<PAGE>   1
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 

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

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                              OR

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

                 FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                       Commission file number: 1-14267
</TABLE>

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

<TABLE>
<S>                                             <C>
                   DELAWARE                                       65-0716904
           (State of Incorporation)                  (I.R.S. Employer Identification No.)
</TABLE>

 

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

 
      Registrant's telephone number, including area code:  (954) 769-6000
 
          Securities registered pursuant to Section 12(b) of the Act:
 

<TABLE>
<S>                                             <C>
             Title of Each Class                  Name of Each Exchange on which Registered
             -------------------                  -----------------------------------------
</TABLE>

 

<TABLE>
<S>                                             <C>
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE           THE NEW YORK STOCK EXCHANGE
</TABLE>

 
       Securities registered pursuant to Section 12(g) of the Act:  NONE
 
     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  [X]  No  [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]
 
     As of January 27, 1999, the registrant had outstanding 79,724,417 shares of
Class A Common Stock and 95,688,083 shares of Class B Common Stock. At such
date, the aggregate market value of the shares of the Common Stock held by
non-affiliates of the registrant was approximately $1,288,608,324.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 

<TABLE>
<S>        <C>

Part III   Portions of the Registrant's Proxy Statement relative to the
           1999 Annual Meeting of Stockholders.
Part IV    Portions of previously filed reports and registration
           statements.
</TABLE>

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

<PAGE>   2
 
                                     INDEX
                                  TO FORM 10-K
 

<TABLE>
<CAPTION>
                                                                            PAGE NUMBER
                                                                            -----------
<S>           <C>                                                           <C>
Item  1.      Business....................................................         1
Item  2.      Properties..................................................        18
Item  3.      Legal and Administrative Proceedings........................        19
Item  4.      Submission of Matters to a Vote of Security Holders.........        19
Item  5.      Market for the Registrant's Common Equity and Related
                Stockholder Matters.......................................        20
Item  6.      Selected Financial Data.....................................        21
Item  7.      Management's Discussion and Analysis of Financial Condition
                and Results of Operations (including Item 7A).............        22
Item  8.      Financial Statements and Supplementary Data.................        31
Item  9.      Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure..................................        51
Item 14.      Exhibits, Financial Statement Schedule and Reports on Form
                8-K.......................................................        53
</TABLE>


<PAGE>   3
 

                                     PART I
 

ITEM 1.  BUSINESS
 
BACKGROUND
 
     In July 1998, Republic Services, Inc. (the "Company") completed the initial
public offering (the "Initial Public Offering") of its Class A common stock, par
value $.01 per share (the "Class A Common Stock"), resulting in net proceeds of
$1.4 billion. All of the proceeds were used to repay debt owed to Republic
Industries, Inc. ("Republic Industries"). As of December 31, 1998, approximately
63.9% of the Company's common stock (including its Class B common stock, par
value $.01 per share (the "Class B Common Stock" and together with the Class A
Common Stock, the "Common Stock") was owned by Republic Industries.
 
COMPANY OVERVIEW
 
     The Company is a leading provider of services in the domestic non-hazardous
solid waste industry. The Company provides solid waste collection services for
commercial, industrial, municipal and residential customers through 131
collection companies in 26 states. The Company also owns or operates 70 transfer
stations and 48 solid waste landfills.
 
     The Company had revenue of $1,369.1 million and $1,127.7 million and
operating income of $284.3 million and $201.3 million for the years ended
December 31, 1998 and 1997, respectively. The $241.4 million (or 21.4%) increase
in revenue and the $83.0 million (or 41.2%) increase in operating income are
primarily attributable to the successful execution of the Company's growth and
operating strategies described below.
 
     The Company's internal growth strategy is supported by its presence in high
growth markets throughout the Sunbelt, including Florida, Georgia, Nevada,
Southern California and Texas, and other domestic markets that have experienced
higher than average population growth during the past several years. The Company
believes that its presence in such markets positions it to experience growth at
rates that are generally higher than the industry's overall growth rate.
 
     Since 1995, the Company has acquired numerous solid waste companies with an
aggregate of over $1.4 billion in annual revenue. In September 1998, the Company
agreed to purchase certain assets, including landfills, transfer stations,
routes and other items, from Waste Management, Inc. ("Waste Management"), and to
convey to Waste Management certain of the Company's assets for a net purchase
price of approximately $490 million in cash plus certain properties. By December
31, 1998, closings with Waste Management had been completed with respect to 6
landfills, 7 transfer stations and 136 commercial collection routes. See "ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Business Combinations."
 
     The Company believes that it is well positioned to continue to increase its
revenue and operating income in order to enhance stockholder value.
 
INDUSTRY OVERVIEW
 
     Based on analyst reports and industry trade publications, the Company
believes that the United States non-hazardous solid waste services industry
generated revenue of approximately $35.0 billion in 1997, of which approximately
44% was generated by publicly-owned waste companies, 23% was generated by
privately-held waste companies and 33% was generated by municipal and other
local governmental authorities. The substantial majority of the publicly-owned
companies' total revenue of approximately $15.4 billion was generated by only
five companies in 1997. However, according to industry data, the domestic
non-hazardous waste industry remains highly fragmented as the privately-held
companies' total revenue of approximately $8.0 billion was generated by more
than 5,000 companies.
 
                                        1

<PAGE>   4
 
     The Company believes that in recent years there has been a trend toward
rapid consolidation in the solid waste collection industry, which has
historically been characterized by numerous small companies. The Company
believes that this trend will continue as a result of the following factors:
 
          Subtitle D Regulation.  Subtitle D ("Subtitle D") of the Resource
     Conservation and Recovery Act of 1976, as amended ("RCRA"), and similar
     state regulations have significantly increased the amount of capital,
     technical expertise, operating costs and financial assurance obligations
     required to own and operate a landfill and other solid waste facilities.
     Many of the smaller industry participants have found these costs difficult,
     if not impossible, to bear. Large publicly-owned companies, such as the
     Company, have greater access to capital, and a lower cost of capital,
     available to finance such increased capital expenditures and costs,
     relative to many of the privately owned companies in the industry.
     Additionally, the required permits for landfill development, expansion or
     construction have become more difficult to acquire. Consequently, many
     smaller, independent operators have decided to either close their
     operations or sell them to larger operators with greater access to capital.
 
          Integration of Solid Waste Businesses.  Vertically integrated solid
     waste companies gain further competitive advantage over non-integrated
     operators by being able to control the waste stream in a market through the
     collection, transfer and disposal process. The ability of the integrated
     companies to internalize the disposal of collected solid waste, coupled
     with access to significant capital resources to make acquisitions, has
     created an environment in which large publicly-owned integrated companies
     can operate more cost effectively and competitively than non-integrated
     operators.
 
          Municipal Privatization.  The trend toward consolidation in the solid
     waste services industry is further supported by the increasing tendency of
     a number of municipalities to privatize their waste disposal operations.
     Privatization of municipal waste operations is often an attractive
     alternative to funding the changes required by Subtitle D.
 
     These developments, as well as the fact that there are a limited number of
viable exit strategies for many of the owners and principals of numerous
privately-held companies in the industry, have contributed to the overall
consolidation trend in the solid waste industry.
 
GROWTH STRATEGY
 
     The Company's growth strategy is to increase revenue, gain market share and
enhance stockholder value through internal growth and acquisitions. For certain
risks related to the Company's growth strategy, see "-- Risk Factors."
 
- - INTERNAL GROWTH.  The Company's internal growth strategy focuses on retaining
  existing customers and obtaining commercial, municipal and industrial
  customers through its well-managed sales and marketing activities.
 
          Long-Term Contracts.  The Company seeks to obtain long-term contracts
     for the collection of solid waste in the high-growth markets in which it
     operates. These include exclusive franchise agreements with municipalities
     as well as commercial and industrial contracts. By obtaining such long-term
     agreements, the Company has the opportunity to grow its contracted revenue
     base at the same rate as the underlying population growth in such markets.
     For example, the Company has secured exclusive, long-term franchise
     agreements in high-growth markets such as Los Angeles and Orange Counties,
     California, Las Vegas, Nevada, Arlington, Texas and many areas of Florida.
     The Company believes that this positions it to experience internal growth
     rates that are generally higher than the overall industry's growth rate. In
     addition, the Company believes that by securing a base of long-term
     recurring revenue in growth markets, the Company is better able to protect
     its market position from competition and is less susceptible to downturns
     in economic conditions.
 
          Sales and Marketing Activities.  The Company's well-managed sales and
     marketing activities enable it to capitalize on its leading positions in
     many of the markets in which it operates. The Company currently has over
     350 sales and marketing employees in the field, who are incentivized by a
     commission structure to generate high levels of revenue. For the most part,
     such employees directly solicit business
                                        2

<PAGE>   5
 
     from existing and prospective commercial, industrial and municipal
     customers. The Company trains new and existing sales personnel with an
     emphasis on teaching sales personnel to understand the Company's rate and
     cost structures.
 
- - ACQUISITION GROWTH.  As a result of the highly fragmented nature of the solid
  waste industry, the Company has been able to grow significantly through
  acquisitions. The Company's acquisition growth strategy is focused on the
  approximately $8.0 billion of revenue that was generated by over 5,000
  privately-held solid waste companies in 1997. The Company believes that its
  ability to acquire many of these privately-held companies is enhanced by
  increasing competition in the solid waste industry, increasing capital
  requirements as a result of changes in solid waste regulatory requirements and
  the limited number of exit strategies for such companies' owners and
  principals. The Company's acquisition growth strategy is to (i) acquire
  businesses that position the Company for growth in existing and new markets,
  (ii) acquire well-managed companies and retain local management, (iii)
  integrate business in existing markets and (iv) acquire operations and
  facilities from municipalities that are privatizing. For certain risks
  involved with the Company's growth strategy, see "-- Risk Factors."
 
          Acquire Businesses Positioning the Company for Growth.  In making
     acquisitions, the Company principally targets high quality businesses that
     will allow it to be, or provide it favorable prospects of becoming, a
     leading provider of integrated solid waste services in markets with
     favorable demographic growth. The Company generally has acquired, and will
     continue to seek to acquire, solid waste collection, transfer and disposal
     companies that (i) have strong operating margins, (ii) are in growth
     markets, (iii) are among the largest or have a significant presence in
     their local markets and (iv) have long-term contracts or franchises with
     municipalities and other customers. Although the Company seeks to expand
     its operations to selected new markets where the potential for growth and
     further integration of operations exists, the Company's primary focus is to
     concentrate its acquisition efforts in its existing markets in the Sunbelt,
     including Florida, Georgia, Nevada, Southern California and Texas and other
     domestic markets that have experienced higher than average population
     growth during the past several years. The Company is not limited to the
     foregoing target criteria for acquisitions, and may also acquire additional
     non-hazardous solid waste operations as opportunities arise. The Company
     continuously reviews possible acquisition candidates and is in discussions
     from time to time with one or more of such candidates. In September 1998,
     the Company entered into an agreement with Waste Management to purchase 16
     landfills, 11 transfer stations and 136 commercial collection routes across
     the United States as well as to obtain disposal agreements at various Waste
     Management disposal sites. With these acquisitions, the Company will have
     expanded its presence in four existing markets and will enter 16 new
     markets. At December 31, 1998, closings had been completed for 6 landfills,
     7 transfer stations and all of the collection routes. Management believes
     that the closing of the remaining Waste Management assets will be completed
     in the first quarter of 1999. See also "ITEM 7. MANAGEMENT'S DISCUSSION AND
     ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Business
     Combinations."
 
          Acquire Well-Managed Companies.  The Company also seeks to acquire
     businesses that have experienced management teams that are willing to work
     for the Company. The Company generally retains the local management of the
     larger acquired companies in order to capitalize on their local market
     knowledge, community relations and name recognition, and to instill their
     entrepreneurial drive at all levels of operations. By furnishing the local
     management of such acquired companies with the Company's financial and
     marketing resources and technical expertise, it is the Company's belief
     that such acquired companies are better able to secure additional municipal
     franchises and other contracts. This enables the Company to grow internally
     such acquired businesses at faster rates than the industry average.
 
          Integrate Business in Existing Markets.  Once it has a base of
     operations in a particular market, the Company focuses on acquiring trucks
     and routes of smaller businesses that also operate in that market and
     surrounding markets, which are typically referred to as "tuck-in"
     acquisitions. The operations of such "tuck-in" businesses, upon being
     acquired by the Company, are integrated into the Company's existing
     operations in that market. In addition, the Company seeks to acquire
     landfills, transfer stations, and collection companies that operate in
     markets already serviced by the Company. By doing so, the
                                        3

<PAGE>   6
 
     Company not only is able to grow its revenue and increase its market share,
     but also is able to integrate operations and consolidate duplicative
     facilities and functions to maximize cost efficiencies and economies of
     scale.
 
          Privatize Municipal Operations.  The Company also seeks to acquire
     solid waste collection operations, transfer stations and landfills that are
     being privatized by municipalities and other governmental authorities. Many
     municipalities are seeking to outsource or sell these types of solid waste
     operations, as they lack the capital, technical expertise and/or
     operational resources necessary to comply with increasingly stringent
     regulatory standards and/or to compete effectively with private-sector
     companies.
 
OPERATING STRATEGY
 
     The Company seeks to leverage existing assets and revenue growth to
increase operating margins and enhance stockholder value. The Company's
operating strategy to accomplish this goal is to (i) utilize the extensive
industry knowledge and experience of the Company's executive management, (ii)
utilize a decentralized management structure in overseeing day-to-day
operations, (iii) integrate waste operations, (iv) improve operating margins
through economies of scale, cost efficiencies and asset utilization and (v)
achieve high levels of customer satisfaction. For certain risks related to the
Company's operating strategy, see "-- Risk Factors."
 
- - EXPERIENCED EXECUTIVE MANAGEMENT TEAM.  The Company believes that it has one
  of the most experienced executive management teams among publicly-traded
  companies in the solid waste industry.
 
       H. Wayne Huizenga, the Company's Chairman, after several years of owning
  and operating private waste hauling companies in Florida, co-founded Waste
  Management in 1971. From 1971 to 1984 he served in various executive
  capacities with Waste Management, including President and Chief Operating
  Officer. By then, Waste Management had become the world's largest integrated
  solid waste services company. From 1987 to 1994, Mr. Huizenga served as
  Chairman and Chief Executive Officer of Blockbuster Entertainment Corporation,
  leading its growth from 19 stores to the world's largest video rental company.
  In August 1995, he became Chairman and Chief Executive Officer of Republic
  Industries.
 
       Harris W. Hudson, the Company's Vice Chairman, worked closely with Mr.
  Huizenga, from 1964 until 1982, at Waste Management and at the private waste
  hauling firms they operated prior to the formation of Waste Management. In
  1982, Mr. Hudson retired as Vice President of Waste Management of Florida,
  Inc., a subsidiary of Waste Management. In 1983, Mr. Hudson founded Hudson
  Management Corporation ("Hudson Management"), a solid waste collection company
  in Florida, and served as its Chairman and Chief Executive Officer until it
  merged with Republic Industries in August 1995. By that time, Hudson
  Management had grown to over $50.0 million in annual revenue, becoming one of
  Florida's largest privately-held solid waste collection companies based on
  revenue. Since August 1995, Mr. Hudson has served as an executive officer of
  Republic Industries, including as President and Vice Chairman.
 
       James E. O'Connor, the Company's Chief Executive Officer since December
  1998, also worked at Waste Management from 1972 to 1978 and from 1982 to 1998.
  During that time, he served in various management positions, including Senior
  Vice President in 1997 and 1998 and Area President of Waste Management of
  Florida, Inc. for five years, from 1992 to 1997.
 
       James H. Cosman, the Company's President and Chief Operating Officer, has
  served as President of Republic Industries' Solid Waste Group since January
  1997. Prior to joining Republic Industries, Mr. Cosman was employed by
  Browning-Ferris Industries, Inc. for over 24 years. During that time, he
  served in various management positions, including Regional Vice
  President -- Northern Region.
 
       The other officers with responsibility for operational affairs of the
  Company have an average of over 16 years of management experience in the solid
  waste industry.
 
- - DECENTRALIZED MANAGEMENT STRUCTURE.  The Company maintains a relatively small
  corporate headquarters staff, relying on a decentralized management structure
  to minimize administrative overhead costs and to manage its day-to-day
  operations more efficiently. The Company's local management has extensive
  industry
 
                                        4

<PAGE>   7
 
  experience in growing, operating and managing solid waste companies, and
  substantial experience in their local geographic markets. The Company's four
  Regional Vice Presidents have an average of 22 years of experience in the
  industry, and the Company's 23 Area Presidents have an average of 20 years of
  experience in the industry. The Regional Vice Presidents and Area Presidents
  have extensive authority, responsibility and autonomy for operations within
  their geographic markets. Compensation for management within regions and areas
  is in large part based on the improvement in operating income produced in each
  manager's geographic area of responsibility. In addition, through long-term
  incentive programs, including stock options, the Company believes that it has
  one of the lowest turnover levels in the industry for its local management
  teams. As a result of retaining experienced managers with extensive local
  knowledge, community relations and name recognition, the Company is able to
  react rapidly to changes in its markets. The Company also seeks to implement
  the best practices of its various regions and areas throughout its operations
  to improve operating margins.
 
- - INTEGRATE OPERATIONS.  The Company seeks to achieve a high rate of waste
  integration by controlling waste streams from the point of collection through
  disposal. Through acquisitions and other market development activities, the
  Company creates market specific, vertically integrated operations typically
  consisting of one or more collection companies, transfer stations and
  landfills. The Company considers acquiring companies which own or operate
  landfills with significant permitted disposal capacity and appropriate levels
  of waste volume. The Company also seeks to acquire solid waste collection
  companies in markets in which its owns or operates landfills. In addition, the
  Company generates internal growth in its disposal operations by constructing
  new landfills and expanding its existing landfills from time to time in
  markets in which it has significant collection operations or in markets that
  it determines lack sufficient disposal capacity. During the year ended
  December 31, 1998, approximately 40% of the total volume of waste collected by
  the Company was disposed of at the Company's landfills. Because the Company
  does not have landfill facilities for all markets in which it provides
  collection services, the Company believes that through landfill and transfer
  station acquisitions and development it has the opportunity to increase its
  waste internalization rate and further integrate its operations. By further
  integrating operations in existing markets through acquisitions and
  developments of landfills and transfer stations, the Company is able to reduce
  its disposal costs.
 
- - ECONOMIES OF SCALE AND COST EFFICIENCIES.  To improve operating margins, the
  Company's management is focused on achieving economies of scale and cost
  efficiencies. The consolidation of acquired businesses into existing
  operations reduces costs by decreasing capital and expenses used in routing,
  personnel, equipment and vehicle maintenance, inventories and back-office
  administration. The Company is generally consolidating its administrative
  centers to reduce its general and administrative costs. The Company reduced
  its selling, general and administrative expenses from 14.2% of consolidated
  revenue in 1996 to 9.9% of consolidated revenue in 1998. In addition, the
  Company's size allows it to negotiate volume discounts for certain purchases,
  including waste disposal rates at landfills operated by third parties.
  Furthermore, the Company has taken steps to increase its utilization of
  assets. For example, to reduce the number of collection vehicles, drivers are
  paid incentive wages based upon the number of customers they service on each
  route. In addition, routes are frequently analyzed and rerouted to ensure that
  the highest number of customers are efficiently serviced over the fewest
  possible miles. By using assets more efficiently, operating expenses are
  lowered significantly.
 
- - HIGH LEVELS OF CUSTOMER SATISFACTION.  The Company complements its operating
  strategy with a goal of maintaining high levels of customer satisfaction. The
  Company's personalized sales process of periodically contacting commercial,
  industrial and municipal customers is intended to maintain relationships and
  ensure service is being properly provided.
 
OPERATIONS
 
     The Company's operations primarily consist of the collection and disposal
of non-hazardous solid waste.
 
     Collection Services.  The Company provides solid waste collection services
to commercial, industrial, municipal and residential customers in 26 states
through 131 collection companies. In 1998, the Company's revenue from collection
services was derived approximately one third from services provided to
commercial
 
                                        5

<PAGE>   8
 
customers, one third from services provided to industrial customers, and one
third from services provided to municipal and residential customers. The
Company's commercial and residential collection operations involve the curbside
collection of refuse from small containers into collection vehicles for
transport to transfer stations or directly to landfills. Commercial collection
services are generally performed under one-year to three-year service
agreements, and fees are determined by such considerations as market factors,
collection frequency, type of equipment furnished, the type and volume or weight
of the waste collected, the distance to the disposal facility and the cost of
disposal.
 
     Residential solid waste collection services are typically performed under
contracts with municipalities, which are generally secured by competitive bid
and which give the Company exclusive rights to service all or a portion of the
homes in their respective jurisdictions. Such contracts or franchises usually
range in duration from one to five years, although some of the Company's
exclusive franchises are for as long as 20 years. Residential solid waste
collection services may also be performed on a subscription basis, in which
individual households contract directly with the Company. The fees received for
subscription residential collection are based primarily on market factors,
frequency and type of service, the distance to the disposal facility and cost of
disposal. In general, subscription residential collection fees are paid
quarterly in advance by the residential customers receiving the service.
 
     In its commercial and industrial collection operations, the Company
supplies its customers with waste containers commonly known as "roll-off"
containers. The Company also rents compactors to large waste generators. Waste
collection services are provided to individual commercial, industrial and
construction facilities on a contractual basis with terms generally ranging from
a single pickup to one year. The Company also rents waste roll-off containers to
construction sites and provides hauling services. The Company collects the
roll-off containers or compacted waste and transports them either to a landfill,
where the waste is disposed of, or to a transfer station.
 
     The Company owns or operates 70 transfer stations. Waste is deposited at
these stations by the Company, other private haulers and municipal haulers for
compaction and transfer to trailers for transport to landfills, incinerators,
recycling facilities or other disposal sites.
 
     The Company also currently provides recycling services in certain markets
primarily to comply with local laws or obligations under its franchise
agreements. These services include the curbside collection of residential
recyclable waste and the provision of a variety of recycling services to
commercial and industrial customers.
 
     Disposal Services.  The Company owns or operates 48 solid waste landfills
with approximately 6,200 permitted acres and total available permitted disposal
capacity of approximately 1.2 billion in-place cubic yards as of December 31,
1998. See "ITEM 2. PROPERTIES." The in-place capacity of the Company's landfills
is subject to change based on engineering factors, requirements of regulatory
authorities and successful site expansions. Certain of the landfills accept
non-hazardous special waste, including utility ash, asbestos and contaminated
soils.
 
     Most of the Company's existing landfill sites have the potential for
expanded disposal capacity beyond the currently permitted acreage. The Company
monitors the availability of permitted disposal capacity at each of its
landfills and evaluates whether to pursue expansion at a given landfill based on
estimated future waste volumes and prices, remaining capacity and likelihood of
obtaining expansion. As of December 31, 1998, the Company believes that each of
its landfills has adequate permitted capacity. To satisfy future disposal
demand, the Company is currently seeking to expand permitted capacity at certain
of its landfills.
 
     Other Services.  The Company has materials recovery facilities and other
recycling operations, which are generally required to fulfill its obligations
under long-term municipal contracts for residential collection services. These
facilities primarily sort recyclable paper, aluminum, glass and other materials.
Most of these recyclable materials are internally collected by the Company's
residential collection operations. In certain areas, the Company receives
certain types of commercial and industrial solid waste that is sorted at its
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. The Company's
strategy, wherever possible, is to reduce its exposure to fluctuations in
recyclable commodity prices
 
                                        6

<PAGE>   9
 
by utilizing third parties' facilities, thereby minimizing its recycling
investment. Long-term contracts for the sale of recycling materials are also
used to mitigate the impact of commodity price fluctuations. The Company also
has composting operations at which yard waste is composted, packaged and sold as
mulch.
 
SALES AND MARKETING
 
     The Company seeks to provide quality services that will enable it to
maintain high levels of customer satisfaction. The Company derives its business
from a broad customer base which the Company believes will enable it to
experience stable growth. Marketing efforts focus on continuing and expanding
business with existing customers as well as attracting new customers.
 
     The Company has more than 350 sales and marketing employees. The Company's
sales and marketing strategy is to provide high-quality comprehensive solid
waste collection, recycling, transfer and disposal services to its customers at
competitive prices. The Company targets potential customers of all sizes, from
small quantity generators to large "Fortune 500" companies and municipalities.
 
     All marketing activity by the Company is local in nature. The Company
generally does not change the tradenames of the local businesses that it
acquires, and therefore it does not operate nationally under any one mark or
tradename. Rather, the Company relies on the goodwill associated with the
acquired companies' local tradenames as used in each geographic market in which
it operates.
 
CUSTOMERS
 
     The Company provides services to commercial, industrial, municipal and
residential customers. No one customer has individually accounted for more than
10.0% of the consolidated revenue of the Company in any of the last three years.
 
REGULATION
 
     The Company's facilities and operations are subject to a variety of
federal, state and local requirements which regulate health, safety, the
environment, zoning and land use. Operating and other permits are generally
required for landfills, certain waste collection vehicles, fuel storage tanks
and other facilities owned or operated by the Company, and these permits are
subject to revocation, modification and renewal. Federal, state and local
regulations vary, but generally govern wastewater or stormwater discharges, air
emissions, the treatment, storage, transportation and disposal of hazardous and
non-hazardous wastes and the remediation of contamination associated with the
release of hazardous substances. Such regulations provide governmental
authorities with strict powers of enforcement, which include the ability to
obtain injunctions and/or impose fines or penalties in the case of violations,
including criminal penalties. These regulations are administered by the U.S.
Environmental Protection Agency ("EPA") and various other federal, state and
local environmental, health and safety agencies and authorities, including the
Occupational Safety and Health Administration of the U.S. Department of Labor
("OSHA").
 
     The Company strives to conduct its operations in compliance with applicable
laws and regulations. However, in the existing climate of heightened
environmental concerns, the Company, from time to time, has been issued
citations or notices from governmental authorities which have resulted in the
need to expend funds for remedial work and related activities at various of the
Company's landfills and other facilities. The Company has established a reserve
which it believes, based on currently available information, will be adequate to
cover any potential regulatory costs. However, there can be no assurance that
actual costs will not exceed the Company's reserve.
 
     Federal Regulation.  The following summarizes the primary environmental and
safety-related federal statutes of the United States affecting the facilities
and operations of the Company:
 
          (1) The Solid Waste Disposal Act, as amended by RCRA ("SWDA").  SWDA
     and its implementing regulations establish a framework for regulating the
     handling, transportation, treatment, storage and disposal of hazardous and
     non-hazardous solid wastes, and require states to develop programs to
     ensure the safe disposal of solid wastes in sanitary landfills.
                                        7

<PAGE>   10
 
          Subtitle D of RCRA establishes a framework for regulating the disposal
     of municipal solid wastes. Regulations under Subtitle D currently include
     minimum comprehensive solid waste management criteria and guidelines,
     including location restrictions, facility design and operating criteria,
     closure and post-closure requirements, financial assurance standards,
     groundwater monitoring requirements and corrective action standards, many
     of which have not commonly been in effect or enforced in the past in
     connection with municipal solid waste landfills. Each state was required to
     submit a permit program designed to implement Subtitle D regulations to the
     EPA by April 9, 1993. These state permit programs may include landfill
     requirements which are more stringent than those of Subtitle D. Some states
     have not yet fully implemented permit programs pursuant to RCRA and
     Subtitle D. Once a state has an approved permit program it is required to
     review all existing landfill permits to ensure compliance with the new
     regulations.
 
          All of the Company's planned landfill expansions or new landfill
     development projects have been engineered to meet or exceed Subtitle D
     requirements. Operating and design criteria for existing operations have
     been modified to comply with these new regulations. Compliance with the
     Subtitle D regulations has resulted in increased costs and may in the
     future require substantial additional expenditures in addition to other
     costs normally associated with the Company's waste management activities.
 
          (2) The Comprehensive Environmental Response, Compensation, and
     Liability Act of 1980, as amended ("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 the
     site, parties who were owners or operators of the site at the time the
     hazardous substances were released, parties who transported hazardous
     substances to the site and parties who arranged for disposal at the 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. CERCLA liability is not
     dependent upon the existence or disposal of "hazardous wastes" but can also
     be based upon the existence of small quantities of more than 700
     "substances" characterized by the EPA as "hazardous," many of which may be
     found in common household waste.
 
          Among other things, 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 (or offer
     an opportunity to) persons potentially liable for the cleanup of the
     hazardous substances to do so. In addition, CERCLA requires the EPA to
     establish a National Priorities List of sites at which hazardous substances
     have been or are threatened to be released and which require investigation
     or cleanup.
 
          Liability under CERCLA is not dependent upon the intentional disposal
     of hazardous wastes. It can be founded upon the release or threatened
     release, even as a result of unintentional, non-negligent or lawful action,
     of thousands of hazardous substances, including very small quantities of
     such substances. Thus, even if the Company's landfills have never knowingly
     received hazardous wastes as such, it is possible that one or more
     hazardous substances may have come to be located or "released" at its
     landfills or at other properties which the Company may have owned or
     operated. The Company could thus 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 the Company's
     facilities before the Company acquired or operated them. The costs of a
     CERCLA cleanup can be very expensive. Given the difficulty of obtaining
     insurance for environmental impairment liability, such liability could have
     a material impact on the Company's business and financial condition. For a
     further discussion, see "-- Liability Insurance and Bonding."
 
          (3) The Federal Water Pollution Control Act of 1972 (the "Clean Water
     Act").  The Clean Water Act regulates the discharge of pollutants from a
     variety of sources, including solid waste disposal sites, into streams,
     rivers and other waters. Point source runoff from the Company's landfills
     and transfer
 
                                        8

<PAGE>   11
 
     stations that is discharged into surface waters must be covered by
     discharge permits that generally require the Company to conduct sampling
     and monitoring and, under certain circumstances, reduce the quantity of
     pollutants in those discharges. Storm water discharge regulations under the
     Clean Water Act require a permit for certain construction activities, which
     may affect the Company's operations. If a landfill or transfer station
     discharges wastewater through a sewage system to a publicly-owned treatment
     works ("POTW"), the facility must comply with discharge limits imposed by
     the POTW. In addition, states may adopt groundwater protection programs
     under the Clean Water Act or Safe Drinking Water Act that could affect
     solid waste landfills. Furthermore, development which alters or affects
     "wetlands" must generally be permitted prior to such development
     commencing, and certain mitigation requirements may be required by the
     permitting agencies.
 
          (4) The Clean Air Act.  The Clean Air Act imposes limitations on
     emissions from various sources, including landfills. On March 12, 1996, the
     EPA enacted rules that require large municipal solid waste landfills to
     install landfill gas monitoring systems. These EPA regulations apply to
     landfills that have been operating since November 8, 1987, and that can
     accommodate 2.5 million cubic meters or more of municipal solid waste. The
     regulations apply whether the landfill is active or closed. The date by
     which each affected landfill must have the required gas collection and
     control system is dependent upon the adoption of state regulations and the
     date the EPA approves the state program. Many state regulatory agencies
     currently require monitoring systems for the collection and control of
     landfill gas. Compliance with the new EPA regulations is not expected to
     have a material effect on the Company.
 
          (5) The Occupational Safety and Health Act of 1970 (the "OSH
     Act").  The OSH Act authorizes OSHA to promulgate occupational safety and
     health standards. Various of these standards, including standards for
     notices of hazardous chemicals and the handling of asbestos, apply to the
     Company's facilities and operations.
 
     State Regulation.  Each state in which the Company operates has its own
laws and regulations governing solid waste disposal, water and air pollution
and, in most cases, releases and cleanup of hazardous substances and liability
for such matters. States also have adopted regulations governing the design,
operation, maintenance and closure of landfills and transfer stations. The
Company's facilities and operations are likely to be subject to these types of
requirements. In addition, the Company's solid waste collection and landfill
operations may be affected by the trend in many states toward requiring the
development of waste reduction and recycling programs. For example, several
states have enacted laws that require counties or municipalities to adopt
comprehensive plans to reduce, through waste planning, composting, recycling or
other programs, the volume of solid waste deposited in landfills. Additionally,
laws and regulations restricting the disposal of certain wastes, including yard
waste, newspapers, beverage containers, unshredded tires, lead-acid batteries
and household appliances in solid waste landfills have been promulgated in
several states and are being considered in others. Legislative and regulatory
measures to mandate or encourage waste reduction at the source and waste
recycling also are under consideration by Congress and the EPA.
 
     In order to construct, expand and operate a landfill, one or more
construction or operating permits, as well as zoning approvals, must be
obtained. These are difficult and time-consuming to obtain, are often opposed by
neighboring landowners and citizens' groups, may be subject to periodic renewal
and are subject to modification and revocation by the issuing agency. In
connection with the Company's acquisition of existing landfills, it may be
necessary to expend considerable time, effort and money to bring the acquired
facilities into compliance with applicable requirements and to obtain the
permits and approvals necessary to increase their capacity.
 
     Many of the Company's facilities own and operate underground storage tanks
("USTs") which are generally used to store petroleum-based products. USTs are
generally subject to federal, state and local laws and regulations that mandate
periodic testing, upgrading, closure and removal of USTs and that, in the event
of leaks from USTs, require that polluted groundwater and soils be remediated.
The Company believes that all the Company's USTs currently meet federal
regulations. If USTs owned or operated by the Company leak, and such leakage
migrates onto the property of others, the Company could be liable for response
costs and other damages to third parties. Compliance with regulations related to
USTs is not expected to have a material adverse effect on the Company.
                                        9

<PAGE>   12
 
     Finally, with regard to its solid waste transportation operations, the
Company is subject to the jurisdiction of the Interstate Commerce Commission and
is regulated by the Federal Highway Administration, Office of Motor Carriers and
by regulatory agencies in each state. Various states have enacted, or are
considering enacting, laws and regulations that would restrict the interstate
transportation and processing of solid waste. In 1978, the United States Supreme
Court held similar laws and regulations unconstitutional; however, states have
attempted to distinguish proposed laws and regulations from the laws and
regulations involved in that ruling. In May 1994, the Supreme Court ruled that
state and local flow control laws and ordinances (which attempt to restrict
waste from leaving its place of generation) were an impermissible burden on
interstate commerce, and therefore, were unconstitutional. In response to these
Supreme Court rulings, Congress has considered passing legislation authorizing
states and local governments to restrict the free movement of solid waste in
interstate commerce. If federal legislation authorizing state and local
governments to restrict the free movement of solid waste in interstate commerce
is enacted, such legislation could adversely affect the Company's operations.
 
     The Company has a reserve for environmental and landfill costs, which
includes landfill site closure and post-closure costs. The Company periodically
reassesses such costs based on various methods and assumptions regarding
landfill airspace and the technical requirements of Subtitle D of RCRA and
adjusts its accruals accordingly. Based on current information and regulatory
requirements, the Company believes that its reserve for such environmental
expenditures is adequate. However, environmental laws may change, and there can
be no assurance that the Company's reserves will be adequate to cover
requirements under existing or new environmental regulations, future changes or
interpretations of existing regulations or the identification of adverse
environmental conditions previously unknown to the Company. See "ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Environmental and Landfill Matters" and "-- Risk Factors -- Risks
relating to environmental regulation."
 
COMPETITION
 
     The Company operates in a highly competitive industry, which is changing as
a result of rapid consolidation. Entry into the Company's business and the
ability to operate profitably in such industry requires substantial amounts of
capital and managerial experience.
 
     Competition in the non-hazardous solid waste industry comes from a number
of large, national publicly-owned companies, including Waste Management,
Browning-Ferris Industries, Inc. and Allied Waste Industries, Inc., numerous
regional publicly- and privately-owned solid waste companies, and from thousands
of small privately-owned companies in their respective markets. Some of the
Company's publicly-owned competitors also are engaging in aggressive acquisition
strategies. Certain of the Company's competitors have significantly larger
operations, and may have significantly greater financial resources, than the
Company. In addition to national and regional firms and numerous local
companies, the Company competes with those municipalities that maintain waste
collection or disposal operations. These municipalities may have financial
advantages due to the availability of tax revenues and tax-exempt financing.
 
     The Company competes for collection accounts primarily on the basis of
price and the quality of its services. From time to time, competitors may reduce
the price of their services in an effort to expand market share or to win a
competitively bid municipal contract.
 
     In each market in which it owns or operates a landfill, the Company
competes for landfill business on the basis of disposal costs, geographical
location and quality of operations. The Company's ability to obtain landfill
business may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste. There also has been an
increasing trend at the state and local levels to mandate waste reduction at the
source and to prohibit the disposal of certain types of wastes, such as yard
wastes, at landfills. This may result in the volume of waste going to landfills
being reduced in certain areas, which may affect the Company's ability to
operate its landfills at their full capacity and/or affect the prices that can
be charged for landfill disposal services. In addition, most of the states in
which the Company operates landfills
 
                                       10

<PAGE>   13
 
have adopted plans or requirements that set goals for specified percentages of
certain solid waste items to be recycled.
 
LIABILITY INSURANCE AND BONDING
 
     The nature of the Company's business exposes it to the risk of liabilities
arising out of its 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 the Company 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 the Company's operations; or claims alleging
negligence or professional errors and omissions in the planning or performance
of work. The Company 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. The majority
of the Company's 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, there is no assurance that the
limits of such environmental liability insurance would be adequate in the event
of a major loss, nor is there assurance that the Company would continue to carry
environmental liability insurance should market conditions in the insurance
industry make such coverage costs prohibitive.
 
     The Company carries general liability, vehicle 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. The Company also carries property insurance. Although
the Company strives to operate safely and prudently and has, subject to certain
limitations and exclusions, substantial liability insurance, no assurance can be
given that the Company will not be exposed to uninsured liabilities which could
have a material adverse effect on its financial condition.
 
     In the normal course of business, the Company may be required to post a
performance bond or a bank letter of credit in connection with municipal
residential collection contracts, the operation, closure or post-closure of
landfills, certain remediation contracts, certain environmental permits and
certain business licenses and permits. Bonds issued by surety companies operate
as a financial guarantee of the Company's performance. To date, the Company has
satisfied financial responsibility requirements by making cash deposits,
obtaining bank letters of credit or by obtaining surety bonds.
 
EMPLOYEES
 
     As of December 31, 1998, the Company employed approximately 10,000 full
time employees, approximately 2,400 of whom were covered by collective
bargaining agreements. The management of the Company believes that it has good
relations with its employees.
 
RISK FACTORS
 
     This Risk Factors section of our Annual Report on Form 10-K includes
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, including, in particular, certain statements
about our plans, strategies and prospects. Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward-looking
statements are reasonable, we cannot assure you that such plans, intentions or
expectations will be achieved. Important factors that could cause our actual
results of differ materially from our forward-looking statements are set forth
in this Risk Factors section. All forward-looking statements attributable to us
or any persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth below. Unless the context requires
otherwise, all references to the "Company," "we," "us,' or "our" include
Republic Services, Inc. and its subsidiaries.
 
                                       11

<PAGE>   14
 
RISK THAT REPUBLIC INDUSTRIES WILL FAIL TO COMPLETE ITS DISTRIBUTION OF REPUBLIC
SERVICES COMMON STOCK OR WILL FAIL TO OBTAIN FAVORABLE LETTER RULING FROM THE
IRS.
 
     Assuming that certain conditions are met, Republic Industries intends to
distribute to its stockholders in 1999 all of the shares of our common stock
which it then owns. In this Annual Report, we will refer to Republic Industries'
distribution of our common stock as the "Distribution." One condition to the
Distribution is that Republic Industries must obtain a private letter ruling
from the Internal Revenue Service stating, to Republic Industries' satisfaction,
that the Distribution of its shares of our common stock will not be taxable to
Republic Industries or to its stockholders for federal income tax purposes.
Republic Industries has applied for this letter ruling from the IRS and intends
promptly to take all necessary steps to complete a tax-free distribution within
three months after all of the conditions to the Distribution, including
obtaining the letter ruling, have been met or waived. Republic Industries does
not plan to distribute its shares of our common stock to its stockholders
without a satisfactory letter ruling from the IRS.
 
     Due to recent changes in the tax laws, we cannot assure you that Republic
Industries will receive a satisfactory letter ruling within the time frame it
contemplates, or at all. Republic Industries filed its request for the letter
ruling with the IRS in July 1998, and in recent weeks has had several meetings
with the IRS to attempt to resolve certain issues relating to the request.
Consequently, we cannot assure you that Republic Industries will complete the
Distribution of its shares of our common stock within the time frame it
contemplates, or at all.
 
     Republic Industries' Distribution of its shares of our common stock also is
subject to the condition that no events or developments occur prior to the
Distribution that, in the sole judgment of the Board of Directors of Republic
Industries, would or could result in the Distribution having a material adverse
effect on Republic Industries or its stockholders. In addition, prior to the
Distribution, Republic Industries must obtain certain consents from governmental
authorities and other third parties.
 
     We cannot assure you that any of the conditions just described, or any
other conditions necessary to the Distribution, will be satisfied. If the
Distribution does not occur in the time frame contemplated, or does not occur at
all, then the market price of the Class A common stock could be materially
adversely affected.
 
RISKS RELATING TO REPUBLIC INDUSTRIES' VOTING CONTROL OF REPUBLIC SERVICES.
 
     Republic Industries currently owns approximately 63.9% of our outstanding
shares of common stock, which represents approximately 88.7% of the combined
voting power of the outstanding shares of our Class A and Class B common stock.
As a result of its voting power, Republic Industries can determine virtually all
matters requiring a vote of the stockholders, including the election of all of
our directors. Our Board of Directors currently consists of five members, two of
whom also currently serve as members of Republic Industries' Board of Directors.
Republic Industries intends to maintain ownership of at least 80% of the
combined voting power of the outstanding shares of our common stock until the
Distribution of its shares of our common stock can be completed. If Republic
Industries does not complete the Distribution, it may elect to maintain its
controlling interest in our common stock indefinitely. As long as Republic
Industries maintains a controlling interest in our common stock, the market
price of our Class A common stock may be adversely affected by events which are
unrelated to our business or operations.
 
RISKS RESULTING FROM THE DISPARATE VOTING RIGHTS OF THE CLASS A AND CLASS B
COMMON STOCK.
 
     The holders of Class A common stock have different voting rights from the
holders of Class B common stock. On all matters submitted to a vote of the
stockholders, holders of Class A common stock are entitled to one vote per share
while holders of Class B common stock are entitled to five votes per share. As a
result of this disparity in voting rights, potential investors and potential
future purchasers of our Class A common stock may not be willing to pay as much
for shares of Class A common stock and the shares of Class A common stock may be
less easily sold for cash.
 
                                       12

<PAGE>   15
 
RISKS RELATING TO AGREEMENTS WHICH WERE NOT SUBJECT TO ARM'S LENGTH
NEGOTIATIONS.
 
     We entered into certain agreements with Republic Industries while we were
its wholly owned subsidiary. None of these agreements were the result of
arm's-length negotiations. As a result, we cannot assure you that these
agreements were made on terms as favorable as could have been obtained from
parties with whom we were not related.
 
RISKS RELATING TO CONFLICTS OF INTEREST OF CERTAIN EXECUTIVE OFFICERS AND
DIRECTORS.
 
     Two of our executive officers also serve as executive officers of Republic
Industries. Two members of our Board of Directors also serve as members of
Republic Industries' Board of Directors. Some of our executive officers and
directors hold shares of Republic Industries common stock or hold options or
warrants to acquire shares of Republic Industries' common stock. As a result of
these relationships, there is a potential for conflicts of interest with respect
to decisions which may arise in the ordinary course of business. Conflicts which
concern whether or not Republic Industries will complete the Distribution of its
shares of our common stock may also arise. We have not established formal
procedures to resolve any conflicts that arise. Consequently, we intend to
resolve any conflicts on a case-by-case basis.
 
RISKS RELATING TO OUR LIMITED ABILITY TO ISSUE COMMON STOCK IN CONNECTION WITH
REPUBLIC INDUSTRIES' DISTRIBUTION OF ITS SHARES OF OUR COMMON STOCK.
 
     In order for Republic Industries' Distribution of its shares of our common
stock to be tax-free to it and its stockholders, among other requirements,
Republic Industries must distribute shares of our common stock representing at
least 80% of the total combined voting power of all classes of our voting stock.
If Republic Industries cannot meet this percentage requirement when it
distributes its shares of our common stock to its stockholders, then the
Distribution will not be tax-free and will not occur.
 
     In order to allow Republic Industries to meet the percentage requirements
of a tax-free Distribution, we have agreed not to issue additional shares of our
capital stock without the consent of Republic Industries if the issuance of
additional shares of our capital stock would, or could, prevent the Distribution
from being tax-free. In addition, in connection with the Distribution proposed
by Republic Industries, we may be required to refrain, prior to and after
completion of the Distribution, from issuing additional capital stock in a
single transaction or series of transactions which, when added to the shares of
our common stock which we issued in our initial public offering and any shares
of our common stock which may be sold by Republic Industries prior to the
Distribution, could result in a 50% or greater change in the vote or value of
our outstanding capital stock.
 
     Meeting the requirements of a tax-free Distribution may make it difficult
for us to raise cash by issuing equity securities, including shares of our
common stock. Meeting these requirements may also make it difficult for us to
complete acquisitions of businesses by issuing equity securities, including
shares of our common stock, to pay for the acquisition.
 
RISKS RELATING TO OUR OBLIGATION TO INDEMNIFY REPUBLIC INDUSTRIES FROM CERTAIN
TAX LIABILITIES ASSOCIATED WITH THE DISTRIBUTION.
 
     We will indemnify Republic Industries for any tax liability it may incur as
a result of actions by us after the Distribution which cause the Distribution to
lose its tax-free status. Any indemnification which we are required to provide
to Republic Industries as a result of tax liability related to the Distribution
would have a material adverse effect on our business, financial condition and
results of operations.
 
RISKS RELATING TO OUR FUTURE CAPITAL REQUIREMENTS AND THE ABSENCE OF FUNDING
FROM REPUBLIC INDUSTRIES.
 
     Our working capital requirements and cash flow from operating activities
can vary from quarter to quarter, depending on the timing of capital
expenditures, acquisitions and other factors. Prior to our initial public
offering, Republic Industries satisfied our working capital needs pursuant to
its corporate-wide cash management policies. Following our initial public
offering, Republic Industries has no longer been required to
 
                                       13

<PAGE>   16
 
provide funds to finance our operations or acquisitions. As a result, we have
incurred and expect to continue to incur both long-term debt and short-term debt
having interest rates and/or repayment terms less favorable than those which
were historically enjoyed with Republic Industries. Additionally, as long as we
remain a subsidiary of Republic Industries, certain restrictive covenants in
Republic Industries' bank credit facilities could adversely affect our ability
to borrow money.
 
     Republic Industries amended its credit facilities to permit us to incur
unsecured indebtedness in excess of $1.0 billion. We have a $1.0 billion
unsecured revolving credit facility with a group of banks. The credit facility
consists of a $500.0 million facility expiring July 1999 and a $500.0 million
facility expiring July 2003. Borrowings under our credit facility bear interest
at LIBOR based rates. When the existing credit facility expires, we cannot
assure you that we will be able to refinance borrowings under that facility on
terms that are as favorable. If we are unable to obtain additional needed
financing on acceptable terms, we may need to reduce the scope of our
acquisition growth strategy, which could have a material adverse effect on our
growth prospects and the market price of our common stock.
 
RISKS RELATING TO THE COMPETITIVE ENVIRONMENT IN WHICH WE OPERATE.
 
     We operate in a highly competitive business environment. Some of our
competitors have significantly larger operations and may have significantly
greater financial resources than we do. In addition, the solid waste industry is
constantly changing as a result of rapid consolidation which may create
additional competitive pressures in our business environment.
 
     We also compete with municipalities that maintain their own waste
collection or disposal operations. These municipalities may have a financial
advantage over us due to the availability of tax revenue and tax-exempt
financing.
 
     In each market in which we own or operate a landfill, we compete for solid
waste volume on the basis of disposal or "tipping" fees, geographical location
and quality of operations. Our ability to obtain solid waste volume for our
landfills may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste.
 
     We compete for collection accounts primarily on the basis of price and the
quality of services. From time to time our competitors may reduce the price of
their services in an effort to expand their market share or to win a
competitively bid municipal contract.
 
     As a result, we may have difficulty competing effectively from time to
time.
 
RISKS RELATING TO OUR DEPENDENCE ON ACQUISITIONS FOR GROWTH.
 
     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 integrate the acquired companies' operations into our business
and then increase the market share of these acquired companies. The
consolidation of our operations with the operations of acquired companies,
including the integration of systems, procedures, personnel and facilities, the
relocation of staff, and the achievement of anticipated cost savings, economies
of scale and other business efficiencies, presents significant challenges to our
management, particularly if several acquisitions occur at the same time. We
cannot assure you that we will be able to identify desirable acquisition
candidates, that we will be able to acquire any of the identified candidates,
that we will effectively integrate companies which are acquired and fully
realize the expected cost savings, economies of scale or business efficiencies,
or that any acquisitions will be profitable or accretive to our earnings.
 
     Additional factors may negatively impact our acquisition growth strategy.
Our acquisition strategy requires the expenditure of significant amounts of
capital. The intense competition among our competitors pursuing the same
acquisition candidates may further increase such capital requirements. In
addition, our inability to account for acquisitions under the pooling of
interests method of accounting for a period ending two years following the
Distribution may limit our ability to complete certain transactions.
Furthermore, in order not to adversely impact the tax-free status of the
Distribution, following the Distribution, we may need to refrain from issuing
additional shares of capital stock in a single transaction or series of
transactions related
                                       14

<PAGE>   17
 
to the Distribution which, when combined with the Class A common stock issued in
the initial public offering along with any shares of common stock sold by
Republic Industries prior to the Distribution, could cause a 50% or greater
change in the vote or value of our outstanding capital stock. If any of the
aforementioned factors force us to alter our growth strategy, our financial
condition, results of operations and growth prospects could be adversely
affected.
 
RISKS RELATING TO UNDISCLOSED LIABILITIES OF BUSINESSES WE ACQUIRE.
 
     In pursuing our acquisition strategy our investigations of the acquisition
candidates may fail to discover certain undisclosed liabilities of the
acquisition candidates. If we acquire a candidate having undisclosed
liabilities, as a successor owner we may be responsible for such undisclosed
liabilities. We typically try to minimize our exposure to such liabilities by
obtaining indemnification from each seller of the acquired companies, and by
deferring payment of a portion of the purchase price as a security for the
indemnification. However, we cannot assure you that such indemnifications will
be obtainable, enforceable, collectible or sufficient in amount, scope or
duration to fully offset any undisclosed liabilities arising from our
acquisitions.
 
RISKS RELATING TO MANAGEMENT OF OUR GROWTH.
 
     Our growth strategy places significant demands on our financial,
operational and management resources. In order to continue our growth and
operate independently of Republic Industries, we will need to add administrative
and other personnel, and make additional investments in operations and systems.
We cannot assure you that we will be able to find and train qualified personnel,
or do so on a timely basis, or expand our operations and systems to the extent,
and in the time, required.
 
RISKS RELATING TO OUR DEPENDENCE ON KEY PERSONNEL.
 
     Our future success depends on the continued contributions of certain key
executive officers. Most of our executive officers do not have employment
agreements and we do not maintain key man life insurance policies on any of our
executive officers. In addition, as a result of our separation from Republic
Industries we will need to employ additional personnel for certain functions
which were previously performed by employees of Republic Industries. The loss of
the services of key employees and officers, whether such loss is through
resignation or other causes, or our inability to attract additional qualified
personnel, could have a material adverse effect on our financial condition,
results of operations and growth prospects.
 
RISKS RELATING TO ENVIRONMENTAL REGULATION.
 
     We may need to spend considerable time, effort and capital to keep our
facilities in compliance with federal, state and local requirements regulating
health, safety, environment, zoning and land use. In addition, certain of our
waste operations that cross state boundaries could be adversely affected if the
federal government, or the state or locality in which these waste operations are
located, imposes discriminatory fees on, or otherwise limits or prohibits, the
transportation or disposal of solid waste. If environmental laws become more
stringent, our environmental capital expenditures and costs for environmental
compliance may increase in the future. In addition, due to the possibility of
unanticipated events or regulatory developments, the amounts and timing of
future environmental expenditures could vary substantially from those we
currently anticipate. Because of the nature of our operations, we have in the
past and may in the future be named as a potentially responsible party in
connection with the investigation or remediation of environmental conditions. We
cannot assure you that the resolution of these investigations will not have a
material adverse effect on our financial condition or results of operations.
 
     Citizens' groups have become increasingly active in challenging the grant
of renewal permits and licenses for landfills and other waste facilities.
Responding to the challenges presented by these citizens' groups has further
increased our costs and extended the time associated with establishing new
facilities and expanding existing facilities.
 
     We currently accrue for landfill costs, which include expected landfill
site closure and post-closure costs, based on consumption of landfill airspace.
At December 31, 1998, assuming that all available landfill capacity is used, we
expect to expense approximately $370.5 million of landfill costs over the
remaining lives of these facilities. We cannot assure you that our reserves for
landfill and environmental costs will be adequate to cover
 
                                       15

<PAGE>   18
 
the requirements of existing environmental regulations, future changes or
interpretations of existing regulations or the identification of adverse
environmental conditions previously unknown to us.
 
RISKS RELATING TO LEGAL PROCEEDINGS.
 
     We are involved in various administrative and legal proceedings in the
ordinary course of business. We cannot give you any assurance with respect to
the outcome of these proceedings or the effect which the outcomes may have on
our insurance coverages or otherwise, or that our reserves are adequate to meet
the requirements of any adverse outcomes. A significant judgment against us, the
loss of significant permits or licenses, or the imposition of a significant fine
could have a material adverse effect on our financial condition or results of
operations.
 
     Citizens' groups have become increasingly active in challenging the grant
or renewal of permits and licenses for landfills and other waste facilities.
Responding to the challenges presented by those citizens' groups has further
increased our costs and extended the time associated with establishing new
facilities and expanding existing facilities.
 
     Except for routine litigation incidental to our business, presently there
are no pending material legal proceedings to which we are a party or to which
any of our property is subject.
 
RISKS RELATING TO THE YEAR 2000.
 
     We use computer software and related technologies throughout our business
that are likely to be affected by the date change in the year 2000. We may not
discover and remediate all potential problems with our systems in a timely
manner. In addition, computer software and related technologies used by our
customers, service providers, vendors and suppliers are also likely to be
affected by the year 2000 date change. Failure of any of these parties to
properly process dates for the year 2000 and thereafter could result in
unanticipated expenses and delays to us, including delays in the payment by our
customers for services provided and delays in our ability to conduct normal
banking operations. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Year 2000."
 
RISKS RELATING TO THE SEASONALITY OF OUR BUSINESS AND OPERATIONS.
 
     Our operations can be adversely affected by periods of inclement weather
which could delay the collection and disposal of waste, reduce the volume of
waste generated or delay the construction or expansion of our landfill sites and
other facilities.
 
RISKS RELATING TO SHARES ELIGIBLE FOR FUTURE SALE.
 
     Subject to applicable law, Republic Industries may sell any and all of the
shares of our common stock that it owns. The Separation and Distribution
Agreement gives Republic Industries the right in certain circumstances to
require us to use our best efforts to register for resale shares of our common
stock held by Republic Industries and its wholly owned subsidiaries. In
addition, prior to the Distribution, Republic Industries may acquire additional
solid waste companies and contribute them to us in exchange for additional
shares of our common stock. Republic Industries may also make additional
investments in our capital securities, or otherwise, prior to the Distribution.
 
     The planned Distribution would involve the distribution of an aggregate of
95,688,083 shares of Class B common stock and 16,474,417 shares of Class A
common stock to Republic Industries' stockholders in 1999 (assuming that no
additional shares of common stock are disposed of or acquired by Republic
Industries between the date hereof and the date of the Distribution). Shares of
Class B common stock may be converted into shares of Class A common stock in
certain circumstances. Substantially all of the shares of common stock to be
distributed to Republic Industries' stockholders in the Distribution will be
eligible for immediate resale in the public market. We cannot predict whether
substantial amounts of shares of our common stock will be sold in the open
market in anticipation of, or following, the Distribution. Any sales of
substantial amounts of shares of our common stock in the public market, or the
perception that such sales might occur, could materially adversely affect the
market price of the Class A common stock.
 
     Any issuance by us of any additional shares of our capital stock is subject
to our agreement with Republic Industries not to issue any shares of capital
stock that would reduce Republic Industries' ownership below the required
distribution percentage described earlier in this Risk Factors section. Subject
to these contractual
                                       16

<PAGE>   19
 
limitations with Republic Industries, we may file registration statements
covering the issuance and/or resale of shares of Class A common stock which may
be issued in potential future acquisitions by us of non-hazardous solid waste
businesses.
 
WE DO NOT PRESENTLY ANTICIPATE PAYING CASH DIVIDENDS ON OUR COMMON STOCK.
 
     We intend to retain all earnings for the foreseeable future for use in the
operation and expansion of our business. In addition, our credit facility
contains restrictions on our ability to declare and pay dividends. Consequently,
we do not anticipate paying any cash dividends on our common stock to our
stockholders for the foreseeable future.
 
                                       17

<PAGE>   20
 

I
TEM 2.  PROPERTIES
 
     The Company's corporate headquarters are located in Ft. Lauderdale, Florida
in premises leased from a subsidiary of Republic Industries. As of December 31,
1998, the Company owned approximately 4,900 collection vehicles. Certain of the
property and equipment of the Company are subject to liens securing payment of
portions of the Company's indebtedness. The Company also leases certain of its
offices and equipment. The Company believes that all of its facilities are
sufficient for its current needs.
 
     The following table provides certain information regarding the 48 landfills
owned or operated by the Company as of December 31, 1998.
 

<TABLE>
<CAPTION>
                                                                                                      UNUSED
                                                                                TOTAL    PERMITTED   PERMITTED
              LANDFILL NAME                            LOCATION                ACREAGE    ACREAGE     ACREAGE
              -------------                            --------                -------   ---------   ---------
  <S>                                    <C>                                   <C>       <C>         <C>
  Anderson(1)..........................  Anderson, California                   1,200        150         101
  Apex.................................  Clark County, Nevada                   2,340      1,233       1,153
  Brazoria.............................  Clute, Texas                           1,000        246         176
  Broadhurst Landfill(2)...............  Jesup, Georgia                           900         90          64
  C&T Regional.........................  Linn, Texas                              200         77          19
  Capital Waste & Recycling
    Disposal...........................  Rotterdam, New York                       33          5          --
  Charter Waste........................  Abilene, Texas                           396        300         283
  Cleveland Container..................  Shelby, North Carolina                   174         77          40
  CWI Florida..........................  Winter Haven, Florida                     80         58          14
  Dozit Landfill.......................  Morganfield, Kentucky                    232         47          33
  East Carolina Landfill...............  Aulander, North Carolina                 729        108          71
  Epperson Landfill....................  Williamstown, Kentucky                   861        100          58
  Foothills Landfill(2)................  Lenior, North Carolina                   231         78          72
  Forest Lawn..........................  Three Oaks, Michigan                     387        126          73
  Front Range..........................  Denver, Colorado                         602        195         162
  Green Ridge..........................  Scottdale, Pennsylvania                  580         87          54
  Green Valley Landfill................  Ashland, Kentucky                        263         37          --
  Kestral Hawk.........................  Racine, Wisconsin                        210        125          37
  Laughlin(2)..........................  Laughlin, Nevada                          40         40          --
  Los Mangos...........................  Alajuela, Costa Rica                      41         24           8
  Mallard Ridge........................  Delavan, Wisconsin                       659         40          14
  National Serv-All....................  Fort Wayne, Indiana                      265        204          41
  Nine Mile Road.......................  St. Augustine, Florida                   154         28           9
  North County.........................  Houston, Texas                            46         40          20
  Northwest Tennessee..................  Union City, Tennessee                    600        120          99
  Oak Grove............................  Winder, Georgia                          301         60          32
  Ohio County Balefill(2)..............  Beaver Dam, Kentucky                     908        179         143
  Pepperhill...........................  North Charleston, South Carolina          37         22          13
  Pine Ridge...........................  Griffin, Georgia                         850        101          81
  Pinellas(2)..........................  St. Petersburg, Florida                  750        478         200
  Presidio(2)..........................  Presidio, Texas                           10         10           6
  Republic/Alpine(2)...................  Alpine, Texas                             80         74          63
  Republic/CSC.........................  Avalon, Texas                            298        205         133
  Republic/Imperial....................  Imperial, California                     250         73          37
  Republic/Maloy.......................  Campbell, Texas                          388        195         130
  Safety Lights........................  Memphis, Tennessee                        49         21           6
  San Angelo(2)........................  San Angelo, Texas                        257        232         109
  Savannah Regional....................  Savannah, Georgia                        132         59          52
  Southern Illinois Regional...........  DeSoto, Illinois                         249        113          47
  Springfield Environmental............  Mt. Vernon, Indiana                       55         25          --
  Swiftcreek Landfill..................  Macon, Georgia                           792         81          33
  Tay-Ban..............................  Birch Run, Michigan                       90         25           6
  Tri-K Landfill.......................  Stanford, Kentucky                       572         64          49
  United Refuse........................  Fort Wayne, Indiana                      305         77          16
  Upper Piedmont Environmental.........  Roxboro, North Carolina                  614         70          54
  Uwharrie Landfill(2).................  Mt. Gilead, North Carolina               905         90          31
  Victory Environmental................  Terre Haute, Indiana                     461        260         138
  Wabash Valley........................  Wabash, Indiana                          284         69          12
                                                                               ------      -----       -----
  Total................................                                        20,860      6,218       3,992
                                                                               ======      =====       =====
</TABLE>

 
- ---------------
 
(1) The Company has entered into a contract to sell this landfill to Waste
    Management.
(2) Operated but not owned by the Company.
 
                                       18

<PAGE>   21
 

ITEM 3.  LEGAL AND ADMINISTRATIVE PROCEEDINGS
 
     The Company generally is and will continue to be involved in various
administrative and legal proceedings in the ordinary course of business. No
assurance can be given with respect to the outcome of these proceedings or the
effect such outcomes may have on the Company, or that the Company's insurance
coverages or reserves with respect thereto are adequate. A significant judgment
against the Company, the loss of significant permits or licenses, or the
imposition of a significant fine could have a material adverse effect on the
Company's financial condition, results of operations and prospects.
 
     Except for routine litigation incidental to the business of the Company,
there are no pending material legal proceedings to which the Company is a party
or to which any of its property is subject. The Company believes that the
outcome of the proceedings to which it is currently a party will not have a
material adverse effect upon its financial condition, results of operations or
prospects. However, unfavorable resolution of any such proceedings could affect
the consolidated results of operations or cash flows for the quarterly period in
which they are resolved.
 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to the stockholders of the Company during the
fourth quarter of 1998.
 
                                       19

<PAGE>   22
 

                                    PART II
 

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS
 
MARKET INFORMATION, HOLDERS AND DIVIDENDS
 
     The Class A Common Stock began trading on the New York Stock Exchange on
July 1, 1998. There is no market for the Class B Common Stock.
 
     The following table sets forth the range of the high and low sales prices
of the Class A Common Stock for the periods indicated:
 

<TABLE>
<CAPTION>
1998                                                          HIGH      LOW
- ----                                                          ----      ----
<S>                                                           <C>       <C>       <C>
Third Quarter...........................................      $ 27 7/16 $ 13 3/8
Fourth Quarter..........................................        24 9/16   14
</TABLE>

 
     On January 27, 1999, the last reported sales price of the Class A Common
Stock was $20 3/4.
 
     There were approximately 37 record holders of the Class A Common Stock at
January 19, 1999. The only record holder of the Class B Common Stock is Republic
Industries.
 
     The Company does not intend to pay cash dividends on the Common Stock for
the foreseeable future because it intends to retain all earnings for use in the
operation and expansion of the Company's business. Furthermore, the Company's
ability to declare or pay dividends is limited by the terms of the credit
facility which contains covenants that restrict the payment of cash dividends.
Holders of Class A Common Stock and Class B Common Stock have identical rights
as to cash dividends, which if declared would be payable on a pro rata basis to
all holders of Common Stock.
 
                                       20

<PAGE>   23
 

ITEM 6.  SELECTED FINANCIAL DATA
 
     The following Selected Financial Data should be read in conjunction with
the Company's Consolidated Financial Statements and notes thereto as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998 and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Form 10-K. The selected
statement of operations data of the Company for the full fiscal year 1994, and
the selected balance sheet data at December 31, 1995 and 1994 presented below
were derived from the unaudited consolidated financial statements of the
Company, which in the opinion of management reflect all adjustments, consisting
of only normal recurring adjustments, necessary for a fair presentation of such
data. See Notes 1, 3, 6 and 9 of Notes to Consolidated Financial Statements for
a discussion of basis of presentation, business combinations, stockholders'
equity and restructuring and other charges and their effect on comparability of
year-to-year data.
 

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                    -------------------------------------------------------------------
                                                       1998          1997          1996          1995          1994
                                                    -----------   -----------   -----------   -----------   -----------
                                                                                                            (UNAUDITED)
                                                                   (IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                                                 <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Revenue...........................................   $1,369.1      $1,127.7      $  953.3      $  805.0      $  610.1
Expenses:
  Cost of operations..............................      842.7         723.0         628.3         507.1         380.8
  Depreciation, amortization and depletion........      106.3          86.1          75.3          63.0          53.2
  Selling, general and administrative.............      135.8         117.3         135.3         137.7         115.0
  Restructuring and other charges.................         --            --           8.8           3.3            --
                                                     --------      --------      --------      --------      --------
Operating income..................................      284.3         201.3         105.6          93.9          61.1
Interest expense..................................      (44.7)        (25.9)        (29.7)        (19.1)        (13.2)
Interest income...................................        1.5           4.9          11.7           4.4           1.5
Other income (expense), net.......................        (.9)          1.8           2.2           1.8          (5.5)
                                                     --------      --------      --------      --------      --------
Income from continuing operations before income
  taxes...........................................      240.2         182.1          89.8          81.0          43.9
Provision for income taxes........................       86.5          65.9          38.0          31.6          17.0
                                                     --------      --------      --------      --------      --------
Income from continuing operations.................      153.7         116.2          51.8          49.4          26.9
Loss from discontinued operations.................         --            --            --         (24.8)         (5.4)
                                                     --------      --------      --------      --------      --------
Net income........................................   $  153.7      $  116.2      $   51.8      $   24.6      $   21.5
                                                     ========      ========      ========      ========      ========
Basic and diluted earnings per share(a)...........   $   1.13      $   1.21      $    .54      $    .26      $    .22
                                                     ========      ========      ========      ========      ========
Weighted average common and common equivalent
  shares outstanding(a)...........................      135.6          95.7          95.7          95.7          95.7
                                                     ========      ========      ========      ========      ========
Pro forma basic and diluted earnings per
  share(b)........................................   $   1.01      $    .74
                                                     ========      ========
Pro forma weighted average common and common
  equivalent shares outstanding(b)................      175.4         175.4
                                                     ========      ========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                    -------------------------------------------------------------------
                                                       1998          1997          1996          1995          1994
                                                    -----------   -----------   -----------   -----------   -----------
                                                                                                     (UNAUDITED)
                                                                               (IN MILLIONS)
<S>                                                 <C>           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents.........................   $  556.6      $     --      $   24.2      $   36.1      $   39.2
Total assets......................................    2,812.1       1,348.0       1,090.3         838.9         681.1
Amounts due to Republic Industries................         --         266.1         254.9         125.0          27.4
Total debt........................................    1,057.1          75.1         142.7         160.1         195.2
Total stockholders' equity........................    1,299.1         750.8         494.5         372.2         272.4
</TABLE>

 
- ---------------
 
(a) Prior to the Initial Public Offering on July 1, 1998, the Company had only
    100 shares of common stock outstanding, all of which were owned by Republic
    Industries. Historical share and per share data have been retroactively
    adjusted for the recapitalization of the Company's 100 shares of common
    stock into 95.7 million shares of Class B Common Stock in July 1998.
(b) Pro forma basic and diluted earnings per share assume the Initial Public
    Offering and the repayment in full of the amounts due to Republic Industries
    occurred as of the beginning of each period presented.
 
                                       21

<PAGE>   24
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included elsewhere herein.
All references to historical share and per share data of the Company's Common
Stock have been retroactively adjusted for the recapitalization of the Company's
100 shares of common stock into 95,688,083 shares of Class B Common Stock in
July 1998.
 
OVERVIEW
 
     In May 1998, Republic Industries announced its intention to separate the
Company from Republic Industries (the "Separation"). Republic Industries also
announced its intention to distribute its remaining shares of Common Stock in
the Company as of the distribution date to Republic Industries' stockholders in
1999, subject to certain conditions and consents (the "Distribution"). The
Company and Republic Industries have entered into certain agreements providing
for the Separation and governing various interim and ongoing relationships
between the companies. The Distribution is conditioned, in part, on Republic
Industries obtaining a private letter ruling from the IRS to the effect that,
among other things, the Distribution will qualify as a tax-free distribution for
federal income tax purposes under Section 355 of the Code, in form and substance
satisfactory to Republic Industries.
 
     In July 1998, the Company completed the Initial Public Offering resulting
in net proceeds of approximately $1.4 billion. In addition, in July 1998 the
Company repaid in full all remaining amounts due to Republic Industries through
the issuance of shares of Class A Common Stock and with the net proceeds from
the Initial Public Offering. Following the Initial Public Offering and the
repayment of amounts due to Republic Industries, Republic Industries owned
approximately 63.9% of the outstanding shares of Class A and Class B Common
Stock which represents approximately 88.7% of the combined voting power of all
of the outstanding shares of the Class A and Class B Common Stock. Following the
recapitalization of the Company's Common Stock, repayment of amounts due to
Republic Industries and the Initial Public Offering, the Company had the
following shares of Common Stock outstanding (in millions):
 

<TABLE>
<CAPTION>
                                                              CLASS A   CLASS B   TOTAL
                                                              -------   -------   -----
<S>                                                           <C>       <C>       <C>
Recapitalization of Company's Common Stock..................     --      95.7      95.7
Repayment of amounts due to Republic Industries.............   16.5        --      16.5
Initial Public Offering.....................................   63.2        --      63.2
                                                               ----      ----     -----
                                                               79.7      95.7     175.4
                                                               ====      ====     =====
</TABLE>

 
     Prior to the Initial Public Offering, the Company had been a wholly owned
subsidiary of Republic Industries. As a wholly owned subsidiary, the Company
received services provided by Republic Industries, including accounting,
auditing, cash management, corporate communications, corporate development,
financial and treasury, human resources and benefit plan administration,
insurance and risk management, legal, purchasing and tax services. Republic
Industries also provided the Company with the services of a number of its
executives and employees. In consideration for these services, Republic
Industries allocated a portion of its overhead costs related to such services to
the Company. This allocation had historically been based on the proportion of
invested capital of the Company as a percentage of the consolidated invested
capital of Republic Industries and its subsidiaries (including the Company). In
June 1998, the Company and Republic Industries entered into a services agreement
("Services Agreement") pursuant to which Republic Industries will continue to
provide the services described herein in exchange for a monthly fee of $1.25
million, subject to review and adjustment from time to time as the Company
reduces services required from Republic Industries. Effective January 1, 1999,
such fee was reduced to $.9 million per month. Management of the Company
believes that the amounts allocated to the Company and/or charged under the
Services Agreement were no less favorable to the Company than costs the Company
would have incurred to obtain such services on its own or from unaffiliated
third parties.
 
                                       22

<PAGE>   25
 
     The historical consolidated financial information included in this Annual
Report does not necessarily reflect what the Company's financial position and
results of operations would have been had the Company been operated as a
separate, stand-alone entity during the periods presented.
 
GENERAL
 
     The Company is a leading provider of non-hazardous solid waste collection
and disposal services in the United States. The Company provides solid waste
collection services for commercial, industrial, municipal and residential
customers through 131 collection companies in 26 states. The Company also owns
or operates 70 transfer stations and 48 solid waste landfills.
 
     The Company's revenue is generated primarily from its solid waste
collection operations, with the remainder comprised of revenue from landfill
disposal services and other services including recycling and composting
operations. Collection, transfer and disposal, recycling and other services
accounted for approximately 78.7%, 10.1%, 3.1% and 8.1%, respectively, of
consolidated revenue for the year ended December 31, 1998.
 
     Revenue from collection operations consists of fees from commercial,
industrial, municipal and residential customers. In 1998, the Company's revenue
from collection services was derived approximately one third from services
provided to commercial customers, one third from services provided to industrial
customers and one third from services provided to municipal and residential
customers. Residential and commercial collection operations in certain markets
are performed under long-term contracts with municipalities. Industrial and
commercial collection operations generally are provided to individual customers
on a contractual basis with terms up to three years. Revenue from landfill
disposal operations consists of tipping fees charged to third parties. Recycling
operations are generally integrated with collection operations with revenue
derived through the sale of recyclable materials. No one customer has
individually accounted for more than 10.0% of the Company's consolidated revenue
in any of the last three years.
 
     Cost of operations for the Company's collection operations is primarily
variable and includes disposal, labor, fuel and equipment maintenance costs. The
Company seeks to achieve a high rate of waste internalization by controlling
waste streams from the point of collection through disposal. During 1998,
approximately 40% of the total volume of waste collected by the Company was
disposed of at the Company's landfills. Landfill cost of operations includes
most daily operating expenses, the legal and administrative costs of ongoing
environmental compliance, costs of capital for cell development and accruals for
closure and post-closure costs. Certain direct landfill development costs, such
as engineering, upgrading, cell construction and permitting costs, are
capitalized and depleted based on consumed airspace. All indirect landfill
development costs are expensed as incurred.
 
BUSINESS COMBINATIONS
 
     The Company makes decisions to acquire or invest in businesses based on
financial and strategic considerations.
 
     Significant businesses acquired and accounted for under the pooling of
interests method of accounting have been included retroactively in the
Consolidated Financial Statements as if the companies had operated as one entity
since inception. Businesses acquired and accounted for under the purchase method
of accounting are included in the Consolidated Financial Statements from the
date of acquisition.
 
     In September 1998, the Company entered into a definitive agreement with
Waste Management to acquire certain assets and to enter into certain disposal
agreements at various Waste Management facilities. The assets to be acquired
include 16 landfills, 11 transfer stations and 136 commercial collection routes
across the United States. Total consideration for the transaction will be
approximately $490.0 million in cash plus certain additional properties, which
will be accounted for under the purchase method of accounting. At December 31,
1998, closings had been completed for 6 landfills, 7 transfer stations and all
of the collection routes at a purchase price of $200.8 million consisting of
cash and certain properties. Management believes the closing of the remaining
asset acquisitions will be completed in the first quarter of 1999.
 
                                       23

<PAGE>   26
 
     Prior to the Initial Public Offering, Republic Industries has acquired
various businesses operating in the solid waste services industry using cash and
shares of Republic Industries common stock ("Republic Industries Common Stock").
These businesses were contributed by Republic Industries to the Company
subsequent to their acquisition. The Company has applied the same accounting
method used by Republic Industries in accounting for business combinations.
 
     During the year ended December 31, 1998, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $128.3 million,
consisting of cash and approximately 3.4 million shares of Republic Industries
Common Stock. Subsequent to the Initial Public Offering, the Company acquired
various solid waste businesses. The aggregate purchase price paid by the Company
in transactions accounted for under the purchase method of accounting was $450.5
million consisting of cash and certain properties. Cost in excess of the fair
value of net assets acquired in 1998 acquisitions totaled approximately $572.4
million. As of December 31, 1998, the Company had intangible assets, net of
accumulated amortization, of $918.3 million, which consist primarily of the cost
in excess of fair value of net assets acquired. Cost in excess of the fair value
of net assets acquired is amortized over forty years on a straight-line basis.
As of December 31, 1998, amortization expense associated with these intangible
assets on an annualized basis is approximately $32.2 million. The Company
believes the forty year life assigned to the cost in excess of the fair value of
net assets acquired is reasonable as the businesses acquired are generally
well-established companies which have been in existence for many years and have
stable, long-term customer relationships.
 
     During the year ended December 31, 1997, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $147.9 million,
consisting of cash and approximately 5.7 million shares of Republic Industries
Common Stock. Cost in excess of the fair value of net assets acquired in these
acquisitions totaled $149.1 million. In addition, Republic Industries issued an
aggregate of approximately 34.1 million shares of Republic Industries Common
Stock in transactions accounted for under the pooling of interests method of
accounting. Included in the shares of Republic Industries Common Stock issued in
acquisitions accounted for under the pooling of interests method of accounting
are approximately 0.3 million shares issued for acquisitions that were not
material individually or in the aggregate and, consequently, prior period
financial statements were not restated for such acquisitions.
 
     During the year ended December 31, 1996, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $87.6 million,
consisting of cash and approximately 6.6 million shares of Republic Industries
Common Stock. Cost in excess of the fair value of net assets acquired in these
acquisitions totaled $73.6 million. In addition, Republic Industries issued an
aggregate of approximately 40.0 million shares of Republic Industries Common
Stock in transactions accounted for under the pooling of interests method of
accounting. Included in the shares of Republic Industries Common Stock issued in
acquisitions accounted for under the pooling of interests method of accounting
are approximately 1.1 million shares issued for acquisitions that were not
material individually or in the aggregate and, consequently, prior period
financial statements were not restated for such acquisitions.
 
     See Note 3, Business Combinations, of Notes to Consolidated Financial
Statements, for further discussion of business combinations.
 
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
 
     Pro forma net income was $177.6 million, or $1.01 per share, for the year
ended December 31, 1998 as compared to $128.9 million, or $.74 per share, for
the year ended December 31, 1997. Pro forma operating results assume the Initial
Public Offering and the repayment in full of the amounts due to Republic
Industries had occurred as of the beginning of each period indicated.
 
     See Note 1, Basis of Presentation, of Notes to Consolidated Financial
Statements, for further discussion of pro forma operating results.
 
                                       24

<PAGE>   27
 
CONSOLIDATED RESULTS OF OPERATIONS
 
  Years Ended December 31, 1998, 1997 and 1996
 
     Net income was $153.7 million for the year ended December 31, 1998 as
compared to $116.2 million in 1997 and $51.8 million in 1996. Operating results
for the year ended December 31, 1996 includes restructuring and other charges
further described below.
 
     The following table sets forth revenue and cost of operations,
depreciation, amortization and depletion, selling, general and administrative
expenses, restructuring and other charges and operating income with percentages
of revenue for the years ended December 31 (in millions):
 

<TABLE>
<CAPTION>
                                         1998       %       1997       %       1996       %
                                       --------   -----   --------   -----   --------   -----
<S>                                    <C>        <C>     <C>        <C>     <C>        <C>
Revenue..............................  $1,369.1   100.0%  $1,127.7   100.0%  $  953.3   100.0%
Cost of operations...................     842.7    61.6      723.0    64.1      628.3    65.9
Depreciation, amortization and
  depletion..........................     106.3     7.8       86.1     7.6       75.3     7.9
Selling, general and administrative
  expenses...........................     135.8     9.9      117.3    10.4      135.3    14.2
Restructuring and other charges......        --      --         --      --        8.8      .9
                                       --------   -----   --------   -----   --------   -----
Operating income.....................  $  284.3    20.8%  $  201.3    17.9%  $  105.6    11.1%
                                       ========   =====   ========   =====   ========   =====
</TABLE>

 
     Revenue.  Revenue was $1,369.1 million, $1,127.7 million and $953.3 million
for the years ended December 31, 1998, 1997 and 1996, respectively. The increase
in 1998 over 1997 of $241.4 million, or 21.4%, is a result of internal growth
which accounted for 12.8% of the increase and acquisitions which accounted for
8.6% of the increase. Price and primarily volume contributed 7.0% of the
internal growth increase and "tuck-in" acquisitions contributed 5.8% of the
increase. The increase in 1997 over 1996 of $174.4 million, or 18.3%, is a
result of internal growth which accounted for 10.8% of the increase and
acquisitions which accounted for 7.5% of the increase. Price and primarily
volume contributed 7.4% of the internal growth increase and "tuck-in"
acquisitions contributed 3.4%.
 
     Cost of Operations.  Cost of operations was $842.7 million, $723.0 million
and $628.3 million or, as a percentage of revenue, 61.6%, 64.1% and 65.9% for
the years ended December 31, 1998, 1997 and 1996, respectively. The increases in
aggregate dollars are a result of the expansion of the Company's operations
through acquisitions and internal growth. The decreases in cost of operations as
a percentage of revenue are primarily a result of improved operating
efficiencies.
 
     Depreciation, Amortization and Depletion.  Depreciation, amortization and
depletion expenses were $106.3 million, $86.1 million and $75.3 million or, as
percentages of revenue, 7.8%, 7.6% and 7.9% for the years ended December 31,
1998, 1997 and 1996, respectively. The increases in depreciation, amortization
and depletion expenses in aggregate dollars are due primarily to acquisitions.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $135.8 million, $117.3 million and $135.3 million
or, as percentages of revenue, 9.9%, 10.4% and 14.2% for the years ended
December 31, 1998, 1997 and 1996, respectively. The decreases in selling,
general and administrative expenses as percentages of revenue in each of the
years are primarily due to leveraging the existing overhead structure over an
expanding revenue base. Included in selling, general and administrative expenses
are Republic Industries' allocations of corporate general and administrative
costs of $7.5 million, $10.2 million and $8.4 million for the years ended
December 31, 1998, 1997 and 1996, respectively, and fees paid to Republic
Industries under the Services Agreement of $7.5 million for the year ended
December 31, 1998. See Note 10, Related Party Transactions, of Notes to
Consolidated Financial Statements for further information.
 
     Restructuring and Other Charges.  The Company recorded restructuring and
other charges of approximately $8.8 million for the year ended December 31,
1996, which includes costs to close certain landfill operations, asset
write-offs and merger expenses associated with certain business combinations
accounted for under the pooling of interests method of accounting.
 
                                       25

<PAGE>   28
 
     Operating Income.  Operating income was $284.3 million, $201.3 million and
$105.6 million for the years ended December 31, 1998, 1997 and 1996,
respectively. Excluding restructuring and other charges, operating income would
have been $114.4 million in 1996.
 
     Interest Expense.  Interest expense was incurred on the Company's revolving
credit facility, amounts due to Republic Industries, and the debt assumed in
acquisitions. Interest expense was $44.7 million, $25.9 million and $29.7
million for the years ended December 31, 1998, 1997 and 1996, respectively, and
includes interest expense on amounts due to Republic Industries of $37.3
million, $20.2 million and $18.8 million for the years ended December 31, 1998,
1997 and 1996, respectively. The amounts due to Republic Industries were repaid
in full in July 1998 through the issuance of Class A Common Stock and proceeds
from the Initial Public Offering.
 
     Pro forma interest expense was $7.4 million and $5.7 million for the years
ended December 31, 1998 and 1997, respectively. This increase is due primarily
to borrowings under the Company's revolving credit facility.
 
     Interest and Other Income.  Interest and other income was $.6 million, $6.7
million and $13.9 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The variances during the periods are primarily due to fluctuations
in cash balances on hand and related interest income.
 
     Income Taxes.  The provision for income taxes was $86.5 million, $65.9
million and $38.0 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The effective income tax rate was 36.0%, 36.2% and 42.3% for the
years ended December 31, 1998, 1997 and 1996, respectively. The higher 1996
effective income tax rate is primarily due to varying higher historical
effective income tax rates of acquired businesses. There can be no assurance
that the trend in the Company's effective tax rate will continue to be favorable
in the future.
 
     Effective with the Initial Public Offering on July 1, 1998, the Company is
no longer included in Republic Industries' federal tax return.
 
ENVIRONMENTAL AND LANDFILL MATTERS
 
     The Company owns or operates 48 solid waste landfills with approximately
6,200 permitted acres and total available permitted disposal capacity of
approximately 1.2 billion in-place cubic yards as of December 31, 1998. As of
December 31, 1998 and 1997, cubic yards of available airspace at the Company's
landfills were 1,230.1 million and 1,104.7 million, respectively. Airspace
increased during 1998 by 125.4 million cubic yards as a result of landfills
acquired and internally developed totaling 145.3 million cubic yards, offset by
consumption of 19.9 million cubic yards during the year.
 
     The Company provides for accrued environmental and landfill costs which
include landfill site closure and post-closure costs. Landfill site closure and
post-closure costs include estimated costs to be incurred for final closure of
the landfills and estimated costs for providing required post-closure monitoring
and maintenance of landfills. These costs are accrued based on consumed
airspace. The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
its interpretation of the technical standards of the Environmental Protection
Agency's Subtitle D regulations. These estimates do not take into account
discounts for the present value of such total estimated costs. Engineering
reviews of the future cost requirements for closure and post-closure monitoring
and maintenance for the Company's operating landfills are performed on an annual
basis. Such reviews provide the basis upon which the Company estimates future
costs and revises the related accruals. Changes in these estimates primarily
relate to modifications in available airspace, inflation and changes in
regulations, all of which are taken into consideration annually. At December 31,
1998, assuming that all available landfill capacity is used, approximately
$370.5 million of such costs are expected to be expensed over the remaining
lives of these facilities.
 
     As of December 31, 1998 and 1997, accrued closure and post-closure costs
associated with landfills were $73.4 million and $47.3 million, respectively.
The current and long-term portion of these costs are included in other current
liabilities and accrued environmental and landfill costs, respectively, in the
Company's consolidated balance sheets. The increase in such accruals resulted
primarily from landfill acquisitions.
 
                                       26

<PAGE>   29
 
     Costs related to environmental remediation activities are accrued by the
Company through a charge to income in the period such liabilities become
probable and can be reasonably estimated.
 
FINANCIAL CONDITION
 
     At December 31, 1998, the Company had $556.6 million of unrestricted cash.
The Company intends to use this cash primarily to fund acquisitions in the near
term.
 
     As previously discussed, on July 1, 1998, the Company completed the Initial
Public Offering, resulting in net proceeds of approximately $1.4 billion. In
July 1998, the Company repaid in full all remaining amounts due to Republic
Industries through the issuance of shares of Class A Common Stock and through
all of the proceeds from the Initial Public Offering.
 
     Prior to the Initial Public Offering, the Company's needs for working
capital and capital for general corporate purposes, including acquisitions, was
satisfied pursuant to Republic Industries' corporate-wide cash management
policies. Subsequent to the Initial Public Offering, the Company has been
financed autonomously and Republic Industries has not provided funds to finance
the Company's operations or acquisitions. The Company's operating cash flow is
used by the Company to finance its working capital, acquisitions and other
requirements. Additionally, in July 1998, the Company entered into a $1.0
billion unsecured revolving credit facility with a group of banks. $500.0
million of the facility has a term expiring in July 1999 and the remaining
$500.0 million has a term expiring in July 2003. Borrowings under the facility
bear interest at LIBOR based rates. Proceeds from the facility are used to
satisfy working capital requirements, capital expenditures and acquisitions. At
December 31, 1998, the Company had approximately $13.3 million of availability
under the short term facility.
 
     The Company is currently evaluating financing alternatives to replace the
credit facility expiring in July 1999. At present, management believes that it
will be able to raise additional debt financing to fund general corporate needs;
however, there can be no assurance that the Company will be able to obtain
additional financing under favorable terms.
 
     The Company believes that it has sufficient financial resources available
to meet its anticipated capital requirements and obligations as they come due.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The major components of changes in cash flows for the years ended December
31, 1998, 1997 and 1996 are discussed below.
 
     Cash Flows from Operating Activities.  Cash provided by operating
activities was $271.1 million, $279.4 million and $143.5 million for the years
ended December 31, 1998, 1997 and 1996, respectively. The changes in cash
provided by operating activities during the periods are due to expansion of the
Company's business.
 
     Cash Flows from Investing Activities.  Cash flows from investing activities
consist primarily of cash used for business acquisitions and capital additions.
Cash used in business acquisitions, net of cash acquired, was $425.2 million
during the year ended December 31, 1998. Capital additions were $193.0 million,
$165.3 million and $146.9 million during the years ended December 31, 1998, 1997
and 1996, respectively.
 
     The Company believes capital expenditures will increase due to expansion of
the Company's business. In addition, the Company expects to use primarily cash
for business acquisitions. The Company intends to finance capital expenditures
and acquisitions through cash on hand, cash flow from operations, the credit
facility and other financings.
 
     Cash Flows from Financing Activities.  Cash flows from financing activities
during the years ended December 31, 1998, 1997 and 1996 included commercial bank
and affiliate borrowings and repayments of debt and, in 1998, proceeds from the
sale of Class A Common Stock in the Initial Public Offering.
 
                                       27

<PAGE>   30
 
     Proceeds from bank and affiliate borrowings were used to fund acquisitions
and capital additions, and to repay debt. All of the proceeds from the Initial
Public Offering were used to repay amounts due to Republic Industries.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." The
Company's major market risk exposure is changing interest rates in the United
States and with fluctuations in the London Interbank Bank Offered Rate. The
Company intends to manage interest rate risk through use of a combination of
fixed and floating rate debt. All items described below are non-trading.
 

<TABLE>
<CAPTION>
                                                          EXPECTED MATURITY DATE                         FAIR VALUE
                                      ---------------------------------------------------------------   DECEMBER 31,
                                       1999    2000    2001    2002     2003    THEREAFTER    TOTAL         1998
                                      ------   -----   -----   -----   ------   ----------   --------   ------------
                                                                      (IN MILLIONS)
<S>                                   <C>      <C>     <C>     <C>     <C>      <C>          <C>        <C>
VARIABLE RATE DEBT
Amount outstanding..................  $495.2   $ 3.4   $ 3.2   $ 3.0   $503.1     $35.9      $1,043.8     $1,043.8
  Average interest rates............    6.40%   5.06%   5.31%   5.19%    6.42%     5.21%         6.36%
</TABLE>

 
SEASONALITY
 
     The Company's operations can be adversely affected by periods of inclement
weather which could delay the collection and disposal of waste, reduce the
volume of waste generated or delay the construction or expansion of the
Company's landfill sites and other facilities.
 
YEAR 2000
 
     The Company utilizes software and related technologies throughout its
business that will be affected by the date change in the year 2000 ("Y2K"). The
Company is currently addressing the impact of Y2K on its computer programs,
embedded chips and third party suppliers. The Company has developed a dedicated
Year 2000 Project Office to coordinate the compliance efforts and ensure that
the project status is monitored and reported throughout the organization.
 
     Six critical systems or processes have been the focus of the Company's Y2K
compliance efforts. These are hauling and disposal fleet operations, electrical
systems, telecommunications, payroll processing, billing systems and payments to
critical third parties. The Company primarily uses industry standard automated
applications in most of its locations. The majority of these applications are
believed to be Y2K compliant, but the Company is currently testing compliance in
coordination with the vendors. The three locations with proprietary software are
currently in the remediation phase and expect to be completed by the end of the
second quarter of 1999.
 
     The Company is currently finalizing its assessment of embedded chips and
third party suppliers. The Company expects to complete the inventory and
assessment of this information during the first quarter of 1999. As information
is received related to these areas, the Company analyzes the compliance of
products and develops a strategy for repair or replacement of non-compliant
systems as well as testing and validation of such items. The Company expects to
be substantially complete with the analysis of this information by early 1999.
The remediation phase is expected to be complete by the third quarter of 1999.
 
     To date, the Company estimates that it has spent approximately $1.2 million
on Y2K efforts across all areas and expects to spend a total of approximately
$4.0 million when complete. The Company expects to fund Y2K costs through
operating cash flows. All system modification costs associated with Y2K will be
expensed as incurred. Y2K expenditures vary significantly in project phases and
vary depending on remedial methods used, and past expenditures in relation to
total estimated costs should not be considered or relied on as a basis for
estimating progress to completion for any element of the Y2K project.
 
     The Company presently believes that upon remediation of its business
software applications, as well as other equipment with embedded technology, the
Y2K issue will not present a materially adverse risk to the Company's future
consolidated results of operations, liquidity, and capital resources. However,
if such remediation is not completed in a timely manner or the level of timely
compliance by key suppliers or vendors is not sufficient, the Y2K issue could
have a material impact on the Company's operations including, but not
 
                                       28

<PAGE>   31
 
limited to, delays in delivery of services resulting in loss of revenue,
increased operating costs, loss of customers or suppliers, or other significant
disruptions to the Company's business. The Company has initiated contingency and
business continuation plans which address the six critical processes described
above to be in place in early 1999 in order to ensure enough time for
implementation of such plan, if necessary and thus possibly avoid such risks.
 
     Determining the Y2K readiness of third party products (information
technology and other computerized equipment) and business dependencies
(including suppliers, distributors or ancillary industry groups) requires
pursuit, collection and appraisal of voluntary statements made or provided by
those parties, if available, together with independent factual research.
Although the Company has taken, and will continue to take, reasonable efforts to
gather information to determine and verify the readiness of such products and
business dependencies, there can be no assurance that reliable information will
be offered or otherwise available. In addition, verification methods (including
testing methods) may not be reliable or fully implemented. Accordingly,
notwithstanding the foregoing efforts, there are no assurances that the Company
is correct in its determination or belief that a product or a business
dependency is Y2K ready.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
requires computer software costs associated with internal use software to be
expensed as incurred until certain capitalization criteria are met. The Company
will adopt SOP 98-1 beginning January 1, 1999. Adoption of this statement will
not have a material impact on the Company's consolidated financial position or
results of operations.
 
     In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires all costs
associated with pre-opening, pre-operating and organization activities to be
expensed as incurred. The Company's accounting policies conform with the
requirements of SOP 98-5, therefore adoption of this statement will not impact
the Company's consolidated financial position or results of operations.
 
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. SFAS 133 cannot
be applied retroactively. The Company will adopt SFAS 133 beginning January 1,
2000. Adoption of this statement is not expected to have a material impact on
the Company's consolidated financial position or results of operations.
 
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
 
     This document contains certain statements that are "Forward Looking
Statements," which include, among other things, the discussions of the Company's
growth and operating strategies and the completion by Republic Industries of the
Distribution, and expectations concerning market position, future operations,
margins, revenue, profitability, liquidity and capital resources, as well as
statements concerning the integration of the operations of acquired businesses
and achievement of financial benefits and operational efficiencies in connection
therewith. Forward Looking Statements are included in "ITEM 1. -- BUSINESS,"
"ITEM 6. -- SELECTED FINANCIAL DATA," "ITEM 7. -- MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and elsewhere
herein. Although the Company believes that the expectations reflected in Forward
Looking Statements are reasonable, the Company can give no assurance that such
expectations will prove to have been correct. Generally, these statements relate
to business plans or strategies, projected or anticipated benefits or other
consequences of such plans or strategies, number of acquisitions and projected
or anticipated benefits from acquisitions made by or to be made by the Company,
or projections involving the operations of the Company or the completion by
Republic Industries of the Distribution, and are subject to a number of
uncertainties, risks and other
 
                                       29

<PAGE>   32
 
influences, many of which are outside the control of the Company and any one of
which, or a combination of which, could materially affect the results of the
Company's operations. Important factors that could cause actual results to
differ materially from the Company's expectations include, but are not limited
to, those that are disclosed in this section and under the section herein
entitled "BUSINESS -- Risk Factors." The Company assumes no duty to update the
Forward Looking Statements.
 
                                       30

<PAGE>   33
 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Certified Public Accountants..........   32
Consolidated Balance Sheets as of December 31, 1998 and
  1997......................................................   33
Consolidated Statements of Operations for each of the Three
  Years Ended December 31, 1998.............................   34
Consolidated Statements of Stockholders' Equity for each of
  the Three Years Ended December 31, 1998...................   35
Consolidated Statements of Cash Flows for each of the Three
  Years Ended December 31, 1998.............................   36
Notes to Consolidated Financial Statements..................   37
Financial Statement Schedule II, Valuation and Qualifying
  Accounts and Reserves, for each of the Three Years Ended
  December 31, 1998.........................................   56
</TABLE>

 
                                       31

<PAGE>   34
 

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To Republic Services, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Republic
Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the schedule based on our
audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Services, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
 
     Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
 
ARTHUR ANDERSEN LLP
 
Fort Lauderdale, Florida,
January 28, 1999.

 
                                       32

<PAGE>   35
 
                            REPUBLIC SERVICES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                        (IN MILLIONS, EXCEPT SHARE DATA)
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1997
                                                              --------   --------
<S>                                                           <C>        <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  556.6   $     --
  Restricted cash...........................................       7.1       18.8
  Accounts receivable, less allowance for doubtful accounts
     of $22.1 and $13.6 at December 31, 1998 and 1997,
     respectively...........................................     182.7      131.0
  Prepaid expenses and other current assets.................      37.6       26.1
                                                              --------   --------
          Total Current Assets..............................     784.0      175.9
PROPERTY AND EQUIPMENT, NET.................................   1,096.1      801.8
INTANGIBLE AND OTHER ASSETS, NET............................     932.0      370.3
                                                              --------   --------
                                                              $2,812.1   $1,348.0
                                                              ========   ========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable..........................................  $   64.7   $   40.2
  Accrued liabilities.......................................     146.2       57.6
  Deferred revenue..........................................      46.6       29.5
  Due to Republic Industries................................        --      266.1
  Notes payable and current maturities of long-term debt....     499.9       10.8

  Other current liabilities.................................      26.4       19.9
                                                              --------   --------
          Total Current Liabilities.........................     783.8      424.1
LONG-TERM DEBT, NET OF CURRENT MATURITIES...................     557.2       64.3
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS....................      77.3       46.0
DEFERRED INCOME TAXES.......................................      71.4       47.5
OTHER LIABILITIES...........................................      23.3       15.3
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Investment by Republic Industries.........................        --      749.8
  Preferred stock, par value $.01 per share; 50,000,000
     shares authorized; none issued.........................        --         --
  Common stock:
     Class A, par value $.01 per share; 250,000,000 shares
      authorized; 79,724,417 and none issued and
      outstanding, respectively.............................        .8         --
     Class B, par value $.01 per share; 125,000,000 shares
      authorized; 95,688,083 shares issued and
      outstanding...........................................       1.0        1.0
  Additional paid-in capital................................   1,203.5         --
  Retained earnings.........................................      93.8         --
                                                              --------   --------
          Total Stockholders' Equity........................   1,299.1      750.8
                                                              --------   --------
                                                              $2,812.1   $1,348.0
                                                              ========   ========
</TABLE>

 
        The accompanying notes are an integral part of these statements.
 
                                       33

<PAGE>   36
 
                            REPUBLIC SERVICES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN MILLIONS, EXCEPT EARNINGS PER SHARE DATA)
 

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1998       1997       1996
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUE.....................................................  $1,369.1   $1,127.7   $  953.3
EXPENSES:
  Cost of operations........................................     842.7      723.0      628.3
  Depreciation, amortization and depletion..................     106.3       86.1       75.3
  Selling, general and administrative.......................     135.8      117.3      135.3
  Restructuring and other charges...........................        --         --        8.8
                                                              --------   --------   --------
OPERATING INCOME............................................     284.3      201.3      105.6
INTEREST EXPENSE............................................     (44.7)     (25.9)     (29.7)
INTEREST INCOME.............................................       1.5        4.9       11.7
OTHER INCOME (EXPENSE), NET.................................       (.9)       1.8        2.2
                                                              --------   --------   --------
INCOME BEFORE INCOME TAXES..................................     240.2      182.1       89.8
PROVISION FOR INCOME TAXES..................................      86.5       65.9       38.0
                                                              --------   --------   --------
NET INCOME..................................................  $  153.7   $  116.2   $   51.8
                                                              ========   ========   ========
BASIC AND DILUTED EARNINGS PER SHARE........................  $   1.13   $   1.21   $    .54
                                                              ========   ========   ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
  OUTSTANDING...............................................     135.6       95.7       95.7
                                                              ========   ========   ========
</TABLE>

 
        The accompanying notes are an integral part of these statements.
 
                                       34

<PAGE>   37
 
                            REPUBLIC SERVICES, INC.
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN MILLIONS)
 

<TABLE>
<CAPTION>
                                                   INVESTMENT      COMMON STOCK      ADDITIONAL
                                                   BY REPUBLIC   -----------------    PAID-IN     RETAINED
                                                   INDUSTRIES    CLASS A   CLASS B    CAPITAL     EARNINGS
                                                   -----------   -------   -------   ----------   --------
<S>                                                <C>           <C>       <C>       <C>          <C>
BALANCE AT DECEMBER 31, 1995.....................   $   371.2     $ --      $1.0      $     --     $  --
  Net income.....................................        51.8       --        --            --        --
  Business acquisitions contributed by Republic
     Industries..................................        79.7       --        --            --        --
  Other..........................................        (9.2)      --        --            --        --
                                                    ---------     ----      ----      --------     -----
BALANCE AT DECEMBER 31, 1996.....................       493.5       --       1.0            --        --
  Net income.....................................       116.2       --        --            --        --
  Business acquisitions contributed by Republic
     Industries..................................       148.4       --        --            --        --
  Investment in Resources........................       (17.4)      --        --            --        --
  Other..........................................         9.1       --        --            --        --
                                                    ---------     ----      ----      --------     -----
BALANCE AT DECEMBER 31, 1997.....................       749.8       --       1.0            --        --
  Net income.....................................        59.9       --        --            --      93.8
  Business acquisitions contributed by Republic
     Industries..................................       128.3       --        --            --        --
  Dividend to Republic Industries................    (2,000.0)      --        --            --        --
  Dividend from Resources........................       437.3       --        --            --        --
  Transfer to additional paid-in capital.........       624.7       --        --        (624.7)       --
  Issuance of Class A Common Stock to Republic
     Industries..................................          --       .2        --         395.2        --
  Sale of Class A Common Stock...................          --       .6        --       1,433.0        --
                                                    ---------     ----      ----      --------     -----
BALANCE AT DECEMBER 31, 1998.....................   $      --     $ .8      $1.0      $1,203.5     $93.8
                                                    =========     ====      ====      ========     =====
</TABLE>

 
        The accompanying notes are an integral part of these statements.
 
                                       35

<PAGE>   38
 
                            REPUBLIC SERVICES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)
 

<TABLE>
<CAPTION>
                                                                  YEARS ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1998        1997        1996
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
  Net income................................................  $   153.7   $   116.2   $    51.8
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation, amortization and depletion of property
       and equipment........................................       88.6        76.1        66.6
     Amortization of intangible assets......................       17.7        10.0         8.7
     Deferred tax provision.................................       19.2        36.5         3.2
     Changes in assets and liabilities, net of effects from
       business acquisitions:
       Accounts receivable..................................      (41.8)      (15.6)      (16.4)
       Prepaid expenses and other assets....................      (11.3)       17.4         7.0
       Accounts payable and accrued liabilities.............      (14.1)      (26.7)      (32.0)
       Other liabilities....................................       59.1        65.5        54.6
                                                              ---------   ---------   ---------
                                                                  271.1       279.4       143.5
                                                              ---------   ---------   ---------
CASH USED IN INVESTING ACTIVITIES:
  Purchases of property and equipment.......................     (193.0)     (165.3)     (146.9)
  Cash used in acquisitions, net of cash acquired...........     (425.2)        2.7         1.2
  Other.....................................................       10.8        (5.5)      (30.0)
                                                              ---------   ---------   ---------
                                                                 (607.4)     (168.1)     (175.7)
                                                              ---------   ---------   ---------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
  Proceeds from the sale of common stock....................    1,433.6          --          --
  Proceeds from notes payable and long-term debt............       10.6         5.2        44.5
  Payments of notes payable and long-term debt..............      (61.8)     (100.2)      (91.4)
  Increase (decrease) in amounts due to Republic
     Industries.............................................   (1,469.5)      (47.3)      166.9
  Net proceeds from revolving credit facility...............      980.0          --          --
  Other.....................................................         --         6.8       (99.7)
                                                              ---------   ---------   ---------
                                                                  892.9      (135.5)       20.3
                                                              ---------   ---------   ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............      556.6       (24.2)      (11.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............         --        24.2        36.1
                                                              ---------   ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................  $   556.6   $      --   $    24.2
                                                              =========   =========   =========
</TABLE>

 
        The accompanying notes are an integral part of these statements.
 
                                       36

<PAGE>   39
 
                            REPUBLIC SERVICES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (ALL TABLES IN MILLIONS, EXCEPT PER SHARE DATA)
 
1. BASIS OF PRESENTATION
 
     The accompanying Consolidated Financial Statements include the accounts of
Republic Services, Inc. and its subsidiaries (the "Company"). As of December 31,
1998, approximately 63.9% of the Company's common stock, par value $.01 per
share ("Common Stock," which is designated when issued as either "Class A Common
Stock" or "Class B Common Stock"), was owned by Republic Industries, Inc.
("Republic Industries"). The Company provides non-hazardous solid waste
collection and disposal services in the United States. All material intercompany
transactions have been eliminated.
 
     The accompanying Consolidated Financial Statements exclude the accounts of
the Company's formerly wholly owned subsidiary, Republic Resources Company, Inc.
("Resources"), all of the common stock of which was distributed to Republic
Industries in June 1998. The Company and Resources have been in dissimilar
businesses, have been managed and financed historically as if they were
autonomous, have had no more than incidental common facilities and costs, have
been operated and financed autonomously after the distribution of Resources to
Republic Industries, and have no financial commitments, guarantees, or
contingent liabilities to each other following the distribution. Based on these
facts, the accounts of Resources have been excluded from the Company's
consolidated financial statements as the Company has elected to characterize the
distribution of Resources as resulting in a change in the reporting entity.
 
     The accompanying Consolidated Financial Statements reflect the accounts of
the Company as a subsidiary of Republic Industries subject to corporate general
and administrative expense allocations or charges under the Services Agreement
as described in Note 10, Related Party Transactions. Such information does not
necessarily reflect the financial position or results of operations of the
Company as a separate, stand-alone entity.
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
 
     All historical share and per share data of the Company's Common Stock for
all periods included in the consolidated financial statements and the notes
thereto have been retroactively adjusted for the recapitalization of 100 shares
of the Company's common stock previously held by Republic Industries into
95,688,083 shares of Class B Common Stock in July 1998, as more fully described
in Note 6, Stockholders' Equity.
 
     In May 1998, Republic Industries announced its intention to separate the
Company from Republic Industries (the "Separation"). Republic Industries also
announced its intention to distribute its remaining shares of Common Stock in
the Company as of the distribution date to Republic Industries' shareholders in
1999, subject to certain conditions and consents (the "Distribution"). The
Company and Republic Industries have entered into certain agreements providing
for the Separation and the Distribution and the governing of various interim and
ongoing relationships between the companies. The Distribution is contingent, in
part, on Republic Industries obtaining a private letter ruling from the Internal
Revenue Service ("IRS") to the effect that, among other things, the Distribution
will qualify as a tax-free distribution for federal income tax purposes under
Section 355 of the Internal Revenue Code of 1986, as amended, in form and
substance satisfactory to Republic Industries.
 
     In July 1998, the Company completed an initial public offering of
approximately 63.2 million shares of its Class A Common Stock ("Initial Public
Offering") resulting in net proceeds of approximately $1.4 billion. In addition,
in July 1998 the Company repaid in full all remaining amounts due to Republic
Industries as of June 30, 1998 through the issuance of shares of Class A Common
Stock and through all of the proceeds from the Initial Public Offering.
Following the Initial Public Offering and the repayment of amounts due to
 
                                       37

<PAGE>   40
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Republic Industries, approximately 63.9% of the outstanding shares of Class A
and Class B Common Stock which represents approximately 88.7% of the combined
voting power of all of the outstanding shares of the Class A and Class B Common
Stock were owned by Republic Industries.
 
     The following unaudited pro forma consolidated statement of operations data
has been prepared assuming the Initial Public Offering and the repayment in full
of the amounts due to Republic Industries had occurred as of the beginning of
each period presented:
 

<TABLE>
<CAPTION>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                              ---------------
                                                               1998     1997
                                                              ------   ------
<S>                                                           <C>      <C>
Operating income............................................  $284.3   $201.3
Interest expense............................................    (7.4)    (5.7)
Interest income.............................................     1.5      4.9
Other income (expense), net.................................     (.9)     1.8
                                                              ------   ------
Income before income taxes..................................   277.5    202.3
Provision for income taxes..................................    99.9     73.4
                                                              ------   ------
Net income..................................................  $177.6   $128.9
                                                              ======   ======
Basic and diluted earnings per share........................  $ 1.01   $  .74
                                                              ======   ======
Weighted average common and common equivalent shares
  outstanding...............................................   175.4    175.4
                                                              ======   ======
</TABLE>

 
     The unaudited pro forma consolidated statement of operations data are
provided for informational purposes only and should not be construed to be
indicative of the Company's consolidated results of operations had the
transactions and events described above been consummated on the dates assumed
and do not project the Company's results of operations for any future date or
period.
 
     Certain reclassifications have been made to the prior period balance sheet
to conform to the current presentation.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
RESTRICTED CASH
 
     Restricted cash consists of amounts held in trust as a financial guaranty
of the Company's performance as well as funds restricted for capital
expenditures under certain debt facilities.
 
OTHER CURRENT ASSETS
 
     Other current assets consist primarily of inventories and short-term notes
receivable. Inventories totaled approximately $13.3 million and $11.7 million at
December 31, 1998 and 1997, respectively, and consist primarily of equipment
parts, compost materials and supplies that are valued under a method that
approximates the lower of cost (first-in, first-out) or market.
 
PROPERTY AND EQUIPMENT
 
     Property and equipment are recorded at cost. Expenditures for major
additions and improvements are capitalized, while maintenance and repairs are
charged to expense as incurred. When property is retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in the Consolidated Statements of
Operations.
 
     The Company revises the estimated useful lives of property and equipment
acquired through business acquisitions to conform with its policies regarding
property and equipment. Depreciation is provided over the
 
                                       38

<PAGE>   41
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
estimated useful lives of the assets involved using the straight-line method.
The estimated useful lives are: twenty to forty years for buildings and
improvements, three to fifteen years for trucks and equipment, and five to ten
years for furniture and fixtures.
 
     Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain a landfill permit
and direct costs incurred to construct and develop the site. These costs are
depleted based on consumed airspace. All indirect landfill development costs are
expensed as incurred.
 
     Interest costs are capitalized in connection with the construction of
landfill sites. Interest capitalized was $.8 million, $.8 million and $1.8
million for the years ended December 31, 1998, 1997 and 1996, respectively.
 
     A summary of property and equipment is as follows:
 

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
Land, landfills and improvements............................  $  586.2    $  420.1
Furniture, fixtures, trucks and equipment...................     806.8       668.9
Buildings and improvements..................................     176.1       126.6
                                                              --------    --------
                                                               1,569.1     1,215.6
Less: accumulated depreciation, amortization and
  depletion.................................................    (473.0)     (413.8)
                                                              --------    --------
                                                              $1,096.1    $  801.8
                                                              ========    ========
</TABLE>

 
     The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the property and equipment in
measuring their recoverability.
 
INTANGIBLE AND OTHER ASSETS
 
     Intangible and other assets consist primarily of the cost of acquired
businesses in excess of the fair value of net assets acquired and other
intangible assets. The cost in excess of the fair value of net assets is
amortized over forty years on a straight-line basis. Other intangible assets
include values assigned to customer lists, long-term contracts and covenants not
to compete and are amortized generally over periods ranging from 5 to 25 years.
Accumulated amortization of intangible assets was $73.0 million and $57.9
million at December 31, 1998 and 1997, respectively.
 
     The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
measuring their recoverability.
 
                                       39

<PAGE>   42
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
ACCRUED LIABILITIES
 
     A summary of accrued liabilities is as follows:
 

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              ---------------
                                                               1998     1997
                                                              ------   ------
<S>                                                           <C>      <C>
Amounts due former owners of acquired businesses............  $ 26.7   $   --
Accrued payroll and benefits................................    25.7     17.0
Accrued disposal costs......................................    16.1      5.1
Accrued fees and taxes......................................    12.7      5.4
Other.......................................................    65.0     30.1
                                                              ------   ------
                                                              $146.2   $ 57.6
                                                              ======   ======
</TABLE>

 
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
 
     A summary of accrued environmental and landfill costs is as follows:
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              -------------
                                                              1998    1997
                                                              -----   -----
<S>                                                           <C>     <C>
Accrued landfill site closure/post-closure costs............  $73.4   $47.3
Accrued environmental costs.................................    9.5     8.6
                                                              -----   -----
                                                               82.9    55.9
Less: current portion (included in other current
  liabilities)..............................................   (5.6)   (9.9)
                                                              -----   -----
                                                              $77.3   $46.0
                                                              =====   =====
</TABLE>

 
     Landfill site closure and post-closure costs include estimated costs to be
incurred for final closure of the landfills and estimated costs for providing
required post-closure monitoring and maintenance of landfills. These costs are
accrued based on consumed airspace. Available airspace is generally based on
estimates of remaining permitted and likely to be permitted airspace developed
by independent engineers together with the Company's engineers and accounting
personnel utilizing information provided by aerial surveys of landfills which
are generally performed annually. These aerial surveys form the basis for the
volume available for disposal. Accruals for closure and post-closure costs
totaled approximately $11.4 million, $7.9 million and $4.4 million during the
years ended December 31, 1998, 1997 and 1996, respectively. Estimated aggregate
closure and post-closure costs will be fully accrued for these landfills at the
time that such facilities cease to accept waste and are closed. At December 31,
1998, approximately $370.5 million of such costs are to be expensed over the
remaining lives of these facilities. The Company estimates its future cost
requirements for closure and post-closure monitoring and maintenance for its
solid waste facilities based on its interpretation of the technical standards of
the United States Environmental Protection Agency's Subtitle D regulations.
These estimates do not take into account discounts for the present value of such
total estimated costs. The Company periodically reassesses such costs based on
various methods and assumptions regarding landfill airspace and the technical
requirements of the Environmental Protection Agency's Subtitle D regulations and
adjusts such accruals accordingly.
 
     In the normal course of business, the Company is subject to ongoing
environmental investigations by certain regulatory agencies, as well as other
claims and disputes that could result in litigation. Environmental costs are
accrued by the Company through a charge to income in the period such liabilities
become probable and can be reasonably estimated. No material amounts were
charged to expense during the years ended December 31, 1998, 1997 and 1996.
 
                                       40

<PAGE>   43
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
REVENUE RECOGNITION
 
     Revenue consists primarily of collection fees from commercial, industrial,
residential and municipal customers and transfer and landfill disposal fees
charged to third parties. Collection, transfer and disposal, recycling and other
services accounted for approximately 78.7%, 10.1%, 3.1% and 8.1%, respectively,
of consolidated revenue for the year ended December 31, 1998. Advance billings
are recorded as deferred revenue and revenue is recognized over the period in
which services are provided. No one customer has individually accounted for more
than 10.0% of the Company's consolidated revenues in any of the past three
years.
 
INCOME TAXES
 
     Effective with the Initial Public Offering on July 1, 1998, the Company is
no longer included in the consolidated federal income tax return of Republic
Industries. For the periods prior to the Initial Public Offering, all tax
amounts have been recorded as if the Company filed a separate federal tax
return. The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.
 
     Certain businesses acquired in 1997 and 1996 and accounted for under the
pooling of interests method of accounting were subchapter S corporations for
income tax purposes. The subchapter S corporation status of these companies was
terminated effective with the closing date of the acquisitions. For purposes of
these Consolidated Financial Statements, federal and state income taxes have
been recorded as if these companies had filed subchapter C corporation tax
returns for the pre-acquisition periods, and the current income tax expense is
reflected in shareholders' equity. Pre-acquisition income taxes related to
pooled S corporations recorded in the consolidated financial statements were $0
million and $4.0 million during the years ended December 31, 1997 and 1996,
respectively.
 
EARNINGS PER SHARE
 
     Earnings per share is computed by dividing net income by the number of
common shares outstanding during the period after giving retroactive effect to
the recapitalization of the 100 shares of common stock held by Republic
Industries into 95,688,083 shares of Class B Common Stock. Diluted earnings per
share equals basic earnings per share for all periods presented since there was
substantially no dilutive effect of common share equivalents outstanding during
the periods presented. See Note 7, Stock Options, for further information
regarding stock options which could potentially dilute earnings per share in
future periods.
 
COMPREHENSIVE INCOME
 
     The Company has no components of other comprehensive income. Accordingly,
net income equals comprehensive income for all periods presented.
 
STATEMENTS OF CASH FLOWS
 
     The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents. The effect of
non-cash transactions related to business combinations, as discussed in Note 3,
Business Combinations, and other non-cash transactions are excluded from the
accompanying Consolidated Statements of Cash Flows.
 
     The Company made interest payments on notes payable and long-term debt of
approximately $44.8 million, $25.1 million and $30.1 million for the years ended
December 31, 1998, 1997 and 1996, respectively. The
 
                                       41

<PAGE>   44
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Company made income tax payments of approximately $65.4 million, $29.4 million
and $31.7 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amounts of cash and cash equivalents, restricted cash,
receivables, and accounts payable and accrued liabilities approximate fair value
due to the short maturity of these instruments. The carrying amounts of notes
payable and long-term debt approximate fair value because interest rates
generally are variable and, accordingly, approximate current market rates.
 
CONCENTRATION OF CREDIT RISK
 
     The Company provides services to commercial, industrial, municipal and
residential customers in the United States. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which services are provided as well as their dispersion across
many geographic areas in the United States. The Company performs ongoing credit
evaluations of its customers, but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends and other information.
 
3. BUSINESS COMBINATIONS
 
     Republic Industries has acquired various businesses operating in the solid
waste services industry using cash and/or shares of its common stock ("Republic
Industries Common Stock"). These businesses were contributed by Republic
Industries to the Company subsequent to their acquisition. The Company has
applied the same accounting method used by Republic Industries in accounting for
business combinations.
 
     Significant businesses acquired and accounted for under the pooling of
interests method of accounting have been included retroactively in the
Consolidated Financial Statements as if the companies had operated as one entity
since inception. Businesses acquired and accounted for under the purchase method
of accounting are included in the Consolidated Financial Statements from the
date of acquisition. The value of the Republic Industries Common Stock issued to
effect business combinations accounted for under the purchase method of
accounting is based on the average market price of Republic Industries Common
Stock over a five day period before and after the parties have reached agreement
on the purchase price and the proposed transaction has been publicly announced,
if applicable.
 
     In September 1998, the Company entered into a definitive agreement with
Waste Management, Inc. ("Waste Management") to acquire certain assets. The
assets to be acquired include 16 landfills, 11 transfer stations and 136
collection routes across the United States as well as disposal agreements at
various Waste Management sites. The Company will pay approximately $490.0
million in cash plus certain additional properties in this transaction which
will be accounted for under the purchase method of accounting. At December 31,
1998, closings had been completed for 6 landfills, 7 transfer stations and all
of the collection routes discussed above, at a purchase price of approximately
$200.8 million consisting of cash and certain properties.
 
     During the year ended 1998, Republic Industries acquired various solid
waste services businesses which were contributed to the Company. The aggregate
purchase price paid by Republic Industries in transactions accounted for under
the purchase method of accounting was $128.3 million, consisting of $60.3
million in cash and approximately 3.4 million shares of Republic Industries
Common Stock valued at $68.0 million. Subsequent to the Initial Public Offering,
the Company acquired various solid waste businesses. The aggregate purchase
price paid by the Company in transactions accounted for under the purchase
method of accounting was $450.5 million consisting of cash and certain
properties.
 
                                       42

<PAGE>   45
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During the year ended December 31, 1997, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $147.9 million
consisting of $11.5 million in cash and 5.7 million shares of Republic
Industries Common Stock valued at $136.4 million. In addition, Republic
Industries issued an aggregate of 34.1 million shares of Republic Industries
Common Stock in transactions accounted for under the pooling of interests method
of accounting. Included in the shares of Republic Industries Common Stock issued
in acquisitions accounted for under the pooling of interests method of
accounting are approximately 0.3 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
 
     During the year ended December 31, 1996, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $87.6 million,
consisting of $16.9 million in cash and 6.6 million shares of Republic
Industries Common Stock valued at $70.7 million. In addition, Republic
Industries issued an aggregate of 40.0 million shares of Republic Industries
Common Stock in transactions accounted for under the pooling of interests method
of accounting. Included in the shares of Republic Industries Common Stock issued
in acquisitions accounted for under the pooling of interests method of
accounting are approximately 1.1 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
 
     The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting for
the years ended December 31:
 

<TABLE>
<CAPTION>
                                                           1998       1997      1996
                                                          -------    ------    ------
<S>                                                       <C>        <C>       <C>
Property and equipment..................................  $ 180.3    $ 36.8    $ 71.8
Cost in excess of net assets acquired...................    572.4     149.1      73.6
Working capital deficit.................................   (108.0)    (18.0)    (20.3)
Long-term debt assumed..................................    (51.7)    (26.8)    (27.1)
Other assets (liabilities)..............................    (39.5)      4.6     (19.5)
Investment by Republic Industries.......................   (128.3)   (148.4)    (79.7)
                                                          -------    ------    ------
Cash used in acquisitions, net of cash acquired.........  $ 425.2    $ (2.7)   $ (1.2)
                                                          =======    ======    ======
</TABLE>

 
     The Company's unaudited pro forma consolidated results of operations
assuming acquisitions accounted for under the purchase method of accounting had
occurred at the beginning of the periods presented are as follows for the years
ended December 31:
 

<TABLE>
<CAPTION>
                                                                1998       1997
                                                              --------   --------
<S>                                                           <C>        <C>
Revenue.....................................................  $1,552.0   $1,392.9
Income from continuing operations...........................     155.5      116.1
Basic and diluted earnings per share........................      1.15       1.21
Weighted average common and common equivalent shares
  outstanding...............................................     135.6       95.7
</TABLE>

 
     The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of the beginning of the
periods presented.
 
                                       43

<PAGE>   46
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4. NOTES PAYABLE AND LONG-TERM DEBT
 
     Notes payable and long-term debt are as follows:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1998       1997
                                                              -------    -------
<S>                                                           <C>        <C>
$1.0 billion unsecured revolving credit facility; interest
  payable using LIBOR based rates (6.4% at December 31,
  1998); $500.0 million matures July 1999 and $500.0 million
  matures 2003..............................................  $ 980.0    $    --
Bonds payable under loan agreements with California
  Pollution Control Financing Authority; interest at
  prevailing market rates (4.3% and 5.0% at December 31,
  1998 and 1997, respectively)..............................     42.0       43.1
Other notes; secured by real property, equipment and other
  assets; interest rates ranging from 4% to 10%; maturing
  through 2009..............................................     35.1       32.0
                                                              -------    -------
                                                              1,057.1       75.1
Less: current portion.......................................   (499.9)     (10.8)
                                                              -------    -------
                                                              $ 557.2    $  64.3
                                                              =======    =======
</TABLE>

 
     At December 31, 1998, aggregate maturities of notes payable and long-term
debt are as follows:
 

<TABLE>
<S>                                                           <C>
1999........................................................  $  499.9
2000........................................................       7.0
2001........................................................       4.5
2002........................................................       4.0
2003........................................................     503.5
Thereafter..................................................      38.2
                                                              --------
                                                              $1,057.1
                                                              ========
</TABLE>

 
     The unsecured revolving credit facility and the loan agreements with the
California Pollution Control Financing Authority require the Company to maintain
certain financial ratios and comply with certain financial covenants. At
December 31, 1998, the Company was in compliance with the financial covenants
under these agreements.
 
5. INCOME TAXES
 
     The components of the provision for income taxes for the years ended
December 31 are as follows:
 

<TABLE>
<CAPTION>
                                                               1998    1997    1996
                                                              ------   -----   -----
<S>                                                           <C>      <C>     <C>
Current:
  Federal...................................................  $ 59.8   $20.9   $30.1
  State.....................................................     7.5     8.5     4.7
Federal and state deferred..................................    23.2    36.5     2.4
Change in valuation allowance...............................    (4.0)     --     0.8
                                                              ------   -----   -----
Provision for income taxes..................................  $ 86.5   $65.9   $38.0
                                                              ======   =====   =====
</TABLE>

 
                                       44

<PAGE>   47
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate for the years ended December 31 is shown below:
 

<TABLE>
<CAPTION>
                                                              1998    1997    1996
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Statutory federal income tax rate...........................  35.0%   35.0%   35.0%
Non-deductible expenses.....................................   1.3     1.5     2.6
State income taxes, net of federal benefit..................   2.1     2.0     3.6
Other, net..................................................  (2.4)   (2.3)    1.1
                                                              ----    ----    ----
Effective income tax rate...................................  36.0%   36.2%   42.3%
                                                              ====    ====    ====
</TABLE>

 
     Components of the net deferred income tax liability in the accompanying
Consolidated Balance Sheets at December 31 are as follows:
 

<TABLE>
<CAPTION>
                                                               1998      1997
                                                              -------   -------
<S>                                                           <C>       <C>
Deferred income tax liabilities:
  Book basis in property over tax basis.....................  $  95.7   $  64.9
Deferred income tax assets:
  Net operating losses and other carryforwards..............       --      (4.0)
  Accruals not currently deductible.........................    (33.0)    (23.0)
Valuation allowance.........................................      8.7       9.6
                                                              -------   -------
Net deferred income tax liability...........................  $  71.4   $  47.5
                                                              =======   =======
</TABLE>

 
     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The Company has provided a valuation allowance to
offset a portion of the deferred tax assets due to uncertainty surrounding the
future realization of such deferred tax assets. The Company adjusts the
valuation allowance in the period management determines it is more likely than
not that deferred tax assets will or will not be realized.
 
6. STOCKHOLDERS' EQUITY
 
     In April 1998, the Company declared a $2.0 billion dividend to Republic
Industries that it paid in the form of notes payable ("Company Notes"). Interest
expense on the Company Notes was $27.6 million for the year ended December 31,
1998.
 
     In June 1998, the Company received a dividend of certain assets from
Resources totaling approximately $437.3 million (the "Resources Dividend"). In
June 1998, the Company prepaid a portion of the amounts outstanding under the
Company Notes totaling $565.4 million using the Resources Dividend, cash and
certain other assets.
 
     In July 1998, the Company amended and restated its Certificate of
Incorporation to authorize capital stock consisting of (a) 50,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), and (b)
750,000,000 shares of Common Stock of which 250,000,000 shares have been
authorized as Class A Common Stock, 125,000,000 shares have been authorized as
Class B Common Stock and 375,000,000 shares may be designated by the Company's
Board of Directors as either Class A Common Stock or Class B Common Stock. In
addition, all 100 shares of common stock previously held by Republic Industries
were converted into 95,688,083 shares of Class B Common Stock. The Class A
Common Stock and Class B Common Stock are identical in all respects, except
holders of Class A Common Stock are entitled to one vote per share while holders
of Class B Common Stock are entitled to five votes per share on all matters
submitted to a vote of the stockholders, including the election of directors.
 
     In July 1998, the Company repaid amounts due to Republic Industries
totaling $395.4 million through the issuance of approximately 16.5 million
shares of Class A Common Stock.
 
                                       45

<PAGE>   48
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In July 1998, the Company completed the Initial Public Offering of
approximately 63.2 million shares of its Class A Common Stock resulting in net
proceeds of approximately $1.4 billion. All of the proceeds from the Initial
Public Offering were used to repay remaining amounts due under the Company
Notes.
 
7. STOCK OPTIONS
 
     In July 1998, the Company adopted the 1998 Stock Incentive Plan ("Stock
Incentive Plan") to provide for grants of options to purchase shares of Class A
Common Stock to employees, non-employee directors and independent contractors of
the Company who are eligible to participate in the Stock Incentive Plan. Options
granted under the Stock Incentive Plan are non-qualified and are granted at a
price equal to the fair market value of the Company's Common Stock at the date
of grant. Generally, options granted will have a term of ten years from the date
of grant, and vest in increments of 25% per year over a four year period on the
yearly anniversary date of the grant. Options granted to non-employee directors
have a term of ten years and vest immediately at the date of grant. The Company
has reserved 20.0 million shares of Class A Common Stock for issuance pursuant
to options granted under the Stock Incentive Plan and Substitute Options (as
defined below). During 1998, options to acquire 573,000 shares of Class A Common
Stock were granted under the Stock Incentive Plan.
 
     The following table summarizes information about the Company's outstanding
and exercisable stock options at December 31, 1998 (shares in thousands):
 

<TABLE>
<CAPTION>
                                                              OUTSTANDING                 EXERCISABLE
                                                    --------------------------------   ------------------
                                                              WEIGHTED-
                                                               AVERAGE     WEIGHTED-            WEIGHTED-
                                                              REMAINING     AVERAGE              AVERAGE
                                                             CONTRACTUAL   EXERCISE             EXERCISE
RANGE OF EXERCISE PRICE                             SHARES   LIFE (YRS.)     PRICE     SHARES     PRICE
- -----------------------                             ------   -----------   ---------   ------   ---------
<S>                                                 <C>      <C>           <C>         <C>      <C>
$14.50-$18.75.....................................  473.0       9.85        $16.81        --     $   --
$23.00-$25.69.....................................  100.0       9.51        $24.35     100.0     $24.35
                                                    -----                              -----
$14.50-$25.69.....................................  573.0       9.79        $18.12     100.0     $24.35
                                                    =====                              =====
</TABLE>

 
     In January 1999, the Board of Directors approved additional grants of
options to acquire approximately 2.0 million shares of Class A Common Stock at
an exercise price of $18 5/16 per share.
 
     Republic Industries has various stock option plans under which options to
acquire shares of Republic Industries Common Stock were granted to employees of
the Company prior to the Initial Public Offering (the "Republic Industries Stock
Options"). Options granted under the plans are non-qualified and are granted at
a price equal to the fair market value of the Republic Industries Common Stock
at the date of grant. Generally, options granted will have a term of ten years
from the date of grant, and will vest in increments of 25% per year over a four
year period on the yearly anniversary of the grant date. As of December 31,
1998, approximately 7.9 million Republic Industries Stock Options held by
employees of the Company were outstanding, 2.8 million of which were
exercisable.
 
     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income. Had compensation cost for stock option
grants under the Republic Industries' stock option plans and the Company's Stock
Incentive Plan been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net income would have decreased
accordingly. Using the Black-Scholes option pricing model for all options
 
                                       46

<PAGE>   49
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
granted after December 31, 1995, the Company's pro forma net income and pro
forma weighted average fair value of options granted, with related assumptions,
are as follows for the years ended December 31:
 

<TABLE>
<CAPTION>
                                                    1998       1997       1996
                                                  --------   --------   --------
<S>                                               <C>        <C>        <C>
Pro forma net income............................  $  132.7   $  108.3   $   47.6
Pro forma earnings per share....................       .98       1.13        .50
Pro forma weighted average fair value of
  Republic Industries Stock Options granted.....     14.45      13.60       7.34
Pro forma weighted average fair value of the
  Company's stock options granted...............      7.71         --         --
Risk free interest rates........................      4.76%      5.74%      5.98%
Expected lives..................................   5 years    5 years    5 years
Expected volatility.............................      40.0%      40.0%      40.0%
</TABLE>

 
     Following the Distribution (as defined in Note 1, Basis of Presentation)
the Company intends to issue substitute options under the Company's Stock
Incentive Plan (collectively "Substitute Options") in substitution for grants of
Republic Industries Stock Options under Republic Industries' stock option plans
as of the date of the Distribution held by individuals employed by the Company
as of the date of the Distribution (the "Company Employees"). Such Substitute
Options will provide for the purchase of a number of shares of Class A Common
Stock determined based on a ratio of average trading prices of Republic
Industries Common Stock and Class A Common Stock immediately prior to the
Distribution. It is not possible to specify how many shares of Class A Common
Stock will be subject to Substitute Options. It is expected that some Republic
Industries Stock Options consisting of stock options held by the Company
Employees will be exercised and that some will be forfeited, and that additional
Republic Industries Stock Options could be granted prior to the date of the
Distribution. In addition, the remaining balance of unexercised Republic
Industries Stock Options will be converted into Substitute Options by reference
to the ratio described above, which will not be known until the time of the
Distribution.
 
8. COMMITMENTS AND CONTINGENCIES
 
LEGAL PROCEEDINGS
 
     The Company is a party to various general legal proceedings which have
arisen in the ordinary course of business. While the results of these matters
cannot be predicted with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position. However, unfavorable resolution could affect the
consolidated results of operations or cash flows for the quarterly periods in
which they are resolved.
 
LEASE COMMITMENTS
 
     The Company and its subsidiaries lease real property, equipment and
software under various operating leases with terms from one to twenty-five
years.
 
                                       47

<PAGE>   50
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Future minimum lease obligations under noncancelable real property,
equipment and software leases with initial terms in excess of one year at
December 31, 1998 are as follows:
 

<TABLE>
<S>                                                           <C>
Year Ending December 31:
1999........................................................  $2.5
2000........................................................   2.3
2001........................................................   1.5
2002........................................................    .9
2003........................................................    .8
Thereafter..................................................    .5
                                                              ----
                                                              $8.5
                                                              ====
</TABLE>

 
LIABILITY INSURANCE
 
     The Company carries general liability, vehicle 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. The Company also carries property insurance.
 
     The Company's liabilities for unpaid and incurred but not reported claims
at December 31, 1998 was $16.9 million under its current risk management program
and $11.1 million under its previous risk management program with Republic
Industries (see Note 10, Related Party Transactions, for further information),
and are included in other current and other liabilities in the accompanying
Consolidated Balance Sheets. While the ultimate amount of claims incurred are
dependent on future developments, in management's opinion, recorded reserves are
adequate to cover the future payment of claims. However, it is reasonably
possible that recorded reserves may not be adequate to cover the future payment
of claims. Adjustments, if any, to estimates recorded resulting from ultimate
claim payments will be reflected in operations in the periods in which such
adjustments are known.
 
OTHER MATTERS
 
     In the normal course of business, the Company is required to post
performance bonds, letters of credit, and/or cash deposits as a financial
guarantee of the Company's performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies by making cash
deposits, obtaining bank letters of credit or by obtaining surety bonds. At
December 31, 1998, surety bonds and letters of credit totaling $380.3 million
expire through 2005.
 
     The Company's business activities are conducted in the context of a
developing and changing statutory and regulatory framework. Governmental
regulation of the waste management industry requires the Company to obtain and
retain numerous governmental permits to conduct various aspects of its
operations. These permits are subject to revocation, modification or denial. The
costs and other capital expenditures which may be required to obtain or retain
the applicable permits or comply with applicable regulations could be
significant.
 
     As a condition to Republic Industries effecting the Distribution (as
defined in Note 1, Basis of Presentation), the Company has agreed to indemnify
Republic Industries for any tax liability suffered by Republic Industries
arising out of actions of the Company after the Distribution that would cause
the Distribution to lose its qualification as a tax-free distribution for
federal income tax purposes.
 
9. RESTRUCTURING AND OTHER CHARGES
 
     During the year ended December 31, 1996, the Company recorded restructuring
and other charges of approximately $8.8 million. These costs included $5.3
million to close certain landfill operations, $1.0 million
 
                                       48

<PAGE>   51
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
of asset write-offs and $2.5 million of merger expenses associated with certain
business combinations accounted for under the pooling of interests method of
accounting. There are no remaining liabilities associated with the 1996
restructuring and other charges as of December 31, 1997.
 
10. RELATED PARTY TRANSACTIONS
 
     Amounts due to Republic Industries consist of the following:
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                                  1997
                                                              ------------
<S>                                                           <C>
Due to Republic Corporate Management Company ("RCMC").......     $107.8
Notes payable to Resources..................................      158.3
                                                                 ------
                                                                 $266.1
                                                                 ======
</TABLE>

 
     The following is an analysis of activity in the due to RCMC account for the
years ended December 31:
 

<TABLE>
<CAPTION>
                                                               1998     1997     1996
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Balance at beginning of period..............................  $107.8   $ 49.3   $86.3
Republic Industries overhead allocations....................     7.5     10.2     8.4
Service Agreement fees......................................     7.5       --      --
Insurance allocations.......................................     9.7     15.9    10.2
Self-insurance reserve allocations..........................    (9.8)    (7.3)   (4.8)
Intercompany purchases......................................    42.4     13.8    12.0
Income taxes................................................    24.0     28.7    23.4
Cash transfers..............................................   (49.6)    (2.8)  (86.2)
Repayment in shares of Class A Common Stock.................  (139.5)      --      --
                                                              ------   ------   -----
Balance at end of period....................................  $   --   $107.8   $49.3
                                                              ======   ======   =====
</TABLE>

 
     Prior to the Initial Public Offering, due to RCMC included allocations of
various expenses from Republic Industries including general and administrative
expenses, risk management premiums, income taxes and other costs. Such
liabilities were non-interest bearing and had no specified repayment terms. In
July 1998, the Company repaid in full amounts due to RCMC as of June 30, 1998
through the issuance of approximately 5.8 million shares of Class A Common
Stock. Subsequent to the Initial Public Offering, due to RCMC consists primarily
of charges under the Services Agreement described below. Such amounts are
non-interest bearing and are repaid periodically using cash.
 
     Prior to the Initial Public Offering, Republic Industries' corporate
general and administrative costs not specifically attributable to its operating
subsidiaries were allocated to the Company based upon the ratio of the Company's
invested capital to Republic Industries' consolidated invested capital. Such
allocations are included in the Company's selling, general and administrative
costs and were approximately $7.5 million, $10.2 million and $8.4 million for
the years ended December 31, 1998, 1997 and 1996, respectively. These amounts
approximate management's estimate of Republic Industries' corporate general and
administrative costs required to support the Company's operations. Management
believes that the amounts allocated to the Company are reasonable and are no
less favorable to the Company than the expenses the Company would have incurred
to obtain such services on its own or from unaffiliated third parties.
 
     In June 1998, the Company and Republic Industries entered into a services
agreement (the "Services Agreement") pursuant to which Republic Industries
provides to the Company certain accounting, auditing, cash management, corporate
communications, corporate development, financial and treasury, human resources
and benefit plan administration, insurance and risk management, legal,
purchasing and tax services. In exchange for the provision of such services,
fees are payable by the Company to Republic Industries in the amount of $1.25
million per month, subject to review and adjustment from time to time as the
Company
 
                                       49

<PAGE>   52
                            REPUBLIC SERVICES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
reduces the amount of services it obtains from Republic Industries. Effective
January 1, 1999, such fees payable by the Company to Republic Industries have
been reduced to $.9 million per month. The Company believes that the fees for
services provided under the Services Agreement are no less favorable to the
Company than could be obtained by the Company internally or from unaffiliated
third parties. Charges under the Services Agreement for the year ended December
31, 1998 were $7.5 million and are included in selling, general and
administrative expenses.
 
     Prior to the Initial Public Offering, the Company participated in Republic
Industries' combined risk management programs for property, casualty and general
liability insurance. The Company was charged for annual premiums of $9.7
million, $15.9 million and $10.2 million for the years ended December 31, 1998,
1997 and 1996, respectively.
 
     Notes payable to Resources represent borrowings prior to the Initial Public
Offering under revolving credit facilities to fund the Company's operations and
to repay debt assumed in acquisitions. Borrowings under these facilities bear
interest at prime plus 50 basis points and are payable on demand. In July 1998,
the Company repaid the notes payable to Resources through the issuance of
approximately 10.7 million shares of Class A Common Stock. Interest expense on
notes payable to Resources was $9.7 million, $20.2 million and $18.8 million for
the years ended December 31, 1998, 1997 and 1996, respectively.
 
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 1998 and 1997.
 

<TABLE>
<CAPTION>
                                                              FIRST    SECOND     THIRD    FOURTH
                                                             QUARTER   QUARTER   QUARTER   QUARTER
                                                             -------   -------   -------   -------
<S>                                                    <C>   <C>       <C>       <C>       <C>
Revenue..............................................  1998  $300.8    $335.9    $355.0    $377.4
                                                       1997  $263.2    $283.7    $287.6    $293.2
Operating income.....................................  1998  $ 59.0    $ 70.7    $ 75.3    $ 79.3
                                                       1997  $ 41.0    $ 47.1    $ 56.3    $ 56.9
Net income...........................................  1998  $ 34.8    $ 25.1    $ 46.2    $ 47.6
                                                       1997  $ 23.2    $ 25.9    $ 32.5    $ 34.6
Basic and diluted net income per share...............  1998  $  .36    $  .26    $  .26    $  .27
                                                       1997  $  .24    $  .27    $  .34    $  .36
Weighted average common and common equivalent shares
  outstanding........................................  1998    95.7      95.7     175.4     175.4
                                                       1997    95.7      95.7      95.7      95.7
</TABLE>

 
                                       50

<PAGE>   53
 

I
TEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
     None.
 
                                       51

<PAGE>   54
 

                                    PART III
 
     The information required by Items 10, 11, 12 and 13 of Part III of Form
10-K will be set forth in the Proxy Statement of the Company relating to the
1999 Annual Meeting of Stockholders and is incorporated by reference herein.
 
                                       52

<PAGE>   55
 

                                    PART IV
 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
 
(a) Exhibits:
 

<TABLE>
<CAPTION>
EXHIBITS                            DESCRIPTION OF EXHIBIT
- ---------                           ----------------------
<C>         <C>  <S>
   3.1       --  Amended and Restated Certificate of Incorporation of the
                 Company (incorporated by reference to Exhibit 3.1 of the
                 Registrant's Quarterly Report on Form 10-Q for the period
                 ended June 30, 1998).
   3.2       --  Amended and Restated Bylaws of the Company (incorporated by
                 reference to Exhibit 3.2 of the Registrant's Quarterly
                 Report on Form 10-Q for the period ended June 30, 1998).
   4.1       --  Form of the Company's Class A Common Stock Certificate
                 (incorporated by reference to Exhibit 4.1 of the
                 Registrant's Registration Statement on Form S-1/A, Amendment
                 No. 2, dated June 29, 1998).
   4.2       --  Long Term Credit Agreement dated as of July 10, 1998 among
                 the Company, Bank of America National Trust and Savings
                 Association, as Administrative Agent, and the several
                 financial institutions party thereto (incorporated by
                 reference to Exhibit 4.1 of the Registrant's Quarterly
                 Report on Form 10-Q for the period ended June 30, 1998).
  10.1       --  Separation and Distribution Agreement dated as of June 30,
                 1998 by and between the Company and Republic Industries
                 (incorporated by reference to Exhibit 10.1 of the
                 Registrant's Quarterly Report on Form 10-Q for the period
                 ended June 30, 1998).
  10.2       --  Employee Benefits Agreement dated as of June 30, 1998 by and
                 between the Company and Republic Industries (incorporated by
                 reference to Exhibit 10.2 of the Registrant's Quarterly
                 Report on Form 10-Q for the period ended June 30, 1998).
  10.3       --  Services Agreement dated as of June 30, 1998 by and between
                 the Company and Republic Industries (incorporated by
                 reference to Exhibit 10.3 of the Registrant's Quarterly
                 Report on Form 10-Q for the period ended June 30, 1998).
  10.4       --  Tax Indemnification and Allocation Agreement dated as of
                 June 30, 1998 by and between the Company and Republic
                 Industries (incorporated by reference to Exhibit 10.4 of the
                 Registrant's Quarterly Report on Form 10-Q for the period
                 ended June 30, 1998).
  10.5       --  1998 Stock Incentive Plan (incorporated by reference to
                 Exhibit 10.5 of the Registrant's Registration Statement on
                 Form S-1/A, Amendment No. 2, dated June 30, 1998).
  10.6*      --  Employment Agreement dated as of December 7, 1998 by and
                 between James E. O'Connor and the Company.
  10.7*      --  Employment Agreement dated as of January 11, 1999 by and
                 between James H. Cosman and the Company.
  21.1*      --  Subsidiaries of the Company.
  27.1*      --  Financial Data Schedule for the Year Ended December 31, 1998
                 (for SEC use only).
</TABLE>

 
- ---------------
*  filed herewith
 
     (b) Financial Statement Schedule. The following financial statement
schedule is filed on page 56 herewith:
 
          Financial Statement Schedule II, Valuation and Qualifying Accounts and
     Reserves, for Each of the Three Years Ended December 31, 1998.
 
                                       53

<PAGE>   56
 
     Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
 
     (c) Reports on Form 8-K:
 
     Form 8-K, dated September 28, 1998 (filed October 1, 1998), Item 5,
reporting that the Company had entered into a definitive agreement with Waste
Management, Inc. to acquire certain assets.
 
                                       54

<PAGE>   57
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          REGISTRANT:
 
                                          REPUBLIC SERVICES, INC.
 
                                          By:     /s/ H. WAYNE HUIZENGA
                                            ------------------------------------
                                                     H. Wayne Huizenga
                                                   Chairman of the Board
January 28, 1999
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
 

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                            <C>
 
                /s/ H. WAYNE HUIZENGA                  Chairman of the Board          January 28, 1999
- -----------------------------------------------------
                  H. Wayne Huizenga
 
                /s/ HARRIS W. HUDSON                   Vice Chairman and Director     January 28, 1999
- -----------------------------------------------------
                  Harris W. Hudson
 
                /s/ JAMES E. O'CONNOR                  Chief Executive Officer and    January 28, 1999
- -----------------------------------------------------    Director (principal
                  James E. O'Connor                      executive officer)
 
                  /s/ TOD C. HOLMES                    Senior Vice President and      January 28, 1999
- -----------------------------------------------------    Chief Financial Officer
                    Tod C. Holmes                        (principal financial
                                                         officer and principal
                                                         accounting officer)
 
                 /s/ JOHN W. CROGHAN                   Director                       January 28, 1999
- -----------------------------------------------------
                   John W. Croghan
 
                /s/ ALLAN C. SORENSEN                  Director                       January 28, 1999
- -----------------------------------------------------
                  Allan C. Sorensen
</TABLE>

 
                                       55

<PAGE>   58
 
                            REPUBLIC SERVICES, INC.
 
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                  SCHEDULE II
                                 (IN MILLIONS)
 

<TABLE>
<CAPTION>
                                                 BALANCE AT   ADDITIONS    ACCOUNTS              BALANCE AT
                                                 BEGINNING    CHARGED TO   WRITTEN                  END
                                                  OF YEAR       INCOME       OFF      OTHER(1)    OF YEAR
                                                 ----------   ----------   --------   --------   ----------
<S>                                              <C>          <C>          <C>        <C>        <C>
CLASSIFICATIONS
Allowance for doubtful accounts:
1998...........................................    $13.6         $5.1       $(7.2)     $10.6       $22.1
1997...........................................      8.3          4.1        (4.1)       5.3        13.6
1996...........................................      7.2          2.6        (2.5)       1.0         8.3
</TABLE>

 
- ---------------
 
(1) Allowance of acquired businesses.
 
                                       56

<PAGE>   59
 

                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
EXHIBITS
- --------                           DESCRIPTION OF EXHIBIT
<C>        <C>  <S>
   3.1      --  Amended and Restated Certificate of Incorporation of the
                Company (incorporated by reference to Exhibit 3.1 of the
                Registrant's Quarterly Report on Form 10-Q for the period
                ended June 30, 1998).
   3.2      --  Amended and Restated Bylaws of the Company (incorporated by
                reference to Exhibit 3.2 of the Registrant's Quarterly
                Report on Form 10-Q for the period ended June 30, 1998).
   4.1      --  Form of the Company's Class A Common Stock Certificate
                (incorporated by reference to Exhibit 4.1 of the
                Registrant's Registration Statement on Form S-1/A, Amendment
                No. 2, dated June 29, 1998).
   4.2      --  Long Term Credit Agreement dated as of July 10, 1998 among
                the Company, Bank of America National Trust and Savings
                Association, as Administrative Agent, and the several
                financial institutions party thereto (incorporated by
                reference to Exhibit 4.1 of the Registrant's Quarterly
                Report on Form 10-Q for the period ended June 30, 1998).
  10.1      --  Separation and Distribution Agreement dated as of June 30,
                1998 by and between the Company and Republic Industries
                (incorporated by reference to Exhibit 10.1 of the
                Registrant's Quarterly Report on Form 10-Q for the period
                ended June 30, 1998).
  10.2      --  Employee Benefits Agreement dated as of June 30, 1998 by and
                between the Company and Republic Industries (incorporated by
                reference to Exhibit 10.2 of the Registrant's Quarterly
                Report on Form 10-Q for the period ended June 30, 1998.)
  10.3      --  Services Agreement dated as of June 30, 1998 by and between
                the Company and Parent (incorporated by reference to Exhibit
                10.3 of the Registrant's Quarterly Report on Form 10-Q for
                the period ended June 30, 1998).
  10.4      --  Tax Indemnification and Allocation Agreement dated as of
                June 30, 1998 by and between the Company and Republic
                Industries (incorporated by reference to Exhibit 10.4 of the
                Registrant's Quarterly Report on Form 10-Q for the period
                ended June 30, 1998).
  10.5      --  1998 Stock Incentive Plan (incorporated by reference to
                Exhibit 10.5 of the Registrant's Registration Statement on
                Form S-1/A, Amendment No. 2, dated June 30, 1998).
  10.6*     --  Employment Agreement dated as of December 7, 1998 by and
                between James E. O'Connor and the Company.
  10.7*     --  Employment Agreement dated as of January 11, 1999 by and
                between James H. Cosman and the Company.
  21.1*     --  Subsidiaries of the Company.
  27.1*     --  Financial Data Schedule for the Year Ended December 31, 1998
                (for SEC use only).
</TABLE>

 
- ---------------
* filed herewith
 
                                       57





<PAGE>   1
                                                                    Exhibit 10.6

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of
December 7, 1998, by and between REPUBLIC SERVICES, INC., a Delaware corporation
(the "Company"), and JAMES E. O'CONNOR, a Florida resident (the "Employee").

         In consideration of the mutual representations, warranties, covenants
and agreements contained in this Agreement, the parties hereto agree as follows:

         1.       EMPLOYMENT.

                  (a) RETENTION. The Company agrees to employ the Employee as
its Chief Executive Officer, and the Employee agrees to accept such employment,
subject to the terms and conditions of this Agreement. The Company also agrees
that its Board of Directors shall appoint the Employee to the Board as of the
effective date of this Agreement, to serve until the next annual meeting of
stockholders of the Company, and that he shall be nominated for election to the
Board at each annual meeting of the stockholders of the Company during the term
of this Agreement.

                  (b) EMPLOYMENT PERIOD. The period during which the Employee
shall serve as an employee of the Company shall commence on the effective date
hereof and, unless earlier terminated pursuant to this Agreement, shall expire
on the third anniversary of the
 effective date hereof; provided that commencing
on the third anniversary of the effective date hereof and on each anniversary
date thereafter, the Employment Period shall automatically be extended for one
additional year unless at least 90 days prior to such anniversary, the Company
or the Employee shall have given written notice that it or he, as applicable,
does not wish to extend this Agreement (the "Employment Period").

                  (c) DUTIES AND RESPONSIBILITIES. During the Employment Period,
the Employee shall serve as Chief Executive Officer and shall have such
authority and responsibility and perform such duties as may be assigned to him
from time to time at the direction of the Board of Directors of the Company, and
in the absence of such assignment, such duties customary to Employee's office as
are necessary to the business and operations of the Company. During the
Employment Period, the Employee's employment shall be full time and the Employee
shall perform his duties honestly, diligently, in good faith and in the best
interests of the Company and shall use his best efforts to promote the interests
of the Company. All executive officers of the Company (except for the Chairman
and the Vice Chairman) shall report to the Chief Executive Officer, and the
Employee shall in that capacity have the authority and responsibility to assign
appropriate duties to such other executive officers as are necessary to the
business and operations of the Company.

                  (d) PRIOR EMPLOYER. The Company acknowledges that the Employee
is bound by certain covenants in favor of his prior employer, copies of which
have been provided to the





<PAGE>   2



Company. The Employee shall be entitled to rely on advice rendered to him by the
General Counsel of the Company with respect to the scope of such covenants and
activities which may be undertaken by the Employee on behalf of the Company or
in fulfillment of his obligations under this Agreement in light of such
covenants. The Company, at its expense, will defend and hold harmless the
Employee against any actions brought by his former employer against the Employee
seeking to enforce such covenants or seeking damages from any alleged breach by
the Employee of such covenants, provided that the Employee had sought and
followed the advice of the General Counsel with respect to the activities that
are the subject matter of such action.

                  (e) OTHER ACTIVITIES. Except upon the prior written consent of
the Company, the Employee, during the Employment Period, will not accept any
other employment. The Employee shall be permitted to engage in any
non-competitive businesses, not-for-profit organizations and other ventures,
such as passive real estate investments, serving on charitable and civic boards
and organizations, and similar activities, so long as such activities do not
materially interfere with or detract from the performance of his duties or
constitute a breach of any of the provisions contained in Section 4 hereof.

         2.       COMPENSATION.

                  (a) BASE SALARY. In consideration for the Employee's services
hereunder and the restrictive covenants contained herein, during the Employment
Period, the Employee shall be paid an annual base salary of $385,000 (the
"Salary"), payable in accordance with the Company's customary payroll practices,
which Salary shall be reviewed annually by the Board of Directors of the
Company. The first annual salary review shall be performed in the first quarter
of 1999. No such review will result in the Employee's salary being reduced to a
level below $385,000 per annum.

                  (b) BONUS. In addition to the Salary, the Employee shall be
eligible for an annual bonus ("Bonus") in an amount of up to 30% of the
Employee's Base Salary during the Employment Period. The Bonus shall be based on
the achievement of corporate goals and objectives, and both such goals and
objectives and the achievement thereof shall be determined in the sole
discretion of the board of directors of the Company. With respect to any Fiscal
Year during the Employment Period in which the Employee is employed by the
Company for less than the entire Fiscal Year, the Bonus shall be prorated for
the period during which the Employee was so employed. The Bonus shall be payable
within thirty (30) days after the end of the Company's Fiscal Year. The term
"Fiscal Year" as used herein shall mean each period of twelve (12) calendar
months commencing on January 1st of each calendar year during the Employment
Period and expiring on the following December 31st.

                  (c) STOCK OPTIONS. The Company shall issue to the Employee
options to purchase 250,000 shares of the Company's Class A Common Stock
pursuant to the terms of an Option Agreement in the form attached hereto as
Exhibit A, in accordance with the Company's 1998 Stock Incentive Plan. The grant
date shall be the day this Agreement is executed and delivered by the parties
(which may be prior to the effective date set forth above), and the exercise
price shall be


                                      - 2 -



<PAGE>   3



based upon the closing price of a share of Class A Common Stock on the New York
Stock Exchange on the last trading day prior to that date. Options to purchase
62,500 shares shall be vested and immediately exercisable upon grant, and
options to purchase an additional 46,875 shares shall vest and become
exercisable each year on the first four anniversary dates of the grant date.

                  (d) BENEFITS. During the Employment Period, the Employee shall
be entitled to participate in any health insurance programs, life insurance
programs, disability programs, stock option plans, bonus plans, pension plans
and other fringe benefit plans and programs as are from time to time established
and maintained for the benefit of the Company's employees or executive officers
generally, subject to the provisions of such plans and programs.

                  (e) EXPENSES. In addition to the Base Salary and benefits
described above, during the Employment Period, the Employee shall be reimbursed
for all out-of-pocket expenses reasonably incurred by him on behalf of or in
connection with the business of the Company, pursuant to the normal standards
and guidelines followed from time to time by the Company.

         3.       TERMINATION.

                  (a) FOR CAUSE. At any time during the Employment Period, the
Company shall have the right to terminate the Employment Period and to discharge
the Employee for Cause (as defined below) effective upon delivery of written
notice to the Employee. Upon any such termination by the Company for Cause, the
Employee or his legal representatives shall be entitled to that portion of the
Salary prorated through the date of termination, and the Company shall have no
further obligations hereunder from and after the date of such termination.
Termination for Cause shall mean termination because of (i) the Employee's
breach of his covenants contained in this Agreement, (ii) the Employee's failure
or refusal to perform the duties and responsibilities required to be performed
by the Employee under the terms of this Agreement, (iii) the Employee's gross
negligence or willful misconduct in the performance of his duties hereunder,
(iv) the Employee's commission of an act constituting a felony, (v) the
Employee's commission of an act (other than the good faith exercise of his
business judgment in the exercise of his responsibilities) resulting in material
damages to the Company or any of its subsidiaries or affiliates (the "Republic
Group"), or (vi) the Employee's inability to perform his duties and
responsibilities as provided herein for reasons other than due to his death,
physical or mental disability or sickness extending for, or reasonably expected
to extend for, greater than sixty days ("death or disability"). In the event of
termination for Cause pursuant to clauses (i) or (ii) above, the Company shall
first advise the Employee of the nature of such breach or the failure or refusal
to perform, and shall provide the Employee with a 30 day period to cure such
breach or to perform prior to the notice of termination for Cause becoming
effective. If the Employee shall resign or otherwise terminate his employment
with the Company, other than for Good Reason (as defined in (b) below), the
Employee shall be deemed for purposes of this Agreement to have been terminated
for Cause, and the Company shall have no further obligations hereunder from and
after the date of such resignation or other termination.


                                      - 3 -



<PAGE>   4



                  (b) WITHOUT CAUSE AND FOR GOOD REASON. At any time during the
Employment Period, (i) the Company shall have the right to terminate the
Employment Period and to discharge the Employee without Cause effective upon
delivery of written notice to the Employee, and (ii) the Employee shall have the
right to terminate the Employment Period for Good Reason effective upon delivery
of written notice to the Company. For purposes of this Agreement, "Good Reason"
shall mean: (i) the Company's demand that the Employee relocate his principal
office to an location outside of Broward County, Florida, (ii) the Company has
materially reduced the duties and responsibilities of the Employee to a level
not appropriate for a Chief Executive Officer, (iii) a majority of the directors
in office as of the date hereof (to the extent they are nominated for
reelection) are not reelected to serve by vote of the Company's stockholders,
(iv) the Company has materially breached any provision of this Agreement and has
not cured such breach following 30 days' notice of such breach from the
Employee. Upon any such termination by the Company without Cause, or by the
Employee for Good Reason (or due to the Employee's death or disability), the
Employee (or his estate) shall be entitled, without any mitigation obligation,
to continue to receive his Salary (at the level in effect at the time of such
termination) payable in accordance with Section 2(a), when and as the same would
have been due and payable hereunder but for such termination, and his health
insurance benefits, for a period ending on the later of the first anniversary of
the date of such termination or the end of the current Employment Period (the
"Severance Period"), and otherwise the Company shall have no further obligations
hereunder from and after the date of such termination; PROVIDED, HOWEVER, that
the Employee shall only be entitled to such Salary continuation payments as long
as he is in compliance with the provisions of Sections 4 and 5 below. In
addition, in the event of termination by the Company without Cause, or by the
Employee for Good Reason, the Employee shall be entitled to exercise any stock
options which are vested and exercisable as of the date of such termination at
any time prior to the end of the Severance Period.

         4.       RESTRICTIVE COVENANTS. In consideration of the foregoing, the
Employee agrees that during the Employment Period, and for a period of three (3)
years following the termination of the Employment Period, the Employee shall not
directly or indirectly:

                  (a) alone or as a partner, joint venturer, officer, director,
member, employee, consultant, agent, independent contractor or stockholder of,
or lender to, any company or business, (i) engage in the business of solid waste
collection, disposal or recycling (the "Solid Waste Services Business") in any
market in which the Republic Group does business, or any other line of business
which is entered into by the Republic Group during the Employment Period, or
(ii) compete with the Republic Group in acquiring or merging with any other
business or acquiring the assets of such other business; or

                  (b) for any reason, (i) induce any customer of the Republic
Group to patronize any business directly or indirectly in competition with the
Solid Waste Services Business conducted by the Republic Group in any market in
which the Republic Group does business; (ii) canvass, solicit or accept from any
customer of the Republic Group any such competitive business; or (iii) request
or advise any customer or vendor of the Republic Group to withdraw, curtail or
cancel any such customer's or vendor's business with the Republic Group; or


                                      - 4 -



<PAGE>   5




                  (c) for any reason, employ, or knowingly permit any company or
business directly or indirectly controlled by him, to employ, any person who was
employed by the Republic Group at or within the prior six months, or in any
manner seek to induce any such person to leave his or her employment.

                  Notwithstanding the foregoing, the beneficial ownership of
less than five percent (5%) of the shares of stock of any corporation having a
class of equity securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section.

         5.       CONFIDENTIALITY. The Employee agrees that at all times during
and after the Employment Period, the Employee shall (i) hold in confidence and
refrain from disclosing to any other party all information, whether written or
oral, tangible or intangible, of a private, secret, proprietary or confidential
nature, of or concerning the Republic Group and their business and operations,
and all files, letters, memoranda, reports, records, computer disks or other
computer storage medium, data, models or any photographic or other tangible
materials containing such information ("Confidential Information"), including
without limitation, any sales, promotional or marketing plans, programs,
techniques, practices or strategies, any expansion plans (including existing and
entry into new geographic and/or product markets), and any customer lists, (ii)
use the Confidential Information solely in connection with his employment with
the Republic Group and for no other purpose, (iii) take all precautions
necessary to ensure that the Confidential Information shall not be, or be
permitted to be, shown, copied or disclosed to third parties, without the prior
written consent of the Republic Group, and (iv) observe all security policies
implemented by the Republic Group from time to time with respect to the
Confidential Information. In the event that the Employee is ordered to disclose
any Confidential Information, whether in a legal or regulatory proceeding or
otherwise, the Employee shall provide the Republic Group with prompt notice of
such request or order so that the Republic Group may seek to prevent disclosure.
In the case of any disclosure, the Employee shall disclose only that portion of
the Confidential Information that he is ordered to disclose.

         6.       SPECIFIC PERFORMANCE; INJUNCTION. The parties agree and
acknowledge that the restrictions contained in Sections 4 and 5 are reasonable
in scope and duration and are necessary to protect the Republic Group. If any
provision of Section 4 or 5 as applied to any party or to any circumstance is
adjudged by a court to be invalid or unenforceable, the same shall in no way
affect any other circumstance or the validity or enforceability of any other
provision of this Agreement. If any such provision, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced. The Employee agrees
and acknowledges that the breach of Section 4 or 5 will cause irreparable injury
to the Republic Group and upon breach of any provision of such Sections, the
Republic Group shall be entitled to injunctive relief, specific performance or
other equitable relief,


                                      - 5 -



<PAGE>   6



without being required to post a bond; PROVIDED, HOWEVER, that, this shall in no
way limit any other remedies which the Republic Group may have (including,
without limitation, the right to seek monetary damages).

         7.       NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery to, the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate in writing to the other parties): (a) if to the Company,
at its principal executive offices, addressed to the Chairman of the Board, with
a copy to the General Counsel; and (b) if to the Employee, at the address listed
on the signature page hereto.

         8.       AMENDMENT; WAIVER. This Agreement may not be modified, 
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.

         9.       ASSIGNMENT; THIRD PARTY BENEFICIARY. This Agreement, and the
Employee's rights and obligations hereunder, may not be assigned or delegated by
him. The Company may assign its rights, and delegate its obligations, hereunder
to any affiliate of the Company, or any successor to the Company or its Solid
Waste Services Business, specifically including the restrictive covenants set
forth in Section 4 hereof. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon its respective
successors and assigns.

         10.      SEVERABILITY; SURVIVAL. In the event that any provision of
this Agreement is found to be void and unenforceable by a court of competent
jurisdiction, then such unenforceable provision shall be deemed modified so as
to be enforceable (or if not subject to modification then eliminated herefrom)
for the purpose of those procedures to the extent necessary to permit the
remaining provisions to be enforced. The provisions of Sections 4 and 5 will
survive the termination for any reason of the Employee's relationship with the
Company.

         11.      COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.


                                      - 6 -



<PAGE>   7



         12.      GOVERNING LAW. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Florida
applicable to contracts executed and to be wholly performed within such State.

         13.      ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of its subject matter and supersedes all
prior agreements and understandings (oral or written) between or among the
parties with respect to such subject matter.

         14.      HEADINGS. The headings of Paragraphs and Sections are for
convenience of reference and are not part of this Agreement and shall not affect
the interpretation of any of its terms.

         15.      CONSTRUCTION. This Agreement shall be construed as a whole
according to its fair meaning and not strictly for or against any party. The
parties acknowledge that each of them has reviewed this Agreement and has had
the opportunity to have it reviewed by their respective attorneys and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not apply in the interpretation of this Agreement.

         16.      ATTORNEY'S FEES. The prevailing party in any litigation
arising out of this Agreement shall be entitled to recover its attorneys' fees
and costs from the other party.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      - 7 -



<PAGE>   8



         IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.


                                    REPUBLIC SERVICES, INC., a Delaware
                                    corporation



                                    By:  /s/ Harris W. Hudson
                                       -----------------------------------------
                                         Name:  Harris W. Hudson
                                              ----------------------------------
                                         Title: Vice Chairman
                                               ---------------------------------



                                    EMPLOYEE:


                                    /s/ James E. O'Connor
                                    --------------------------------------------
                                    JAMES E. O'CONNOR


                                    Address for Notices:

                                    [omitted]
                                    --------------------------------------------

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

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

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






                                      - 8 -



<PAGE>   1
                                                                    Exhibit 10.7

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is entered into this 11th day 
of January, 1999, by and between REPUBLIC SERVICES, INC., a Delaware corporation
(the "Company"), and JAMES H. COSMAN, SR., a Florida resident (the "Employee").

                                                  R E C I T A L S

         A. Employee and Republic Industries, Inc., a Delaware corporation and
the parent of Company ("Republic") are parties to that certain Offer Letter,
dated January 9, 1997 (the "Letter"). Pursuant to and in accordance with the
terms and conditions set for in the Letter, Employee served as the President and
Chief Operating Officer of Republic's Solid Waste Division for the period
commencing on January 6, 1997 and continuing through and including January 6,
2000 (the "Effective Date").

         B. On June 30, 1998, the Company and Republic entered into a Separation
and Distribution Agreement (the "Separation Agreement") pursuant to which (i)
the Company was separated from Republic's other business, (ii) Republic caused
the Company to consummate an initial public offering of the Company's common
stock, and (iii) Republic agreed, upon the satisfaction of certain conditions,
to distribute to Republic's stockholders on a tax-free basis. As part of the
transactions consummated pursuant
 to the Separation Agreement, various
obligations of Republic (including Republic's obligations under the Letter) were
transferred to and assumed by the Company and Republic received a novation from
its obligations thereunder.

         C. The parties hereto desire to affirm, amend and restate the
provisions of the Letter on the terms and conditions hereinafter provided.

                                A G R E E M E N T

         In consideration of the mutual representations, warranties, covenants
and agreements contained in this Agreement, subject to ratification of this
Agreement by the Compensation Committee of the Board of Directors, the parties
hereto agree as follows:

         1.       EMPLOYMENT.

                  (a) RETENTION. The Company agrees to employ the Employee as
its President and Chief Operating Officer, and the Employee agrees to accept
such employment, subject to the terms and conditions of this Agreement.

                  (b) EMPLOYMENT PERIOD. The period during which the Employee
shall serve as an employee of the Company shall commence on the date hereof and,
unless earlier terminated



<PAGE>   2



pursuant to this Agreement, shall expire on the third anniversary of the
Effective Date; provided that commencing on the third anniversary of the
Effective Date and on each anniversary date thereafter, the Employment Period
shall automatically be extended for one additional year unless at least 90 days
prior to such anniversary, the Company or the Employee shall have given written
notice that it or he, as applicable, does not wish to extend this Agreement (the
"Employment Period").

                  (c) DUTIES AND RESPONSIBILITIES. During the Employment Period,
the Employee shall serve as Chief Operating Officer and shall have such
authority and responsibility and perform such duties as may be assigned to him
from time to time by the Chief Executive Officer of the Company, and in the
absence of such assignment, such duties customary to Employee's office as are
necessary to the business and operations of the Company. During the Employment
Period, the Employee's employment shall be full time and the Employee shall
perform his duties honestly, diligently, in good faith and in the best interests
of the Company and shall use his best efforts to promote the interests of the
Company.

                  (d) OTHER ACTIVITIES. Except upon the prior written consent of
the Company, the Employee, during the Employment Period, will not accept any
other employment. The Employee shall be permitted to engage in any
non-competitive businesses, not-for-profit organizations and other ventures,
such as passive real estate investments, serving on charitable and civic boards
and organizations, and similar activities, so long as such activities do not
materially interfere with or detract from the performance of his duties or
constitute a breach of any of the provisions contained in Section 4 hereof.

         2.       COMPENSATION.

                  (a) BASE SALARY. In consideration for the Employee's services
hereunder and the restrictive covenants contained herein, during the Employment
Period, the Employee shall be paid an annual base salary of $400,000 (the
"Salary"), payable in accordance with the Company's customary payroll practices,
which Salary shall be reviewed annually by the Board of Directors of the
Company.

                  (b) BONUS. In addition to the Salary, the Employee shall be
eligible for an annual bonus ("Bonus") in an amount of up to 30% of the
Employee's Base Salary during the Employment Period. The Bonus shall be based on
the achievement of corporate goals and objectives, and both such goals and
objectives and the achievement thereof shall be determined in the sole
discretion of the board of directors of the Company. With respect to any Fiscal
Year during the Employment Period in which the Employee is employed by the
Company for less than the entire Fiscal Year, the Bonus shall be prorated for
the period during which the Employee was so employed. The Bonus shall be payable
within thirty (30) days after the end of the Company's Fiscal Year. The term
"Fiscal Year" as used herein shall mean each period of twelve (12) calendar
months commencing on January 1st of each calendar year during the Employment
Period and expiring on the following December 31st.


                                      - 2 -



<PAGE>   3




                  (c) BENEFITS. During the Employment Period, the Employee shall
be entitled to participate in any health insurance programs, life insurance
programs, disability programs, stock option plans, bonus plans, pension plans
and other fringe benefit plans and programs as are from time to time established
and maintained for the benefit of the Company's employees or executive officers
generally, subject to the provisions of such plans and programs.

                  (d) EXPENSES. In addition to the Base Salary and benefits
described above, during the Employment Period, the Employee shall be reimbursed
for all out-of-pocket expenses reasonably incurred by him on behalf of or in
connection with the business of the Company, pursuant to the normal standards
and guidelines followed from time to time by the Company.

         3.       TERMINATION.

                  (a) FOR CAUSE. At any time during the Employment Period, the
Company shall have the right to terminate the Employment Period and to discharge
the Employee for Cause (as defined below) effective upon delivery of written
notice to the Employee. Upon any such termination by the Company for Cause, the
Employee or his legal representatives shall be entitled to that portion of the
Salary prorated through the date of termination, and the Company shall have no
further obligations hereunder from and after the date of such termination.
Termination for Cause shall mean termination because of (i) the Employee's
material breach of his covenants contained in this Agreement (other than the
covenants set forth in Sections 4 and 5 of this Agreement, the breach of which
shall not be subject to a standard of materiality), (ii) the Employee's failure
or refusal to perform the duties and responsibilities required to be performed
by the Employee under the terms of this Agreement, (iii) the Employee's gross
negligence or willful misconduct in the performance of his duties hereunder,
(iv) the Employee's commission of an act constituting a felony, (v) the
Employee's commission of an act (other than the good faith exercise of his
business judgment in the exercise of his responsibilities) resulting in material
damages to the Company or any of its subsidiaries or affiliates (the "Republic
Group"), or (vi) the Employee's inability to perform his duties and
responsibilities as provided herein for reasons other than due to his death,
physical or mental disability or sickness extending for, or reasonably expected
to extend for, greater than sixty days ("death or disability"). In the event of
termination for Cause pursuant to clauses (i) or (ii) above, the Company shall
first advise the Employee of the nature of such breach or the failure or refusal
to perform, and shall provide the Employee with a 30 day period to cure such
breach or to perform prior to the notice of termination for Cause becoming
effective. If the Employee shall resign or otherwise terminate his employment
with the Company, other than for Good Reason (as defined in (b) below), the
Employee shall be deemed for purposes of this Agreement to have been terminated
for Cause, and the Company shall have no further obligations hereunder from and
after the date of such resignation or other termination.

                  (b) WITHOUT CAUSE AND FOR GOOD REASON. At any time during the
Employment Period, (i) the Company shall have the right to terminate the
Employment Period



                                      - 3 -



<PAGE>   4



and to discharge the Employee without Cause effective upon delivery of written
notice to the Employee, and (ii) the Employee shall have the right to terminate
the Employment Period for Good Reason effective upon delivery of written notice
to the Company. For purposes of this Agreement, "Good Reason" shall mean: (i)
the Company's demand that the Employee relocate his principal office to an
location outside of Broward County, Florida, (ii) the Company has materially
reduced the duties and responsibilities of the Employee to a level not
appropriate for a President and Chief Operating Officer, (iii) a majority of the
directors in office as of the date hereof (to the extent they are nominated for
reelection) are not reelected to serve by vote of the Company's stockholders,
(iv) the Company has materially breached any provision of this Agreement and has
not cured such breach following 30 days' notice of such breach from the
Employee. Upon any such termination by the Company without Cause, or by the
Employee for Good Reason (or due to the Employee's death or disability), the
Employee (or his estate) shall be entitled, without any mitigation obligation,
to continue to receive his Salary (at the level in effect at the time of such
termination) payable in accordance with Section 2(a), when and as the same would
have been due and payable hereunder but for such termination, and his health
insurance benefits, for a period ending on the later of the first anniversary of
the date of such termination or the end of the current Employment Period (the
"Severance Period"), and otherwise the Company shall have no further obligations
hereunder from and after the date of such termination; PROVIDED, HOWEVER, that
the Employee shall only be entitled to such Salary continuation payments as long
as he is in compliance with the provisions of Sections 4 and 5 below. In
addition, in the event of termination by the Company without Cause, or by the
Employee for Good Reason, the Employee shall be entitled to exercise any stock
options which are vested and exercisable as of the date of such termination at
any time prior to the end of the Severance Period.

         4.       RESTRICTIVE COVENANTS. In consideration of the foregoing, the
Employee agrees that during the Employment Period, and for a period of three (3)
years following the termination of the Employment Period, the Employee shall not
directly or indirectly:

                  (a) alone or as a partner, joint venturer, officer, director,
member, employee, consultant, agent, independent contractor or stockholder of,
or lender to, any company or business, (i) engage in the business of solid waste
collection, disposal or recycling (the "Solid Waste Services Business") in any
market in which the Republic Group does business, or any other line of business
which is entered into by the Republic Group during the Employment Period, or
(ii) compete with the Republic Group in acquiring or merging with any other
business or acquiring the assets of such other business; or

                  (b) for any reason, (i) induce any customer of the Republic
Group to patronize any business directly or indirectly in competition with the
Solid Waste Services Business conducted by the Republic Group in any market in
which the Republic Group does business; (ii) canvass, solicit or accept from any
customer of the Republic Group any such competitive business; or (iii) request
or advise any customer or vendor of the Republic Group to withdraw, curtail or
cancel any such customer's or vendor's business with the Republic Group; or



                                      - 4 -



<PAGE>   5




                  (c) for any reason, employ, or knowingly permit any company or
business directly or indirectly controlled by him, to employ, any person who was
employed by the Republic Group at or within the prior six months, or in any
manner seek to induce any such person to leave his or her employment.

                  Notwithstanding the foregoing, the beneficial ownership of
less than five percent (5%) of the shares of stock of any corporation having a
class of equity securities actively traded on a national securities exchange or
over-the-counter market shall not be deemed, in and of itself, to violate the
prohibitions of this Section.

         5.       CONFIDENTIALITY. The Employee agrees that at all times during
and after the Employment Period, the Employee shall (i) hold in confidence and
refrain from disclosing to any other party all information, whether written or
oral, tangible or intangible, of a private, secret, proprietary or confidential
nature, of or concerning the Republic Group and their business and operations,
and all files, letters, memoranda, reports, records, computer disks or other
computer storage medium, data, models or any photographic or other tangible
materials containing such information ("Confidential Information"), including
without limitation, any sales, promotional or marketing plans, programs,
techniques, practices or strategies, any expansion plans (including existing and
entry into new geographic and/or product markets), and any customer lists, (ii)
use the Confidential Information solely in connection with his employment with
the Republic Group and for no other purpose, (iii) take all precautions
necessary to ensure that the Confidential Information shall not be, or be
permitted to be, shown, copied or disclosed to third parties, without the prior
written consent of the Republic Group, and (iv) observe all security policies
implemented by the Republic Group from time to time with respect to the
Confidential Information. In the event that the Employee is ordered to disclose
any Confidential Information, whether in a legal or regulatory proceeding or
otherwise, the Employee shall provide the Republic Group with prompt notice of
such request or order so that the Republic Group may seek to prevent disclosure.
In the case of any disclosure, the Employee shall disclose only that portion of
the Confidential Information that he is ordered to disclose.

         6.       SPECIFIC PERFORMANCE; INJUNCTION. The parties agree and
acknowledge that the restrictions contained in Sections 4 and 5 are reasonable
in scope and duration and are necessary to protect the Republic Group. If any
provision of Section 4 or 5 as applied to any party or to any circumstance is
adjudged by a court to be invalid or unenforceable, the same shall in no way
affect any other circumstance or the validity or enforceability of any other
provision of this Agreement. If any such provision, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced. The Employee agrees
and acknowledges that the breach of Section 4 or 5 will cause irreparable injury
to the Republic Group and upon breach of any provision of such Sections, the
Republic Group shall be entitled to injunctive relief, specific


                                      - 5 -



<PAGE>   6



performance or other equitable relief, without being required to post a bond;
PROVIDED, HOWEVER, that, this shall in no way limit any other remedies which the
Republic Group may have (including, without limitation, the right to seek
monetary damages).

         7.       NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery to, the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate in writing to the other parties): (a) if to the Company,
at its principal executive offices, addressed to the Chairman of the Board, with
a copy to the General Counsel; and (b) if to the Employee, at the address listed
on the signature page hereto.

         8.       AMENDMENT; WAIVER. This Agreement may not be modified, 
amended, supplemented, canceled or discharged, except by written instrument
executed by all parties. No failure to exercise, and no delay in exercising, any
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.

         9.       ASSIGNMENT; THIRD PARTY BENEFICIARY. This Agreement, and the
Employee's rights and obligations hereunder, may not be assigned or delegated by
him. The Company may assign its rights, and delegate its obligations, hereunder
to any affiliate of the Company, or any successor to the Company or its Solid
Waste Services Business, specifically including the restrictive covenants set
forth in Section 4 hereof. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon its respective
successors and assigns.

         10.      SEVERABILITY; SURVIVAL. In the event that any provision of
this Agreement is found to be void and unenforceable by a court of competent
jurisdiction, then such unenforceable provision shall be deemed modified so as
to be enforceable (or if not subject to modification then eliminated herefrom)
for the purpose of those procedures to the extent necessary to permit the
remaining provisions to be enforced. The provisions of Sections 4 and 5 will
survive the termination for any reason of the Employee's relationship with the
Company.



                                      - 6 -



<PAGE>   7



         11.      COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.

         12.      GOVERNING LAW. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Florida
applicable to contracts executed and to be wholly performed within such State.

         13.      ENTIRE AGREEMENT. This Agreement contains the entire 
understanding of the parties in respect of its subject matter and supersedes all
prior agreements and understandings (oral or written) between or among the
parties with respect to such subject matter.

         14.      HEADINGS. The headings of Paragraphs and Sections are for 
convenience of reference and are not part of this Agreement and shall not affect
the interpretation of any of its terms.

         15.      CONSTRUCTION. This Agreement shall be construed as a whole
according to its fair meaning and not strictly for or against any party. The
parties acknowledge that each of them has reviewed this Agreement and has had
the opportunity to have it reviewed by their respective attorneys and that any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not apply in the interpretation of this Agreement.

         16.      ATTORNEY'S FEES. The prevailing party in any litigation
arising out of this Agreement shall be entitled to recover its attorneys' fees
and costs from the other party.

                         [SIGNATURES ON FOLLOWING PAGE]


                                      - 7 -



<PAGE>   8



         IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.

                                        REPUBLIC SERVICES, INC., a Delaware
                                        corporation



                                        By:  /s/ Harris W. Hudson
                                           -------------------------------------
                                             Name:  Harris W. Hudson
                                                  ------------------------------
                                             Title: Vice Chairman
                                                   -----------------------------



                                        EMPLOYEE:

                                        /s/ James H. Cosman, Sr.
                                        ----------------------------------------
                                        JAMES H. COSMAN, SR.

                                        Address for Notices:

                                        [omitted]
                                        ----------------------------------------

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

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

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




                                      - 8 -






<PAGE>   1
                                                                    EXHIBIT 21.1






Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------



A.G. Disposal Service, Inc.                              NY

A.J. Panzarella & Co., Inc.                              FL
(d/b/a Larry O'Connor Sanitation Service)

AAA Commercial, Inc.                                     VA

AAA Disposal of Tennessee, Inc.                          TN        

AAA Disposal Services, Inc.                              VA        

AAA Land and Building Co., Inc.                          VA   

AAA Maintenance, Inc.                                    VA   

AAA Recycling, Inc.                                      VA   

Ace Disposal Service, Inc.                               OH

Addington Environmental, Inc.                            KY

Addington Holding Company                                DE

Addington Resources, Inc.                                DE

Alameda Associates                                       CA

All County Recycling, Inc.                               NJ
 
All Refuse Services, Inc.                                NY

All Service Refuse Company, Inc.                         FL

Alpco Waste Systems, Inc.                                NY

Anderson Refuse Company, Inc.                            IN

Anderson Solid Waste, Inc.                               CA

Antler Park, Inc.                                        IN

Arc Disposal Company, Inc.                               IL

Area Container Services, Inc.                            VA 

Ariana, LLC                                              DE

Arlington Disposal Company, Inc.                         TX 

ASA Leasing, Inc.                                        CA

ASCO Sanitation, Inc.                                    MS

Barker Brothers Waste Incorporated                       TN


- --------------------------------------------------------------------------------
                                                                    Page 1 of 11

<PAGE>   2




Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------



Barker Brothers, Inc.                                    TN

Bel-Art Paper Stock Company                              CA
(d/b/a Bel-Art Environmental Systems, Inc.)

Beran Cleaning Corporation                               NJ
(d/b/a Beran Services)

Berrien County Landfill, Inc.                            MI

Big Box Roll-Off Service                                 CA

BLT-Alameda, L.P.                                        CA

Bluegrass Recycling & Transfer Company                   KY

Briggeman Industries, Inc.                               CA

Briggerman Disposal Services, Inc.                       CA


Broadhurst Environmental, Inc.                           KY

Burgess' Refuse Removal Service, Inc.                    NC

C.S.C. Disposal and Landfill, Inc.                       TX

Cal Waste Industries, Inc.                               CA

Capital Waste & Recycling, Inc.                          NY

Cascade Pacific Engineering, Inc.                        OR

Cate's Rubbish Removal Services, Inc.                    NH

CDS Environmental, Inc. of Florida                       FL

CDS Environmental of Atlanta, Inc.                       GA

Century Disposal Service, Inc.                           CA

Charleston Disposal Systems, Inc.                        SC

Charter Waste, Inc.                                      TX

CJM Trucking & Soils Company, Inc.                       TX

Cleveland Container Service, Inc.                        NC

Coggins Waste Management, Inc.                           NJ

Collection Service Company, Inc.                         NC

Collection Services, Inc.                                KY
(d/b/a M&M Sanitation, Inc., Epperson Collection
Services, CSI of Northern Kentucky, B&J Sanitation,
Pennyrile Sanitation, Bluegrass Waste Alliance &
Tri-K Hauling)

Commercial Waste Disposal, Inc.                          KY
(d/b/a CWI of Kentucky)

Compactor Rental Systems of Delaware, Inc.               DE

Consolidated Disposal Service, Inc.                      CA



- -------------------------------------------------------------------------------
                                                                    Page 2 of 11

<PAGE>   3







Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------


Consolidated Disposal Service, LLC                       DE

Continental Waste Industries - Gary, Inc.                IN

Continental Waste Industries Arizona, Inc.               DE

Continental Waste Industries, Inc.                       DE

Covington Waste, Inc.                                    TN

CWI of Florida, Inc.                                     FL
(d/b/a Southland Waste Systems)

CWI of Illinois, Inc.                                    IL

CWI of Missouri, Inc.                                    MO

CWI of NJ, Inc.                                          NJ

CWI of Northwest Indiana, Inc.                           IN

D&L Waste, Inc.                                          NC

D.W. Gutzmer Rubbish Disposal, Inc.                      NY

Daybreak Recycling Systems, Inc.                         CA

Disposal Services, Inc.                                  NY
(d/b/a Upstate Disposal Service & R&R Refuse)

Dozit Company, Inc.                                      KY

Duncan Disposal, Inc.                                    TX

E&P Investment Corporation                               IL

East Bay Sanitation Service, Inc.                        FL

East Carolina Environmental, Inc.                        KY

ECO Services of S.C., Inc.                               SC

EETL 1, Inc.                                             TX

El Centro Sanitation Service, Co.                        CA

Elliot's Agri-Service, Inc.                              TX

Enviro-Comp Services, Inc.                               FL

Envirocycle, Inc.                                        FL

Environmental Hygiene Management, Inc.                   CA

Environmental Specialists, Inc.                          MO

Epperson Waste Disposal, Inc.                            KY

Expert Disposal Services, Inc.                           CA

Fat Man, Inc.                                            CA


- --------------------------------------------------------------------------------
                                                                    Page 3 of 11

<PAGE>   4







Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Fenn-Cav, Inc.                                           SC

Fennell Container Co, Inc.                               SC

Fennell Waste Systems, Inc.                              SC

Fisk Environmental Services, Inc.                        IN

Fisk Sanitation Service, Inc.                            IN

FLL, Inc.                                                MI

Florida Refuse Service, Inc.                             FL

G.E.M. Environmental Management, Inc.                    DE

Garbage Disposal Service, Inc.                           NC

GF/WFF, Inc.                                             SC

Gilliam Transfer, Inc.                                   MO

Grand Prairie Disposal Company, Inc.                     TX

Green Disposal Services, Inc.                            UT

Green Valley Environmental Corp.                         KY

Greenfield Environmental Development Corp.               DE

Gulf Coast Waste Service, Inc.                           FL

H.P. Disposal, Inc.                                      CA

Hank's Disposal, Inc.                                    IN

Helper's Hand of America, Inc.                           IN

Hobbs Rubbish Service, Inc.                              CA

Honeygo Run Reclamation, Inc.                            MD

Houston Organics, Inc.                                   TX

Hudson Management Corporation                            FL

Hyder Waste Container, Inc.                              NC

Imperial Sanitation Services, Inc.                       FL

Indiana Recycling LLC                                    IN

J.C. Duncan Company, Inc.                                TX

Jamax Corporation                                        IN

JMN, Inc.                                                NC




- --------------------------------------------------------------------------------
                                                                    Page 4 of 11

<PAGE>   5





Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Karat Corp.                                              NJ

L.R. Stuart and Sons, Inc.                               VA

Laughlin Environmental, Inc.                             TX

Lawson Land Company                                      FL

Lawson Realty                                            FL

Lazaro's Waste Service, Inc.                             FL

Living Earth Technology Company                          DE

LSW Environmental, Inc.                                  GA

Luberto Carting Corp.                                    NJ

M-G Disposal Service, Inc.                               CA

M-G Disposal Service, LLC                                DE

M.C.C. Recycling, Inc.                                   NJ

Marpal Co.                                               NJ

Medical Waste Services, Inc.                             FL

Meyer Mechanical Services, Inc.                          IN

Meyer Transportation, LLC                                IN

Meyer Waste Systems, Inc.                                IN

Mid-East Waste Services, Inc.                            NC

Mid-State Environmental                                  KY

Middlesex Carting Co., Inc.                              NJ
(d/b/a Midco Waste Systems)

Midwest Material Management, Inc.                        IN

Monarch Environmental, Inc.                              KY

National Serv-All, Inc.                                  IN

Nine Mile Road, Inc.                                     FL

Noble Risley, Jr. & Sons, Inc.                           IL

Northwest Florida Sanitation, Inc.                       FL

Northwest Tennessee Disposal Corp.                       TN

NRL, Inc.                                                KY

Ohio County Balefill, Inc.                               KY

Ojai Rubbish Service, Inc.                               CA




- --------------------------------------------------------------------------------
                                                                    Page 5 of 11

<PAGE>   6





Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Olympic Disposal Corp.                                   NY

P.A.K. Equipment Co., Inc.                               NJ

Pantego I, Inc.                                          TX

Pepperhill Development Co., Inc.                         SC

Perdomo & Sons, Inc.                                     CA

Pine Ridge Recycling, Inc.                               GA

Pinellas Environmental, Inc.                             KY

Prichard Landfill Corporation                            WV

PSI Waste Systems, Inc.                                  ID

R.E. Wolfe Enterprises of Edingburg, Inc.                TX

R.E. Wolfe Enterprises of Texas, Inc.                    TX

Rainbow Industries, Inc.                                 VA

Rapid Disposal Service, Inc.                             NJ

Raritan Valley Disposal Service, Co., Inc.               NJ

Raritan Valley Recycling, Inc.                           NJ

RCLJ Construction, Inc.                                  TX

Recycling Concepts, Inc.                                 NC

Recycling Industries, Inc.                               NJ

Reliable Disposal, Inc.                                  MI

Reliable Sanitation, Inc.                                FL

Republic Acquisition Company                             DE

Republic Dumpco, Inc.                                    NV

Republic Environmental Technologies, Inc.                NV
(d/b/a Republic Environmental Technologies of
Nevada & Apex Aggregates Company)

Republic Imperial Acquisition Corp.                      OK

Republic Resource Company                                DE

Republic Services Group of Pennsylvania Hauling, LLC     PA

Republic Services Group of Pennsylvania I, LLC           PA

Republic Services Group of Pennsylvania II, LLC          PA

Republic Services Group of Pennsylvania III, LLC         PA

Republic Services Group of Pennsylvania IV, LLC          PA



- -------------------------------------------------------------------------------
                                                                   Page 6 of 11












<PAGE>   7





Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------


Republic Services of Arizona Hauling, LLC                AZ    

Republic Services of California Hauling, LLC             DE

Republic Services of California I, LLC                   DE

Republic Services of California II, LLC                  DE

Republic Services of Colorado Hauling, LLC               CO

Republic Services of Colorado I, LLC                     CO

Republic Services of Florida Hauling, LLC                FL

Republic Services of Georgia I, LLC                      GA

Republic Services of Kentucky Hauling, LLC               KY

Republic Services of Kentucky I, LLC                     KY

Republic Services of Kentucky II, LLC                    KY

Republic Services of Michigan Hauling, LLC               MI

Republic Services of Michigan I, LLC                     MI

Republic Services of Michigan II, LLC                    MI

Republic Services of Michigan III, LLC                   MI

Republic Services of Michigan IV, LLC                    MI

Republic Services of Michigan V, LLC                     MI

Republic Services of New York Hauling, LLC               NY

Republic Services of New York I, LLC                     NY

Republic Services of New York II, LLC                    NY

Republic Services of Ohio Hauling, LLC                   OH

Republic Services of Ohio I, LLC                         OH

Republic Services of Ohio II, LLC                        OH

Republic Services of Ohio III, LLC                       OH

Republic Services of Ohio IV, LLC                        OH

Republic Services of Ohio V, LLC                         OH

Republic Services of Oregon Hauling, LLC                 OR

Republic Services of Oregon I, LLC                       OR

Republic Services of Tennessee Hauling, LLC              DE

Republic Services of Tennessee I, LLC                    DE



- --------------------------------------------------------------------------------
                                                                    Page 7 of 11




<PAGE>   8





Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Republic Services of Virginia Hauling, LLC               VA

Republic Services of Wisconsin Hauling, LLC              WI

Republic Services of Wisconsin I, LLC                    WI

Republic Services of Wisconsin II, LLC                   WI

Republic Services, Inc.                                  DE

Republic Silver State Disposal, Inc.                     NV
(d/b/a Republic Silver State Disposal Services)

Republic Wabash Company                                  DE

Republic Waste Services of Texas Hauling, LLC            TX

Republic Waste Services of Texas I, LLC                  TX

Republic Waste Services of Texas II, LLC                 TX

Republic Waste Services of Texas III, LLC                TX

Republic/Maloy Landfill & Sanitation, Inc.               TX

Resources Aviation, Inc.                                 FL

RI/ACR Merger Corp.                                      NJ

RI/AHI Merger Corp.                                      CA

RI/CDI Merger Corp.                                      CA

RI/DBI Merger Corp.                                      CA

RI/MC Merger Corp.                                       NJ

RI/PAK Merger Corp.                                      NJ

RII Management Company                                   DE

RITM, LLC                                                DE

Robert A. Moor, Jr. Disposal Services, Inc.              PA
(d/b/a Area Container)

Rochester Dismantling and Roll-Off, Inc.                 NY

RS/WM Holding Company, Inc.                              DE

RSI Waste Management, Inc.                               DE

Rubbish Control, Inc.                                    CA

Rubbish Control, LLC                                     DE

Safety Lights, Inc.                                      TN

Sandy Hollow Landfill Corp.                              WV

Sanifill, Inc.                                           TN



- --------------------------------------------------------------------------------
                                                                    Page 8 of 11




<PAGE>   9



Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Savannah Regional Industrial Landfill, Inc.              GA

Schofield Corporation of Orlando                         FL
(d/b/a Southland Waste Systems)

Seaboard Waste Systems, Inc.                             FL

Seagull Sanitation Systems, Inc.                         CA

Smithton Sanitation Service, Inc.                        NC

South Trans, Inc.                                        NJ

Southern Illinois Regional Landfill, Inc.                IL

Southland Environmental Services, Inc.                   FL
(d/b/a Southland Environmental Systems, Inc.)

Southland Maintenance Services, Inc.                     FL

Southland Recycling Services, Inc.                       FL

Southland Waste Systems of Georgia, Inc.                 GA

Southland Waste Systems of Jax, Inc.                     FL

Southland Waste Systems of Ware Co., Inc.                GA

Southland Waste Systems, Inc.                            FL

Space Coast Sanitation, Inc.                             FL

Specialized Waste Systems, Inc.                          CA

Spector Waste Paper Corp.                                NY

Springfield Environmental, Inc.                          IN

Springfield Environmental, Inc.                          DE

Statewide Environmental Contractors, Inc.                NJ

Suburban Disposal Service, Inc.                          SC

Suburban Sanitation of California, Inc.                  CA

Suburban Sanitation Services, Inc.                       AZ

Sullivan Environmental Services, Inc.                    GA

SunBurst Sanitation Corporation                          FL

Sunrise Disposal, Inc.                                   IN

Swift Creek Environmental, Inc.                          GA

T.W. Recycling, Corp.                                    NJ

Taormina Industries, Inc.                                CA

Taormina Industries, LLC                                 DE


- -------------------------------------------------------------------------------
                                                                    Page 9 of 11


<PAGE>   10





Name                                          State 
of Company                                    of Incorporation
- ---------------------------------------------------------------------------

Tay-Ban Corporation                           MI
(d/b/a Taymouth Landfill)

Taylor Disposal Services, Inc.                VA

Terre Haute Recycling, Inc.                   IN

Thomas W. DeLisa, Inc.                        NJ

Tos-It Service Company, Inc.                  TX

Town & Country Disposal, Inc.                 NY

Trashaway Services, Inc.                      TX

Treasure Coast Refuse Corp.                   FL

Tri-County Refuse Service, Inc.               MI

Tri-K Landfill, Inc.                          KY

Tri-State Ltd.                                IN

Triple C Disposal Service, Inc.               TX

Triple G Landfills, Inc.                      IN

United Refuse Co., Inc.                       IN

United Waste Service, Inc.                    GA

Upper Piedmont Environmental, Inc.            KY  

Uwharrie Environmental, Inc.                  KY

Victory Environmental Services, Inc.          DE

Victory Waste Incorporated                    CA

Village Disposal Services, Inc.               FL

W.R. Lalevee Realty Company, Inc.             NJ

Wabash Valley Landfill Company, Ltd.          PA

Wabash Valley Refuse Removal Company, L.P.    IN

Waste Collection Services Corp.               FL
(d/b/a Seaside Sanitation)

Waste Handling Systems, Inc.                  NC

Wes Tex Waste Services, Inc.                  TX

Westchester Investments, Inc.                 IN

Westside Sanitation, Inc.                     FL

White Stone of Warren, Inc.                   KY

Wilshire Disposal Services, Inc.              CA
(d/b/a Wilshire Rubbish Serv.,
Zakaroff Rubbish Co., Mike's Rubbish,
Mike's Rubbish Serv.)


- ---------------------------------------------------------------------------
                                                              Page 10 of 11


<PAGE>   11





Name                                                     State 
of Company                                               of Incorporation
- -------------------------------------------------------------------------------

Wood River Rubbish Company, Inc.                         ID

WPP Continental de Costa Rica, S.A.                      Costa Rica

WPP Services, Inc.                                       OH

York Waste Disposal, Inc.                                PA

Zakaroff Industries, Inc.                                CA
(d/b/a Zakaroff Recycling Services, West,
Hollywood Recycling Services, Inc.
and L.A. Waste Disposal)























- -------------------------------------------------------------------------------
                                                                  Page 11 of 11





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REPUBLIC SERVICES, INC. FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                         556,600
<SECURITIES>                                         0
<RECEIVABLES>                                  204,800
<ALLOWANCES>                                    22,100
<INVENTORY>                                          0
<CURRENT-ASSETS>                               784,000
<PP&E>                                       1,569,100
<DEPRECIATION>                                 473,000
<TOTAL-ASSETS>                               2,812,100
<CURRENT-LIABILITIES>                          783,800
<BONDS>                                        557,200
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         1,800
<OTHER-SE>                                   1,297,300
<TOTAL-LIABILITY-AND-EQUITY>                 2,812,100
<SALES>                                              0
<TOTAL-REVENUES>                             1,369,100
<CGS>                                                0
<TOTAL-COSTS>                                  842,700
<OTHER-EXPENSES>                               242,100
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              44,700
<INCOME-PRETAX>                                240,200
<INCOME-TAX>                                    86,500
<INCOME-CONTINUING>                            153,700
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   153,700
<EPS-PRIMARY>                                     1.13
<EPS-DILUTED>                                     1.13
        

</TABLE>