Summary of REPUBLIC SERVICES, INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto included under Item 1. In addition, reference should be made to our audited consolidated financial statements and notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended December 31, 2008 and in our current report on Form 8-K, filed June 5, 2009.
General
We are the second largest provider of services in the domestic non-hazardous solid waste industry. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 378 collection companies in 40 states and Puerto Rico. We also own or operate 236 transfer stations, 199 active solid waste landfills and 78 recycling facilities. We completed our merger with Allied Waste Industries, Inc. (Allied) in December 2008. We believe that this merger creates a strong operating platform that will allow us to continue to provide quality service to our customers and superior returns to our stockholders.
Despite the challenging economic environment, our business performed well during the first nine months of 2009 due in large part to the indispensable nature of our services and the scalability of our business. Revenue during the nine months ended September 30, 2009 increased by 154% to $6.2 billion compared to $2.4 billion during the comparable period in 2008. This increase in revenue is attributable to our merger with Allied. Assuming the merger with Allied occurred on January 1, 2008, and the revenue associated with the related divestitures is eliminated in the period the assets were sold along with the comparable prior year period, core revenue for the nine months ended September 30, 2009 would have been a decrease of 11.4% consisting of a 3.2% increase in core price offset by decreases of 9.6% in core volume, 2.6% in fuel charges and 2.4% in commodity price. See "Consolidated Results of Operations - Revenue" for additional information regarding our revenue. The increase in core price partially offset volume declines, lower commodity prices and lower fuel charges. This increase in price, together with cost control steps taken by our operations management to scale the business down for lower volumes, also served to moderate profit margin declines associated with rising costs and declining revenue resulting from decreases in service volumes.
We expect that the economic challenges we experienced during the latter part of 2008 and the first nine months of 2009 will continue through the remainder of 2009 and may extend into 2010. We anticipate continued decreases in volumes in all lines of our business. We also anticipate that prices for recycling commodities will remain low. However, we believe that we will benefit from our cost control and pricing initiatives. Ours is a capital intensive business. Slower growth allows us to reduce capital spending, thus maintaining strong free cash flow despite a weaker economy. In addition, our attention is focused on integrating our newly merged company and achieving cost synergies as a result of the merger.
Recent Developments
We notified the registered holders of our 7.875% Senior Notes due 2013 and our 4.250% Senior Subordinated Convertible Debentures due 2034 that we will redeem all of the notes outstanding in the fourth quarter of 2009. The 7.875% Senior Notes due 2013 will be redeemed at 102.625% and the 4.250% Senior Subordinated Convertible Debentures due 2034 will be redeemed at par. With respect to this redemption, we expect to incur a fourth quarter loss on extinguishment of debt of approximately $55 million. We intend to use cash on hand and, if necessary, incremental borrowings under our revolving credit facility to fund the redemptions. We may also explore capital market opportunities to fund the redemption if market conditions are favorable. Business Acquisitions and Divestitures
We make decisions to acquire, invest in or divest of businesses based on financial and strategic considerations. Businesses acquired are accounted for under the purchase method of accounting and are included in our consolidated financial statements from the date of acquisition. Merger with Allied Waste Industries, Inc. On December 5, 2008, we acquired all the issued and outstanding shares of Allied in a stock-for-stock transaction for an aggregate purchase price of $11.5 billion which includes approximately $5.4 billion of debt, at fair value. The allocation of purchase price to the fair value of the assets and liabilities acquired in the acquisition of Allied is preliminary and subject to revision. Due to the volume and complexity of the information required to value these assets and liabilities, our valuation of certain significant balances, including landfill development costs, property and equipment, intangible assets, accrued landfill and environmental costs (which includes landfill asset retirement obligations and environmental remediation liabilities), deferred taxes and other long-term tax liabilities, and, included in other long-term liabilities, liabilities for litigation, claims and assessments, and self-insurance, is not completed. Our

Table of Contents

purchase price allocation includes values we finalized to date and estimates of the values not yet finalized. We expect our purchase price allocation for the acquisition of Allied to be completed during 2009. Adjustments after the allocation period made to the valuation of assets and liabilities acquired will be recorded in the consolidated statement of income in the period in which such adjustments become known. Of the approximate $9.1 billion of goodwill resulting from the transaction, we expect substantially all of it will be non-deductible for income tax purposes.
As a condition of the merger with Allied in December 2008, the Department of Justice (DOJ) required us to divest of certain assets and related liabilities. As such, we classified these assets and liabilities as assets held for sale in our consolidated balance sheet at December 31, 2008. Certain of the legacy Republic assets classified as held for sale were adjusted to their estimated fair values less costs to sell and resulted in the recognition of an asset impairment loss of $1.8 million in our consolidated statements of income for the quarter ended March 31, 2009. As of September 30, 2009 we are complete with our required divestitures.
As a result of our acquisition of Allied, we committed to a restructuring plan related to our corporate overhead and other administrative and operating functions. The plan included closing our corporate office in Florida, consolidating administrative functions to Arizona, the former headquarters of Allied, and reducing staffing levels. The plan also included closing and consolidating certain operating locations and terminating certain leases. During the three and nine months ended September 30, 2009, we incurred $12.3 million and $55.9 million of restructuring and integration charges related to our integration of Allied of which, $33.2 million for the nine months ended September 30, 2009 consists of charges for severance and other employee termination and relocation benefits. The remainder of the charges primarily related to consulting and professional fees. Substantially, all the charges are recorded in our "Corporate" segment. We expect to be substantially complete with our plan by the fourth quarter of 2009. We expect to incur additional charges approximating $12.8 million to complete our plan. We expect that the majority of these charges will be paid during the remainder of 2009 and 2010. By the end of 2009, we anticipate realizing $145 million of annual run rate synergies as a result of the merger of Republic Services and Allied. Our previous guidance for 2009 annual run rate synergies was $125 million. We expect to achieve $165 million to $175 million of annual run rate synergies by the end of 2010.
Other Divestitures
In October 2009, we divested a hauling operation in Miami-Dade County, Florida. As such we classified the assets and liabilities related to the operation as assets held for sale in our consolidated balance sheets at September 30, 2009. We adjusted these assets to their estimated fair values less costs to sell, resulting in the recognition of an asset impairment loss of $8.7 million in our consolidated statement of income for the three months ended September 30, 2009. Overview of Our Business
We generate revenue primarily from our solid waste collection, transfer and disposal operations.
The following table reflects our revenue by service line (in millions of dollars and as a percentage of our revenue):

                             Three Months Ended September 30,                          Nine Months Ended September 30,
                              2009                       2008                        2009                          2008
Collection:
Residential          $   548.0         26.4 %    $  216.2         25.9 %    $  1,644.6         26.5 %    $      633.4         26.0 %
Commercial               634.4         30.6         259.2         31.1         1,926.8         31.1             762.5         31.2
Industrial               396.2         19.1         161.3         19.3         1,173.4         18.9             476.3         19.5
Other                      6.5          0.3           5.9          0.7            20.1          0.4              16.2          0.7
                                                                                                           aaaaaaaa a
Total collection       1,585.1         76.4         642.6         77.0         4,764.9         76.9           1,888.4         77.4

Transfer and
disposal                 789.4                      304.7                      2,374.9                          886.6
Less:
Intercompany            (392.7 )                   (154.0 )                   (1,191.3 )                       (455.2 )

Transfer and
disposal, net            396.7         19.1         150.7         18.1         1,183.6         19.1             431.4         17.7
Other                     91.7          4.5          40.7          4.9           251.6          4.0             120.9          4.9

Total revenue        $ 2,073.5        100.0 %    $  834.0        100.0 %    $  6,200.1        100.0 %    $    2,440.7        100.0 %

Other revenue consists primarily of revenue from sales of recycled materials and revenue from national accounts acquired from Allied. National accounts revenue included in other revenue represents the portion of revenue generated from nationwide contracts in markets outside our operating areas, and, as such, the associated waste handling services are subcontracted to local operators.

Table of Contents

Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
The increase in revenue during the three and nine months ended September 30, 2009 compared to the comparable 2008 period is due to our merger with Allied. Our revenue from collection operations consists of fees we receive from commercial, industrial, municipal and residential customers. Our residential and commercial collection operations in some markets are based on long-term contracts with municipalities. Certain of our municipal contracts have annual price escalation clauses that are tied to changes in an underlying base index such as consumer prices. We generally provide commercial and industrial collection services to individual customers under contracts with terms up to three years. Our landfill operations 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. No one customer has individually accounted for more than 10% of our consolidated revenue or of our reportable segment revenue in any of the periods presented.
The cost of our collection operations is primarily variable and includes disposal, labor, self-insurance, fuel and equipment maintenance costs. It also includes depreciation for equipment and facilities. We seek operating efficiencies by controlling the movement of waste from the point of collection through disposal. During the three months ended September 30, 2009 and 2008, approximately 67% and 58%, respectively, of the total waste volume that we collected was disposed at landfill sites that we own or operate ("internalization"). The increase in internalization for the three months ended September 30, 2009 is due to a higher concentration of integrated hauling and landfill operations acquired from Allied.
Our landfill costs include daily operating expenses, costs of capital for cell development, costs for final capping, closure and post-closure and the legal and administrative costs of ongoing environmental compliance. Daily operating expenses include leachate treatment and disposal, methane gas and groundwater monitoring and system maintenance, interim cap maintenance, and costs associated with the application of daily cover materials. We expense all indirect landfill development costs as they are incurred. We use life cycle accounting and the units-of-consumption method to recognize certain direct landfill costs related to landfill development. In life cycle accounting, certain direct costs are capitalized, and charged to depletion expense based on the consumption of cubic yards of available airspace. These costs include all costs to acquire and construct a site including excavation, natural and synthetic liners, construction of leachate collection systems, installation of methane gas collection and monitoring systems, installation of groundwater monitoring wells, and other costs associated with the acquisition and development of the site. Obligations associated with final capping, closure and post-closure are capitalized and amortized on a units-of-consumption basis as airspace is consumed.
Annually, in the fourth quarter, we review our calculations for asset retirement obligations. However, if there are significant changes in the facts and circumstances related to a site during the year, we will update our assumptions prospectively in the period that all the relevant facts and circumstances are known.

Table of Contents

Segment Discussion
Summarized financial information concerning our reportable segments for the
respective three and nine months ended September 30, 2009 and 2008 is shown in
the following table (in millions of dollars and operating margin as a percentage
of our revenue):

                                                       Depreciation,
                                                       Amortization,          Gain (Loss) on          Operating
                                        Net            Depletion and          Disposition of           Income            Operating
                                      Revenue            Accretion             Assets, Net             (Loss)             Margin
Three Months Ended
September 30, 2009:
Eastern                              $   536.4        $          53.7        $            5.3        $     135.9               25.3 %
Midwest                                  457.4                   57.3                     0.8               96.9               21.2 %
Southern                                 507.6                   59.6                    (6.9 )            112.1               22.1 %
Western                                  547.4                   57.2                     0.3              124.4               22.7 %
Corporate entities                        24.7                   12.7                    (0.4 )            (82.4 )

Total                                $ 2,073.5        $         240.5        $           (0.9 )      $     386.9               18.7 %


Three Months Ended
September 30, 2008:
Eastern                              $   225.5        $          19.3        $              -        $      54.5               24.2 %
Midwest                                  181.3                   22.7                       -               36.5               20.1 %
Southern                                 216.5                   19.9                       -               43.5               20.1 %
Western                                  210.7                   18.0                       -               50.4               23.9 %
Corporate entities                           -                    2.0                       -              (17.9 )

Total                                $   834.0        $          81.9        $              -        $     167.0               20.0 %




                                                       Depreciation,
                                                       Amortization,          Gain (Loss) on         Operating
                                        Net            Depletion and          Disposition of           Income           Operating
                                      Revenue            Accretion             Assets, Net             (Loss)            Margin
Nine Months Ended September 30,
2009:
Eastern                              $ 1,600.0        $         162.8        $            5.0        $    371.2               23.2 %
Midwest                                1,337.1                  171.2                    27.2             290.3               21.7 %
Southern                               1,553.5                  183.2                    32.1             403.0               25.9 %
Western                                1,638.4                  171.3                    88.2             471.2               28.8 %
Corporate entities                        71.1                   37.6                    (8.2 )          (275.1 )

Total                                $ 6,200.1        $         726.1        $          144.3        $  1,260.6               20.3 %


Nine Months Ended September 30,
2008:
Eastern                              $   663.5        $          57.6        $              -        $    117.5               17.7 %
Midwest                                  516.8                   64.7                       -              96.1               18.6 %
Southern                                 636.7                   58.5                       -             123.0               19.3 %
Western                                  623.6                   53.7                       -             112.6               18.1 %
Corporate entities                         0.1                    5.9                       -             (54.4 )

Total                                $ 2,440.7        $         240.4        $              -        $    394.8               16.2 %

Corporate functions include legal, tax, treasury, information technology, risk management, human resources, corporate accounts and other typical administrative functions. National accounts revenue included in the corporate entities represents the portion of revenue generated from nationwide contracts in markets outside our operating areas, and, as such, the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
Amounts by region for 2008 have been reclassified to conform to the current year's presentation. The changes are due to the realignment of our regions in 2009.
Our operations are managed and reviewed through four geographic regions that we designate as our reportable segments. We completed the reorganization of our operating segments related to our acquisition of Allied in the first quarter of 2009, and are providing internal and external reporting in accordance with our reorganized structure. Significant changes in the revenue and operating margins of our reportable segments for the three and nine month periods ended September 30, 2009 compared to the three and nine month periods ended September 30, 2008 are discussed in the following paragraphs. The increase in aggregate dollars for revenue, depreciation, amortization, depletion and accretion, and operating income (loss) for each of our reportable segments is due to our acquisition of Allied. As previously discussed, the results of our reportable segments were also affected by the disposition of certain assets and liabilities, as required by the DOJ. Where the effect was significant, we have noted our operating margin exclusive of these gains. Additionally, the decreases in volumes and commodities noted below are attributable to the economic slowdown. The

Table of Contents

factors affecting our revenue and operating margins by reportable segment are:
� Eastern Region. Revenue for the three and nine months ended September 30, 2009, benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.

In the third quarter of 2009, we realized a $5.3 million net gain from the disposition of assets of which increased operating margins by 1.0%. In the second quarter of 2008, we incurred a $34.0 million charge for environmental conditions at our Countywide Recycling and Disposal Facility in Ohio, which reduced our operating margin for the nine months ended September 30, 2008 by 5.1%. Otherwise, our margins as a percentage of revenue were fairly consistent period to period as increased amortization costs resulting from assets acquired from Allied, higher labor, disposal and facilities expense were offset by lower fuel and selling, general and administrative expenses.

� Midwest Region. Revenue for the three and nine months ended September 30, 2009 benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.

For the three and nine months ended September 30, 2009, we realized net gains from the disposition of assets of $0.8 million and $27.2 million which increased operating margins by 0.2% and 2.0%. Otherwise, the improvement in operating margin for the three and nine months ended September 30, 2009, is primarily due to lower disposal, transportation, fuel, and selling, general and administrative expenses. The increase in operating margin was partially offset by increased amortization expense resulting from assets acquired from Allied and higher risk insurance and facilities expense.

� Southern Region. Revenue for the three and nine months ended September 30, 2009, benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial and landfill lines of business. We also experienced declines in fuel surcharges.

For the three and nine months ended September 30, 2009, we realized net gains (losses) from the disposition of assets of $(6.9) million and $32.1 million which impacted operating margins by (1.4) % and 2.1%. Otherwise the improvement in operating margin for the three and nine months ended September 30, 2009, is primarily due to lower disposal, transport and fuel costs partially offset by increased amortization expense resulting from assets acquired from Allied and higher risk insurance and facilities expense. lower labor, fuel, disposal and transportation costs, partially offset by increased amortization costs resulting from assets acquired from Allied and higher landfill operating and facilities expense.

� Western Region. Revenue for the three and nine months ended September 30, 2009, benefited from core price growth in all lines of business. However, the increase in revenue from core price was more than offset by volume declines in all lines of business, especially in our industrial, commercial and landfill lines of business. We also experienced declines in fuel surcharges.

For the three and nine months ended September 30, 2009, we realized gains from the disposition of assets of $0.3 million and $88.2 million which increased operating margin by 0.1% and 5.4%. In the second quarter of 2008, we incurred a $34.0 million charge for environmental conditions at the Sunrise Landfill in Nevada which reduced operating margin for the nine months ended September 30, 2008 by 5.4%. Otherwise, margins for the quarter over quarter period were lower due to lower landfill revenue which has higher margins than collection revenue and higher franchise fees, depreciation and amortization expense. Year over year margins were fairly flat. Margins were favorably impacted by lower labor, fuel, transportation and selling, general and administrative expenses, offset by increased amortization expense resulting from assets acquired from Allied and facilities expense.

Table of Contents

� Corporate Entities. The increase in net revenue for the corporate entities relates to Allied's national accounts program. The increase in depreciation, amortization, depletion and accretion expense, and the increase in the operating loss at the Corporate Entities is attributable to the acquisition of Allied. Included in our gain (loss) on disposition of assets for the three and nine months ended September 30, 2009, is $0.5 million and $8.2 million of transaction related expenses from the disposition of assets in the other segments.

Consolidated Results of Operations
Our net income attributable to Republic Services, Inc. was $120.5 million and $459.4 million, or $0.32 and $1.21 per diluted share, for the three and the nine months ended September 30, 2009, as compared to $88.7 million and $205.5 million, or $0.48 and $1.11 per diluted share, for the three and nine months ended September 30, 2008.
During the three and nine months ended September 30, 2009 and 2008, we recorded a number of gains, charges (recoveries) and other expenses that impacted our pre-tax income, net income attributable to Republic Services, Inc. (Net Income - Republic) and diluted earnings per share. These items primarily consist of the following (in millions, except per share data):