You should read the following discussion in conjunction with the unaudited consolidated financial statements and notes thereto included under Item 1. In addition, you should refer 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, 2011.
Overview
We are the second largest provider of services in the domestic non-hazardous solid waste industry, as measured by revenue. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 333 collection operations in 38 states and Puerto Rico. We own or operate 193 transfer stations, 191 active solid waste landfills and 71 materials recovery facilities. We also operate 69 landfill gas and renewable energy projects.
Revenue for the nine months ended September 30, 2012 decreased to $6,089.9 million compared to $6,167.7 million for the same period in 2011. This change in revenue is due to increases in core price of 0.7% and acquisitions, net of divestitures of 0.4% more than offset by decreases in volume of 1.1% and recycling commodities of 1.3%. Fuel surcharges were flat versus the comparable 2011 period.
The following table summarizes our revenue, costs and expenses for the three and nine months ended September 30, 2012 and 2011 (in millions of dollars and as a percentage of revenue):

                            Three Months Ended September 30,                       Nine Months Ended September 30,
                            2012                        2011                       2012                       2011
Revenue            $   2,046.9     100.0   %    $ 2,116.2     100.0   %    $ 6,089.9     100.0   %    $ 6,167.7     100.0   %
Expenses:
Cost of
operations             1,280.5      62.6          1,260.0      59.6          3,722.2      61.1          3,657.5      59.3
Depreciation,
amortization
  and depletion
of property
  and equipment          186.1       9.1            195.5       9.2            579.2       9.5            572.3       9.3
Amortization of
other
  intangible
assets and
  other assets            17.4       0.9             19.5       0.9             52.9       0.9             57.1       0.9
Accretion                 19.7       0.9             19.4       0.9             59.1       1.0             58.6       1.0
Selling, general
and
  administrative         193.8       9.5            207.5       9.8            613.5      10.1            611.5       9.9
Negotiation and
withdrawal
  costs -
Central States            31.3       1.5                -         -             34.6       0.6                -         -
Loss (gain) on
disposition of
  assets and
impairments, net           0.2         -              5.8       0.3             (3.4 )    (0.1 )           24.8       0.4
Operating income   $     317.9      15.5   %    $   408.5      19.3   %    $ 1,031.8      16.9   %    $ 1,185.9      19.2   %

Our pre-tax income was $223.1 million and $624.8 million for the three and nine months ended September 30, 2012, respectively, versus $296.0 million and $647.3 million for the comparable 2011 periods, respectively. Our net income attributable to Republic Services, Inc. was $152.7 million and $444.8 million for the three and nine months ended September 30, 2012, or $0.42 and $1.20 per diluted share, respectively, versus $193.5 million and $398.2 million, or $0.52 and $1.05 per diluted share for the comparable 2011 periods, respectively. During each of the three and nine months ended September 30, 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.

                           Three Months Ended September 30, 2012              Three Months Ended September 30, 2011
                                             Net           Diluted                              Net           Diluted
                           Pre-tax         Income -       Earnings            Pre-tax         Income -       Earnings
                           Income          Republic       per Share           Income          Republic       per Share
As reported            $       223.1     $    152.7     $      0.42       $       296.0     $    193.5     $      0.52
Negotiation and
withdrawal costs -
  Central States                31.3           18.6            0.05                   -              -               -
Loss on
extinguishment of
debt                             2.3            1.3               -                 6.0            5.8            0.01
(Gain) loss on
disposition of
assets
  and impairments,
net                              0.1           (1.9 )             -                 5.8           (0.8 )             -
Adjusted               $       256.8     $    170.7     $      0.47       $       307.8     $    198.5     $      0.53



                               Nine Months Ended September 30, 2012                  Nine Months Ended September 30, 2011
                                                Net             Diluted                               Net           Diluted
                           Pre-tax           Income -           Earnings            Pre-tax         Income -       Earnings
                           Income            Republic          per Share            Income          Republic       per Share
As reported            $      624.8       $      444.8       $       1.20       $       647.3     $    398.2     $      1.05
Negotiation and
withdrawal costs -
  Central States               34.6               20.6               0.06                   -              -               -
Loss on
extinguishment of
debt                          112.6               68.7               0.19               207.3          127.3            0.33
(Gain) loss on
disposition of
assets
  and impairments,
net                            (3.6 )             (4.1 )            (0.01 )              24.8           17.6            0.05
Adjusted               $      768.4       $      530.0       $       1.44       $       879.4     $    543.1     $      1.43

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 generally accepted accounting principles in the United States (U.S. GAAP), provides an understanding of operational activities before the financial impact of certain non-operational items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. Comparable charges and costs have been incurred in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted pre-tax income, adjusted net income attributable to Republic Services, Inc. and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.

Negotiation and withdrawal costs - Central States. During the three and nine months ended September 30, 2012, we incurred costs related to the negotiation of collective bargaining agreements under which we have obligations to contribute to the Central States, Southeast and Southwest Areas Pension Fund (Central States or the Fund). Additionally, during the three months ended September 30, 2012, we recorded a charge to earnings of approximately $31 million for our partial withdrawal liability from the Fund.
Loss on Extinguishment of Debt. During the three and nine months ended September 30, 2012 and 2011, we completed refinancing transactions that resulted in cash paid for premiums and professional fees to repurchase outstanding debt as well as the non-cash write-off of 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.
(Gain) loss on Disposition of Assets and Impairments, Net. During the nine months ended September 30, 2012, we recorded a net gain on disposition of assets and impairments of $3.6 million primarily related to divestitures in our Eastern Region. During the three and nine months ended September 30, 2011, we recorded a loss on disposition of assets and impairments, net of $5.8 million and $24.8 million, respectively, primarily related to divestitures in our Southern and Western Regions.
Recent Developments

In October 2012, we restructured our field and corporate operations to create a more efficient and competitive company. These changes include consolidating our field regions from from four to three and our areas from 28 to 20, relocating office space, and reducing administrative staffing levels. We expect to record expenses of approximately $30 million with respect to this

restructuring, approximately one-half of which will be incurred in the fourth quarter of 2012. We expect this restructuring will reduce our selling, general and administrative expenses by approximately $23 million annually.

In November 2012, we updated our full year 2012 financial guidance and provided a preliminary 2013 outlook.

Adjusted Diluted Earnings per Share

The following is a summary of anticipated adjusted diluted earnings per share
for the year ending December 31, 2012 which is not a measure determined in
accordance with GAAP:
                                                    (Anticipated)
                                                         Year
                                                        Ending
                                                     December 31,
                                                         2012
Diluted earnings per share                          $ 1.58 - 1.60
Loss on extinguishment of debt                               0.19
Negotiation and withdrawal costs - Central States            0.06
Restructuring expenses                                       0.03
Gain on disposition of assets and impairments, net          (0.01 )
Adjusted diluted earnings per share                 $ 1.85 - 1.87

We also are providing our preliminary outlook for 2013. Adjusted diluted earnings per share is expected to be in a range of $1.90 to $1.92. This adjusted diluted earnings per share guidance assumes an effective tax rate of 33.5% and 38.0% for the years ending December 31, 2012 and 2013, respectively.

We believe that the presentation of adjusted diluted earnings per share, which excludes loss on extinguishment of debt in 2012, negotiation and withdrawal costs - Central States, restructuring expenses and gain on disposition of assets and impairments, net, provides an understanding of operational activities before the financial impact of certain items. We use this measure, and believe investors will find it 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. Our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.

Results of Operations
Revenue
We generate revenue primarily from our solid waste collection operations. Our remaining revenue is from other services, including transfer stations, landfill disposal and recycling. Our revenue from collection operations consists of fees we receive from commercial, industrial, municipal and residential customers. Our 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 material recovery facilities generate revenue from disposal or tipping fees charged to third parties. In general, we integrate our recycling operations with our collection operations and obtain revenue from the sale of recyclable materials. Other 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, and, as such, the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
The following table reflects our revenue by service line for the three and nine months ended September 30, 2012 and 2011 (in millions of dollars and as a percentage of revenue):

                           Three Months Ended September 30,                       Nine Months Ended September 30,
                           2012                       2011                        2012                       2011
Collection:
  Residential      $   542.0      26.5   %    $   538.3      25.4   %     $ 1,614.0      26.5   %    $ 1,601.6      26.0   %
  Commercial           632.4      30.9            625.9      29.6           1,884.4      30.9          1,871.5      30.3
  Industrial           395.9      19.3            397.5      18.8           1,154.7      19.0          1,141.7      18.5
  Other                  8.4       0.4              8.5       0.4              24.9       0.4             24.4       0.4
   Total
collection           1,578.7      77.1          1,570.2      74.2           4,678.0      76.8          4,639.2      75.2

Transfer               247.7                      258.8                       721.4                      750.9
Less:
Intercompany          (146.4 )                   (146.3 )                    (427.5 )                   (433.0 )
  Transfer, net        101.3       5.0            112.5       5.3             293.9       4.8            317.9       5.2

Landfill               477.7                      496.4                     1,408.7                    1,400.3
Less:
Intercompany          (218.2 )                   (219.8 )                    (650.0 )                   (636.1 )
  Landfill, net        259.5      12.7            276.6      13.1             758.7      12.5            764.2      12.4

  Sale of
recyclable
materials               78.4       3.8            120.0       5.7             266.5       4.4            341.2       5.5
  Other non-core        29.0       1.4             36.9       1.7              92.8       1.5            105.2       1.7
  Other                107.4       5.2            156.9       7.4             359.3       5.9            446.4       7.2

Total revenue      $ 2,046.9     100.0   %    $ 2,116.2     100.0   %     $ 6,089.9     100.0   %    $ 6,167.7     100.0   %

Changes in price are restricted on approximately 50% of our annual revenue. Of these restricted pricing arrangements:
• approximately 65% are price changes based upon fluctuation in a specific index as defined in the contract (primarily based on consumer price index);

• approximately 15% are fixed price increases based on stated contract terms; or

• 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, most pricing resets lag between the measurement period and the date the revised pricing goes into effect. As a result, current changes in a specific index, such as the consumer price index, may not manifest themselves in our reported pricing for several quarters into the future.
The following table reflects changes in our revenue for the three and nine months ended September 30, 2012 versus the comparable 2011 periods:

                               Three Months Ended September 30,           Nine Months Ended September 30,
                                  2012                  2011                2012                  2011
Core price                          1.0  %                0.7  %              0.7  %                0.9  %
Fuel surcharges                    (0.4 )                 1.2                   -                   1.0
  Total price                       0.6                   1.9                 0.7                   1.9
Volume                             (2.1 )                 0.3                (1.1 )                (0.5 )
Recycling commodities              (2.0 )                 1.7                (1.3 )                 1.4
San Mateo and Toronto
contract losses                       -                  (1.4 )                 -                  (1.4 )
Total internal growth              (3.5 )                 2.5                (1.7 )                 1.4
Acquisitions /
divestitures, net                   0.2                   0.1                 0.4                  (0.1 )

During the three and nine months ended September 30, 2012, we experienced the following changes in our revenue versus the comparable 2011 periods:

• Core price increased revenue by 1.0% and 0.7%, respectively, due to positive pricing in all lines of business.

• Volume decreased revenue by 2.1% (including 0.5% due to one less workday) and 1.1%, respectively. Volume declines were primarily in our industrial collection, landfill and transfer station lines of business due to the acquisition of a large national broker by our competitor, the loss of a large national accounts contract and the loss of certain municipal disposal contracts. We also experienced decreases in special waste and construction and demolition volumes in our landfill line of business.

• Recycling commodities decreased revenue by 2.0% and 1.3%, respectively, primarily due to the change in the market price of materials. Average prices for old corrugated cardboard (OCC) for the three and nine months ended September 30, 2012 were $110.13 and $127.89 per ton versus $172.57 and $165.04 per ton for the comparable 2011 periods, a decrease of $62.44 and $37.15 per ton or 36.2% and 22.5%, respectively. Average prices of old newspaper (ONP) for the three and nine months ended September 30, 2012 were $92.45 and $104.46 per ton versus $152.93 and $150.59 per ton for the comparable 2011 periods, a decrease of $60.48 and $46.13 per ton or 39.5% and 30.6%, respectively. The declines in prices were partially offset by increased volumes processed.

Changing market demand for recyclable materials causes volatility in commodity prices. At current volumes and mix of materials, we believe a ten dollar per ton change in the price of recyclable materials will change annual revenue and operating income by approximately $27 million and $18 million, respectively. Cost of Operations
Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers who transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our National Accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel credits; disposal franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs, which includes financial assurance, leachate disposal and other landfill maintenance costs; risk management, which includes casualty insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers associated with recycling commodities; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations.

The following table summarizes the major components of our cost of operations for the three and nine months ended September 30, 2012 and 2011 (in millions of dollars and as a percentage of revenue):

                                  Three Months Ended September 30,                         Nine Months Ended September 30,
                                   2012                         2011                        2012                        2011
Labor and related
benefits                 $     393.0        19.2   %    $   387.7     18.3   %    $   1,172.4       19.3   %    $ 1,148.4     18.6   %
Transfer and disposal
costs                          159.3         7.8            166.9      7.9              460.3        7.6            483.2      7.8
Maintenance and
repairs                        175.1         8.5            166.0      7.8              511.7        8.4            471.4      7.6
Transportation and
subcontract costs              108.4         5.3            118.2      5.6              324.5        5.3            330.2      5.4
Fuel                           132.3         6.5            133.3      6.3              395.5        6.5            388.2      6.3
Franchise fees and
taxes                          102.6         5.0            103.7      4.9              302.2        4.9            296.2      4.8
Landfill operating
costs                           70.6         3.4             34.0      1.6              129.6        2.1             92.9      1.5
Risk management                 44.3         2.2             39.9      1.9              132.0        2.2            129.9      2.1
Cost of goods sold              25.3         1.3             41.8      2.0               89.9        1.5            113.8      1.9
Other                           69.6         3.4             68.5      3.2              204.1        3.3            203.3      3.3
Total cost of
operations               $   1,280.5        62.6   %    $ 1,260.0     59.5   %    $   3,722.2       61.1   %    $ 3,657.5     59.3   %

The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies.
Our cost of operations increased $20.5 million and $64.7 million or, as a percentage of revenue 3.1% and 1.8%, respectively,

for the three and nine months ended September 30, 2012 versus the comparable 2011 periods, primarily as a result of the following:
• Labor and related benefits increased due to wage increases during the three and nine months ended September 30, 2012 versus the comparable 2011 periods. As a percentage of revenue, labor and related benefits were negatively impacted by the relative mix of higher collection revenue and lower recycling revenue versus the comparable 2011 periods.

• Maintenance and repairs expense increased due to the increased cost of tires and costs associated with our fleet maintenance initiatives as well as container refurbishment expenses.

• Our fuel costs in aggregate dollars decreased $1.0 million during the three months ended September 30, 2012 versus the comparable 2011 period due to lower fuel consumption levels. For the nine months ended September 30, 2012, our fuel costs in aggregate dollars and as a percentage revenue increased $7.3 million and 0.2% versus the comparable 2011 period primarily due to higher prices. Average fuel costs per gallon for the three months ended September 30, 2012 were $3.94 versus $3.87 for the comparable 2011 period, an increase of $0.07 or 1.8%. Average fuel costs per gallon for the nine months ended September 30, 2012 were $3.95 versus $3.84 for the comparable 2011 period, an increase of $0.11 or 2.9%.

At current consumption levels, a ten-cent change in the price of diesel fuel changes our fuel costs by approximately $14 million on an annual basis. Offsetting these changes in fuel expense would be changes in our fuel recovery fee charged to our customers. At current participation rates, a ten-cent change in the price of diesel fuel changes our fuel recovery fee by approximately $9 million.
• Franchise fees and taxes increased during the nine months ended September 30, 2012 primarily due to the acquisition of businesses in franchise markets.

• Landfill operating expenses in aggregate dollars and as a percentage of revenue increased $36.6 million and 1.8% and $36.7 million and 0.6%, respectively, for the three and nine months ended September 30, 2012 versus the comparable 2011 periods, primarily due to $37.1 million of remediation charge we recorded in connection with environmental conditions at our closed disposal facility in Missouri.

These increases in costs were partially offset by:
• Transfer and disposal costs decreased during the three and nine months ended September 30, 2012 versus the comparable 2011 periods, primarily due to lower disposal prices and lower volumes disposed at third party sites. During the three and nine months ended September 30, 2012, approximately 67% of the total waste volume we collected was disposed at landfill sites that we own or operate (internalization), versus 66% for the comparable 2011 periods.

• Transportation and subcontract costs decreased during the three and nine months ended September 30, 2012 versus the comparable 2011 periods, primarily due to the loss of a large national accounts contract.

• Cost of goods sold in aggregate dollars and as a percentage of revenue decreased $16.5 million and 0.7% and $23.9 million and 0.4%, respectively, for the three and nine months ended September 30, 2012 versus the comparable 2011 periods, primarily due to a decline in market value of recycled commodities and the loss of a large national accounts contract offset by an increase in the volume of commodities processed.

Depreciation, Amortization and Depletion of Property and Equipment The following table summarizes depreciation, amortization and depletion of property and equipment for the three and nine months ended September 30, 2012 and 2011 (in millions of dollars and as a percentage of revenue):

. . .