News Column

REPUBLIC SERVICES, INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

February 13, 2014

You should read the following discussion in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in Item 8 of this Form 10-K. This discussion may contain forward-looking statements that anticipate results that are subject to uncertainty. We discuss in more detail various factors that could cause actual results to differ from expectations in Item 1A, Risk Factors in this Form 10-K. Overview We are the second largest provider of services in the domestic non-hazardous solid waste industry, as measured by revenue. Our operations are in 39 states and Puerto Rico. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 336 collection operations. We own or operate 199 transfer stations, 190 active solid waste landfills and 69 recycling centers. We also operate 69 landfill gas and renewable energy projects. Revenue for the year ended December 31, 2013 was $8,417.2 million compared to $8,118.3 million for 2012. This 3.7% increase in revenue was made up of increases in average yield of 1.3%, fuel recovery fees of 0.3% and acquisitions, net of divestitures of 0.5%, as well as increases in volume of 1.3% and recycling commodities increases of 0.3%. The following table summarizes our revenue, costs and expenses for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars and as a percentage of revenue): 2013 2012 2011 Revenue $ 8,417.2 100.0 % $ 8,118.3 100.0 % $ 8,192.9 100.0 % Expenses: Cost of operations 5,234.7 62.2 5,005.7 61.7 4,865.1 59.4 Depreciation, amortization and depletion of property and equipment 806.7 9.6 778.4 9.6 766.9 9.4 Amortization of other intangible assets and other assets 70.7 0.8 70.1 0.9 76.7 0.9 Accretion 76.6 0.9 78.4 1.0 78.0 0.9 Selling, general and administrative 853.8 10.1 820.9 10.1 825.4 10.1 Negotiation and withdrawal costs - Central States Pension and Other Funds 157.7 1.9 35.8 0.4 - - (Gain) loss on disposition of assets and impairments, net (1.9 ) - (2.7 ) - 28.1 0.3 Restructuring charges 8.6 0.1 11.1 0.1 - - Operating income $ 1,210.3 14.4 % $ 1,320.6 16.3 % $ 1,552.7 19.0 % Our pre-tax income was $851.2 million, $823.9 million and $906.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. Our net income attributable to Republic Services, Inc. was $588.9 million, or $1.62 per diluted share for the year ended December 31, 2013, compared to $571.8 million, or $1.55 per diluted share, for the year ended December 31, 2012, and $589.2 million, or $1.56 per diluted share, for the year ended December 31, 2011. During each of the three years ended December 31, 2013, 2012 and 2011, we recorded a number of charges and other expenses and benefits that impacted our pre-tax income, net income attributable to Republic Services, Inc. (Net Income - Republic) and diluted earnings per share as noted in the following table (in millions, except per share data). Additionally, see our "Cost of Operations," "Selling, General and Administrative Expenses" and "Income Taxes" discussions contained in the Results of Operations section of this Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of other items that impacted our earnings. 27



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Table of Contents Year Ended Year Ended Year Ended December 31, 2013 December 31, 2012 December 31, 2011 Diluted Diluted Diluted Net Earnings Net Earnings Net Earnings Pre-tax Income - per Pre-tax Income - per Pre-tax Income - per Income Republic Share Income Republic Share Income Republic Share As reported $ 851.2$ 588.9$ 1.62$ 823.9$ 571.8$ 1.55$ 906.3$ 589.2$ 1.56 Negotiation and withdrawal costs - Central States Pension and Other Funds 157.7 98.3 0.27 35.8 21.6 0.06 - - - Restructuring charges 8.6 5.6 0.02 11.1 6.6 0.02 - - - Loss on extinguishment of debt 2.1 1.3 - 112.6 68.6 0.18 210.8 129.3 0.34 Bridgeton remediation 108.7 65.6 0.18 74.1 44.7 0.12 - - - Tax valuation allowance adjustment - (43.5 ) (0.12 ) - - - - - - (Gain) loss on disposition of assets and impairments, net (1.9 ) (0.9 ) - (5.3 ) (5.2 ) (0.01 ) 28.1 19.8 0.06 Adjusted $ 1,126.4$ 715.3$ 1.97$ 1,052.2$ 708.1$ 1.92$ 1,145.2$ 738.3$ 1.96 We believe that presenting adjusted pre-tax income, adjusted net income attributable to Republic Services, Inc., and adjusted diluted earnings per share, which are not measures determined in accordance with accounting principles generally accepted in the United States (U.S. GAAP), provides an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges and costs in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. In the case of the Bridgeton remediation charges, we are adjusting such amounts due to their significant effect on our operating results; however, in the ordinary course of our business, we often incur remediation adjustments that we do not adjust from our operating results. Our definition of adjusted pre-tax income, adjusted net income attributable to Republic Services Inc., and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. Negotiation and withdrawal costs - Central States Pension and Other Funds. During the years ended December 31, 2013 and 2012, we recorded charges to earnings of $157.7 million and $35.8 million, respectively, primarily related to our negotiation and withdrawal liability from the Central States, Southeast and Southwest Areas Pension Fund (the Fund). Also included within these charges to earnings for 2013 is $2.1 million for withdrawal events at the multiemployer pension plan to which we contribute related to our operations in Puerto Rico, as well as costs of $17.0 million ($5.1 million in 2012) related to the negotiation of collective bargaining agreements under which we had obligations to contribute to the Fund. Restructuring charges. During the fourth quarter of 2012, we announced a restructuring of our field and corporate operations to create a more efficient and competitive company. These changes included consolidating our field regions from four to three and our areas from 28 to 20, relocating office space, and reducing administrative staffing levels. During the years ended December 31, 2013 and 2012, we incurred $8.6 million and $11.1 million, respectively, of restructuring charges, which consisted of severance and other employee termination benefits, relocation benefits, and the closure of offices with non-cancellable lease agreements. Loss on extinguishment of debt. During the years ended December 31, 2013, 2012 and 2011, we completed various refinancing transactions that resulted in cash paid for premiums and professional fees to repurchase outstanding debt, as well as non-cash charges for unamortized debt discounts and deferred issuance costs. For a more detailed discussion of the components of these costs and the debt series to which they relate, see our "Loss on Extinguishment of Debt" discussion contained in the Results of Operations section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. Bridgeton remediation. We recorded environmental remediation charges at our closed Bridgeton Landfill in Missouri of $108.7 million in June 2013 and $74.1 million during 2012 to manage the remediation area and monitor the site. 28



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Tax valuation allowance adjustment. During the fourth quarter of 2013, we reduced our valuation allowance related to certain deferred tax assets for state net operating loss carryforwards due to our determination that it is more likely than not a portion of these carryforwards would be utilized in future years. (Gain) loss on disposition of assets and impairments, net. For a more detailed discussion of the components of this, see our "(Gain) Loss on Disposition of Assets and Impairments, Net" discussion contained in the Results of Operations section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. 2014 Guidance In 2014, we will continue to focus on managing the controllable aspects of our business by enhancing the quality of our revenue, investing in profitable growth opportunities, and reducing costs. Our team remains focused on executing our strategy to deliver consistent earnings and free cash flow growth, and improve return on invested capital. We are committed to an efficient capital structure, maintaining our investment grade rating, and increasing cash returns to our stockholders. Our guidance is based on current economic conditions and does not assume any significant changes in the overall economy in 2014. Specific guidance follows: Revenue We expect 2014 revenue to increase by approximately 3.5% to 4.5% comprised of the following: Increase (Decrease) Average yield 1.0 to 1.5% Volume 1.5 to 2.0 Fuel recovery fees - Recycled commodities - Acquisitions / divestitures, net 1.0 Total change 3.5 to 4.5%



Changes in price are restricted on approximately 50% of our annual service revenue. Of these restricted pricing arrangements:

approximately 60% are price changes based on fluctuations in a specific

index (primarily the consumer price index) as defined in the contract;

approximately 20% are fixed price increases based on stated contract

terms; and

approximately 20% are price changes based on a cost plus a specific profit

margin or other measurement.

The consumer price index varies from a single historical stated period of time or an average of trailing historical rates over a stated period of time. In addition, the initial impact of pricing resets typically lags 6 to 12 months from the end of the index measurement period to the date the revised pricing goes into effect. As a result, current changes in a specific index may not manifest themselves in our reported pricing for several quarters into the future. Diluted Earnings per Share We expect 2014 diluted earnings per share to be in the range of $1.93 to $1.98. 29



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Property and Equipment, Net In 2014, we anticipate receiving approximately $820 million of property and equipment, net of proceeds from sales of property and equipment, as follows: Trucks and equipment $ 355 Landfill 265 Containers 125 Facilities and other 90 Property and equipment received during 2013 835 Proceeds from sales of property and equipment (15 )



Property and equipment received, net of proceeds, during 2014 $ 820

Results of Operations Revenue We generate revenue primarily from our solid waste collection operations. Our remaining revenue is from other services, including transfer station services, landfill disposal and recycling. Our residential and commercial collection operations in some markets are based on long-term contracts with municipalities. Certain of our municipal contracts have annual price escalation clauses that are tied to changes in an underlying base index such as the consumer price index. We generally provide commercial and industrial collection services to customers under contracts with terms up to three years. Our transfer stations, landfills and, to a lesser extent, our recycling facilities generate revenue from disposal or tipping fees charged to third parties. In general, we integrate our recycling operations with our collection operations and obtain revenue from the sale of recyclable materials. Other non-core revenue consists primarily of revenue from National Accounts, which represents the portion of revenue generated from nationwide contracts in markets outside our operating areas where the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations. The following table reflects our revenue by service line for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars and as a percentage of our revenue): 2013 2012 2011 Collection: Residential $ 2,175.5 25.8 % $ 2,155.7 26.6 % $ 2,135.7 26.1 % Commercial 2,616.9 31.1 2,523.2 31.1 2,487.5 30.4 Industrial 1,639.4 19.5 1,544.2 19.0 1,515.4 18.5 Other 34.7 0.4 33.4 0.4 32.9 0.4 Total collection 6,466.5 76.8 6,256.5 77.1 6,171.5 75.4 Transfer 1,021.8 964.5 994.2 Less: Intercompany (615.2 ) (575.3 ) (572.8 ) Transfer, net 406.6 4.8 389.2 4.8 421.4 5.1 Landfill 1,927.2 1,863.3 1,867.6 Less: Intercompany (902.2 ) (862.5 ) (846.9 ) Landfill, net 1,025.0 12.2 1,000.8 12.3 1,020.7 12.5 Sale of recycled commodities 374.6 4.5 349.0 4.3 438.6 5.4 Other non-core 144.5 1.7 122.8 1.5 140.7 1.6 Other 519.1 6.2 471.8 5.8 579.3 7.0 Total revenue $ 8,417.2 100.0 % $ 8,118.3 100.0 % $ 8,192.9 100.0 % 30



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The following table reflects changes in our revenue for the years ended December 31, 2013, 2012 and 2011, as compared to the previous year:

2013 2012 2011 Average yield 1.3 % 0.8 % 0.8 % Fuel recovery fees 0.3 0.1 1.0 Total price 1.6 0.9 1.8 Volume 1.3 (1.0 ) (0.4 ) Recycled commodities 0.3 (1.2 ) 1.0



San Mateo and Toronto contract losses - - (1.4 ) Total internal growth

3.2 (1.3 ) 1.0 Acquisitions / divestitures, net 0.5 0.4 0.1 Total 3.7 % (0.9 )% 1.1 % Core price 3.3 % 2.8 % 2.8 % In 2013, we conformed the terms we use to describe components of price in an effort to better align with industry participants. We have not changed our calculation methodology, but we believe use of these terms allows for consistent comparison across the industry. Average yield, which we formerly referred to as "core price," is defined as revenue growth from the change in average price per unit of service, expressed as a percentage. We now use "core price" to mean price increases to customers and fees, excluding fuel recovery, net of price decreases to retain customers.



Revenue - 2013 compared to 2012

The increase in revenue in 2013 compared to 2012 is due to the following:

Average yield increased revenue by 1.3% due to positive pricing in all lines of business.



The fuel recovery fee program, which mitigates our exposure to increases

in fuel prices, generated 0.3% of the total revenue growth. These fees fluctuate with the price of fuel and, consequently, any increase in fuel



prices would result in an increase in our revenue. Higher fuel recovery

fees for 2013 as compared to 2012 resulted primarily from an increase in

the fuel recovery rates charged. During 2013, we were able to recover

approximately 74% of our direct fuel expenses with fuel recovery fees, compared to 67% during 2012. Volume increased revenue by 1.3%, primarily due to higher volumes in commercial and industrial collection, disposal and non-core lines of



business, partially offset by lower volumes in our residential collection

line of business. Volume increases in our landfill line of business during

2013 were primarily attributable to construction and special waste volumes, offset by decreases in municipal solid waste. Recycled commodities increased revenue by 0.3%, primarily due to the



change in the market price of materials as well as increased production

volumes. The average price for old corrugated cardboard was $128 per ton

for 2013 compared to $124 per ton for 2012. The average price of old

newspaper was $93 per ton for 2013 compared to $105 per ton for 2012. Our

recycled commodity volume for 2013 of 2.2 million tons sold was 9% higher

than the volume in 2012 as a result of our investment in recycling centers

along with higher organic volumes.

Changing market demand for recycled commodities causes volatility in commodity prices. At current volumes and mix of materials, we believe a $10 per ton change in the price of recycled commodities will change annual revenue and operating income by approximately $31 million and $19 million, respectively.



Revenue - 2012 compared to 2011

The decrease in revenue in 2012 compared to 2011 is due to the following:

Average yield increased revenue by 0.8% due to positive pricing in our

collection, transfer and landfill lines of business. Pricing was higher in

the second half of 2012, which reflects the higher level of price resets

to our index-based customers. 31



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Fuel recovery fees increased revenue by 0.1% and 1.0% for 2012 and 2011, respectively. The impact of the change in fuel recovery fees was diminished in 2012 as the average fuel price per gallon increased approximately 3% from 2011 to 2012 as compared to approximately 29% from



2010 to 2011. For 2012 and 2011, we were able to recover approximately 67%

and 68%, respectively, of our fuel costs with fuel recovery fees.



Volume decreased revenue by 1.0% in 2012. Volume declines were primarily

in our landfill, transfer station and non-core lines of business,

primarily due to the acquisition of a large national broker by a

competitor and the loss of a large National Accounts contract. Within the

landfill business, special waste and construction and demolition volumes

decreased by approximately 4.3% and 6.4%, respectively, and landfill

municipal solid waste volumes declined approximately 5.3% compared to the

prior year. Volume declines in special waste were caused by special waste

event work not recurring in 2012 and being postponed due to continuing

weak economic conditions. The decline in landfill municipal solid waste

volumes relates primarily to a loss of certain municipal disposal

contracts in our East Region and competitive pressures in our Los Angeles

market. Collection volumes were positive 0.2% year over year, with most

improvements coming from the commercial and industrial lines of business.

Recycled commodities decreased revenue by 1.2% due to a decrease in the

market price of materials. Average prices for old corrugated cardboard in

2012 were $124 per ton compared to $159 per ton in 2011, a decrease of $35

per ton or 22%. Average prices of old newspaper for 2012 were $105 per ton

compared to $142 per ton in 2011, a decrease of $37 per ton or 26%. The

declines in prices were partially offset by increased volumes processed.

Our 2012 recycled commodity volume of 2.1 million tons sold was 2.5%

higher than 2011 volumes.

Cost of Operations Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers that transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our National Accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel tax credits; disposal franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs, which includes financial assurance, leachate disposal, remediation charges and other landfill maintenance costs; risk management, which includes casualty insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers associated with recycling commodities; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations. The following table summarizes the major components of our cost of operations for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars and as a percentage of our revenue): 2013 2012 2011 Labor and related benefits $ 1,651.6 19.6 % $ 1,573.9 19.4 % $ 1,530.4 18.7 % Transfer and disposal costs 637.0 7.6 616.4 7.6 636.1 7.8 Maintenance and repairs 736.0 8.7 682.7 8.4 632.1 7.7 Transportation and subcontract costs 469.1 5.6 431.9 5.3 443.4 5.4 Fuel 516.7 6.1 530.1 6.5 516.5 6.3 Franchise fees and taxes 412.5 4.9 401.9 5.0 395.7 4.8 Landfill operating costs 116.4 1.4 124.0 1.5 126.1 1.5 Risk management 158.7 1.9 177.3 2.2 167.5 2.0 Cost of goods sold 132.8 1.6 114.6 1.4 146.8 1.8 Other 295.2 3.5 278.8 3.4 270.5 3.4 Subtotal 5,126.0 60.9 4,931.6 60.7 4,865.1 59.4 Bridgeton remediation 108.7 1.3 74.1 1.0 - - Total cost of operations $ 5,234.7 62.2 % $ 5,005.7 61.7 % $ 4,865.1 59.4 % These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies. 32



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Cost of Operations - 2013 compared to 2012

Our cost of operations increased $229.0 million or, as a percentage of revenue, 0.5% in 2013 compared to 2012, primarily as a result of the following:

Labor and related benefits increased due to increased hourly and salaried

wages as a result of merit increases, health care costs and collection

volumes.

Transfer and disposal costs increased primarily due to higher prices and

volumes disposed at third party sites. During 2013, approximately 68% of

the total waste volume we collected was disposed at landfill sites that we

own or operate (internalization) compared to 67% for 2012.

Maintenance and repairs expense increased due to higher collection volume,

cost of parts, internal labor, third party truck repairs and costs

associated with our fleet maintenance initiative. Container and compactor

maintenance had an unfavorable impact on maintenance and repairs expense

due primarily to increased container repairs resulting from unit growth in

our commercial and industrial lines of business. Subcontract costs increased primarily due to new National Accounts



contracts and subcontracted work. Transportation costs increased due to an

increase in transfer station volumes and increased fuel surcharges. Our fuel costs in aggregate dollars and as a percentage of revenue decreased $13.4 million and 0.4%, respectively, due to our continued



conversion to lower cost compressed natural gas (CNG) and alternative fuel

tax credits. Average fuel costs per gallon for 2013 were $3.92 compared to

$3.97 for 2012, a decrease of 1%.

At current consumption levels, we believe a twenty-cent per gallon change in the price of diesel fuel would change our fuel costs by approximately $25 million per year. Offsetting these changes in fuel expense would be changes in our fuel recovery fee charged to our customers. At current participation rates, a twenty-cent per gallon change in the price of diesel fuel changes our fuel recovery fee by approximately $20 million per year. Franchise fees and taxes increased due to increased collection revenue in franchised markets as well as increased host fees and taxes due to increased landfill volumes.



Landfill operating expenses in aggregate dollars and as a percentage of

revenue decreased $7.6 million and 0.1%, respectively, primarily due to net favorable remediation adjustments of $17.1 million, of which $15.0 million relates to changes in the estimated timing of payments for our



remediation obligations, offset by increased leachate management expenses

of $9.1 million.

Risk management expenses decreased primarily due to favorable actuarial

development, primarily in our auto liability self-insurance reserves.

Cost of goods sold relates to rebates paid for volumes delivered to our

recycling facilities. Cost of goods sold in aggregate dollars and as a

percentage of revenue increased $18.2 million and 0.2%, respectively,

primarily due to an increase in both the volume of commodities sold and the average cost per ton for commodities.



Included in other cost of operations is occupancy and facility costs,

which increased $7.5 million primarily due to increased facility maintenance expense.



We recorded environmental remediation charges at our closed Bridgeton

Landfill in Missouri of $108.7 million in June 2013 and $74.1 million

during 2012 to manage the remediation area and monitor the site.

Cost of Operations - 2012 compared to 2011

Our cost of operations increased $140.6 million or, as a percentage of revenue, 2.3% in 2012 compared to 2011, primarily as a result of the following: Labor and related benefits increased due to merit based wage increases in

2012 compared to 2011, as well as increases in health care costs. As a

percentage of revenue, labor and related benefits were negatively impacted

by the relative mix of higher collection revenue and lower landfill, transfer, commodity and subcontract revenue compared to 2011 because these revenues have little or no variable labor costs.



Transfer and disposal costs decreased, primarily due to lower disposal

prices and lower volumes disposed at third party sites. During 2012,

approximately 67% of the total waste volume we collected was disposed at

landfill sites that we own or operate (internalization) compared to 66% for 2011. 33



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Maintenance and repairs expense increased due to costs associated with our

fleet maintenance initiative, as well as the increased cost of tires and container refurbishment expenses.



Transportation and subcontract costs decreased during 2012 compared to

2011, primarily due to the loss of a large National Accounts contract.

Our fuel costs in aggregate dollars and as a percentage of revenue

increased $13.6 million and 0.2%, respectively, primarily due to higher

fuel prices. Average fuel costs per gallon for 2012 were $3.97 compared to

$3.85 for 2011, an increase of $0.12 or 3.1%.

Franchise fees and taxes increased, primarily due to the acquisition of

businesses in franchise markets.

Landfill operating expenses in aggregate dollars and as a percentage of

revenue decreased $2.1 million, but remained relatively consistent as a percentage of revenue at 1.5% for both 2012 and 2011.



Cost of goods sold relates to rebates paid for volumes delivered to our

recycling facilities. Cost of goods sold in aggregate dollars and as a

percentage of revenue decreased $32.2 million and 0.4%, respectively,

primarily due to a decline in the market value of recycled commodities,

offset by an increase in the volume of commodities processed.

Risk management expenses increased, primarily due to lower favorable

actuarial development compared to the prior year.

We recorded environmental remediation charges at our closed Bridgeton

Landfill in Missouri of $74.1 million during 2012 to manage the

remediation area and monitor the site.

Depreciation, Amortization and Depletion of Property and Equipment The following table summarizes depreciation, amortization and depletion of property and equipment for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars and as a percentage of revenue):

2013 2012



2011

Depreciation and amortization of property

and equipment $ 544.8 6.5 % $ 520.8 6.4 % $ 511.4 6.3 % Landfill depletion and amortization 261.9 3.1 257.6 3.2 255.5 3.1 Depreciation, amortization and depletion expense $ 806.7 9.6 % $ 778.4 9.6 % $ 766.9 9.4 %



Depreciation, Amortization and Depletion of Property and Equipment - 2013 compared to 2012

Depreciation and amortization of property and equipment in aggregate dollars increased $24.0 million, primarily due to higher costs of residential side loaders for automating our residential collection routes and an increased number of CNG vehicles, which are more expensive to purchase than diesel vehicles. In addition, we made increased investments in new and upgraded recycling infrastructure projects that became operational over the past several quarters. Depreciation and amortization of property and equipment as a percentage of revenue remained relatively consistent at 6.5% for 2013 and 6.4% for 2012. Landfill depletion and amortization expense in aggregate dollars increased $4.3 million, primarily due to increased landfill disposal volumes, as well as an overall increase in our average depletion rate. Offsetting these increases were favorable amortization adjustments of $0.3 million that were recognized in 2013 relative to asset retirement obligations, compared to net unfavorable adjustments of $4.9 million in 2012. Landfill depletion and amortization as a percentage of revenue remained relatively consistent at 3.1% for 2013 and 3.2% for 2012.



Depreciation, Amortization and Depletion of Property and Equipment - 2012 compared to 2011

Depreciation and amortization of property and equipment increased $9.4 million for 2012, primarily due to higher costs of residential side loaders and an increased number of CNG vehicles. In addition, we made increased investments in new and upgraded recycling infrastructure projects that became operational in 2012. Landfill depletion and amortization expense increased $2.1 million, primarily due to unfavorable adjustments to landfill depletion and amortization expense for asset retirement obligations of $4.9 million recorded during 2012 compared to favorable adjustments of $9.6 million recorded during 2011. Offsetting the increase in costs relative to asset retirement obligations was an overall decline in landfill depletion due to lower disposal volumes. 34



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Amortization of Other Intangible Assets and Other Assets

Expenses for amortization of intangible and other assets were $70.7 million, $70.1 million and $76.7 million for 2013, 2012 and 2011, respectively, or, as a percentage of revenue, 0.8% for 2013 and 0.9% for 2012 and 2011. Our other intangible assets and other assets primarily relate to customer lists, franchise agreements, municipal contracts, trade names (now fully amortized in 2013), favorable lease assets and, to a lesser extent, non-compete agreements. Amortization of intangible assets in aggregate dollars decreased during 2012 as compared to 2011 primarily due to municipal agreement intangibles acquired from Allied that are now fully amortized. Accretion Expense Accretion expenses were $76.6 million, $78.4 million and $78.0 million, or, as a percentage of revenue, 0.9%, 1.0% and 0.9% for 2013, 2012 and 2011, respectively. Accretion expenses have remained relatively unchanged as our asset retirement obligations remained relatively consistent period over period.



Selling, General and Administrative Expenses

Selling, general and administrative expenses include salaries, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems, and clerical and administrative departments. Other expenses include rent and office costs, fees for professional services provided by third parties, legal settlements, marketing, investor and community relations services, directors' and officers' insurance, general employee relocation, travel, entertainment and bank charges. Restructuring charges are excluded from selling, general and administrative expenses and are discussed separately below. The following table provides the components of our selling, general and administrative expenses for the three years ended December 31, 2013, 2012 and 2011 (in millions of dollars and as a percentage of revenue): 2013 2012 2011 Salaries $ 545.4 6.5 % $ 539.4 6.6 % $ 539.6 6.6 % Provision for doubtful accounts 16.1 0.2 29.7 0.4 21.0 0.3 Other 292.3 3.4 251.8 3.1 264.8 3.2 Total selling, general and administrative expenses $ 853.8 10.1 % $ 820.9 10.1 % $ 825.4 10.1 % These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to those of other companies. Selling, General and Administrative Expenses - 2013 compared to 2012



Salaries increased $6.0 million, but remained relatively consistent as a percentage of revenue at 6.5% and 6.6% for 2013 and 2012, respectively. During 2013, we recorded severance costs due to management departures, and higher salaries, payroll taxes and benefits resulting from merit increases and management incentive pay, partially offset by lower salaries expense in connection with the reorganization.

Provision for doubtful accounts decreased $13.6 million and 0.2% of revenue, primarily due to a net favorable adjustment, recorded in our corporate segment, of $8.3 million resulting from a change in our estimated future bad debts. Other selling, general and administrative expenses in aggregate dollars and as a percentage of revenue increased $40.5 million and 0.3%, respectively. These increases are primarily related to charges for legal settlements of $29.6 million for 2013, which relate to legal matters occurring in the ordinary course of business, as compared to net favorable legal settlement adjustments of $3.7 million for 2012. 35



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Selling, General and Administrative Expenses - 2012 compared to 2011

Salaries decreased $0.2 million and remained consistent as a percentage of revenue for 2012 compared to 2011. The decrease is primarily due to lower management incentive pay due to our revised financial expectations, offset by merit wage increases and the expansion of our sales team in the second half of 2011.



Provision for doubtful accounts increased due to an increase in unrecoverable amounts from certain customers and the recovery during 2011 of accounts previously written-off.

Other selling, general and administrative expenses decreased $13.0 million or, as a percentage of revenue, 0.1%, primarily as a result of a decrease in legal fees and settlements and consulting and professional fees, partially offset by higher recruiting and relocation expenses. Negotiation and Withdrawal Costs - Central States Pension and Other Funds During 2013, we recorded charges to earnings of $157.7 million, primarily related to our negotiation costs of $17.0 million and our withdrawal liability from the Central States, Southeast and Southwest Areas Pension Fund (the Fund) of $138.6 million. Also included in the $157.7 million of charges for 2013 is $2.1 million for withdrawal events at the multiemployer pension plan to which we contribute related to our operations in Puerto Rico. During 2012, we recorded charges to earnings of $35.8 million, primarily related to our negotiation costs of $5.1 million and our partial withdrawal liability from the Fund of $30.7 million. The payments associated with any withdrawal liability ordinarily would be due in installments over a period of 20 years, and the payments are unlikely to be material to our cash flow in any particular period. For additional discussion and detail regarding our obligations to the Fund, see our Central States, Southeast and Southwest Areas Pension Fund discussion in Note 11, Employee Benefit Plans, to our consolidated financial statements in Item 8 of this Form 10-K.



(Gain) Loss on Disposition of Assets and Impairments, Net

During 2013, we recorded a net gain on disposition of assets and impairments of $1.9 million, primarily related to contingent sale price of $1.0 million received during the first quarter of 2013 in connection with a 2011 business divestiture in our West Region and the disposal of a business in one market in our West Region, which resulted in a gain of $0.9 million and proceeds of $1.7 million. During 2012, we recorded a net gain on disposition of assets and impairments of $2.7 million, primarily due to a $5.5 million net gain on a divestiture of a collection business in our East Region and a sale of certain assets associated with our rail logistics business. Proceeds from dispositions of solid waste assets were $9.6 million during 2012. During 2011, we disposed of businesses in various markets, resulting in a gain of $21.0 million. In connection with the dispositions, we closed a landfill, resulting in an asset impairment charge of $28.7 million for the remaining landfill assets and the acceleration of capping, closure and post-closure obligations. Additionally, we recorded asset impairments of $20.4 million primarily related to certain long-lived assets that are held for sale and losses on the divestiture of certain businesses and related goodwill. Proceeds from dispositions of solid waste assets were $14.2 million during 2011. Restructuring Charges During the fourth quarter of 2012, we restructured our field and corporate operations to create a more efficient and competitive company. These changes include consolidating our field regions from four to three and our areas from 28 to 20, relocating office space, and reducing administrative staffing levels. During 2013 and 2012, we incurred $8.6 million and $11.1 million of restructuring charges, respectively, which consisted of severance and other employee termination benefits, relocation benefits, and the closure of offices with non-cancellable lease agreements. Substantially all of these charges were recorded in our corporate segment and were incurred as of December 31, 2013. As of December 31, 2013, $1.8 million remains accrued for severance and other employee termination benefits and lease exit costs. 36



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Interest Expense The following table provides the components of interest expense, including accretion of debt discounts and accretion of discounts primarily associated with environmental and self-funded risk insurance liabilities assumed in the Allied acquisition (in millions of dollars): 2013 2012



2011

Interest expense on debt and capital lease obligations $ 319.8$ 338.5

$ 372.9 Accretion of debt discounts 6.9 12.2



25.6

Accretion of remediation reserves and other 40.6 46.2 49.8 Less: capitalized interest (7.3 ) (8.4 ) (8.1 ) Total interest expense $ 360.0$ 388.5$ 440.2 The decrease in interest expense and accretion of debt discounts for 2013 compared to 2012 and for 2012 compared to 2011 is primarily due to refinancing certain of our higher interest rate debt in 2012. Beginning August 2013, we entered into various interest rate swap agreements relative to our 4.750% fixed rate senior notes due in May 2023. These swap agreements, which were designated as fair value hedges, have a total notional value of $300.0 million and resulted in a $2.0 million reduction in interest expense during 2013. During 2013, 2012 and 2011, cash paid for interest was $324.0 million, $341.0 million and $396.2 million, respectively. Loss on Extinguishment of Debt The following table summarizes the refinancing transactions that resulted in cash paid for premiums and professional fees to repurchase outstanding debt, as well as non-cash charges for unamortized debt discounts and deferred issuance costs for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars): Cash Paid on Non-cash Loss Loss on on Total Loss on Principal Extinguishment Extinguishment Extinguishment Repaid of Debt of Debt of Debt 2013: Tax-exempt financings $ 189.1 $ - $ 2.1 $ 2.1 Loss on extinguishment of debt for the year ended December 31, 2013 $ - $ 2.1 $ 2.1



2012:

Amendments to Credit Facilities $ - $ - $ 1.5 $ 1.5 $750.0 million 6.875% senior notes due June 2017 750.0 25.8 71.0 96.8 Tax-exempt financings 94.0 - 14.2 14.2 Ineffective portion of interest rate lock settlements - 0.1 - 0.1 Loss on extinguishment of debt for the year ended December 31, 2012 $ 25.9 $ 86.7 $ 112.6



2011:

$600.0 million 7.125% senior notes due May 2016 $ 600.0 $ 21.4 $ 61.3 $ 82.7 $99.5 million 9.250% debentures due May 2021 64.2 24.2 3.8 28.0 $360.0 million 7.400% debentures due September 2035 194.8 44.7 49.9 94.6 Amendments to Credit Facilities - - 1.7 1.7 Ineffective portion of interest rate lock settlements - 0.3 - 0.3 Tax-exempt financings 30.0 - 3.5 3.5 Loss on extinguishment of debt for the year ended December 31, 2011 $ 90.6 $ 120.2 $ 210.8 37



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Income Taxes Our provision for income taxes was $262.1 million, $251.8 million and $317.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. Our effective income tax rate was 30.8%, 30.6% and 35.0% for 2013, 2012 and 2011, respectively. Our 2013 effective tax rate was favorably impacted by approximately $42 million for adjustments to our valuation allowance for state loss carryforwards, primarily due to our determination that it is more likely than not that a portion of these loss carryforwards will be utilized in future periods. In addition, our 2013 effective tax rate was favorably impacted by the settlement with the IRS appeals division and the Joint Committee of Taxation during the first quarter of 2013 for tax years 2009 and 2010. This settlement benefited our 2013 tax provision by approximately $14 million due to the reversals of previously accrued tax and interest. Our 2012 effective tax rate was favorably impacted by the settlement with the IRS appeals division for tax years 2004 to 2008. This settlement benefited our 2012 tax provision by approximately $35 million due to the reversals of previously accrued tax and interest. In 2011, our effective tax rate was favorably impacted by the settlement with the IRS appeals division for tax years 2000 to 2003. This settlement favorably impacted our 2011 tax provision by approximately $23 million due to reversals of previously accrued tax and interest. In addition, our 2013, 2012 and 2011 tax provisions were favorably impacted by the realization of tax credits and lower state rates due to changes in estimates of approximately $9.6 million, $16.0 million and $19.0 million, respectively. We made income tax payments (net of refunds received) of approximately $288 million, $185 million and $173 million for 2013, 2012 and 2011, respectively. Income taxes paid in 2013 reflect the favorable tax depreciation provisions of the American Tax Relief Act of 2012, signed into law on January 2, 2013. This legislation extended 50% bonus depreciation for property placed in service during 2013 and helped mitigate the negative impact from the lack of property deductions due to bonus depreciation taken in prior years. Income taxes paid in 2012 and 2011 reflect the favorable tax depreciation provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act) that was signed into law in December 2010. The Tax Relief Act included 100% bonus depreciation for property placed in service after September 8, 2010 and through December 31, 2011 and 50% bonus depreciation for property placed in service in 2012. For additional discussion and detail regarding our income taxes, see Note 10, Income Taxes, to our consolidated financial statements in Item 8 of this Form 10-K. 38



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Reportable Segments Our operations are managed and evaluated through three regions: East, Central and West. These three regions are presented below as our reportable segments. The historical results, discussion and presentation of our reportable segments for all periods presented reflect the impact of the restructuring of our operations in the fourth quarter of 2012. These reportable segments provide integrated waste management services consisting of collection, transfer, recycling and disposal of non-hazardous solid waste. Summarized financial information concerning our reportable segments for the years ended December 31, 2013, 2012 and 2011 is shown in the following table (in millions of dollars and as a percentage of revenue): Depreciation, Amortization, Depletion Adjustments to and Amortization Accretion Before Expense Depreciation, Gain (Loss) on Adjustments for for Asset Amortization, Disposition of Operating Net Asset Retirement Retirement Depletion and Assets and Income Operating Revenue Obligations Obligations Accretion Impairments, Net (Loss) Margin 2013: East $ 2,456.0 $ 252.9 $ 4.7 $ 257.6 $ - $ 451.0 18.4 % Central 2,512.1 307.4 (2.8 ) 304.6 - 494.5 19.7 West 3,324.4 345.8 (3.0 ) 342.8 1.9 766.6 23.1 Corporate entities 124.7 48.2 0.8 49.0 - (501.8 ) Total $ 8,417.2 $ 954.3 $ (0.3 ) $ 954.0 $ 1.9 $ 1,210.3 14.4 % 2012: East $ 2,445.8 $ 247.6 $ (3.0 ) $ 244.6 $ 5.3 $ 474.6 19.4 % Central 2,424.8 289.6 (4.6 ) 285.0 (0.3 ) 474.5 19.6 West 3,158.0 333.5 (0.8 ) 332.7 0.1 685.9 21.7 Corporate entities 89.7 51.3 13.3 64.6 (2.4 ) (314.4 ) Total $ 8,118.3 $ 922.0 $ 4.9 $ 926.9 $ 2.7 $ 1,320.6 16.3 % 2011: East $ 2,525.7 $ 248.8 $ (2.3 ) $ 246.5 $ (23.2 ) $ 550.7 21.8 % Central 2,430.3 294.1 (17.0 ) 277.1 (0.7 ) 529.3 21.8 West 3,139.1 337.3 (1.5 ) 335.8 (5.4 ) 735.9 23.4 Corporate entities 97.8 51.0 11.2 62.2 1.2 (263.2 ) Total $ 8,192.9 $ 931.2 $ (9.6 ) $ 921.6 $ (28.1 ) $ 1,552.7 19.0 % Corporate entities include legal, tax, treasury, information technology, risk management, human resources, corporate accounts, closed landfills and other administrative functions. National Accounts revenue included in corporate entities represents the portion of revenue generated from nationwide contracts in markets outside our operating areas where the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations. Significant changes in the revenue and operating margins of our reportable segments for 2013 compared to 2012 and 2012 compared to 2011 are discussed in the following paragraphs. 2013 compared to 2012 East Region Revenue for 2013 increased 0.4% from 2012, primarily due to average yield and volume increases in our commercial and industrial collection lines of business and an average yield increase in our landfill line of business. These increases were partially offset by declines in volume in our residential collection, landfill and transfer station lines of business. The volume declines in our residential collection line of business were primarily due to the loss of certain municipal contracts and volume decreases in our disposal lines of business were primarily related to the loss of certain disposal contracts. 39



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Operating income in our East Region decreased from $474.6 million for 2012, or a 19.4% operating margin, to $451.0 million for 2013, or an 18.4% operating margin, primarily as a result of the following:

Cost of operations negatively impacted operating income during 2013

compared to 2012, primarily due to higher labor and benefits and repair

and maintenance costs. These unfavorable items were partially offset by lower fuel expenses due to lower prices of diesel fuel and reduced risk management expenses. Cost of goods sold increased for 2013 from 2012 primarily due to a higher volume of commodities sold.



Depreciation, amortization, depletion and accretion negatively impacted

operating income during 2013 compared to 2012 primarily due to unfavorable

adjustments for asset retirement obligations of $4.7 million in 2013 compared to net favorable adjustments of $3.0 million in 2012.



Selling, general and administrative expenses favorably impacted operating

income, primarily due to higher provisions for doubtful accounts in 2012 compared to 2013.



Net gains on disposition of assets and impairments unfavorably impacted

operating income during 2013 compared to 2012, primarily as a result of a

$5.5 million net gain on the divestiture of a collection business and the

sale of certain assets associated with our rail logistics business in 2012. Central Region Revenue for 2013 increased 3.6% from 2012, primarily due to average yield and volume increases in our commercial and industrial collection lines of business, increased volumes in our residential collection line of business, increased municipal solid waste landfill volume and increased average yield for our disposal lines of business. These increases were partially offset by declines in transfer station volumes. Operating income in our Central Region increased from $474.5 million for 2012, or a 19.6% operating margin, to $494.5 million for 2013, or a 19.7% operating margin, primarily as a result of the following:



Cost of operations negatively impacted operating income due to higher

labor and benefits, repair and maintenance, and cost of goods sold. Cost of goods sold increased for 2013 from 2012 primarily due to a higher volume of commodities sold.



Selling, general and administrative expenses favorably impacted operating

income for 2013 compared to 2012, primarily due to lower legal settlement

and legal fee expenses, offset by increased provisions for doubtful

accounts.

West Region Revenue for 2013 increased 5.3% from 2012, primarily due to increases in average yield and volume in substantially all core lines of business. Volume increases in the landfill line of business were primarily due to increased special waste event work. Operating income in our West Region increased from $685.9 million for 2012, or a 21.7% operating margin, to $766.6 million for 2013, or a 23.1% operating margin, primarily as a result of the following:



Cost of operations favorably impacted operating income margin primarily

due to lower fuel costs, which were primarily driven by increased usage of

CNG and alternative fuel credits, offset by other operating cost increases. During 2013, we recorded a net gain on disposition of assets and



impairments of $1.9 million, primarily related to contingent sale price of

$1.0 million received during the first quarter of 2013 in connection with

a 2011 business divestiture and the disposal of a business in one market,

which resulted in a gain of $0.9 million and proceeds of $1.7 million.

Corporate Entities During 2013, the corporate entities had operating losses of $501.8 million compared to $314.4 million for 2012. Operating losses for 2013 were adversely impacted by a $108.7 million charge recorded in connection with remediation at our closed Bridgeton Landfill in Missouri, as compared to $74.1 million of charges recorded in 2012, a charge to earnings of $140.7 million during 2013 for our withdrawal liability from the Fund and Puerto Rico multiemployer pension plans, as compared to $30.7 million of charges recorded in 2012, and certain legal settlement charges in 2013 of $31.3 million. 40



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Table of Contents 2012 compared to 2011 East Region Revenue for 2012 declined 3.2%, primarily due to declines in volume in our collection, landfill and transfer station lines of business, coupled with lower recycling commodity revenue and decreases in average yield in our collection line of business. The volume declines were primarily due to the loss of a large National Accounts contract and the loss of certain disposal contracts. These decreases were partially offset by price increases in the landfill and transfer station lines of business during 2012. Operating income in our East Region decreased from $550.7 million for 2011, or a 21.8% operating margin, to $474.6 million for 2012, or a 19.4% operating margin. In addition to the impact of the decrease in revenue, the following cost categories impacted operating income:



Cost of operations negatively impacted operating income due to higher

labor and benefits, fuel and repair and maintenance costs. Environmental

costs increased primarily due to higher leachate disposal costs, third party survey and engineering costs and other landfill maintenance. These



unfavorable items were partially offset by favorable transfer, disposal,

subcontract and transportation costs primarily due to lower disposal

prices and volumes. In addition, cost of goods sold declined primarily due

to lower market value of recycled commodities offset by an increase in volume of commodities sold.



Depreciation, amortization, depletion and accretion favorably impacted

operating income primarily due to favorable adjustments for asset

retirement obligations of $3.0 million in 2012 compared to $2.3 million in

2011.



Selling, general and administrative expenses decreased operating income

primarily due to wage increases, higher legal fees and settlements, and higher provision for doubtful accounts. Net gains (losses) on disposition of assets and impairments had a



favorable impact on operating income in 2012 compared to 2011, primarily

due to a $5.5 million net gain on the divestiture of a collection business

and the sale of certain assets associated with our rail logistics business

in 2012. During 2011, we disposed of businesses in three markets resulting

in a net gain of $17.3 million. In connection with the disposition of these businesses, we closed a landfill site resulting in an asset impairment charge of $28.7 million for the remaining landfill assets and



the acceleration of capping, closure and post-closure costs. In addition,

in 2011 we recorded asset impairments of $12.3 million primarily related

to certain long-lived assets that were held for sale.

Central Region Revenue for 2012 declined 0.2%, primarily due to a decline in volumes in our transfer station and landfill lines of business and a decline in recycling commodity revenue as a result of decreases in commodity prices. The volume declines were primarily due to the loss of a large National Accounts contract and special waste event work not recurring in 2012. These decreases were partially offset by an increase in average yield in all lines of business and volume increases in all collection lines of business during 2012. Operating income in our Central Region decreased from $529.3 million for 2011, or a 21.8% operating margin, to $474.5 million for 2012, or a 19.6% operating margin, primarily as a result of the following:



Cost of operations negatively impacted operating income due to higher

labor and benefits, fuel, and repair and maintenance costs. Environmental

costs increased primarily due to higher gas maintenance and third party survey and engineering costs. These unfavorable items were partially offset by favorable cost of goods sold primarily due to a decline in market value of recycled commodities offset by an increase in volume of commodities sold.



Depreciation, amortization, depletion and accretion unfavorably impacted

operating income primarily due to favorable adjustments for asset

retirement obligations of $4.6 million in 2012 compared to $17.0 million

in 2011.



Selling, general and administrative expenses decreased operating income

primarily due to wage increases, higher legal fees and settlements and higher provision for doubtful accounts. 41



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West Region Revenue for 2012 increased 0.6% due to an increase in average yield in all lines of business and an increase in volumes in our commercial and industrial collection lines of business. These increases were partially offset by a decline in volumes in our residential collection, landfill and transfer station lines of business as well as lower recycling commodity revenue. The volume decline in our landfill line of business was primarily due to competitive disposal pricing and special waste event work not recurring in 2012. Operating income in our West Region decreased from $735.9 million for 2011, or a 23.4% operating margin, to $685.9 million for 2012, or a 21.7% operating margin, primarily as a result of the following:



Cost of operations negatively impacted operating income due to higher

labor and benefits, fuel, franchise fees and repair and maintenance costs.

Cost of operations was higher as a percentage of revenue in part due to lower special waste event work in 2012, which has a lower operating cost associated with it. Environmental costs increased primarily due to a $7.2



million charge recorded in connection with environmental conditions at our

closed disposal facility in Nevada.



Depreciation, amortization, depletion and accretion favorably impacted

operating income primarily due to lower landfill volumes.



Selling, general and administrative expenses contributed to a decrease in

operating income, primarily due to increased legal fees and settlements.

Net gains (losses) on disposition of assets and impairments favorably

impacted 2012 operating income as compared to 2011 primarily as a result

of 2011 asset impairments of $7.2 million for expected losses on the

divestiture of certain businesses. These assets were subsequently sold in

the third quarter of 2011 resulting in no further loss. Offsetting this 2011 impairment expense was a $1.7 million gain on sale recorded in connection with a separate business disposition.



Corporate Entities

During 2012, the corporate entities had an operating loss of $314.4 million compared to an operating loss of $263.2 million for 2011.

The operating loss for 2012 was favorably impacted by lower management incentive pay, lower legal fees and lower consulting expenses. These favorable adjustments were more than offset by unfavorable remediation adjustments due to a $74.1 million charge recorded in connection with environmental conditions at our closed Bridgeton landfill in Missouri, and adjustments to asset retirement obligations totaling $13.3 million at other closed landfills. In addition, during 2012 we recorded a charge to earnings of $35.8 million primarily related to negotiation costs and our partial withdrawal from Central States Pension Fund. During the fourth quarter of 2012, we restructured our field and corporate operations to create a more efficient and competitive company. We incurred $11.1 million of restructuring charges that consisted of severance and other employee termination benefits, relocation benefits, and the closure of offices with non-cancellable lease agreements with terms ranging from two to five years. Landfill and Environmental Matters Our landfill costs include daily operating expenses, costs of capital for cell development, costs for final capping, closure and post-closure, and the legal and administrative costs of ongoing environmental compliance. Daily operating expenses include leachate treatment and disposal, methane gas and groundwater monitoring and system maintenance, interim cap maintenance, and costs associated with applying daily cover materials. We expense all indirect landfill development costs as they are incurred. We use life cycle accounting and the units-of-consumption method to recognize certain direct landfill costs related to landfill development. In life cycle accounting, certain direct costs are capitalized and charged to depletion expense based on the consumption of cubic yards of available airspace. These costs include all costs to acquire and construct a site, including excavation, natural and synthetic liners, construction of leachate collection systems, installation of methane gas collection and monitoring systems, installation of groundwater monitoring wells, and other costs associated with acquiring and developing the site. Obligations associated with final capping, closure and post-closure are capitalized and amortized on a units-of-consumption basis as airspace is consumed. 42



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Cost and airspace estimates are developed at least annually by engineers. Our operating and accounting personnel use these estimates to adjust the rates we use to expense capitalized costs. Changes in these estimates primarily relate to changes in costs, available airspace, inflation and applicable regulations. Changes in available airspace include changes in engineering estimates, changes in design and changes due to the addition of airspace lying in expansion areas that we believe have a probable likelihood of being permitted. Available Airspace The following tables reflect landfill airspace activity for active landfills owned or operated by us for the years ended December 31, 2013, 2012 and 2011: Balance Landfills Permits Changes Balance as of New Acquired, Granted, in as of December 31, Expansions Net of Net of Airspace Engineering December 31, 2012 Undertaken



Divestitures Closures Consumed Estimates 2013 Cubic yards (in millions): Permitted airspace

4,562.5 -



- 164.4 (73.3 ) (3.0 ) 4,650.6 Probable expansion airspace

260.4 18.6 - (51.1 ) - (5.0 ) 222.9 Total cubic yards (in millions) 4,822.9 18.6



- 113.3 (73.3 ) (8.0 ) 4,873.5 Number of sites: Permitted airspace

191 (1 ) 190 Probable expansion airspace 10 1 (2 ) 9 Balance Landfills Permits Changes Balance as of New Acquired, Granted, in as of December 31, Expansions Net of Net of Airspace Engineering December 31, 2011 Undertaken



Divestitures Closures Consumed Estimates 2012 Cubic yards (in millions): Permitted airspace

4,621.8 -



- 25.3 (73.6 ) (11.0 ) 4,562.5 Probable expansion airspace

166.5 113.1 - (19.2 ) - - 260.4 Total cubic yards (in millions) 4,788.3 113.1 - 6.1 (73.6 ) (11.0 ) 4,822.9 Number of sites: Permitted airspace 191 191 Probable expansion airspace 8 4 (2 ) 10 Balance Landfills Permits Changes Balance as of New Acquired, Granted, in as of December 31, Expansions Net of Net of Airspace Engineering December 31, 2010 Undertaken



Divestitures Closures Consumed Estimates 2011 Cubic yards (in millions): Permitted airspace

4,595.5 - 7.9 98.1 (79.9 ) 0.2 4,621.8 Probable expansion airspace 149.1 69.4 - (52.1 ) - 0.1 166.5 Total cubic yards (in millions) 4,744.6 69.4 7.9 46.0 (79.9 ) 0.3 4,788.3 Number of sites: Permitted airspace 193 1 (3 ) 191 Probable expansion airspace 8 4 (4 ) 8



Changes in engineering estimates typically include modifications to the available disposal capacity of a landfill based on a refinement of the capacity calculations resulting from updated information.

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As of December 31, 2013, we owned or operated 190 active solid waste landfills with total available disposal capacity estimated to be 4.9 billion in-place cubic yards. Total available disposal capacity represents the sum of estimated permitted airspace plus an estimate of probable expansion airspace. Engineers develop these estimates at least annually using information provided by annual aerial surveys. As of December 31, 2013, total available disposal capacity is estimated to be 4.7 billion in-place cubic yards of permitted airspace plus 0.2 billion in-place cubic yards of probable expansion airspace. Before airspace included in an expansion area is determined to be probable expansion airspace and, therefore, included in our calculation of total available disposal capacity, it must meet all of our expansion criteria. See Note 2, Summary of Significant Accounting Policies, and Note 8, Landfill and Environmental Costs, to our consolidated financial statements in Item 8 of this Form 10-K for further information. Also see our "Critical Accounting Judgments and Estimates" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. As of December 31, 2013, nine of our landfills met all of our criteria for including their probable expansion airspace in their total available disposal capacity. At projected annual volumes, these nine landfills have an estimated remaining average site life of 53 years, including probable expansion airspace. The average estimated remaining life of all of our landfills is 66 years. We have other expansion opportunities that are not included in our total available airspace because they do not meet all of our criteria for treatment as probable expansion airspace. The following table reflects the estimated operating lives of our active landfill sites based on available and probable disposal capacity using current annual volumes as of December 31, 2013: Number Number of Sites of Sites without with Probable Probable Percent Expansion Expansion Total of Airspace Airspace Sites Total 0 to 5 years 16 - 16 8.4 % 6 to 10 years 16 - 16 8.4 11 to 20 years 33 - 33 17.4 21 to 40 years 41 5 46 24.2 41+ years 75 4 79 41.6 Total 181 9 190 100.0 % Final Capping, Closure and Post-Closure Costs As of December 31, 2013, accrued final capping, closure and post-closure costs were $1,091.3 million, of which $93.6 million are current and $997.7 million are long-term as reflected in our consolidated balance sheets in accrued landfill and environmental costs included in Item 8 of this Form 10-K. Remediation and Other Charges for Landfill Matters The following is a discussion of certain of our significant remediation matters: Bridgeton Landfill. In June 2013, we recorded an environmental remediation charge at our closed Bridgeton Landfill in Missouri of $108.7 million to manage the remediation area and monitor the site. As of December 31, 2013, the remediation liability recorded for this site is $93.9 million, of which $30.9 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $63.0 million to $342.0 million. Countywide Landfill. In September 2009, Republic Services of Ohio II, LLC entered into Final Findings and Orders with the Ohio Environmental Protection Agency that require us to implement a comprehensive operation and maintenance program to manage the remediation area at the Countywide Recycling and Disposal Facility (Countywide). The remediation liability for Countywide recorded as of December 31, 2013 is $47.0 million, of which $4.6 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $46 million to $67 million. Congress Landfill. In August 2010, Congress Development Company agreed with the State of Illinois to have a Final Consent Order (Final Order) entered by the Circuit Court of Illinois, Cook County. Pursuant to the Final Order, we have agreed to continue to implement certain remedial activities at the Congress Landfill. The remediation liability recorded as of December 31, 2013 is $82.7 million, of which $9.9 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $53 million to $153 million. 44



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It is reasonably possible that we will need to adjust the liabilities noted above to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in our estimates of the costs, timing or duration of the required actions could have a material adverse effect on our consolidated financial position, results of operations or cash flows. Investment in Landfills The following tables reflect changes in our investment in landfills for the years ended December 31, 2013, 2012 and 2011 and the future expected investment as of December 31, 2013 (in millions): Non-cash Impairments, Adjustments Balance Additions Additions Transfers for Balance as of Acquisitions for Asset Charged and Asset as of December 31, Capital Net of Retirement to Other Retirement December 31, 2012 Additions Retirements Divestitures Obligations Expense Adjustments Obligations 2013 Non-depletable landfill land $ 166.0$ 2.3$ (4.3 ) $ - $ - $ - $ 0.2 $ - $ 164.2 Landfill development costs 5,018.0 2.6 - - 36.5 - 323.6 12.0 5,392.7



Construction-in-progress

-landfill 134.5 259.5 - - - - (321.5 ) - 72.5 Accumulated depletion and amortization (1,896.4 ) - - - - (262.2 ) (1.9 ) 0.3 (2,160.2 ) Net investment in landfill land and development costs $ 3,422.1$ 264.4$ (4.3 ) $ - $ 36.5$ (262.2 ) $ 0.4 $ 12.3 $ 3,469.2 Non-cash Impairments, Adjustments Balance Additions Additions Transfers for Balance as of Acquisitions for Asset Charged and Asset as of December 31, Capital Net of Retirement to Other Retirement December 31, 2011 Additions Retirements Divestitures Obligations Expense Adjustments Obligations 2012 Non-depletable landfill land $ 161.8$ 3.3$ (0.3 ) $ - $ - $ - $ 1.2 $ - $ 166.0 Landfill development costs 4,763.3 8.0 - (0.3 ) 33.8 - 217.8 (4.6 ) 5,018.0 Construction-in-progress -landfill 187.3 263.2 - - - - (316.0 ) - 134.5 Accumulated depletion and amortization (1,735.7 ) - - 0.3 - (252.7 ) 96.4 (4.7 ) (1,896.4 ) Net investment in landfill land and development costs $ 3,376.7$ 274.5$ (0.3 ) $ - $ 33.8$ (252.7 )$ (0.6 )$ (9.3 )$ 3,422.1 45



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Table of Contents Non-cash Impairments, Adjustments Balance Additions Additions Transfers for Balance as of

Acquisitions for Asset Charged and

Asset as of December 31, Capital Net of Retirement to Other Retirement December 31, 2010 Additions Retirements Divestitures Obligations Expense Adjustments Obligations 2011 Non-depletable landfill land $ 158.0$ 3.1 $ - $ - $ - $ - $ 0.7 $ - $ 161.8 Landfill development costs 4,575.2 2.8 - 8.7 33.9 - 173.7 (31.0 ) 4,763.3 Construction-in-progress -landfill 133.2 272.5 - (0.4 ) - - (218.0 ) - 187.3 Accumulated depletion and amortization (1,504.6 ) - - 0.5 - (264.5 ) 23.0 9.9 (1,735.7 ) Net investment in landfill land and development costs $ 3,361.8$ 278.4 $ - $ 8.8 $ 33.9$ (264.5 )$ (20.6 )$ (21.1 )$ 3,376.7 Balance as of Expected Total December 31, Future Expected 2013 Investment Investment Non-depletable landfill land $ 164.2 $ - $ 164.2 Landfill development costs 5,392.7 7,494.6 12,887.3 Construction-in-progress - landfill 72.5 - 72.5 Accumulated depletion and amortization (2,160.2 ) - (2,160.2 ) Net investment in landfill land and development costs $ 3,469.2 $



7,494.6 $ 10,963.8

The following table reflects our net investment in our landfills, excluding non-depletable land, and our depletion, amortization and accretion expense for the years ended December 31, 2013, 2012 and 2011:

2013 2012



2011

Number of landfills owned or operated 190 191



191

Net investment, excluding non-depletable land (in millions) $ 3,305.0$ 3,256.1$ 3,214.9 Total estimated available disposal capacity (in millions of cubic yards) 4,873.5 4,822.9



4,788.3

Net investment per cubic yard $ 0.68$ 0.68$ 0.67 Landfill depletion and amortization expense (in millions) $ 261.9$ 257.6$ 255.5 Accretion expense (in millions) 76.6 78.4



78.0

338.5 336.0



333.5

Airspace consumed (in millions of cubic yards) 73.3 73.6



79.9

Depletion, amortization and accretion expense per cubic yard of airspace consumed $ 4.62$ 4.57



$ 4.17

During 2013 and 2012, our average compaction rate was approximately 2,000 pounds per cubic yard based on a three-year historical moving average. As of December 31, 2013, we expect to spend an estimated additional $7.5 billion on existing landfills, primarily related to cell construction and environmental structures, over their remaining lives. Our total expected investment, excluding non-depletable land, estimated to be $10.8 billion, or $2.22 per cubic yard, is used in determining our depletion and amortization expense based on airspace consumed using the units-of-consumption method. 46



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Property and Equipment The following tables reflect the activity in our property and equipment accounts for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars): Gross Property and Equipment Non-Cash Adjustments Impairments, Balance Additions for Transfers Balance as of Acquisitions, for Asset Asset and as of December 31, Capital Net of Retirement Retirement Other December 31, 2012 Additions Retirements Divestitures Obligations Obligations Adjustments 2013 Other land $ 376.9$ 0.1$ (1.1 ) $ - $ - $ - $ 1.7 $ 377.6 Non-depletable landfill land 166.0 2.3 (4.3 ) - - - 0.2 164.2 Landfill development costs 5,018.0 2.6 - - 36.5 12.0 323.6 5,392.7 Vehicles and equipment 4,946.4 546.9 (144.6 ) 18.0 - - 37.0 5,403.7 Buildings and improvements 864.2 28.9 (2.0 ) 0.1 - - 44.4 935.6



Construction-in-progress -

landfill 134.5 259.5 - - - - (321.5 ) 72.5



Construction-in-progress -

other 53.3 42.3 - - - - (82.3 ) 13.3 Total $ 11,559.3$ 882.6$ (152.0 ) $ 18.1 $ 36.5 $ 12.0 $ 3.1 $ 12,359.6 Accumulated



Depreciation, Amortization and Depletion

Adjustments Impairments, Balance Additions for Transfers Balance as of Charged Acquisitions, Asset and as of December 31, to Net of Retirement Other December 31, 2012 Expense Retirements



Divestitures Obligations Adjustments 2013 Landfill development costs $ (1,896.4 )$ (262.2 ) $

- $ - $ 0.3 $ (1.9 )$ (2,160.2 ) Vehicles and equipment (2,512.3 ) (507.7 ) 135.8 - - 0.4 (2,883.8 ) Buildings and improvements (240.3 ) (39.7 ) 1.5 - - (0.3 ) (278.8 ) Total $ (4,649.0 )$ (809.6 )$ 137.3 $ - $ 0.3 $ (1.8 )$ (5,322.8 ) Gross Property and Equipment Non-Cash Adjustments Impairments, Balance Additions for Transfers Balance as of Acquisitions, for Asset Asset and as of December 31, Capital Net of Retirement Retirement Other December 31, 2011 Additions Retirements Divestitures Obligations Obligations Adjustments 2012 Other land $ 375.1 $ - $ (1.9 ) $ 3.7 $ - $ - $ - $ 376.9 Non-depletable landfill land 161.8 3.3 (0.3 ) - - - 1.2 166.0 Landfill development costs 4,763.3 8.0 - (0.3 ) 33.8 (4.6 ) 217.8 5,018.0 Vehicles and equipment 4,515.1 478.1 (98.7 ) 12.5 - - 39.4 4,946.4 Buildings and improvements 802.8 30.7 (14.3 ) 7.4 - - 37.6 864.2



Construction-in-progress -

landfill 187.3 263.2 - - - - (316.0 ) 134.5



Construction-in-progress -

other 47.3 83.4 - - - - (77.4 ) 53.3 Total $ 10,852.7$ 866.7$ (115.2 ) $ 23.3 $ 33.8 $ (4.6 )$ (97.4 )$ 11,559.3 Accumulated



Depreciation, Amortization and Depletion

Adjustments Impairments, Balance Additions for Transfers Balance as of Charged Acquisitions, Asset and as of December 31, to Net of Retirement Other December 31, 2011 Expense Retirements Divestitures Obligations Adjustments 2012 Landfill development costs $ (1,735.7 )$ (252.7 ) $ - $ 0.3 $ (4.7 )$ 96.4$ (1,896.4 ) Vehicles and equipment (2,119.1 ) (486.6 ) 91.6 1.5 - 0.3 (2,512.3 ) Buildings and improvements (205.6 ) (37.0 ) 2.2 0.3 - (0.2 ) (240.3 ) Total $ (4,060.4 )$ (776.3 )$ 93.8 $ 2.1 $ (4.7 )$ 96.5$ (4,649.0 ) 47



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Table of Contents Gross Property and Equipment Non-Cash Adjustments Impairments, Balance Additions for Transfers Balance as of Acquisitions, for Asset Asset and as of December 31, Capital Net of Retirement Retirement Other December 31, 2010 Additions Retirements Divestitures Obligations Obligations Adjustments 2011 Other land $ 391.9$ 0.8$ (1.9 ) $ (1.1 ) $ - $ - $ (14.6 )$ 375.1 Non-depletable landfill land 158.0 3.1 - - - - 0.7 161.8 Landfill development costs 4,575.2 2.8 - 8.7 33.9 (31.0 ) 173.7



4,763.3

Vehicles and equipment 4,142.1 522.0 (178.8 ) 1.3 - - 28.5 4,515.1 Buildings and improvements 768.5 19.6 (2.7 ) 1.3 - - 16.1 802.8



Construction-in-progress -

landfill 133.2 272.5 - (0.4 ) - - (218.0 ) 187.3



Construction-in-progress -

other 27.2 64.9 - (0.1 ) - - (44.7 ) 47.3 Total $ 10,196.1$ 885.7$ (183.4 ) $ 9.7 $ 33.9 $ (31.0 )$ (58.3 )$ 10,852.7 Accumulated



Depreciation, Amortization and Depletion

Adjustments Impairments, Balance Additions for Transfers Balance as of Charged Acquisitions, Asset and as of December 31, to Net of Retirement Other December 31, 2010 Expense Retirements Divestitures Obligations Adjustments 2011 Landfill development costs $ (1,504.6 )$ (264.5 ) $ - $ 0.5 $ 9.9 $ 23.0$ (1,735.7 ) Vehicles and equipment (1,820.6 ) (478.8 ) 162.4 18.2 - (0.3 ) (2,119.1 ) Buildings and improvements (172.4 ) (35.3 ) 1.4 0.4 - 0.3 (205.6 ) Total $ (3,497.6 )$ (778.6 )$ 163.8 $ 19.1 $ 9.9 $ 23.0$ (4,060.4 ) Liquidity and Capital Resources The following table summarizes our cash flow from operating activities, investing activities and financing activities for the years ended December 31, 2013, 2012 and 2011 (in millions of dollars): 2013 2012



2011

Net cash provided by operating activities $ 1,548.2$ 1,513.8$ 1,766.7 Net cash used in investing activities (933.8 ) (937.6 ) (950.2 ) Net cash used in financing activities (468.7 ) (574.9 ) (838.5 ) Cash Flows Provided by Operating Activities Certain of the more significant items affecting our operating cash flows for 2013 and 2012 are summarized below: Changes in assets and liabilities, net of effects of business acquisitions and divestitures, decreased our cash flow from operations by $256.6 million in 2013 compared to a decrease of $377.0 million in 2012, primarily as a result of the following: Our accounts receivable, exclusive of the change in allowance for doubtful



accounts, increased $61.6 million during 2013 due to the timing of

billings, net of collections, as compared to a $37.2 million increase in

2012. As of December 31, 2013 and 2012, the number of days our sales were outstanding were 38 days, or 25 net of deferred revenue.



Cash paid for income taxes was $288 million and $185 million for 2013 and

2012, respectively.

Our accounts payable increased $37.9 million during 2013 due to the timing

of payments, as compared to a $49.6 million decrease in 2012.

We paid $15.8 million during 2013 related to a restructuring announced

during the fourth quarter of 2012. During 2012, we paid synergy incentive

plan bonuses of $68.1 million. We also paid $2.2 million during 2012 in

connection with the restructuring announced in the fourth quarter of 2012. Cash paid for capping, closure and post-closure obligations was $8.0



million million higher during 2013 compared to 2012, primarily due to a

$17.8 million payment to settle our post-closure liability for one of our closed landfill sites. 48



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Cash paid for remediation obligations was $49.4 million higher during 2013

compared to 2012, primarily due to remediation work performed at our closed Bridgeton Landfill in Missouri. Our other liabilities increased $16.9 million during 2013, which is primarily due to the timing of payment for certain payroll related accruals and other accrued expenses, as compared to a $55.3 million decrease in 2012. We use cash flows from operations to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Certain of the more significant items affecting our operating cash flows for 2012 and 2011 are summarized below: Changes in assets and liabilities, net of effects of business acquisitions and divestitures, decreased our cash flow from operations by $377.0 million in 2012 compared to a decrease of $406.9 million in 2011, a decrease of $29.9 million, primarily as a result of the following:



Our accounts receivable, exclusive of the change in allowance for doubtful

accounts, increased $37.2 million during 2012 due to the timing of

billings, net of collections, as compared to a $16.0 million increase

during the comparable 2011 period. As of December 31, 2012 and 2011, the number of days our sales were outstanding were 38 and 37 days, respectively. Our accounts payable decreased $89.1 million year over year due to the



timing of payments, and a decrease in property and equipment received

during the period but paid in the following period of $36.8 million. In

addition, net book credit balances in our primary disbursement accounts

classified as accounts payable on our consolidated balance sheets

decreased from $85.6 million as of December 31, 2011 to $51.0 million as

of December 31, 2012. Income taxes paid, net of refunds received, were approximately $185 million and $173 million for 2012 and 2011, respectively.



During the first quarter of 2012, we paid synergy incentive plan bonuses

of approximately $68 million. We also paid $2.2 million during 2012 in connection with the fourth quarter 2012 restructuring. During 2012, we paid $77.6 million to settle capping, closure and post-closure obligations, a decrease of $28.1 million from the $105.7 million paid in 2011. The decrease in cash paid for capping, closure, and post-closure activities is primarily due to the timing of obligations. During 2012, we paid $73.1 million for environmental remediation



obligations, an increase of $28.1 million from the $45.0 million paid in

2011, primarily related to remediation work performed at one of our closed

landfill sites in our West Region.

Cash paid for interest was $55.2 million lower during 2012 than 2011 due

to refinancing of our higher interest rate debt.

Cash Flows Used in Investing Activities

The most significant items affecting our investing cash flows for the periods presented are summarized below:

Capital expenditures during 2013 were $880.8 million compared with $903.5

million for 2012 and $936.5 million for 2011. Property and equipment

received during 2013, 2012 and 2011 were $879.8 million, $866.7 million

and $885.7 million, respectively. Proceeds from sales of property and equipment during 2013 were $23.9 million compared to $28.7 million for 2012 and $34.6 million for 2011. Proceeds from sales of property and equipment in 2011 were higher than



2013 and 2012 due to the sale of equipment used as part of our expired

transportation and disposal contract with the City of Toronto in 2011. 49



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During 2013, we paid $68.7 million for acquisitions of collection businesses in all three regions. During 2012, we paid $95.3 million for



acquisitions of collection, recycling and transfer station businesses in

all three regions. During 2011, we paid $42.6 million for acquisitions,

including one landfill public-private partnership, one recycling business

and a variety of collection businesses. In addition, during 2013, 2012 and

2011, we paid $5.4 million, $0.3 million and $3.1 million, respectively,

in relation to holdback liabilities resulting from acquisitions.



Decreases (increases) in our restricted cash and marketable securities

balances were $(5.5) million, $23.2 million and $(16.8) million for 2013,

2012 and 2011, respectively. Changes in restricted cash and marketable

securities are primarily related to the issuance of tax-exempt bonds for

our capital needs, collateral for certain of our obligations and amounts

held in trust as a guarantee of performance. Funds received from issuances

of tax-exempt bonds are deposited directly into trust accounts by the

bonding authority at the time of issuance. As we do not have the ability

to use these funds for general operating purposes, they are classified as

restricted cash in our consolidated balance sheets and cash used in our investing activities. The increase of $(5.5) million during 2013 is primarily due to investments in restricted cash related to our self-insurance program. During 2012, we received $24.7 million in connection with an issuance of tax-exempt bonds. Reimbursements from the trust for qualifying expenditures or for repayments of the related



tax-exempt bonds are presented as cash provided by investing activities in

our consolidated statements of cash flows. Such reimbursements amounted to

$22.4 million and $17.3 million during 2012 and 2011, respectively. During

2012, we paid $29.5 million to settle a legal matter that was funded

through a restricted escrow account in 2011.

We intend to finance capital expenditures and acquisitions through cash on hand, restricted cash held for capital expenditures, cash flows from operations, our revolving credit facilities, and tax-exempt bonds and other financings. We primarily expect to use cash for consideration paid for future business acquisitions. Cash Flows Used in Financing Activities



The most significant items affecting the comparison of our cash flows from financing activities for the periods presented are summarized below:

Payments of notes payable and long-term debt, net of proceeds were $58.9 million during 2013 compared to net proceeds of $50.8 million and $36.8



million for 2012 and 2011, respectively. For a more detailed discussion,

see the "Financial Condition" section of this Management's Discussion and

Analysis of Financial Condition and Results of Operations. Cash premiums and fees paid in connection with the issuance of our debt and to settle certain hedging relationships were $1.6 million, $43.3 million and $148.4 million for 2013, 2012 and 2011, respectively. For a more detailed discussion, see our "Financial Condition" section of this



Management's Discussion and Analysis of Financial Condition and Results of

Operations. In October 2013, the board of directors added $650.0 million to the existing share repurchase authorization. As of December 31, 2013, there



was $760.6 million remaining under our share repurchase authorization.

These authorizations are in addition to the $400.0 million repurchase

program authorized in November 2010. From November 2010 to December 31,

2013, we repurchased 35.5 million shares of our stock for $1,039.2 million

at a weighted average cost per share of $29.30. During 2013, we

repurchased 6.5 million shares of our stock for $213.6 million. During

2012, we repurchased 11.8 million shares for $324.7 million. During 2011,

we repurchased 15.7 million shares for $459.7 million. During 2014, we expect to use approximately $400 million of our authorization to repurchase our outstanding shares of common stock.



We initiated a quarterly cash dividend in July 2003 and have increased our

dividend from time to time thereafter. In July 2013, our board of directors approved an increase to our quarterly dividend to $0.26 per share. Prior to this increase, in July 2012 the board of directors approved an increase in the quarterly dividend to $0.235 per share.



Dividends paid were $348.5 million, $329.1 million and $309.4 million for

2013, 2012 and 2011, respectively. 50



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Table of Contents Financial Condition Cash and Cash Equivalents As of December 31, 2013, we had $213.3 million of cash and cash equivalents and $169.7 million of restricted cash deposits and restricted marketable securities, including $21.9 million of restricted cash and marketable securities held for capital expenditures under certain debt facilities, $56.0 million of restricted cash and marketable securities pledged to regulatory agencies and governmental entities as financial guarantees of our performance related to our final capping, closure and post-closure obligations at our landfills and $88.4 million of restricted cash and marketable securities related to our self-funded insurance obligations. We intend to use excess cash on hand and cash from operating activities to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise. We believe that our excess cash, cash from operating activities and our availability to draw from our Credit Facilities provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due. In the future we may choose to voluntarily retire certain portions of our outstanding debt before their maturity dates using cash from operations or additional borrowings. We also may explore opportunities in the capital markets to fund redemptions should market conditions be favorable. Early extinguishment of debt will result in an impairment charge in the period in which the debt is repaid. The loss on early extinguishment of debt relates to premiums paid to effectuate the repurchase and the relative portion of unamortized note discounts and debt issue costs. Credit Facilities In May 2012, we amended and restated our $1.25 billion unsecured revolving credit facility due September 2013 (the Amended and Restated Credit Facility) to extend the maturity to May 2017. The Amended and Restated Credit Facility includes a feature that allows us to increase availability, at our option, by an aggregate amount up to $500 million through increased commitments from existing lenders or the addition of new lenders. At our option, borrowings under the Amended and Restated Credit Facility bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the agreements). Contemporaneous with the execution of the Amended and Restated Credit Facility, we entered into Amendment No. 1 to our existing $1.25 billion unsecured credit facility (the Existing Credit Facility and, together with the Amended and Restated Credit Facility, the Credit Facilities) to reduce the commitments under the Existing Credit Facility to $1.0 billion and conform certain terms of the Existing Credit Facility to those of the Amended and Restated Credit Facility. Amendment No. 1 does not extend the maturity date under the Existing Credit Facility, which matures in April 2016. In connection with entering into the Amended and Restated Credit Facility and Amendment No. 1 to the Existing Credit Facility, the guarantees by our subsidiary guarantors of the Amended and Restated Credit Facility and the Existing Credit Facility were released. As a result, the guarantees by our subsidiary guarantors of all of Republic's outstanding senior notes were automatically released. In addition, the guarantees by all of our subsidiary guarantors (other than Allied Waste Industries, Inc. and Allied Waste North America, Inc.) of the 9.250% debentures and the 7.400% debentures issued by our subsidiary Browning-Ferris Industries, LLC (successor to Browning-Ferris Industries, Inc.) also were automatically released. As of December 31, 2013, we had no borrowings under our Credit Facilities. As of December 31, 2012, we had $25.0 million of Eurodollar Rate borrowings at an interest rate of 1.32%. Our Credit Facilities also are subject to facility fees based on applicable rates defined in the agreements and the aggregate commitments, regardless of usage. Availability under our Credit Facilities can be used for working capital, capital expenditures, letters of credit and other general corporate purposes. We had $722.1 million and $909.4 million of letters of credit using availability under our Credit Facilities, leaving $1,527.9 million and $1,315.6 million of availability under our Credit Facilities as of December 31, 2013 and 2012, respectively. We were in compliance with the covenants under our Credit Facilities as of December 31, 2013. 51



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The agreements governing our Credit Facilities require us to comply with certain financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants. Compliance with these covenants is a condition for any incremental borrowings under our Credit Facilities and failure to meet these covenants would enable the lenders to require repayment of any outstanding loans, which would adversely affect our liquidity. As of December 31, 2013, our EBITDA to interest ratio was 6.41 compared to the 3.00 minimum required by the covenants, and our total debt to EBITDA ratio was 3.03 compared to the 3.75 maximum allowed by the covenants. In July 2013, we amended our Credit Facilities to allow for our maximum total debt to EBITDA ratio not to exceed 3.75 for each of the fiscal quarters ending June 30, 2013, September 30, 2013, December 31, 2013, and March 31, 2014, and 3.50 for each fiscal quarter ending thereafter. As of December 31, 2013, we were in compliance with the covenants of the Credit Facilities, and we expect to be in compliance throughout 2014. EBITDA, which is a non-U.S. GAAP measure, is calculated as defined in our Credit Facility agreements. In this context, EBITDA is used solely to provide information regarding the extent to which we are in compliance with debt covenants and is not comparable to EBITDA used by other companies or used by us for other purposes. In March 2012, we entered into a $75.0 million uncommitted, unsecured credit facility agreement (the Uncommitted Credit Facility) bearing interest at LIBOR, plus an applicable margin. In July 2012, we amended the Uncommitted Credit Facility to increase the size to $125.0 million, with all other terms remaining unchanged. Our Uncommitted Credit Facility is subject to facility fees defined in the agreement, regardless of usage. We can use borrowings under the Uncommitted Credit Facility for working capital and other general corporate purposes. The agreements governing our Uncommitted Credit Facility require us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. As of December 31, 2013, we had no borrowings under our Uncommitted Credit Facility. As of December 31, 2012, we had $13.9 million of borrowings under our Uncommitted Credit Facility at an interest rate of 1.35%. Senior Notes and Debentures During 2013, 2012 and 2011, we completed financing transactions that resulted in cash paid for premiums and professional fees to repurchase debt as well as the non-cash charges for unamortized debt discounts and deferred issuance costs. For a more detailed discussion, see our "Loss on Extinguishment of Debt" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations. In June 2012, we issued $850.0 million of 3.550% senior notes due 2022 (the 3.550% Notes). The 3.550% Notes are unsubordinated and unsecured obligations. We used the net proceeds from the 3.550% Notes to fund the redemption of our subsidiary Allied Waste North America, Inc.'s$750.0 million 6.875% senior notes maturing in 2017 and for general corporate purposes. In August 2011, our 6.750% senior notes matured and we used cash on hand and incremental borrowings under our Credit Facilities to repay $387.0 million of principal due on these notes. In May 2011, we issued $700.0 million of 3.800% senior notes due 2018 (the 3.800% Notes), $550.0 million of 4.750% senior notes due 2023 (the 4.750% Notes) and $600.0 million of 5.700% senior notes due 2041 (the 5.700% Notes, together with the 3.800% Notes and the 4.750% Notes, the 2011 Notes). We used the net proceeds from the 2011 Notes as follows: (a) $621.4 million to fund the redemption of our $600.0 million 7.125% senior notes maturing in 2016; (b) $81.6 million to purchase $59.2 million of our subsidiary Browning-Ferris Industries, LLC's 9.250% debentures maturing in 2021; (c) $221.8 million to purchase $180.7 million of our subsidiary Browning-Ferris Industries, LLC's 7.400% debentures maturing in 2035; (d) $619.0 million to repay borrowings under our Credit Facilities; and (e) the remainder for general corporate purposes. In May 2011, our 6.375% senior notes matured and we used cash on hand and incremental borrowings under our Credit Facilities to repay $216.9 million of principal due on these notes. In February 2011, our 5.750% senior notes matured and we used cash on hand and incremental borrowings under our Credit Facilities to repay $262.9 million of principal due on these notes. Interest Rate Swap Agreements During the second half of 2013, we entered into various interest rate swap agreements relative to our 4.750% fixed rate senior notes due in May 2023. These transactions were entered into with the goal of reducing overall borrowing costs and rebalancing our debt portfolio's ratio of fixed to floating interest rates. As of December 31, 2013, our outstanding swap agreements have a total notional value of $300.0 million and require us to pay interest at floating rates based on changes in LIBOR, and receive interest at a fixed rate of 4.750%. For the year ended December 31, 2013 net interest received from the swaps was $2.0 million. These swap agreements mature in May 2023. 52



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Tax-Exempt Financings As of December 31, 2013 and 2012, we had $1,087.7 million and $1,097.5 million, respectively, of fixed and variable rate tax-exempt financings outstanding with maturities ranging from 2014 to 2038. Approximately 85% of our tax-exempt financings are remarketed quarterly by a remarketing agent to effectively maintain a variable yield. Certain of these variable rate tax-exempt financings are credit enhanced with letters of credit having terms in excess of one year issued by banks with investment grade credit ratings. The holders of the bonds can put them back to the remarketing agent at the end of each interest period. To date, the remarketing agents have been able to remarket our variable rate unsecured tax-exempt bonds. These bonds have been classified as long term because of our ability and intent to refinance them using availability under our Credit Facilities, if necessary. As of December 31, 2013, we had $169.7 million of restricted cash and marketable securities, of which $21.9 million represented proceeds from the issuance of tax-exempt bonds and other tax-exempt financings and will be used to fund capital expenditures under the terms of the agreements. Restricted cash and marketable securities also include amounts held in trust as a financial guarantee of our performance. Fuel Hedges We use derivative instruments designated as cash flow hedges to manage our exposure to changes in diesel fuel prices. We have entered into multiple agreements related to forecasted diesel fuel purchases. The agreements qualified for, and were designated as, effective hedges of changes in the prices of forecasted diesel fuel purchases (fuel hedges). For a summary of our outstanding fuel hedges as of December 31, 2013, see Note 16, Financial Instruments, to our consolidated financial statements in Item 8 of this Form 10-K. The aggregated fair values of our outstanding fuel hedges as of December 31, 2013 and 2012 were current assets of $6.7 million and $3.1 million, respectively, and current liabilities of $0.1 million and $0.4 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The effective portions of the changes in fair values as of December 31, 2013 and 2012, net of tax, of $3.9 million and $1.6 million, respectively, have been recorded in stockholders' equity as components of accumulated other comprehensive income. During 2013, approximately 19% of our fuel volume purchases were hedged with swap agreements and we were able to recover approximately 74% of our fuel costs with fuel recovery fees from certain of our customers. During 2012, approximately 8% of our fuel volume purchases were hedged with swap agreements and we were able to recover approximately 67% of our fuel costs with fuel recovery fees from certain of our customers. Recycling Commodity Hedges Revenue from the sale of recycling commodities is primarily from sales of old corrugated cardboard and old newspaper. We use derivative instruments such as swaps and costless collars designated as cash flow hedges to manage our exposure to changes in prices of these commodities. We have entered into multiple agreements related to forecasted old corrugated cardboard and old newspaper sales. These agreements qualified for, and were designated as, effective hedges of changes in the prices of certain forecasted recycling commodity sales (recycling commodity hedges). For a summary of our outstanding recycling commodity hedges as of December 31, 2013, see Note 16, Financial Instruments, to our consolidated financial statements in Item 8 of this Form 10-K. The aggregate fair values of the outstanding recycling commodity hedges as of December 31, 2013 and 2012 were current assets of $0.3 million and $1.0 million, respectively, and current liabilities of $0.6 million and $1.2 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The effective portions of the changes in fair values of our recycling commodity hedges as of December 31, 2013 and 2012, net of tax, of $0.2 million and $0.1 million have been recorded in stockholders' equity as a component of accumulated other comprehensive income. For 2013 and 2012, approximately 24% and 41% of our sales volume of commodities were subject to cash flow hedges, respectively. 53



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Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2013 (in millions): Maturities of Notes Payable, Capital Leases Scheduled Interest Final Capping, Unconditional Year Ending Operating and Other Long- Payment Closure and Purchase December 31, Leases Term Debt Obligations Post-Closure Remediation Commitments Total 2014 $ 26.1 $ 15.7 $ 308.2 $ 93.6 $ 85.1 $ 266.7 $ 795.4 2015 21.6 10.2 307.6 119.4 49.8 58.4 567.0 2016 18.3 4.2 307.5 79.4 44.6 38.4 492.4 2017 17.6 4.5 307.3 78.1 35.6 34.4 477.5 2018 14.5 705.0 293.9 88.8 42.3 29.3 1,173.8 Thereafter 64.0 6,360.3 2,685.9 5,052.5 349.0 231.3 14,743.0 Total $ 162.1 $ 7,099.9 $ 4,210.4$ 5,511.8$ 606.4 $ 658.5 $ 18,249.1 Scheduled interest payment obligations in the above table were calculated using stated coupon rates for fixed rate debt and interest rates applicable as of December 31, 2013 for variable rate debt. The impact of our outstanding interest rate swaps on the interest payments of our 4.750% fixed rate senior notes is also included based on the floating rates in effect as of December 31, 2013. We intend to use excess cash on hand and cash from operating activities to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise. We believe that our excess cash, cash from operating activities and our availability to draw from our Credit Facilities provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due. In the future, we may choose to voluntarily retire certain portions of our outstanding debt before their maturity dates using cash from operations or additional borrowings. We also may explore opportunities in the capital markets to fund redemptions should market conditions be favorable. The present value of capital lease obligations is included in our consolidated balance sheets. The estimated remaining final capping, closure and post-closure and remediation expenditures presented above are not inflated or discounted and reflect the estimated future payments for liabilities incurred and recorded as of December 31, 2013. Unconditional purchase commitments consist primarily of (1) disposal related agreements that include fixed or minimum royalty payments, host agreements and take-or-pay and put-or-pay agreements and (2) other obligations including committed capital expenditures and consulting service agreements. Debt covenants Our Credit Facilities contain financial covenants. We can pay dividends and repurchase common stock if we are in compliance with these covenants. As of December 31, 2013, we were in compliance with all financial and other covenants under our Credit Facilities. We were also in compliance with the non-financial covenants in the indentures relating to our senior notes as of December 31, 2013. We expect to be in compliance with our covenants during 2014. Failure to comply with the financial and other covenants under our Credit Facilities, as well as the occurrence of certain material adverse events, would constitute defaults and would allow the lenders under our Credit Facilities to accelerate the maturity of all indebtedness under the related agreements. This could also have an adverse impact on the availability of financial assurances. In addition, maturity acceleration on our Credit Facilities constitutes an event of default under our other debt instruments, including our senior notes, and, therefore, our senior notes would also be subject to acceleration of maturity. If such acceleration were to occur, we would not have sufficient liquidity available to repay the indebtedness. We would likely have to seek an amendment under our Credit Facilities for relief from the financial covenants or repay the debt with proceeds from the issuance of new debt or equity, or asset sales, if necessary. We may be unable to amend our Credit Facilities or raise sufficient capital to repay such obligations in the event the maturities are accelerated. 54



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Financial assurance We must provide financial assurance to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs, and related to our performance under certain collection, landfill and transfer station contracts. We satisfy these financial assurance requirements by providing surety bonds, letters of credit, or insurance policies (the Financial Assurance Instruments), or trust deposits, which are included in restricted cash and marketable securities and other assets in our consolidated balance sheets. The amount of the financial assurance requirements for capping, closure and post-closure costs is determined by applicable state environmental regulations. The financial assurance requirements for capping, closure and post-closure costs may be associated with a portion of the landfill or the entire landfill. Generally, states require a third-party engineering specialist to determine the estimated capping, closure and post-closure costs that are used to determine the required amount of financial assurance for a landfill. The amount of financial assurance required can, and generally will, differ from the obligation determined and recorded under U.S. GAAP. The amount of the financial assurance requirements related to contract performance varies by contract. Additionally, we must provide financial assurance for our insurance program and collateral for certain performance obligations. We do not expect a material increase in financial assurance requirements during 2014, although the mix of financial assurance instruments may change. These financial instruments are issued in the normal course of business and are not considered indebtedness. Because we currently have no liability for the Financial Assurance Instruments, they are not reflected in our consolidated balance sheets; however, we record capping, closure and post-closure liabilities and self-insurance liabilities as they are incurred. The underlying obligations of the financial assurance instruments, in excess of those already reflected in our consolidated balance sheets, would be recorded if it is probable that we would be unable to fulfill our related obligations. We do not expect this to occur. Off-Balance Sheet Arrangements We have no off-balance sheet debt or similar obligations, other than financial assurance instruments and operating leases, that are not classified as debt. We do not guarantee any third-party debt. Free Cash Flow We define free cash flow, which is not a measure determined in accordance with U.S. GAAP, as cash provided by operating activities less purchases of property and equipment, plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows. Our free cash flow for the years ended December 31, 2013, 2012 and 2011 is calculated as follows (in millions of dollars): 2013 2012



2011

Cash provided by operating activities $ 1,548.2$ 1,513.8$ 1,766.7 Purchases of property and equipment

(880.8 ) (903.5 ) (936.5 ) Proceeds from sales of property and equipment 23.9 28.7 34.6 Free cash flow $ 691.3$ 639.0$ 864.8 For a discussion of the changes in the components of free cash flow, you should read our "Cash Flows Provided By Operating Activities and Cash Flows Used In Investing Activities" section contained elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations. 55



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Purchases of property and equipment as reflected in our consolidated statements of cash flows and as presented in the free cash flow table above represent amounts paid during the period for such expenditures. A reconciliation of property and equipment reflected in the consolidated statements of cash flows to property and equipment received for the years ended December 31, 2013, 2012 and 2011 is as follows (in millions of dollars): 2013 2012



2011

Purchases of property and equipment per the consolidated statements of cash flows $ 880.8$ 903.5$ 936.5 Adjustments for property and equipment received during the prior period but paid for in the following period, net (1.0 ) (36.8 ) (50.8 ) Property and equipment received $ 879.8$ 866.7



$ 885.7

The adjustments noted above do not affect our net change in cash and cash equivalents as reflected in our consolidated statements of cash flows. We believe that the presentation of free cash flow provides useful information regarding our recurring cash provided by operating activities after expenditures for property and equipment received, plus proceeds from sales of property and equipment. It also demonstrates our ability to execute our financial strategy, which includes reinvesting in existing capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit rating and minimizing debt, paying cash dividends and repurchasing common stock, and maintaining and improving our market position through business optimization. In addition, free cash flow is a key metric used to determine compensation. The presentation of free cash flow has material limitations. Free cash flow does not represent our cash flow available for discretionary expenditures because it excludes certain expenditures that are required or that we have committed to such as debt service requirements and dividend payments. Our definition of free cash flow may not be comparable to similarly titled measures presented by other companies. Contingencies For a description of our contingencies, see Note 10, Income Taxes, and Note 17, Commitments and Contingencies, to our consolidated financial statements in Item 8 of this Form 10-K. Critical Accounting Judgments and Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP and necessarily include certain estimates and judgments made by management. The following is a list of accounting policies that we believe are the most critical in understanding our consolidated financial position, results of operations and cash flows and that may require management to make subjective or complex judgments about matters that are inherently uncertain. Such critical accounting policies, estimates and judgments are applicable to all of our operating segments. We have noted examples of the residual accounting and business risks inherent in the accounting for these areas. Residual accounting and business risks are defined as the inherent risks that we face after the application of our policies and processes that are generally outside of our control or ability to forecast. Landfill Accounting Landfill operating costs are treated as period expenses and are not discussed further in this section. Our landfill assets and liabilities fall into the following two categories, each of which requires accounting judgments and estimates:



Landfill development costs that are capitalized as an asset.

Landfill retirement obligations relating to our capping, closure and post-closure liabilities that result in a corresponding landfill retirement asset. 56



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Landfill Development Costs We use life-cycle accounting and the units-of-consumption method to recognize landfill development costs over the life of the site. In life-cycle accounting, all costs to acquire and construct a site are capitalized, and charged to expense based on the consumption of cubic yards of available airspace. Obligations associated with final capping, closure and post-closure are also capitalized, and amortized on a units-of-consumption basis as airspace is consumed. Cost and airspace estimates are developed at least annually by engineers. Site permits. To develop, construct and operate a landfill, we must obtain permits from various regulatory agencies at the local, state and federal levels. The permitting process requires an initial site study to determine whether the location is feasible for landfill operations. The initial studies are reviewed by our environmental management group and then submitted to the regulatory agencies for approval. During the development stage we capitalize certain costs that we incur after site selection but before the receipt of all required permits if we believe that it is probable that the site will be permitted. Residual risks:



Changes in legislative or regulatory requirements may cause changes to the

landfill site permitting process. These changes could make it more difficult and costly to obtain and maintain a landfill permit.



Studies performed could be inaccurate, which could result in the denial or

revocation of a permit and changes to accounting assumptions. Conditions

could exist that were not identified in the study, which may make the location not feasible for a landfill and could result in the denial of a permit. Denial or revocation of a permit could impair the recorded value of the landfill asset.



Actions by neighboring parties, private citizen groups or others to oppose

our efforts to obtain, maintain or expand permits could result in denial,

revocation or suspension of a permit, which could adversely impact the

economic viability of the landfill and could impair the recorded value of

the landfill. As a result of opposition to our obtaining a permit,

improved technical information as a project progresses, or changes in the

anticipated economics associated with a project, we may decide to reduce

the scope of, or abandon a project, which could result in an asset

impairment.

Technical landfill design. Upon receipt of initial regulatory approval, technical landfill designs are prepared. The technical designs, which include the detailed specifications to develop and construct all components of the landfill including the types and quantities of materials that will be required, are reviewed by our environmental management group. The technical designs are submitted to the regulatory agencies for approval. Upon approval of the technical designs, the regulatory agencies issue permits to develop and operate the landfill. Residual risks:



Changes in legislative or regulatory requirements may require changes in

the landfill technical designs. These changes could make it more difficult

and costly to meet new design standards.



Technical design requirements, as approved, may need modifications at some

future point in time.



Technical designs could be inaccurate and could result in increased

construction costs, difficulty in obtaining a permit or the use of rates to recognize the amortization of landfill development costs and asset retirement obligations that are not appropriate. Permitted and probable landfill disposal capacity. Included in the technical designs are factors that determine the ultimate disposal capacity of the landfill. These factors include the area over which the landfill will be developed, such as the depth of excavation, the height of the landfill elevation and the angle of the side-slope construction. The disposal capacity of the landfill is calculated in cubic yards. This measurement of volume is then converted to a disposal capacity expressed in tons based on a site-specific expected density to be achieved over the remaining operating life of the landfill. Residual risks:



Estimates of future disposal capacity may change as a result of changes in

legislative or regulatory design requirements.



The density of waste may vary due to variations in operating conditions,

including waste compaction practices, site design, climate and the nature

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Capacity is defined in cubic yards but waste received is measured in tons.

The number of tons per cubic yard varies by type of waste and our rate of compaction. Development costs. The types of costs that are detailed in the technical design specifications generally include excavation, natural and synthetic liners, construction of leachate collection systems, installation of methane gas collection systems and monitoring probes, installation of groundwater monitoring wells, construction of leachate management facilities and other costs associated with the development of the site. We review the adequacy of our cost estimates on an annual basis by comparing estimated costs with third-party bids or contractual arrangements, reviewing the changes in year over year cost estimates for reasonableness, and comparing our resulting development cost per acre with prior period costs. These development costs, together with any costs incurred to acquire, design and permit the landfill, including capitalized interest, are recorded to the landfill asset on the balance sheet as incurred. Residual risk:



Actual future costs of construction materials and third-party labor could

differ from the costs we have estimated because of the level of demand and

the availability of the required materials and labor. Technical designs

could be altered due to unexpected operating conditions, regulatory

changes or legislative changes.

Landfill development asset amortization. To match the expense related to the landfill asset with the revenue generated by the landfill operations, we amortize the landfill development asset over its operating life on a per-ton basis as waste is accepted at the landfill. The landfill asset is fully amortized at the end of a landfill's operating life. The per-ton rate is calculated by dividing the sum of the landfill development asset net book value plus estimated future development costs (as described above) for the landfill, by the landfill's estimated remaining disposal capacity. The expected future development costs are not inflated or discounted, but rather expressed in nominal dollars. This rate is applied to each ton accepted at the landfill to arrive at amortization expense for the period. Amortization rates are influenced by the original cost basis of the landfill, including acquisition costs, which in turn is determined by geographic location and market values. We secure significant landfill assets through business acquisitions and value them at the time of acquisition based on fair value. Amortization rates are also influenced by site-specific engineering and cost factors. Residual risk:



Changes in our future development cost estimates or our disposal capacity

will normally result in a change in our amortization rates and will impact

amortization expense prospectively. An unexpected significant increase in

estimated costs or reduction in disposal capacity could affect the ongoing

economic viability of the landfill and result in asset impairment. On at least an annual basis, we update the estimates of future development costs and remaining disposal capacity for each landfill. These costs and disposal capacity estimates are reviewed and approved by senior operations management annually. Changes in cost estimates and disposal capacity are reflected prospectively in the landfill amortization rates that are updated annually. Landfill Asset Retirement Obligations We have two types of retirement obligations related to landfills: (1) capping and (2) closure and post-closure. Obligations associated with final capping activities that occur during the operating life of the landfill are recognized on a units-of-consumption basis as airspace is consumed within each discrete capping event. Obligations related to closure and post-closure activities that occur after the landfill has ceased operations are recognized on a units-of-consumption basis as airspace is consumed throughout the entire life of the landfill. Landfill retirement obligations are capitalized as the related liabilities are recognized and amortized using the units-of-consumption method over the airspace consumed within the capping event or the airspace consumed within the entire landfill, depending on the nature of the obligation. All obligations are initially measured at estimated fair value. Fair value is calculated on a present value basis using an inflation rate and our credit-adjusted, risk-free rate in effect at the time the liabilities were incurred. Future costs for final capping, closure and post-closure are developed at least annually by engineers, and are inflated to future value using estimated future payment dates and inflation rate projections. Landfill capping. As individual areas within each landfill reach capacity, we must cap and close the areas in accordance with the landfill site permit. These requirements are detailed in the technical design of the landfill site process previously described. 58



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Closure and post-closure. Closure costs are costs incurred after a landfill stops receiving waste, but prior to being certified as closed. After the entire landfill has reached capacity and is certified closed, we must continue to maintain and monitor the site for a post-closure period, which generally extends for 30 years. Costs associated with closure and post-closure requirements generally include maintenance of the site, the monitoring of methane gas collection systems and groundwater systems, and other activities that occur after the site has ceased accepting waste. Costs associated with post-closure monitoring generally include groundwater sampling, analysis and statistical reports, third-party labor associated with gas system operations and maintenance, transportation and disposal of leachate, and erosion control costs related to the final cap. Landfill retirement obligation liabilities and assets. Estimates of the total future costs required to cap, close and monitor each landfill as specified by the landfill permit are updated annually. The estimates include inflation, the specific timing of future cash outflows, and the anticipated waste flow into the capping events. Our cost estimates are inflated to the period of performance using an estimate of inflation, which is updated annually and is based upon the ten year average consumer price index (2.5% in both 2013 and 2012). The present value of the remaining capping costs for specific capping events and the remaining closure and post-closure costs for each landfill are recorded as incurred on a per-ton basis. These liabilities are incurred as disposal capacity is consumed at the landfill. Capping, closure and post-closure liabilities are recorded in layers and discounted using our credit-adjusted risk-free rate in effect at the time the obligation is incurred (5.0% in 2013 and 4.75% in 2012). Retirement obligations are increased each year to reflect the passage of time by accreting the balance at the weighted average credit-adjusted risk-free rate that was used to calculate each layer of the recorded liabilities. This accretion is charged to operating expenses. Actual cash expenditures reduce the asset retirement obligation liabilities as they are made. Corresponding retirement obligation assets are recorded for the same value as the additions to the capping, closure and post-closure liabilities. The retirement obligation assets are amortized to expense on a per-ton basis as disposal capacity is consumed. The per-ton rate is calculated by dividing the sum of each of the recorded retirement obligation asset's net book value and expected future additions to the retirement obligation asset by the remaining disposal capacity. A per-ton rate is determined for each separate capping event based on the disposal capacity relating to that event. Closure and post-closure per-ton rates are based on the total disposal capacity of the landfill. Residual risks:



Changes in legislative or regulatory requirements, including changes in

capping, closure activities or post-closure monitoring activities, types and quantities of materials used, or term of post-closure care, could cause changes in our cost estimates. Changes in the landfill retirement obligation due to changes in the anticipated waste flow, changes in airspace compaction estimates or changes in the timing of expenditures for closed landfills and fully



incurred but unpaid capping events are recorded in results of operations

prospectively. This could result in unanticipated increases or decreases

in expense.



Actual timing of disposal capacity utilization could differ from projected

timing, causing differences in timing of when amortization and accretion

expense is recognized for capping, closure and post-closure liabilities.

Changes in inflation rates could impact our actual future costs and our

total liabilities. Changes in our capital structure or market conditions could result in changes to the credit-adjusted risk-free rate used to discount the



liabilities, which could cause changes in future recorded liabilities,

assets and expense.



Amortization rates could change in the future based on the evaluation of

new facts and circumstances relating to landfill capping design,

post-closure monitoring requirements, or the inflation or discount rate.

On an annual basis, we update our estimates of future capping, closure and post-closure costs and of future disposal capacity for each landfill. Revisions in estimates of our costs or timing of expenditures are recognized immediately as increases or decreases to the capping, closure and post-closure liabilities and the corresponding retirement obligation assets. Changes in the assets result in changes to the amortization rates which are applied prospectively, except for fully incurred capping events and closed landfills, where the changes are recorded immediately in results of operations since the associated disposal capacity has already been consumed. 59



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Permitted and probable disposal capacity. Disposal capacity is determined by the specifications detailed in the landfill permit. We classify this disposal capacity as permitted. We also include probable expansion disposal capacity in our remaining disposal capacity estimates, thus including additional disposal capacity being sought through means of a permit expansion. Probable expansion disposal capacity has not yet received final approval from the applicable regulatory agencies, but we have determined that certain critical criteria have been met and that the successful completion of the expansion is probable. We have developed six criteria that must be met before an expansion area is designated as probable expansion airspace. We believe that satisfying all of these criteria demonstrates a high likelihood that expansion airspace that is incorporated in our landfill costing will be permitted. However, because some of these criteria are judgmental, they may exclude expansion airspace that will eventually be permitted or include expansion airspace that will not be permitted. In either of these scenarios, our amortization, depletion and accretion expense could change significantly. Our internal criteria to classify disposal capacity as probable expansion airspace are as follows: We own the land associated with the expansion airspace or control it pursuant to an option agreement;



We are committed to supporting the expansion project financially and with

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



Progress is being made on the project;

The expansion is attainable within a reasonable time frame; and

We believe it is likely we will receive the expansion permit.

After successfully meeting these criteria, the disposal capacity that will result from the planned expansion is included in our remaining disposal capacity estimates. Additionally, for purposes of calculating landfill amortization and capping, closure and post-closure rates, we include the incremental costs to develop, construct, close and monitor the related probable expansion disposal capacity. Residual risk:



We may be unsuccessful in obtaining permits for probable expansion

disposal capacity because of the failure to obtain the final local, state

or federal permits or due to other unknown reasons. If we are unsuccessful

in obtaining permits for probable expansion disposal capacity, or the disposal capacity for which we obtain approvals is less than what was estimated, both our estimated total costs and disposal capacity will be reduced, which generally increases the rates we charge for landfill



amortization and capping, closure and post-closure accruals. An unexpected

decrease in disposal capacity could also cause an asset impairment.

Environmental Liabilities We are subject to an array of laws and regulations relating to the protection of the environment, and we remediate sites in the ordinary course of our business. Under current laws and regulations, we may be responsible for environmental remediation at sites that we either own or operate, including sites that we have acquired, or sites where we have (or a company that we have acquired has) delivered waste. Our environmental remediation liabilities primarily include costs associated with remediating groundwater, surface water and soil contamination, as well as controlling and containing methane gas migration and the related legal costs. To estimate our ultimate liability at these sites, we evaluate several factors, including the nature and extent of contamination at each identified site, the required remediation methods, the apportionment of responsibility among the potentially responsible parties and the financial viability of those parties. We accrue for costs associated with environmental remediation obligations when such costs are probable and reasonably estimable in accordance with accounting for loss contingencies. We periodically review the status of all environmental matters and update our estimates of the likelihood of and future expenditures for remediation as necessary. Changes in the liabilities resulting from these reviews are recognized currently in earnings in the period in which the adjustment is known. Adjustments to estimates are reasonably possible in the near term and may result in changes to recorded amounts. With the exception of those obligations assumed in the acquisition of Allied, environmental obligations are recorded on an undiscounted basis. Environmental obligations assumed in the acquisition of Allied, which were initially estimated on a discounted basis, are accreted to full value over time through charges to interest expense. Adjustments arising from changes in amounts and timing of estimated costs and settlements may result in increases or decreases in these obligations and are calculated on a discounted basis as they were initially estimated on a discounted basis. These adjustments are charged to operating income when they are known. We perform a comprehensive review of our environmental obligations annually and also review changes in facts and circumstances associated with these obligations at least quarterly. We have not reduced the liabilities we have recorded for recoveries from other potentially responsible parties or insurance companies. 60



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We cannot determine with precision the ultimate amounts of our

environmental remediation liabilities. Our estimates of these liabilities

require assumptions about uncertain future events. Thus, our estimates

could change substantially as additional information becomes available

regarding the nature or extent of contamination, the required remediation

methods, the final apportionment of responsibility among the potentially

responsible parties identified, the financial viability of those parties,

and the actions of governmental agencies or private parties with interests

in the matter.



Actual amounts could differ from the estimated liabilities as a result of

changes in estimated future litigation costs to pursue the matter to ultimate resolution. An unanticipated environmental liability that arises could result in a material charge to our consolidated statement of income. Self-Insurance Reserves and Related Costs Our insurance programs for workers' compensation, commercial general and auto liability, environmental and remediation liability, and employee-related health care benefits are either self-insured or subject to high deductible insurance policies. Accruals for self-insurance or deductible reserves are based on claims filed and estimates of claims incurred but not reported. We maintain high deductibles for commercial general liability, automobile liability and workers' compensation coverage, ranging from $2.0 million to $5.0 million. Residual risks:



Incident rates, including frequency and severity, and other actuarial

assumptions could change causing our current and future actuarially

determined obligations to change, which would be reflected in our

consolidated statement of income in the period in which such adjustment is

known. Recorded reserves may not be adequate to cover the future payment of



claims. Adjustments, if any, to estimates recorded resulting from ultimate

claim payments would be reflected in the consolidated statements of income

in the periods in which such adjustments are known. The settlement costs to discharge our obligations, including legal and



health care costs, could increase or decrease causing current estimates of

our self-insurance reserves to change.

Loss Contingencies We are subject to various legal proceedings, claims and regulatory matters, the outcomes of which are subject to significant uncertainty. We determine whether to disclose material loss contingencies or accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible or probable, and whether it can be reasonably estimated. We analyze our litigation and regulatory matters based on available information to assess the potential liabilities. Management develops its assessment based on an analysis of possible outcomes under various strategies. We record and disclose loss contingencies pursuant to the applicable accounting guidance for such matter. We record losses related to contingencies in cost of operations or selling, general and administrative expenses, depending on the nature of the underlying transaction leading to the loss contingency. Residual risks: Actual costs may vary from our estimates for a variety of reasons, including differing interpretations of laws, opinions on culpability and assessments of the amount of damages. Loss contingency assumptions involve judgments that are inherently



subjective and generally involve matters that are by their nature complex

and unpredictable. If a loss contingency results in an adverse judgment or

is settled for a significant amount, it could have a material adverse

impact on our consolidated financial position, results of operations or

cash flows in the period in which such judgment or settlement occurs.

New claims may be asserted that are not included in our loss contingencies.

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Asset Impairment Valuation methodology. We evaluate our long-lived assets (other than goodwill) for impairment whenever events or changes in circumstances indicate the carrying amount of the asset or asset group may not be recoverable based on projected cash flows anticipated to be generated from the ongoing operation of those assets or we intend to sell or otherwise dispose of the assets.



Residual risk:

If events or changes in circumstances occur, including reductions in anticipated cash flows generated by our operations or determinations to divest assets, certain assets could be impaired, which would result in a non-cash charge to earnings. Evaluation criteria. We test long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Examples of such events could include a significant adverse change in the extent or manner in which we use a long-lived asset, a change in its physical condition, or new circumstances that could cause an expectation that it is more likely than not that we would sell or otherwise dispose of a long-lived asset significantly before the end of its previously estimated useful life. Residual risk:



Our most significant asset impairment exposure, other than goodwill (which

is discussed below), relates to our landfills. A significant reduction in

our estimated disposal capacity as a result of unanticipated events such

as regulatory developments, revocation of an existing permit or denial of

an expansion permit, or changes in our assumptions used to calculate

disposal capacity, could trigger an impairment charge.

Recognition criteria. If such circumstances arise, we recognize impairment for the difference between the carrying amount and fair value of the asset if the net book value of the asset exceeds the sum of the estimated undiscounted cash flows expected to result from its use and eventual disposition. We generally use the present value of the expected cash flows from that asset to determine fair value. Goodwill Recoverability We annually test goodwill for impairment at December 31 or when an indicator of impairment exists. We test goodwill for impairment using the two-step process. The first step is a screen for potential impairment, while the second step measures the amount of the impairment, if any. The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. We have defined our reporting units to be consistent with our operating segments: East, Central and West. In determining fair value, we primarily use discounted future cash flows and operating results based on a comparative multiple of earnings or revenues. Significant estimates used in our fair value calculation using discounted future cash flows include: (1) estimates of future revenue and expense growth by reporting unit, which we estimate to range from 2% to 4%; (2) future estimated effective tax rates, which we estimate to be 40%; (3) future estimated capital expenditures as well as future required investments in working capital; (4) estimated discount rates, which we estimate to range between 7% and 8%; and (5) the future terminal value of the reporting unit, which is based on its ability to exist into perpetuity. Significant estimates used in the fair value calculation using market value multiples include: (a) estimated future growth potential of the reporting unit; (b) estimated multiples of revenue or earnings a willing buyer is likely to pay; and (c) estimated control premium a willing buyer is likely to pay. In addition, we evaluate a reporting unit for impairment if events or circumstances change between annual tests, indicating a possible impairment. Examples of such events or circumstances include: (1) a significant adverse change in legal factors or in the business climate; (2) an adverse action or assessment by a regulator; (3) a more likely than not expectation that a reporting unit or a significant portion thereof will be sold; (4) continued or sustained losses at a reporting unit; (5) a significant decline in our market capitalization as compared to our book value; or (6) the testing for recoverability of a significant asset group within the reporting unit. We assign assets and liabilities from our corporate operating segment to our three reporting units to the extent that such assets or liabilities relate to the cash flows of the reporting unit and would be included in determining the reporting unit's fair value. 62



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In preparing our annual test for impairment as of December 31, 2013, we determined that our indicated fair value of total invested capital exceeded our total market capitalization. We believe one of the primary reconciling differences between the indicated fair value of total invested capital and our total market capitalization is due to a control premium. We believe the control premium represents the value a market participant could extract as savings and/or synergies by obtaining control, and thereby eliminating duplicative overhead and operating costs resulting from the consolidation of routes and internalization of waste streams. As of December 31, 2013, we determined that the indicated fair value of our reporting units exceeded their carrying value by approximately 40% on average and, therefore, we noted no indicators of impairment at our reporting units. We will continuously monitor market trends in our business, the related expected cash flows and our calculation of market capitalization for purposes of identifying possible indicators of impairment. If our book value per share exceeds our market price per share or if we have other indicators of impairment, we will be required to perform an interim step one impairment analysis, which may lead to a step two analysis and possible impairment of our goodwill. Additionally, we would then be required to review our remaining long-lived assets for impairment. Our operating segments, which also represent our reporting units, are comprised of several vertically integrated businesses. When an individual business within an integrated operating segment is divested, goodwill is allocated to that business based on its fair value relative to the fair value of its operating segment. Residual risks:



Future events could cause us to conclude that impairment indicators exist

and that goodwill associated with acquired businesses is impaired.



The valuation of identifiable goodwill requires significant estimates and

judgment about future performance, cash flows and fair value. Our future

results could be affected if these current estimates of future performance

and fair value change. For example, a reduction in long-term growth

assumptions could reduce the estimated fair value of the operating

segments to below their carrying values, which could trigger an impairment

charge. Similarly, an increase in our discount rate could trigger an

impairment charge. Any resulting impairment charge could have a material

adverse impact on our financial condition and results of operations.

Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets (other than non-deductible goodwill) and liabilities. Deferred tax assets and liabilities are measured using the income tax rate in effect during the year in which the differences are expected to reverse. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making this determination, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we will make an adjustment to the valuation allowance which would reduce our provision for income taxes. During the three months ended December 31, 2013, we determined that it is more likely than not that we will realize a portion of our deferred tax asset related to certain state loss carryforwards. This resulted in a reduction to our valuation allowance for these loss carryforwards of approximately $43.5 million.



Significant factors used in our determination of the $43.5 million include:

the removal of negative evidence associated with the subsidiary's

cumulative loss position; and

the existence of future taxable income in future periods as a result of:

third-party debt refinancings;

reductions in intercompany indebtedness; and

ongoing operational improvements combined with the expected stable,

predictable nature of our business.

Items that did not factor significantly in our determination were:

taxable income in prior carryback years; and

future reversals of existing taxable temporary differences, as these were

already considered or benefited in our valuation allowance. 63



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For additional discussion and detail regarding our valuation allowance, see Note 10, Income Taxes, to our consolidated financial statements in Item 8 of this Form 10-K. Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid. We are subject to U.S. federal income taxes and to the income taxes of numerous states and Puerto Rico. Significant judgments and estimates are required in determining the combined income tax expense. Regarding the accounting for uncertainty in income taxes recognized in the financial statements, we record a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in our consolidated statements of income. Accrued interest and penalties are included within other accrued liabilities and deferred income taxes and other long-term tax liabilities in our consolidated balance sheets. Residual risks:



Income tax assets and liabilities established in purchase accounting for

acquisitions are based on assumptions that could differ from the ultimate

outcome of the tax matters. Such adjustments would be charged or credited

to earnings, unless they meet certain remeasurement criteria and are allowed to be adjusted to goodwill.



Changes in the estimated realizability of deferred tax assets could result

in adjustments to our provision for income taxes.



Valuation allowances for deferred tax assets and the realizability of net

operating loss carryforwards for tax purposes are based on our judgment.

If our judgments and estimates concerning valuation allowances and the realizability of net operating loss carryforwards are incorrect, our provision for income taxes would change.



We are currently under examination or administrative review by various

taxing authorities for certain tax years. The Internal Revenue Code and

income tax regulations are a complex set of rules that we must interpret

and apply. Positions taken in tax years under examination or subsequent

years are subject to challenge. Accordingly, we may have exposure for

additional tax liabilities arising from these audits if any positions

taken by us or by companies we have acquired are disallowed by the taxing

authorities.



We adjust our liabilities for uncertain tax positions when our judgment

changes as a result of the evaluation of new information not previously

available. Due to the complexity of some of these uncertainties, their

ultimate resolution may result in payments that are materially different

from our current estimates of the tax liabilities. These differences will be reflected as increases or decreases to our provision for income taxes in the period in which they are determined. Defined Benefit Pension Plans We currently have one qualified defined benefit pension plan, the BFI Retirement Plan (the Plan). The Plan covers certain employees in the United States, including some employees subject to collective bargaining agreements. The Plan's benefit formula is based on a percentage of compensation as defined in the Plan document. The benefits of approximately 97% of the current plan participants were frozen upon Allied's acquisition of BFI in 1999. Our pension contributions are made in accordance with funding standards established by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, as amended by the Pension Protection Act of 2006. The Plan's assets are invested as determined by our Retirement Benefits Committee. As of December 31, 2013, the plan assets were invested in fixed income bond funds, equity funds and cash. The Retirement Benefits Committee annually reviews and adjusts the plan's asset allocation as deemed necessary. As of December 31, 2013, the Plan was overfunded by $8.1 million, compared to our unfunded benefit obligation of $6.1 million as of December 31, 2012. Residual risk:



Changes in the plan's investment mix and performance of the equity and

bond markets and fund managers could impact the amount of pension income

or expense recorded, the funded status of the plan and the need for future

cash contributions. 64



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Assumptions. The benefit obligation and associated income or expense related to the Plan are determined based on assumptions concerning items such as discount rates, expected rates of return and average rates of compensation increases. Our assumptions are reviewed annually and adjusted as deemed necessary. We determine the discount rate based on a model that matches the timing and amount of expected benefit payments to maturities of high quality bonds priced as of the Plan measurement date. Where that timing does not correspond to a published high-quality bond rate, our model uses an expected yield curve to determine an appropriate current discount rate. The yield on the bonds is used to derive a discount rate for the liability. If the discount rate were to increase by 1%, our benefit obligation would decrease by approximately $20 million. If the discount rate were to decrease by 1%, our benefit obligation would increase by approximately $24 million. In developing our expected rate of return assumption, we evaluate long-term expected and historical returns on the Plan assets, giving consideration to our asset mix and the anticipated duration of the Plan obligations. The average rate of compensation increase reflects our expectations of average pay increases over the periods benefits are earned. Less than 3% of participants in the Plan continue to earn service benefits. Residual risks:



Our assumed discount rate is sensitive to changes in market-based interest

rates. A decrease in the discount rate will increase our related benefit

plan obligation.



Our annual pension expense would be impacted if the actual return on plan

assets were to vary from the expected return.

New Accounting Standards For a description of new accounting standards that may affect us, see Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements in Item 8 of this Form 10-K. 65



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