50,000
and 50,382 shares of our common stock which were issued to Messrs. Holmes
and Barclay, respectively, in substitute of options previously granted to
them to acquire shares of AutoNation common stock.
(3) "All Other Compensation" includes the following amounts: (a) for the fiscal
year ended December 31, 2001, the company's matching contributions under our
401(k) plan and supplemental savings plans as follows: Mr. O'Connor,
$10,054; Mr. Holmes, $5,727; and Mr. Barclay, $3,400; (b) for the fiscal
year ended December 31, 2000, the company's matching contributions under our
401(k) plan and supplemental savings plans as follows: Mr. O'Connor, $3,400;
Mr. Holmes, $3,400; and Mr. Barclay, $3,400; (c) for the fiscal year ended
December 31, 1999, the company's matching contributions under our 401(k)
plan and supplemental savings plans as follows: Mr. O'Connor, $3,200; Mr.
Holmes, $3,200; and Mr. Barclay, $3,200.
(4) Amounts reflect payments made on behalf of Mr. Hudson for aircraft use,
which were included in his Form W-2s as compensation.
(5) Amount reflects payments of certain relocation expenses for Mr. Holmes.

78

OPTION GRANTS IN YEAR ENDED DECEMBER 31, 2001

The following table sets forth certain information concerning grants of
stock options to our Chief Executive Officer and our other three most highly
compensated executive officers during the year ended December 31, 2001:

- ---------------

(1) The options granted to the named executive officers become exercisable for
25% of the shares of common stock covered by such options on each of the
first four successive anniversary dates of the date of grant.
(2) The exercise price for the options listed in the table was the fair market
value on the date of grant. The exercise price may be paid in cash, in
shares of common stock valued at fair market value on the date of exercise
or pursuant to a cashless exercise procedure under which the optionee
provides instructions to a brokerage firm to sell the purchased shares and
to remit to the company, out of the sale proceeds, an amount equal to the
exercise price plus all required withholding taxes and other deductions.
(3) The options listed in the table expire 10 years from the date of grant. An
earlier expiration date may apply in the event of the optionee's termination
of employment, retirement, death or disability.
(4) These columns show the gains executives could realize if our company's stock
appreciates at a 5% or 10% rate over the ten-year term of the option. These
growth rates are arbitrary assumptions specified by the Securities and
Exchange Commission and are not the company's predictions.

AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES

The following table sets forth certain information concerning the number of
stock options held by our Chief Executive Officer and our other three most
highly compensated executive officers as of December 31, 2001, and the value of
in-the-money options outstanding as of such date. The value of in-the-money
options was calculated by determining the difference between the closing price
of a share of our common stock as reported on the New York Stock Exchange
composite tape on December 31, 2001 and the exercise price of the options.

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LONG-TERM INCENTIVE PLAN -- AWARDS IN YEAR ENDED DECEMBER 31, 2001

The following table sets forth certain information concerning participation
by our Chief Executive Officer and our other three most highly compensated
executive officers in our long-term incentive plan during the year ended
December 31, 2001:

- ---------------

(1) See "Long-Term Incentive Plan" on page 83 for a general description of the
criteria to be applied in determining the amounts payable.
(2) During 2001, our company did not achieve the predetermined levels for
payouts for that year.

COMPENSATION OF DIRECTORS

We pay each of our non-employee directors $25,000 per year, and $1,000 for
each board or committee meeting they attend. In addition, under our 1998 Stock
Incentive Plan, we make an initial grant to each of our non-employee directors
of non-qualified stock options to purchase 50,000 shares of our common stock
when he or she is elected to the board of directors, and we make annual grants
to purchase 10,000 shares of our common stock. These options are immediately
exercisable. As of March 26, 2002, we have granted options to purchase 260,000
shares of our common stock to our non-employee directors. We also reimburse our
non-employee directors for reasonable expenses incurred for attending board of
director and committee meetings. We have not adopted any other policies
regarding directors' compensation and benefits.

We compensate Mr. Huizenga, our Chairman, separate from our executive
officers and non-employee directors. We granted Mr. Huizenga options to purchase
800,000 shares of our common stock in 1999 and have granted him options to
purchase 200,000 shares of our common stock with respect to each year since
1999. The annual grant of options to Mr. Huizenga for 2000 was made in October
1999 along with the annual grant of options to all employees for 2000. These
options become exercisable for 25% of the shares of common stock covered by such
options on each of the first four successive anniversary dates of the date of
grant. As of March 26, 2002, we have granted options to purchase 1,400,000
shares of our common stock to Mr. Huizenga.

EMPLOYMENT AGREEMENTS

James E. O'Connor. We entered into a three year employment agreement with
James E. O'Connor to serve as our President and Chief Executive Officer,
effective as of October 25, 2000. The agreement will continue in effect on a
"rolling" three year basis, meaning that at any time during the agreement, three
years will remain in the term of the agreement. The agreement provides that Mr.
O'Connor will continue his service on our board of directors and that Mr.
O'Connor will be nominated for election to our board of directors at each annual
meeting of stockholders during the term of the agreement. The agreement provides
that Mr. O'Connor will receive an annual base salary of $510,000 for our 2000
fiscal year, $650,000 for our 2001 fiscal year and $790,000 for our 2002 fiscal
year. Mr. O'Connor's salary for any year after our 2002 fiscal year will be
$790,000 unless our board of directors expressly provides otherwise. Mr.
O'Connor's annual salary may be increased at any time at the discretion of our
board of directors to reflect merit or for other increases.

In addition to his base salary, Mr. O'Connor is eligible for an annual
bonus of up to 60% of his annual base salary during the 2000 and 2001 fiscal
years and for an annual bonus of up to 70% of his annual base salary during the
2002 fiscal year and thereafter, through the term of the agreement. Mr.
O'Connor's annual bonus is based on the achievement of corporate goals and
objectives established by our board of directors or an appropriate committee of
the board of directors. Under the agreement, Mr. O'Connor is entitled to
participate in our stock option plans and other employee compensation programs
that we may establish. Mr. O'Connor

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also is entitled to health, life and disability insurance and he may participate
in other benefit programs that we may establish.

Under the agreement, we may terminate Mr. O'Connor at any time with or
without "cause" and Mr. O'Connor may at any time terminate his employment with
or without "good reason," in each case as defined in the agreement. If we
terminate Mr. O'Connor without cause or if Mr. O'Connor terminates his
employment with good reason, then Mr. O'Connor will be entitled to the following
as severance payments:

- Mr. O'Connor will continue to receive his salary through the date of
termination and afterwards for three years from the date of termination,

- Mr. O'Connor will continue to receive his health benefits for a period
ending no later than the third anniversary of the date of termination,

- all of Mr. O'Connor's stock options or other stock grants will
immediately vest in full and remain exercisable until the earlier of
their expiration or three years from the date of termination,

- all incentive cash grants shall immediately vest and be payable to Mr.
O'Connor as if all targets and conditions had been met, except where a
specific service is required of Mr. O'Connor for a specific period of
time, in which case the incentive cash grant will be payable on a pro
rata basis, and

- Mr. O'Connor will be paid the balance of all amounts credited to his
deferred compensation account.

Upon a change of control, as defined in the agreement, if, within two years
after the change of control, Mr. O'Connor's employment is terminated by us
without cause or if Mr. O'Connor terminates his employment with good reason,
then we are required to pay Mr. O'Connor:

- the severance payments described above, paid in a single lump sum, and

- three times the maximum annual bonus that Mr. O'Connor would have been
eligible to receive in the fiscal year when the termination occurred,
paid in a single lump sum.

Under the agreement, Mr. O'Connor is subject to confidentiality
obligations, as well as non-compete and non-solicitation covenants, for a three
year period following the termination of his employment.

Any successor to our company will be required to assume and perform all of
our covenants, agreements and obligations under the agreement.

Tod C. Holmes. We entered into a two year employment agreement with Tod C.
Holmes to serve as our Senior Vice President and Chief Financial Officer,
effective as of October 25, 2000. The agreement will continue in effect on a
rolling two year basis. The agreement provides that Mr. Holmes will receive an
annual base salary of $280,000 for our 2000 fiscal year, $315,000 for our 2001
fiscal year and $350,000 for our 2002 fiscal year. Mr. Holmes' salary for any
year after our 2002 fiscal year will be $350,000 unless our board of directors
expressly provides otherwise. Mr. Holmes' annual salary may be increased at any
time at the discretion of our board of directors to reflect merit or for other
increases.

In addition to his base salary, Mr. Holmes is eligible for an annual bonus
of up to 40% of his annual base salary during the 2000 and 2001 fiscal years and
for an annual bonus of up to 50% of his annual base salary during the 2002
fiscal year and thereafter, through the term of the agreement. Mr. Holmes'
annual bonus is based on the achievement of corporate goals and objectives
established by our board of directors or an appropriate committee of the board
of directors. Under the agreement, Mr. Holmes is entitled to participate in our
stock option plans and other employee compensation programs that we may
establish. Mr. Holmes also is entitled to health, life and disability insurance
and he may participate in other benefit programs that we may establish.

81

Under the agreement, we may terminate Mr. Holmes at any time with or
without "cause" and Mr. Holmes may at any time terminate his employment with or
without "good reason," in each case as defined in the agreement. If we terminate
Mr. Holmes without cause or if Mr. Holmes terminates his employment with good
reason, then Mr. Holmes will be entitled to the following as severance payments:

- Mr. Holmes will continue to receive his salary through the date of
termination and afterwards for two years from the date of termination,

- Mr. Holmes will continue to receive his health benefits for a period
ending no later than the second anniversary of the date of termination,

- all of Mr. Holmes' stock options or other stock grants will immediately
vest in full and will remain exercisable until the earlier of their
expiration or two years from the date of termination,

- all incentive cash grants shall immediately vest and be payable to Mr.
Holmes as if all targets and conditions had been met, except where a
specific service is required of Mr. Holmes for a specific period of time,
in which case the incentive cash grant will be payable on a pro rata
basis, and

- Mr. Holmes will be paid the balance of all amounts credited to his
deferred compensation account.

Upon a change of control, as defined in the agreement, if, within two years
after the change of control, Mr. Holmes' employment is terminated by us without
cause or if Mr. Holmes terminates his employment with good reason, then we are
required to pay Mr. Holmes:

- the severance payments described above, paid in a single lump sum, and

- two times the maximum annual bonus that Mr. Holmes would have been
eligible to receive in the fiscal year when the termination occurred,
paid in a single lump sum.

Under the agreement, Mr. Holmes is subject to confidentiality obligations,
as well as non-compete and non-solicitation covenants, for a three year period
following the termination of his employment.

Any successor to our company will be required to assume and perform all of
our covenants, agreements and obligations under the agreement.

David A. Barclay. We entered into a two year employment agreement with
David A. Barclay to serve as our Senior Vice President and General Counsel,
effective as of October 25, 2000. The agreement is substantially on the same
terms as Mr. Holmes' agreement, which is described above, except that Mr.
Barclay will receive an annual base salary of $225,000 for our 2000 fiscal year,
$260,000 for our 2001 fiscal year and $300,000 for our 2002 fiscal year. Mr.
Barclay's salary for any year after our 2002 fiscal year will be $300,000 unless
our board of directors expressly provides otherwise. Also, Mr. Barclay is
eligible for an annual bonus of up to 35% of his annual base salary during the
2000 and 2001 fiscal years and for an annual bonus of up to 40% of his annual
base salary during the 2002 fiscal year and thereafter, through the term of the
agreement.

Harris W. Hudson. We entered into a six and one-half year employment
agreement with Harris W. Hudson to serve as our Vice Chairman, effective as of
July 31, 2001. Mr. Hudson will receive an annual base salary of $500,000 for our
2001 and 2002 fiscal years, $400,000 for our 2003 fiscal year, $300,000 for our
2004 fiscal year, $200,000 for our 2005 fiscal year and $100,000 for our 2006
and 2007 fiscal years. Unless earlier terminated in accordance with its terms,
Mr. Hudson's agreement will expire on December 31, 2007.

Mr. Hudson will not participate in any bonus program. During the term of
the agreement, Mr. Hudson is entitled to health, life and disability insurance.
During the term of the agreement, Mr. Hudson will participate in our stock
option plans on the same basis that our independent directors participate in
these plans. Stock options previously granted to Mr. Hudson will continue to
vest and be exercisable in accordance with the terms of the options granted.

Under the agreement, we may terminate Mr. Hudson at any time with or
without "cause" and Mr. Hudson may terminate his employment with or without
"good reason," in each case as defined in the

82

agreement. If we terminate Mr. Hudson without cause or if Mr. Hudson terminates
his employment with good reason, then Mr. Hudson will be entitled to the
following as severance payments:

- Mr. Hudson will continue to receive his salary through the end of the
term of the agreement,

- Mr. Hudson will continue to receive his health benefits for a period
ending no later than the third anniversary of the date of termination,
and

- all of Mr. Hudson's stock options will immediately vest in full and will
remain exercisable until the earlier of their expiration or December 31,
2009.

Upon a change of control, as defined in the agreement, if, within two years
after a change of control, Mr. Hudson's employment is terminated by us without
cause or if Mr. Hudson terminates his employment with good reason, and if Mr.
Hudson so elects, we are required to pay to him the severance payments described
above in a single lump sum.

Under the agreement, Mr. Hudson is subject to confidentiality obligations,
as well as non-compete and non-solicitation covenants, for a three-year period
following the termination of employment.

Any successor to the company will be required to assume and perform all of
our covenants, agreements and obligations under the agreement.

STOCK INCENTIVE PLAN

In July 1998, we adopted the Republic Services, Inc. 1998 Stock Incentive
Plan to provide for the grant of options to purchase shares of common stock,
stock appreciation rights and stock grants to employees, non-employee directors
and consultants who are eligible to participate in the Stock Incentive Plan. The
Stock Incentive Plan provides for the grant of options to employees and
independent contractors at the discretion of our board of directors.
Additionally, the Stock Incentive Plan provides for an automatic grant of an
option to purchase 50,000 shares of common stock to each member of the board of
directors who joins the board of directors as a non-employee director, and an
additional automatic grant of an option to purchase 10,000 shares of common
stock each fiscal year after the member joins the board if he remains as a board
member. We have reserved 20,000,000 shares of common stock for issuance under
the Stock Incentive Plan.

In March 2002, we adopted an amendment and restatement of our Stock
Incentive Plan to, among other things, increase the number of shares of our
common stock subject to the Stock Incentive Plan to 27,000,000 shares. The
amendment and restatement also eliminates the eligibility of consultants and
independent contractors as participants. We are asking our stockholders to
approve and adopt this amendment and restatement at our annual meeting on May
16, 2002.

In January 2002, our compensation committee approved our company's annual
grant of stock options for 2002. This grant allows participants to acquire
approximately 2.2 million shares of common stock at an exercise price of $17.40
per share, which was the quoted market price as of the grant date.

As of March 26, 2002, we had options to purchase approximately 14.4 million
shares of our common stock outstanding under our 1998 Stock Incentive Plan. As
of March 26, 2002, we had approximately 2.3 million shares of our common stock
available to grant under our existing Stock Incentive Plan.

LONG-TERM INCENTIVE PLAN

In January 2001, we adopted the Republic Services, Inc. Long-Term Incentive
Plan. Our key officers are eligible to participate in the plan. The plan tracks
our performance over three-year periods beginning on January 1, 2001, with a new
three-year period beginning on January 1 of each subsequent year. Cash payments
under the long-term incentive plan will be made following the end of each
three-year period based on the achievement of specified pre-set financial
objectives that emphasize profitable growth, improved asset utilization,
increased free cash flow and increased returns on invested capital.

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401(K) PLAN

We have adopted a 401(k) Savings and Retirement Plan that qualifies for
preferential tax treatment under section 401(a) of the Internal Revenue Code.
Under the plan, all of our employees who are not covered by a collective
bargaining agreement may participate in the plan following 90 days of service
with the company. Our employees are permitted to contribute up to 15% of their
salaries (up to a maximum contribution of $11,000 per year). We match one-half
of the first four percent of an employee's contributions under the plan in
shares of our common stock. The match is made on a quarterly basis and is fully
vested when made.

SUPPLEMENTAL SAVINGS PLAN

We have adopted the Republic Services, Inc. Supplemental Savings
Plan -- Executive Salary Deferral Arrangement and the Republic Services, Inc.
Supplemental Savings Plan -- Bonus Deferral Arrangement. These plans are
designed to provide an opportunity for our key employees to participate in a
retirement program that is similar to the provisions of our 401(k) plan without
the restrictions of the Internal Revenue Code and the discrimination testing
that prevents meaningful accumulations for key, highly compensated employees.
Eligibility for the plan is determined by and at the discretion of the
compensation committee. Participants elect to make pre-tax payroll-deducted
salary and/or bonus deferrals to the respective plans at the beginning of each
plan year at any percentage up to 25%, including the amount contributed under
our 401(k) plan. Where the company match was also restricted under the 401(k)
plan (notably for employees earning in excess of $170,000), a corresponding
match amount in our common stock is available under this plan. The match will be
funded at yearend and will be calculated based upon the formula of $.50 for each
dollar deferred up to a maximum of 4% of gross compensation inclusive of the
amounts funded within the 401(k) plan, but not subject to IRS limitations.

EMPLOYEE STOCK PURCHASE PLAN

We have adopted the Republic Services, Inc. Amended and Restated Employee
Stock Purchase Plan. All of our employees who work at least 20 hours per week
and have worked for us at least three months may voluntarily participate in the
plan. During specified offering periods, these eligible employees may, through
payroll deductions, buy whole and fractional shares of our common stock at a
purchase price equal to 85% of the lower of (1) the fair market value of our
common stock on the first day of the offering period and (2) the fair market
value of our common stock on the last day of the offering period. Employees may
sell the common stock purchased under the plan after they have owned the shares
for at least 180 consecutive days.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Sorensen, Croghan and Rodriguez served as members of the
compensation committee throughout 2001. No member of the compensation committee
was an officer or employee of our company during the prior year or was formerly
an officer of our company. During the year ended December 31, 2001, none of our
executive officers served on the compensation committee of any other entity, any
of whose directors or executive officers served either on our board of directors
or on our compensation committee.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Based solely upon a review of (1) Forms 3 and 4 and amendments to each form
furnished to us pursuant to Rule 16a-3(c) under the Exchange Act during our
fiscal year ended December 31, 2001, (2) any Forms 5 and amendments to the forms
furnished to us with respect to our fiscal year ended December 31, 2001, and (3)
any written representations referred to us in subparagraph (b)(2)(i) of Item 405
of Regulation S-K under the Exchange Act, except for one transaction in 1998
that was reflected on a Form 5 filed by Harris W. Hudson on February 11, 2002,
no person who at any time during the fiscal year ended December 31, 2001 was a
director, officer or, to our knowledge, a beneficial owner of more than 10% of
our common stock failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the fiscal year ended December 31, 2001 or
prior fiscal years.

SECURITY OWNERSHIP OF FIVE PERCENT SHAREHOLDERS

The following table shows certain information as of March 26, 2002 with
respect to the beneficial ownership of common stock by each of our stockholders
who is known by us to be a beneficial owner of more than 5% of our outstanding
common stock.

- ---------------

(1) Based on Amendment No. 6 to Schedule 13G filed with the SEC by FMR Corp. on
February 14, 2002. Includes 16,773,478 shares owned by Fidelity Management
and Research Company, 934,500 shares owned by Fidelity Management Trust
Company, 890,000 shares owned by Fidelity International Limited, and 1,000
shares owned by Strategic Advisors, Inc. Fidelity Management and Research
Company, Fidelity Management Trust Company, Fidelity International Limited
and Strategic Advisors, Inc. are all wholly-owned subsidiaries of FMR Corp.

(2) Based on Amendment No. 2 to Schedule 13G filed with the SEC by Cascade
Investment LLC on February 12, 2002.

(3) Based on Amendment No. 1 to Schedule 13G filed with the SEC by Wellington
Management Company, LLP on February 14, 2002.

(4) Based on Amendment No. 1 to Schedule 13G filed with the SEC by Legg Mason,
Inc. on February 8, 2002.

(5) Based on Amendment No. 1 to Schedule 13G filed with the SEC by Vanguard
Windsor Funds -- Vanguard Windsor Fund on February 12, 2002.

85

SECURITY OWNERSHIP OF MANAGEMENT

The following table shows certain information as of March 26, 2002 with
respect to the beneficial ownership of common stock by (1) each of our
directors, (2) each of the executive officers listed in the "Summary
Compensation Table" on page 78 and (3) all of our current directors and
executive officers as a group. We have adjusted share amounts and percentages
shown for each individual, entity or group in the table to give effect to shares
of common stock that are not outstanding but which the individual, entity or
group may acquire upon exercise of all options exercisable within 60 days of
March 26, 2002. However, we do not deem these shares of common stock to be
outstanding for the purpose of computing the percentage of outstanding shares
beneficially owned by any other individual, entity or group.

- ---------------

* Less than 1 percent

(1) The aggregate amount of common stock beneficially owned by Mr. Huizenga
consists of vested options to purchase 750,000 shares.
(2) The aggregate amount of common stock beneficially owned by Mr. Hudson
consists of 1,000 shares owned directly by him and vested options to
purchase 560,000 shares.
(3) The aggregate amount of common stock beneficially owned by Mr. O'Connor
consists of 7,200 shares owned directly by him and vested options to
purchase 338,125 shares.
(4) The aggregate amount of common stock beneficially owned by Mr. Croghan
consists of 100,000 shares owned directly by him and vested options to
purchase 90,000 shares.
(5) The aggregate amount of common stock beneficially owned by Mr. Rodriguez
consists of vested options to purchase 80,000 shares.
(6) The aggregate amount of common stock beneficially owned by Mr. Sorensen
consists of vested options to purchase 90,000 shares.
(7) The aggregate amount of common stock beneficially owned by Mr. Holmes
consists of 11,048 shares owned directly by him and vested options to
acquire 127,500 shares.
(8) The aggregate amount of common stock beneficially owned by Mr. Barclay
consists of vested options to acquire 127,882 shares.
(9) The aggregate amount of common stock beneficially owned by all directors and
executive officers as a group consists of (a) 119,248 shares and (b) vested
options to purchase 2,163,507 shares.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Before our initial public offering on July 1, 1998, we had been a
wholly-owned subsidiary of AutoNation. AutoNation currently owns no shares of
our common stock. Mr. Huizenga is the Chairman of the board of directors of
AutoNation and a member of the board of directors of ANC Rental Corporation. Mr.
Hudson is the Vice Chairman and a director of AutoNation. Messrs. Huizenga and
Hudson in the aggregate own in excess of 10% of AutoNation and ANC Rental
Corporation. As a result, the following transactions between our company and
AutoNation and ANC Rental Corporation may be deemed to be intercompany or
related party transactions.

SEPARATION AND DISTRIBUTION AGREEMENT

The Separation and Distribution Agreement that we entered into with
AutoNation in June 1998 provided for the principal corporate transactions
required to effect our separation from AutoNation, and for other arrangements
governing the future relationship between our company and AutoNation. The
agreement provides for indemnification by each party in favor of the other party
with respect to specified matters relating to the Separation and Distribution
Agreement, our initial public offering and the secondary offering of our common
stock owned by AutoNation. The Separation and Distribution Agreement also
provides for indemnifications between our company and AutoNation regarding
contingent liabilities primarily relating to our respective businesses or
otherwise assigned to our company, and provides that the parties will each have
the exclusive right to any benefit received with respect to any contingent gain
that primarily relates to the business of that party, or that is expressly
assigned to that party. Under the terms of the Separation and Distribution
Agreement, AutoNation has agreed that, for a period of five years after we are
no longer a subsidiary of AutoNation, AutoNation will not directly or indirectly
compete with us in the solid waste services industry anywhere in North America,
and we have agreed that, for a period of five years after that time, we will not
directly or indirectly compete with AutoNation in the automotive retail or
vehicle rental industries anywhere in North America.

TAX INDEMNIFICATION AND ALLOCATION AGREEMENT

In connection with our separation from AutoNation, we entered into a Tax
Indemnification and Allocation Agreement with AutoNation that provides that
AutoNation will indemnify us for income taxes that we might incur with respect
to certain internal restructuring transactions that we entered into in June 1998
in connection with our initial public offering.

We were included in AutoNation's consolidated group for federal income tax
purposes for periods during which AutoNation beneficially owned at least 80% of
the total voting power and value of our outstanding common stock. Each
corporation that is a member of a consolidated group during any portion of the
group's tax year is jointly and severally liable for the federal income tax
liability of the group for that year. We and our subsidiaries stopped being
members of AutoNation's consolidated group when we became a public company in
July 1998. The Tax Indemnification and Allocation Agreement allocates tax
liabilities between AutoNation and our company during the periods when we were
included in AutoNation's consolidated group, and provides each company rights of
indemnification.

LEASE

In July 1998, we signed a lease with a subsidiary of AutoNation for 10,800
square feet of office space at AutoNation's corporate headquarters in Fort
Lauderdale, Florida. The annual lease rate is $220,320 ($20.40 per square foot),
and we pay for certain common area maintenance charges.

Effective January 1999, we amended the lease to increase the space we are
renting to 14,443 square feet at an annual rate of $294,637 ($20.40 per square
foot). The lease had an initial term of one year which we renewed in July 1999
for an additional one year term through June 2000. The rent includes utilities,
security, parking, building maintenance and cleaning services.

87

Effective April 4, 2000, we amended the lease further to increase the space
we are renting to 29,217 square feet at an annual rate of $20.40 per square foot
through December 31, 2000, $23.54 per square foot from January 1, 2001 through
December 31, 2001 and thereafter increasing each year by 3% per square foot over
the prior year's rate. The lease runs through February 28, 2003. We may
terminate the lease on 18 months written notice.

We believe that the lease is on terms no less favorable than could be
obtained from persons unrelated to our company.

OTHER TRANSACTIONS WITH AUTONATION AND ANC RENTAL CORPORATION

During 2001, we collected solid waste from, and leased roll-off containers
to, certain automotive retail and other properties of AutoNation. We provided
all of these services at standard rates. We continue to provide these services
to AutoNation on the same terms. During 2001, we rented vehicles from ANC Rental
Corporation under standard form vehicle rental agreements under which we were
charged standard rates.

In March 2000, we sold a Lear Jet 55 to AutoNation for approximately 4.7
million. In January 2001, we purchased the Lear Jet 55 from AutoNation for
approximately $4.7 million which we believe approximated its fair market value.

OTHER TRANSACTIONS WITH RELATED PARTIES

The following is a summary of other agreements and transactions that the
company is involved in with related parties. It is the Company's 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. It
is management's belief that all of these transactions met that standard at the
time such transactions were effected.

Pro Player Stadium is a professional sports stadium in South Florida that
is owned and controlled by Mr. Huizenga. One of our subsidiaries collected solid
waste from, and leased roll-off waste containers to, Pro Player Stadium pursuant
to standard agreements under which Pro Player Stadium paid an aggregate of
$303,297 in 2001. During 2001, one of our subsidiaries collected solid waste
from the National Car Rental Center, an arena in Broward County, Florida, which
was operated by a subsidiary of Boca Resorts, Inc. until July 2001. For these
services, our subsidiary was paid an aggregate of $93,488. Mr. Huizenga is the
Chairman of and controls Boca Resorts, Inc. and Mr. Hudson is a director of Boca
Resorts, Inc. We expect to continue to provide these services in 2002 on the
same terms.

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(a) Exhibits:

- ---------------

* filed herewith

(b) Financial Statement Schedule. The following financial statement
schedule is filed on page 92 herewith:

Financial Statement Schedule II, Valuation and Qualifying Accounts and
Reserves, for each of the Three Years Ended December 31, 2001.

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

(c) Reports on Form 8-K:

Form 8-K, filed and dated October 29, 2001, including a press release
announcing the Company's operating results for the three and nine months ended
September 30, 2001, and a press release announcing the board of directors'
approval of an additional $125.0 million for the Company's Common Stock
repurchase program.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

REGISTRANT:

REPUBLIC SERVICES, INC.

By: /s/ H. WAYNE HUIZENGA
------------------------------------
H. Wayne Huizenga
Chairman of the Board

March 28, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

91

REPUBLIC SERVICES, INC.

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN MILLIONS)

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(1) Allowance of acquired and divested businesses, net.

92

EXHIBIT INDEX