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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
 
     
(Mark One)    
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended December 31, 2010
OR
o
  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.)
 
     
18500 North Allied Way
  85054
Phoenix, Arizona
  (Zip Code)
(Address of Principal Executive Offices)
   
 
Registrant’s telephone number, including area code: (480) 627-2700
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 $.01 per share
  The New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)  Yes þ     No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
             
Large accelerated filer þ
  Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ
 
As of June 30, 2010, the aggregate market value of the shares of the Common Stock held by non-affiliates of the registrant was $11.4 billion.
 
As of February 10, 2011, the registrant had outstanding 384,060,682 shares of Common Stock (excluding treasury shares of 16,476,812).
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Registrant’s Proxy Statement relative to the 2011 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.
 


 

 
TABLE OF CONTENTS
 
                 
  PART I              
  Item 1.     Business     2  
  Item 1A.     Risk Factors     16  
  Item 1B.     Unresolved Staff Comments     25  
  Item 2.     Properties     25  
  Item 3.     Legal Proceedings     25  
  Item 4.     (Removed and Reserved)     30  
             
  PART II              
  Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     30  
  Item 6.     Selected Financial Data     33  
  Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations     34  
  Item 7A.     Quantitative and Qualitative Disclosures About Market Risk     76  
  Item 8.     Financial Statements and Supplementary Data     78  
  Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     155  
  Item 9A.     Controls and Procedures     155  
  Item 9B.     Other Information     156  
             
  PART III              
  Item 10.     Directors, Executive Officers and Corporate Governance     156  
  Item 11.     Executive Compensation     156  
  Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     156  
  Item 13.     Certain Relationships and Related Transactions, and Director Independence     157  
  Item 14.     Principal Accounting Fees and Services     157  
             
  PART IV              
  Item 15.     Exhibits, Financial Statement Schedules     157  
        Signatures     167  
 EX-10.17
 EX-10.39
 EX-10.40
 EX-21.1
 EX-23.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT


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Unless the context requires otherwise, all references in this Form 10-K to “Republic”, “the company,” “we,” “us” and “our” refer to Republic Services, Inc. and its consolidated subsidiaries.
 
PART I
 
ITEM 1.  BUSINESS
 
Overview
 
We are the second largest provider of services in the domestic non-hazardous solid waste industry as measured by revenue. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 348 collection companies in 40 states and Puerto Rico. We own or operate 204 transfer stations, 193 active solid waste landfills and 76 recycling facilities. We also operate 73 landfill gas and renewable energy projects. We were incorporated as a Delaware corporation in 1996.
 
Based on analysts’ reports and industry trade publications, we believe that the United States non-hazardous solid waste services industry generates annual revenue of approximately $54 billion, of which approximately 60% is generated by publicly owned waste companies. We believe that we and one other public waste company generated in excess of 60% of the publicly owned companies’ total revenue. Additionally, industry data indicates that the non-hazardous waste industry in the United States remains fragmented as privately held companies and municipal and other local governmental authorities generate approximately 17% and 23%, respectively, of total industry revenue. In general, growth in the solid waste industry is linked to growth in the overall economy, including the level of new household and business formation and changes in residential and commercial construction activity.
 
Our operations are national in scope, but the physical collection and disposal of waste is very much a local business; therefore, the dynamics and opportunities differ in each of our markets. By combining local operating management with standardized business practices, we can drive greater overall operating efficiency across the company, while maintaining day-to-day operating decisions at the local level, closest to the customer. We implement this strategy through an organizational structure that groups our operations within a corporate, region and area structure. We manage our operations through four geographic operating segments which are also our reportable segments: Eastern, Midwestern, Southern and Western. The boundaries of our operating segments may change from time to time. Each of our regions is organized into several operating areas and each area contains multiple operating locations. Each of our regions and substantially all our areas provide collection, transfer, recycling and disposal services. We believe this structure facilitates the integration of our operations within each region, which is a critical component of our operating strategy. It also allows us to maximize the growth opportunities in each of our markets and to operate the business efficiently, while maintaining effective controls and standards over operational and administrative matters, including financial reporting. See Note 14, Segment Reporting, to our consolidated financial statements in Item 8 of this Form 10-K for further discussion of our operating segments.
 
On December 5, 2008, we acquired all the issued and outstanding shares of Allied Waste Industries, Inc. (Allied) in a stock-for-stock transaction for an aggregate purchase price of $12.1 billion, which included $5.4 billion of debt, at fair value. The acquisition created a company with a strong, national operating platform. The foundation of this platform is our large network of disposal sites, which provides us with a far stronger vertically integrated operating structure than either company would have been able to achieve on its own. We believe that our improved vertically integrated operations will be a key driver of our future profitability.
 
We had revenue of $8.1 billion, $8.2 billion and $3.7 billion and operating income of $1.5 billion, $1.6 billion and $0.3 billion for the years ended December 31, 2010, 2009 and 2008, respectively. In addition to the Allied acquisition, a number of items impacted our 2010, 2009 and 2008 financial results. For a description of these items, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview and Consolidated Results of Operations, included elsewhere in this Form 10-K.


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During the past several years, we supported our internal growth strategy with our presence in markets with higher than average population growth. We believe our presence in these markets positions us to experience growth at rates that are generally higher than those of declining population growth.
 
We continue to focus on enhancing stockholder value by implementing our operating and financial strategies. To ensure that our goals relative to these strategies are achieved, we have developed and implemented incentive programs that help focus our entire company on realizing key performance metrics, including increasing free cash flow, achieving targeted earnings, maintaining and improving returns on invested capital, and maintaining the integration synergies we have achieved. Our operating and financial strategies are described further herein.
 
Operating Strategy
 
We seek to leverage existing assets and revenue growth to increase operating margins and enhance stockholder value. Our operating strategy for accomplishing this goal includes the following:
 
  •   using the extensive industry knowledge and experience of our executive management team,
 
  •   using a decentralized management structure in overseeing day-to-day operations,
 
  •   using our strong, integrated operating platform, and
 
  •   implementing major initiatives aimed at improving the quality of our service and our operating margins.
 
Experienced Executive Management Team
 
We believe that we have one of the most experienced executive management teams in the solid waste industry.
 
Donald W. Slager became our CEO and remained our President on January 1, 2011, after having served as our President and Chief Operating Officer (COO) from the Allied acquisition in December 2008 until then. Prior to the acquisition, Mr. Slager worked for Allied from 1992 through 2008 and served in various management positions, including President and COO from 2004 through 2008 and Executive Vice President and COO from 2003 to 2004. From 2001 to 2003, Mr. Slager served as Senior Vice President, Operations. Mr. Slager held various management positions at Allied from 1992 to 2003, and was previously General Manager at National Waste Services, where he served in various management positions since 1985. Mr. Slager has over 30 years of experience in the solid waste industry. Mr. Slager has been a member of our Board of Directors since June 24, 2010.
 
Tod C. Holmes has served as our Chief Financial Officer since August 1998. Mr. Holmes served as our Vice President of Finance from June 1998 until August 1998 and as Vice President of Finance of our former parent company’s Solid Waste Group from January 1998 until June 1998. From 1987 to 1998, Mr. Holmes served in various management positions with Browning-Ferris Industries, Inc., including Vice President, Investor Relations from 1996 to 1998, Divisional Vice President, Collection Operations from 1995 to 1996, Divisional Vice President and Regional Controller – Northern Region from 1993 to 1995, and Divisional Vice President and Assistant Corporate Controller from 1991 to 1993. Mr. Holmes has over 23 years of experience in the solid waste industry.
 
Kevin Walbridge has served as our Executive Vice President – Operations since October 1, 2010. Mr. Walbridge served as our Senior Vice President of Midwestern Operations from December 2008 until then, and served as our Central Region Vice President from the time he joined us in 1997 through December 2008. Before joining us, Mr. Walbridge served as the Vice President Operations/Co-Owner of National Serv All from 1996 to 1997, the President of Waste Management of Alameda County from 1993 to 1996, and the Division President of Empire Waste Management from 1985 to 1993. Mr. Walbridge has over 28 years of experience in the solid waste industry.
 
Michael P. Rissman has served as our Executive Vice President, General Counsel and Corporate Secretary since August 2009. Previously, Mr. Rissman had served as acting General Counsel and Corporate Secretary


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from March 2009. Mr. Rissman joined Allied as Vice President and Deputy General Counsel in July 2007 and continued in the same positions at Republic following the Allied acquisition in December 2008. Prior to joining Allied, Mr. Rissman was a partner at Mayer, Brown, Rowe & Maw, LLP, in Chicago, where he worked from 1990 until coming to Allied in 2007.
 
Our regional senior vice presidents have an average of 25 years of experience in the industry.
 
Decentralized Management Structure
 
We rely on a decentralized management structure to minimize administrative overhead costs and to more efficiently manage our day-to-day operations. Our local management has extensive industry experience in growing, operating and managing solid waste companies and has substantial experience in their local geographic markets, allowing us to quickly respond to and meet our customers’ needs and stay in touch with local businesses and municipalities. Each regional management team includes a senior vice president, vice president-controller, vice president of human resources, vice president of sales, vice president of operations support, director of safety, director of engineering and environmental management, and director of market planning and development. We believe that our strong regional management teams allow us to more effectively and efficiently drive our initiatives and help ensure consistency throughout the organization. Our regional management teams and area presidents have extensive authority, responsibility and autonomy for operations within their respective geographic markets. Compensation for area management teams is primarily based on improving operating income, free cash flow and return on invested capital generated in each manager’s geographic area of responsibility. In addition, through long-term incentive programs, including stock options, we believe we have achieved one of the lowest turnover levels in the industry for our local management teams. As a result of retaining experienced managers with extensive knowledge of and involvement in their local communities, we are proactive in anticipating customers’ needs and adjusting to changes in our markets. We also seek to implement the best practices of our various regions and areas throughout our operations to continue improving operating margins.
 
Strong, Integrated Operating Platform
 
We believe that with the Allied acquisition we have created a company with a strong, national operating platform. Most previous attempts to consolidate the waste industry focused on a “roll up” strategy often involving relatively young companies solely focused on increasing revenue through acquisitions. We believe that the combination of Republic’s and Allied’s mature and proven business practices has been a critical component of our success and has driven the realization of approximately $190 million in annual run-rate synergies since completion of the acquisition. During 2011, we will continue to monitor the synergies we believe we have achieved and we will implement additional initiatives aimed at further improving operating margins.
 
Separate from acquisition related integration activities, we seek to achieve a high rate of internalization by controlling waste streams from the point of collection through disposal. Our fully integrated markets generally have a lower cost of operations and more favorable cash flows than our non-integrated markets. Through acquisitions, landfill operating agreements and other market development activities, we create market-specific, integrated operations typically consisting of one or more collection companies, transfer stations and landfills. We consider acquiring companies that own or operate landfills with significant permitted disposal capacity and appropriate levels of waste volumes.
 
We also seek to acquire solid waste collection companies in markets in which we own or operate landfills. In addition, we generate internal growth in our disposal operations by developing new landfills and expanding our existing landfills from time to time in markets in which we have significant collection operations or in markets that we determine lack sufficient disposal capacity. During the years ended December 31, 2010, 2009 and 2008, approximately 67%, 68% and 58%, respectively, of the total waste volume that we collected was disposed at landfill sites that we own or operate (internalization). This increase in internalization from 2008 to 2009 is due to a higher concentration of integrated hauling and landfill operations acquired in the Allied acquisition. In a number of our larger markets, we and our competitors are required to take waste to government-controlled disposal facilities (flow-control). This provides us with an opportunity to effectively


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compete in these markets without investing in landfill capacity. By further integrating operations in existing markets, we may be able to reduce our disposal costs.
 
We continue to invest in integrating and expanding our information systems and technology platform. Our platform consists of the best of the legacy systems from both Republic and Allied. During 2009, we converted the entire company to a single payable and general ledger system. During 2010, we converted to a single operating system and we transitioned the entire company to a single payroll and human resource system. Our future technology related initiatives will include customer relationship management, billing, productivity and maintenance systems. We believe that the combination of these systems will prove to be a competitive advantage for our company.
 
Major Initiatives
 
During 2010, we believe we completed the most successful integration and consolidation of two major companies in the waste industry. The integration process allowed us to select the best tools and systems and to adopt the best practices of these two successful companies. During 2011, we will continue or begin to implement the following major initiatives aimed at improving profitability:
 
  •   Safety. Safety remains our highest priority for all of our employees and the communities we serve. Our long-standing commitment to safety is unwavering and is evident in our mission statement. We will continue to improve the driver safety training program and reward our people for operating in a safe and conscientious manner in all our lines of business.
 
  •   Customer Experience. We strive to provide the highest level of customer service. Our policy is to periodically visit each commercial account to ensure customer service and satisfaction. In addition to visiting existing customers, a salesperson develops a base of prospective customers within each market. We also have municipal marketing representatives that are responsible for working with each municipality or community to which we provide residential service to ensure customer satisfaction. Additionally, the municipal representatives organize and drive the effort to obtain new or renew municipal contracts in their service areas.
 
We will continue to reinvest in our existing fleet of vehicles, equipment, landfills and other facilities to ensure the highest level of service to our customers and the communities we serve. In addition, we continue to focus on innovative waste disposal processes and programs to help our customers achieve their goals related to sustainability and environmentally sound waste practices. We believe that these in turn will help us achieve profitable growth.
 
During 2011, we will continue to exceed our customers’ expectations through the consistent delivery of high quality service and an expanded use of technology to make it easier to do business with us. Our technology eventually will allow more customers to access information and perform functions like change service requests and make payments over the internet that were previously done with the assistance of a customer service representative. By increasing the ease of use and functionality of our web-based market presence, we believe we will enhance customer satisfaction and retention while we lower our costs.
 
  •   Economies of Scale, Cost Efficiencies and Asset Utilization. We continue to identify and implement best practices throughout our organization with the goal of permanently improving overall operating and financial results. These best practice initiatives focus on critical areas of our operations such as landfill operations, truck routing, recycling, maintenance and related service efficiencies, purchasing and administrative activities. The consolidation of acquired businesses into existing operations reduces costs by decreasing capital and expenses used for truck routing, personnel, equipment and vehicle maintenance, inventories and back-office administration. Generally, we consolidate our acquired administrative centers to reduce our general and administrative costs. Our goal is to maintain our selling, general and administrative costs at no more than 10.0% of revenue, which we believe is appropriate given our existing business platform.


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In addition, our procurement initiatives ensure that we negotiate volume discounts for goods and services purchased. Further, we have taken steps to maximize the utilization of our assets. For example, to reduce the number of collection vehicles and maximize the efficiency of our fleet and drivers, we use a route optimization program to minimize drive times and improve operating density. Additionally, in 2011 we will continue to convert certain of our residential routes to single driver side-load service, thereby increasing employee safety and increasing route efficiency and service times. We continue to invest in our material recovery facilities by converting certain facilities from dual to single stream sorting and by updating our technology and equipment, all resulting in higher levels of productivity and recovered materials from a more efficient collection and recovery process. By using assets more efficiently, operating expenses can be reduced.
 
  •   Targeted Profitable Growth. Our growth strategy focuses on increasing revenue, gaining market share and enhancing stockholder value through internal growth in price and volume as well as acquisitions. Our internal growth strategy focuses on retaining existing customers and obtaining new commercial, municipal and industrial customers through our well-managed sales and marketing activities.
 
Price Growth. We seek to secure price increases necessary to offset increased costs, to improve our operating margins and to obtain adequate returns on our substantial investments in assets such as our landfills.
 
Volume Growth. Growth through increases in our customer base and services provided is the most capital efficient means for us to build our business. We seek to obtain long-term contracts for collecting solid waste in markets with growing populations. These include exclusive franchise agreements with municipalities as well as commercial and industrial contracts. By obtaining such long-term agreements, we have the opportunity to grow our contracted revenue base at the same rate as the underlying population growth in these markets. We believe it is important to have secured exclusive, long-term franchise agreements in growing market areas. We believe that this positions us to experience internal growth rates that are generally higher than our industry’s overall growth rate. In addition, we believe that by securing a base of long-term recurring revenue in growing population markets, we are better able to protect our market position from competition and our business may be less susceptible to downturns in economic conditions. Volume growth includes not only expanding landfill and transfer station capacity and investing in trucks and containers, but also includes investing in information tools and training needed to ensure high productivity and quality service throughout all functional areas of our business. We work to increase collection and disposal volumes while ensuring that prices charged for such services provide an appropriate return on our capital investment.
 
Sales and Marketing Activities. We seek to manage our sales and marketing activities to enable us to capitalize on our leading position in many of the markets in which we operate. We provide a National Accounts program in response to the needs of our national clients, centralizing services to effectively manage their needs, such as minimizing their procurement costs. We currently have approximately 1,100 sales and marketing employees in the field who are compensated using a commission structure that is focused on generating high levels of quality revenue. Generally, these employees directly solicit business from existing and new business from prospective commercial, industrial, municipal and residential customers. In training sales personnel we emphasize increased price and cost structures as well as the use of a customer relationship management system that assists in tracking sales opportunities. It also tracks renewal periods for potential commercial, industrial and franchise contracts. We believe our National Accounts program offers an opportunity for sales growth over the next several years.
 
Development Activities. We seek to identify opportunities to further our position as an integrated service provider in markets where we are not fully integrated. Where appropriate, we seek to obtain permits to build transfer stations, recycling facilities, and landfills that would provide vertically integrated waste services or expand the service areas for our existing disposal sites. Development projects, while generally less capital intensive than acquisitions, typically require extensive permitting efforts that can take years to complete with no assurance of success. We undertake development


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projects when we believe there is a reasonable probability of success and where reasonably priced acquisition opportunities are not available.
 
Acquisition Growth. Our acquisition growth strategy focuses primarily on privately held solid waste and recycling companies and the waste and recycling operations of municipal and other local governmental authorities that complement our existing business platform. We believe our ability to acquire privately held companies is enhanced by increasing competition in the solid waste industry, increasing capital requirements due to changes in solid waste regulatory requirements, and the limited number of exit strategies for privately held companies. We also seek to acquire operations and facilities from municipalities that are privatizing, as they seek to raise capital and reduce risk. In addition, we will continue to evaluate opportunities to acquire operations and facilities that are being divested by other publicly owned waste companies. Our acquisition growth strategy focuses primarily on the following:
 
  •   acquiring privately held businesses that position us for growth,
 
  •   acquiring well-managed companies and, when appropriate, retaining local management, and
 
  •   acquiring operations and facilities from municipalities that are privatizing and from publicly owned companies that are divesting of assets.
 
In addition, we have and may continue to exchange businesses with other solid waste companies if by doing so there is a net benefit to our business platform. These activities allow us to increase revenue and market share, lower our cost of operations as a percentage of revenue, and consolidate duplicative facilities and functions to maximize cost efficiencies and economies of scale.
 
  •   Durability. We believe our decentralized management structure provides us with a competitive advantage by allowing us to quickly respond to and meet customer’s needs and to stay in touch with local businesses and municipalities. However, functions such as fleet maintenance and customer service are areas where we believe we can continue to build durable, consistent processes across all operating divisions. Through standardization of core functions, we believe we can minimize variability in our maintenance facilities resulting in a safer fleet of vehicles and lower costs. By automating the collection process, we believe we can improve safety, increase productivity and reduce labor costs, thereby increasing operating margins.
 
For certain risks related to our operating strategy, see Item 1A. Risk Factors.
 
Financial Strategy
 
Key components of our financial strategy include generating and growing free cash flow and sustaining or improving our return on invested capital. Our definition of free cash flow, which is not a measure determined in accordance with United States generally accepted accounting principles (U.S. GAAP), is cash provided by operating activities less purchases of property and equipment, plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows. We believe that free cash flow is a driver of stockholder value and provides useful information regarding the recurring cash provided by our operations. Free cash flow also demonstrates our ability to execute our financial strategy, which includes reinvesting in capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit ratings and reducing debt, paying cash dividends, repurchasing our stock, and maintaining and improving our market position through business optimization. Free cash flow is also a key metric used to determine management’s compensation.
 
We manage our free cash flow by ensuring that capital expenditures and operating asset levels are appropriate in light of our existing business and growth opportunities and by closely managing our working capital, which consists primarily of accounts receivable and accounts payable.


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We have used and will continue to use our cash flow to maximize stockholder value as well as our return on invested capital. Our Financial Strategy includes:
 
Market Growth and Optimization
 
Within our markets, our goal is to deliver sustainable, long-term profitable growth while efficiently operating our assets to generate acceptable rates of return. We allocate capital to businesses, markets and development projects to support growth in order to achieve acceptable rates of return. We develop previously non-permitted, non-contiguous landfill sites (greenfield landfill sites). We also expand our existing landfill sites, when possible. We supplement this organic growth with acquisitions of operating assets, such as landfills, transfer stations, material recovery facilities and tuck-in acquisitions of collection and disposal operations in existing markets. We continuously evaluate our existing operating assets and their deployment within each market to determine if we have optimized our position and to ensure appropriate investment of capital. Where operations are not generating acceptable returns, we examine opportunities to achieve greater efficiencies and returns through the integration of additional assets. If such enhancements are not possible, we may ultimately decide to divest the existing assets and reallocate resources to other markets.
 
Enhancing Stockholder Value
 
  •   Dividends. In July 2003, our Board of Directors initiated a quarterly cash dividend of $0.04 per share. Our quarterly dividend has increased from time to time thereafter, the latest increase occurring in the third quarter of 2010 to $0.20 per share, representing a compound annual growth rate of approximately 26%. We expect to continue paying quarterly cash dividends and may consider additional increases of our quarterly cash dividend if we believe it will enhance stockholder value.
 
  •   Share Repurchase. In November 2010, our board of directors approved a share repurchase program pursuant to which we may repurchase up to $400.0 million of our outstanding shares of common stock. As of December 31, 2010, we used $41.1 million under the program to repurchase 1.4 million shares at an average cost per share of $28.46. We expect to use the remaining funds in this program to repurchase shares during 2011. We intend to execute our financial strategy while still maintaining flexibility to take advantage of market growth opportunities and still maintaining our investment grade credit ratings.
 
Capital Structure
 
  •   Debt. Following our December 5, 2008 Allied acquisition, we initiated a debt reduction program which, to date, has resulted in a net reduction in borrowings of $1.3 billion funded by cash flow from operations and proceeds from disposition of assets. We also refinanced $1.5 billion in senior notes and $677.4 million in tax-exempt financings which reduced the average coupon rate on our senior notes and tax-exempt financings, on a weighted average basis, by more than 125 basis points while extending our debt maturities and thereby giving greater stability to our capital structure. We anticipate taking further advantage of capital market opportunities to mitigate our financial risk by issuing new debt in 2011 and using the proceeds to repay existing debt. Any early extinguishment of debt may result in a charge in the period in which the debt is repurchased and retired.
 
  •   Credit Ratings. We believe that a key component of our financial strategy includes maintaining investment grade ratings on our senior debt, which was rated BBB by Standard & Poor’s, BBB by Fitch and Baa3 by Moody’s as of December 31, 2010. Such ratings have allowed us, and should continue to allow us, to readily access capital markets at competitive rates. Our cash utilization strategy will continue to focus on maintaining our investment grade credit ratings.
 
For certain risks related to our financial strategy, see Item 1A. Risk Factors.
 
Operations
 
Our operations primarily consist of the collection, transfer and disposal of non-hazardous solid waste.


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Collection Services. We provide solid waste collection services to commercial, industrial, municipal and residential customers through 348 collection companies. In 2010, 76.2% of our revenue was derived from collection services. Within the collection line of business, 35% of our revenue is from services provided to municipal and residential customers, 40% is from services provided to commercial customers, and 25% is from services provided to industrial and other customers.
 
Our residential collection operations involve the curbside collection of refuse from small containers into collection vehicles for transport to transfer stations or directly to landfills. Residential solid waste collection services are typically performed under contracts with municipalities, which we generally secure by competitive bid and which give us exclusive rights to service all or a portion of the homes in the respective municipalities. These contracts or franchises usually range in duration from one to five years, although some of our exclusive franchises are for significantly longer periods. Residential solid waste collection services may also be performed on a subscription basis, in which individual households contract directly with us. The fees received for subscription residential collection are based primarily on market factors, frequency and type of service, the distance to the disposal facility and the cost of disposal. In general, subscription residential collection fees are paid quarterly in advance by the residential customers receiving the service.
 
In our commercial and industrial collection operations, we supply our customers with waste containers of varying sizes. We also rent compactors to large waste generators. Commercial collection services are generally performed under one- to three-year service agreements, and fees are determined by considerations such as market factors, collection frequency, type of equipment furnished, the type and volume or weight of the waste collected, transportation costs, the distance to the disposal facility and the cost of disposal.
 
We also provide waste collection services to industrial and construction facilities on a contractual basis with terms ranging from a single pickup to one year or longer. Our construction services are provided to the commercial construction and home building sectors. We collect the containers or compacted waste and transport the waste either to a landfill or a transfer station for disposal.
 
We also provide recycling services in certain markets. These services include the curbside collection of residential recyclable waste and the provision of a variety of recycling services to commercial and industrial customers.
 
Transfer and Disposal Services. We own or operate 204 transfer stations. We deposit waste at these transfer stations, as do other private haulers and municipal haulers, for compaction and transfer to trailers for transport to disposal sites or recycling facilities. In 2010, transfer and disposal services accounted for 18.2% of our revenue.
 
As of December 31, 2010, we owned or operated 193 active landfills, which had approximately 36,000 permitted acres and total available permitted and probable expansion disposal capacity of approximately 4.7 billion in-place cubic yards. The in-place capacity of our landfills is subject to change based on engineering factors, requirements of regulatory authorities, our ability to continue to operate our landfills in compliance with applicable regulations, and our ability to successfully renew operating permits and obtain expansion permits at our sites. Some of our landfills accept non-hazardous special waste, including utility ash, asbestos and contaminated soils.
 
Most of our active landfill sites have the potential for expanded disposal capacity beyond the currently permitted acreage. We monitor the availability of permitted disposal capacity at each of our landfills and evaluate whether to pursue an expansion at a given landfill based on estimated future waste volumes and prices, market needs, remaining capacity and likelihood of obtaining an expansion. To satisfy future disposal demand, we are currently seeking to expand permitted capacity at certain of our landfills. However, we cannot assure you that all proposed or future expansions will be permitted as designed.
 
We also have responsibility for 129 closed landfills, for which we have associated closure and post-closure obligations.


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Landfill Gas and Renewable Energy Projects. During 2010, we brought two new landfill gas to energy (LFGTE) projects on line, resulting in a total of 73 active LFGTE projects. These projects consist of the following:
 
•   51 electric plants fueled by landfill gas;
 
•   14 medium British Thermal Unit (BTU) plants providing landfill gas to industrial users to be burned as fuel;
 
•   six high BTU plants that provide pipeline quality natural gas that ultimately could be used to fuel our natural gas fleet, and
 
•   two projects that burn landfill gas to evaporate leachate.
 
The beneficial use of landfill gas provides our economy and environment with significant benefits, including:
 
•   The use and destruction of methane, a potent greenhouse gas, which reduces air pollution; and
 
•   The use of landfill gas offsets the use of fossil fuels, thus reducing our dependence on foreign oil and use of our natural resources.
 
Our 51 generating projects produce 321 megawatts of electricity annually, which is enough power to supply the electric needs of 189,530 homes. Our 22 other LFGTE projects process and produce 55,950 cubic feet per minute of landfill gas annually, which provides an energy benefit equivalent to heating 190,151 homes. The environmental benefit of all of our projects removes the equivalent of 950,434 tons of methane emissions and 2,346,535 tons of carbon dioxide emissions from the atmosphere. This is equivalent to removing the emissions of approximately 3.9 million cars from our highways.
 
One of the two new projects, a medium BTU use project at our Newton County Landfill, received the USEPA 2010 Project of the Year award.
 
In 2010, we also began the design and construction of new projects at nine landfills, which is comprised of seven electric plants, one medium BTU plant and one high BTU plant. The high BTU project, announced in the fall of 2010, will feature an industry first process of producing high BTU pipeline quality gas and using that gas to provide equivalent renewable compressed natural gas (CNG) to a portion of our expanding fleet of CNG refuse vehicles.
 
Recycling Facilities and Other Services. We own or operate 76 materials recovery facilities and other recycling operations. These facilities sort recyclable paper, aluminum, glass and other materials. Most of these recyclable materials are internally collected by our residential collection operations. In some areas, we receive commercial and industrial solid waste that is sorted at our facilities into recyclable materials and non-recyclable waste. The recyclable materials are salvaged, repackaged and sold to third parties, and the non-recyclable waste is disposed of at landfills or incinerators.
 
Sales and Marketing
 
We seek to provide quality services that will enable us to maintain high levels of customer satisfaction. Our business is derived from a broad customer base, which we believe will enable us to experience stable growth. We focus our marketing efforts on continuing and expanding our business with existing customers, as well as attracting new customers.
 
We employ approximately 1,100 sales and marketing employees with a sales and marketing strategy of providing high-quality, comprehensive solid waste collection, recycling, transfer and disposal services to our customers at competitive prices. We target customers of all sizes, from small quantity generators to large “Fortune 500” companies and municipalities.
 
While most of our marketing activity is local in nature, we also provide a National Accounts program in response to the needs of national and regional customers. This National Accounts program is designed to provide the best total solution to our customers’ evolving waste management needs in an environmentally responsible manner. We partner with national clients to reach their sustainability goals, optimize waste streams,


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balance equipment and service intervals, and provide customized reporting. The National Accounts program centralizes services to effectively manage customer needs, while helping minimize procurement costs. With our extended geographic reach, this program effectively serves our customers nationwide. As industry leaders, our mission is to utilize our strengths and expertise to exceed customer expectations by consistently delivering the best national program available.
 
Historically we have not always changed the trade names of the local businesses we acquired, and therefore we do not operate nationally under any one mark or trade name. The majority of our operations, however, are branded under either “Republic,” “Allied” or “BFI.”
 
Customers
 
We provide services to a broad base of commercial, industrial, municipal and residential customers. No single customer has individually accounted for more than 3% of our consolidated revenue or of our reportable segment revenue in any of the last three years.
 
Competition
 
We operate in a highly competitive industry. However, entry into our business and the ability to operate profitably require substantial amounts of capital and managerial experience.
 
Competition in the non-hazardous solid waste industry comes from a few other large, national publicly owned companies, including Waste Management, Inc., several regional publicly and privately owned solid waste companies, and thousands of small privately owned companies. In any given market, competitors may have larger operations and greater resources. In addition to national and regional firms and numerous local companies, we compete with municipalities that maintain waste collection or disposal operations. These municipalities may have financial advantages due to the availability of tax revenue and tax-exempt financing.
 
We compete for collection accounts primarily on the basis of price and the quality of our services. From time to time, our competitors may reduce the price of their services in an effort to expand market share or to win a competitively bid municipal contract. Our ability to maintain and increase prices in certain markets may be impacted by the pricing policies of our competitors. This may have an impact on our future revenue and profitability.
 
Seasonality and Severe Weather
 
Our operations can be adversely affected by periods of inclement or severe weather, which could increase the volume of waste collected under our existing contracts (without corresponding compensation), delay the collection and disposal of waste, reduce the volume of waste delivered to our disposal sites, or delay the construction or expansion of our landfill sites and other facilities. Our operations also can be favorably affected by severe weather, which could increase the volume of waste in situations where we are able to charge for our additional services.
 
Regulation
 
Our facilities and operations are subject to a variety of federal, state and local requirements that regulate the environment, public health, safety, zoning and land use. Operating and other permits, licenses and other approvals generally are required for landfills and transfer stations, certain solid waste collection vehicles, fuel storage tanks and other facilities that we own or operate. These permits are subject to denial, revocation, modification and renewal in certain circumstances. Federal, state and local laws and regulations vary, but generally govern wastewater or storm water discharges, air emissions, the handling, transportation, treatment, storage and disposal of hazardous and non-hazardous waste, and the remediation of contamination associated with the release or threatened release of hazardous substances. These laws and regulations provide governmental authorities with strict powers of enforcement, which include the ability to revoke or decline to renew any of our operating permits, obtain injunctions, or impose fines or penalties in the event of violations, including


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criminal penalties. The U.S. Environmental Protection Agency (EPA) and various other federal, state and local authorities administer these regulations.
 
We strive to conduct our operations in compliance with applicable laws, regulations and permits. However, in the existing climate of heightened environmental concerns, from time to time we have been issued citations or notices from governmental authorities that have resulted in the need to expend funds for remedial work and related activities at various landfills and other facilities. We cannot assure you that citations and notices will not be issued in the future despite our regulatory compliance efforts. We have established final capping, closure, post-closure and remediation reserves that we believe, based on currently available information, will be adequate to cover our current estimates of regulatory costs. However, we cannot assure you that actual costs will not exceed our reserves. Refer to the Contractual Obligations table within Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere herein for further information.
 
Federal Regulation. The following summarizes the primary federal environmental and occupational health and safety-related statutes that affect our facilities and operations:
 
•   The Solid Waste Disposal Act, including the Resource Conservation and Recovery Act (RCRA). RCRA establishes a framework for regulating the handling, transportation, treatment, storage and disposal of hazardous and non-hazardous solid waste, and requires states to develop programs to ensure the safe disposal of solid waste in sanitary landfills.
 
Subtitle D of RCRA establishes a framework for regulating the disposal of municipal solid waste. Regulations under Subtitle D currently include minimum comprehensive solid waste management criteria and guidelines, including location restrictions, facility design and operating criteria, final capping, closure and post-closure requirements, financial assurance standards, groundwater monitoring requirements and corrective action standards. All of the states in which we operate have implemented permit programs pursuant to RCRA and Subtitle D. These state permit programs may include landfill requirements which are more stringent than those of Subtitle D. Our failure to comply with the implementation of federal environmental requirements by state and local authorities at any of our locations may lead to temporary or permanent loss of an operating permit, which would result in costs in connection with securing new permits and reduced revenue from lost operational time.
 
All of our planned landfill expansions and new landfill development projects have been engineered to meet or exceed Subtitle D requirements. Operating and design criteria for existing operations have been modified to comply with these regulations. Compliance with Subtitle D regulations has resulted in increased costs and may in the future require substantial additional expenditures in addition to other costs normally associated with our waste management activities.
 
•   The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA). CERCLA, among other things, provides for the cleanup of sites from which there is a release or threatened release of a hazardous substance into the environment. CERCLA may impose strict joint and several liability for the costs of cleanup and for damages to natural resources upon current owners and operators of a site, parties who were owners or operators of a site at the time the hazardous substances were disposed of, parties who transported the hazardous substances to a site, and parties who arranged for the disposal of the hazardous substances at a site. Under the authority of CERCLA and its implementing regulations, detailed requirements apply to the manner and degree of investigation and remediation of facilities and sites where hazardous substances have been or are threatened to be released into the environment. Liability under CERCLA is not dependent on the existence or disposal of only “hazardous wastes,” but also can be based upon the existence of small quantities of more than 700 “substances,” characterized by the EPA as “hazardous” many of which are found in common household waste.
 
Among other things, CERCLA authorizes the federal government to investigate and remediate sites at which hazardous substances have been or are threatened to be released into the environment or to order persons potentially liable for the cleanup of the hazardous substances to do so themselves. In addition, the


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EPA has established a National Priorities List of sites at which hazardous substances have been or are threatened to be released and which require investigation or cleanup.
 
CERCLA liability is strict liability. It can be founded upon the release or threatened release, even as a result of unintentional, non-negligent or lawful action, of hazardous substances, including very small quantities of such substances. Thus, even if we have never knowingly transported or received hazardous waste, it is likely that hazardous substances have been deposited or “released” at landfills or other facilities that we presently or historically have owned or operated, or at properties owned by third parties to which we have transported waste. Therefore, we could be liable under CERCLA for the cost of cleaning up such hazardous substances at such sites and for damages to natural resources, even if those substances were deposited at our facilities before we acquired or operated them. The costs of a CERCLA cleanup can be very expensive and can include the costs of disposing remediation wastes at appropriately-licensed facilities. Given the difficulty of obtaining insurance for environmental impairment liability, such liability could have a material impact on our business, financial condition, results of operations and cash flows.
 
•   The Federal Water Pollution Control Act of 1972 (the Clean Water Act). This act regulates the discharge of pollutants from a variety of sources, including solid waste disposal sites, into streams, rivers and other waters of the United States. Runoff from our landfills and transfer stations that is discharged into surface waters through discrete conveyances must be covered by discharge permits that generally require us to conduct sampling and monitoring, and, under certain circumstances, to reduce the quantity of pollutants in those discharges. Storm water discharge regulations under the Clean Water Act require a permit for certain construction activities and for runoff from industrial operations and facilities, which may affect our operations. If a landfill or transfer station discharges wastewater through a sewage system to a publicly owned treatment works, the facility must comply with discharge limits imposed by that treatment works. In addition, states may adopt groundwater protection programs under the Clean Water Act or the Safe Drinking Water Act that could affect the manner in which our solid waste landfills monitor and control their waste management activities. Furthermore, in the event that development at any of our facilities alters or affects wetlands, we may be required to secure permits prior to such development commencing. In these situations, permitting agencies may require mitigation of wetland impacts.
 
•   The Clean Air Act. The Clean Air Act imposes limitations on emissions from various sources, including landfills. In March 1996, the EPA promulgated regulations that require large municipal solid waste landfills to install landfill gas monitoring systems. These regulations apply to landfills that commenced construction, reconstruction or modification on or after May 30, 1991, and, principally, to landfills that can accommodate 2.5 million cubic meters or more of municipal solid waste. The regulations apply whether the landfill is active or closed. The date by which each affected landfill is required to have a gas collection and control system installed and made operational varies depending on calculated emission rates at the landfill. Efforts to curtail the emission of greenhouse gases and to ameliorate the effect of climate change may require our landfills to deploy more stringent emission controls and monitoring systems, with resulting capital or operating costs. In addition, our vehicle fleet may also become subject to higher efficiency standards or other carbon-emission restrictions. See Item 1A. Risk Factors – “Regulation of greenhouse gas emissions could impose costs on our operations, the magnitude of which we cannot yet estimate.” Many state regulatory agencies also currently require monitoring systems for the collection and control of certain landfill gas. Certain of these state agencies are also implementing greenhouse gas control regulations that would also apply to landfill gas emissions.
 
•   The Occupational Safety and Health Act of 1970 (OSHA). OSHA authorizes the Occupational Safety and Health Administration of the U.S. Department of Labor to promulgate occupational safety and health standards. A number of these standards, including standards for notices of hazardous chemicals and the handling of asbestos, apply to our facilities and operations.
 
State and Local Regulation. Each state in which we operate has its own laws and regulations governing solid waste disposal, water and air pollution, and, in most cases, releases and cleanup of hazardous substances and liabilities for such matters. States also have adopted regulations governing the design, operation, maintenance and closure of landfills and transfer stations. Some counties, municipalities and other local governments have


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adopted similar laws and regulations. Our facilities and operations are likely to be subject to these types of requirements. In addition, our operations may be affected by the trend in many states toward requiring the development of solid waste reduction and recycling programs. For example, several states have enacted laws that require counties or municipalities to adopt comprehensive plans to reduce, through solid waste planning, composting, recycling or other programs, the volume of solid waste deposited in landfills. Additionally, laws and regulations restricting the disposal of certain waste in solid waste landfills, including yard waste, newspapers, beverage containers, unshredded tires, lead-acid batteries, electronic wastes and household appliances, have been promulgated in several states and are being considered in others. Legislative and regulatory measures to mandate or encourage waste reduction at the source and waste recycling also have been or are under consideration by the U.S. Congress and the EPA.
 
To construct, operate and expand a landfill, we must obtain one or more construction or operating permits, as well as zoning and land use approvals. These permits and approvals may be burdensome to obtain and to comply with, are often opposed by neighboring landowners and citizens’ groups, may be subject to periodic renewal, and are subject to denial, modification, non-renewal and revocation by the issuing agency. Significant compliance disclosure obligations often accompany these processes. In connection with our acquisition of existing landfills, we may be required to expend considerable time, effort and money to bring the acquired facilities into compliance with applicable requirements and to obtain the permits and approvals necessary to increase their capacity.
 
Other Regulations. Many of our facilities own and operate underground storage tanks that are generally used to store petroleum-based products. These tanks are generally subject to federal, state and local laws and regulations that mandate their periodic testing, upgrading, closure and removal. In the event of leaks or releases from these tanks, these regulations require that polluted groundwater and soils be remediated. We believe that all of our underground storage tanks meet all applicable regulations. If underground storage tanks we own or operate leak, we could be liable for response costs and, if the leakage migrates onto the property of others, we could be liable for damages to third parties. We are unaware of facts indicating that issues of compliance with regulations related to underground storage tanks will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
 
With regard to our solid waste transportation operations, we are subject to the jurisdiction of the Surface Transportation Board and are regulated by the Federal Highway Administration, Office of Motor Carriers, and by regulatory agencies in states that regulate such matters. Various state and local government authorities have enacted or promulgated, or are considering enacting or promulgating, laws and regulations that would restrict the transportation of solid waste across state, county, or other jurisdiction lines. In 1978, the U.S. Supreme Court ruled that a law that restricts the importation of out-of-state solid waste is unconstitutional; however, states have attempted to distinguish proposed laws from those involved in and implicated by that ruling. In 1994, the Supreme Court ruled that a flow control law, which attempted to restrict solid waste from leaving its place of generation, imposes an impermissible burden upon interstate commerce, and, therefore, is unconstitutional. In 2007, the Supreme Court upheld the right of a local government to direct the flow of solid waste to a publicly owned and publicly operated waste facility. A number of county and other local jurisdictions have enacted ordinances or other regulations restricting the free movement of solid waste across jurisdictional boundaries. Other governments may enact similar regulations in the future. These regulations may, in some cases, cause a decline in volumes of waste delivered to our landfills or transfer stations and may increase our costs of disposal, thereby adversely affecting our operations.
 
Liabilities Established for Landfill and Environmental Costs. We have established reserves for landfill and environmental costs, which include landfill site final capping, closure and post-closure costs. We periodically reassess such costs based on various methods and assumptions regarding landfill airspace and the technical requirements of Subtitle D of RCRA, and we adjust our rates used to expense final capping, closure and post-closure costs accordingly. Based on current information and regulatory requirements, we believe that our recorded reserves for such landfill and environmental expenditures are adequate. However, environmental laws may change, and we cannot assure you that our recorded reserves will be adequate to cover requirements under existing or new environmental laws and regulations, future changes or interpretations of existing laws and regulations, or adverse environmental conditions previously unknown to us.


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Liability Insurance and Bonding
 
The nature of our business exposes us to the risk of liabilities arising out of our operations, including possible damages to the environment. Such potential liabilities could involve, for example, claims for remediation costs, personal injury, property damage and damage to the environment in cases where we may be held responsible for the escape of harmful materials; claims of employees, customers or third parties for personal injury or property damage occurring in the course of our operations; or claims alleging negligence or other wrongdoing in the planning or performance of work. We could also be subject to fines and civil and criminal penalties in connection with alleged violations of regulatory requirements. Because of the nature and scope of the possible environmental damages, liabilities imposed in environmental litigation can be significant. Our solid waste operations have third party environmental liability insurance with limits in excess of those required by permit regulations, subject to certain limitations and exclusions. However, we cannot assure you that such environmental liability insurance would be adequate, in scope or amount, in the event of a major loss, nor can we assure you that we would continue to carry excess environmental liability insurance should market conditions in the insurance industry make such coverage costs prohibitive.
 
We have general liability, vehicle liability, employment practices liability, pollution liability, directors and officers’ liability, workers’ compensation and 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 we have, subject to limitations and exclusions, substantial liability insurance, we cannot assure you that we will not be exposed to uninsured liabilities that could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.
 
Our insurance programs for workers’ compensation, general liability, vehicle liability, and employee-related health care benefits are effectively self-insured. Claims in excess of self-insurance levels are insured subject to the excess policy limits and exclusions. Accruals are based on claims filed and actuarial estimates of claims development and claims incurred but not reported. Due to the variable condition of the insurance market, we have experienced, and may experience in the future, increased self-insurance retention levels and increased premiums. As we assume more risk for self-insurance through higher retention levels, we may experience more variability in our self-insurance reserves and expense.
 
In the normal course of business, we post performance bonds, insurance policies, letters of credit, or cash or marketable securities deposits in connection with municipal residential collection contracts, closure and post-closure of landfills, environmental remediation, environmental permits, and business licenses and permits as a financial guarantee of our performance. To date, we have satisfied financial responsibility requirements by making cash or marketable securities deposits or by obtaining bank letters of credit, insurance policies or surety bonds.
 
Employees
 
As of December 31, 2010, we employed approximately 30,000 full-time employees, approximately 27% of whom were covered by collective bargaining agreements. From time to time, our operating locations may experience union organizing efforts. We have not historically experienced any significant work stoppages. We currently have no disputes or bargaining circumstances that we believe could cause significant disruptions in our business. Our management believes that we have good relations with our employees.
 
Availability of Reports and Other Information
 
Our corporate website is http://www.republicservices.com. We make available on this website, free of charge, access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements on Schedule 14A and amendments to those materials filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934. We make such materials available as soon as reasonably practicable after we electronically submit them to the Securities and Exchange Commission (SEC). Our corporate website also contains our Corporate Governance Guidelines, Code of Ethics, Political Contributions Policy and Charters of the Nominating and Corporate Governance Committee, Audit Committee


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and Compensation Committee of the Board of Directors. In addition, the SEC website is http://www.sec.gov. The SEC makes available on this website, free of charge, reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC. Information on our website or the SEC website is not part of this Form 10-K. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K and applicable New York Stock Exchange (NYSE) rules regarding amendments to or waivers of our Code of Ethics by posting this information on our website at www.republicservices.com.
 
ITEM 1A.  RISK FACTORS
 
This Form 10-K contains certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “expect,” “will,” “may,” “anticipate,” “plan,” “estimate,” “project,” “intend,” “should,” “can,” “likely,” “could” and similar expressions are intended to identify forward-looking statements. These statements include statements about our plans, strategies and prospects. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of our management and are subject to risk and uncertainties, including the risks set forth below in these risk factors, which could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
 
In light of these risks, uncertainties, assumptions and factors, the results anticipated by the forward-looking statements discussed in this Form 10-K may not occur. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K. Except to the extent required by applicable law or regulation, we undertake no obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events.
 
We have substantial indebtedness, which may limit our financial flexibility.
 
As of December 31, 2010, we had approximately $7.0 billion in principal value of debt and capital leases outstanding. This amount of indebtedness and our debt service requirements may limit our financial flexibility to access additional capital and make capital expenditures and other investments in our business, to withstand economic downturns and interest rate increases, to plan for or react to changes in our business and our industry, and to comply with the financial and other restrictive covenants of our debt instruments. Further, our ability to comply with the financial and other covenants contained in our debt instruments may be affected by changes in economic or business conditions or other events that are beyond our control. If we do not comply with these covenants and restrictions, we may be required to take actions such as reducing or delaying capital expenditures, reducing dividends or stock repurchases, selling assets, restructuring or refinancing all or part of our existing debt, or seeking additional equity capital.
 
The downturn in the U.S. economy may continue to have an adverse impact on our operating results.
 
A weak economy generally results in decreases in the volumes of waste generated. In 2010, weakness in the U.S. economy had a negative effect on our revenue, operating results and operating cash flows. The current and previous economic slowdowns have negatively impacted the portion of our collection business servicing the manufacturing and construction industries. As a result of the global economic crisis, we may experience the negative effects of increased competitive pricing pressure and customer turnover as well. We cannot assure you that worsening economic conditions or a prolonged or recurring recession will not have a significant adverse impact on our consolidated financial condition, results of operations or cash flows. Furthermore, recovery in solid waste volumes historically has lagged behind recovery in the general economy and we cannot assure you that an improvement in general economic conditions will result in an immediate, or any, improvement in our consolidated financial condition, results of operations or cash flows.


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The downturn in the U.S. economy may expose us to credit risk for amounts due from governmental agencies, large national accounts and others.
 
The weak U.S. economy has reduced the amount of taxes collected by various governmental agencies. We provide services to a number of these agencies including numerous municipalities. These governmental agencies may suffer financial difficulties resulting from a decrease in tax revenue and may ultimately be unable or unwilling to pay amounts owed to us. In addition, the weak economy may cause other customers, including our large national accounts, to suffer financial difficulties and ultimately to be unable or unwilling to pay amounts owed to us. This could have a negative impact on our consolidated financial condition, results of operations and cash flows.
 
The downturn in the U.S. economy and in the financial markets could expose us to counter-party risk associated with our derivatives.
 
To reduce our exposure to fluctuations in various commodities and interest rates, we have entered into a number of derivative agreements. These derivative agreements require us or the counter-party to such agreements to make payments to the other party if the price of certain commodities or interest rates vary from a specified amount. Although we only enter these agreements with investment grade-rated financial institutions, a continued downturn in the U.S. economy or in the financial markets could adversely impact the financial stability of the counter-parties with which we do business, potentially limiting their ability to fulfill their obligations under our derivative agreements. This could have a negative impact on our consolidated financial condition, results of operations and cash flows.
 
The waste industry is highly competitive and includes competitors that may have greater financial and operational resources, flexibility to reduce prices and other competitive advantages that could make it difficult for us to compete effectively.
 
We principally compete with large national waste management companies, numerous municipalities, and numerous regional and local companies for collection and disposal accounts. Competition for collection accounts is primarily based on price and the quality of services. Competition for disposal business is primarily based on disposal costs, geographic location and quality of operations. One of our competitors may have greater financial and operational resources than we do. Further, many counties and municipalities that operate their own waste collection and disposal facilities have the benefits of tax revenue or tax-exempt financing. Our ability to obtain solid waste volume for our landfills may also be limited by the fact that some major collection companies also own or operate landfills to which they send their waste. In markets in which we do not own or operate a landfill, our collection operations may operate at a disadvantage to fully integrated competitors. As a result of these factors, from time to time we may have difficulty competing effectively in certain markets. If we were to lower prices to address these competitive issues, it could negatively impact our revenues and profitability.
 
Price increases may not be adequate to offset the impact of increased costs and may cause us to lose volume.
 
We seek to secure price increases necessary to offset higher costs (including fuel and environmental costs), to maintain or improve operating margins, and to obtain adequate returns on our substantial investments in assets such as our landfills. From time to time, our competitors may reduce their prices in an effort to expand their market share. Contractual, general economic or market-specific conditions also may limit our ability to raise prices. For example, many of our contracts have price adjustment provisions that are tied to an index such as the Consumer Price Index. Particularly in a weak U.S. economy such as the current one, our costs may increase in excess of the increase, if any, in the Consumer Price Index. This may continue to be the case even when the U.S. economy recovers because a recovery in the solid waste industry historically has lagged behind a recovery in the general economy. As a result, we may be unable to offset increases in costs, improve our operating margins and obtain adequate investment returns through price increases. We may also lose volume to lower-cost competitors.


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Increases in the cost of fuel or petrochemicals will increase our operating expenses, and we cannot assure you that we will be able to recover fuel or oil cost increases from our customers.
 
We depend on fuel purchased in the open market to operate our collection and transfer trucks and other equipment used for collection, transfer, and disposal. Fuel prices are unpredictable and can fluctuate significantly based on events beyond our control, including geopolitical developments, actions by the Organization of the Petroleum Exporting Countries and other oil and gas producers, supply and demand for oil and gas, war, terrorism and unrest in oil-producing countries, and regional production patterns. Due to contractual or market factors, we may not be able to offset such volatility through fuel surcharges. For example, our fuel costs were $407.6 million in 2010, representing 5.0% of our revenue compared to $349.8 million in 2009, representing 4.3% of our revenue.
 
To manage our exposure to volatility in fuel prices, we have entered into multiple swap agreements whereby we receive or make payments to counter-parties should the price of fuel vary from a specified amount. During 2010, approximately 7% of our fuel volume purchases were hedged with swap agreements. Additionally, we are able to collect fuel recovery fees from some customers. For 2010, we were able to recover approximately 66% of our fuel costs with fuel recovery fees.
 
Over the last several years, regulations have been adopted mandating changes in the composition of fuels for motor vehicles. In November 2010, EPA finalized its Renewable Fuel Standard for 2011, which mandates increasing volumes of renewable fuels and biofuels to be used in motor vehicles driven in the U.S. These regulations will likely affect the type of fuel our motor vehicle fleet uses and in the near-term increase the cost of that fuel. Our operations also require the use of products (such as liners at our landfills) whose costs may vary with the price of petrochemicals. An increase in the price of petrochemicals could increase the cost of those products, which would increase our operating and capital costs. We are also susceptible to increases in indirect fuel surcharges from our vendors.
 
Fluctuations in prices for recycled commodities that we sell to customers may adversely affect our consolidated financial condition, results of operations and cash flows.
 
We process recyclable materials such as paper, cardboard, plastics, aluminum and other metals for sale to third parties. Our results of operations may be affected by changing prices or market requirements for recyclable materials. The resale and purchase prices of, and market demand for, recyclable materials can be volatile due to changes in economic conditions and numerous other factors beyond our control. These fluctuations may affect our consolidated financial condition, results of operations and cash flows. We have in the past, and may in the future, enter into swap agreements whereby we receive or make payments to counter-parties if the price of commodities varies from a specified amount or range.
 
Adverse weather conditions may limit our operations and increase the costs of collection and disposal.
 
Our collection and landfill operations could be adversely impacted by extended periods of inclement weather, or by increased severity of weather and climate extremes resulting in the future from climate change, any of which could increase the volume of waste collected under our existing contracts (without corresponding compensation), interfere with collection and landfill operations, delay the development of landfill capacity or reduce the volume of waste generated by our customers. In addition, adverse weather conditions may result in the temporary suspension of our operations, which can significantly affect our operating results in the affected regions during those periods.
 
We currently have matters pending with the Internal Revenue Service (the “IRS”), which could result in large cash expenditures and could have a material adverse impact on our operating results and cash flows.
 
During its examination of Allied’s 2002 tax year, the IRS asserted that a 2002 redemption of four partnership interests in waste-to-energy businesses should have been recharacterized as disguised sale transactions. This issue is currently before the Appeals Division of the IRS. The Company believes its position is supported by relevant technical authorities and strong business purpose and we intend to vigorously defend our position on


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this matter. The potential tax and interest through December 31, 2010 (to the extent unpaid) have been fully reserved in our consolidated balance sheet. A disallowance would not materially affect our consolidated results of operations; however, a deficiency payment would adversely impact our cash flow in the period the payment was made. The accrual of additional interest charges through the time this matter is resolved will affect our consolidated results of operations. In addition, the successful assertion by the IRS of penalty and penalty-related interest in connection with this matter could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
 
Additionally, during its examination of Allied’s 2000 through 2007 tax years, the IRS proposed that certain landfill costs be allocated to the collection and control of methane gas that is naturally emitted from landfills. The IRS’ position is that the methane gas emitted by a landfill constitutes a joint product resulting from landfill operations and, therefore, associated costs should not be expensed until the methane gas is sold or otherwise disposed. We believe we have several meritorious defenses, including the fact that methane gas is not actively produced for sale by us but rather arises naturally in the context of providing disposal services. Therefore, we believe that the resolution of this issue will not have a material adverse impact on our consolidated financial position, results of operations or cash flows.
 
For additional information on these matters, see Note 10, Income Taxes, to our consolidated financial statements in Item 8. of this Form 10-K.
 
We may be unable to execute our financial strategy.
 
Our ability to execute our financial strategy depends on our ability to maintain investment grade ratings on our senior debt. The credit rating process is contingent upon a number of factors, many of which are beyond our control. We cannot assure you that we will be able to maintain our investment grade ratings in the future. Our interest expense would increase and our ability to obtain financing on favorable terms may be adversely affected should we fail to maintain investment grade ratings.
 
Our financial strategy is also dependent on our ability to generate sufficient cash flow to reinvest in our existing business, fund internal growth, acquire other solid waste businesses, pay dividends, repurchase stock, reduce indebtedness and minimize borrowings, and take other actions to enhance stockholder value. We cannot assure you that: we will be successful in executing our broad-based pricing program; we will generate sufficient cash flow to execute our financial strategy; we will be able to pay cash dividends at our present rate, we will be able to increase the amount of such dividends, or we will be able to continue our share repurchase program.
 
A downgrade in our bond ratings could adversely affect our liquidity by increasing the cost of debt and financial assurance instruments.
 
While downgrades of our bond ratings may not have an immediate impact on our cost of debt or liquidity, they may impact our cost of debt and liquidity over the near to medium term. If the rating agencies downgrade our debt, this may increase the interest rate we must pay to issue new debt, and it may even make it prohibitively expensive for us to issue new debt. If our debt ratings are downgraded, future access to financial assurance markets at a reasonable cost, or at all, also may be adversely impacted.
 
The solid waste industry is a capital-intensive industry and the amount we spend on capital expenditures may exceed current expectations, which could require us to obtain additional funding for our operations or impair our ability to grow our business.
 
Our ability to remain competitive and to grow and expand our operations largely depends on our cash flow from operations and access to capital. If our capital efficiency programs are unable to offset the impact of inflation and business growth, it may be necessary to increase the amount we spend. Additionally, if we make acquisitions or further expand our operations, the amount we expend on capital, capping, closure, post-closure and environmental remediation expenditures will increase. Our cash needs also will increase if the expenditures for capping, closure, post-closure and remediation activities increase above our current estimates, which may


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occur over a long period due to changes in federal, state or local government requirements and other factors beyond our control. Increases in expenditures would negatively impact our cash flows.
 
Over the last several years, regulations have been adopted mandating the reduction of vehicle tail pipe emissions. In May 2010, the EPA and the National Highway Traffic Safety Administration (“NHTSA”) finalized the first U.S. standards for GHG emissions from conventional automobiles, including large pick-up trucks. These regulations include increased fuel economy requirements and apply to new motor vehicles covering model years 2012 through 2016. We do not expect that this final rule will lead to a material increase in our capital costs. Later in 2010 the EPA and the NHTSA proposed rules expanding the scope of GHG emission standards for motor vehicles to include heavy duty vehicles, including solid waste collection vehicles and tractor trailers. These rules would similarly include increased fuel economy standards for such vehicles and would apply to new heavy-duty motor vehicles covering model years 2014 through 2018. Because the rule is still in the proposal stage, we cannot predict its effect on us but it could increase our capital costs. This also could cause an increase in vehicle operating costs or a reduction in operating efficiency.
 
We may be unable to obtain or maintain required permits or to expand existing permitted capacity of our landfills, which could decrease our revenue and increase our costs.
 
We cannot assure you that we will successfully obtain or maintain the permits we require to operate our business because permits to operate non-hazardous solid waste landfills and to expand the permitted capacity of existing landfills have become more difficult and expensive to obtain and maintain. Permits often take years to obtain as a result of numerous hearings and compliance requirements with regard to zoning, environmental and other regulations. These permits are also often subject to resistance from citizen or other groups and other political pressures. Local communities and citizen groups, adjacent landowners or governmental agencies may oppose the issuance of a permit or approval we may need, allege violations of the permits under which we currently operate or laws or regulations to which we are subject, or seek to impose liability on us for environmental damage. Responding to these challenges has, at times, increased our costs and extended the time associated with establishing new facilities and expanding existing facilities. In addition, failure to receive regulatory and zoning approval may prohibit us from establishing new facilities or expanding existing facilities. Our failure to obtain the required permits to operate our non-hazardous solid waste landfills could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. In addition, we may have to dispose collected waste at landfills operated by our competitors or haul the waste long distances at a higher cost to one of our other landfills, either of which could significantly increase our waste disposal costs.
 
The waste industry is subject to extensive government regulation, and existing or future regulations may restrict our operations, increase our costs of operations or require us to make additional capital expenditures.
 
If we inadequately accrue for landfill capping, closure and post-closure costs, our financial condition and results of operations may be adversely affected.
 
A landfill must be closed and capped, and post-closure maintenance commenced, once the permitted capacity of the landfill is reached and additional capacity is not authorized. We have significant financial obligations relating to capping, closure and post-closure costs at our existing owned or operated landfills, and will have material financial obligations with respect to any future owned or operated landfills. We establish accruals for the estimated costs associated with capping, closure and post-closure financial obligations. We could underestimate such accruals, and our financial obligations for capping, closure or post-closure costs could exceed the amount accrued or amounts otherwise receivable pursuant to trust funds established for this purpose. Such a shortfall could result in significant unanticipated charges to income. Additionally, if a landfill is required to be closed earlier than expected or its remaining airspace is reduced for any other reason, the accruals for capping, closure and post-closure could be required to be accelerated, which could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.


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We cannot assure you that we will continue to operate our landfills at current volumes due to the use of alternatives to landfill disposal caused by state requirements or voluntary initiatives.
 
Most of the states in which we operate landfills require counties and municipalities to formulate comprehensive plans to reduce the volume of solid waste deposited in landfills through waste planning, composting and recycling, or other programs. Some state and local governments mandate waste reduction at the source and prohibit the disposal of certain types of wastes, such as yard waste, at landfills. Although such actions are useful in protecting our environment, these actions, as well as voluntary private initiatives by customers to reduce waste or seek disposal alternatives, have reduced and will in the future reduce the volume of waste going to landfills. Accordingly, we cannot assure you that we will be able to operate our landfills at their current volumes or charge current prices for landfill disposal services due to the decrease in demand for such services.
 
The possibility of landfill and transfer station site development projects, expansion projects or pending acquisitions not being completed or certain other events could result in a material charge to income.
 
We capitalize certain expenditures relating to development, expansion and other projects. If a facility or operation is permanently shut down or determined to be impaired, or a development or expansion project is not completed or is determined to be impaired, we will charge any unamortized capitalized expenditures to income relating to such facility or project that we are unable to recover through sale, transfer or otherwise. In future periods, we may incur charges against earnings in accordance with this policy, or other events may cause impairments. Such charges could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
 
We are subject to costly environmental regulations and flow-control regulations that may affect our operating margins, restrict our operations and subject us to additional liability.
 
Complying with laws and regulations governing the use, treatment, storage, transfer and disposal of solid and hazardous wastes and materials, air quality, water quality and the remediation of contamination associated with the release of hazardous substances is costly. Laws and regulations often require us to enhance or replace our equipment and to modify landfill operations or initiate final closure of a landfill. We cannot assure you that we will be able to implement price increases sufficient to offset the costs of complying with these laws and regulations. In addition, environmental regulatory changes could accelerate or increase expenditures for capping, closure and post-closure, and environmental and remediation activities at solid waste facilities and obligate us to spend sums in addition to those presently accrued for such purposes.
 
Our collection, transfer, and landfill operations are, and may in the future continue to be, affected by state or local laws or regulations that restrict the transportation of solid waste across state, county or other jurisdictional lines or that direct the flow of waste to a specified facility. Such laws and regulations could negatively affect our operations, resulting in declines in landfill volumes and increased costs of alternate disposal.
 
In addition to the costs of complying with environmental regulations, we incur costs to defend against litigation brought by government agencies and private parties who allege we are in violation of our permits and applicable environmental laws and regulations, or who assert claims alleging environmental damage, personal injury or property damage. As a result, we may be required to pay fines or implement corrective measures, or we may have our permits and licenses modified or revoked. A significant judgment against us, the loss of a significant permit or license, or the imposition of a significant fine could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. We establish accruals for our estimates of the costs associated with our environmental obligations. We could underestimate such accruals and remediation costs could exceed amounts accrued. Such shortfalls could result in significant unanticipated charges to income.


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Regulation of greenhouse gas emissions could impose costs on our operations, the magnitude of which we cannot yet estimate.
 
Efforts to curtail the emission of greenhouse gases (GHGs) and to ameliorate the effects of climate change continue to be debated on the federal, regional, and state level. Our landfill operations emit methane, identified as a GHG, and our vehicle fleets emit, among others, carbon dioxide, which has also been identified as a GHG. Conventional wisdom now suggests that passage of comprehensive, federal climate change legislation is highly unlikely. Nonetheless, should comprehensive federal climate change legislation be enacted, we expect it to impose costs on our operations, the materiality of which we cannot predict.
 
Absent comprehensive federal legislation to control GHG emissions, EPA is moving ahead administratively under its existing Clean Air Act authority. In October 2009, EPA published a Proposed Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (PSD tailoring rule). EPA finalized the PSD tailoring rule on May 13, 2010. The finalized PSD tailoring rule establishes new thresholds for GHG emissions that define when Clean Air Act permits would be required and would “tailor” these programs to limit which facilities would be required to obtain permits. EPA’s legal authority to “tailor” this rule has been challenged. As of January 2, 2011, some of our landfills became subject to the PSD tailoring rule, which requires permit amendments and could require additional emission controls for GHGs when modifications are made to these landfills, which could increase our costs.
 
On October 25, 2010, EPA and the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA), proposed rules to reduce GHG emissions from medium and heavy duty vehicles. These proposed rules, if finalized, would impose higher fuel economy standards of heavy duty vehicles. As such, the proposed rules could require us to expend additional capital on our vehicle fleet.
 
In addition to the obligations imposed by the PSD tailoring rule, as a result of EPA finding that six GHGs endanger public health in December 2009 EPA may impose additional GHG emissions controls on stationary sources. While EPA made its finding in the context of regulating air emissions from motor vehicles, now that it has made the endangerment finding, other provisions of the Clean Air Act provide EPA with the authority to impose further regulations upon stationary sources of GHG emissions, including landfills. We cannot predict the requirements or effective date of any additional stationary source rules that might apply to landfills as a result of the endangerment finding and, accordingly, we cannot assure you that further developments in this area will not have a material effect on our landfill operations or on our consolidated financial condition, results of operations, or cash flows.
 
We may have potential environmental liabilities that are not covered by our insurance. Changes in insurance markets also may impact our financial results.
 
We may incur liabilities for the deterioration of the environment as a result of our operations. We maintain high deductibles for our environmental liability insurance coverage. If we were to incur substantial liability for environmental damage, our insurance coverage may be inadequate to cover such liability. This could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
 
Also, due to the variable condition of the insurance market, we may experience future increases in self-insurance levels as a result of increased retention levels and increased premiums. As we assume more risk for self-insurance through higher retention levels, we may experience more variability in our self-insurance reserves and expense.
 
Despite our efforts, we may incur additional hazardous substances liability in excess of amounts presently known and accrued.
 
We are a potentially responsible party at many sites under CERCLA, which provides for the remediation of contaminated facilities and imposes strict, joint and several liability for the cost of remediation on current owners and operators of a facility at which there has been a release or a threatened release of a “hazardous substance.” CERCLA liability also extends to parties who were site owners and operators at the time hazardous substances were disposed, and on persons who arrange for the disposal of such substances at the facility (i.e.,


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generators of the waste and transporters who selected the disposal site). Hundreds of substances are defined as “hazardous” under CERCLA and their presence, even in minute amounts, can result in substantial liability. Notwithstanding our efforts to comply with applicable regulations and to avoid transporting and receiving hazardous substances, we may have additional liability under CERCLA, or similar state laws or RCRA, in excess of our current reserves because such substances may be present in waste collected by us or disposed of in our landfills, or in waste collected, transported or disposed of in the past by companies we have acquired. Actual costs for these liabilities could be significantly greater than amounts presently accrued for these purposes, which could have a material adverse impact on our consolidated financial position, results of operations, and cash flows.
 
Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.
 
We are, and from time to time become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business. Many of these matters raise difficult and complicated factual and legal issues and are subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is uncertain. Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows.
 
We may be unable to manage our growth effectively.
 
Our growth strategy places significant demands on our financial, operational and management resources. To continue our growth, we may need to add administrative and other personnel, and will need to make additional investments in operations and systems. We cannot assure you that we will be able to find and train qualified personnel, or do so on a timely basis, or expand our operations and systems to the extent, and in the time, required.
 
We may be unable to execute our acquisition growth strategy.
 
Our ability to execute our growth strategy depends in part on our ability to identify and acquire desirable acquisition candidates as well as our ability to successfully consolidate acquired operations into our business. The consolidation of our operations with those of acquired companies may present significant challenges to our management. In addition, competition among our competitors for acquisition candidates may prevent us from acquiring certain acquisition candidates. As such, we cannot assure you that:
 
•   desirable acquisition candidates exist or will be identified;
 
•   we will be able to acquire any of the candidates identified;
 
•   we will effectively consolidate companies we acquire; or
 
•   any acquisitions will be profitable or accretive to our earnings.
 
If any of the aforementioned factors force us to alter our growth strategy, our growth prospects could be adversely affected.
 
Businesses we acquire may have undisclosed liabilities.
 
In pursuing our acquisition strategy, our due diligence investigations of the acquisition candidates may fail to discover certain undisclosed liabilities of the acquisition candidates. If we acquire a company having undisclosed liabilities such as environmental, remediation or contractual, as a successor owner we may be responsible for such undisclosed liabilities. We expect to try to minimize our exposure to such liabilities by conducting due diligence, by obtaining indemnification from each of the sellers of the acquired companies, by deferring payment of a portion of the purchase price as security for the indemnification and by acquiring only specified assets. However, we cannot assure you that we will be able to obtain indemnification or that any


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indemnification obtained will be enforceable, collectible or sufficient in amount, scope or duration to fully offset any undisclosed liabilities arising from our acquisitions.
 
Our consolidated financial statements are based on estimates and assumptions that may differ from actual results.
 
Our consolidated financial statements have been prepared in accordance with U.S. GAAP and necessarily include amounts based on estimates and assumptions made by management. Actual results could differ from these amounts. Significant items requiring management to make subjective or complex judgments about matters that are inherently uncertain include the carrying value of long-lived assets, the depletion and amortization of landfill development costs, accruals for final capping, closure and post-closure costs, valuation allowances for accounts receivable and deferred tax assets, liabilities for potential litigation, claims and assessments, and liabilities for environmental remediation, employee benefit and pension plans, deferred taxes, uncertain tax positions and self-insurance.
 
We cannot assure you that the liabilities recorded for landfill and environmental costs will be adequate to cover the requirements of existing environmental regulations, future changes to or interpretations of existing regulations, or the identification of adverse environmental conditions previously unknown to management.
 
The introduction of new accounting rules, laws or regulations could adversely impact our results of operations.
 
Complying with new accounting rules, laws or regulations could adversely impact our financial condition, results of operations or cash flows, or cause unanticipated fluctuations in our results of operations in future periods.
 
We may be subject to workforce influences, including work stoppages, which could increase our operating costs and disrupt our operations.
 
As of December 31, 2010, approximately 27% of our workforce was represented by various local labor unions. If our unionized workers were to engage in strikes, work stoppages or other slowdowns, we could experience a significant disruption of our operations and an increase in our operating costs, which could have an adverse impact on our consolidated financial condition, results of operations and cash flows. Additional groups of employees may seek union representation in the future and, if successful, the negotiation of collective bargaining agreements could divert management attention and result in increased operating costs. If a greater percentage of our workforce becomes unionized, our business and financial results could be materially and adversely impacted due to the potential for increased operating costs.
 
Our obligation to fund multi-employer pension plans to which we contribute may have an adverse impact on us.
 
We contribute to at least 28 multi-employer pension plans covering at least 22% of our current employees. We do not administer these plans and generally are not represented on the boards of trustees of these plans. The Pension Protection Act enacted in 2006 (the PPA) requires under-funded pension plans to improve their funding ratios. Based on the information available to us, we believe that some of the multi-employer plans to which we contribute are either “critical” or “endangered” as those terms are defined in the PPA. We cannot determine at this time the amount of additional funding, if any, we may be required to make to these plans and, therefore, have not recorded any related liabilities. However, plan assessments could have an adverse impact on our results of operations or cash flows for a given period. Furthermore, under current law, upon the termination of a multi-employer pension plan, or in the event of a withdrawal by us (which we consider from time to time) or a mass withdrawal of contributing employers (each, a “Withdrawal Event”), we would be required to make payments to the plan for our proportionate share of the plan’s unfunded vested liabilities. We cannot assure you that there will not be a Withdrawal Event with respect to any of the multi-employer pension plans to which we contribute or that, in the event of such a Withdrawal Event, the amounts we would be


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required to contribute would not have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
 
The costs of providing for pension benefits and related funding requirements are subject to changes in pension fund values and fluctuating actuarial assumptions, and may have a material adverse impact on our results of operations and cash flows.
 
We sponsor a defined benefit pension plan which is funded with trustee assets invested in a diversified portfolio of debt and equity securities. Our costs for providing such benefits and related funding requirements are subject to changes in the market value of plan assets. Our pension expenses and related funding requirements are also subject to various actuarial calculations and assumptions, which may differ materially from actual results due to changing market and economic conditions, interest rates and other factors. A significant increase in our pension obligations and funding requirements could have a material adverse impact on our consolidated financial condition, results of operations and cash flows.
 
The loss of key personnel could have a material adverse effect on our consolidated financial condition, results of operations, cash flows and growth prospects.
 
Our future success depends on the continued contributions of several key employees and officers. The loss of the services of key employees and officers, whether such loss is through resignation or other causes, or the inability to attract additional qualified personnel, could have a material adverse effect on our financial condition, results of operations, cash flows and growth prospects.
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
None.
 
ITEM 2.  PROPERTIES
 
Our corporate office is located at 18500 North Allied Way, Phoenix, Arizona 85054, where we currently lease approximately 145,000 square feet of office space. We also maintain regional administrative offices in all of our regions.
 
Our principal property and equipment consists of land, landfills, buildings, vehicles and equipment. We own or lease real property in the states in which we conduct operations. At December 31, 2010, we owned or operated 348 collection companies, 204 transfer stations, 193 active solid waste landfills and 76 recycling facilities in 40 states and Puerto Rico. In aggregate, our active solid waste landfills total approximately 97,000 acres, including approximately 36,000 permitted acres. We also own or have responsibilities for 129 closed landfills. We believe that our property and equipment are adequate for our current needs.
 
ITEM 3.  LEGAL PROCEEDINGS
 
We are subject to extensive and evolving laws and regulations and have implemented our own safeguards to respond to regulatory requirements. In the normal course of conducting our operations, we become involved in legal proceedings. Some of these actions may result in fines, penalties or judgments against us, which may impact earnings and cash flows for a particular period. Although we cannot predict the ultimate outcome of any legal matter with certainty, except as described below or in Note 10 to our consolidated financial statements, Income Taxes, in the discussion of our outstanding tax dispute with the IRS, we do not believe that the outcome of our pending legal proceedings will have a material adverse impact on our consolidated financial position, results of operations or cash flows.
 
As used herein, legal proceedings refers to litigation and similar claims against us and our subsidiaries, excluding: (i) ordinary course accidents, general commercial liability and workers compensation claims, which are covered by insurance programs, subject to customary deductibles, and which, together with self-insured employee health care costs, are discussed in Note 7 to our consolidated financial statements, Other Liabilities-Self-Insurance Reserves; (ii) tax-related matters, which are discussed in Note 10 to our consolidated financial


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statements, Income Taxes; and (iii) environmental remediation liabilities, which are discussed in Note 8 to our consolidated financial statements, Landfill and Environmental Costs. Please see our consolidated financial statements included in this Form 10-K under Item 8 for information about these matters.
 
We accrue for legal proceedings when losses become probable and reasonably estimable. We have recorded an aggregate accrual of approximately $113 million relating to our outstanding legal proceedings as of December 31, 2010, including those described herein and others not specifically identified herein. As of the end of each applicable reporting period, we review each of our legal proceedings and, where it is probable that a liability has been incurred, we accrue for all probable and reasonably estimable losses. Where we are able to reasonably estimate a range of losses we may incur with respect to such a matter, we record an accrual for the amount within the range that constitutes our best estimate. If we are able to reasonably estimate a range but no amount within the range appears to be a better estimate than any other, we use the amount that is the low end of such range. If we used the high ends of such ranges, our aggregate potential liability would have been approximately $121 million higher than the amount recorded as of December 31, 2010.
 
General Legal Proceedings
 
Countywide Matter
 
In a suit filed on October 8, 2008 in the Tuscarawas County Ohio Court of Common Pleas, approximately 700 individuals and businesses located in the area around Countywide sued Republic Services, Inc. and Republic-Ohio for alleged negligence and nuisance. Republic-Ohio has owned and operated Countywide since February 1, 1999. Waste Management, Inc. and Waste Management Ohio, Inc., previous owners and operators of Countywide, have been named as defendants as well. Plaintiffs allege that due to the acceptance of a specific waste stream and operational issues and conditions, the landfill has generated odors and other unsafe emissions that have impaired the use and value of their property and may have adverse health effects. A second almost identical lawsuit was filed by approximately 82 plaintiffs on October 13, 2009 in the Tuscarawas County Ohio Court of Common Pleas against Republic Services, Inc., Republic-Ohio, Waste Management, Inc., and Waste Management Ohio, Inc. The court has consolidated the two actions. We have assumed both the defense and the liability of the Waste Management entities in the consolidated action. The relief requested on behalf of each plaintiff in the consolidated action is: (1) an award of compensatory damages according to proof in an amount in excess of $25,000 for each of the three counts of the amended complaint; (2) an award of punitive damages in the amount of two times compensatory damages, pursuant to applicable statute, or in such amount as may be awarded at trial for each of the three counts of the amended complaint; (3) costs for medical screening and monitoring of each plaintiff; (4) interest on the damages according to law; (5) costs and disbursements of the lawsuit; (6) reasonable fees for attorneys and expert witnesses; and (7) any other and further relief as the court deems just, proper and equitable. Plaintiffs filed an amended consolidated complaint on September 9, 2010, which no longer asserts a claim for medical monitoring. As a result of various dismissals of plaintiffs, this case presently consists of approximately 600 plaintiffs. Discovery is ongoing. We will vigorously defend against the plaintiffs’ allegations in the consolidated action.
 
Luri Matter
 
On August 17, 2007, a former employee, Ronald Luri, sued Republic Services, Inc., Republic Services of Ohio Hauling LLC, Republic Services of Ohio I LLC, Jim Bowen and Ron Krall in the Cuyahoga County Common Pleas Court in Ohio. Plaintiff alleges that he was unlawfully fired in retaliation for refusing to discharge or demote three employees who were all over 50 years old. On July 3, 2008, a jury verdict was awarded against us in the amount of $46.6 million, including $43.1 million in punitive damages. On September 24, 2008, the Court awarded pre-judgment interest of $0.3 million and attorney fees and litigation costs of $1.1 million. Post-judgment interest accrued at a rate of 8% for 2008 and 5% for 2009, and is accruing at a rate of 4% for 2010. Management anticipates that post-judgment interest could accrue through the middle of 2011 for a total of $7.7 million. We have filed a notice of appeal, and the case has been fully briefed in the Court of Appeals. It is reasonably possible that following all appeals a final judgment of liability for compensatory and punitive damages may be assessed against us related to this matter.


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Litigation Related to Fuel and Environmental Fees
 
On July 8, 2009, CLN Properties, Inc. and Maevers Management Company, Inc. filed a complaint against Republic Services, Inc. and Allied Waste Industries, Inc. in the United States District Court in Arizona, in which plaintiffs complain about fuel recovery fees and environmental recovery fees. The complaint purports to be filed on behalf of a nationwide class of similarly situated plaintiffs. The complaint asserts various legal and equitable theories of recovery and alleges in essence that the fees were not properly disclosed, were unfair, and were contrary to contract. The District Court denied plaintiffs’ motion for class certification on December 13, 2010. Plaintiffs filed a motion for reconsideration of that ruling, which the District Court also denied. Plaintiffs have not filed a timely interlocutory appeal, but could file an appeal after any judgment in this case. Based on the District Court’s opinion and the small amounts at issue with respect to the 10 remaining plaintiffs, we will no longer report on this case after this Form 10-K.
 
On July 23, 2009, Klingler’s European Bake Shop & Deli, Inc., filed a complaint against BFI Waste Services, LLC in the Circuit Court of Jefferson County, Alabama, in which plaintiff complains about fuel/environmental recovery fees and administrative fees charged. The complaint purports to be filed on behalf of a class of similarly situated plaintiffs in Alabama. This complaint asserts various legal and equitable theories of recovery and alleges in essence that the fees were not properly disclosed, were unfair, and were contrary to contract. Class-certification-related discovery is underway. Plaintiff’s deadline for moving for class certification is August 12, 2011.
 
The plaintiffs in both actions have not specified the amount of damages sought. Although the range of reasonably possible loss cannot be estimated, we do not believe that these matters will have a material impact on our consolidated financial positions, results of operations or cash flows. We will continue to vigorously defend the claims in both lawsuits.
 
Proxy Disclosure Matter
 
In late 2009, a stockholder sued Republic Services, Inc. in Federal court in Delaware challenging our disclosures in our 2009 proxy statement with respect to the Executive Incentive Plan (EIP) that was approved by our stockholders at the 2009 annual meeting. The lawsuit is styled as a combined proxy disclosure claim and derivative action. We are a defendant only with respect to the proxy disclosure claim, which seeks only to require us to make additional disclosures regarding the EIP and to hold a new stockholder vote prior to making any payments under the EIP. The derivative claim is purportedly brought on behalf of our company against all of our directors and the individuals who were executive officers at the time of the 2009 annual meeting and alleges, among other things, breach of fiduciary duty. That claim also seeks injunctive relief and seeks to recoup on behalf of our company an unspecified amount of the incentive compensation that may be paid to our executives under the EIP, as well as the amount of any tax deductions that may be lost if the EIP does not comply with Section 162(m) of the Internal Revenue Code. Defendants’ motions to dismiss plaintiff’s complaint have been fully briefed. We believe the lawsuit is without merit and is not material and intend to vigorously defend against the plaintiff’s allegations.
 
Contracting Matter
 
We discovered actions of non-compliance by one of our subsidiaries with the subcontracting provisions of certain government contracts in one of our markets. We reported the discovery to, and have had further discussions with, law enforcement and other authorities. Such non-compliance could result in payments by us in the form of restitution, damages, or penalties, or the loss of future business in the affected market or other markets. Based on the information currently available to us, including our expectation that our self-disclosure will be viewed favorably by the applicable authorities, we presently believe that the resolution of the matter, while it may have a material impact on our results of operations or cash flows in the period in which it is recognized or paid, will not have a material adverse effect on our consolidated financial position.


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Congress Development Landfill Matters
 
Congress Development Co. (CDC) is a general partnership that owns and operates the Congress Landfill. The general partners in CDC are our subsidiary, Allied Waste Transportation, Inc. (Allied Transportation), and an unaffiliated entity, John Sexton Sand & Gravel Corporation (Sexton). Sexton was the operator of the landfill through early 2007, when Allied Transportation took over as the operator. The general partners likely will be jointly and severally liable for the costs associated with the following matters relating to the Congress Landfill.
 
In a suit originally filed on December 23, 2009 in the Circuit Court of Cook County, Illinois and subsequently amended to add additional plaintiffs, approximately 2,300 plaintiffs sued our subsidiaries Allied Transportation and Allied Waste Industries, Inc., CDC and Sexton. The plaintiffs allege bodily injury, property damage and inability to have normal use and enjoyment of property arising from, among other things, odors and other damages arising from landfill gas leaking, and they base their claims on negligence, trespass, and nuisance. Following the court’s order in our favor striking the plaintiffs’ allegations requesting actual damages in excess of $50,000,000 and punitive damages in excess of $50,000,000, the amount of damages being sought is unspecified. The court entered an order dismissing Allied Waste Industries, Inc. without prejudice on October 26, 2010. We intend to vigorously defend against the plaintiffs’ allegations in this action.
 
Livingston Matter
 
On October 13, 2009, the Twenty-First Judicial District Court, Parish of Livingston, State of Louisiana, issued its Post Class Certification Findings of Fact and Conclusions of Law in a lawsuit alleging nuisance from the activities of the CECOS hazardous waste facility located in Livingston Parish, Louisiana. The court granted class certification for all those living within a six mile radius of the CECOS site between the years 1977 and 1990. We have filed a notice of appeal with respect to the class certification order and briefing is complete. The parties are currently attempting to resolve the matter through mediation. If the mediation does not resolve the matter, we intend to continue to defend this lawsuit vigorously.
 
Legal Proceedings Involving Governmental Authorities with Possible Sanctions of $100,000 or More
 
Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions unless we reasonably believe that the monetary sanctions will not equal or exceed $100,000. We are disclosing the following matters in accordance with that requirement:
 
Forward Matters
 
The District Attorney for San Joaquin County filed a civil action against Forward, Inc. and Allied Waste Industries, Inc. on February 14, 2008 in the Superior Court of California, County of San Joaquin. The complaint seeks civil penalties of $2,500 for each alleged violation, but no less than $10.0 million, and an injunction against Forward and Allied for alleged permit and regulatory violations at the Forward Landfill. The District Attorney contends that the alleged violations constitute unfair business practices under the California Business and Professions Code section 17200, et seq., by virtue of violations of Public Resources Code Division 30, Part 4, Chapter 3, Article 1, sections 44004 and 44014(b); California Code of Regulations Title 27, Chapter 3, Subchapter 4, Article 6, sections 20690(11) and 20919.5; and Health and Safety Code sections 25200, 25100, et seq., and 25500, et seq. Although the complaint is worded very broadly and does not identify specific permit or regulatory violations, the District Attorney has articulated three primary concerns in past communications, alleging that the landfill: (1) used green waste containing food as alternative daily cover, (2) exceeded its daily solid waste tonnage receipt limitations under its solid waste facility permit, and (3) received hazardous waste in violation of its permit (i.e., auto shredder waste). Additionally, the District Attorney alleges that landfill gas measured by a monitoring probe at the property boundary has exceeded an action level of five percent methane. We are vigorously defending against the allegations.
 
On February 5, 2010, the U.S. Environmental Protection Agency (EPA) Region IX delivered a Finding and Notice of Violation to the Forward Landfill as a result of alleged violations of the Title V permit issued under


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the Clean Air Act. The facility is jointly regulated by the EPA and the San Joaquin Valley Air Pollution Control District. The alleged violations include operating gas collection wellheads at greater than 15% oxygen, experiencing a subsurface oxidation event on multiple occasions, and submitting inaccurate compliance certifications. While a complaint has not yet been filed, on December 15, 2010, the District issued a 60-day Notice of Intent to Sue based on these allegations. We are undergoing nonbinding mediation with the agencies as we continue to vigorously defend against the allegations.
 
Imperial Landfill Matter
 
On May 18, 2009, the Pennsylvania Department of Environmental Protection (PADEP) and the Allegheny County Health Department (ACHD) presented the Imperial Landfill a proposed consent order and agreement for a series of alleged violations related to landfill gas, leachate control, cover management, and resulting nuisance odor complaints, primarily in late 2008 and 2009. On March 12, 2010, we signed a Consent Assessment of Civil Penalties (CACP) with the PADEP in connection with PADEP’s allegations of violations at the landfill through November 16, 2009. The total penalty amount in the CACP was $650,000. On April 12, 2010, additional orders were issued against us by both the PADEP and the ACHD for the allegedly continuing failure to bring the landfill’s odor issues under control. We have concluded settlements with both agencies. On November 22, 2010, we finalized a Consent Order and Agreement (COA) with the ACHD, in which we paid a penalty of $225,000 for all violations up to the date of the COA and agreed to certain operational requirements. The ACHD withdrew its April 12, 2010 Order. On December 22, 2010, we executed a COA with the PADEP, pursuant to which we have paid a penalty of $142,000 for all violations of which PADEP was aware from November 17, 2009 through December 15, 2010. We also agreed to certain operational requirements.
 
Sunshine Canyon Matter
 
On November 17, 2009, the South Coast Air Quality Management District (SCAQMD) issued a Petition for an Order for Abatement (Petition) as a result of a series of odor complaints and notices of violation alleged to be associated with the operations at the Sunshine Canyon Landfill located in Sylmar, California (Sunshine Canyon). The Petition described eight notices of violation beginning in November 2008 and continuing to November 2009. The SCAQMD’s independent Hearing Board held a series of public hearings between December 2009 and March 2010, after which it issued a final order (Order) that requires certain operational changes aimed at odor control, and further requires Sunshine Canyon to perform several studies regarding odor control techniques, equipment and site meteorology. In July 2010, the Hearing Board approved an amended Order suspending certain operational requirements contained in the initial Order pending completion of additional odor control studies. While the District prosecutor’s office has stated its intention to assess a penalty on Sunshine Canyon, it has not indicated the amount or type of such a penalty. In September 2010, the County of Los Angeles Department of Public Works (Department) issued a directive to Sunshine Canyon requiring the implementation of certain corrective measures aimed at reducing odors. Sunshine Canyon, the SCAQMD Hearing Board and SCAQMD staff are currently attempting to resolve conflicting requirements between the County’s directive and the Hearing Board’s Order.
 
Lorain County Landfill Matter
 
Since 2006, the Lorain County Landfill located in Lorain, Ohio has agreed to two consensual Director’s Final Findings and Orders (DFFO’s) issued by the Ohio Environmental Protection Agency related to operational issues, including odor nuisances. The Ohio Attorney General’s office has advised us that it intends to initiate legal proceedings against our subsidiary, Lorain County Landfill, LLC, and against Lorain County LFG Power Station Energy Developments, Inc., which has operated and maintained the landfill’s gas collection system, for violations that are alleged to continue to occur in violation of the DFFOs and are related to continuing alleged nuisance odors. We are engaging in discussions with representatives of the Attorney General’s office to attempt to amicably resolve the State’s issues and to negotiate a consent order that would be filed with the common pleas court. While the Attorney General’s office has stated its intention to assess a penalty on Lorain County Landfill, LLC (as well as Lorain County LFG Power Station Energy Developments, Inc.), it has not indicated


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the amount or type of penalty it will seek. The Attorney General’s office also has indicated it will seek injunctive relief, but has not yet indicated what such injunctive relief would entail. Discussions with the Attorney General’s office are ongoing.
 
Queen Creek Matter
 
The Maricopa County Air Quality Department issued a Notice of Violation (NOV) to the Maricopa County Solid Waste Department (Solid Waste Department) in March 2010 and to the Town of Queen Creek (“Queen Creek”) and Allied Waste Industries (Arizona), Inc. (Allied Waste) in October 2010 relating to the Queen Creek Landfill (Landfill). The NOV alleges violations of the Clean Air Act relating to the Landfill while it was in operation. The Landfill was owned by Maricopa County and operated by Allied Waste under contract with Queen Creek between 1996 and 2006, at which time it was closed. The NOV alleges the failure to design, install and operate a landfill gas collection control system, failure to timely apply for an air quality permit, and failure to provide required reports relating to landfill capacity, status and closure. Under the terms of several intergovernmental agreements between Maricopa County and Queen Creek, Maricopa County agreed to be responsible for the activities that are the subject of the NOVs and to indemnify Queen Creek and its contractors for Maricopa County’s failure to meet its obligations under the agreements. The Company will vigorously defend against the allegations and seek indemnification from Maricopa County.
 
ITEM 4.  REMOVED AND RESERVED
 
PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information, Holders and Dividends
 
The principal market for our common stock is the New York Stock Exchange (NYSE), and it is traded under the symbol RSG. The following table sets forth the range of the high and low sale prices per share of our common stock on the NYSE and the cash dividends declared per share of common stock for the periods indicated:
 
                         
            Dividends
    High   Low   Declared
 
Year Ended December 31, 2010:
                       
First Quarter
  $  29.55     $  25.15     $  0.19  
Second Quarter
    31.92       27.65       0.19  
Third Quarter
    32.95       28.97       0.20  
Fourth Quarter
    32.13       27.70       0.20  
Year Ended December 31, 2009:
                       
First Quarter
  $ 26.81     $ 15.05     $ 0.19  
Second Quarter
    24.45       16.31       0.19  
Third Quarter
    27.34       23.32       0.19  
Fourth Quarter
    29.82       25.44       0.19  
 
There were 844 holders of record of our common stock at February 10, 2011, which does not include beneficial owners for whom Cede & Co. or others act as nominees.
 
In February 2011, our board of directors declared a regular quarterly dividend of $0.20 per share for stockholders of record on April 1, 2011. We expect to continue to pay quarterly cash dividends, and we may consider increasing our quarterly cash dividends if we believe it will enhance stockholder value.


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We have the ability under our credit facilities to pay dividends and repurchase our common stock subject to our compliance with the financial covenants in our credit facilities. As of December 31, 2010 and throughout the entire year, we were in compliance with the financial covenants in our credit facilities.
 
Issuer Purchases of Equity Securities
 
The following table provides information relating to our purchases of shares of our common stock during the three months ended December 31, 2010:
 
                                 
                Total Number of Shares
    Approximate Dollar
 
                Shares Purchased as
    Value of Shares that
 
    Total Number of
    Average Price Paid
    Part of Publicly
    May Yet Be Purchased
 
    Shares Purchased (a)     per Share (a)     Announced Program (b)     Under the Program (c)  
 
October 2010
        $           $  
November 2010
    965,431     $ 28.25       965,431     $ 372,728,864  
December 2010
    499,409     $ 28.93       479,900     $       358,860,447  
                                 
      1,464,840     $             28.48       1,445,331          
                                 
 
 
(a) Our board of directors has approved a share repurchase program pursuant to which we may repurchase up to $400.0 million of our outstanding shares of common stock through December 31, 2011 (the 2010 Program). The 2010 Program was publicly announced on November 4, 2010. Share repurchases under the 2010 Program may be made through open market purchases or privately negotiated transactions in accordance with applicable federal securities laws. While the board of directors has approved the 2010 Program, the timing of any purchases, the prices and the number of shares of common stock to be purchased will be determined by our management, at its discretion, and will depend upon market conditions and other factors. The 2010 Program may be extended, suspended or discontinued at any time.
 
(b) The total number of shares purchased during the fourth quarter of 2010 includes: (i) 1,445,331 shares of common stock purchased pursuant to the 2010 Program; and (ii) 19,509 shares of common stock surrendered to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock issued to employees. We expect to continue to satisfy minimum tax withholding obligations in connection with the vesting of outstanding restricted stock through the withholding of shares.
 
(c) Shares that may be purchased under the program excludes 19,509 shares of common stock surrendered to satisfy statutory minimum tax withholding obligations in connection with the vesting of restricted stock issued to employees.
 
Recent Sales of Unregistered Securities
 
None


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Performance Graph
 
The following graph compares the performance of our common stock to the Standard & Poor’s 500 Stock Index (S&P 500 Index) and the Dow Jones Waste & Disposal Services Index (DJW&DS Index). The graph covers the period from December 31, 2005 to December 31, 2010 and assumes that the value of the investment in our common stock and in each index was $100 at December 31, 2005 and that all dividends were reinvested.
 
Comparison of Five Year Cumulative Total Return
Assumes Initial Investment of $100
 
(PERFORMANCE GRAPH)
 
Indexed Returns For Years Ending
 
                                                 
    December 31,
    2005   2006   2007   2008   2009   2010
 
Republic Services, Inc. 
  $ 100.00     $ 109.91     $ 129.38     $ 104.98     $ 123.88     $ 134.12  
S&P 500 Stock Index
    100.00       115.80       122.16       76.96       97.33       111.99  
DJW&DS Index
    100.00       122.88       128.50       120.68       137.37       163.17  


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ITEM 6.  SELECTED FINANCIAL DATA
 
The following Selected Financial Data should be read in conjunction with our consolidated financial statements and notes thereto as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010 and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
 
The Allied acquisition was effective December 5, 2008 and has been accounted for as an acquisition of Allied by Republic. The consolidated financial statements include the operating results of Allied from the date of the acquisition, and have not been retroactively restated to include Allied’s historical financial position or results of operations. In accordance with the purchase method of accounting, the purchase price paid has been allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired being recorded as goodwill.
 
Our shares, per share data and weighted average common and common equivalent shares outstanding have been retroactively adjusted for all periods prior to 2007 to reflect a 3-for-2 stock split in the form of a stock dividend that was effective on March 16, 2007.
 
See Notes 1, 2, 3, 8, 9, 10 and 12 of the notes to our consolidated financial statements in Item 8 of this Form 10-K for a discussion of basis of presentation, significant accounting policies, business acquisitions and divestitures, restructuring charges, landfill and environmental costs, debt, income taxes and stockholders’ equity and their effect on comparability of year-to-year data. These historical results are not necessarily indicative of the results to be expected in the future. Amounts are in millions, except per share amounts.
 
                                         
    Year Ended December 31,  
    2010     2009     2008     2007     2006  
 
Statement of Operations Data:
                                       
Revenue
  $ 8,106.6     $ 8,199.1     $ 3,685.1     $ 3,176.2     $ 3,070.6  
Expenses:
                                       
Cost of operations
    4,764.8       4,844.2       2,416.7       2,003.9       1,924.4  
Depreciation, amortization and depletion
    833.7       869.7       354.1       305.5       296.0  
Accretion
    80.5       88.8       23.9       17.1       15.7  
Selling, general and administrative
    858.0       880.4       434.7       313.7       315.0  
Loss (gain) on disposition of assets and impairments, net
    19.1       (137.0 )     89.8              
Restructuring charges
    11.4       63.2       82.7              
                                         
Operating income
    1,539.1       1,589.8       283.2       536.0       519.5  
Interest expense
    (507.4 )     (595.9 )     (131.9 )     (94.8 )     (95.8 )
Loss on extinguishment of debt
    (160.8 )     (134.1 )                  
Interest income
    0.7       2.0       9.6       12.8       15.8  
Other income (expense), net
    5.4       3.2       (1.6 )     14.1       4.2  
                                         
Income before income taxes
    877.0       865.0       159.3       468.1       443.7  
Provision for income taxes
    369.5       368.5       85.4       177.9       164.1  
                                         
Net income
    507.5       496.5       73.9       290.2       279.6  
Less: Income attributable to noncontrolling interests
    (1.0 )     (1.5 )     (0.1 )            
                                         
Net income attributable to Republic Services, Inc. 
  $ 506.5     $ 495.0     $ 73.8     $ 290.2     $ 279.6  
                                         
Basic earnings per share attributable to Republic Services, Inc. stockholders:
                                       
Basic earnings per share
  $ 1.32     $ 1.30     $ 0.38     $ 1.53     $ 1.41  
                                         
Weighted average common shares outstanding
    383.0       379.7       196.7       190.1       198.2  
                                         
Diluted earnings per share attributable to Republic
                                       
Services, Inc. stockholders:
                                       
Diluted earnings per share
  $ 1.32     $ 1.30     $ 0.37     $ 1.51     $ 1.39  
                                         
Weighted average common and common equivalent shares outstanding
    385.1       381.0       198.4       192.0       200.6  
                                         
Cash dividends per common share
  $ 0.7800     $ 0.7600     $ 0.7200     $ 0.5534     $ 0.4000  
                                         


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    Year Ended December 31,  
    2010     2009     2008     2007     2006  
 
Other Operating Data:
                                       
Cash flows from operating activities
  $ 1,433.7     $ 1,396.5     $ 512.2     $ 661.3     $ 511.2  
Capital expenditures
    794.7       826.3       386.9       292.5       326.7  
Proceeds from sales of property and equipment
    37.4       31.8       8.2       6.1       18.5  
Balance Sheet Data:
                                       
Cash and cash equivalents
  $   88.3     $ 48.0      $   68.7     $ 21.8     $      29.1  
Restricted cash and marketable securities
    172.8       240.5       281.9       165.0       153.3  
Total assets
    19,461.9       19,540.3       19,921.4       4,467.8       4,429.4  
Total debt
    6,743.6       6,962.6       7,702.5       1,567.8       1,547.2  
Total stockholders’ equity
    7,848.9       7,567.1       7,282.5       1,303.8       1,422.1  
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto, included elsewhere herein. This discussion may contain forward-looking statements that anticipate results based on management’s plans that are subject to uncertainty. We discuss in more detail various factors that could cause actual results to differ from expectations in Item 1A. Risk Factors.
 
Overview
 
We are the second largest provider of services in the domestic non-hazardous solid waste industry, as measured by revenue. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 348 collection companies in 40 states and Puerto Rico. We own or operate 204 transfer stations, 193 active solid waste landfills and 76 recycling facilities. We also operate 73 landfill gas and renewable energy projects. We completed our acquisition of Allied Waste Industries, Inc. (Allied) in December 2008. We believe that this acquisition creates a strong operating platform that will allow us to continue to provide quality service to our customers and superior returns to our stockholders.
 
Despite the challenging economic environment, our business has performed well during 2010 due in large part to the indispensable nature of our services and the scalability of our business. Revenue for the year ended December 31, 2010 decreased by 1.1% or $92.5 million to $8,106.6 million as compared to $8,199.1 million during the comparable period in 2009. Due to the Allied acquisition, the DOJ required us to divest of certain assets and related liabilities. The resulting divestitures, as well as other divestitures in the normal course of business, decreased revenue by 1.1% for the year ended December 31, 2010 from the year ended December 31, 2009. Excluding divested revenue, core revenue for the year ended December 31, 2010 was unchanged, consisting of a 1.6% increase in core price, 1.4% increase in commodity price and a 0.5% increase in fuel charges, offset by a decrease of 3.5% in core volume due to the continued weak economy. The core price increase, together with operating efficiencies arising from the acquisition and cost control measures taken by our operations management to scale the business down for lower volumes, served to moderate profit margin declines.
 
During 2010, we completed the integration of Allied operations resulting in approximately $190 million of annual run-rate synergy savings, of which $161 million relates to operating synergies and $29 million relates to financing synergies, exceeding our original estimate of approximately $150 million by 26.7%. Since the acquisition in 2008, we have repaid $1.3 billion of net borrowings through December 31, 2010 and have refinanced $1.5 billion of senior notes and $677.4 million of tax-exempt financings at lower interest rates. Free cash flow generated from operations allowed us to increase our regular quarterly dividend 5% in the third quarter of 2010 and in November 2010, our board of directors approved a share repurchase program pursuant to which we may repurchase up to $400.0 million of our outstanding shares of common stock.

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2011 Guidance
 
Our objectives for 2011 remain consistent with previous years and focus on enhancing stockholder value by increasing returns on invested capital and through the efficient use of free cash flow. Despite the challenging economy, we remain committed to continuing our broad-based pricing program across all lines of business to recover increasing costs and to expand our operating margins.
 
Our guidance is based on current economic conditions and does not assume any improvement or deterioration in the overall economy in 2011. Specific guidance follows:
 
Revenue
 
We expect 2011 revenue to increase by approximately 0.5 to 1.5%. This consists of the following:
 
     
    Increase
    (Decrease)
 
Core price
  1.0 to 1.5%
Volume
  0.0 to 0.5%
San Mateo and Toronto contract losses
  (1.5)%
Fuel surcharges
  0.5%
Commodities
  0.5%
     
Total change
  0.5 to 1.5%
     
 
Approximately 50% of our annual revenue is restricted as to the amount of certain pricing changes. Such restrictions on price increases include but are not limited to each of the following:
 
•   Price changes based upon fluctuation in a specific index as defined in the contract;
 
•   Fixed price increases based on stated contract terms; or
 
•   Price changes based on a cost plus a specific profit margin or other measurement.
 
Of these restricted pricing arrangements, approximately 70% are based on a consumer price index, 20% are fixed arrangements and the remainder are based upon a cost plus or other specific arrangement. The consumer price index varies from a single historical stated period of time or an average of trailing historical rates over a stated period of time. In addition, many pricing resets lag between the measurement period and the date the revised pricing goes into effect. As a result, current changes in a specific index, such as the consumer price index, may not manifest themselves in our reported pricing for several quarters into the future.
 
Property and Equipment
 
In 2011, we anticipate receiving $750 million of property and equipment. Purchases of property and equipment as reflected on our consolidated statement of cash flows for 2011 are expected to be $870 million and represent amounts paid during 2011 for such expenditures. The difference between property and equipment received and purchases of property and equipment is adjustments for approximately $120 million of property and equipment received during 2010 but paid for in 2011.
 
Recent Developments
 
Subsequent to December 31, 2010, we: (i) entered into certain interest rate locks with an aggregate notional amount in excess of $550.0 million to manage exposure to fluctuations in interest rates in anticipation of a planned issuance of senior notes in the first half of 2011 and (ii) financed the maturity of our $262.9 million 5.750% senior notes with proceeds from our Credit Facilities.


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Business Acquisitions and Divestitures
 
We make decisions to acquire, invest in or divest of businesses based on financial and strategic considerations. Businesses acquired are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the date of acquisition.
 
Acquisition of Allied Waste Industries, Inc.
 
On December 5, 2008, we acquired all the issued and outstanding shares of Allied in a stock-for-stock transaction for an aggregate purchase price of $12.1 billion, which included $5.4 billion of debt, at fair value. We completed the integration of the operations of the two companies and converted to one operating system during 2010.
 
As a condition of the Allied acquisition, the DOJ required us to divest of certain assets and related liabilities. We completed all of the required divestitures during 2009.
 
Consolidated Results of Operations
 
Years Ended December 31, 2010, 2009 and 2008
 
The following table summarizes our operating revenue, costs and expenses in millions of dollars and as a percentage of our revenue for the years ended December 31, 2010, 2009 and 2008:
 
                                                 
    2010     2009     2008  
 
Revenue
  $ 8,106.6       100.0 %   $ 8,199.1       100.0 %   $ 3,685.1       100.0 %
Cost of operations
    4,764.8       58.8       4,844.2       59.1       2,416.7       65.6  
Depreciation, amortization and depletion of property and equipment
    762.2       9.4       799.1       9.7       342.3       9.3  
Amortization of other intangible assets and other assets
    71.5       0.9       70.6       0.9       11.8       0.3  
Accretion
    80.5       1.0       88.8       1.1       23.9       0.7  
Selling, general and administrative
    858.0       10.6       880.4       10.7       434.7       11.8  
Loss (gain) on disposition of assets and impairments, net
    19.1       0.2       (137.0 )     (1.7 )     89.8       2.4  
Restructuring charges
    11.4       0.1       63.2       0.8       82.7       2.2  
                                                 
Operating income
  $   1,539.1         19.0 %   $   1,589.8         19.4 %   $   283.2         7.7 %
                                                 
 
Pre-tax income was $877.0 million, $865.0 million and $159.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. Net income attributable to Republic Services, Inc. was $506.5 million, or $1.32 per diluted share, for the year ended December 31, 2010, compared to $495.0 million, or $1.30 per diluted share in 2009 and $73.8 million, or $0.37 per diluted share in 2008.
 
During each of the three years ended December 31, 2010, 2009 and 2008, we recorded a number of gains, charges (recoveries) and other expenses that impacted our pre-tax income, net income attributable to Republic


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Services, Inc. (Net Income – Republic) and diluted earnings per share. These items primarily consist of the following (in millions, except per share data):
 
                                                                         
    Year Ended December 31, 2010     Year Ended December 31, 2009     Year Ended December 31, 2008  
          Net
    Diluted
          Net
    Diluted
          Net
    Diluted
 
    Pre-tax
    Income -
    Earnings
    Pre-tax
    Income -
    Earnings
    Pre-tax
    Income -
    Earnings
 
    Income     Republic     per Share     Income     Republic     per Share     Income     Republic     per Share  
 
As reported
  $ 877.0     $ 506.5     $ 1.32     $ 865.0     $ 495.0     $ 1.30     $ 159.3     $ 73.8     $ 0.37  
Loss on extinguishment of debt
    160.8       98.6       0.26       134.1       83.3       0.22       -       -       -  
Costs to achieve synergies
    33.3       20.3       0.05       41.8       25.6       0.06       2.9       1.7       0.01  
Restructuring charges
    11.4       7.0       0.02       63.2       38.6       0.10       82.7       49.9       0.25  
Remediation (recoveries) charges
    -       -       -       (6.8 )     (4.1 )     (0.01 )     156.8       94.6       0.48  
Loss (gain) on disposition of assets and impairments, net
    19.1       25.4       0.06       (137.0 )     (73.8 )     (0.19 )     89.8       54.1       0.27  
Tax effect of permanent items
    -       -       -       -       -       -       -       31.1       0.16  
                                                                         
Adjusted
  $  1,101.6     $   657.8     $   1.71     $  960.3     $   564.6     $   1.48     $  491.5     $   305.2     $   1.54  
                                                                         
 
Loss on extinguishment of debt. During 2010, we refinanced $677.4 million and repaid $97.8 million of our tax-exempt financings resulting in a loss on extinguishment of debt of $28.5 million related to the write-off of unamortized debt discounts and professional fees to effectuate these transactions.
 
Additionally, during 2010, we issued $850.0 million of 5.00% senior notes due 2020 and $650.0 million of 6.20% senior notes due 2040 (collectively, the Notes). We used the net proceeds from the Notes as follows: (i) $433.7 million to redeem the 6.125% senior notes due 2014 at a premium of 102.042% ($425.0 million principal outstanding); (ii) $621.8 million to redeem the 7.250% senior notes due 2015 at a premium of 103.625% ($600.0 million principal outstanding); and (iii) the remainder to reduce amounts outstanding under our Credit Facilities and for general corporate purposes. We incurred a loss on extinguishment of debt of $132.1 million for premiums paid to repurchase debt, to write-off unamortized debt discounts and for professional fees paid to effectuate the repurchase of the senior notes. Separately, we incurred a loss of $0.2 million in 2010 related to the write-off of unamortized deferred issuance costs associated with the accounts receivable securitization program.
 
During 2009, we issued $1,250.0 million of senior notes, the proceeds of which were primarily used to purchase and retire outstanding senior notes maturing in 2010 through 2034. Additionally, we repurchased certain of our outstanding senior notes in the secondary market.
 
Costs to achieve synergies. During the year ended December 31, 2010, we incurred $33.3 million of incremental costs to achieve our synergy plan that are recorded in selling, general and administrative expenses versus $41.8 million and $2.9 million for the comparable 2009 and 2008 periods, respectively. These incremental costs primarily relate to a synergy incentive plan as well as other integration costs. In 2011, we do not expect to incur any additional costs to achieve synergies.
 
Restructuring charges. During the year ended December 31, 2010, we incurred $11.4 million of restructuring and integration charges related to the Allied acquisition versus $63.2 million and $82.7 million for the comparable 2009 and 2008 periods, respectively. These charges consist of severance and other employee termination and relocation benefits as well as consulting and professional fees. Substantially all of these charges were recorded in our corporate segment. In 2011, we do not expect to incur any additional restructuring charges related to the Allied acquisition.
 
Remediation (recoveries) charges. During 2009, we recovered $(12.0) million of insurance proceeds related to remediation costs at the Countywide facility, which were partially offset by additional charges of $5.2 million at our closed disposal facility in California. Remediation and related charges of $156.8 million during 2008 were attributable to changes to our cost estimates at the Countywide facility, our closed disposal facility in California, and the Sunrise Landfill in Nevada.


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Loss (gain) on disposition of assets and impairments, net. During the year ended December 31, 2010, we recorded a net loss on the disposition of assets of $4.0 million as a result of business divestures, including transaction costs. Additionally, during 2010 we recorded an impairment loss of $15.1 million related to certain long-lived assets that are held and used.
 
During 2009, we recorded net gain on disposition of assets, net of costs to sell of $(137.0) million related to the mandatory disposition of assets as required by DOJ as well as discretionary dispositions. During 2008, we recorded asset impairments of $89.8 million primarily related to the Countywide facility, our former corporate office in Florida and impairment on sales of DOJ required divestitures.
 
Tax effect of permanent items in adjustments. During 2008, our effective tax rate was impacted by several expenses associated with the acquisition that were not tax deductible.
 
In addition to the items discussed above, we incurred the following charges during the year ended December 31, 2008:
 
  •   Conforming adjustments for accounting policies. During 2008, we recorded bad debt expense of $14.2 million related to conforming Allied’s methodology for recording the allowance for doubtful accounts for accounts receivable with our methodology and $5.4 million to provide for specific bankruptcy exposures.
 
  •   Legal reserves. During 2008, we incurred $24.3 million of charges related to our estimates of the outcome of various legal matters.
 
  •   Landfill amortization. During 2008, we recorded $2.8 million of incremental landfill amortization expense as compared to the amortization expense Allied would have recorded for the same period.
 
We believe that the presentation of adjusted pre-tax income, adjusted net income attributable to Republic Services, Inc. and adjusted diluted earnings per share, which are not measures determined in accordance with U.S. GAAP, provide an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. Comparable charges and costs have been incurred in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted pre-tax income, adjusted net income attributable to Republic Services, Inc. and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.
 
These gains and charges affected our consolidated statements of income for the years ended December 31, 2010, 2009 and 2008, as follows (in millions):
 
                         
    2010     2009     2008  
 
Expenses:
                       
Cost of operations
  $ -     $ (6.8 )   $ 153.9  
Selling, general and administrative
    33.3       41.8       4.8  
Loss (gain) on disposition of assets and impairments, net
    19.1        (137.0 )     89.8  
Restructuring charges
    11.4       63.2       82.7  
Loss on extinguishment of debt
    160.8       134.1       -  
Other (income) expense, net
    -       -       1.0  
                         
Total charges, net
  $   224.6     $ 95.3     $   332.2  
                         
 
Revenue
 
We generate revenue primarily from our solid waste collection operations. Our remaining revenue is from other services, including transfer stations, landfill disposal and recycling. Our revenue from collection operations consists of fees we receive from commercial, industrial, municipal and residential customers. Our


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residential and commercial collection operations in some markets are based on long-term contracts with municipalities. Certain of our municipal contracts have annual price escalation clauses that are tied to changes in an underlying base index such as the consumer price index. We generally provide commercial and industrial collection services to customers under contracts with terms up to three years. Our transfer station, landfill and, to a lesser extent, our material recovery facilities generate revenue from disposal or tipping fees charged to third parties. In general, we integrate our recycling operations with our collection operations and obtain revenue from the sale of recyclable materials. Other revenue consists primarily of revenue from sales of recyclable materials and revenue from National Accounts. National Accounts revenue included in other revenue represents the portion of revenue generated from nationwide contracts in markets outside our operating areas, and, as such, the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
 
The following table reflects our revenue by service line for the respective years ended December 31 (in millions of dollars and as a percentage of our revenue):
 
                                                 
    2010     2009     2008  
 
Collection:
                                               
Residential
  $ 2,173.9       26.8 %   $ 2,187.0       26.7 %   $ 966.0       26.2 %
Commercial
    2,486.8       30.7       2,553.4       31.1       1,161.4       31.5  
Industrial
    1,482.9       18.3       1,541.4       18.8       711.4       19.3  
Other
    29.6       0.4       26.9       0.3       23.2       0.7  
                                                 
Total collection
    6,173.2       76.2       6,308.7       76.9       2,862.0       77.7  
                                                 
Transfer and disposal
    2,998.9               3,113.5               1,343.4          
Less: Intercompany
    (1,521.6 )             (1,564.1 )             (683.5 )        
                                                 
Transfer and disposal, net
    1,477.3       18.2       1,549.4       18.9       659.9       17.9  
                                                 
Sale of materials
    307.1       3.8       181.2       2.2       121.1       3.3  
Other non-core
    149.0       1.8       159.8       2.0       42.1       1.1  
                                                 
Other
    456.1       5.6       341.0       4.2       163.2       4.4  
                                                 
Total revenue
  $   8,106.6       100.0 %   $   8,199.1       100.0 %   $   3,685.1       100.0 %
                                                 
 
The following table reflects changes in our core adjusted revenue for the years ended December 31, 2010, 2009 and 2008. We have presented the components of our revenue changes for the year ended December 31, 2009 assuming the Allied acquisition occurred on January 1, 2008:
 
                         
    2010     2009     2008  
 
Core price
    1.6 %     3.0 %     4.4 %
Fuel surcharges
    0.5       (2.5 )     1.8  
Commodities
    1.4       (1.7 )     0.1  
                         
Total price
    3.5       (1.2 )     6.3  
Volume
    (3.5 )     (9.5 )     (3.8 )
                         
Total internal growth
    -       (10.7 )     2.5  
Acquisitions/divestitures, net
    (1.1 )     (1.4 )     13.5  
Intercompany eliminations
    -       (0.3 )     -  
                         
Total
    (1.1 )%     (12.4 )%     16.0 %
                         
 
Intercompany revenue relates to prior year transactions between Republic and Allied that would have been eliminated if the companies had merged on January 1, 2008. Certain prior year amounts have been reclassified to conform to the current year’s presentation.


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Revenue – 2010 versus 2009
 
The decrease in revenue in 2010 compared to 2009 is due to the following:
 
  •   Changes in core price increased revenue by 1.6% in 2010 compared to 3.0% in 2009. The lower core price increase in 2010 compared to 2009 is due primarily to the lower inflationary environment which limits our price increases on index based contracts, partially offset by our continued broad-based pricing initiatives.
 
  •   Changes in fuel surcharges increased revenue by 0.5% in 2010 compared to a decrease of 2.5% in 2009. Revenue benefited from fuel surcharges resulting from higher fuel costs that were passed along to our customers in 2010. The increase in fuel surcharges in 2010 compared to 2009 is directly attributable to an increase in fuel costs.
 
  •   Changes in commodity prices increased revenue by 1.4% in 2010 compared to a decrease of 1.7% in 2009. Revenue benefited from higher commodity prices for recovered materials in 2010 compared to 2009.
 
  •   Changes in core volume decreased revenue by 3.5% in 2010 compared to 9.5% in 2009. During 2010, we continued to experience negative core growth in all lines of business, especially in temporary roll-off within our industrial collection business in the first half of 2010. Core volume continued to decline throughout 2010, however, at a lower rate than earlier in the year or in 2009.
 
  •   Changes in acquisitions and divestitures, net decreased revenue by 1.1% in 2010 compared to 1.4% in 2009. The DOJ required us to divest of certain assets and related liabilities in connection with the Allied acquisition. The resulting divestitures, as well as other divestitures in the normal course of business, decreased revenue by 1.1% in 2010 compared to 2009.
 
Revenue – 2009 versus 2008
 
The increase in revenue in 2009 compared to 2008 is due to the Allied acquisition in December 2008. Additionally:
 
  •   Changes in core price increased revenue by 3.0% and 4.4% in 2009 and 2008, respectively, due to our broad-based pricing initiative which we started during 2003.
 
  •   Changes in fuel surcharges decreased revenue by 2.5% in 2009 compared to an increase of 1.8% in 2008. Revenue benefited from fuel surcharges resulting from high fuel costs that were passed along to our customers during 2008. The decline in fuel surcharges in 2009 compared to 2008 is directly attributable to a decline in fuel costs.
 
  •   Changes in commodity prices decreased revenue by 1.7% in 2009 compared to an increase of 0.1% in 2008. During 2009, lower market demand resulted in lower pricing for the commodities we sell.
 
  •   Changes in core volume decreased revenue by 9.5% and 3.8% in 2009 and 2008, respectively. During 2009, we experienced negative core volume growth in all lines of business, especially in our industrial collection and landfill businesses, as a result of the challenging economic environment.
 
Cost of Operations
 
Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers who transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel credits; disposal franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs, which includes landfill accretion, financial assurance, leachate


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disposal and other landfill maintenance costs; risk management, which includes casualty insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers associated with recycling commodities; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations.
 
The following table summarizes the major components of our cost of operations for the years ended December 31, 2010, 2009 and 2008 (in millions of dollars and as a percentage of our revenue):
 
                                                 
    2010     2009     2008  
 
Labor and related benefits
  $ 1,534.4       18.9 %   $ 1,561.0       19.0 %   $ 707.0       19.2 %
Transfer and disposal costs
    665.7       8.2       707.3       8.6       348.7       9.5  
Maintenance and repairs
    609.7       7.5       649.2       7.9       281.8       7.6  
Transportation and subcontract costs
    465.4       5.7       490.5       6.0       244.4       6.6  
Fuel
    407.6       5.0       349.8       4.3       235.3       6.4  
Franchise fees and taxes
    395.8       4.9       403.7       4.9       139.0       3.8  
Landfill operating costs
    136.2       1.7       117.8       1.4       190.5       5.2  
Risk management
    171.6       2.1       212.0       2.6       112.7       3.0  
Cost of goods sold
    103.9       1.3       63.3       0.8       50.3       1.4  
Other
    274.5       3.5       289.6       3.6       107.0       2.9  
                                                 
Total cost of operations
  $   4,764.8         58.8 %   $   4,844.2         59.1 %   $   2,416.7         65.6 %
                                                 
 
The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, care should be taken when comparing our cost of operations by cost component to that of other companies.
 
During the years ended December 31, 2010, 2009 and 2008, approximately 67%, 68% and 58%, respectively, of the total waste volume that we collected was disposed at landfill sites that we own or operate (internalization). This increase in internalization from 2008 to 2009 is due to a higher concentration of integrated hauling and landfill operations acquired in the Allied acquisition.
 
Cost of Operations – 2010 versus 2009
 
Our cost of operations, as a percentage of revenue, decreased 0.3% for the year ended December 31, 2010 compared to the year ended December 31, 2009, primarily as a result of the following:
 
  •   Transfer and disposal, maintenance and repair, and transportation and subcontract costs continue to decrease versus the comparable 2009 period due to lower waste volumes and cost control measures.
 
  •   Risk management costs decreased during 2010 as we continued to experience favorable actuarial developments primarily attributable to our continued focus on safety.
 
Partially offset by:
 
  •   Fuel expenses increased by $57.8 million, or 16.5%, year over year. Average fuel costs per gallon for the year ended December 31, 2010 were $2.99, an increase of $0.52 or approximately 21% from the average price of $2.47 for the year ended December 31, 2009.
 
  •   Landfill operating costs increased by $18.4 million, or 15.6%, year over year. During the year ended December 31, 2009, we recovered $12.0 million of insurance proceeds related to remediation costs at the Countywide facility which reduced our landfill operating costs during that period. There were no such recoveries during the comparable 2010 period. The remainder of the increase in landfill operating costs is due to adjustments recorded at several remediation reserve sites.


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Cost of Operations – 2009 versus 2008
 
Our cost of operations, as a percentage of revenue, improved 6.5% to 59.1% for the year ended December 31, 2009 compared to 65.6% for the year ended December 31, 2008, primarily as a result of the following:
 
  •   Transfer and disposal costs decreased as a percentage of revenue primarily due to lower fuel and disposal costs. In addition, transfer and disposal costs were also favorably impacted by increased internalization of our waste streams into landfills either owned or operated by us.
 
  •   Fuel costs decreased approximately 35% from an average of $3.80 per gallon during 2008 to an average of $2.47 per gallon during 2009.
 
  •   Landfill operating costs decreased 3.8% as a percentage of revenue, primarily due to charges we recorded during 2008 consisting of $98.0 million related to estimated costs to comply with Final Findings and Orders issued by the Ohio Environmental Protection Agency and the Agreed Order on Consent issued by the Environmental Protection Agency in response to environmental conditions at the Countywide facility, $21.9 million related to environmental conditions at our closed disposal facility in California and $34.0 million related to environmental conditions at the Sunrise Landfill. These charges increased our 2008 cost of operations as a percentage of revenue by 4.2% for the year ended December 31, 2008.
 
  •   Other cost of operations increased 0.7% as a percentage of revenue primarily due to increases in occupancy and facility expenses as well as equipment rental expense.
 
Depreciation, Amortization and Depletion of Property and Equipment
 
The following table summarizes depreciation, amortization and depletion of property and equipment for the years ended December 31, 2010, 2009 and 2008 (in millions of dollars and as a percentage of revenue):
 
                                                 
    2010     2009     2008  
 
Depreciation and amortization of property and equipment
  $ 511.6       6.3 %   $ 520.6       6.3 %   $ 222.6       6.0 %
Landfill depletion and amortization
    250.6       3.1       278.5       3.4       119.7       3.3  
                                                 
Depreciation, amortization and depletion expense
  $   762.2         9.4 %   $   799.1         9.7 %   $   342.3         9.3 %
                                                 
 
Depreciation, Amortization and Depletion of Property and Equipment – 2010 versus 2009
 
The decrease in landfill depletion and amortization in aggregate dollars and as a percentage of revenue is due to a reduction of amortization expense associated with lower landfill volumes and assets divested as required by the DOJ. Depreciation and amortization of property and equipment, as a percentage of revenue, has remained consistent year over year.
 
Depreciation, Amortization and Depletion of Property and Equipment – 2009 versus 2008
 
The increase in depreciation, amortization and depletion expenses as a percentage of revenue is primarily due to increases in depreciation and depletion expense associated with equipment and landfills acquired from Allied and recorded at their fair values. We allocated $2.6 billion of fair value to the landfills we acquired from Allied. The increase in the landfill depletion and amortization in aggregate dollars is directly attributable to this allocation of fair value.
 
Amortization of Other Intangible and Other Assets
 
Expenses for amortization of intangible and other assets were $71.5 million, $70.6 million and $11.8 million, or, as a percentage of revenue, 0.9%, 0.9% and 0.3% for the years ended December 31, 2010, 2009 and 2008, respectively. Our other intangible and other assets primarily relate to customer lists, franchise agreements, municipal contracts, trade names, favorable lease assets and to a lesser extent non-compete agreements. The


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increase in such expenses in aggregate dollars and as a percentage of revenue for the year ended December 31, 2009 versus 2008 is due to the amortization of intangible assets recorded as a result of the Allied acquisition.
 
Accretion Expense
 
Accretion expense was $80.5 million, $88.8 million and $23.9 million, or, as a percentage of revenue, 1.0%, 1.1% and 0.7% for the years ended December 31, 2010, 2009 and 2008, respectively. The decrease in accretion expense in 2010 compared to 2009 is primarily due to the decrease in our weighted average credit-adjusted risk-free rate used to accrete new layers of our capping, closure and post-closure liabilities and the divestiture of several landfills. The increase in such expenses in aggregate dollars in 2009 versus 2008 is primarily due to an increase in asset retirement obligations associated with the Allied acquisition. The asset retirement obligations acquired from Allied are recorded using a discount rate of 9.75%, which is higher than the credit-adjusted, risk-free rate we have used historically to record such obligations.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses include salaries, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems and clerical and administrative departments. Other expenses include rent and office costs, fees for professional services provided by third parties, marketing, investor and community relations, directors’ and officers’ insurance, general employee relocation, travel, entertainment and bank charges, but excludes any such amounts recorded as restructuring charges.
 
The following table provides the components of our selling, general and administrative costs for the three years ended December 31, 2010, 2009 and 2008 (in millions of dollars and as a percentage of revenue):
 
                                                 
    2010     2009     2008  
 
Salaries
  $ 538.6       6.6 %   $ 548.1       6.7 %   $ 237.6       6.4 %
Provision for doubtful accounts
    23.6       0.3       27.3       0.3       36.5       1.0  
Costs to achieve synergies
    33.3       0.4       41.6       0.5       2.9       0.1  
Other
    262.5       3.3       263.4       3.2       157.7       4.3  
                                                 
Total selling, general and administrative expenses
  $   858.0         10.6 %   $   880.4         10.7 %   $   434.7         11.8 %
                                                 
 
The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, care should be taken when comparing our selling, general and administrative expenses by cost component to that of other companies.
 
Selling, General and Administrative Expenses – 2010 versus 2009
 
Selling, general and administrative expenses decreased $22.4 million for the year ended December 31, 2010 compared to 2009 and, as a percentage of revenue, remained consistent with 2009. Selling, general and administrative expenses includes an accrual for synergy bonus related to the Allied acquisition of approximately $33 million in 2010 and $34 million in 2009. In 2011, we do not expect to incur any additional costs to achieve synergies.
 
Selling, General and Administrative Expenses – 2009 versus 2008
 
Selling, general and administrative expenses in 2009 include $41.6 million of costs to achieve synergies related to the Allied acquisition. These costs primarily consist of a synergy related bonus of approximately $34 million accrued in 2009.
 
For the year ended December 31, 2008, we recorded $14.2 million of bad debt expense related to conforming Allied’s methodology for recording the allowance for doubtful accounts on accounts receivable with ours and $5.4 million to provide for specific bankruptcy exposures. We also recorded $24.3 million of settlement


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charges related to our estimates of the outcome of various legal matters and a charge of $2.9 million related to the synergy related bonus.
 
Excluding charges for synergies, conforming accounting policies, bankruptcies and certain legal matters, selling, general and administrative expenses for the years ended December 31, 2010, 2009 and 2008 would have been $824.7 million, $838.8 million and $387.9 million, or 10.2%, 10.2% and 10.5% as a percentage of revenue, respectively. With the completion of the integration of Allied, our goal is to maintain our selling, general and administrative costs at no more than 10.0% of revenue, which we believe is appropriate given our existing business platform.
 
Loss (gain) on Disposition of Assets and Impairments, Net
 
Loss (gain) on disposition of assets and impairments, net of costs to sell was $19.1 million, $(137.0) million and $89.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
We divested certain assets throughout 2010 resulting in a net loss on disposition of assets of $4.0 million, including transaction costs. Additionally, we recorded an impairment loss of $15.1 million related to certain long-lived assets that are held and used.
 
During the year ended December 31, 2009, we divested of certain assets as required by the DOJ as a condition of the Allied acquisition and recorded a gain of $153.5 million. Offsetting this gain was a loss of $10.2 million recognized in connection with the divestiture of a hauling operation in Miami-Dade County, Florida as well as $7.1 million of additional asset impairments, primarily related to our former corporate offices and other assets sold or held for sale.
 
During the year ended December 31, 2008, we recorded a charge of $75.9 million related to the impairment of the Countywide facility. This impairment relates to the anticipated loss of permitted airspace associated with complying with F&Os issued by the OEPA and the AOC issued by the EPA based upon recent negotiations with the OEPA and the EPA. Also during the year ended December 31, 2008, we recorded $7.8 million of other impairment charges, consisting primarily of charges related to our former corporate office in South Florida.
 
Restructuring Charges
 
During the year ended December 31, 2010, we incurred $11.4 million of restructuring and integration charges related to the integration of Allied, which consisted of charges and adjustments for severance, employee termination and relocation benefits. The remainder of the charges primarily related to consulting and professional fees. Substantially all of these charges were recorded in our corporate entities segment. We do not expect to incur any significant additional charges with respect to this plan. During the years ended December 31, 2009 and 2008, we incurred $63.2 million and $82.7 million, respectively, of such charges.
 
Interest Expense
 
The following table provides the components of interest expense, including accretion of debt discounts and accretion of discounts primarily associated with environmental and self-funded risk insurance liabilities assumed in the Allied acquisition:
 
                         
    2010     2009     2008  
 
Interest expense on debt and capital lease obligations
  $ 413.2     $ 453.5     $ 123.9  
Accretion of debt discounts
    52.4       92.1       10.1  
Accretion of remediation and risk reserves
    48.1       58.1       0.5  
Less: capitalized interest
    (6.3 )     (7.8 )     (2.6 )
                         
Total interest expense
  $   507.4     $   595.9     $   131.9  
                         
 
The decrease in interest expense during the year ended December 31, 2010 versus 2009 is due to refinancing our higher interest rate debt during 2010 and in the second half of 2009 and the net reduction of borrowings.


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The increase in interest expense during the year ended December 31, 2009 versus 2008 is primarily due to the additional debt we assumed as a result of the Allied acquisition. Interest expense also increased as a result of accreting discounts applied to debt or imputing interest on environmental and risk reserves assumed from Allied.
 
The debt we assumed from Allied was recorded at fair value as of December 5, 2008. We recorded a discount of $624.3 million, which is amortized as interest expense over the applicable terms of the related debt instruments or written-off upon refinancing. The remaining unamortized discounts on the outstanding debt assumed from Allied as of December 31, 2010 are as follows (in millions):
 
                 
          Expected
 
          Amortization
 
    Remaining
    Over the Next
 
    Discount     Twelve Months  
 
$400.0 million 5.750% senior notes due February 2011
  $ 1.2     $ 1.2  
$275.0 million 6.375% senior notes due April 2011
    1.8       1.8  
$600.0 million 7.125% senior notes due May 2016
    64.5       9.7  
$750.0 million 6.875% senior notes due June 2017
    86.1       10.4  
$99.5 million 9.250% debentures due May 2021
    6.1       0.4  
$360.0 million 7.400% debentures due September 2035
    92.4       0.9  
Other, maturing 2014 through 2027
    21.9       2.6  
                 
Total
  $   274.0     $   27.0  
                 
 
Loss on Extinguishment of Debt
 
Loss on early extinguishment of debt was $160.8 million for the year ended December 31, 2010, resulting from the following:
 
  •   During 2010, we refinanced $677.4 million and repaid $97.8 million of our tax-exempt financings resulting in a loss on extinguishment of debt of $28.5 million related to charges for unamortized debt discounts and professional fees paid to effectuate these transactions.
 
  •   In March 2010, we issued $850.0 million of 5.000% senior notes due 2020 and $650.0 million of 6.200% senior notes due 2040. We used the net proceeds from these senior notes as follows: (i) $433.7 million to redeem the 6.125% senior notes due 2014 at a premium of 102.042% ($425.0 million principal outstanding); (ii) $621.8 million to redeem the 7.250% senior notes due 2015 at a premium of 103.625% ($600.0 million principal outstanding); and (iii) the remainder to reduce amounts outstanding under our Credit Facilities and for general corporate purposes. We incurred a loss of $132.1 million for premiums paid to repurchase debt, to write-off unamortized debt discounts and for professional fees paid to effectuate the repurchase of the senior notes.
 
  •   Additionally in March 2010, we repaid all borrowings and terminated our accounts receivable securitization program with two financial institutions that allowed us to borrow up to $300.0 million on a revolving basis under loan agreements secured by receivables. We recorded a loss on extinguishment of debt of $0.2 million related to the charges for unamortized deferred issuance costs associated with this program.
 
Loss on early extinguishment of debt was $134.1 million for the year ended December 31, 2009, resulting from the following:
 
  •   In September 2009, we issued $650.0 million of 5.500% senior notes due 2019 with an unamortized discount of $4.5 million at December 31, 2009. A portion of the net proceeds from these notes was used to purchase and retire $325.5 million of our outstanding senior notes maturing in 2010 and 2011.


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  •   In November 2009, we issued $600.0 million of 5.250% Senior Notes due 2021. The net proceeds from these notes as well as draws on our revolver were used to purchase and retire our 7.875% Senior Notes due 2013 (redeemed at 102.625%), our 7.375% Senior Notes due 2014 (redeemed at 103.688%), and our 4.250% Senior Subordinated Convertible Debentures due 2034 (redeemed at par).
 
  •   In addition, during 2009 we repurchased and retired certain of our senior notes in the secondary market.
 
In the future we may chose to voluntarily retire certain portions of our outstanding debt before their maturity using cash from operations or additional borrowings. We also may explore opportunities in capital markets to fund redemptions. The early extinguishment of debt may result in an impairment charge in the period in which the debt is repurchased and retired.
 
Income Taxes
 
Our provision for income taxes was $369.5 million, $368.5 million and $85.4 million for the years ended December 31, 2010, 2009 and 2008, respectively. Our effective income tax rate was 42.1%, 42.6% and 53.6% for the years ended December 31, 2010, 2009 and 2008, respectively. Our effective income tax rate is adversely impacted by expenses incurred which are non-deductible for tax, disposition of assets that have little or no basis for tax, and accruals for penalties and interest on uncertain tax positions.
 
In the future we may choose to divest certain operating assets that have little or no tax basis, thereby resulting in a higher taxable gain than otherwise would be recognized. The higher taxable gain will increase our effective rate in the quarter in which the divestiture is consummated.
 
Reportable Segments
 
Our operations are managed and reviewed through four geographic regions that we designate as our reportable segments. Summarized financial information concerning our reportable segments for the years ended December 31, 2010, 2009 and 2008 is shown in the following table (in millions of dollars and as a percentage of revenue):
 
                                                         
          Depletion and
    Amortization
          Gain (Loss) on
             
          Accretion Before
    Expense
    Depreciation,
    Disposition of
             
          Adjustments for
    for Asset
    Amortization,
    Assets, Net
    Operating
       
    Net
    Asset Retirement
    Retirement
    Depletion and
    and Asset
    Income
    Operating
 
    Revenue     Obligations     Obligations     Accretion     Impairment     (Loss)     Margin  
 
2010:
                                                       
Eastern
  $ 2,075.5     $ 208.8     $ (3.3 )   $ 205.5     $ (15.0 )   $ 488.4       23.5 %
Midwestern
    1,766.9       214.2       (10.6 )     203.6       9.3       402.0       22.8  
Southern
    1,977.3       225.3       (3.8 )     221.5       1.8       482.8       24.4  
Western
    2,188.6       224.2       (6.0 )     218.2       (0.9 )     521.2       23.8  
Corporate entities
    98.3       51.9       13.5       65.4       (14.3 )     (355.3 )     -  
                                                         
Total
  $   8,106.6     $      924.4     $     (10.2 )   $     914.2     $      (19.1 )   $   1,539.1         19.0 %
                                                         
2009:
                                                       
Eastern
  $ 2,115.0     $ 215.5     $ (1.2 )   $ 214.3     $ 4.0     $ 483.0       22.8 %
Midwestern
    1,777.0       227.3       (1.4 )     225.9       27.1       367.3       20.7  
Southern
    2,046.2       241.9       (8.8 )     233.1       29.8       522.9       25.6  
Western
    2,170.0       228.5       6.4       234.9       88.1       582.0       26.8  
Corporate entities
    90.9       50.4       (0.1 )     50.3       (12.0 )     (365.4 )     -  
                                                         
Total
  $ 8,199.1     $ 963.6     $ (5.1 )   $ 958.5     $ 137.0     $ 1,589.8       19.4 %
                                                         
2008:
                                                       
Eastern
  $ 989.9     $ 89.6     $ 5.5     $ 95.1     $ (82.0 )   $ (2.0 )     (0.2 )%
Midwestern
    771.7       97.7       (0.9 )     96.8       (0.8 )     127.6       16.5  
Southern
    970.2       94.3       0.5       94.8       -       184.8       19.0  
Western
    942.6       84.7       (5.0 )     79.7       (1.2 )     155.1       16.5  
Corporate entities
    10.7       11.1       0.5       11.6       (5.8 )     (182.3 )     -  
                                                         
Total
  $ 3,685.1     $ 377.4     $ 0.6     $ 378.0     $ (89.8 )   $ 283.2       7.7 %
                                                         


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Corporate entities include legal, tax, treasury, information technology, risk management, human resources, corporate accounts and other typical administrative functions. National Accounts revenue included in corporate entities represents the portion of revenue generated from nationwide contracts in markets outside our operating areas, and, as such, the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
 
We completed the reorganization of our operating segments related to the Allied acquisition in the first quarter of 2009, and are providing internal and external reporting in accordance with our reorganized structure. Significant changes in the revenue and operating margins of our reportable segments comparing 2010 to 2009 and 2009 to 2008 are discussed in the following paragraphs. The results of our reportable segments were also affected by the disposition of certain assets and liabilities, as required by the DOJ, as well as in the normal course of business. Additionally, for 2010 compared to 2009, the decrease in revenue resulting from declines in volumes noted below is attributable to the continued economic slowdown. The increase in aggregate dollars in 2009 compared to 2008 for revenue, depreciation, amortization, depletion and accretion, and operating income (loss) for each of our reportable segments is due to the Allied acquisition.
 
2010 compared to 2009
 
Eastern Region
 
Revenue for the year ended December 31, 2010 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in our collection and transfer station lines of business while our landfill line of business reflected a modest increase. The year ended December 31, 2010 includes revenue of $20.8 million associated with divested locations. The year ended December 31, 2009 includes revenue of $61.9 million associated with divested locations. Excluding the effect of the divested revenue, revenue increased $1.6 million for the year ended December 31, 2010 versus 2009.
 
For the year ended December 31, 2010, operating margins were 23.5% versus 22.8% in 2009. The increase in operating margins is due primarily to lower labor, benefits, disposal, transportation, repair and maintenance expenses as a result of lower volumes and cost control measures as well as lower risk insurance costs partially offset by the loss on the disposition of assets of $15.0 million in 2010 compared to the gain of $4.0 million in 2009, as well as higher fuel costs and costs of commodities sold and an $12.0 million recovery of insurance proceeds related to remediation costs at the Countywide facility that reduced our landfill operating costs during the third quarter of 2009.
 
Midwestern Region
 
Revenue for the year ended December 31, 2010 benefited from core price growth in all lines of business except landfill. While price associated with municipal solid waste volumes increased during 2010, this increase was offset by a higher mix of special waste volumes. However, the increase in revenue from core price, for the year ended December 31, 2010 was more than offset by volume declines in our collection and transfer station lines of business. Landfill volumes increased for the year ended December 31, 2010 primarily due to special waste event driven work. The year ended December 31, 2010 includes revenues of $22.5 million associated with divested locations. The year ended December 31, 2009 includes revenue of $31.5 million associated with divested locations. Excluding the effect of the divested revenue, revenue decreased $1.1 million for the year ended December 31, 2010 versus 2009.
 
For the year ended December 31, 2010, operating margins were 22.8% versus 20.7% in 2009. The increase in operating margins is due primarily to lower labor, benefits, disposal, transportation, and repair and maintenance expenses as a result of lower volumes and cost control measures as well as lower risk insurance costs and a favorable adjustment to amortization expense for asset retirement obligations of $10.6 million in 2010 compared to a favorable adjustment of $1.4 million in 2009 partially offset by the lower gain on the disposition of assets of $9.3 million in 2010 compared to a gain of $27.1 million in 2009, as well as higher fuel costs and costs of commodities sold.


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Southern Region
 
Revenue for the year ended December 31, 2010 benefited from core price growth in all lines of business except transfer station. However, the increase in revenue from core price was more than offset by volume declines, especially in our collection and landfill lines of business. Contributing to the decline in revenue for the year ended December 31, 2009 was $30.4 million of revenue associated with divested locations. Excluding the effect of the divested revenue, revenue decreased $38.5 million for the year ended December 31, 2010 versus 2009.
 
For the year ended December 31, 2010, operating margins were 24.4% versus 25.6% in 2009. The decrease in operating margins is due primarily to the gain on disposition of assets of $1.8 million in the 2010 period compared to the gain of $29.8 million in 2009 as well as higher fuel costs and costs of commodities sold, partially offset by lower labor, benefits, disposal and repair and maintenance expenses as a result of lower volumes and cost control measures and lower risk insurance costs.
 
Western Region
 
Revenue for the year ended December 31, 2010 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines, especially in our collection and transfer station lines of business. Landfill volumes in 2010 increased primarily due to special waste event driven work. The year ended December 31, 2009 includes revenues of $11.0 million associated with divested locations. Excluding the divested revenue, revenue increased $29.6 million for the year ended December 31, 2010 versus 2009.
 
For the year ended December 31, 2010, operating margins were 23.8% versus 26.8% in 2009. The decrease in operating margins is primarily attributed to the loss on disposition of assets of $0.9 million in 2010 compared to the gain of $88.1 million in 2009 as well as higher fuel costs and costs of commodities sold, partially offset by lower risk insurance costs and a favorable adjustment to amortization expense for asset retirement obligations of $6.0 million in 2010 compared to an unfavorable adjustment of $6.4 million in 2009. Additionally, we recorded a $5.2 million remediation charge in 2009 related to environmental conditions at our closed disposal facility in California.
 
Corporate Entities
 
The changes in net revenue relates to our National Accounts program serviced by third parties. Included in our gain (loss) on disposition of assets and impairments, net, for the years ended December 31, 2010 and 2009 are transaction related expenses from the disposition of assets in our other segments. Additionally, during the year ended December 31, 2010, we recorded an impairment loss of $14.4 million related to certain long-lived assets that are held and used.
 
2009 compared to 2008
 
Eastern Region
 
Revenue for the year ended December 31, 2009 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.
 
In 2009, we realized a $4.0 million net gain from the disposition of assets, which increased operating margins by 0.2%. We also recovered $12.0 million of insurance proceeds related to remediation costs at the Countywide facility in Ohio, which increased operating margins by 0.6%.
 
In 2008, we incurred a $99.9 million charge for environmental conditions at the Countywide facility, which reduced our operating margin for the year ended December 31, 2008 by 10.1%. We incurred a $75.9 million charge related to the anticipated loss of permitted airspace at Countywide based upon negotiations with the


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OEPA and EPA, which reduced our operating margin by 7.7%. We also incurred $11.0 million in legal settlement costs, which decreased operating margins by 1.1%.
 
The remaining increase in operating margins is attributed to lower fuel, disposal, and selling, general and administrative expenses, partially offset by higher depreciation and amortization costs resulting from assets acquired from Allied and higher labor and facilities expense.
 
Midwestern Region
 
Revenue for the year ended December 31, 2009 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.
 
In 2009, we realized net gains from the disposition of assets of $27.1 million, which increased operating margins by 1.5%. Otherwise, the improvement in operating margin for the year ended December 31, 2009 is primarily due to lower transportation, fuel, and selling, general and administrative expenses. The increase in operating margin was partially offset by increased depreciation and amortization expense resulting from assets acquired from Allied and higher facilities expense.
 
Southern Region
 
Revenue for the year ended December 31, 2009 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.
 
For the year ended December 31, 2009, we realized net gains from the disposition of assets of $29.8 million, which impacted operating margins by 1.5%. We also realized in 2009 an $8.8 million favorable adjustment to amortization expense for asset retirement obligations which increased our operating margin by 0.4%. Otherwise the improvement in operating margin for the year ended December 31, 2009, is primarily due to lower disposal, transport and fuel costs, partially offset by increased depreciation and amortization expense resulting from assets acquired from Allied and higher facilities expense.
 
Western Region
 
Revenue for the year ended December 31, 2009 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.
 
For the year ended December 31, 2009, we realized gains from the disposition of assets of $88.1 million, which increased operating margins by 4.1%. Partially offsetting these gains was an unfavorable adjustment to amortization expense for asset retirement obligations of $6.4 million, reducing operating margin by 0.3%, and remediation charges totaling $5.2 million, reducing operating margin by 0.3% related to environmental conditions at our closed disposal facility in California. In addition, lower landfill revenue (which has higher margins than our collection line of business) negatively impacted 2009 margins.
 
In the second quarter of 2008, we incurred a $34.0 million charge at the Sunrise Landfill and a $21.9 million charge at our closed disposal facility in California for environmental conditions at each of these locations. The charges reduced operating margin by 5.9%. Margins were favorably impacted by lower labor, fuel, transportation and selling, general and administrative expenses, offset by increased depreciation and amortization expense resulting from assets acquired from Allied and higher facilities expense.


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Corporate Entities
 
The increase in net revenue relates to Allied’s National Accounts program. The increase in depreciation, amortization, depletion and accretion expense, and the increase in the operating loss are attributable to the Allied acquisition. Included in our gain (loss) on disposition of assets and impairments, net for the year ended December 31, 2009 are transaction related expenses of $8.2 million from the disposition of assets in the other segments and a $3.7 million charge for the asset impairment associated with our former corporate office in Florida.
 
Landfill and Environmental Matters
 
Our landfill costs include daily operating expenses, costs of capital for cell development, costs for final capping, closure and post-closure, and the legal and administrative costs of ongoing environmental compliance. Daily operating expenses include leachate treatment and disposal, methane gas and groundwater monitoring and system maintenance, interim cap maintenance, and costs associated with the application of daily cover materials. We expense all indirect landfill development costs as they are incurred. We use life cycle accounting and the units-of-consumption method to recognize certain direct landfill costs related to landfill development. In life cycle accounting, certain direct costs are capitalized and charged to depletion expense based on the consumption of cubic yards of available airspace. These costs include all costs to acquire and construct a site, including excavation, natural and synthetic liners, construction of leachate collection systems, installation of methane gas collection and monitoring systems, installation of groundwater monitoring wells, and other costs associated with the acquisition and development of the site. Obligations associated with final capping, closure and post-closure are capitalized and amortized on a units-of-consumption basis as airspace is consumed.
 
Cost and airspace estimates are developed at least annually by engineers. These estimates are used by our operating and accounting personnel to adjust the rates we use to expense capitalized costs. Changes in these estimates primarily relate to changes in costs, available airspace, inflation and applicable regulations. Changes in available airspace include changes in engineering estimates, changes in design and changes due to the addition of airspace lying in expansion areas that we believe have a probable likelihood of being permitted.
 
Available Airspace
 
The following tables reflect landfill airspace activity for active landfills owned or operated by us for the years ended December 31, 2010, 2009 and 2008:
 
                                                         
    Balance
          Landfills
    Permits
                   
    as of
    New
    Acquired,
    Granted,
          Changes in
    Balance as of
 
    December 31,
    Expansions
    Net of
    Net of
    Airspace
    Engineering
    December 31,
 
    2009     Undertaken     Divestitures     Closures     Consumed     Estimates     2010  
 
Cubic yards (in millions):
                                                       
Permitted airspace
    4,436.4       -       15.3       222.6       (84.3 )     5.5       4,595.5  
Probable expansion airspace
    212.5       29.8       -       (93.1 )     -       (0.1 )     149.1  
                                                         
Total cubic yards (in millions)
    4,648.9       29.8       15.3       129.5       (84.3 )     5.4       4,744.6  
                                                         
Number of sites:
                                                       
Permitted airspace
    192               3       (2 )                     193  
                                                         
Probable expansion airspace
    12       2               (6 )                     8  
                                                         
 


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    Balance
          Landfills
    Permits
          Changes
    Balance
 
    as of
    New
    Acquired,
    Granted,
          in
    as of
 
    December 31,
    Expansions
    Net of
    Net of
    Airspace
    Engineering
    December 31,
 
    2008     Undertaken     Divestitures     Closures     Consumed     Estimates     2009  
 
Cubic yards (in millions):
                                                       
Permitted airspace
    4,559.6       -       (176.8 )     134.2       (86.9 )     6.3       4,436.4  
Probable expansion airspace
    386.2       22.4       (62.2 )     (133.2 )     -       (0.7 )     212.5  
                                                         
Total cubic yards (in millions)
    4,945.8       22.4       (239.0 )     1.0       (86.9 )     5.6       4,648.9  
                                                         
Number of sites:
                                                       
Permitted airspace
    213               (9 )     (12 )                     192  
                                                         
Probable expansion airspace
    23       1       (1 )     (11 )                     12  
                                                         
 
                                                         
    Balance
          Permits
          Changes
          Balance
 
    as of
          Granted,
          in
    Changes
    as of
 
    December 31,
    Allied
    Net of
    Airspace
    Engineering
    in
    December 31,
 
    2007     Acquisition     Closures     Consumed     Estimates     Design     2008  
 
Cubic yards (in millions):
                                                       
Permitted airspace
    1,537.3       3,061.1       22.5       (42.7 )     (18.6 )     -       4,559.6  
Probable expansion airspace
    192.0       214.1       (18.9 )     -       -       (1.0 )     386.2  
                                                         
Total cubic yards (in millions)
    1,729.3       3,275.2       3.6       (42.7 )     (18.6 )     (1.0 )     4,945.8  
                                                         
Number of sites:
                                                       
Permitted airspace
    58       157       (2 )                             213  
                                                         
Probable expansion airspace
    11       15       (3 )                             23  
                                                         
 
Changes in engineering estimates typically include modifications to the available disposal capacity of a landfill based on a refinement of the capacity calculations resulting from updated information. Changes in design typically include significant modifications to a landfill’s footprint or vertical slopes.
 
As of December 31, 2010, we owned or operated 193 active solid waste landfills with total available disposal capacity estimated to be 4.7 billion in-place cubic yards. Total available disposal capacity represents the sum of estimated permitted airspace plus an estimate of probable expansion airspace. These estimates are developed at least annually by engineers using information provided by annual aerial surveys. As of December 31, 2010, total available disposal capacity is estimated to be 4.6 billion in-place cubic yards of permitted airspace plus 0.1 billion in-place cubic yards of probable expansion airspace. Before airspace included in an expansion area is determined to be probable expansion airspace and, therefore, included in our calculation of total available disposal capacity, it must meet all of our expansion criteria. See Note 2, Summary of Significant Accounting Policies, and Note 8, Landfill and Environmental Costs, to our consolidated financial statements in Item 8 of this Form 10-K for further information. During 2010, total available airspace increased by a net 0.1 billion cubic yards primarily due to new expansions and net acquisitions offset by airspace consumed and divestitures.
 
During 2009, total available airspace decreased by a net 0.3 billion cubic yards primarily due to divestitures, closures and airspace consumed, partially offset by new expansions.
 
During 2008, total available airspace increased by a net 3.2 billion cubic yards due to the Allied acquisition in December, which contributed 157 active landfills representing 3.3 billion cubic yards of permitted and probable expansion airspace. Excluding the Allied acquisition, total available airspace related to Republic’s pre-acquisition operations decreased by a net 0.1 billion cubic yards, primarily due to airspace consumed, changes in engineering estimates and changes in design. The decrease during 2008 due to changes in engineering estimates is primarily due to a reduction of remaining airspace at the Countywide facility.

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At December 31, 2007, 11.1% of our total available airspace, or 0.2 billion cubic yards, consisted of probable expansion airspace at eleven of our landfills. At December 31, 2010, 3.1% of our total available airspace, or 0.1 billion cubic yards, consisted of probable expansion airspace at eight of our landfills. Between December 31, 2007 and December 31, 2010, we received permits for 19 of our probable expansions, which demonstrates our continued success in obtaining permits for expansion airspace.
 
As of December 31, 2010, eight of our landfills meet all of our criteria for including their probable expansion airspace in their total available disposal capacity. At projected annual volumes, these landfills have an estimated remaining average site life of 48 years, including probable expansion airspace. The average estimated remaining life of all of our landfills is 55 years. We have other expansion opportunities that are not included in our total available airspace because they do not meet all of our criteria for probable expansion airspace.
 
The following table reflects the estimated operating lives of our active landfill sites based on available and probable disposal capacity using current annual volumes as of December 31, 2010:
 
                                 
    Number of
    Number of
             
    Sites
    Sites
             
    without
    with
             
    Probable
    Probable
          Percent
 
    Expansion
    Expansion
    Total
    of
 
    Airspace     Airspace     Sites     Total  
 
0 to 5 years
    14       -       14       7.3 %
6 to 10 years
    18       1       19       9.8 %
11 to 20 years
    47       1       48       24.9 %
21 to 40 years
    50       -       50       25.9 %
41+ years
    56       6       62       32.1 %
                                 
Total
    185       8       193       100.0 %
                                 
 
Final Capping, Closure and Post-Closure Costs
 
As of December 31, 2010, accrued final capping, closure and post-closure costs were $1,046.5 million, of which $93.9 million is current and $952.6 million is long-term as reflected in our consolidated balance sheets in accrued landfill and environmental costs.
 
Remediation and Other Charges for Landfill Matters
 
In December 2009, we finalized our purchase price allocation for the environmental liabilities we assumed as part of the Allied acquisition. These liabilities represent our estimate of costs to remediate sites that were previously owned or operated by Allied or sites at which Allied, or a predecessor company that it had acquired, had been identified as a potentially responsible party. The remediation of these sites is in various stages of completion from having received an initial notice from a regulatory agency and commencing investigation to being in the final stages of post remedial monitoring. See also Note 2, Summary of Significant Accounting Policies – Environmental Remediation Liabilities, for further information. We have recorded these liabilities at their estimated fair values using a discount rate of 9.75%. Discounted liabilities are accreted to interest expense through the period that they are paid.
 
The following is a discussion of certain of our significant remediation matters:
 
Countywide Landfill. In September 2009, Republic Services of Ohio II, LLC entered into Final Findings and Orders with the Ohio Environmental Protection Agency that require us to implement a comprehensive operation and maintenance program to manage the remediation area at the Countywide Recycling and Disposal Facility (Countywide). The remediation liability for Countywide recorded as of December 31, 2010 is $68.4 million, of which $7.1 million is expected to be paid during 2011. We believe the reasonably possible range of loss for remediation costs is $59 million to $81 million.


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West Contra Costa County Landfill. In 2006, we were issued an Enforcement Order by the California Department of Toxic Substance Control (DTSC) for the Class 1 Hazardous waste cell at the West Contra Costa County Landfill (West County). Subsequently, we entered into a Consent Agreement with DTSC in 2007 at which time we agreed to undertake certain remedial actions. The remediation liability for West County recorded as of December 31, 2010 is $46.5 million, of which $2.5 million is expected to be paid during 2011. We believe the reasonably possible range of loss for remediation costs is $36 million to $63 million.
 
Sunrise Landfill. In August 2008, Republic Services of Southern Nevada (RSSN), signed a Consent Decree with the EPA, the Bureau of Land Management and Clark County, Nevada related to the Sunrise Landfill. Under the Consent Decree, RSSN has agreed to perform certain remedial actions at the Sunrise Landfill for which RSSN and Clark County were otherwise jointly and severally liable. We also paid $1.0 million in sanctions related to the Consent Decree. RSSN is currently working with the Clark County Staff and Board of Commissioners to develop a mechanism to fund the costs to comply with the Consent Decree. However, we have not recorded any potential recoveries. The remediation liability for Sunrise recorded as of December 31, 2010 is $37.5 million, of which $23.0 million is expected to be paid during 2011. We believe the reasonably possible range of loss for remediation costs is $29 million to $44 million.
 
Congress Landfill. In August 2010, Congress Development Company agreed with the State of Illinois to have a Final Consent Order (Final Order) entered by the Circuit Court of Illinois, Cook County. Pursuant to the Final Order, we have agreed to continue to implement certain remedial activities at the Congress Landfill. The remediation liability recorded as of December 31, 2010 is $82.6 million, of which $8.4 million is expected to be paid during 2011. We believe the reasonably possible range of loss for remediation costs is $46 million to $146 million.
 
It is reasonably possible that we will need to adjust the liabilities noted above to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in our estimates of the costs, timing or duration of the required actions could have a material adverse effect on our consolidated financial position, results of operations or cash flows.
 
Investment in Landfills
 
The following tables reflect changes in our investment in landfills for the years ended December 31, 2010, 2009 and 2008 and the future expected investment as of December 31, 2010 (in millions):
 
                                                                         
                            Non-cash
          Impairments,
    Adjustments
       
    Balance
                      Additions
    Additions
    Transfers
    for
    Balance
 
    as of
                Acquisitions
    for Asset
    Charged
    and
    Asset
    as of
 
    December 31,
    Capital
          Net of
    Retirement
    to
    Other
    Retirement
    December 31,
 
    2009     Additions     Retirements     Divestitures     Obligations     Expense     Adjustments     Obligations     2010  
 
Non-depletable landfill land
  $ 142.7     $ 1.3     $ -     $ (1.7 )   $ -     $ -     $ 15.7     $ -     $ 158.0  
Landfill development costs
    4,230.9       15.4       0.2       (13.9 )     31.5       -       337.6       (26.5 )     4,575.2  
Construction-in-progress - landfill
    245.1       250.7       (0.1 )     0.1       -       -       (362.6 )     -       133.2  
Accumulated depletion and amortization
    (1,275.4 )     -       -       19.6       -       (258.9 )     -       10.1       (1,504.6 )
                                                                         
Net investment in landfill land and development costs
  $     3,343.3     $     267.4     $       0.1     $        4.1     $     31.5     $     (258.9 )   $      (9.3 )   $     (16.4 )   $     3,361.8  
                                                                         
 
                         
    Balance
             
    as of
    Expected
    Total
 
    December 31,
    Future
    Expected
 
    2010     Investment     Investment  
 
Non-depletable landfill land
  $ 158.0     $ -     $ 158.0  
Landfill development costs
    4,575.2       6,100.6       10,675.8  
Construction-in-progress – landfill
    133.2       -       133.2  
Accumulated depletion and amortization
    (1,504.6 )     -       (1,504.6 )
                         
Net investment in landfill land and development costs
  $     3,361.8     $     6,100.6     $     9,462.4  
                         
 


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                            Non-cash
                Impairments
    Adjustments
       
    Balance
                      Additions
    Additions
    Transfers
    and Transfers
    for
    Balance
 
    as of
                Acquisitions
    for Asset
    Charged
    and
    to Assets
    Asset
    as of
 
    December 31,
    Capital
          Net of
    Retirement
    to
    Other
    Held for
    Retirement
    December 31,
 
    2008     Additions     Retirements     Divestitures     Obligations     Expense     Adjustments     Sale     Obligations     2009  
 
Non-depletable landfill land
  $ 169.3     $ 5.9     $ (2.6 )   $ (7.9 )   $ -     $ -     $ (17.0 )   $ (5.0 )   $ -     $ 142.7  
Landfill development costs
    4,126.3       11.7       (0.3 )     (3.2 )     32.5       -       132.6       (8.5 )     (60.2 )     4,230.9  
Construction-in-progress - landfill
    76.2       278.8       -       -       -       -       (109.5 )     (0.4 )     -       245.1  
Accumulated depletion and amortization
    (1,004.2 )     -       -       1.2       -       (282.5 )     -       5.2       4.9       (1,275.4 )
                                                                                 
Net investment in landfill land and development costs
  $     3,367.6     $     296.4     $      (2.9 )   $     (9.9 )   $     32.5     $     (282.5 )   $      6.1     $       (8.7 )   $     (55.3 )   $     3,343.3  
                                                                                 
 
                                                                         
                      Non-cash
                Impairments
    Adjustments
       
    Balance
                Additions
    Additions
    Transfers
    and Transfers
    for
    Balance
 
    as of
                for Asset
    Charged
    and
    to Assets
    Asset
    as of
 
    December 31,
    Capital
    Allied
    Retirement
    to
    Other
    Held for
    Retirement
    December 31,
 
    2007     Additions     Acquisition     Obligations     Expense     Adjustments     Sale     Obligations     2008  
 
Non-depletable landfill land
  $ 52.7     $ 0.2     $ 115.7     $ -     $ -     $ 0.7     $ -     $ -     $ 169.3  
Landfill development costs
    1,809.1       3.6       2,610.8       20.5       -       74.8       (359.3 )     (33.2 )     4,126.3  
Construction-in-progress- landfill
    66.4       105.1       0.3       -       -       (74.0 )     (21.6 )     -       76.2  
Accumulated depletion and amortization
    (1,039.5 )     -       (1.2 )     -       (119.1 )     -       155.0       0.6       (1,004.2 )
                                                                         
Net investment in landfill land and development costs
  $      888.7     $     108.9     $     2,725.6     $     20.5     $     (119.1 )   $      1.5     $     (225.9 )   $     (32.6 )   $ 3,367.6  
                                                                         
 
The following table reflects our net investment in our landfills, excluding non-depletable land, and our depletion, amortization and accretion expense for the years ended December 31, 2010, 2009 and 2008:
 
                         
    2010     2009     2008  
 
Number of landfills owned or operated
    193       192       213  
                         
Net investment, excluding non-depletable land (in millions)
  $  3,203.8     $  3,200.6     $  3,198.3  
Total estimated available disposal capacity (in millions of cubic yards)
    4,744.6       4,648.9       4,945.8  
                         
Net investment per cubic yard
  $ 0.68     $ 0.69     $ 0.65  
                         
Landfill depletion and amortization expense (in millions)
  $ 250.6     $ 278.5     $ 119.7  
Accretion expense (in millions)
    80.5       88.8       23.9  
                         
      331.1       367.3       143.6  
Airspace consumed (in millions of cubic yards)
    84.3       86.9       42.7  
                         
Depletion, amortization and accretion expense per cubic yard of airspace consumed
  $ 3.93     $ 4.23     $ 3.36  
                         
 
During the year ended December 31, 2010, our average compaction rate was approximately 1,800 pounds per cubic yard based on our three-year historical moving average as compared to 1,700 pounds per cubic yard for the year ended December 31, 2009 based on our three-year historical moving average. Our compaction rates may improve as a result of the settlement and decomposition of waste.
 
As of December 31, 2010, we expect to spend an estimated additional $6.1 billion on existing landfills, primarily related to cell construction and environmental structures, over their expected remaining lives. Our total expected investment, excluding non-depletable land, estimated to be $9.3 billion, or $1.96 per cubic yard, is used in determining our depletion and amortization expense based on airspace consumed using the units-of-consumption method.

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Property and Equipment
 
The following tables reflect the activity in our property and equipment accounts for the years ended December 31, 2010, 2009 and 2008 (in millions):
 
                                                                 
    Gross Property and Equipment  
                            Non-Cash
    Adjustments
    Impairments,
       
    Balance
                      Additions
    for
    Transfers
    Balance
 
    as of
                Acquisitions,
    for Asset
    Asset
    and
    as of
 
    December 31,
    Capital
          Net of
    Retirement
    Retirement
    Other
    December 31,
 
    2009     Additions     Retirements     Divestitures     Obligations     Obligations     Adjustments     2010  
 
Other land
  $ 418.7     $ 2.6     $ (9.4 )   $ (21.0 )   $ -     $ -     $ 1.0     $ 391.9  
Non-depletable landfill land
    142.7       1.3       -       (1.7 )     -       -       15.7       158.0  
Landfill development costs
    4,230.9       15.4       0.2       (13.9 )     31.5       (26.5 )     337.6       4,575.2  
Vehicles and equipment
    3,792.4       522.6       (174.5 )     (2.1 )     -       -       3.7       4,142.1  
Buildings and improvements
    741.6       24.4       (10.8 )     (2.4 )     -       -       15.7       768.5  
Construction-in-progress - landfill
    245.1       250.7       (0.1 )     0.1       -       -       (362.6 )     133.2  
Construction-in-progress - other
    23.0       31.6       0.2       -       -       -       (27.6 )     27.2  
                                                                 
Total
  $     9,594.4     $     848.6     $     (194.4 )   $      (41.0 )   $      31.5     $     (26.5 )   $      (16.5 )   $     10,196.1  
                                                                 
 
                                                 
    Accumulated Depreciation, Amortization and Depletion  
                            Adjustments
       
    Balance
    Additions
                for
    Balance
 
    as of
    Charged
          Acquisitions,
    Asset
    as of
 
    December 31,
    to
          Net of
    Retirement
    December 31,
 
    2009     Expense     Retirements     Divestitures     Obligations     2010  
 
Landfill development costs
  $ (1,275.4 )   $ (258.9 )   $ -     $ 19.6     $ 10.1     $ (1,504.6 )
Vehicles and equipment
    (1,518.2 )     (478.7 )     162.2       14.1       -       (1,820.6 )
Buildings and improvements
    (143.1 )     (35.2 )     3.7       2.2       -       (172.4 )
                                                 
Total
  $      (2,936.7 )   $      (772.8 )   $      165.9     $       35.9     $       10.1     $      (3,497.6 )
                                                 
 
                                                                         
    Gross Property and Equipment  
                            Non-Cash
    Adjustments
          Impairments
       
    Balance
                      Additions
    for
    Transfers
    and Transfers
    Balance
 
    as of
                Acquisitions,
    for Asset
    Asset
    and
    to Assets
    as of
 
    December 31,
    Capital
          Net of
    Retirement
    Retirement
    Other
    Held for
    December 31,
 
    2008     Additions     Retirements     Divestitures     Obligations     Obligations     Adjustments     Sale     2009  
 
Other land
  $ 464.4     $ 10.1     $ (3.5 )   $ (48.3 )   $ -     $ -     $ (0.4 )   $ (3.6 )   $ 418.7  
Non-depletable landfill land
    169.3       5.9       (2.6 )     (7.9 )     -       -       (17.0 )     (5.0 )     142.7  
Landfill development costs
    4,126.3       11.7       (0.3 )     (3.2 )     32.5       (60.2 )     132.6       (8.5 )     4,230.9  
Vehicles and equipment
    3,432.3       509.1       (126.1 )     (7.5 )     -       -       2.0       (17.4 )     3,792.4  
Buildings and improvements
    706.0       17.6       (12.1 )     (0.8 )     -       -       31.2       (0.3 )     741.6  
Construction-in-progress - landfill
    76.2       278.8       -       -       -       -       (109.5 )     (0.4 )     245.1  
Construction-in-progress - other
    26.3       29.3       -       6.9       -       -       (39.3 )     (0.2 )     23.0  
                                                                         
Total
  $      9,000.8     $      862.5     $      (144.6 )   $      (60.8 )   $       32.5     $       (60.2 )   $       (0.4 )   $       (35.4 )   $      9,594.4  
                                                                         
 
                                                         
    Accumulated Depreciation, Amortization and Depletion  
                            Adjustments
    Impairments
       
    Balance
    Additions
                for
    and Transfers
    Balance
 
    as of
    Charged
          Acquisitions,
    Asset
    to Assets
    as of
 
    December 31,
    to
          Net of
    Retirement
    Held for
    December 31,
 
    2008     Expense     Retirements     Divestitures     Obligations     Sale     2009  
 
Landfill development costs
  $ (1,004.2 )   $ (282.5 )   $ -     $ 1.2     $ 4.9     $ 5.2     $ (1,275.4 )
Vehicles and equipment
    (1,147.3 )     (490.3 )     107.5       4.7       -       7.2       (1,518.2 )
Buildings and improvements
    (111.1 )     (36.9 )     1.4       (0.7 )     -       4.2       (143.1 )
                                                         
Total
  $      (2,262.6 )   $      (809.7 )   $      108.9     $        5.2     $       4.9     $        16.6     $      (2,936.7 )
                                                         
 


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    Gross Property and Equipment  
                            Non-Cash
    Adjustments
          Impairments
       
    Balance
                      Additions
    for
    Transfers
    and Transfers
    Balance
 
    as of
                Acquisitions,
    for Asset
    Asset
    and
    to Assets
    as of
 
    December 31,
    Capital
          Net of
    Retirement
    Retirement
    Other
    Held for
    December 31,
 
    2007     Additions     Retirements     Divestitures     Obligations     Obligations     Adjustments     Sale     2008  
 
Other land
  $ 105.7     $ 1.4     $ (0.1 )   $ 358.5     $ -     $ -     $ (0.7 )   $ (0.4 )   $ 464.4  
Non-depletable landfill land
    52.7       0.2       -       115.7       -       -       0.7       -       169.3  
Landfill development costs
    1,809.1       3.6       -       2,610.8       20.5       (33.2 )     74.8       (359.3 )     4,126.3  
Vehicles and equipment
    1,965.1       232.8       (87.8 )     1,380.4       -       -       2.8       (61.0 )     3,432.3  
Buildings and improvements
    346.7       5.0       (7.5 )     379.9       -       -       19.9       (38.0 )     706.0  
Construction-in-progress - landfill
    66.4       105.1       -       0.3       -       -       (74.0 )     (21.6 )     76.2  
Construction-in-progress - other
    11.8       23.9       -       14.2       -       -       (23.5 )     (0.1 )     26.3  
                                                                         
Total
  $      4,357.5     $      372.0     $      (95.4 )   $      4,859.8     $      20.5     $      (33.2 )   $        -     $      (480.4 )   $      9,000.8  
                                                                         
 
                                                         
    Accumulated Depreciation, Amortization and Depletion  
                            Adjustments
    Impairments
       
    Balance
    Additions
                for
    and Transfers
    Balance
 
    as of
    Charged
          Acquisitions,
    Asset
    to Assets
    as of
 
    December 31,
    to
          Net of
    Retirement
    Held for
    December 31,
 
    2007     Expense     Retirements     Divestitures     Obligations     Sale     2008  
 
Landfill development costs
  $ (1,039.5 )   $ (119.1 )   $ -     $ (1.2 )   $ 0.6     $ 155.0     $ (1,004.2 )
Vehicles and equipment
    (1,052.7 )     (208.3 )     87.5       2.9       -       23.3       (1,147.3 )
Buildings and improvements
    (101.0 )     (15.0 )     1.0       -       -       3.9       (111.1 )
                                                         
Total
  $      (2,193.2 )   $      (342.4 )   $      88.5     $        1.7     $      0.6     $      182.2     $      (2,262.6 )
                                                         
 
Liquidity and Capital Resources
 
The major components of changes in cash flows for the years ended December 31, 2010, 2009 and 2008 are discussed in the following paragraphs. The following table summarizes our cash flow from operating activities, investing activities and financing activities for the years ended December 31, 2010, 2009 and 2008:
 
                         
    2010   2009   2008
 
Net cash provided by operating activities
  $ 1,433.7     $ 1,396.5     $ 512.2  
Net cash used in investing activities
    (690.5 )     (242.5 )     (934.7 )
Net cash used in financing activities
    (702.9 )     (1,174.7 )     469.4  
 
Cash Flows Provided by Operating Activities
 
Certain of the more significant items affecting the comparison of our operating cash flows for 2010 and 2009 are summarized below:
 
Earnings increase. Our net income increased by $11.0 million on a year-over-year basis.
 
Changes in assets and liabilities, net of effects from business acquisitions and divestitures. Changes in assets and liabilities decreased our cash flow from operations by $360.9 million in 2010 versus a decrease of $251.9 million in 2009, an increase of $109.0 million, primarily as a result of the following:
 
  •   During the fourth quarter of 2010, we recorded a tax receivable of approximately $70 million primarily due to the effects of current deductions for property placed into service during the fourth quarter, referred to as “Bonus Depreciation.” We expect a refund of approximately $50 million in the first quarter of 2011.
 
  •   During 2010, we paid $161.8 million to settle capping, closure, post-closure and remediation obligations, an increase of $4.7 million from $157.1 million we paid in 2009. The increase in cash paid for capping, closure, post closure and remediation activities is primarily due to the timing of obligations.

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  •   During 2010, we paid $20.0 million for restructuring and synergy related costs incurred in connection with the restructuring plan related to the Allied acquisition, a decrease of $46.5 million from $66.5 million we paid in 2009. The decrease in cash expenditures is due to a decrease in restructuring and synergy plan activities in 2010.
 
  •   During 2010, we made income tax payments (net of refunds received) of approximately $418 million, of which approximately $111 million related to the settlement of certain tax liabilities regarding BFI risk management companies. During 2009, we made income tax payments (net of refunds received) of approximately $444 million, of which approximately $105 million related to taxes on our divestitures.
 
  •   Cash paid for interest was $53.8 million lower during 2010 versus 2009 due to reductions in debt balances and refinancing of our higher interest rate debt in the second half of 2009 and throughout 2010.
 
The most significant items affecting the comparison of our operating cash flows for 2009 and 2008 are summarized below:
 
Earnings increase. Our net income increased by $422.6 million on a year-over-year basis, primarily due to the Allied acquisition in December 2008, which positively affected our cash flow from operations in 2009.
 
Changes in assets and liabilities, net of effects from business acquisitions and divestitures. Changes in assets and liabilities decreased our cash flow from operations by $251.9 million in 2009 versus a decrease of $78.9 million in 2008, primarily as a result of the following:
 
  •   During 2009, the cash we paid to settle our capping, closure, post-closure and remediation obligations increased by $85.9 million. The increase in cash paid for capping, closure, post closure and remediation activities is primarily due to the Allied acquisition.
 
  •   During 2009, we paid $66.5 million for restructuring and synergy related costs incurred in connection with the restructuring plan related to the Allied acquisition.
 
  •   During 2009, we made income tax payments (net of refunds received) of approximately $444 million, of which approximately $105 million related to taxes on our divestitures. During 2008, we made income tax payments (net of refunds received) of approximately $128 million. During 2008, approximately $32 million of federal tax payments were deferred and paid in 2009 as a result of the Allied acquisition.
 
Cash Flows Used in Investing Activities
 
The most significant items affecting the comparison of our investing cash flows for the periods presented are summarized below:
 
Capital expenditures. Capital expenditures during 2010 were $794.7 million, compared with $826.3 million in 2009 and $386.9 million in 2008. Capital expenditures in 2009 were higher than 2008 due to the Allied acquisition in December 2008. During 2011, we expect our capital expenditures to approximate $870 million. However, we expect property and equipment received during 2011 to be $750 million, which excludes $120 million of property and equipment received during 2010 but paid during 2011.
 
Proceeds from sales of property and equipment. Proceeds on sale of property and equipment during 2010 were $37.4 million, compared with $31.8 million in 2009 and $8.2 million in 2008. Proceeds on sale of property and equipment in 2010 were higher than 2009 due to the sale of our former headquarters building in Florida. Proceeds on sale of property in 2009 were higher than 2008 due to the Allied acquisition in December 2008.
 
Cash used in acquisitions and development projects, net of cash acquired. During 2010, we paid $58.9 million for eight acquisitions, including a landfill development project. Cash paid for acquisitions in 2008 includes the retirement of Allied’s credit facility, net of cash acquired, and $13.4 million of cash paid for other acquisitions.


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Proceeds from divestitures. Proceeds from divestitures (net of cash divested) and other sales of assets were $60.0 million in 2010, $511.1 million in 2009 and $3.3 million in 2008. During the year ended December 31, 2010, we received $60.0 million in cash proceeds, net of cash divested, primarily related to certain hauling and transfer station assets sold in our Eastern Region. Proceeds received in 2009 were primarily the result of divesting certain assets as required by the DOJ as a condition of the Allied acquisition.
 
Change in restricted cash and marketable securities. Changes in our restricted cash and marketable securities balances, which are largely related to the issuance of tax-exempt bonds for our capital needs and amounts held in trust as a guarantee of performance, contributed $66.3 million and $41.6 million to our investing activities in 2010 and 2009 compared to a $5.3 million use of cash in 2008. Funds received from issuances of tax-exempt bonds are deposited directly into trust accounts by the bonding authority at the time of issuance. As we do not have the ability to use these funds for general operating purposes, they are classified as restricted cash in our consolidated balance sheets. Proceeds from bond issuances into restricted trust accounts represent cash used in investing activities in our consolidated statements of cash flows. Reimbursements from the trust for qualifying expenditures are presented as cash provided by investing activities in our consolidated statements of cash flows. During 2010 and 2009, our reimbursements from restricted cash accounts exceeded funds received from the issuance of tax-exempt bonds.
 
We intend to finance capital expenditures and acquisitions through cash on hand, restricted cash held for capital expenditures, cash flows from operations, our revolving credit facilities, and tax-exempt bonds and other financings. We expect to use primarily cash for future business acquisitions.
 
Cash Flows Provided by (Used in) Financing Activities
 
The most significant items affecting the comparison of our cash flows from financing activities for the periods presented are summarized:
 
Net debt repayments or borrowings. Payments of notes payable and long-term debt net of proceeds from notes payable and long-term debt and issuance of senior notes were $397.4 million in 2010 versus $865.9 million in 2009 and net borrowing of $712.8 million in 2008. During 2010 we issued $850.0 million of 5.00% senior notes due 2020 and $650.0 million of 6.20% senior notes due 2040. We used the net proceeds from the Notes as follows: (i) $433.7 million to redeem the 6.125% senior notes due 2014 at a premium of 102.042% ($425.0 million principal outstanding); (ii) $621.8 million to redeem the 7.250% senior notes due 2015 at a premium of 103.625% ($600.0 million principal outstanding); and (iii) the remainder to reduce amounts outstanding under our Credit Facilities and for general corporate purposes. During 2010, we also we repaid all borrowings and terminated our accounts receivable securitization program and we refinanced $677.4 million and repaid $97.8 million of our tax-exempt financings.
 
During 2009, we issued $650.0 million of 5.500% Senior Notes due 2019 and $600.0 million of 5.250% Senior Notes due 2021. The primary use of proceeds from the notes together with draws on our Credit Facilities was to purchase and retire: (i) $325.5 million of varied senior notes maturing in 2010 and 2011 pursuant to our September 2009 tender offer; (ii) $450.0 million of 7.875% of Senior Notes due 2013; (iii) $400.0 million of 7.375% Senior Notes due 2014; (iv) $230.0 million of 4.250% Senior Subordinated Convertible Debentures due 2034 and; (v) repurchase certain of our senior notes maturing in 2010 and 2011 in the secondary market. Additionally, our senior unsecured notes bearing interest at a fixed rate of 7.125% matured during 2009. We repaid the remaining principal balance of $99.3 million in May 2009. Net borrowings reflected in our cash flows provided by financing activities in 2008 were primarily related to the Allied acquisition. We used proceeds from our revolver to refinance extensions of credit under Allied’s senior credit facility, to pay fees and expenses in connection therewith, and to pay fees and expenses incurred in connection with the acquisition.
 
Premiums and fees paid to issue and retire senior notes. Cash premiums and fees paid in connection with the issuance of our 2020 and 2040 notes, premiums paid for note redemptions and fees paid to issue tax-exempt indebtedness were $56.6 million during 2010. In connection with the issuance of our senior notes as well as purchasing and retiring certain indebtedness in 2009, we incurred cash premiums and fees totaling $61.6 million.


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Purchase of common stock for treasury. From 2000 through 2008, our board of directors authorized the repurchase of up to $2.6 billion of our common stock. As of December 31, 2008, we had paid $2.3 billion to repurchase 82.6 million shares of our common stock, of which $138.4 million was paid during 2008 to repurchase 4.6 million shares. The stock repurchase program was suspended in the second quarter of 2008 due to the pending Allied acquisition. In November 2010, our board of directors approved a share repurchase program pursuant to which we may repurchase up to $400.0 million of our outstanding shares of common stock through December 31, 2011. As of December 31, 2010, we have repurchased 1.4 million shares for $41.1 million at a weighted average cost per share of $28.46. We expect to use the remaining funds under this program to repurchase shares during 2011.
 
Cash dividends paid. We initiated a quarterly cash dividend in July 2003. The dividend has been increased from time to time thereafter. In July 2010, the board of directors approved an increase in the quarterly dividend to $0.20 per share. Dividends paid were $294.6 million, $288.3 million and $128.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.
 
Financial Condition
 
As of December 31, 2010, we had $88.3 million of cash and cash equivalents, and $172.8 million of restricted cash deposits and restricted marketable securities, including $39.8 million of restricted cash held for capital expenditures under certain debt facilities.
 
Our $1.0 billion revolving credit facility due April 2012 and our $1.75 billion revolving credit facility due September 2013 (collectively, Credit Facilities) bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the agreements). As of December 31, 2010 and 2009, the interest rate for our borrowings under our Credit Facilities was 1.56% and 1.62%, respectively. Our Credit Facilities are also subject to facility fees based on applicable rates defined in the agreements and the aggregate commitments, regardless of usage. Availability under our Credit Facilities can be used for working capital, capital expenditures, letters of credit and other general corporate purposes. We had $75.0 million and $300.0 million of Eurodollar Rate borrowings and nil and $15.4 million of Base Rate borrowings as of December 31, 2010 and 2009, respectively. We had $1,037.5 million and $1,634.0 million of letters of credit utilizing availability under our Credit Facilities, leaving $1,637.5 million and $800.6 million of availability under our Credit Facilities at December 31, 2010 and 2009, respectively.
 
The agreements governing our Credit Facilities require us to comply with certain financial and other covenants. We can pay dividends and repurchase common stock if we are in compliance with these covenants. Compliance with these covenants is a condition for any incremental borrowings under our Credit Facilities and failure to meet these covenants would enable the lenders to require repayment of any outstanding loans (which would adversely affect our liquidity). At December 31, 2010, our EBITDA to interest ratio was 4.64 compared to the 3.00 minimum required by the covenants, and our total debt to EBITDA ratio was 2.85 compared to the 3.25 maximum allowed by the covenants. At December 31, 2010, we were in compliance with the covenants of the Credit Facilities, and we expect to be in compliance during 2011.
 
EBITDA, which is a non-GAAP measure, is calculated as defined in our Credit Facility agreements. In this context, EBITDA is used solely to provide information regarding the extent to which we are in compliance with debt covenants and is not comparable to EBITDA used by other companies or used by us for other purposes.
 
In March 2010, we issued $850.0 million of 5.00% senior notes due 2020 (the 2020 Notes) and $650.0 million of 6.20% senior notes due 2040 (the 2040 Notes, and, together with the 2020 Notes, the Notes). The Notes are general senior unsecured obligations and mature on March 1, 2020 (in the case of the 2020 Notes) and March 1, 2040 (in the case of the 2040 Notes). Interest is payable semi-annually on March 1 and September 1, beginning September 1, 2010. The Notes are guaranteed by each of our subsidiaries that also guarantees our Credit Facilities. These guarantees are general senior unsecured obligations of our subsidiary guarantors.
 
We used the net proceeds from the Notes as follows: (i) $433.7 million to redeem the 6.125% senior notes due 2014 at a premium of 102.042% ($425.0 million principal outstanding); (ii) $621.8 million to redeem the


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7.250% senior notes due 2015 at a premium of 103.625% ($600.0 million principal outstanding); and (iii) the remainder to reduce amounts outstanding under our Credit Facilities and for general corporate purposes. We incurred a loss of $132.1 million for premiums paid to repurchase debt, charges for unamortized debt discounts and professional fees paid to effectuate the repurchase of the senior notes.
 
In March 2010, we repaid all borrowings and terminated our accounts receivable securitization program with two financial institutions that allowed us to borrow up to $300.0 million on a revolving basis under loan agreements secured by receivables. We recorded a loss on extinguishment of debt of $0.2 million related to unamortized deferred issuance costs associated with terminating this program.
 
To manage risk associated with fluctuations in interest rates, we have entered into interest rate swap agreements with investment grade-rated financial institutions. Our outstanding swap agreements have a total notional value of $210.0 million and require us to pay interest at floating rates based on changes in LIBOR and receive interest at a fixed rate of 6.75%. Our swap agreements mature in August 2011.
 
At December 31, 2010, we had $1,151.8 million of tax-exempt bonds and other tax-exempt financings outstanding. Borrowings under these bonds and other financings bear interest based on fixed or floating interest rates at prevailing market rates ranging from 0.28% to 8.25% at December 31, 2010 and have maturities ranging from 2012 to 2035. As of December 31, 2010, we had $39.8 million of restricted cash related to proceeds from tax-exempt bonds and other tax-exempt financings. This restricted cash will be used to reimburse capital expenditures under the terms of the agreements.
 
During the year ended December 31, 2010, we refinanced $677.4 million and repaid $97.8 million of our tax-exempt financings resulting in a loss on extinguishment of debt of $28.5 million related to charges for unamortized debt discounts and professional fees paid to effectuate these transactions.
 
We intend to use excess cash on hand and cash from operating activities to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise. We believe that our excess cash, cash from operating activities and proceeds from our revolving credit facilities provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due.
 
In the future we may choose to voluntarily retire certain portions of our outstanding debt before their maturity dates using cash from operations or additional borrowings. We may also explore opportunities in capital markets to fund redemptions should market conditions be favorable. Any early extinguishment of debt may result in an impairment charge in the period in which the debt is repurchased and retired. The loss on early extinguishment of debt relates to premiums paid to effectuate the repurchase and the relative portion of unamortized note discounts and debt issue costs.
 
Fuel Hedges
 
We use derivative instruments designated as cash flow hedges to manage our exposure to changes in diesel fuel prices. We have entered into multiple agreements related to forecasted diesel fuel purchases. The agreements qualified for, and were designated as, effective hedges of changes in the prices of forecasted diesel fuel purchases (fuel hedges).


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The following fuel hedges were outstanding during 2010 and 2009:
 
                     
            Notional Amount
   
            (in Gallons
  Contract Price
Inception Date   Commencement Date   Termination Date   per Month)   per Gallon
 
January 26, 2007
  January 5, 2009   December 28, 2009     500,000     $2.83
January 26, 2007
  January 4, 2010   December 27, 2010     500,000     2.81
November 5, 2007
  January 5, 2009   December 30, 2013     60,000     3.28
March 17, 2008
  January 5, 2009   December 31, 2012     50,000     3.72
March 17, 2008
  January 5, 2009   December 31, 2012     50,000     3.74
September 22, 2008
  January 1, 2009   December 31, 2011     150,000     4.16 - 4.17
July 10, 2009
  January 1, 2010   December 31, 2010     100,000     2.84
July 10, 2009
  January 1, 2011   December 31, 2011     100,000     3.05
July 10, 2009
  January 1, 2012   December 31, 2012     100,000     3.20
 
If the national U.S. on-highway average price for a gallon of diesel fuel (average price) as published by the Department of Energy exceeds the contract price per gallon, we receive the difference between the average price and the contract price (multiplied by the notional gallons) from the counter-party. If the national U.S. on-highway average price for a gallon of diesel fuel is less than the contract price per gallon, we pay the difference to the counter-party.
 
The fair values of our fuel hedges are obtained from third-party counter-parties and are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets (Level 2 in the fair value hierarchy). The aggregated fair values of the outstanding fuel hedges at December 31, 2010 and 2009 were current assets of $1.6 million and $3.2 million, respectively, and accrued liabilities of $1.9 million and $4.9 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively.
 
The effective portions of the changes in fair values as of December 31, 2010 and 2009, net of tax, of $0.2 million and $1.0 million, respectively, have been recorded in stockholders’ equity as components of accumulated other comprehensive income. The ineffective portions of the changes in fair values as of December 31, 2010, 2009 and 2008 were immaterial and have been recorded in other income (expense), net in our consolidated statements of income. Realized (losses) gains of $(2.0) million, $(7.3) million and $5.9 million related to these fuel hedges are included in cost of operations in our consolidated statements of income for the years ended December 31, 2010, 2009 and 2008, respectively.
 
During 2010, approximately 7% of our fuel volume purchases were hedged with swap agreements. Additionally, we were able to recover approximately 66% of our fuel costs with fuel recovery fees from certain of our customers.
 
Recycling Commodity Hedges
 
Revenue from sale of recycling commodities is primarily from sales of old corrugated cardboard (OCC) and old newspaper (ONP). We use derivative instruments such as swaps and costless collars designated as cash flow hedges to manage our exposure to changes in prices of these commodities. We have entered into multiple agreements related to the forecasted OCC and ONP sales. The agreements qualified for, and were designated as, effective hedges of changes in the prices of certain forecasted commodity sales (commodity hedges).


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The following commodity swaps were outstanding during 2010 and 2009:
 
                             
                Notional Amount
  Contract Price
            Transaction
  (in Short Tons
  Per Short
Inception Date   Commencement Date   Termination Date   Hedged   per Month)   Ton
 
May 16, 2008
  January 1, 2009   December 31, 2010   OCC     1,000     $ 105.00  
May 16, 2008
  January 1, 2009   December 31, 2010   ONP     1,000       102.00  
May 16, 2008
  January 1, 2009   December 31, 2010   ONP     1,000       106.00  
May 16, 2008
  January 1, 2009   December 31, 2010   OCC     1,000       103.00  
April 28, 2008
  January 1, 2009   December 31, 2010   OCC     1,000       106.00  
April 28, 2008
  January 1, 2009   December 31, 2010   ONP     1,000       106.00  
April 28, 2008
  January 1, 2009   December 31, 2010   OCC     1,000       110.00  
April 28, 2008
  January 1, 2009   December 31, 2010   ONP     1,000       103.00  
December 8, 2009
  January 1, 2010   December 31, 2011   ONP     2,000       76.00  
December 10, 2009
  January 1, 2010   December 31, 2011   OCC     2,000       82.00  
December 11, 2009
  January 1, 2010   December 31, 2011   OCC     2,000       82.00  
January 5, 2010
  January 1, 2010   December 31, 2011   ONP     2,000       84.00  
January 6, 2010
  January 1, 2010   December 31, 2011   OCC     1,000       90.00  
January 27, 2010
  February 1, 2010   January 31, 2012   OCC     1,000       90.00  
September 23, 2010
  January 1, 2011   December 31, 2011   ONP     1,000       95.00  
September 28, 2010
  January 1, 2011   December 31, 2011   ONP     1,000       95.00  
October 11, 2010
  January 1, 2011   December 31, 2012   OCC     1,500       115.00  
 
If the price per short ton of the hedging instrument (average price) as reported on the Official Board Market is less than the contract price per short ton, we receive the difference between the average price and the contract price (multiplied by the notional short tons) from the counter-party. If the price of the commodity exceeds the contract price per short ton, we pay the difference to the counter-party.
 
The fair values of our commodity swaps are obtained from third-party counter-parties and are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets (Level 2 in the fair value hierarchy).
 
On December 8, 2010, we entered into a two-year costless collar agreement on forecasted sales of 10,000 short tons of OCC a month. The agreement involves combining a purchased put option giving us the right to sell 10,000 short tons of OCC monthly for 24 months at an established floor strike price with a written call option obligating us to deliver 10,000 short tons of OCC monthly for 24 months at an established cap strike price. The puts and calls have the same settlement dates, are net settled in cash on such date and have the same terms to expiration. The contemporaneous combination of options resulted in no net premium for us and represents a costless collar. Under the agreement, we will not make or receive any payment, as long as the settlement price is between the floor price and cap price. However, if the settlement price is above the cap, we would be required to pay the counterparty an amount equal to the excess of the settlement price over the cap times the monthly volumes hedged. Also, if the settlement price is below the floor, the counterparty would be required to pay us the deficit of the settlement price below the floor times the monthly volumes hedged. The objective of this agreement is to reduce the variability of the cash flows of the forecasted sales of OCC between two designated strike prices.
 
The following costless collar hedges were outstanding at December 31, 2010: