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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K

(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2002



OR

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

For the transition period from ____ to ____

Commission File Number 0-19285

ALLIED WASTE INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of incorporation or organization) |  | 88-0228636
(IRS Employer Identification Number)

|                                                                                                         |  |                 
|-------------------------------------------------------------------------------------------------------- |  | ----------------
|15880 North Greenway-Hayden Loop, Suite 100
Scottsdale, Arizona
(Address of principal executive offices) |  | 85260
(Zip Code)

Registrants telephone number, including area code: (480) 627-2700

Securities registered pursuant to Section 12(b) of the Act:

|                                                             |                                           |                                                
|------------------------------------------------------------ | ----------------------------------------- | -----------------------------------------------
|Title of each class                                          | Name of each exchange on which registered
|                                                             |                                           |                                                
|Common Stock, $.01 par value
Preferred Stock Purchase Rights |                                           | New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.x

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes x No o

The aggregate market value of the registrants voting stock held by
nonaffiliates of the registrant was $1,893,141,926 as of June 28, 2002.

The number of shares of the registrants common stock, $.01 par value,
outstanding at March 25, 2003 was 196,824,278.

The registrants proxy statement is to be filed in connection with the
registrants 2003 annual meeting of stockholders, portions of which are
incorporated by reference into Part III of this report.



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TABLE OF CONTENTS



|           |                                                                                               |  |  |  |  |  |  | 
|---------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I    
|           | Item 1. Business                                                                             
|           | Item 2. Properties                                                                           
|           | Item 3. Legal Proceedings                                                                    
|           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|           | Item 5. Market Price and Dividends on the Common Stock and Related Stockholder Matters       
|           | Item 6. Selected Financial Data                                                              
|           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|           | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|           | Item 8. Financial Statements and Supplementary Data                                          
|           | Item 9. Changes in and Disagreements on Accounting and Financial Disclosure                  
|PART III  
|           | Item 11. Executive Compensation                                                              
|           | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|           | Item 13. Certain Relationships and Related Transactions                                      
|           | Item 14. Controls and Procedures                                                             
|PART IV   
|           | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|EX-3.1(ii)
|EX-10.18  
|EX-10.44  
|EX-10.46  
|EX-10.49  
|EX-10.75  
|EX-10.76  
|EX-10.77  
|EX-12.1   
|EX-14     
|EX-21     
|EX-23.1   
|EX-99.1   
|EX-99.2   



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TABLE OF CONTENTS

|         |         |                |                                                                                       |  |     |     |  |  | 
|-------- | ------- | -------------- | ------------------------------------------------------------------------------------- |  | --- | --- |  |  | 
|PART I   |         |                |                                                                                       |  |     |     |  | 
|         | Item 1  |                | Business                                                                              |  |     | 3   | 
|         | Item 2  |                | Properties                                                                            |  |     | 11  | 
|         | Item 3  |                | Legal Proceedings                                                                     |  |     | 11  | 
|         | Item 4  |                | Submission of Matters to a Vote of Security Holders                                   |  |     | 13  | 
|PART II  |         |                |                                                                                       |  |     |     |  | 
|         | Item 5  |                | Market Price and Dividends on the Common Stock and Related Stockholder Matters        |  |     | 13  | 
|         | Item 6  |                | Selected Financial Data                                                               |  |     | 14  | 
|         | Item 7  |                | Management's Discussion and Analysis of Financial Condition and Results of Operations |  |     | 17  | 
|         | Item 7A |                | Quantitative and Qualitative Disclosures About Market Risk                            |  |     | 56  | 
|         | Item 8  |                | Financial Statements and Supplementary Data                                           |  |     | 57  | 
|         | Item 9  |                | Changes in and Disagreements on Accounting and Financial Disclosure                   |  |     | 121 | 
|PART III |         |                |                                                                                       |  |     |     |  | 
|         | Item 10 |                | Directors and Executive Officers of the Registrant                                    |  |     | 121 | 
|         | Item 11 |                | Executive Compensation                                                                |  |     | 121 | 
|         | Item 12 |                | Security Ownership of Certain Beneficial Owners and Management                        |  |     | 121 | 
|         | Item 13 |                | Certain Relationships and Related Transactions                                        |  |     | 121 | 
|         | Item 14 |                | Controls and Procedures                                                               |  |     | 121 | 
|PART IV  |         |                |                                                                                       |  |     |     |  | 
|         | Item 15 |                | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  |     | 122 | 
|         |         | Signatures     |                                                                                       |  | 162 |    
|         |         | Certifications |                                                                                       |  | 163 |    

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Unless the context requires otherwise, reference in this Form 10-K to Allied,
we, us and our, refer to Allied Waste Industries, Inc. and its
consolidated subsidiaries.




PART I




Item 1.Business

Overview

We are the second largest, non-hazardous solid waste management company in the
United States. The non-hazardous solid waste industry in the United States
generates approximately $40 billion of annual revenue from publicly traded
companies, municipalities and privately held companies. Publicly traded
companies generate approximately 47% of the revenues, while municipalities and
private companies generate approximately 30% and 23% of revenues,
respectively. Presently, the three largest publicly traded companies in the waste management
industry in the United States generate over 90% of the public company revenues.

We provide collection, transfer, recycling and disposal services for
approximately 10 million residential, commercial and industrial customers. We
operate as a vertically integrated company which entails picking up waste from
businesses and residences and disposing of that waste in our own landfills to
the extent that it is economically feasible (referred to as internalization).
This allows us greater stability in and control over the waste flow into our
landfills and, therefore, greater control over the cash flow stability in our
business. We serve our customers through a network of 340 collection
companies, 175 transfer stations, 169 active landfills and 66 recycling
facilities in 118 major markets within 39 states.

We reported revenues of approximately $5.5 billion and approximately $5.6
billion for the years ended December 31, 2002 and 2001, respectively. During
the years ended December 31, 2002 and 2001, we generated operating cash flows
of approximately $1,032.7 million and $905.2 million, and reinvested $542.3
million and $500.9 million of capital into the business, respectively. During
2002, we reduced our debt balance by $377.5 million to $8.88 billion and our
debt to total capitalization was 82.1% and 84.1% at December 31, 2002 and 2001,
respectively. Our current business objectives are to focus on internal growth
and maximize cash flow to repay debt.

Our management philosophy utilizes a decentralized operating model, with
centralized management oversight and centralized control of functions and
activities related to risk, regulations and compliance. Because the waste
collection and disposal business is a very local business, operations and
opportunities differ in each of our markets. By utilizing a decentralized
operating model, the day-to-day operating decisions are made locally, close to
the customer. We believe that this model allows us to maximize the growth and
development opportunities in each market in which we operate and has largely
contributed to our ability to operate the business efficiently, while
maintaining effective controls over our operations and administrative matters,
including financial reporting and risk management.

We were incorporated in Delaware in 1987. Since then we have acquired
companies within the waste industry that either provide additional
infrastructure, such as landfills and transfer stations in existing markets, or
tuck into our existing collection companies and enhance our internalization and
profitability in a market. Since 2001, we have funded the acquisition of
companies through the proceeds from divestitures of our own non-integrated
assets. In 2002, we divested companies with $69.3 million of annualized
revenue for net proceeds of $84.3 million and acquired companies with $28.3
million of annualized revenue for a purchase price of $55.4 million.

General information about us can be found at
www.alliedwaste.com. Our annual report on Form 10-K,
quarterly reports on Form 10-Q and current reports on
Form 8-K, as well as any amendments to those reports,
are available free of charge through our website as
soon as reasonably practicable after we file them
with, or furnish them to, the Securities and Exchange
Commission (the SEC).

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Business Strategy

The major components of our business strategy are intended to maximize operating cash
flows to enable us to continue to pay down debt. These components are: (1) operating
vertically integrated, non-hazardous solid waste service businesses with a high rate of
waste internalization (which is the process of transferring to and disposing of waste we
collect at our own landfills); (2) managing our businesses locally with a strong
operations focus on customer service; (3) maintaining or improving our market position
through internal development and incremental acquisitions; and (4) maintaining the
financial capacity and effective administrative systems and controls to support on-going
operations and future growth.

Vertical Integration and Internalization.Our vertical integration
business strategy has been and continues to be the key element of our
operating philosophy. The fundamental objective of the vertical
integration business model is to control the waste stream from the point
of collection through disposal, thereby achieving a high rate of waste
internalization (or the percentage of collected waste that we manage
through to disposal). We have built through market-specific acquisitions
vertically integrated operations typically consisting of collection
companies, transfer stations, recycling facilities and landfills. We
target strategic acquisitions in specific markets to maximize our
vertical integration strategy. Within our markets, we seek to strengthen
our competitive position and improve our financial returns by acquiring
and selling operating assets. We believe that we can realize competitive
advantages by continuously implementing this strategy across existing and
selected new markets in the United States. Our internalization rate, as
measured by collection volumes, was approximately 67% at the end of 2002
and 2001.

Focus on Customer Service Excellence.Decentralized operations and local
management characterize our operations-oriented business strategy.
Historically, we have successfully focused our management development
activities on recruiting and retaining operating managers with extensive
industry and local market experiences. Our senior operating management
average over 25 years of industry experience. By continuing to hire and
retain experienced, local market-oriented managers, we believe that we
are well positioned to react to customer needs and changes in our markets
and are able to capitalize on growth opportunities. The focus on
customer services is supported by investing in and maintaining a quality
asset base and providing training programs that maximize our operational
excellence.

Internal Development and Incremental Acquisitions.Our focus is on
achieving a sustainable rate of long-term growth and efficiently
operating the assets we have accumulated since the early 1990s. We intend to increase revenues by
increasing volumes collected and disposed of and by increasing the rates
we charge for the services we provide. We intend to supplement this
internal growth with acquisitions of operating assets in existing
markets, such as landfills and transfer stations, and tuck-in
acquisitions of privately owned solid waste operations, funded by the
sale of operations that are not consistent with our business model. We
also intend to examine opportunities when government entities privatize
the operation of all or part of their solid waste systems. In addition,
we seek to achieve broad domestic geographic diversification in our
operations through market development initiatives.

Maintaining Financial Capacity and Infrastructure for Future Growth.We
seek to implement our business strategy by maintaining sufficient
financial capacity and effective administrative systems and controls. Our
operating cash flows have historically been sufficient to fund our debt
service, working capital and capital expenditure requirements, and we
maintain revolving line of credit capacity which has been sufficient to
handle seasonal and other peak spending requirements. Cash flows in
excess of current year debt maturities have been applied to future
maturities.

Our system of internal controls is implemented through clear policies and
procedures and appropriate delegation of authority and segregation of
responsibility. Our company policies establish a philosophy of
conducting operations in a responsible and ethical manner. Our system of
internal controls are reviewed, modified and improved as changes occur in
business conditions and our operations.

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Operations

Our revenue mix (including intercompany revenues) for 2002 was
approximately $4.2 billion (62.2%) collection, $2.1 billion (31.6%)
disposal (including transfer), $243.1 million (3.6%) recycling and $173.9
million (2.6%) other. No one customer has individually accounted for
more than 1% of our consolidated revenue in any of the last three years.

Collection. Collection operations involve collecting and transporting
non-hazardous waste from the point of generation to the transfer station
or the site of disposal. Fees relating to collection services are based
on general competitive and prevailing local economic conditions and other
considerations such as collection frequency, type of equipment furnished
(if any), the type and volume or weight of the waste collected, the
distance traveled to the transfer station or disposal facility and the
cost of disposal. Depending on the customer being served, we generally
provide solid waste collection under the following two service lines:



| |  |  | Commercial.We provide containerized non-hazardous solid waste
disposal services to a wide variety of commercial and industrial
customers. Commercial revenue represents approximately 72% of our
collection revenue. We provide customers with containers that are
designed to be lifted mechanically and either emptied into a
collection vehicles compaction hopper or, in the case of roll-off
containers, to be loaded onto the collection vehicle. Our
commercial containers generally range in size from one to eight
cubic yards and our roll-off containers generally range in size
from 20 to 40 cubic yards. Contracts for roll-off containers may
provide for temporary (such as the removal of waste from a
construction site) or ongoing services. Commercial contract terms
generally range from 1 to 3 years and commonly have renewal
options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Residential.We perform residential collection services under
individual monthly subscriptions directly to households or under
exclusive contracts with municipal governments that allow us to
service all or a portion of the homes in the municipalities at
established rates. Municipal contracts generally have a term of 3
to 5 years and commonly have renewal options. We seek to obtain
municipal contracts that enhance the efficiency and profitability
of our operations as a result of the density of collection
customers within a given area. Residential revenue represents
approximately 28% of our collection revenue, approximately 40% of
which is subscription revenue and approximately 60% of which is
municipal revenue. Prior to the end of the term of most municipal
contracts, we will attempt to renegotiate the contract, and if
unable to do so, will generally re-bid the contract on a sealed bid
basis. We also make residential collection service arrangements
directly with households. We seek to enter into residential service
arrangements where the route density is high, thereby creating
additional economic benefit. Residential collection fees are either
paid by the municipalities out of tax revenues or service charges,
or are paid directly by the residents who receive the service.

Transfer Stations. A transfer station is a facility where solid waste is
received from third-party and company owned collection vehicles and then
transferred to and compacted in large, specially constructed trailers for
transportation to disposal facilities. This consolidation reduces costs
by increasing the density of the waste being transported through
compaction and by improving utilization of collection personnel and
equipment. We generally base fees upon such factors as general
competitive and economic conditions, the type and volume or weight of the
waste transferred, the transport distance to the disposal facility and
the cost of disposal. We believe that as increased regulations and public
pressure restrict the development of landfills in urban and suburban
areas, transfer stations will continue to be used as an efficient means
to transport waste over longer distances to available landfills.

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Disposal.Non-hazardous solid waste landfills are the primary method of
disposal of solid waste in the United States. Currently, a landfill must
be designed, permitted, operated and closed in compliance with
comprehensive federal, state and local regulations, most of which are
promulgated under Subtitle D of the Resource Conservation and Recovery
Act (RCRA). Operating procedures include excavation, spreading and
compacting of waste, and covering of waste with earth or other inert
material. Disposal fees and the cost of transferring solid waste to the
disposal facility place an economic restriction on the geographic scope
of landfill operations in a particular market. Access to a disposal
facility, such as a landfill, is necessary for all solid waste management
companies. While access to disposal facilities owned or operated by
unaffiliated parties can generally be obtained, we prefer, in keeping
with our business strategy, to own or operate our own disposal
facilities. This strategy ensures access and allows us to internalize
disposal fees.

Recycling. We are primarily engaged in two types of recycling activities:



| |  |  | Collection.Collection services include curbside collection of
recyclable materials for residential customers and commercial and
industrial collection of recyclable materials. We generally charge
recycling fees based on the service sought by the customer. The
customer pays for the cost of removing, sorting and transferring recyclable materials downstream in the recycling process. Revenues
from recycling collection services are reported in the collection
line of business.                                                                                                                                                                                                                                                                                                                                                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Commodity Sales.We receive mixed waste materials at a materials
recovery facility, which is often integrated into, or contiguous
to, a transfer or collection operation. At the facility, we sort,
separate, accumulate, bind or place in a container and ready for
transport materials such as paper, cardboard, plastic, aluminum and
other metals. We also engage in organic materials recycling and/or
disposal. Cardboard and various grades of paper represented
approximately 80% of our processed recyclable product in 2002. The
purchaser of the recyclables generally pays for the sorted
materials based on fluctuating spot-market prices. We seek to
mitigate exposure to fluctuating commodity prices by entering into
contractual agreements that set a minimum sales price on the
recyclables and when possible passing through profit or loss from
the sale of recyclables to customers.

Organization, Marketing and Sales

Our management philosophy utilizes decentralized operating management,
with centralized compliance, regulatory and financial controls. We
believe that this model allows us to maximize the growth and development
opportunities in each of our markets and has largely contributed to our
ability to operate the business efficiently, while maintaining effective
controls over our operations and administrative matters, including
financial reporting. Since the waste collection and disposal business is
a very local business, operations and opportunities differ in each of our
markets. By utilizing decentralized operating management, the day-to-day
operating decisions are made at the local level, which is closest to the
customer.

We implement this philosophy through a corporate, area, region and
district infrastructure. In 2002, we expanded our operations into four
geographic areas: Eastern, Southern, Central and Western. The areas are
further divided into a total of twelve regions. Consistent with the
vertical integration business model, each region is organized into
several operating districts and each district contains a group of
specific business units with individual site operations. Each of our
regions, and substantially all of our districts include collection,
transfer, recycling and disposal services, which facilitates efficient
and cost effective waste handling and allows the regions and districts to
maximize the efficiencies from the internalization of waste. This
organizational structure provides our field operators the ability and
flexibility to manage profitability within their respective geographic
area, while providing guidance and resources to the local management.

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Corporate and area management, establish long-term business plans,
outline business and financial goals, implement policies and procedures
and evaluate effectiveness to provide for uniform controls throughout the
organization. Regional management develops tactical plans and implements
and monitors compliance with policies and procedures to achieve the
business goals and objectives. District management is responsible for
operational execution in accordance with business plans and compliance
with policies and procedures.

The area level of the organization is responsible for, among other
things, short and long-term market planning and development, goal
setting, oversight of the execution of corporate-wide initiatives and
communication of results and trends within their respective geographic
operating segment. The area staff consists primarily of an area vice
president, an area controller, a project development manager responsible
for future landfill and transfer station development, and a market
development representative responsible for acquisitions. Each area has
three regions under its management.

The regions are responsible for, among other things, implementation and
compliance of corporate-wide policies and initiatives, business unit
reviews and analysis, personnel development and training and for
providing functional expertise. All region managers and most district
managers have responsibility for all phases of the vertical integration
model including collection, transfer, recycling and disposal. The regions
consist primarily of a regional vice president, regional controller,
assistant regional vice president, assistant regional controller, sales
manager, regional engineer, safety manager, human resource manager,
materials marketing manager and accounting and information systems
support staff. Region offices are typically located in a districts
facility in order to reduce overhead costs and to promote a close working
relationship between the region management and district personnel. Each
region has approximately 5 districts under its management.

The districts consist of a group of specific business units with
individual site operations, known as divisions, usually operating as a
vertically integrated operation within a common marketplace. A division
is generally comprised of a single operating unit, such as a collection
facility, transfer station or a landfill. Districts range in size from
approximately $25 million to $250 million in revenue.

The districts are responsible for the execution of the business plans,
coordinating divisions within markets, pricing and market guidance,
landfill site construction, maximizing company assets and state and local
government affairs. The districts consist primarily of a district
manager, district controller, assistant district controller, district
safety manager and environmental manager.

Our policy is to periodically visit each commercial account to ensure
customer satisfaction and to sell additional services. In addition to
calling on existing customers, each salesperson calls upon potential
customers within a defined area in each market.

We also have municipal marketing representatives in most service areas
who are responsible for communicating with each municipality or community
to which we provide residential service to ensure customer satisfaction.
Additionally, the municipal representatives organize and handle bids for
renewal and new municipal contracts in their service area.

In addition to base salary, we compensate area, region and district
management through a bonus program and stock incentive plans.
Compensation pursuant to the bonus and stock incentive plans is largely
contingent upon meeting or exceeding various earnings and cash flow goals
in the managers geographic area of responsibility, as well as the
achievement of overall company goals.

We believe in financial responsibility and reporting at the operating
level and as a result, consolidate over 300 financial statements,
inclusive of balance sheets, which extend to areas, regions, districts
and divisions.

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Employees

At December 31, 2002, we employed approximately 29,000 employees of whom
approximately 28,000 were full-time employees. Approximately 5,000 of the
full-time employees were employed in clerical, administrative, and sales
positions; approximately 3,000 in management; and the remaining in collection,
disposal, transfer station and other operations. Approximately 7,000 of our
employees are covered by collective bargaining agreements. We currently have
no disputes or bargaining circumstances that could cause significant
disruptions in our business. Compensation information for our executive
management and directors is incorporated by reference in our Proxy Statement
for the 2003 Annual Meeting of Stockholders.

Competition

The non-hazardous waste collection and disposal industry is highly competitive.
We compete with large companies and municipalities which may have greater
financial and operational flexibility. We also compete with the use of
alternatives to landfill disposal because of certain state requirements to
reduce landfill disposal. The non-hazardous waste collection and disposal
industry is led by three large national waste management companies: Allied,
Waste Management, Inc., and Republic Services, Inc. It also includes numerous
regional and local companies. Many counties and municipalities that operate
their own waste collection and disposal facilities have the benefits of
tax-exempt financing and may control the disposal of waste collected within
their jurisdictions. We also compete on the basis of price and the quality of
our services.

We encounter competition in our landfill business on the basis of geographic
location, quality of operations and of alternatives to landfill disposal, such
as recycling and incineration. Further, most of the states in which we operate
landfills require counties and municipalities to formulate comprehensive plans
to reduce the volume of solid waste deposited in landfills through waste
planning, composting and recycling or other programs. Some state and local
governments mandate waste reduction at the source and prohibit the disposal of
certain types of wastes, such as yard wastes, at landfills.

Environmental and Other Regulations

We are subject to extensive and evolving environmental laws and regulations
administered by the Environmental Protection Agency (the EPA) and various other
federal, state and local environmental, zoning, health and safety agencies.
Many of these agencies periodically examine our operations to monitor
compliance with such laws and regulations. Governmental authorities have the
power to enforce compliance with these regulations and to obtain injunctions or
impose civil or criminal penalties in case of violations. We believe that
regulation of the waste industry will continue to evolve and we will adapt to
such future regulatory requirements to ensure compliance.

Our operation of landfills subjects us to certain operational, monitoring, site
maintenance, closure, post-closure and other obligations which could give rise
to increased costs for compliance and corrective measures. In connection with
our acquisition and continued operation of existing landfills, we must often
spend considerable time, effort and money to obtain permits required to
increase the capacity of these landfills.

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Our operations are subject to extensive regulation, principally under the following federal statutes:

The Resource Conservation and Recovery Act of 1976, as amended (RCRA).RCRA regulates the handling,
transportation and disposal of hazardous and non-hazardous wastes and delegates authority to states
to develop programs to ensure the safe disposal of solid wastes. On October 9, 1991, the EPA
promulgated Solid Waste Disposal Facility Criteria for non-hazardous solid waste landfills under
Subtitle D. Subtitle D includes location standards, facility design and operating criteria, closure
and post-closure requirements, financial assurance standards and groundwater monitoring as well as
corrective action standards, many of which had not commonly been in place or enforced previously at
landfills. Subtitle D applies to all solid waste landfill cells that received waste after October 9,
1991, and, with limited exceptions, required all landfills to meet these requirements by October 9,
1993. Subtitle D required landfills that were not in compliance with the requirements of Subtitle D
on the applicable date of implementation, which varied state by state, to close. In addition,
landfills that stopped receiving waste before October 9, 1993 were not required to comply with the
final cover provisions of Subtitle D. Each state must comply with Subtitle D and was required to
submit a permit program designed to implement Subtitle D to the EPA for approval by April 9, 1993.
All states except Maine and Washington have EPA approved programs which implemented the minimum
requirements of Subtitle D.

The Federal Water Pollution Control Act of 1972 as amended (the Clean Water Act).This act
establishes rules regulating the discharge of pollutants into streams and other waters of the United
States (as defined in the Clean Water Act) from a variety of sources, including solid waste disposal
sites. If runoff from our landfills or transfer stations may be discharged into surface waters, the
Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and
monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges.
The EPA has expanded the permit program to include storm water discharges from landfills that
receive, or in the past received, industrial waste. In addition, if development may alter or affect
wetlands, we may have to obtain a permit and undertake certain mitigation measures before
development may begin. This requirement is likely to affect the construction or expansion of many
solid waste disposal sites, including some we own or are developing.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended
(CERCLA). CERCLA addresses problems created by the release or threatened release of hazardous
substances (as defined in CERCLA) into the environment. CERCLAs primary mechanism for achieving
remediation of such problems is to impose strict, joint and several liability for cleanup of
disposal sites on current owners and operators of the site, former site owners and operators at the
time of disposal, and parties who arranged for disposal at the facility (i.e. generators of the
waste and transporters who select the disposal site). The costs of a CERCLA cleanup can be
substantial. Liability under CERCLA is not dependent on the existence or disposal of hazardous
wastes (as defined under RCRA), but can also be founded on the existence of even minute amounts of
the more than 700 hazardous substances listed by the EPA.

The Clean Air Act of 1970 as amended (the Clean Air Act).The Clean Air Act provides for increased
federal, state and local regulation of the emission of air pollutants. The EPA has applied the Clean
Air Act to landfills. In March 1996, the EPA adopted New Source Performance Standard and Emission
Guidelines (the Emission Guidelines) for municipal solid waste landfills. These regulations impose
limits on air emissions from solid waste landfills. The Emission Guidelines impose two sets of
emissions standards, one of which is applicable to all solid waste landfills for which construction,
reconstruction or modification was commenced before May 30, 1991. The other applies to all municipal
solid waste landfills for which construction, reconstruction or modification was commenced on or
after May 30, 1991. The Emission Guidelines are being implemented by the states after the EPA
approves the individual states program. These guidelines, combined with the new permitting programs
established under the Clean Air Act subject solid waste landfills to significant permitting
requirements and, in some instances, require installation of gas recovery systems to reduce
emissions to allowable limits. EPA also regulates the emission of hazardous air pollutants from
municipal landfills, and has promulgated regulations that require measures to monitor and reduce
such emissions.

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The Occupational Safety and Health Act of 1970 as amended (OSHA).OSHA establishes certain employer
responsibilities, including maintenance of a workplace free of recognized hazards likely to cause
death or serious injury, compliance with standards promulgated by the Occupational Safety and Health
Administration, and various record keeping, disclosure and procedural requirements. Various
standards, including standards for notices of hazards, safety in excavation and demolition work, and
the handling of asbestos, may apply to our operations.

Future Federal Legislation.In the future, our collection, transfer and landfill operations may also
be affected by legislation that may be proposed in the United States Congress that would authorize
the states to enact laws governing interstate shipments of waste. Such proposed federal legislation
may allow individual states to prohibit the disposal of out-of-state waste or to limit the amount of
out-of-state waste that could be imported for disposal and would require states, under certain
circumstances, to reduce the amounts of waste exported to other states. If this or similar
legislation is enacted, states in which we operate landfills could act to limit or prohibit the
importation of out-of-state waste. Such state actions could adversely affect landfills within these
states that receive a significant portion of waste originating from out-of-state. Our collection,
transfer and landfill operations may also be affected by flow control legislation, which may be
proposed in the United States Congress. This proposed federal legislation may allow states and local
governments to direct waste generated within their jurisdiction to a specific facility for disposal
or processing. If this or similar legislation is enacted, state or local governments with
jurisdiction over our landfills could act to limit or prohibit disposal or processing of waste in
our landfills.

State Regulation.Each state in which we operate has laws and regulations governing solid waste
disposal and water and air pollution and, in most cases, regulations governing the design,
operation, maintenance and closure of landfills and transfer stations. We believe that several
states have proposed or have considered adopting legislation that would regulate the interstate
transportation and disposal of waste in their landfills. Many states have also adopted legislative
and regulatory measures to mandate or encourage waste reduction at the source and waste recycling.

Our collection and landfill operations may be affected by the current trend toward laws requiring
the development of waste reduction and recycling programs. For example, a number of states have
enacted laws that require counties to adopt comprehensive plans to reduce, through waste planning,
composting and recycling or other programs, the volume of solid waste deposited in landfills. A
number of states have also taken or propose to take steps to ban or otherwise limit the disposal of
certain wastes, such as yard wastes, beverage containers, newspapers, unshredded tires, lead-acid
batteries and household appliances into landfills.

We have implemented and will continue to implement environmental safeguards that seek to comply with
these governmental requirements.

Liability Insurance and Bonding

We carry general liability, comprehensive property damage, automobile, workers compensation,
employers liability, directors and officers liability, limited environmental impairment liability
and other coverage we believe are customary in the industry. We are partially self-insured for
general liability, automobile and workers compensation insurance with varying loss thresholds up to
$3 million. We do not expect the impact of any known casualty, property or environmental claims or
other contingency to be material to our consolidated liquidity, financial position or results of
operations.

We are required to provide approximately $2.8 billion of financial assurances to governmental
agencies under applicable environmental regulations relating to our landfill operations and
collection contracts and of financial guarantee bonds for self-insurance. We satisfy the financial
assurance requirements by providing performance bonds, letters of credit, insurance policies or
trust deposits. We expect no material increase in financial assurance obligations although the mix
of financial assurance instruments may change.

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Corporate Governance

In July 2002, the Sarbanes-Oxley Act was signed into law, including provisions establishing new disclosure and reporting requirements. In
January 2003, the SEC adopted rules addressing the new disclosure requirements in the Sarbanes-Oxley Act relating to codes of ethics for a
companys principle executive, financial and accounting officers. We will be required to comply with these rules on December 31, 2003. We
have in place a code of ethics for our executive officers and senior financial officers which is included as Exhibit 14 to this Form 10-K.

In addition, the New York Stock Exchange has proposed rules requiring disclosure of corporate governance guidelines and related documents on
companies websites, which are not yet effective. We have begun to voluntarily provide such information. The charters of our audit,
compensation and nominating committees, and our corporate governance guidelines are available in print to any stockholder who requests them.
We expect this information to be available on our website no later than the second half of 2003.

Audit Committee Financial Experts

Our Board of Directors has determined that the chairman of our audit committee, Robert Agate, is an
audit committee financial expert as defined in section 3(a)(58) of the Exchange Act of 1934 (Exchange
Act). The Board of Directors has also determined that other members of the audit committee also
meet the definition of a financial expert. All of the audit committee members are independent as
defined in section 10A(m)(3) of the Exchange Act.




Item 2.Properties

Our principal executive offices are located at 15880 N. Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260 where we currently lease
approximately 105,000 square feet of office space. We currently maintain regional administrative offices in all of our regions.

Our principal property and equipment consists of land, buildings, and vehicles and equipment, substantially all of which are encumbered by
liens in favor of our primary lenders. We own or lease real property in the states in which we are conducting operations. At December 31,
2002, we owned or operated 340 collection companies, 175 transfer stations, 169 active solid waste landfills and 66 recycling facilities
within 39 states. Our active solid waste landfills aggregated to approximately 73,951 total acres, including approximately 24,671 permitted
acres. We believe that our property and equipment are adequate for our current needs.




Item 3.Legal Proceedings

We are involved in certain routine litigation. We believe that such litigation arose in the ordinary course of business and that costs of settlements or
judgments arising from such suits will not have a materially adverse effect on our consolidated liquidity, financial position or results of operations.

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Federal, state and local laws and regulations that relate to the protection of the environment regulate our business. The nature of our business results in us
frequently becoming a party to judicial or administrative proceedings involving governmental authorities and other interested parties. At December 31, 2002, we
were a party to two pending environmental enforcement matters where potential monetary sanctions are reasonably likely to exceed $100,000 and one such matter
that was resolved during the fourth quarter of 2002. We believe that these matters will not have a material adverse effect on our consolidated financial
statements.

On October 30, 2002, we signed a Stipulation and Proposal for Settlement with the State of Illinois relating to an alleged failure of BFI Waste Systems of North
America, Inc. to timely obtain a significant modification permit for its Mallard Lake Landfill in DuPage County Illinois. Under the Stipulation and Proposal for
Settlement, we paid $94,000 in penalties and we are in the process of implementing a supplemental environmental project in the amount of approximately $200,000.

Additionally in 2002, we received an Administrative Order from the New Jersey Department of Environmental Protection (NJDEP) alleging violations of permit and
regulatory requirements at our Linden, New Jersey transfer station, seeking a penalty of $140,000 and reducing the daily limit on the volume of waste that the
transfer station is allowed to handle. We have successfully negotiated with NJDEP to restore the prior permit levels and we are in the process of discussing the
amount of the assessed penalty.

In October 2002, we agreed to a settlement with the EPA regarding alleged violations of the Clean Air Act related to the practice of our hauling company in
Boston, Massachusetts, of crushing appliances, some of which contained freon or other regulated chlorofluorocarbons. The consent decree was entered by the court
on January 28, 2003. On February 21, 2003, we paid $782,550
in penalties and we are in the process of implementing a supplemental
environmental project in the amount of
approximately $2.3 million.

Other than the foregoing matters, at December 31, 2002, we were not involved in any such proceedings where we reasonably believe sanctions imposed by
governmental authorities will exceed $100,000 or which we believe will have a material effect on our consolidated liquidity, financial position or results of
operations. From time to time, we may also be subject to actions brought by citizens groups, adjacent landowners or others in connection with the permitting and
licensing of our landfills or transfer stations, or alleging personal injury, environmental damage or violations of the permits and licenses pursuant to which we
operate.

We have been notified that we are considered a potentially responsible party at a number of sites under CERCLA or other environmental laws. In all cases, such
alleged responsibility is due to the actions of companies prior to the time we acquired them. We continually review our status with respect to each site, taking
into account the alleged connection to the site and the extent of the contribution to the volume of waste at the site, the available evidence connecting the
entity to that site and the number and financial soundness of other potentially responsible parties at the site. The ultimate amounts for environmental
liabilities at sites where we may be a potentially responsible party cannot be determined and estimates of such liabilities made by us require assumptions about
future events subject to a number of uncertainties, including the extent of the contamination, the appropriate remedy, the financial viability of other
potentially responsible parties and the final apportionment of responsibility among the potentially responsible parties. Where we have concluded that our
estimated share of potential liabilities is probable, a provision has been made in the consolidated financial statements. Since the ultimate outcome of these
matters may differ from the estimates used in our assessments to date, the recorded liabilities are periodically evaluated, as additional information becomes
available, to ascertain that the accrued liabilities are adequate. We have determined that the recorded liability for environmental matters as of December 31,
2002 of approximately $365.1 million represents the most probable outcome of these contingent matters. We do not expect that adjustments to estimates, which may be
reasonably possible in the near term and that may result in changes to recorded amounts, will have a material effect on our consolidated liquidity, financial
position or results of operations. For more information about our potential environmental liabilities see Note 8 to our Consolidated Financial Statements
included herein under Item 8.

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Item 4.Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2002.

On January 23, 2003, a special meeting of our stockholders was held at which we submitted to a vote of our stockholders a proposal to increase in the number of
authorized shares of common stock from 300 million to 525 million. The results of the vote were as follows:

|                  |  |  |             | 
|----------------- |  |  | ----------- | 
|Affirmative votes |  |  | 221,086,285 | 
|Against           |  |  | 8,692,998   | 
|Abstentions       |  |  | 995,340     | 

PART II




Item 5.Market Price and Dividends on the Common Stock and Related Stockholder Matters

Price Range of Common Stock

Our common stock, $0.01 par value, is traded on the New York Stock Exchange under the symbol AW. The high and low closing sales prices per share for the
periods indicated were as follows:

|                              |  |      |       |     |  |   |       | 
|----------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|                              |  | High |       | Low
|                              |  |      |       |    
|Year Ended December 31, 2001: |  |      |       |     |  |   |       | 
|First Quarter                 |  | $    | 17.35 |     |  | $ | 13.85 | 
|Second Quarter                |  |      | 19.35 |     |  |   | 14.50 | 
|Third Quarter                 |  |      | 19.74 |     |  |   | 11.05 | 
|Fourth Quarter                |  |      | 14.70 |     |  |   | 9.10  | 
|                             
|Year Ended December 31, 2002: |  |      |       |     |  |   |       | 
|First Quarter                 |  | $    | 14.43 |     |  | $ | 9.95  | 
|Second Quarter                |  |      | 12.58 |     |  |   | 9.60  | 
|Third Quarter                 |  |      | 8.95  |     |  |   | 6.21  | 
|Fourth Quarter                |  |      | 11.22 |     |  |   | 5.80  | 

On March 25, 2003, the closing
sales price of our common stock was $8.63. The number of holders of
record of our common stock at March 25, 2003, was
approximately 643.

Dividend Policy

We have not paid dividends on our common stock and are currently prohibited by the terms of our loan agreements from paying dividends. For more detail
discussion on these loan agreements, see Note 5 to our Consolidated Financial Statements included herein in Item 8.

Recent Sales of Unregistered Securities

In November 2002, we issued
$375.0 million of 9.25% senior notes due 2012 in a private
placement under Rule 144A of the Securities Act of 1933. We will
initiate the registration of these notes with the SEC under the Securities Act
of 1933 shortly after the filing of this Form 10-K.

Equity Compensation Plan Information

Information required to be included about our equity compensation plan is incorporated by reference to the material appearing under the heading Equity
Compensation Plan Information in the Proxy Statement for the 2003 Annual Meeting of Stockholders.

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Item 6.Selected Financial Data

The selected financial data presented
below as of and for the three years ended December 31, 2002 are
derived from our Consolidated Financial Statements. The selected
financial data presented below as of and for the two  years ended
December 31, 1999 are derived from our Consolidated Financial
Statements, except for the cost of
operations and selling, general and administrative expenses which
give effect to the reclassification discussed
in Note 1 below. Our Consolidated
Financial Statements as of and for the years ended December 31, 2002 and 2001 have been audited by PricewaterhouseCoopers LLP, independent accountants. Our Consolidated
Financial Statements for each of the years ended December 31,
2000, 1999 and 1998 prior to the revisions described in Notes 1
and 3 to the 2002 Consolidated Financial Statements, were audited by Arthur Andersen LLP, independent accountants. These selected financial
data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and
the related notes included elsewhere in this Form 10-K. (Amounts are in millions, except per share amounts and percentages.)

|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- | ------- | - | ------- | ------- |  | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                                                                                                            |                   |   | 2002    |         | 2001 |   | 2000    |         | 1999(6) |   | 1998(7)
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |        
|Statement of Operations Data:                                                                                                                               |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Revenues                                                                                                                                                    |                   | $ | 5,517.3 |         |      | $ | 5,565.3 |         |         | $ | 5,707.5 |         |  | $ | 3,341.1 |        |   | $ | 1,575.6 |       
|Cost of operations(1)                                                                                                                                       |                   |   | 3,289.6 |         |      |   | 3,205.7 |         |         |   | 3,367.6 |         |  |   | 2,365.8 |        |   |   | 1,001.9 |       
|Selling, general and
administrative expenses(1)                                                                                                             |                   |   | 484.5   |         |      |   | 456.1   |         |         |   | 430.9   |         |  |   | 403.4   |        |   |   | 363.8   |       
|Depreciation and amortization                                                                                                                               |                   |   | 496.5   |         |      |   | 466.3   |         |         |   | 450.8   |         |  |   | 273.4   |        |   |   | 149.3   |       
|Goodwill amortization (2)                                                                                                                                   |                   |   |        |         |      |   | 226.7   |         |         |   | 223.2   |         |  |   | 110.7   |        |   |   | 30.7    |       
|Non-cash (gain) loss on
divestiture of assets(3)                                                                                                            |                   |   | (9.3    | )       |      |   | 107.0   |         |         |   | 26.5    |         |  |   |        |        |   |   |        |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|                                                                                                                                                            | Operating income  |   |         | 1,256.0 |      |   |         | 1,103.5 |         |   |         | 1,208.5 |  |   |         | 187.8  |   |   |         | 29.9   |  
|Equity in earnings of
unconsolidated affiliates                                                                                                             |                   |   |        |         |      |   | (14.1   | )       |         |   | (50.8   | )       |  |   | (20.7   | )      |   |   |        |       
|Interest expense and other                                                                                                                                  |                   |   | 845.3   |         |      |   | 847.6   |         |         |   | 878.1   |         |  |   | 435.8   |        |   |   | 84.4    |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Income (loss) before income
taxes                                                                                                                           |                   |   | 410.7   |         |      |   | 270.0   |         |         |   | 381.2   |         |  |   | (227.3  | )      |   |   | (54.5   | )     
|Income tax expense (benefit)                                                                                                                                |                   |   | 183.6   |         |      |   | 190.8   |         |         |   | 237.5   |         |  |   | (8.8    | )      |   |   | 43.8    |       
|Minority interest                                                                                                                                           |                   |   | 1.9     |         |      |   | 3.7     |         |         |   | 6.0     |         |  |   | 2.8     |        |   |   |        |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Income (loss) before
extraordinary loss and
cumulative effect of
change in accounting
principle                                                             |                   |   | 225.2   |         |      |   | 75.5    |         |         |   | 137.7   |         |  |   | (221.3  | )      |   |   | (98.3   | )     
|Extraordinary loss, net of
income tax benefit(4)                                                                                                            |                   |   | 10.1    |         |      |   | 17.0    |         |         |   | 13.3    |         |  |   | 3.1     |        |   |   | 124.8   |       
|Cumulative effect of change in
accounting principle, net of
income tax benefit(5)                                                                           |                   |   |        |         |      |   |        |         |         |   |        |         |  |   | 64.3    |        |   |   |        |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|                                                                                                                                                            | Net income (loss) |   |         | 215.1   |      |   |         | 58.5    |         |   |         | 124.4   |  |   |         | (288.7 | ) |   |         | (223.1 | )
|Dividends on preferred stock                                                                                                                                |                   |   | 77.9    |         |      |   | 73.0    |         |         |   | 68.5    |         |  |   | 27.8    |        |   |   |        |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Net income (loss) available
to common shareholders                                                                                                          |                   | $ | 137.2   |         |      | $ | (14.5   | )       |         | $ | 55.9    |         |  | $ | (316.5  | )      |   | $ | (223.1  | )     
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Basic EPS:                                                                                                                                                  |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Income (loss) available to
common shareholders before
extraordinary loss and
cumulative effect of change
in accounting principle, net of
income tax benefit |                   | $ | 0.77    |         |      | $ | 0.01    |         |         | $ | 0.37    |         |  | $ | (1.33   | )      |   | $ | (0.54   | )     
|Extraordinary loss, net of
income tax benefit                                                                                                               |                   |   | (0.05   | )       |      |   | (0.08   | )       |         |   | (0.07   | )       |  |   | (0.02   | )      |   |   | (0.68   | )     
|Cumulative effect of change in
accounting principle, net of
income tax benefit                                                                              |                   |   |        |         |      |   |        |         |         |   |        |         |  |   | (0.34   | )      |   |   |        |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Net income (loss) available to
common shareholders                                                                                                          |                   | $ | 0.72    |         |      | $ | (0.07   | )       |         | $ | 0.30    |         |  | $ | (1.69   | )      |   | $ | (1.22   | )     
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       
|Weighted average common
shares                                                                                                                              |                   |   | 190.2   |         |      |   | 189.6   |         |         |   | 188.8   |         |  |   | 187.8   |        |   |   | 182.8   |       
|                                                                                                                                                            |                   |   |         |         |      |   |         |         |         |   |         |         |  |   |         |        |   |   |         |       

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|                                                                                                                                                            |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------- |  | ------- | ----- | - |  | - | ----- | - |  | - | ------ | -
|                                                                                                                                                            |  | 2002 |       | 2001 |  | 2000 |       | 1999(6) |  | 1998(7)
|                                                                                                                                                            |  |      |       |      |  |      |       |         |  |        
|Diluted EPS:                                                                                                                                                |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|Income (loss) available to
common shareholders before
extraordinary loss and
cumulative effect of change in
accounting principle, net of income
tax benefit |  | $    | 0.76  |      |  | $    | 0.01  |         |  | $       | 0.36  |   |  | $ | (1.33 | ) |  | $ | (0.54  | )
|Extraordinary loss, net of income
tax benefit                                                                                                               |  |      | (0.05 | )    |  |      | (0.08 | )       |  |         | (0.07 | ) |  |   | (0.02 | ) |  |   | (0.68  | )
|Cumulative effect of change in
accounting principle, net of income
tax benefit                                                                              |  |      |      |      |  |      |      |         |  |         |      |   |  |   | (0.34 | ) |  |   |       |  
|                                                                                                                                                            |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|Net income (loss) available to
common shareholders                                                                                                          |  | $    | 0.71  |      |  | $    | (0.07 | )       |  | $       | 0.29  |   |  | $ | (1.69 | ) |  | $ | (1.22  | )
|                                                                                                                                                            |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|Weighted average common and
common equivalent shares                                                                                                        |  |      | 193.5 |      |  |      | 194.9 |         |  |         | 191.1 |   |  |   | 187.8 |   |  |   | 182.8  |  
|                                                                                                                                                            |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|Pro forma amounts, assuming the
change in accounting principle is
applied retroactively:                                                                    |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   |        |  
|Net loss available to common
shareholders                                                                                                                   |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  | $ | (256.3 | )
|Diluted loss per share                                                                                                                                      |  |      |       |      |  |      |       |         |  |         |       |   |  |   |       |   |  |   | (1.40  | )

Statement of Cash Flows Data:

|                                                                          |  |      |         |      |  |      |        |      |  |      |        |   |  |   |          |   |  |   |        |  
|------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | -------- | - |  | - | ------ | -
|                                                                          |  | 2002 |         | 2001 |  | 2000 |        | 1999 |  | 1998
|                                                                          |  |      |         |      |  |      |        |      |  |     
|Cash flows from operating activities                                      |  | $    | 1,032.7 |      |  | $    | 905.2  |      |  | $    | 803.3  |   |  | $ | 489.0    |   |  | $ | 169.4  |  
|Cash flows used for investing
activities (including capital
expenditures) |  |      | (523.8  | )    |  |      | (434.0 | )    |  |      | (209.9 | ) |  |   | (7,462.5 | ) |  |   | (678.4 | )
|Cash flows provided by (used for)
financing activities                    |  |      | (487.5  | )    |  |      | (434.4 | )    |  |      | (592.7 | ) |  |   | 7,055.2  |   |  |   | 515.4  |  

Balance Sheet Data:

|                                                               |  |      |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   |         |  
|-------------------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | - |  | - | ------- | -
|                                                               |  | 2002 |          | 2001 |  | 2000 |          | 1999 |  | 1998
|                                                               |  |      |          |      |  |      |          |      |  |     
|Cash and cash equivalents                                      |  | $    | 180.3    |      |  | $    | 158.8    |      |  | $    | 122.1    |   |  | $ | 121.4    |   |  | $ | 39.7    |  
|Working capital (deficit)                                      |  |      | (377.7   | )    |  |      | (235.0   | )    |  |      | (328.0   | ) |  |   | (381.1   | ) |  |   | 45.0    |  
|Property and equipment, net                                    |  |      | 4,081.4  |      |  |      | 4,010.9  |      |  |      | 3,860.5  |   |  |   | 3,738.4  |   |  |   | 1,776.0 |  
|Goodwill, net                                                  |  |      | 8,530.5  |      |  |      | 8,556.9  |      |  |      | 8,717.4  |   |  |   | 8,238.9  |   |  |   | 1,327.5 |  
|Total assets                                                   |  |      | 13,928.9 |      |  |      | 14,347.1 |      |  |      | 14,513.6 |   |  |   | 14,963.1 |   |  |   | 3,752.6 |  
|Total debt                                                     |  |      | 8,882.2  |      |  |      | 9,259.6  |      |  |      | 9,649.1  |   |  |   | 10,243.2 |   |  |   | 2,140.4 |  
|Preferred stock                                                |  |      | 1,246.9  |      |  |      | 1,169.0  |      |  |      | 1,096.0  |   |  |   | 1,027.8  |   |  |   |        |  
|Stockholders equity                                           |  |      | 689.1    |      |  |      | 585.8    |      |  |      | 671.6    |   |  |   | 611.8    |   |  |   | 930.1   |  
|Total debt to total capitalization
(including preferred stock) |  |      | 82       | %    |  |      | 84       | %    |  |      | 85       | % |  |   | 85       | % |  |   | 69      | %

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##### Table of Contents





---

|(1) |  | During the years ended December 31, 2001, 2000, 1999 and 1998, we
incurred costs related to acquisitions that are included in cost of
operations of approximately $10.4 million, $87.6 million, $416.9
million and $109.6 million and that are included in selling general
and administrative expenses of approximately $17.4 million, $13.3
million, $172.0 million and $208.0 million, respectively.
These amounts had previously been reflected as a separate line item
titled Acquisition related and unusual costs. These costs
primarily related to environmental related matters, litigation
liabilities, risk management liabilities, loss contract provisions,
transition costs and transaction costs. From 1999 to 2001, the costs
discussed above were predominantly in connection with the July 30,
1999 acquisition of Browning-Ferris Industries, Inc. (BFI). There were
no costs of this nature incurred during 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | In accordance with Statement of Financial Accounting Standards 142,
Goodwill and Other Intangible Assets(SFAS 142), amortization of
goodwill ceased on January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) |  | The non-cash (gain) loss on divestiture of assets in 2002, 2001 and
2000 relate to divestitures of certain non-integrated operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(4) |  | We incurred extraordinary losses as a result of the write-off of
deferred debt issuance costs and other costs incurred in connection
with the early extinguishment of debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(5) |  | During the third quarter of 1999, we changed our method of accounting
for capitalized interest. According to U.S. GAAP, this change is
applied from the beginning of 1999. We recorded a charge for the
cumulative effect of the change in accounting principle of $106.2
million ($64.3 million, net of income taxes) effective January 1,
1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(6) |  | Results of operations for the year ended December 31, 1999 include the
results of operations of BFI from the acquisition date of July 30,
1999 through year end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(7) |  | During 1998, certain acquisitions were accounted for under the
poolings-of-interests method and are reflected in the results of
operations as if the acquisition had occurred on the first day of the
year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Financial Statements and the notes thereto, included elsewhere herein.

General

The major components of our business strategy are intended to maximize operating cash flows to enable us to continue to pay down debt. These components are: (1)
operating vertically integrated non-hazardous solid waste service businesses with a high rate of waste internalization (which is the process of transferring and
disposing of waste we collect at our own landfills); (2) managing these businesses locally with a strong operations focus on customer service; (3) maintaining or
improving our market position through internal development and incremental acquisitions; and (4) maintaining the financial capacity and administrative systems and
controls to support on-going operations and future growth.

During 2002, we generated revenues of $5.5 billion, cash from operations of $1,032.7 million, reinvested $542.3 million of capital into the business and reduced debt
by $377.5 million to $8.88 billion at December 31, 2002. During 2002, we experienced a decline in revenues and earnings primarily attributable to pricing pressures
driven by the continued economic slowdown. Economic pressures have made it difficult to recover increases in costs caused by normal inflation, increases in medical,
property and casualty insurance in excess of normal inflation, and the expansion in our field infrastructure implemented in 2002 to provide our field operators the
ability and flexibility to manage more efficiently within the
geographic area for which each is responsible.

Revenues.Our revenues result primarily from fees charged to customers for waste collection, transfer, recycling and disposal services. We also generate revenue from
the sale of recycled commodities. Revenue is recorded as services are provided, including instances where services are billed in advance of the service being
provided. The following tables show the percentage of our total reported revenues by service line and geographic areas.

Revenues by Service Line (in millions, except percentages):

|                  |  |                          |          |      |  |      |       |   |  |   |          |   |  |  |       |   |  |   |          |   |  |  |       |  
|----------------- |  | ------------------------ | -------- | ---- |  | ---- | ----- | - |  | - | -------- | - |  |  | ----- | - |  | - | -------- | - |  |  | ----- | -
|                  |  | Years Ended December 31,
|                  |  |                         
|                  |  | 2002                     |          | 2001 |  | 2000
|                  |  |                          |          |      |  |     
|Collection(1)     |  | $                        | 4,172.7  |      |  |      | 62.2  | % |  | $ | 4,203.9  |   |  |  | 62.4  | % |  | $ | 4,227.7  |   |  |  | 61.7  | %
|Disposal(2)       |  |                          | 2,121.9  |      |  |      | 31.6  |   |  |   | 2,104.5  |   |  |  | 31.3  |   |  |   | 1,993.3  |   |  |  | 29.1  |  
|Recycling         |  |                          | 243.1    |      |  |      | 3.6   |   |  |   | 232.0    |   |  |  | 3.4   |   |  |   | 384.0    |   |  |  | 5.6   |  
|Other             |  |                          | 173.9    |      |  |      | 2.6   |   |  |   | 196.5    |   |  |  | 2.9   |   |  |   | 242.2    |   |  |  | 3.6   |  
|                  |  |                          |          |      |  |      |       |   |  |   |          |   |  |  |       |   |  |   |          |   |  |  |       |  
|                  |  |                          | 6,711.6  |      |  |      | 100.0 | % |  |   | 6,736.9  |   |  |  | 100.0 | % |  |   | 6,847.2  |   |  |  | 100.0 | %
|                  |  |                          |          |      |  |      |       |   |  |   |          |   |  |  |       |   |  |   |          |   |  |  |       |  
|Intercompany      |  |                          | (1,194.3 | )    |  |      |       |   |  |   | (1,171.6 | ) |  |  |       |   |  |   | (1,139.7 | ) |  |  |       |  
|                  |  |                          |          |      |  |      |       |   |  |   |          |   |  |  |       |   |  |   |          |   |  |  |       |  
|Reported revenues |  | $                        | 5,517.3  |      |  |      |       |   |  | $ | 5,565.3  |   |  |  |       |   |  | $ | 5,707.5  |   |  |  |       |  
|                  |  |                          |          |      |  |      |       |   |  |   |          |   |  |  |       |   |  |   |          |   |  |  |       |  



---

| |  | (1) For 2002 and 2001, collection revenues consist of 72% revenues from commercial customers and 28% revenues from residential customers. For 2000,
collection revenues consist of 73% revenues from commercial customers and 27% revenues from residential customers.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) Revenues from landfills and transfer stations are included in disposal.                                                                                                                                                                                           

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Revenues by Area(1) (in thousands, except percentages) :

|         |                |   |                          |           |      |  |      |       |   |   |           |           |  |  |      |       |  
|-------- | -------------- | - | ------------------------ | --------- | ---- |  | ---- | ----- | - | - | --------- | --------- |  |  | ---- | ----- | -
|         |                |   | Years Ended December 31,
|         |                |   |                         
|         |                |   | 2002                     |           | 2001
|         |                |   |                          |           |     
|Eastern  |                | $ | 1,560,317                |           |      |  | 28.3 | %     |   | $ | 1,614,794 |           |  |  | 29.0 | %    
|Southern |                |   | 1,335,058                |           |      |  | 24.2 |       |   |   | 1,370,964 |           |  |  | 24.7 |      
|Central  |                |   | 1,398,462                |           |      |  | 25.3 |       |   |   | 1,381,464 |           |  |  | 24.8 |      
|Western  |                |   | 1,194,192                |           |      |  | 21.6 |       |   |   | 1,158,402 |           |  |  | 20.8 |      
|Other(2) |                |   | 29,277                   |           |      |  | 0.6  |       |   |   | 39,636    |           |  |  | 0.7  |      
|         |                |   |                          |           |      |  |      |       |   |   |           |           |  |  |      |      
|         | Total revenues |   | $                        | 5,517,306 |      |  |      | 100.0 | % |   | $         | 5,565,260 |  |  |      | 100.0 | %
|         |                |   |                          |           |      |  |      |       |   |   |           |           |  |  |      |      



---

| |  | (1) See discussion in Footnote 17 of Notes to Consolidated Financial Statements included under Item 8 herein.                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (2) Amounts relate primarily to our subsidiaries which provide services throughout the organization.                                                                                                                                                                                                                                                  
|
| |  | As stated above, a component of our business strategy is to increase our revenue through internal growth which we intend to do by increasing volumes collected and
disposed and by increasing the rates we charge for the services we provide. The following table sets forth the components of our revenue internal growth for the
periods indicated:

|                                       |       |  |                          |      |      |  |      |     |  
|-------------------------------------- | ----- |  | ------------------------ | ---- | ---- |  | ---- | --- | -
|                                       |       |  | Years Ended December 31,
|                                       |       |  |                         
|                                       |       |  | 2002                     |      | 2001
|                                       |       |  |                          |      |     
|Internal growth excluding commodity(1) |       |  |                          |      |      |  |      |    
|Price                                  |       |  | (1.7                     | )%   |      |  | 0.1  | %  
|Volume                                 |       |  | 0.9                      | %    |      |  | 0.7  | %  
|                                       |       |  |                          |      |      |  |      |    
|                                       | Total |  |                          | (0.8 | )%   |  |      | 0.8 | %
|                                       |       |  |                          |      |      |  |      |    
|Internal growth including commodity(1) |       |  | (1.1                     | )%   |      |  | (2.0 | )% 
|                                       |       |  |                          |      |      |  |      |    



---

| |  | (1) Internal growth is not a measure of operating performance under U.S. GAAP. Our method of calculation may differ from
similarly titled measures used by other companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Operating Expenses. Cost of operations includes expenses related to labor, repairs and maintenance, equipment and facility rent, fuel, utilities and taxes,
environmental compliance and remediation, safety and insurance, and costs of independent haulers transporting our waste to the disposal site. Additionally, cost
of operations includes disposal costs which consists of third-party disposal costs, landfill taxes, host community fees, landfill royalty payments, landfill site
maintenance, fuel and other equipment operating expenses and increases in the accruals for estimated closure and post-closure monitoring expenses. Billing system
conversion, duplicative facilities and operations, loss contract provisions, and environmental matter costs resulting from acquisition activities are also included
in cost of operations. In addition, gains or losses on sale of assets used in our operations are included in cost of operations.
|
| |  | Selling, general and administrative expenses include compensation and overhead for corporate and field general management, accounting and finance, legal,
management information systems and clerical and administrative departments, in addition to sales, investor and community relations and provisions for estimated
uncollectible accounts receivable. Included in selling, general and administrative expenses are the costs of transitional employees resulting from acquisition
activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Depreciation and amortization includes depreciation of fixed assets and amortization costs associated with the acquisition and development of landfill airspace and
intangible assets. Depreciation is provided on the straight-line method over the estimated useful lives of buildings and improvements (30-40 years), vehicles and
equipment (3-15 years), containers and compactors (5-10 years) and furniture and office equipment (3-8 years).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Goodwill amortization includes the amortization of costs paid in excess of the fair value of net assets acquired prior to July 1, 2001 in purchase business
combinations. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(SFAS 142), goodwill amortization ceased
January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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##### Table of Contents



Other Matters

In June 2002, the Board of Directors named PricewaterhouseCoopers LLP (PwC) as our independent auditing firm, replacing Arthur Andersen LLP. In August
2002, PwC completed a re-audit of the 2001 financial statements at our request which resulted in no restatement of the 2001 financial results.

Critical Accounting Judgments and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported
amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements.
The SEC has defined a companys most critical accounting policies as those that are most important to the portrayal of the companys financial condition and
results of operations that require managements most difficult, subjective or complex judgments, often as a result of the need to make estimates of matters that
are inherently uncertain. These judgments and estimates often involve future events. Based on this definition, we have identified the critical accounting
policies and judgments addressed below. In addition, management has discussed these accounting policies and judgments with the Audit Committee of our Board of
Directors. No one geographic operating segment has more significant concentration of the critical accounting policies and judgments addressed below. Although we
believe that our estimates and assumptions are reasonable, they are based upon information available at the time of the valuations. Actual results may differ
significantly from estimates under different assumptions or conditions. The following critical accounting judgments and estimates are based on our accounting
practices in effect during 2002.

We have noted examples of the residual accounting risk inherent for these areas that you should be aware of and for you to consider. Residual accounting risk is
defined as the inherent risk that remains after the application of our policies and processes and is generally outside of our control.

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|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                               
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Residual                                                                                                                                                                                      
|Accounting Area                         |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Accounting Risk                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                               
|Landfill accounting                     |  | In June 2001, the Financial Accounting Standards
Board (FASB) issued SFAS 143, Accounting for
Asset Retirement Obligations (SFAS 143), which
outlines standards for accounting for an
obligation associated with the retirement of a
long-lived tangible asset and the associated
retirement costs. This standard will impact our
accounting for landfill closure and post-closure
obligations. See Note 1 of our Consolidated
Financial Statements in Item 8 of this Form 10-K
for discussion of our adoption of SFAS 143 and
the related impact to our landfill accounting.
The following discussion of our landfill
accounting is based on our accounting practices
in effect during 2002, prior to the adoption of
SFAS 143.                                                                            |  |                                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                               
|                                        |  | We own a portfolio of 169 active landfills with
estimated remaining lives, based on current waste
flows, which range from 1 to over 150 years, and
an average remaining life of approximately 38
years. In addition to our portfolio of active
landfills, we own or have responsibility for 110
closed landfills that are no longer accepting
waste.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                               
|                                        |  | We use the life cycle accounting method for
landfills and the related closure and
post-closure liabilities. In life cycle
accounting, all costs to acquire, develop, close,
and monitor a site during post-closure are
capitalized or accrued and charged to expense
over the associated landfill capacity based upon
the consumption of airspace. Our cost
accumulation for recording the asset and
liabilities related to landfills is driven by the
technical design that is developed by a third
party consultant and approved by a regulatory
agency. The technical design includes the
construction and closure specifications and the
types and quantities of materials required and
determine the landfill capacity. Landfill
capacity is updated periodically based on third
party aerial surveys. |  |                                                                                                                                                                                               
|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                               
|Landfill asset and
related
amortization |  | Site Permit and Technical Design
In order to develop, construct and operate a
landfill, we are required to obtain permits from
various regulatory agencies at the local, state
and federal level. The permitting process
requires an initial siting study to determine
whether the location is feasible for landfill
operations. The studies are typically prepared by
third party consultants and                                                                                                                                                                                                                                                                                                                                                                                                          |  | Changes in legislative or
regulatory requirements may cause
changes in the landfill site
permitting process. These changes
could make it more difficult or
costly to obtain a landfill
permit.

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                                 
|Accounting Area |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | reviewed by our
environmental management group. The initial
studies are submitted to the regulatory agencies
for approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Studies performed by third
parties could be inaccurate which
could result in the revocation of
a permit. Conditions could exist
that were not identified in the
study which makes the location
not feasible for a landfill and
could result in the revocation of
a permit.                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | Technical Landfill Design                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | Upon receipt of initial regulatory approval,
technical landfill designs are prepared. These
designs are compiled by third party consultants
and reviewed by our environmental management
group. The technical designs include the detailed
specifications to develop and construct all
components of the landfill including the types
and quantities of materials that will be
required. The technical designs are submitted to
the regulatory agencies for approval. Upon
approval of the technical design, the regulatory
agencies issue permits to develop and operate the
landfill. |  | Changes in legislative or regulatory requirements may
require changes in the landfill
technical design. These changes
could make it more difficult or
costly to meet new design
standards.
Technical design requirements, as
approved, may need modifications
at some future point in time.
Third party designs could be
inaccurate and could result in
increased construction costs or
difficulty in obtaining a permit.
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | Landfill Disposal Capacity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | Included in the technical designs are the factors
that determine the ultimate disposal capacity of
the landfill. These factors include the area over
which the landfill will be developed, 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 an
average expected density to be achieved over the
operating life of the landfill.                           |  | 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 of
the waste.                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | Development Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|                |  | The types of costs that are detailed in the
technical design specifications generally include
excavation, natural and synthetic liners,
leachate collection system construction,
installation of methane gas monitoring probes,
installation of groundwater monitoring wells,
construction of leachate management facilities
and other costs associated with the development
of the site. To review the adequacy of our cost
estimates                                                                                                                                                  |  | Actual future costs of construction materials and third
party labor could differ from the
costs we have estimated because
of the impact from general
economic conditions on the
availability of the required
materials and labor. Technical
designs could be altered by
unexpected operating conditions                                                                                                                  

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                        
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Residual                                                                                                                                               
|Accounting Area |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Accounting Risk                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                        
|                |  | used in the annual update of the above
costs, we compare estimated costs with third
party bids or contractual arrangements, we review
changes in year over year cost estimates for
reasonableness, and we compare our resulting
development cost per acre with prior periods.
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.                                                                                                                                                                                                                                                       |  | or altered by regulatory or
legislation changes.                                                                                                       
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                        
|                |  | Landfill Amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                        
|                |  | In order to match the amortization of the
landfill asset with the revenue generated by the
landfill operations, we amortize the landfill
asset over its operating life on a per-ton basis
as waste is accepted at the landfill. At the end
of a landfills operating life, the landfill
asset is fully amortized. The per-ton rate is
calculated by dividing the sum of the landfill
net book value and estimated future development
costs (as described above) of the landfill by the
estimated remaining disposal capacity. The costs
are not inflated and discounted, but rather
expressed in nominal dollars. This rate is
applied to each ton accepted at the landfill and
recorded as a charge to depreciation and
amortization expense. |  |                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                        
|                |  | Amortization rates per-ton are influenced by the
original cost basis for the landfill, including
acquisition costs, which in turn is determined by
geographic location and market values. We have
secured significant landfill assets through
business acquisitions in recent years and valued
them at the time of acquisition based upon market
value. Also, per-ton rates are influenced by
site specific engineering and cost factors.                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                        
|                |  | Estimate Updates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                        
|                |  | On an annual basis, we update the estimates of
future development costs and remaining disposal
capacity for each landfill. The cost estimates
are prepared by company and third-party engineers
based on the applicable local, state and federal
requirements and site specific technical design
requirements. Estimates of future disposal
capacity are updated using aerial surveys of each
landfill to estimate utilized disposal capacity
and remaining disposal capacity. These costs and
disposal capacity estimates are reviewed and
approved by senior operations management
annually. Changes in the cost estimates are                                                                                                               |  | Rates could change in the future
based upon evaluations of new
facts and circumstances relating
to site permit and design
criteria or development cost.

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##### Table of Contents



|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                          
|------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                       |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Residual                                                                                                                                                                                                                                                 
|Accounting Area                                        |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Accounting Risk                                                                                                                                                                                                                                          
|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                          
|                                                       |  | reflected prospectively in the landfill
amortization rates that are updated annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                          
|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                          
|                                                       |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                          
|                                                       |  | During 2002, we expensed approximately $164.1
million, or an average of $2.26 per ton consumed,
related to landfill amortization as compared to
$149.2 million or an average of $2.10 per ton
consumed during 2001. We incurred landfill
development costs of $228.0 million and acquired
$16.1 million to the landfill assets during 2002.
The net book value of our landfill assets
increased from $1.775 billion at December 31,
2001 to $1.874 billion at December 31, 2002. We
have available disposal capacity of approximately
2.5 billion tons. Estimated total future
development costs for our 169 active landfills is
approximately $3.7 billion, excluding capitalized
interest. |  |                                                                                                                                                                                                                                                          
|                                                      
|Closure and
post-closure
liabilities and
related costs |  | Landfill Closure Design
As individual areas within each landfill reach
capacity, we are required to cap and close the
areas in accordance with the landfill site
permit. These requirements are detailed in the
technical design of the landfill siting process
described above. Generally, closure requirements
include the application of compacted clay,
geosynthetic liners and vegetative soil barriers
in addition to the construction of drainage
channels and methane gas collection systems,
among other closure activities.                                                                                                                                                        |  | 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.
|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                          
|                                                       |  | Post-Closure Monitoring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                          
|                                                       |  | After the entire landfill site has reached
capacity and is closed, we are required to
maintain and monitor the site for a post-closure
period, which usually extends for 30 years.
Post-closure requirements generally include
maintenance of the site and monitoring the
methane gas collection systems and groundwater
systems, among other post-closure activities.
Costs associated with post-closure monitoring
generally include groundwater sampling, analysis
and statistical reports, third party labor
associated with gas systems operations and
maintenance, transportation and disposal of
leachate and erosion control costs related to the
final cap.                         |  |                                                                                                                                                                                                                                                          
|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                          
|                                                       |  | Closure and Post-Closure Provision                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                          
|                                                       |  | In order to match the cost of the closure and
post-closure requirements with the revenue
generated by the landfill operations, we                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Actual timing of disposal
capacity utilization could differ
from projected timing, causing                                                                                                                                                               

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Residual                                                                                                                                                                                             
|Accounting Area |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Accounting Risk                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | accrue the closure and post-closure costs on a
per ton basis as waste is accepted at the landfill,
over its operating life.                                                                                                                                                                                                                                                                                                                                                          |  | increases or decreases in the per
ton rates used to accrue closure
and post-closure liabilities.                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | For each landfill, the per-ton rate is calculated
as follows: 
(1)  The total estimated future costs
required to close       and monitor the landfill
as specified by each landfill permit                                                                                                                                                                                                                                                                                           |  | Changes in future inflation rate
projections could impact our
actual future costs and our total
liability.                                                                                           
|                |  | is
quantified.(2)  The timing of the estimated future cash
outflows is       projected based on the
anticipated waste flow into the       landfill.                                                                                                                                                                                                                                                                                                                                  |  | Changes in risk-free capital
rates used to discount the
liabilities could cause changes
in our recorded liabilities and costs.                                                                       
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | (3)  The expenditures are inflated based on
an average CPI rate       and discounted back to
todays dollars using an average       long-term
risk-free rate of return. (We review
historical       interest rates for
government-backed bonds and other low       risk
investments to estimate the long-term
risk-free rate of       return. For 2002, the
average CPI rate was 2.5% and the       long-term
risk-free rate was 7.0%.)                                              |  |                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | (4)  The present value of the total closure
and post-closure       costs for the landfill is
divided by the estimated remaining       disposal
capacity of the landfill to calculate the
per ton rate.       The disposal capacity for the
closure and post-closure rate       is determined
on the same basis as the landfill
amortization       rate previously described.                                                                                                         |  |                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | (5)  This rate is applied to each ton
accepted at the landfill and       recorded as a
charge to cost of operations and an
increase       to the closure and post-closure
accrual.                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | (6)  The balance sheet accrual is increased
by accreting the       balance at the long-term
risk free rate and recorded as a       charge to
cost of operations.                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | Actual cash expenditures reduce the accrual as
they are incurred.                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                      
|                |  | Estimate Updates                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                      
|                |  | On an annual basis, we update the estimate of
future closure and post-closure costs and
estimates of future disposal capacity for each
landfill. Cost estimates are prepared by internal
and third party engineers based on the applicable
local, state and federal regulations and the
specifications detailed in the landfill permit.
Revisions in estimates of our costs are treated
prospectively for our operating landfills but are
recorded immediately for closed landfills. |  | Rates could change in the future
based on the evaluation of new
facts and circumstances relating
to landfill closure design,
post-closure monitoring
requirements, or the inflation or
discount rate.

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|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                      |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Accounting Area                       |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | Disposal capacity estimates are updated using
aerial surveys of each landfill to estimate
remaining disposal capacity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | During 2002, we expensed approximately $70.8
million, or an average of $0.98 per ton consumed
as compared to $67.2 million or an average of
$0.95 per ton consumed during 2001, related to
provisions for closure and post-closure accruals,
including accretion. During 2002 and 2001,
expenditures against these accruals were $77.2
million and $59.2 million, respectively.                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | We currently estimate total future payments for
closure and post-closure to be approximately $3.0
billion. The present value of such estimate is
$1.0 billion. At December 31, 2002 and 2001,
accruals for landfill closure and post-closure
costs were $594.8 million and $609.5 million,
respectively, which reflects the degree to which
we have filled the landfill.                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Estimated
remaining
disposal
capacity |  | Recognition Criteria
As described previously, disposal capacity is
determined by the specifications detailed in the
landfill permit obtained. We classify this
disposal capacity as permitted. We also include
probable expansion disposal capacity in our
remaining disposal capacity estimates, which
relates to additional disposal capacity being
sought through means of an expansion. Probable
expansion disposal capacity has not yet received
final approval from the regulatory agencies, but
we have determined that certain critical criteria
have been met and the successful completion of
the expansion is highly probable. Our internal
criteria to classify disposal capacity as
probable expansion are as follows: |  | We may be unsuccessful in
obtaining permits for probable
expansion disposal capacity
because of the failure to achieve
any of the 5 criteria stated
below 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 costs
and disposal capacity will
change, which will impact the
rates we charge for landfill
amortization and closure and
post-closure accruals.
|                                      |  | 1. We have control of and access to the
land where the expansion permit is being sought.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | 2. All geologic and other technical siting
criteria for a landfill have been met or a
variance from such requirements has been received
(or can reasonably be expected to be achieved).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                      |  | 3. The political process has been assessed and
there are no identified impediments that cannot
be resolved.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|---------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                   |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Residual                                                                                                                                                     
|Accounting Area                    |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Accounting Risk                                                                                                                                              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|                                   |  | 4. We are actively pursuing the expansion permit
and an expectation that the final local, state
and federal permits will be received within the
next five years.                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|                                   |  | 5. Senior operations management approval has been
obtained.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|                                   |  | 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 the landfill amortization
and closure and post-closure rates, we include
the incremental costs to develop, construct,
close and monitor the related probable expansion
disposal capacity.                                                                                                                                                     |  |                                                                                                                                                              
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|                                   |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                              
|                                   |  | At December 31, 2002, we had 1.9 billion tons of
permitted disposal capacity, and at 35 of our
landfills, 580.1 million tons of probable
expansion disposal capacity. During 2002, we
received permits for approximately 57.1 million
tons of disposal capacity that was previously
classified as probable expansion. During 2002,
we were not denied any expansions for which the
disposal capacity was classified as probable
expansion.                                                                                                                     |  |                                                                                                                                                              
|                                  
|Non-recurring
acquisition
accruals |  | Nature of Liabilities
At the time of an acquisition accounted for under
the purchase method of accounting, we evaluate
and adjust existing accruals of the acquired
company to represent our estimate of the future
costs to settle the assumed obligations. Assumed
liabilities as well as liabilities resulting
directly from the completion of the acquisition
are considered in the net assets acquired and
resulting goodwill allocation.                                                                                                                 |  | There could be changes in
circumstances or estimates that
cause the actual settlement of
these liabilities to be higher or
lower than our original estimates.
|                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                              
|                                   |  | Liabilities resulting from changes in estimates
of assumed obligations, including litigation,
self-insurance reserves and loss contracts, as
well as liabilities related to restructuring and
abandonment activities, are accrued at the time
of acquisition through a charge to expense.
Additionally, transition costs that are not
accruable at the time of acquisition, including
transitional personnel costs, route
restructurings and costs associated with the
consolidation of operations are expensed in the
period in which the costs are incurred. |  | Additional liabilities may exist
related to the acquired
operations that have not been
identified.                                                           

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|                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                       |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Accounting Area                                                        |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  | Estimate Updates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  | We evaluate the adequacy of the non-recurring
acquisition accruals at least annually by
obtaining third party actuarial valuations of
assumed self-insurance obligations, third party
legal counsel updates for assumed litigation and
field and corporate management reviews of all
acquisition related commitments. Any changes in
the liabilities resulting from these reviews are
recorded in the period in which the change in
estimate is made. The adjustment is charged to
either an expense or goodwill consistent with how
the original liability was established and the
period of time that has elapsed since the date of
the acquisition. Generally, we do not record
adjustments to goodwill after one year from the
date of the acquisition.                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                       |  | At December 31, 2002 and 2001, we had
approximately $200.9 million and $292.6 million,
respectively, of non-recurring acquisition
accruals remaining on our balance sheet,
consisting primarily of loss contracts,
litigation and compliance, and risk management
and insurance liabilities associated with the
acquisition of BFI. Cash paid against
non-recurring acquisition accruals, including
severance in 2002, was $88.7 million and $116.8
million in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                      
|Environmental
liabilities
including CERCLA
or other
environmental laws |  | Nature of Liabilities
Liabilities arise from contamination existing at
landfills or other properties and are based on
our estimates of future costs that we will incur
for incremental remediation activities and the
related litigation costs. To determine our
ultimate liability at these sites, we have used
third party environmental engineers and attorneys
to assist in the evaluation of several factors,
including the extent of contamination at each
identified site and the most appropriate remedy.
We accrue for costs associated with environmental
remediation obligations when such costs are
probable and reasonably estimable. If these
liabilities are assumed in connection with an
acquisition, any increases in these accruals from
the amounts recorded by the predecessor are
charged to operating expense. If the liabilities
arise through the normal course of business, the
accruals are also charged to operating expense. |  | Actual settlement of these
liabilities could differ from our
estimates due to a number of
uncertainties, such as the extent
of contamination at a particular
site, the final remedy, the
financial viability of other
potentially responsible parties,
and the final apportionment of
responsibility among the
potentially responsible parties. Actual
amounts could differ from
the estimated liability as a
result of changes in estimated
future litigation costs to pursue
the matter to ultimate resolution
including both legal and remedial
costs.

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|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                             |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Accounting Area                              |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  | Estimate Updates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  | We periodically consult with outside legal
counsel and environmental engineers to review the
status of all environmental matters and to assist
our environmental and legal management in
updating our estimates of the likelihood and
amounts of resolution. As the timing of cash
payments for these liabilities is uncertain, the
accrued costs are not discounted. Any changes in
the liabilities resulting from these reviews are
recorded to operating income in the period in
which the change in estimate is made.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             |  | We have determined that the recorded liability
for environmental matters as of December 31, 2002
and 2001 of approximately $365.1 million and
$395.4 million, respectively, represents the most
probable outcome of these contingent matters.
Cash paid for environmental matters during 2002
and 2001 was $27.8 million and $36.4 million,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                            
|Self-insurance liabilities and
related costs |  | We are partially self-insured for general
liability, automobile, and workers compensation
insurance with varying loss thresholds up to $3
million. We are fully self-insured for employee
group health claims. The self-insurance portion
of the liability for unpaid claims and associated
expenses, including incurred but not reported
losses, is actuarially determined by a third
party actuary and reflected in our balance sheet
as an accrued liability. We use a third-party
administrator to track and evaluate actual claims
experience for consistency with the data used in
the annual actuarial valuation. The expense is
charged to operating costs. The actuarially
determined liability is calculated in part by our
past claims experience factor, which considers
both the frequency and settlement amount of
claims.As of December 31, 2002 and 2001, we had
approximately $146.2 and $88.1 of self-insurance liabilities on our
balance sheet. Cash paid for
self-insurance claims during 2002 and 2001 was
$191.4 million and $163.9 million, respectively. |  | If we experience self-insurance
claims or costs above or below
our historically evaluated
levels, these estimates may
increase or decrease.
Incident rates, including
frequency and severity, could
increase or decrease during a
year causing our actuarially
determined obligations to
increase or decrease.
The costs to discharge our
obligations, including legal
costs and health care costs,
could increase or decrease causing current and/or prior
estimates of our self-insurance liability to change.
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                            
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Allowance for
doubtful accounts
receivable   |  | We provide services to approximately 10 million
customers throughout the United States. We
perform credit evaluations of our significant
customers and establish an allowance for doubtful
accounts based on the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Adverse changes in the financial
health of our customers could
change the timing or levels of
collections.                                                                                                                                                                                                                                                                                                                                                                                                      

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|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                
|Accounting Area     |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                         
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|                    |  | aging of our receivables,
payment performance factors, historical trends
and other information. In general, we reserve 50%
of receivables outstanding 90 to 120 days and
100% of those outstanding over 120 days. We also
review outstanding balances on an account
specific basis and reserve the receivable if
information becomes available indicating we will
not receive payment. Our reserve is evaluated
and revised on a monthly basis.                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|                   
|Asset
Impairment    |  | Valuation Methodology
We evaluate our long-lived assets for impairment
based on projected cash flows anticipated to be
generated from the ongoing operation of those
assets.Evaluation CriteriaWe test long-lived assets for recoverability
whenever events or changes in circumstances
indicate that the assets carrying amounts 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 would 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. |  | If we have changes in events or circumstances, including reductions in anticipated cash flows generated by our operations or determinations
to divest of certain assets, certain assets could be impaired which
would result in a non-cash charge to earnings.                                                                                                                                          
|                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|                    |  | Recognition Criteria                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|                    |  | If such circumstances arise, we recognize an
impairment for the difference between the
carrying amount and fair value of the asset, if
the carrying amount of the asset does not exceed
the sum of the undiscounted cash flows expected
to result from the use and eventual disposition
of the asset. We use the present value of the
expected cash flows from that asset to determine
fair value.                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|                   
|Goodwill
Impairment |  | Valuation Methodology
We evaluate goodwill for impairment based on fair
value of each geographic operating segment. Our
geographic operating segment is an aggregate of
several vertically integrated businesses with
similar operational characteristics. We estimate
fair value based on net cash flows discounted
using an estimated weighted-average cost of
capital of approximately 8%. In addition,
consideration is also given to an earnings
multiple approach, enterprise value and overall
company market capitalization to evaluate the
reasonableness of our discounted cash flows.                                                                                                                                                       |  | The estimated fair value could
change as there are future
changes in our capital structure,
cost of debt, interest rates,
ability to perform at levels that
were forecasted, actual capital
expenditure levels, or our market
capitalization. For example, a
reduction in long-term growth
assumptions could reduce the
estimated fair value to below
carrying value, which would
trigger an impairment.

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|--------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                             
|Accounting Area |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | Evaluation Criteria:
Annually, we test realizability of goodwill. In
addition, we test goodwill for recoverability
between annual evaluations whenever events or
changes in circumstances indicate that the
carrying amounts may not be recoverable.
Examples of such events could include a
significant adverse change in legal factors,
liquidity or in the business climate, an adverse
action or assessment by a regulator,
unanticipated competition, loss of key personnel,
or new circumstances that would cause an
expectation that it is more likely than not that
we would sell or otherwise dispose of an
operating segment or a significant portion of a
geographic operating segment. |  | Similarly, an increase in our
weighted average cost of capital
could trigger an impairment.                                                                                                                                                                                                                                                                                                                          
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | Recognition Criteria                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | We recognize an impairment if net book value
exceeds the fair value as determined using
discounted future cash flows on a geographic
operating segment basis. At
the time of a divestiture of an individual
business unit within a geographic operating
segment, goodwill is allocated to that business
unit and a gain or loss on disposal is derived.
Subsequently, the remaining goodwill in the
geographic operating segment from which the
assets were divested is re-evaluated for
impairment, which could also result in an
additional loss.                                                                                                                                                |  | In the past, we have incurred
non-cash losses on sales of
assets. If similar divestiture
decisions are made in the future,
we could incur additional
non-cash losses on asset sales.
A divestiture of any individual
asset below the geographic
operating segment level could
result in a loss.                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                |  | At December 31, 2002 and 2001, we had $8.5
billion and $8.6 billion of goodwill recorded.
Upon adoption of SFAS 142 at January 1, 2002, we
had no impairment of goodwill. In addition, at
December 31, 2002, we completed our annual
evaluation of goodwill recoverability and there
was no impairment of goodwill.                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                      
|               
|Tax Accruals    |  | We account for income taxes using a balance sheet
approach whereby deferred tax assets and
liabilities are determined based on the
differences in financial reporting and income tax
basis of assets, other than non-deductible
goodwill, and liabilities. The differences are
measured using the income tax rate in effect
during the year in which the differences are
expected to reverse. We utilize outside experts
and legal counsel to assist in the development or
review of significant tax positions used in
establishing our liability.                                                                                                                                                 |  | The balance sheet classification
and amount of the tax accounts
established relating to
acquisitions are based on certain
assumptions that could possibly
change based on the ultimate
outcome of certain tax matters.
As these tax accounts were
established in purchase
accounting, any future changes
relating to these amounts will
result in balance sheet
reclassifications, which may
include an adjustment to

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|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Residual                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Accounting Area               |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  | The acquisition of BFI in 1999, which was
accounted for as a business purchase combination,
resulted in approximately $6.8 billion of
goodwill, $6.5 billion of which the amortization
is non-deductible.
Income tax expense is recorded on an interim
basis based on the expected annual effective tax
rate. The effective tax rate is determined using
estimated full year earnings, non-deductible
items and tax credits that are anticipated to be
utilized.Summary
As of December 31, 2002, net operating loss,
capital loss, foreign tax credit and minimum tax
credit carryforwards with an after tax benefit
totaling $196.0 million remain unused that will
expire if not used by the end of various future
years. Valuation allowances have been
established for the possibility that some of
these carryforwards may not be used. |  | goodwill.
Actual income tax rates can vary
from period to period as a result
of differences between estimated
and actual earnings,
non-deductible items and tax
credit utilization. We
are currently under
examination by various state and
federal taxing authorities for
certain tax years. Positions
taken in those and other tax
years are subject to challenge.
Accordingly, we may have
exposures to tax liabilities
arising from these audits if any
positions taken are disallowed by
the taxing authorities. (See
Note 14 of our Consolidated
Financial Statements in Item 8 of
this Form 10-K.)
|                             
|Defined
Benefit
Pension Plans |  | Recognition Criteria
We assumed two defined benefit retirement plans
in connection with the acquisition of BFI, which
were merged into one plan during 2002. The
benefits of approximately 97% of the plan
participants were frozen upon acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  | The benefit obligation and associated income or
expense is actuarially determined by an
independent third party based on actuarial
assumptions. We use a third party to administer
the plan and maintain certain data that is
provided to the actuary. The plan assets are
managed by a third party that is unaffiliated to
our actuary. We recognize in our financial
statements an accrued liability (or a prepaid
pension expense), for the difference between the
cost to satisfy our pension obligation and the
investment income earned or contributions to the
plan. Pension income or expense is recorded to
selling, general and administrative expense.                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  | Our funding policy is to make annual
contributions to the pension plan as determined
to be required by the plans actuary. No
contributions were required during the last three
years. No contributions are anticipated for 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                              |  | The plans policy is to invest the plans assets
as determined by our Benefits Committee. At                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | Changes in our investment mix
could impact the amount of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|                |  |                                                                                                                                                         |  |                                                                                                              
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                           |  | Residual                                                                                                     
|Accounting Area |  | Use of Estimates                                                                                                                                        |  | Accounting Risk                                                                                              
|                |  |                                                                                                                                                         |  |                                                                                                              
|                |  | December 31, 2002, of the total plan assets of
$278 million, approximately 40% was invested in
fixed bond funds and approximately 60% in equity
funds.  |  | pension income or expense
recorded, the funded status of
the plan and the need for future
cash contributions.
|                |  |                                                                                                                                                         |  |                                                                                                              
|                |  | Assumptions                                                                                                                                             |  |                                                                                                              
|                |  | The assumptions used in the actuarial determined
funded status are as follows: (weighted average
assumptions as of our measurement date, September
30): |  |                                                                                                              

| |  |                 |  |  |      |      |  |      |      |   |  | 
| |  | --------------- |  |  | ---- | ---- |  | ---- | ---- | - |  | 
| |  |                 |  |  |      | 2002 |  | 2001
| |  |                 |  |  |      |      |  |     
| |  | Discount rate   |  |  | 6.75 | %    |  |      | 7.25 | %
| |  | Expected return |  |  |      |      |  |      |      |  
| |  | on plan assets  |  |  | 9.50 | %    |  |      | 9.75 | %
| |  | Average rate of |  |  |      |      |  |      |      |  
| |  | compensation    |  |  |      |      |  |      |      |  
| |  | increase        |  |  | 4.00 | %    |  |      | 4.00 | %

| |  |                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                           
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our discount rate represents the yield on
investment grade bonds at which our obligation
could be settled. Our discount rate is based on
a review of the current rate of long-term bonds
that receive one of the two highest ratings given
by a recognized rating agency. The long-term
bonds we use have a duration that is equivalent
to our obligations under the plan. |  | Our discount rate is sensitive to
changes in interest rates. A
decrease in the discount rate
will increase the liability and
decrease the funded status of the
plan.      
| |  |                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                           
| |  | The expected return on our plan assets represents
a long-term view of returns based on our current
asset mix. In developing our expected rate of
return assumption, we evaluated an analysis of
long-term expected returns on the plan assets
from our investment managers which gave
consideration to our asset mix and anticipated
length of obligation of our plan.     |  | The fair value of the plan assets
is impacted by general market
conditions. If actual return on
plan assets varies from the
expected returns, actual results
could differ.
| |  |                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                           
| |  | The average rate of compensation increase applies
only to the portion of the plan that is not
frozen. Less than 3% of the plan participants
continue to earn benefits. This rate reflects
our expectations of average pay increases over
the period benefits are earned.                                                                                                   |  |                                                                                                                                                                           

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|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  | Accounting Policy and Process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Residual                                                                                                                                                                                                                                                                                                                                                                  
|Accounting Area |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Accounting Risk                                                                                                                                                                                                                                                                                                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | We annually review our actual asset allocation,
discount rate, expected rate of return and other
actuarial assumptions and adjust them as deemed
necessary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Changes in our key assumptions
could cause changes in our
assets, liabilities and income or
expense recorded. For example, a
decrease in the discount rate
would result in a greater
benefits obligation and more
pension expense in future
periods. A lower expected return
on assets would decrease the plan
assets and increase the amount of
pension expense recorded.
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | Summary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | At our measurement date of September 30, 2002,
the accumulated benefit obligation exceeded the
market value of the underlying pension assets due
to an overall decline in the fair value of the
assets and an increase in our discount rate
assumption. As a result, we were required under
SFAS 87 to record an accrued benefit liability of
$16.5 million. This non-cash adjustment resulted
in an after tax charge to Other Comprehensive
Income of $74.8 million, reflected as a reduction
to shareholders equity. This adjustment did not
impact net income. At December 31, 2001, our
consolidated balance sheet reflected a prepaid
pension asset of $100.1 million. |  | Future actual pension income will
depend on future investment
performance, changes in future
discount rates and various other
factors related to the plans
specific beneficiary population.                                                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | We recorded pension income of $8.2 million and
$17.2 million during 2002 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | We anticipate the pension expense in 2003 to be
approximately $3.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                                                                                                                                                                                                                                                           
|                |  | The plan paid benefits of approximately $13
million and $15 million for the plan years ended
September 30, 2002 and 2001, respectively.
Because the majority of the plan is frozen, we
anticipate fairly constant benefit payments in
the future.                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                           

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Results of Operations

The following table sets forth the percentage relationship that the various
items bear to revenues for the periods indicated.

|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |      |  
|----------------------------------------------- | -------------------------------------------------- |  | ------------------------ | ---- | ---- |  | ----- | ---- | -- |  | ----- | ---- | -
|                                                |                                                    |  | Years Ended December 31,
|                                                |                                                    |  |                         
|                                                |                                                    |  | 2002                     |      | 2001 |  | 2000 
|                                                |                                                    |  |                          |      |      |  |      
|Statement of Operations Data:                   |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|Revenues                                        |                                                    |  | 100.0                    | %    |      |  | 100.0 | %    |    |  | 100.0 | %   
|Cost of operations                              |                                                    |  | 59.6                     |      |      |  | 57.6  |      |    |  | 59.0  |     
|Selling, general and administrative expenses    |                                                    |  | 8.8                      |      |      |  | 8.2   |      |    |  | 7.6   |     
|Depreciation and amortization                   |                                                    |  | 9.0                      |      |      |  | 8.4   |      |    |  | 7.9   |     
|Goodwill amortization                           |                                                    |  |                         |      |      |  | 4.1   |      |    |  | 3.9   |     
|Non-cash (gain) loss on divestiture of assets   |                                                    |  | (0.2                     | )    |      |  | 1.9   |      |    |  | 0.4   |     
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|                                                | Operating income                                   |  |                          | 22.8 |      |  |       | 19.8 |    |  |       | 21.2 |  
|Equity in earnings of unconsolidated affiliates |                                                    |  |                         |      |      |  | (0.3  | )    |    |  | (0.9  | )   
|Interest expense and other                      |                                                    |  | 15.4                     |      |      |  | 15.2  |      |    |  | 15.4  |     
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|                                                | Income before income taxes                         |  |                          | 7.4  |      |  |       | 4.9  |    |  |       | 6.7  |  
|Income tax expense                              |                                                    |  | 3.3                      |      |      |  | 3.4   |      |    |  | 4.2   |     
|Minority interest                               |                                                    |  | 0.0                      |      |      |  | 0.1   |      |    |  | 0.1   |     
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|                                                | Income before extraordinary loss                   |  |                          | 4.1  |      |  |       | 1.4  |    |  |       | 2.4  |  
|Extraordinary loss, net of income tax benefit   |                                                    |  | 0.2                      |      |      |  | 0.3   |      |    |  | 0.2   |     
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|                                                | Net income                                         |  |                          | 3.9  |      |  |       | 1.1  |    |  |       | 2.2  |  
|Dividends on preferred stock                    |                                                    |  | 1.4                      |      |      |  | 1.3   |      |    |  | 1.2   |     
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     
|                                                | Net income (loss) available to common
shareholders |  |                          | 2.5  | %    |  |       | (0.2 | )% |  |       | 1.0  | %
|                                                |                                                    |  |                          |      |      |  |       |      |    |  |       |     

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Years Ended December 31, 2002 and 2001

During 2002, we experienced a decline in revenues and earnings primarily
attributable to pricing pressures driven by the continued economic slowdown.
The slowing economy and other competitive conditions have resulted in
reductions in our overall average price per unit of 1.7% and up to 3% in
certain lines of business. Economic pressures have prevented us from recovering
increases in costs caused by normal inflation, unusually large increases in
medical, property and casualty insurance costs and the expanded field
infrastructure.

Revenues. Revenues in 2002 were $5.517 billion compared to $5.565 billion in
2001 a decrease of 0.9% or $48 million. The decrease is attributable to $89.1
million related to a decline in per unit pricing, partially offset by an
increase in volumes of $47.1 million. During 2002, pricing pressures were
primarily experienced in the landfill, roll-off and commercial collection
businesses. The residential collection business remained fairly constant.
Landfill volumes increased by 4.0%, partially offset by 2.0% decrease in
landfill pricing when compared to 2001. Additionally, increases in commodity
revenues and net acquired revenues were offset by decreases in other non-core
revenues. Commodity revenues increased as a result of increases in the average
price per ton, while volumes remained fairly constant when comparing 2002 to
2001.

Cost of Operations. Cost of operations in 2002 was $3.290 billion compared to
$3.206 billion in 2001, an increase of 2.6% or $84 million. The 2001 costs of
operations included $10.4 million of BFI transition costs. These costs are not
recurring costs of ongoing operations since they primarily related to the BFI
transitional employees. There were no BFI transition costs expensed during
2002.

Cost of operations on a comparable basis, excluding the BFI transition costs,
increased by $94.4 million. As a percentage of revenue, cost of operations
increased from 57.4% in 2001 to 59.6% in 2002. This increase is attributable
to an increase in overall operating costs from normal inflation that we have
not been able to recover due to pricing pressures. In addition, our annual
medical, property and casualty insurance costs increased in excess of normal
inflationary increases.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 2002 were $484.5 million compared to $456.1 million
in 2001, an increase of 6.2%. Included in selling, general and administrative
expenses are $17.4 million of BFI transition costs for the year ended December
31, 2001. These costs are not recurring costs of ongoing operations and
primarily related to the billing system conversion associated with the
acquisition of BFI. There were no BFI transition costs expensed during 2002.

Selling, general and administrative expenses on a comparable basis, excluding
the BFI transition costs, increased by $45.8 million, or 10.4%. As a percentage
of revenue, selling, general and administrative expenses, excluding these
costs, increased from 7.9% in 2001 to 8.8% in 2002. In addition to normal
inflationary increases in costs, this increase is attributable to increased
costs associated with the field infrastructure expansion and higher
professional fees.

Depreciation and Amortization.Depreciation and amortization in 2002 was
$496.5 million compared to $466.3 million in 2001, an increase of 6.5%. As a
percentage of revenues, depreciation and amortization expense increased to 9.0%
in 2002 from 8.4% in 2001. The increase is primarily attributable to an
increase in landfill volumes and increased capital expenditures.

Goodwill Amortization.Effective January 1, 2002, we discontinued the
amortization of our goodwill upon the adoption of SFAS 142. For the year ended
December 31, 2001, goodwill amortization was $226.7 million.

Non-Cash (Gain) Loss on Asset Sale.As part of our ongoing review of
operations and our goal of having a self-funding market development program, we
sell non-integrated operations from time to time. In October 2002, we sold
certain non-integrated collection operations for net proceeds of approximately
$77.5 million and reflected a gain of approximately $9.3 million ($8.2 million
loss on an after-tax basis). The proceeds were used to repay debt and are
subsequently to be redeployed to purchase assets in other markets.

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During February 2001 we sold certain operations for approximately $53 million
and reflected a non-cash loss of approximately $107 million ($65 million, net
of income tax benefit) in the reported results for the first quarter of 2001.
The proceeds were used initially to repay debt and subsequently redeployed to
purchase other assets in other markets.

Equity in Earnings of Unconsolidated Subsidiaries. On April 30, 2002, we
completed the exchange of our minority interest in the four Ref-Fuel facilities
for the 99% interest in our equipment purchasing subsidiaries owned by
subsidiaries of American Ref-Fuel Company LLC. We no longer have any interest
in the Ref-Fuel entities and we own 100% of the equipment purchasing
subsidiaries. During 2001, we reported approximately $23.2 million in
revenues, $3.5 million in operating income and $14.1 million of equity earnings
from American Ref-Fuel.

Interest Expense and Other. Interest expense and other was $845.3 million in
2002 compared to $847.6 million in 2001, a decrease of 0.3%. Excluding the
non-cash effect of accounting for de-designated interest rate swap contracts,
the comparable interest expense for the year ended December 31, 2002 was $812.3
representing a decrease of 4.2% from 2001. The decrease is attributable
primarily to the repayment of debt from our continued de-leveraging strategy,
offset by a reduction in the amount of interest we capitalized. At December
31, 2002, approximately 98% of our debt was fixed, 72% directly through a fixed
coupon, and 26% through interest rate swap agreements.

Included in interest expense and other, during the year ended December 31,
2002, is $35.4 million of amortization of amounts in accumulated other
comprehensive income in stockholders equity and a gain of $2.4 million,
related to the change in market value of the interest rate swap contracts that
were de-designated on December 31, 2002. Before de-designation, the changes in
market value were recorded as a component of equity in accumulated other
comprehensive income. Due to the non-cash nature and unpredictability of the
mark to market impact, we evaluate interest expense excluding the effects of
de-designation.

Income Taxes. Income taxes reflect an effective tax rate of 44.9% in 2002 and
71.7% in 2001. The effective income tax rate of 2002 deviates from the federal
statutory rate of 35% primarily due to the write-off of non-deductible goodwill
of $35 million in connection with 2002 divestitures. The effective income tax
rate in 2001 deviated from the federal statutory rate primarily due to the
non-deductibility of the amortization related to $6.5 billion of goodwill
recorded in connection with the acquisition of BFI.

Extraordinary Loss, net. During 2002, we repaid $475.6 million of our tranche
A, B and C term loan facility before its maturity date, with the net proceeds
of $370.6 million from the issuance of $375 million senior notes and $105.0
million of operating cash flows. In connection with these repayments, we
recognized an extraordinary charge for the early extinguishments of the debt of
approximately $5.9 million ($3.6 million, net of income tax benefit) related to
the write-off of deferred debt issuance costs. These prepayments reduced
amounts maturing in 2003 by approximately $104 million.

In August 2002, we repaid our 2001 subsidiary line of credit before its
maturity. In connection with the repayment, we recognized an extraordinary
loss of approximately $10.9 million ($6.5 million, net of tax) related to the
write-off of $7.7 million of deferred debt issuance costs and for a $3.2
million prepayment penalty paid. The 2001 subsidiaries line of credit was
repaid with the cash from operations and the Revolving Credit Facility.

During 2001, we repaid $1,326.4 million of our tranche A, B and C term loan
facility before its maturity date, with net proceeds from the issuance of $600
million and $750 million senior notes. In connection with these repayments, we
recognized extraordinary charges for the early extinguishment of the debt of
approximately $28 million ($17.0 million, net of income tax benefit) related to
the write-off of deferred debt issuance costs.

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Dividends on Preferred Stock.Dividends on preferred stock were $77.9 million
in 2002 and $73.0 million in 2001, which reflects the 6.5% dividend on the
liquidation preference of the preferred stock issued on July 30, 1999 in
connection with the financing of the acquisition of BFI. Dividends were not
paid in cash, instead, the liquidation preference of the preferred stock
increased by accrued, but unpaid dividends.

Years Ended December 31, 2001 and 2000

Results of operations for the year ended December 31, 2001 as compared to
December 31, 2000 reflected the negative impact of the economic slowdown, our
inability to maintain selling prices in the face of continued cost basis
inflation and the decline in recycled paper commodity prices and volume. These
factors have combined to result in a decrease in revenue and operating margins
when comparing 2001 to 2000. The slowing economy and other competitive
conditions have resulted in reductions in average prices per unit in most
service lines.

Revenues. Revenues in 2001 were $5.565 billion compared to $5.707 billion in
2000, a decrease of 2.5% or $142.2 million. Acquisitions increased revenues by
$182 million, but were offset by $215 million of divested revenue, resulting in
a net decrease in revenue of $32 million between years. During 2001 we
increased revenue by approximately three percent through selective price
increases on existing customers. However, this increase was offset by the
negative impact of customer turnover and price concessions during the year.
The net result was an increase in revenue of approximately $4 million.
Landfill and collection volume increases during 2001 resulted in a year over
year increase in revenue of approximately $38 million. Recycling revenues
decreased by approximately $152 million for 2001 driven by declines in recycled
paper volumes and prices. During 2001, we processed approximately 2.5 million
tons of recycled paper, consisting primarily of cardboard, newspaper and mixed
paper as compared to 3.2 million tons in 2000. The average price per ton for
these products decreased approximately 40% for 2001 as compared to 2000.

Cost of Operations. Cost of operations in 2001 was $3.206 billion compared to
$3.368 billion in 2000, a decrease of 4.8% or $162 million. As a percentage of
revenues, cost of operations decreased to 57.6% in 2001 from 59.0% in 2000.
The costs of operations include acquisition related and unusual costs primarily
consisting of BFI transition activities of $10.4 million in 2001 and $87.6
million in 2000. Since these acquisition related and unusual costs are not
normal recurring costs of the business and primarily relate to the transition
of BFI, we evaluate cost of operations excluding these costs. Cost of
operations excluding these items was $3.195 billion in 2001 and $3.280 billion
in 2000 resulting in a decrease of 2.6% or $85 million. The decrease in cost of
operations, excluding these items, was primarily caused by the decrease in
revenues. The cost of recycling materials decreased by $60 million as a result
of the decline in commodity price and volume. As a percentage of revenues,
excluding these items, cost of operations decreased slightly to 57.4% in 2001
from 57.5% in 2000. The decrease as a percentage of revenues is the result of
the improvement in our landfill internalization from 63% to 67% from the year
ended December 31, 2000 to the same period in 2001 offset by increased volumes
at lower prices primarily in the second half of 2001.

Selling, General and Administrative Expenses. SG&A expenses in 2001 were $456.1
million compared to $430.8 million in 2000, an increase of 5.9%. As a
percentage of revenues, SG&A increased to 8.2% in 2001 from 7.6% in 2000. SG&A
expenses include acquisition related and unusual costs primarily consisting of
BFI transition activities of $17.4 million in 2001 and $13.3 million in 2000.
Since these acquisition related and unusual costs are not normal recurring
costs of the business and primarily relate to the transition of BFI, we
evaluate SG&A expenses excluding these costs. SG&A expenses excluding these
items increased 5.1% and as a percentage of revenues, SG&A expenses increased
to 7.9% in 2001 from 7.3% in 2000. This increase is primarily due to the
continued build out of our support structure of the organization, increases in
our bad debt expense as a result of economic conditions and increases in
professional fees.

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Depreciation and Amortization.Depreciation and amortization in 2001 was
$466.3 million compared to $450.8 million in 2000, an increase of 3.4%. As a
percentage of revenues, depreciation and amortization expense increased to 8.4%
in 2001 from 7.9% in 2000. The percent increase is primarily due to the year
over year increase in landfill volumes of approximately four million tons and
increasing capital expenditures, from $389.9 million during 2000 to $500.9
million during 2001.

Non-Cash Loss on Asset Sale.As part of our ongoing review of operations and our goal
of having a self-funding market development program, we sold certain non-integrated
operations during February 2001 in the Northeast region for approximately $53 million
and reflected a non-cash loss of approximately $107 million ($65 million, net of income
tax benefit) in the reported results for the first quarter of 2001. The proceeds were
used to repay debt, and subsequently redeployed as a part of our self-funding market
development program to purchase assets in other markets that improve our market density
and internalization. During 2000, we recorded $26.5 million on non-cash loss related
to divestitures of certain operations.

Equity in Earnings of Unconsolidated Subsidiaries.On April 30, 2001, American
Ref-Fuel Company LLC, a joint venture of Duke Energy North America and United American
Energy Corporation, acquired our 100% ownership interest in the Ref-Fuel Chester,
Pennsylvania facility; our 50% interest in the Rochester, Massachusetts facility; and
our 51% interest in Ref-Fuels marketing company. The ownership structure of the four
remaining Ref-Fuel facilities located in New York, New Jersey, and Connecticut was
modified to give American Ref-Fuel Company LLC operational controls of those entities.
In 2000, these operations generated approximate annual revenues, operating income and
equity earnings of $70 million, $15 million, and $51 million, respectively.

Interest Expense and Other. Interest expense and other was $847.6 million in
2001 compared to $878.2 million in 2000, a decrease of 3.5%. The decrease is
primarily a result of reductions in the overall debt balance during 2001 of
$389.5 million and a decrease in the effective interest rate from 9.2% at
December 31, 2000 to 8.8% at December 31, 2001. At December 31, 2001,
approximately 96% of our debt was fixed, 64% directly, and 32% through interest
rate swap agreements.

Income Taxes. Income taxes reflect an effective tax rate of 71.7% in 2001 and
63.3% in 2000. The effective income tax rate in 2001 and 2000 deviates from the
federal statutory rate of 35% primarily due to the non-deductibility of the
amortization related to $6.5 billion of goodwill recorded in connection with
the acquisition of BFI.

Extraordinary Loss, net. During 2001, we repaid $1,326.4 million of our
tranche A, B and C term loan facility before its maturity date, with net
proceeds from the issuance of $600 million and $750 million senior notes. In
connection with the these repayments, we recognized extraordinary charges for
the early extinguishments of the debt of approximately $28 million ($17.0
million, net of income tax benefit) related to the write-off of deferred debt
issuance costs.

During 2000, we repaid our asset sale term loan and tranche D loan facilities
before their respective maturity dates. In connection with these repayments,
we recognized extraordinary charges for the early extinguishment of the debt of
approximately $21.9 million ($13.3 million, net of income tax benefit) related
to the write-off of deferred debt issuance costs.

Dividends on Preferred Stock.Dividends on preferred stock were $73.0 million
in 2001 and $68.5 million in 2000, which reflects the 6.5% dividend on the
liquidation preference of the preferred stock issued on July 30, 1999 in
connection with the financing of the acquisition of BFI. Dividends were not
paid in cash, instead, the liquidation preference of the preferred stock
increased by accrued, but unpaid dividends.

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Liquidity and Capital Resources

We meet operational liquidity needs with operating cash flow. When
non-operating liquidity needs arise, such as, funding our debt maturities and
capital expenditure requirements, they are met, if not from remaining operating
cash flow, with borrowings under our revolving credit facility. At December
31, 2002, we had $567.2 million available under the Revolving Credit Facility.

Cash provided by operations for the year ended December 31, 2002 was $1,032.7
million (including $88.7 million spent against non-recurring acquisition
accruals). Cash provided from operations increased by $127.5 million or 14%
when compared to the same period in the prior year. During the year ended
December 31, 2002, we used cash from operations, proceeds from net market
development activity of $31.3 million, and proceeds from the sale of fixed
assets of $30.3 million to:



| |  |  | fund $542.3 million of capital expenditures,                          
| | - |  | ----------------------------------------------------------------------
|
| |  |  | reduce debt by $377.5 million,                                        
|
| |  |  | fund outstanding amounts in our disbursement account of $87.1 million,
|
| |  |  | increase our ending cash balance by $21.4 million and                 
|
| |  |  | fund $66.0 million of other non-operating net cash outflows.          

At December 31, 2002, the current portion of our outstanding debt was $163.5
million. Approximately $156.7 million of this amount was paid in January 2003
with operating cash flows and application of our ending cash on our
consolidated balance sheet. At December 31, 2002, we had cash and cash
equivalents totaling $180.3 million.

During the year ended December 31, 2001, we used cash from operations of $905.2
million (including $136.0 million spent on non-recurring acquisition accruals
and transition costs), proceeds from net market development activity of $110.4
million, and proceeds from the sale of fixed assets of $30.9 million to:



| |  |  | fund $500.9 million of capital expenditures,                 
| | - |  | -------------------------------------------------------------
|
| |  |  | reduce debt by $389.5 million,                               
|
| |  |  | increase our ending cash balance by $36.7 million and        
|
| |  |  | fund $119.4 million of other non-operating net cash outflows.

At December 31, 2001, the current portion of our outstanding debt was $22.1
million. At December 31, 2001, we had cash and cash equivalents on hand
totaling $158.8 million.

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During the three years ended December 31, 2002, our cash flows from operating,
investing and financing activities were as follows (in millions):

|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |        |  
|----------------------------------------------------------------------------------------------------- | ------------------------------------- | - | ------------------------ | ------- | ---- | - | -------- | ------ | - | - | -------- | ------ | -
|                                                                                                      |                                       |   | Years Ended December 31,
|                                                                                                      |                                       |   |                         
|                                                                                                      |                                       |   | 2002                     |         | 2001 |   | 2000    
|                                                                                                      |                                       |   |                          |         |      |   |         
|Operating Activities:                                                                                 |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Net income                                                                                            |                                       | $ | 215.1                    |         |      | $ | 58.5     |        |   | $ | 124.4    |       
|Non-cash (gain) loss on divestiture of
assets                                                         |                                       |   | (9.3                     | )       |      |   | 107.0    |        |   |   | 26.5     |       
|Non-cash operating expenses(1)                                                                        |                                       |   | 722.0                    |         |      |   | 915.1    |        |   |   | 892.5    |       
|Gain on sale of fixed assets                                                                          |                                       |   | (7.1                     | )       |      |   | (13.9    | )      |   |   | (10.5    | )     
|Extraordinary loss due to early
extinguishments of debt, net of
income tax benefit                    |                                       |   | 8.3                      |         |      |   | 12.3     |        |   |   | 13.3     |       
|Non-cash gain on de-designated
interest rate swap contracts                                           |                                       |   | (2.4                     | )       |      |   |         |        |   |   |         |       
|Amortization of accumulated other
comprehensive income for de-designated
interest rate swap contracts |                                       |   | 35.4                     |         |      |   |         |        |   |   |         |       
|Changes in working capital                                                                            |                                       |   | 193.6                    |         |      |   | (30.3    | )      |   |   | (38.6    | )     
|Non-recurring acquisition accruals                                                                    |                                       |   | (88.7                    | )       |      |   | (115.1   | )      |   |   | (167.5   | )     
|Closure, post-closure and
environmental expenditures,
net of provision                                |                                       |   | (34.2                    | )       |      |   | (28.4    | )      |   |   | (36.8    | )     
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|                                                                                                      | Cash provided by operating activities |   |                          | 1,032.7 |      |   |          | 905.2  |   |   |          | 803.3  |  
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Investing Activities:                                                                                 |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Cost of acquisitions, net of cash
acquired (2)                                                        |                                       |   | (51.4                    | )       |      |   | (249.5   | )      |   |   | (802.9   | )     
|Proceeds from divestitures, net of
cash divested (2)                                                  |                                       |   | 82.6                     |         |      |   | 359.9    |        |   |   | 1,039.2  |       
|Accruals for acquisition price and
severance costs                                                    |                                       |   |                         |         |      |   | (1.7     | )      |   |   | (27.8    | )     
|Net distributions from unconsolidated
affiliates                                                      |                                       |   |                         |         |      |   |         |        |   |   | 15.4     |       
|Capital expenditures                                                                                  |                                       |   | (542.3                   | )       |      |   | (500.9   | )      |   |   | (389.9   | )     
|Capitalized interest                                                                                  |                                       |   | (20.6                    | )       |      |   | (45.7    | )      |   |   | (45.4    | )     
|Proceeds from sale of fixed assets                                                                    |                                       |   | 30.2                     |         |      |   | 30.9     |        |   |   | 42.9     |       
|Change in deferred acquisition costs,
notes receivable and other                                      |                                       |   | (22.3                    | )       |      |   | (27.1    | )      |   |   | (41.4    | )     
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|                                                                                                      | Cash used for investing activities    |   |                          | (523.8  | )    |   |          | (434.1 | ) |   |          | (209.9 | )
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Financing Activities:                                                                                 |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Net proceeds from exercise of stock
options                                                           |                                       |   | 2.8                      |         |      |   | 6.4      |        |   |   | 1.7      |       
|Change in disbursement account                                                                        |                                       |   | (87.1                    | )       |      |   |         |        |   |   |         |       
|Proceeds from long-term debt, net of
issuance costs                                                   |                                       |   | 1,044.3                  |         |      |   | 2,755.8  |        |   |   | 2,202.0  |       
|Repayments of long-term debt                                                                          |                                       |   | (1,447.5                 | )       |      |   | (3,196.6 | )      |   |   | (2,796.4 | )     
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|                                                                                                      | Cash used for financing activities    |   |                          | (487.5  | )    |   |          | (434.4 | ) |   |          | (592.7 | )
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       
|Increase in cash and cash equivalents                                                                 |                                       | $ | 21.4                     |         |      | $ | 36.7     |        |   | $ | 0.7      |       
|                                                                                                      |                                       |   |                          |         |      |   |          |        |   |   |          |       



|(1) |  | Consists principally of provisions for depreciation and amortization, undistributed earnings of equity
investments, allowance for doubtful accounts, accretion of debt and amortization of debt issuance costs, and
deferred income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | During 2002, we acquired solid
waste operations representing approximately $28.3 million in annual revenues and sold
operations representing approximately $70.1 million ($69.3 million, net of intercompany eliminations) in annual
revenues. During 2001, we acquired solid waste operations,
representing approximately $150.4 million in annual revenues,
and sold operations representing approximately $153.9 million ($146.6 million net of intercompany eliminations)
in annual revenues. During 2000, we acquired solid waste operations, representing approximately $482.6 million
($468.9 million net of intercompany eliminations) in annual revenues and sold operations representing
approximately $814.2 million ($679.4 million net of intercompany eliminations) in annual revenues.

40



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##### Table of Contents



The following table summarizes the components of our cash flow used to rollforward total debt balances (in millions):

|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|-------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------------------------ | ------- | ---- | ------- | ------ | ------- | - | -------- | ------ | ------- | -
|                                                                           |                                                      |         | Years ended December 31,
|                                                                           |                                                      |         |                         
|                                                                           |                                                      |         | 2002                     |         | 2001 |         | 2000  
|                                                                           |                                                      |         |                          |         |      |         |       
|Free cash flow (1):                                                        |                                                      |         |                          |         |      |         |        |         |   |          |       
|                                                                           | EBITDA (2)                                           |         | $                        | 1,752.5 |      |         | $      | 1,796.5 |   |          | $      | 1,882.6 |  
|                                                                           | Other non-cash items (3)                             |         |                          | 72.9    |      |         |        | 184.3   |   |          |        | 97.2    |  
|                                                                           | Cash interest (4)                                    |         |                          | (803.5  | )    |         |        | (830.1  | ) |          |        | (899.1  | )
|                                                                           | Cash taxes                                           |         |                          | 1.1     |      |         |        | (56.9   | ) |          |        | (27.9   | )
|                                                                           | Closure, post-closure and
environmental expenditures |         |                          | (105.0  | )    |         |        | (95.6   | ) |          |        | (98.5   | )
|                                                                           | Capital expenditures,
excluding acquisitions         |         |                          | (542.3  | )    |         |        | (500.9  | ) |          |        | (389.9  | )
|                                                                           | Changes in working capital                           |         |                          | 100.9   |      |         |        | (21.7   | ) |          |        | (63.3   | )
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|Free cash flow                                                             |                                                      | 476.6   |                          |         |      | 475.6   |        |         |   | 501.1    |       
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|Expenditures against
non-recurring acquisition
accruals and severance cost |                                                      | (88.7   | )                        |         |      | (116.8  | )      |         |   | (195.4   | )     
|Divestitures, net of acquisitions
and other investing activities           |                                                      | 39.2    |                          |         |      | 114.2   |        |         |   | 237.8    |       
|Debt issuance costs                                                        |                                                      | (7.8    | )                        |         |      | (42.2   | )      |         |   |         |       
|Change in cash                                                             |                                                      | (21.4   | )                        |         |      | (36.7   | )      |         |   | (0.7     | )     
|Accretion and other                                                        |                                                      | (20.4   | )                        |         |      | (4.6    | )      |         |   | 51.3     |       
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|Cash available to pay
down debt                                            | $                                                    | 377.5   |                          |         | $    | 389.5   |        |         | $ | 594.1    |       
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|Beginning debt balance                                                     | $                                                    | 9,259.6 |                          |         | $    | 9,649.1 |        |         | $ | 10,243.2 |       
|Cash available to pay
down debt                                            |                                                      |         | (377.5                   | )       |      |         | (389.5 | )       |   |          | (594.1 | )      
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  
|Ending debt balance                                                        | $                                                    | 8,882.1 |                          |         | $    | 9,259.6 |        |         | $ | 9,649.1  |       
|                                                                           |                                                      |         |                          |         |      |         |        |         |   |          |        |         |  



|(1) |  | Free cash flows consists of EBITDA, as defined below, plus non-cash items less cash
outflows for interest, taxes, capital expenditures (excluding acquisitions),
changes in working capital, (including expenditures for non-recurring acquisition
accruals and excluding accrued interest and taxes), and closure, post closure and
environmental expenditures. We use free cash flows to provide information
regarding cash generated from our operations to service our debt, after cash
requirements for capital expenditures. Free cash flow is not a measure of
operating performance or liquidity under U.S. generally accepted accounting
principles (GAAP). It should not be construed as an alternative to the statement
of cash flows, which is prepared in accordance with U.S. GAAP. This method of
calculation may differ from similarly titled measures used by other companies.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. We consider EBITDA to provide useful information regarding our
ability to meet debt service, capital expenditures and working capital
requirements. EBITDA is not a measure of operating income, operating performance,
or liquidity under U.S. GAAP. It should not be construed as an alternative to
operating income as determined in accordance with U.S. GAAP. This method of
calculation may differ from similarly titled measures used by other companies.                                                                                                                                                                                                                                                                                                                                          
|   
|(3) |  | Includes closure and post-closure provisions, allowance for doubtful accounts, net
gain or loss on divestiture of assets and net gain on sale of fixed assets, all of
which are included in EBITDA and are non-cash in nature. The net gain or loss on
divestitures of assets during 2002, 2001, and 2000 was $9.3 million gain, $107.0
million loss and $26.5 million loss, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) |  | The 2001 cash interest includes the receipt of $27.2 million related to the unwind
of a fair value interest rate swap. The proceeds were recorded as a deferred gain
and are being amortized ratably into interest income through October 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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We have historically operated and we expect that we will continue to operate with a working capital deficit. This deficit,
in part, is caused by the current portion of our outstanding debt. We regularly use excess available cash from operating
and non-operating activities to pay the current portion of our outstanding debt. To the extent excess cash from operations
exceeds our scheduled debt maturities, we prepay future maturities. Our financing strategy for market development is to
utilize cash flow from divestiture activity to repay debt and to fund any acquisition activity. In addition to funding our
operational working capital and debt reduction needs, we are committed to investing capital in our asset base. Our capital
expenditures are primarily for the construction and build out of our landfills, for the trucks and containers used by our
collection operations and heavy equipment used in both our collection and landfill operations and are expected to average
8%-10% of revenue. Following is a summary of capital expenditures for the years ended December 31, (in millions):

|                                       |                                                    |   |       |       |      |   |          |       |  |   |       |       | 
|-------------------------------------- | -------------------------------------------------- | - | ----- | ----- | ---- | - | -------- | ----- |  | - | ----- | ----- | 
|                                       |                                                    |   | 2002  |       | 2001 |   | 2000 (2)
|                                       |                                                    |   |       |       |      |   |         
|Trucks, containers and heavy
equipment |                                                    | $ | 292.2 |       |      | $ | 273.3    |       |  | $ | 195.5 |      
|Landfill development                   |                                                    |   | 207.3 |       |      |   | 181.9    |       |  |   | 170.9 |      
|Other (1)                              |                                                    |   | 42.8  |       |      |   | 45.7     |       |  |   | 23.5  |      
|                                       |                                                    |   |       |       |      |   |          |       |  |   |       |      
|                                       | Total capital expenditures,
excluding acquisitions |   | $     | 542.3 |      |   | $        | 500.9 |  |   | $     | 389.9 | 
|                                       |                                                    |   |       |       |      |   |          |       |  |   |       |      



|(1) |  | Includes land and improvements, land held for permitting as landfills, buildings and improvements, and furniture
and office equipment.                                         
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | During 2000, capital expenditures were unusually low as a result of heavy investment in property and equipment
made by BFI immediately prior to our acquisition of BFI in 1999.

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Contractual Obligations and Commitments

Our debt structure consists primarily of $2.375 billion outstanding under our 1999 Credit Facility, $375 million of the senior notes issued in 2002, $1.35
billion of the senior notes issued in 2001, $2.0 billion of the senior subordinated notes issued in 1999, $1.7 billion of senior notes issued in 1998 and
$1.1 billion of debt assumed in connection with the BFI acquisition. As of December 31, 2002, we had aggregate availability under the revolving credit
facility of our 1999 Credit Facility of approximately $567.2 million for working capital, letters of credit, acquisitions and other general corporate
purposes.

The following table provides additional maturity detail of our long-term debt obligations at December 31, 2002 (in millions):

|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |   |  |   |         |  
|----------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ------- |  |  | - | ----- |  |  | - | ------- | - |  | - | ------- | -
|Debt                                      |  | 2003 |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Revolving Credit Facility                 |  | $    |      |      |  | $    |      |      |  | $    |      |            |  | $     |        |  |  | $ |      |  |  | $ |        |   |  | $ |        |  
|Tranche A term loan                       |  |      |      |      |  |      | 374.1 |      |  |      | 525.0 |            |  |       |        |  |  |   |      |  |  |   |        |   |  |   | 899.1   |  
|Tranche B term loan                       |  |      |      |      |  |      |      |      |  |      |      |            |  |       | 670.9   |  |  |   |      |  |  |   |        |   |  |   | 670.9   |  
|Tranche C term loan                       |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   | 805.1 |  |  |   |        |   |  |   | 805.1   |  
|6.10% BFI senior notes (1)                |  |      | 156.7 |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   |        |   |  |   | 156.7   |  
|7.375% senior notes                       |  |      |      |      |  |      | 225.0 |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   |        |   |  |   | 225.0   |  
|7.875% BFI senior notes                   |  |      |      |      |  |      |      |      |  |      | 69.5  |            |  |       |        |  |  |   |      |  |  |   |        |   |  |   | 69.5    |  
|7.625% senior notes                       |  |      |      |      |  |      |      |      |  |      |      |            |  |       | 600.0   |  |  |   |      |  |  |   |        |   |  |   | 600.
0  |  
|8.875% senior notes
due 2008              |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 600.0   |   |  |   | 600.0   |  
|8.50% senior notes
due 2008               |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 750.0   |   |  |   | 750.0   |  
|9.25% senior notes
due 2012               |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 375.0   |   |  |   | 375.0   |  
|6.375% BFI senior
notes due 2008          |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 161.2   |   |  |   | 161.2   |  
|7.875% senior notes
due 2009              |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 875.0   |   |  |   | 875.0   |  
|10.00% senior
subordinated notes
due 2009 |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 2,000.0 |   |  |   | 2,000.0 |  
|9.25% BFI debentures
due 2021             |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 99.5    |   |  |   | 99.5    |  
|7.40% BFI debentures
due 2035             |  |      |      |      |  |      |      |      |  |      |      |            |  |       |        |  |  |   |      |  |  |   | 360.0   |   |  |   | 360.0   |  
|Other Debt                                |  |      | 6.8   |      |  |      | 4.7   |      |  |      | 14.9  |            |  |       | 5.1     |  |  |   | 0.8   |  |  |   | 296.5   |   |  |   | 328.8   |  
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |   |  |   |         |  
|Total principal due                       |  | $    | 163.5 |      |  | $    | 603.8 |      |  | $    | 609.4 |            |  | $     | 1,276.0 |  |  | $ | 805.9 |  |  | $ | 5,517.2 |   |  | $ | 8,975.8 |  
|Discount, net                             |  |      | (0.2  | )    |  |      | (0.1  | )    |  |      | (1.4  | )          |  |       |        |  |  |   |      |  |  |   | (91.9   | ) |  |   | (93.6   | )
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |   |  |   |         |  
|Total long-term debt
balance              |  | $    | 163.3 |      |  | $    | 603.7 |      |  | $    | 608.0 |            |  | $     | 1,276.0 |  |  | $ | 805.9 |  |  | $ | 5,425.3 |   |  | $ | 8,882.2 |  
|                                          |  |      |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |   |  |   |         |  



|(1) |  | In January 2003, the 6.10% BFI senior notes were repaid upon maturity with cash flow from operations and application of
our ending cash balance.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

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The following table outlines what we regard as our significant contractual obligations, their payment dates
and expirations.

|                                                  |  |                                     |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |  |  |   |         |    
|------------------------------------------------- |  | ----------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ------- |  |  | - | ----- |  |  | - | ------- |  |  | - | ------- | ---
|                                                  |  | Payments Due by Year ( in millions)
|Contractual                                       |  |                                    
|Obligations (1)                                   |  | 2003                                |       | 2004 |  | 2005 |       | 2006 |  | 2007 |       | Thereafter |  | Total
|                                                  |  |                                     |       |      |  |      |       |      |  |      |       |            |  |      
|Long-term debt                                    |  | $                                   | 163.5 | (2)  |  | $    | 603.8 |      |  | $    | 609.4 |            |  | $     | 1,276.0 |  |  | $ | 805.9 |  |  | $ | 5,517.2 |  |  | $ | 8,975.8 | (3)
|Capital lease
obligations                         |  |                                     | 3.6   |      |  |      | 2.7   |      |  |      | 1.4   |            |  |       | 0.5     |  |  |   | 0.4   |  |  |   | 4.7     |  |  |   | 13.3    |    
|Operating leases
(included in
operating
expenses) |  |                                     | 24.9  |      |  |      | 23.0  |      |  |      | 19.0  |            |  |       | 16.6    |  |  |   | 11.5  |  |  |   | 51.0    |  |  |   | 146.0   |    
|Other long-term
liabilities(4)                    |  |                                     |      |      |  |      | 73.8  |      |  |      | 54.1  |            |  |       | 30.3    |  |  |   | 20.8  |  |  |   | 124.1   |  |  |   | 303.1   |    
|                                                  |  |                                     |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |  |  |   |         |    
|Total cash contractual
obligations                |  | $                                   | 192.0 |      |  | $    | 703.3 |      |  | $    | 683.9 |            |  | $     | 1,323.4 |  |  | $ | 838.6 |  |  | $ | 5,697.0 |  |  | $ | 9,438.2 |    
|                                                  |  |                                     |       |      |  |      |       |      |  |      |       |            |  |       |         |  |  |   |       |  |  |   |         |  |  |   |         |    

|(1) |  | Purchase obligations entered into in the normal course of business are not reflected in this table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | In January 2003, the 6.10% BFI senior notes were repaid upon maturity with cash flow from operations and
application of our ending cash balance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(3) |  | Amount represents total principle due before discount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(4) |  | The other long-term liabilities
consist primarily of non-recurring acquisition accruals, derivative
liabilities for interest rate swap contracts, accrued insurance and
other miscellaneous long-term obligations. In addition to the $303.1 million of other long-term liabilities identified above, we have $125.7 million of
derivative liability for interest rate swaps, which is paid through interest expense payments over the life of
the swap contracts. The contracts mature at various times between
2003 and 2005. See discussion in Footnote 6
of the Notes to the Consolidated Financial Statements included under
Item 8 herein. We also have $16.5 million of net pension liability included in long-term liabilities on the Consolidated Balance Sheet, however, this liability is not included in the table above as these are not cash obligations.

Our 1999 Credit Facility has certain provisions, calculated annually, which accelerate repayments of principal under the term loans
if we generate cash flow in excess of certain levels. This could result in usage of the revolving loan facility to accommodate
cash timing differences. Factors primarily causing excess cash flow, as defined, could include increases in operating cash flow,
lower capital expenditures and working capital requirements, net divestitures or other favorable cash generating activities. Cash
flow available to repay debt in excess of the current years maturities will be ratably applied to future maturities.

Our 1999 Credit Facility and the indentures relating to our senior subordinated notes and our senior notes contain financial
covenants and restrictions on our ability to complete acquisitions, pay dividends, incur indebtedness, make investments and take
certain other corporate actions.

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The following is additional information on our 1999 Credit Facility as of December 31, 2002 (in millions, except ratios):

|                                         |  |   |         | 
|---------------------------------------- |  | - | ------- | 
|Revolver Availability:                   |  |   |         | 
|Capacity Commitment                      |  | $ | 1,291.3 | 
|Less: Borrowings                         |  |   |        | 
|Less: Letters of Credit outstanding      |  |   | 724.1   | 
|                                         |  |   |         | 
|Total Availability                       |  | $ | 567.2   | 
|                                         |  |   |         | 
|Financial Covenants:                     |  |   |         | 
|Debt / EBITDA (1)                        |  |   | 5.01x   | 
|Covenant Maximum                         |  |   | 5.75x   | 
|EBITDA in excess of covenant requirement |  | $ | 193.2   | 
|                                         |  |   |         | 
|EBITDA / Total Interest                  |  |   | 2.20x   | 
|Covenant Minimum                         |  |   | 2.00x   | 
|EBITDA in excess of covenant requirement |  | $ | 145.9   | 



|(1) |  | EBITDA and Total Interest are defined in our 1999 Credit Facility (filed in
conjunction with this Form 10-K, see exhibit 10.18) and are based on twelve month
trailing amounts.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are subject to the following financial covenants under our 1999 Credit Facility:

|                  |  |                    |  |                       |  |                    
|----------------- |  | ------------------ |  | --------------------- |  | -------------------
|From the          |  | Through the        |  |                       |  |                    
|Quarter Ending    |  | Quarter Ending     |  | Total Debt/EBITDA (1) |  | EBITDA/Interest (1)
|                  |  |                    |  |                       |  |                    
|December 31, 2002 |  | December 31, 2002  |  | 5.75x                 |  | 2.00x              
|                  |  |                    |  |                       |  |                    
|March 31, 2003    |  | September 30, 2003 |  | 5.50x                 |  | 2.00x              
|                  |  |                    |  |                       |  |                    
|December 31, 2003 |  | March 31, 2004     |  | 5.25x                 |  | 2.25x              
|                  |  |                    |  |                       |  |                    
|June 30, 2004     |  | September 30, 2004 |  | 5.00x                 |  | 2.25x              
|                  |  |                    |  |                       |  |                    
|December 31, 2004 |  | September 30, 2005 |  | 4.50x                 |  | 2.50x              
|                  |  |                    |  |                       |  |                    
|December 31, 2005 |  | December 31, 2005  |  | 4.25x                 |  | 2.75x              



|(1) |  | EBITDA and Total Interest used for this calculation are defined in our 1999 Credit Facility
(filed in conjunction with this Form 10-K, see exhibit 10.18) and are based on twelve months
trailing amounts.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to pay dividends on preferred and common stock is most significantly limited by our 1999 Credit Facility, which specifies that in order to pay cash dividends, the
ratio of Total Debt/EBITDA must be less than 4:1. This ratio was 5.01:1 at December 31, 2002 and therefore we are currently precluded from the payment of cash dividends. Shares
of our Series A Senior Convertible Preferred Stock are entitled to cumulative quarterly dividends in an amount equal to 6.5% per annum. Beginning July 30, 2004, the dividend
rate on the Series A Senior Convertible Preferred Stock increases to 12% per annum for any dividends that are not paid in cash. There are circumstances under which we would not
be required to accrue dividends at the 12% rate. As long as we have a Total Debt/EBITDA ratio of less than 4:1, under our 1999 Credit Facility, we would be able to pay cash
dividends at the 6.5% rate.

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We are required to provide financial assurances to governmental agencies under applicable environmental regulations relating to our landfill operations for capping, closure and post-closure costs, and performance under
certain collection, landfill and transfer station contracts. We satisfy the financial assurance requirements by providing performance bonds, letters of credit, insurance policies or trust deposits. Additionally, we are
required to provide financial assurance for our self-insurance program and collateral required for certain performance obligations. During 2003, we expect no material increase in financial assurance obligations although the
mix of financial assurance instruments may change.

At December 31, 2002, we had the following financial assurance instruments (in thousands):

|                      |  |              |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 
|--------------------- |  | ------------ | --------- | ----------- |  | ------------- | ------- | -------------- |  | ----- | ------- |  |  | - | ------- |  |  | - | --------- | 
|                      |  | Landfill     |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |  
|                      |  | Closure/     |           | Contract    |  | Risk/Casualty |         | Collateral for |  |       |         | 
|                      |  | Post-Closure |           | Performance |  | Insurance     |         | Obligations    |  | Total
|                      |  |              |           |             |  |               |         |                |  |      
|Insurance Policies    |  | $            | 997,901   |             |  | $             |        |                |  | $     |        |  |  | $ |        |  |  | $ | 997,901   | 
|Surety Bonds          |  |              | 341,747   |             |  |               | 625,142 |                |  |       |        |  |  |   |        |  |  |   | 966,889   | 
|Trust Deposits        |  |              | 62,742    |             |  |               |        |                |  |       |        |  |  |   |        |  |  |   | 62,742    | 
|Letters of Credit (1) |  |              | 234,471   |             |  |               | 48,484  |                |  |       | 211,802 |  |  |   | 229,306 |  |  |   | 724,063   | 
|                      |  |              |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 
|Total                 |  | $            | 1,636,861 |             |  | $             | 673,626 |                |  | $     | 211,802 |  |  | $ | 229,306 |  |  | $ | 2,751,595 | 
|                      |  |              |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 



|(1) |  | These amounts are issued under the Revolving Credit Facility of our 1999 Credit Facility.
|--- |  | -----------------------------------------------------------------------------------------

These financial assurance instruments are issued in the normal course of business. They are not debt and, therefore, are not reflected in the accompanying Consolidated Balance Sheets. The
underlying obligations of the financial assurance instruments would be valued and recorded in the Consolidated Balance Sheets if it is probable that we would be unable to perform our
obligations under the financial assurance contracts. We do not expect this to occur.

Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations, other than financial assurance instruments discussed above which are not debt. We have no transactions or
obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any
third party debt.

Significant Financing Events in 2002

In November 2002, through the issuance of $375 million of senior notes
due 2012, we refinanced approximately $370.6 million of our 1999 Credit Facility with fixed rate bonds.
Additionally, in August 2002, we repaid the 2001 subsidiaries line of credit
before its maturity date. The 2001 subsidiaries line of credit was repaid with the cash from operations and the revolving credit facility under the 1999 Credit Facility. At December 31, 2002, we had no borrowings under the Revolving Credit Facility.

In December 2002, we filed a shelf registration statement with the SEC that would allow us to issue equity and/or debt securities up to $2.0 billion from time to time as determined by the Board of Directors and as market conditions permit. The
registration statement was declared effective by the SEC on December 31, 2002. We expect to use the net proceeds from any issuances of securities under the shelf registration for general corporate purposes, including repaying or refinancing bank
borrowings and for working capital, capital expenditures and other acquisitions.

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Financing Plan

We are a highly leveraged company with
$8.9 billion of outstanding debt at December 31, 2002. The
vast majority of our debt was incurred to acquire solid waste
companies during the past 10 years. Our debt maturity schedule
reflects annual scheduled payments of $164 million,
$604 million and $609 million for 2003, 2004 and 2005,
respectively. Our first objective is to address maturities under the
1999 Credit Facility. In the future, we expect to continue to repay
debt with cash flow from operations and it is possible that we will
endeavor to refinance our debt obligations to extend maturities.

The Revolving Credit Facility component of the 1999 Credit Facility expires in
July 2005. During 2003, we intend to take actions towards
refinancing the 1999 Credit Facility. Both the term loan market and revolver
market have contracted over the past years due, we believe, to
consolidation in the banking industry, demands for increased returns within the
banking industry and the reduction in average lender hold positions. Accordingly, we recognize that we will need to continue to
reduce the size of the 1999 Credit Facility in order to effectively put in
place a new credit facility. The $7 billion 1999 Credit Facility has already
been reduced to $3.7 billion at December 31, 2002 through the application of
cash flow from operations, net proceeds from divestitures and offerings of
senior notes. We believe that between December 31, 2002 and the time we
refinance the 1999 Credit Facility, we will further reduce its size to
approximately $3.0 billion.

We believe we have several alternatives available to us that will allow this
reduction to occur. The alternatives include continued application of cash flow from operating
activities, possible asset divestitures in excess of acquisitions and potential
capital market transactions. Capital market transactions could involve either
new capital for us or refinancing short-term maturities for longer-term
maturities or some combination of both. Our course of action is subject to
ongoing analysis and consideration of the economic environment. The exact
size, combination or timing of these events is subject to various
considerations, some of which are out of our control, and we
cannot assume that we will be able to secure a refinancing on terms we regard
as favorable, or at all.

Increase in Authorized Shares

On January 23, 2003, a special meeting of our stockholders was held at which we
submitted to a vote of our stockholders, and obtained approval, for an increase
in the number of authorized shares of common stock from 300 million to 525
million.

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Interest Rate Swap Portfolio

Consistent with our risk management policy, we have entered into floating-rate to fixed-rate swap agreements for the
purpose of hedging variability of interest expense and interest payments on our long-term variable rate bank debt.
Our strategy is to use floating to fixed interest rate swap agreements when such transactions will serve to reduce
our aggregate exposure. We enter into these contracts solely for the purpose of reducing variable interest rate
risk; positions are not taken for trading purposes. Our risk management policy requires that we evaluate the credit
of our counterparties and that we monitor counterparty exposure. At December 31, 2002, counterparties for 91% of
our interest rate swap portfolio were rated Aa3. The counterparty for the remaining 9% is rated A1.

Our interest rate swap portfolio continues to fix 98% of our variable rate interest payment obligation, protecting
us from cash flow variations arising from changes in short term interest rates. We believe this is prudent given
our capital structure. At December 31, 2002, we had $2.3 billion of notional amount of interest rate swap contracts
with a weighted average 15 months to maturity. These contracts expire as follows: $650 million during 2003, $1.4
billion during 2004 and $250 million during 2005. Our corporate policy is that at least 75% of our total debt must
be effectively fixed, either directly or through interest rate swap agreements. At December 31, 2002, approximately
98% of our debt was fixed, 72% directly, and 26% through interest rate swap agreements. The average interest rate
paid under swap contracts at December 31, 2002 was 6.06% compared to LIBOR of 1.38%.

In accordance with Statement of Financial Accounting Standards 133, Accounting for Derivative and Hedging Activities
(SFAS 133)as amended by SFAS 138, Accounting for Certain Derivative and Hedging Activities (SFAS 138), a portion of
our interest rate swap portfolio was de-designated for hedge accounting purposes at December 31, 2001. These
contracts remain in place and continue to protect us from cash flow variability. At the time debt obligations are
repaid prior to maturity, we may or may not terminate interest rate swap contracts depending on the reflective
economic considerations.

The following table outlines our maturities debt and interest rate swap contract roll-off schedule as of
December 31, 2002 (in thousands):

|                |  |           |           |           |  |       |           |     |  |   |           |  
|--------------- |  | --------- | --------- | --------- |  | ----- | --------- | --- |  | - | --------- | -
|Debt Maturities |  |           |           |           |  |       |           |     |  |   |           |  
|                |  | Bank Debt |           | All Other |  | Total
|                |  |           |           |           |  |      
|2003            |  | $         |          |           |  | $     | 163,526   | (1) |  | $ | 163,526   |  
|2004            |  |           | 374,061   |           |  |       | 229,778   |     |  |   | 603,839   |  
|2005            |  |           | 525,000   |           |  |       | 84,420    |     |  |   | 609,420   |  
|2006            |  |           | 670,941   |           |  |       | 605,026   |     |  |   | 1,275,967 |  
|2007            |  |           | 805,130   |           |  |       | 793       |     |  |   | 805,923   |  
|Thereafter      |  |           |          |           |  |       | 5,517,130 |     |  |   | 5,517,130 |  
|Discount, net   |  |           |          |           |  |       | (93,637   | )   |  |   | (93,637   | )
|                |  |           |           |           |  |       |           |     |  |   |           |  
|Total           |  | $         | 2,375,132 |           |  | $     | 6,507,036 |     |  | $ | 8,882,168 |  
|                |  |           |           |           |  |       |           |     |  |   |           |  

|                   |  |            |         |               |  |       |           |  |  |   |           | 
|------------------ |  | ---------- | ------- | ------------- |  | ----- | --------- |  |  | - | --------- | 
|Interest Rate Swap |  |            |         |               |  |       |           |  |  |   |           | 
|Contracts Notional |  |            |         |               |  |       |           |  |  |   |           | 
|Amounts            |  |            |         |               |  |       |           |  |  |   |           | 
|                   |  | Designated |         | De-designated |  | Total
|                   |  |            |         |               |  |      
|2003               |  | $          | 250,000 |               |  | $     | 400,000   |  |  | $ | 650,000   | 
|2004               |  |            | 475,000 |               |  |       | 925,000   |  |  |   | 1,400,000 | 
|2005               |  |            | 250,000 |               |  |       |          |  |  |   | 250,000   | 
|                   |  |            |         |               |  |       |           |  |  |   |           | 
|Total              |  | $          | 975,000 |               |  | $     | 1,325,000 |  |  | $ | 2,300,000 | 
|                   |  |            |         |               |  |       |           |  |  |   |           | 



|(1) |  | In January 2003, the 6.10% BFI senior notes were repaid upon maturity with cash
flow from operations and application of our ending balance.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------

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Contingencies

We are currently under examination by various state
and federal taxing authorities for certain tax years.
A federal income tax audit for the years ended
December 31, 1998 and 1999 is ongoing. A federal
income tax audit for BFIs tax years ended September
30, 1996 through July 30, 1999 is completed with the
exception of the matter discussed below.

During 2002, we received notification from the IRS
disallowing all of a capital loss included in BFIs
July 30, 1999 tax return. If such disallowance is
upheld, we estimate it could have a federal and state
income tax effect of up to $310 million plus accrued
interest through December 31, 2002 of approximately
$40 million. We also received a notification from the
IRS assessing a penalty of between 20% and 40% of the
additional income tax resulting from the disallowance.
Because of several meritorious defenses, we believe
the successful assertion of penalties is remote.

In October 2002, the IRS issued a revenue procedure
outlining two resolution alternatives related to this
matter. Taxpayers could elect to participate under
this revenue procedure if certain eligibility
requirements were met. We decided not to participate
under this IRS issuance. We continue to believe our
position is well supported and we will vigorously
contest the disallowance. The resolution of this
matter may entail efforts including administrative
appeals and litigation which could extend over several
years. An unfavorable result could require future
cash expenditures but should have minimal, if any,
impact on our consolidated results of operations as
the amount has been fully reserved for on our
consolidated balance sheet.

We enter into contracts in the normal
course of business that include
indemnification clauses.
Indemnifications relating to known
liabilities are recorded in the
Consolidated Financial Statements
based on our best estimate of required
future payments. We are not able to
determine potential future payments
for indemnifications that relate to
contingent events or occurrences, such
as the imposition of additional taxes
due to a change in the tax law or
adverse interpretation of the tax law,
and indemnifications made in
divestiture agreements where we
indemnify the buyer for liabilities
that may become known in the future
but that relate to our activities
prior to the divestiture.

Subtitle D and other regulations that
apply to the non-hazardous waste
disposal industry have required us, as
well as others in the industry, to
alter operations and to modify or
replace pre-Subtitle D landfills. Such
expenditures have been and will
continue to be substantial. Further
regulatory changes could accelerate
expenditures for closure and
post-closure monitoring and obligate
us to spend sums in addition to those
presently reserved for such purposes.
These factors, together with the other
factors discussed above, could
substantially increase our operating
costs and our ability to invest in our
facilities.

Related Party Transactions

For a description of related party transactions. See Note 16 to our
Consolidated Financial Statements included under Item 8 of this
Form 10-K.

New Accounting Standards

For a description of the new accounting standards that affect us, see Note 1 to
our Consolidated Financial Statements included under Item 8 of this Form 10-K.

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Disclosure Regarding Forward Looking Statements

This Form 10-K includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (Forward Looking Statements).All statements,
other than statements of historical fact included in this report, are Forward
Looking Statements. Although we believe that the expectations reflected in such
Forward Looking Statements are reasonable, we can give no assurance that such
expectations will prove to be correct. Generally, these Forward Looking Statements
include, among others, statements regarding:



| |  |  | our business plans or strategies, projected or anticipated benefits or
other consequences of such plans or strategies;                                                                                                   
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | the adequacy of our cash flow to make payments on our indebtedness and fund
other liquidity needs;                                                                                                                       
| |  |  | our expectation that we will spend approximately $615 million on capital
expenditures, closure, post-closure and remediation expenditures related to
landfill operations in 2003;                                        
| |  |  | our expectations that total capital expenditures will be approximately
8%-10% of revenues in 2003;                                                                                                                       
| |  |  | our ability to increase revenue growth and internal growth by increasing
volumes collected and disposed and by increasing the rates for the services
we provide;                                                         
| |  |  | our Financing Plan including, without limitation, our expectation of
refinancing the 1999 Credit Facility;                                                                                                               
| |  |  | our ability to perform our obligations under financial assurance contracts
and our ability to maintain the current amount and mix of financial assurance
contracts;                                                      
| |  |  | underlying assumptions including internal growth as well as general
economic and financial market conditions;                                                                                                            
| |  |  | our expectation that our casualty, property or environmental claims or
other contingencies will not have a material effect on our operations;                                                                            
| |  |  | our estimate of federal and state income taxes and penalties required to be
paid if we do not prevail in our appeal of the IRS disallowance of capital
losses related to BFI; and                                       
| |  |  | our belief that the costs of settlements or judgments arising from
litigation and the effects of settlements or judgments on our consolidated
liquidity, financial position or results of operation will not be material.

All phases of our operations are subject to a number of uncertainties, risks and
other influences, many of which are outside of our control and any one of which, or
a combination of which, could materially affect the results of our operations.
Important factors that could cause actual results to differ materially from our
expectations are discussed below. These risks and uncertainties include, without
limitations:

Our significant leverage may make it difficult for us to service our debt and operate our business.We have had and will
likely continue to have a substantial amount of outstanding indebtedness with significant debt service requirements. At
December 31, 2002, our consolidated debt was approximately $8.88 billion and our debt to total capitalization was 82.1%.
The degree to which we are leveraged could have important consequences. For example, it could:

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| |  |  | make it more difficult for us to satisfy our obligations with respect to our debt;                                                                                                                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness,
which would reduce the availability of our cash flow to fund internal growth through working capital and capital
expenditures and for other general corporate purposes;
| |  |  | increase our vulnerability to economic downturns in our industry;                                                                                                                                                                                                                     
| |  |  | increase our vulnerability to interest rate increases to the extent any of our variable rate debt is not hedged;                                                                                                                                                                      
| |  |  | place us at a competitive disadvantage compared to our competitors that have less debt in relation to cash flow;                                                                                                                                                                      
| |  |  | limit our flexibility in planning for or reacting to changes in our business and our industry;                                                                                                                                                                                        
| |  |  | limit, among other things, our ability to borrow additional funds or obtain other financing capacity; and                                                                                                                                                                             
| |  |  | subject us to a greater risk of noncompliance with financial and other restrictive covenants in our indebtedness.
The failure to comply with these covenants could result in an event of default which, if not cured or waived, could
have a material negative effect on us.          

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. As of December 31, 2002,
our debt agreements permit us to incur substantial additional indebtedness under various financial ratio tests. As of
December 31, 2002, we had no cash draws outstanding under our $1.3 billion revolving credit facility. As of such date, we
had $724.1 million in letters of credit drawn on the revolving credit facility that support financial assurance purposes,
leaving $567.2 million of availability.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many
factors beyond our control.Our ability to make payments on our indebtedness will depend on our ability to generate cash
flow in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash
flow from operations, available cash and available borrowings under our 1999 Credit Facility will be adequate to meet our
liquidity needs for the foreseeable future.

We cannot assure you that our business will generate sufficient cash flow from operations, or that future borrowings will
be available to us under our 1999 Credit Facility in an amount sufficient to enable us to pay our indebtedness or to fund
other liquidity needs.

We may be unable to refinance
our indebtedness.We may need to refinance all or a portion of
our indebtedness before maturity. We cannot assure you that we will be able to refinance any of our
indebtedness, including our 1999 Credit Facility, on commercially reasonable terms or at all. We may also need to refinance
our senior notes, our senior subordinated notes and/or other
indebtedness to pay the principal amounts due at maturity. There can
be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations
on commercially reasonable terms or at all.

Covenants in our credit facility, our indentures and the instruments governing our other indebtedness may limit our ability
to operate our business.Our 1999 Credit Facility, and certain of the agreements governing our other indebtedness contain
covenants that restrict our ability to make distributions or other payments to our investors and creditors unless we
satisfy certain financial tests or other criteria. We must also comply with certain specified financial ratios and tests.
In some cases, our subsidiaries are subject to similar restrictions which may restrict their ability to make distributions
to us. Our credit facility and these other agreements contain additional affirmative and negative covenants, including
limitation on our ability to incur additional indebtedness and to make acquisitions and capital expenditures. All of these
restrictions could affect our ability to operate our business and may limit our ability to take advantage of potential
business opportunities as they arise.

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If we do not comply with these covenants and restrictions, we could be in default under our credit facility and other debt
agreements and the debt, together with accrued interest, could then be declared immediately due and payable. If we default
under our 1999 Credit Facility, the lenders could cause all of our outstanding debt obligations under such credit facility
to become due and payable, require us to apply all of our cash to
repay the indebtedness under such credit facility or prevent us from making debt
service payments on any other indebtedness we owe. If we are unable to repay any borrowings when due, the lenders under our
1999 Credit Facility could proceed against their collateral, which includes most of the assets we own, including the stock
and assets of our subsidiaries. In addition, any default under our 1999 Credit Facility or agreements governing our other
indebtedness could lead to an acceleration of debt under our other debt instruments that contain cross acceleration or
cross-default provisions. Our ability to comply with these provisions of our credit facility and other agreements governing
our other indebtedness may be affected by changes in the economic or business conditions or other events beyond our
control.

We compete with large companies and municipalities that may have greater financial and operational resources. We also
compete with the use of alternatives to landfill disposal in part because of state requirements to reduce landfill disposal
and we cannot assure you that we will continue to operate our landfills at currently estimated volumes.The non-hazardous
waste collection and disposal industry is highly competitive. We compete with large companies and municipalities which may
have greater financial and operational resources. The non-hazardous waste collection and disposal industry is led by three
large national waste management companies: Allied, Waste Management, Inc., and Republic Services, Inc. It also includes
numerous regional and local companies. Many counties and municipalities that operate their own waste collection and
disposal facilities have the benefits of tax-exempt financing and may control the disposal of waste collected within their
jurisdictions.

We encounter competition due to the use of alternatives to landfill disposal, such as recycling and incineration, because
of state requirements to reduce landfill disposal and we cannot ensure that our landfills will continue to operate at
currently estimated volumes. Further, most of the states or municipalities in which we operate landfills require counties
and municipalities to formulate comprehensive plans to reduce the volume of solid waste deposited in landfills through
waste planning, composting and recycling or other programs. Some state and local governments mandate waste reduction at the
source and prohibit the disposal of certain types of wastes, such as yard wastes, at landfills. These actions may reduce
the volume of waste going to landfills in certain areas. If this occurs, we cannot assure that we will be able to operate
our landfills at their current estimated volumes or charge current prices for landfill disposal services due to the decrease
in demand for services.

If we are unable to execute our business strategy, our waste disposal expenses could increase significantly.Over the long
term, our ability to continue to sustain our current vertical integration strategy will depend on our ability to maintain
appropriate landfill capacity, collection operations and transfer stations. We cannot assure you that we will be able to
replace such assets either timely or cost effectively or integrate acquisition candidates effectively or profitably.
Further, we cannot assure you that we will be successful in expanding the permitted capacity of our current landfills once
our landfill capacity is full. In such event, we may have to dispose
of collected waste at landfills operated by our
competitors or haul the waste long distances at a higher cost to
another of our landfills, either of which could significantly
increase our waste disposal expenses.

We may be unable to obtain required permits.There can be no assurance that we will successfully obtain the permits we
require to operate our business because permits to operate non-hazardous solid waste landfills and to expand the permitted
capacity of existing landfills have become increasingly difficult and expensive to obtain. Permits often take years to
obtain as a result of numerous hearings and compliance with zoning, environmental and other regulatory measures. These
permits are also often subject to resistance from citizen or other groups and other political pressures. Our failure to
obtain the required permits to operate non-hazardous solid waste landfills could have a material negative effect on our
future results of operations.

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The solid waste industry is a capital-intensive industry that may consume cash from our operations and borrowings.Our
ability to remain competitive, grow and expand operations largely depends on our cash flow from operations and access to
capital. We spent approximately $647.3 million in combination for our capital expenditures and capping, closure, and
post-closure and remediation expenditures related to our landfill operations during 2002, and we expect to spend
approximately $615 million for these purposes in 2003. If we undertake more acquisitions or further expand our operations,
the amount we expend on capital, capping, closure, and post-closure and remediation expenditures may increase.
Acquisitions may increase our capital requirements because acquisitions may require sizable amounts of capital, and
competition with other solid waste companies that have a similar acquisition strategy may increase costs. Increases in
expenditures may result in low levels of working capital or require
us to finance working capital deficits. We intend to continue to
fund our cash needs through cash flow from operations and borrowings under our 1999 Credit Facility, if necessary. However,
we may require additional equity and/or debt financing for debt repayment obligations and to fund our growth.

Our cash needs will increase if the expenditures for closure and post-closure monitoring increase above the reserves
recorded for these costs. Expenditures for these costs may increase as a result of any federal, state or local government
regulatory action, including changes in closing or monitoring activities, types and quantities of materials used or the
period of required post-closure monitoring. These factors, together with those discussed above, could substantially
increase our operating costs and therefore impair our ability to invest in our existing facilities or new facilities.

We may not be able to obtain necessary financial assurances.We are required to
provide financial assurances to governmental agencies under applicable
environmental regulations relating to our landfill operations and collection
contracts. In addition, we are required to provide financial assurances for our
self insurance program. We satisfy the financial assurances requirements by
providing performance bonds, letters of credit, insurance policies or trust
deposits. As of December 31, 2002, we have not experienced difficulty in obtaining
the financial assurances that we need and we do not have any indications that we
will not have continued availability of these types of instruments. However, we
cannot make any assurances that the level of financial assurance that we are
required to provide will be available in the future.

Changes in interest rates may effect our results of operations.At December 31, 2002, approximately 98% of our debt was
fixed, 72% directly and 26% through interest rate swap agreements. The amount of this swap contract portfolio was $2.3
billion. For certain interest rate swap agreements, we record non-cash mark to market gains and losses based on changes in
future yield curves to the statement of operations. Changes in the yield curves could result in additional non-cash losses
being recorded in the statement of operations.

Continued downturn in U.S. economic conditions may have an adverse impact on our operating performance and results of
operations.Our business is affected by general economic conditions. The continued weakness in the U.S. economy has had a
negative effect on our operating results, including decreases in revenues and operating cash flows. Additionally, as is
expected in a down-cycle economic environment, we have experienced the negative effects of increased competitive pricing
pressure and customer turnover. If economic conditions continue to deteriorate or fail to recover, we will continue to
experience pressure on the pricing that we are able to achieve for our services. In addition, worsening economic
conditions may lead to further negative effects of customer turnover. There can be no assurance that current economic
conditions or worsening economic conditions or a prolonged or recurring recession will not have a significant adverse
impact on our operating results.

We may be affected by adverse weather conditions.Our collection and landfill operations could be adversely affected by
long periods of inclement weather which interfere with collection and landfill operations, delay the development of
landfill capacity and/or reduce the volume of waste generated by our customers. In addition, certain of our operations may
be temporarily suspended as a result of particularly harsh weather conditions. Severe weather can negatively affect the
costs of collection and disposal. Long periods of inclement weather could have an adverse effect on our results of
operations.

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Loss of key executives and failure to attract qualified management could limit our growth and negatively impact our
operations.We depend highly upon our senior management team. We will continue to depend on operations management personnel
with waste industry experience. We do not know the availability of such experienced management personnel or how much it may
cost to attract and retain such personnel. The loss of the services of any member of senior management or the inability to
hire experienced operations management personnel could have a
material adverse effect on our operations and financial
condition.

We are subject to costly environmental regulations and environmental litigation.Our equipment, facilities, and operations
are subject to extensive and changing federal, state, and local environmental laws and regulations relating to
environmental protection and occupational health and safety. These include, among other things, laws and regulations
governing the use, treatment, storage, and disposal of solid and hazardous wastes and materials, air quality, water quality
and the remediation of contamination associated with the release of hazardous substances.

Our compliance with these regulatory requirements is costly. Government laws and regulations often require us to enhance
or replace our equipment and to modify landfill operations or initiate final closure of a landfill. We cannot assure you
that we will be able to implement price increases sufficient to offset the cost of complying with these laws and
regulations. In addition, environmental regulatory changes could accelerate or increase expenditures for closure and
post-closure monitoring at solid waste facilities and obligate us to spend sums in addition to those presently accrued for
such purposes.

In addition to the costs of complying with environmental regulations, we incur costs to defend against litigation brought
by government agencies and private parties who allege we are in violation of our permits. As a result, we may be required
to pay fines or our permits and licenses may be modified or revoked. We are, and also may be in the future, defendants in
lawsuits brought by governmental agencies and surrounding landowners who assert claims alleging environmental damage,
personal injury, property damage and/or violations of permits and licenses by us. A significant judgment against us, the
loss of a significant permit or license or the imposition of a significant fine could have a material negative effect on
our financial condition.

Certain of our waste disposal operations traverse state and county boundaries. In the future, our collection, transfer and
landfill operations may also be affected by proposed federal legislation that authorizes the states to enact legislation
governing interstate shipments of waste. Such proposed federal legislation may allow individual states to prohibit or limit
importing out-of-state waste to be disposed of and may require states, under some circumstances, to reduce the amount of
waste exported to other states. If this or similar legislation is enacted in states in which we operate landfills that
receive a significant portion of waste originating from out-of-state, our operations could be negatively affected. We
believe that several states have proposed or have considered adopting legislation that would regulate the interstate
transportation and disposal of waste in the states landfills. Our collection, transfer and landfill operations may also be
affected by flow control legislation which may be proposed in the United States Congress. This proposed federal
legislation may allow states and local governments to direct waste generated within their jurisdictions to a specific
facility for disposal or processing. If this or similar legislation is enacted, state or local governments with
jurisdiction over our landfills could act to limit or prohibit disposal or processing of waste in our landfills.

We may have potential environmental liabilities that are greater than our insurance coverage.We may incur liabilities for
the deterioration of the environment as a result of our operations. Any substantial liability for environmental damage
could materially adversely affect our operating results and financial condition. Due to the limited nature of our insurance
coverage of environmental liability, if we were to incur substantial financial liability for environmental damage, our
business and financial condition could be materially adversely affected.

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We may have additional hazardous substances liability.We are a potentially responsible party at many sites under the
CERCLA and analogous state laws. CERCLA provides for the remediation of contaminated facilities and imposes strict, joint
and several liability on current and former owners or operators of a facility at which there has been a release or a
threatened release of a hazardous substance, on persons who arrange for the disposal of such substances at the facility
and on persons who transport such substances to the facility. Hundreds of substances are defined as hazardous under
CERCLA and their presence, even in minute amounts, can result in substantial liability. As used in this report,
non-hazardous waste means substances that are not defined as hazardous waste under federal regulations. The statute
provides for the remediation of contaminated facilities and imposes costs on the responsible parties. The expense of
conducting such a cleanup can be significant. We have significant liabilities under these laws, primarily due to acquired
businesses and properties and their former operations. Notwithstanding our efforts to comply with applicable regulations
and to avoid transporting and receiving hazardous substances, we may have additional liability because such substances may
be present in waste collected by us or disposed of in our landfills, or in waste collected, transported or disposed of in
the past by acquired companies. In addition, actual costs for these liabilities could be significantly greater than amounts
presently accrued for these purposes.

There may be undisclosed liabilities associated with our acquisitions.In connection with any acquisition made by us,
there may be liabilities that we fail to discover or are unable to discover including liabilities arising from
non-compliance with environmental laws by prior owners and for which we, as successor owner, may be responsible.
Similarly, we incur capitalized costs associated with acquisitions, which may never be consummated, resulting in a
potential charge to earnings.

We are subject to examination by various federal and state taxing authorities.We are currently under examination by
various federal and state taxing authorities for certain tax years. Any material disagreement with a taxing authorities
could result in large cash expenditures and adversely affect our operating results and financial condition. A federal
income tax audit for the years ended December 31, 1998 and 1999 is ongoing. A federal income tax audit for BFIs tax years
ended September 30, 1996 through July 30, 1999, is completed with the exception of the matter discussed below. During the
second quarter of 2002, we received notification from the Internal Revenue Service (IRS) disallowing all of a capital loss
included in BFIs July 30, 1999 tax return. If such disallowance is upheld, we estimate it could have a federal and state
income tax effect of up to $310 million plus accrued interest through December 31, 2002 of approximately $40 million. We
also received notification from the IRS assessing a penalty of between 20% and 40% of the additional income tax resulting
from the disallowance. In October 2002, the IRS issued a revenue procedure outlining two resolution alternatives related
to this matter. Taxpayers could elect to participate under this revenue procedure if certain eligibility requirements were
met. We decided not to participate under this IRS issuance.

We believe that the resolution of this matter may entail efforts including administrative appeals and litigation extending
over several years. An unfavorable result of this matter could require future potential cash expenditures that could have
a material negative effect on our financial condition.

Fluctuations in commodity prices could affect our operating results.As part of our recycling services, we process
recyclable materials such as paper, cardboard, plastics, aluminum and other metals for sale to third parties, generally at
current market prices. All of these materials are subject to significant price fluctuations, which are driven by general
market conditions. These price fluctuations may affect our future operating income and cash flows.

Inflation and Prevailing Economic Conditions

Our objective is to be able to implement
price increases sufficient to offset most
cost increases resulting from inflation.
However, competitive factors have and may
continue to require us to absorb cost
increases resulting from inflation. As a
result, we have been unable to implement
price increases sufficient to offset cost
increases resulting from inflation.
Consistent with industry practice, most of
our contracts provide for a pass through of
certain costs, including increases in
landfill tipping fees and, in some cases,
fuel costs. We are unable to determine the
future impact of a sustained economic
slowdown.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

We are subject to interest rate risk on our variable rate long-term debt. To reduce the risk from
interest rate fluctuations, we enter into hedging transactions that have been authorized pursuant to
our policies and procedures. We do not use financial instruments for trading purposes and are not a
party to any leveraged derivatives.

We have effectively converted a significant portion of our long-term debt, which required payment at
variable rates of interest, to fixed rate obligations through interest rate swap transactions. During
2002, these transactions required us to pay fixed rates of interest on notional amounts of principal
to counter-parties. The counter-parties, in turn, paid to us variable rates of interest on the same
notional amounts of principal. Increases or decreases in short-term market rates did not materially
impact earnings and cash flow in 2002 as a significant portion of variable rate debt had been swapped
for fixed rates. The following interest rate table summarizes all interest rate swaps that were in
effect and their fair value as of December 31, 2002:

|                   |  |                           |  |               |      |                  |  |                    |  |                |  |             |          | 
|------------------ |  | ------------------------- |  | ------------- | ---- | ---------------- |  | ------------------ |  | -------------- |  | ----------- | -------- | 
|                   |  |                           |  |               |      |                  |  |                    |  |                |  | Fair Market
|Notional Principal |  |                           |  |               |      |                  |  | Underlying         |  |                |  | Value      
|(in thousands)     |  | Maturity                  |  | Interest Paid |      | Obligations      |  | Interest Received  |  | (in thousands)
|                   |  |                           |  |               |      |                  |  |                    |  |               
|                   |  |                           |  |               |      | Credit Agreement |  |                    |  |               
|$2,300,000         |  | January 2003  March 2005 |  |               | 6.06 | %                |  | Term Loan Facility |  | Libor          |  |             | $125,746 | 

At December 31, 2002, with 98% of our debt fixed either directly or through interest rate swap
agreements, we have $170.5 million of floating rate debt. If interest rates increased by 100 basis
points, annualized interest expense would increase by $1.7 million ($1.0 million after tax). This
analysis does not reflect the effect that declining interest rates would have on other items, such as
new borrowings nor the favorable impact they would have on interest expense and cash payments for
interest. Accordingly, any changes in interest rates would have a minimal impact on our net income.
See Notes 5 and 6 to our Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information regarding how we manage interest rate risk.

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Item 8.Financial Statements and Supplementary Data

Report of Independent Accountants by PricewaterhouseCoopers LLP.

Report of Independent Public Accountants by Arthur Andersen LLP.

Consolidated Balance Sheets as of December 31, 2002 and 2001.

Consolidated Statements of Operations for the Three Years Ended December 31, 2002.

Consolidated
Statements of Stockholders Equity for the Three Years Ended
     December 31, 2002.

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2002.

Notes to Consolidated Financial Statements.

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Report of Independent Accountants

To the Board of Directors and Shareholders
of Allied Waste Industries, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders equity and of cash
flows present fairly, in all material respects, the financial position of
Allied Waste Industries, Inc. and its subsidiaries at December 31, 2002 and
2001, and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the 2001 and 2002 information included in the financial statement
schedule included in Item 15 of Part IV herein presents fairly, in all material
respects, the 2001 and 2002 information set forth therein when read in
conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of
the Companys management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion. The financial statements of the Company for the year ended
December 31, 2000, prior to the revisions discussed in
Notes 1 and 3 to the consolidated financial statements and the 2000 financial statement schedule information, were audited by other independent accountants who have ceased
operations. Those independent accountants expressed an unqualified opinion on
those statements and that schedule information dated February 8, 2002.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments as of January 1,
2001, and the Company changed its method of accounting for goodwill and other
intangible assets as of January 1, 2002.

As discussed above, the financial statements of Allied Waste Industries, Inc.
for the year ended December 31, 2000, were audited by other independent
accountants who have ceased operations. As described in Note 1 to the
consolidated financial statements, these financial statements have
been revised to classify amounts previously reported
as Acquisition related and Unusual Costs as components of
Cost of Operations and Selling, general and
administrative expenses. In addition, as described
in Note 3 to the consolidated financial statements, these financial statements have been revised to
include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which was adopted by the Company as of
January 1, 2002. We audited the adjustments described in
Note 1 that were applied to revise the 2000 consolidated
financial statements and the transitional disclosures for 2000
described in Note 3. In our opinion, such adjustments described
in Note 1 are appropriate and have been properly applied and the transitional disclosures for 2000 in Note 3 are appropriate. However, we were not engaged to audit,
review, or apply any procedures to the 2000 consolidated financial statements of the Company
other than with respect to such adjustments and transitional disclosures and, accordingly, we do not express
an opinion or any other form of assurance on the 2000 consolidated financial statements
taken as a whole.

PricewaterhouseCoopers LLP

Phoenix, Arizona
February 13, 2003

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THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP AND ARTHUR
ANDERSEN LLP DID NOT CONSENT TO THE USE OF THIS REPORT IN THIS FORM 10-K OR ANY
PREVIOUSLY FILED REGISTRATION STATEMENTS. AS DISCUSSED IN NOTE 3, THE COMPANY
HAS REVISED ITS FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2000 TO
INCLUDE THE TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 142,GOODWILL AND INTANGIBLE ASSETS. THE ARTHUR
ANDERSEN REPORT DOES NOT EXTEND TO THESE CHANGES. THE REVISIONS TO THE 2000
FINANCIAL STATEMENTS RELATED TO THESE TRANSITIONAL DISCLOSURES WERE REPORTED ON
BY PRICEWATERHOUSECOOPERS LLP, AS STATED IN THEIR REPORT APPEARING HEREIN.

Report of Independent Public Accountants

To Allied Waste Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Allied Waste
Industries, Inc., (a Delaware corporation) and subsidiaries as of December 31,
2001* and 2000**, and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements and the schedule referred
to below are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allied Waste Industries, Inc.
and subsidiaries as of December 31, 2001* and 2000**, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

As explained in Note 1 to the financial statements, effective January 1, 1999,
the Company changed its method of accounting for the capitalization of
interest, and effective January 1, 2001*, the Company changed its method for
accounting for derivatives.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II listed in Item 14 of Part IV
herein*** is presented for purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Phoenix, Arizona
February 8, 2002 *

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| | *   | Subsequent to the date of this report, the
Consolidated Balance Sheet as of December 31, 2001
and the related Consolidated Statements of
Operations, Stockholders Equity and Cash Flows for
the year then ended were audited by
PricewaterhouseCoopers LLP whose report appears on
page 58 on Form 10-K filed herein.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | **  | The Companys Consolidated Balance Sheet as of
December 31, 2000 is not included in this Form 10-K.                                                                                                                                                                                                                   
|
| | *** | The information referred to herein for the year ended
December 31, 2000 is included in Item 15 on this Form
10-K.                                                                                                                                                                                                     

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ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

|                                                                                                                                                    |                                            |   |              |            |      |   |           |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------ | ---------- | ---- | - | --------- | ---------- | 
|                                                                                                                                                    |                                            |   | December 31,
|                                                                                                                                                    |                                            |   |             
|                                                                                                                                                    |                                            |   | 2002         |            | 2001
|                                                                                                                                                    |                                            |   |              |            |     
|ASSETS                                                                                                                                              |                                            |   |              |            |      |   |           |           
|Current Assets                                                                                                                                    
|Cash and cash equivalents                                                                                                                           |                                            | $ | 180,285      |            |      | $ | 158,841   |           
|Accounts receivable, net of allowance of $23,692 and $31,876                                                                                        |                                            |   | 687,616      |            |      |   | 751,416   |           
|Prepaid and other current assets                                                                                                                    |                                            |   | 99,765       |            |      |   | 132,026   |           
|Deferred income taxes, net                                                                                                                          |                                            |   | 104,421      |            |      |   | 156,203   |           
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|                                                                                                                                                    | Total current assets                       |   |              | 1,072,087  |      |   |           | 1,198,486  | 
|Property and equipment, net                                                                                                                         |                                            |   | 4,081,372    |            |      |   | 4,010,886 |           
|Goodwill, net                                                                                                                                       |                                            |   | 8,530,463    |            |      |   | 8,556,877 |           
|Other assets, net                                                                                                                                   |                                            |   | 245,000      |            |      |   | 580,844   |           
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|                                                                                                                                                    | Total assets                               |   | $            | 13,928,922 |      |   | $         | 14,347,093 | 
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                |                                            |   |              |            |      |   |           |           
|Current Liabilities                                                                                                                               
|Current portion of long-term debt                                                                                                                   |                                            | $ | 163,526      |            |      | $ | 22,130    |           
|Accounts payable                                                                                                                                    |                                            |   | 431,222      |            |      |   | 456,063   |           
|Current portion of accrued closure, post-closure and
environmental costs                                                                            |                                            |   | 95,249       |            |      |   | 126,885   |           
|Accrued interest                                                                                                                                    |                                            |   | 182,039      |            |      |   | 192,872   |           
|Other accrued liabilities                                                                                                                           |                                            |   | 349,536      |            |      |   | 402,816   |           
|Unearned revenue                                                                                                                                    |                                            |   | 228,221      |            |      |   | 232,769   |           
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|                                                                                                                                                    | Total current liabilities                  |   |              | 1,449,793  |      |   |           | 1,433,535  | 
|Long-term debt, less current portion                                                                                                                |                                            |   | 8,718,642    |            |      |   | 9,237,503 |           
|Deferred income taxes                                                                                                                               |                                            |   | 509,910      |            |      |   | 418,836   |           
|Accrued closure, post-closure and environmental costs,
less current portion                                                                         |                                            |   | 864,674      |            |      |   | 878,006   |           
|Other long-term obligations                                                                                                                         |                                            |   | 449,901      |            |      |   | 624,390   |           
|Commitments
and contingencies                                                                                                                      
|Series A senior convertible preferred stock, 1,000 shares
authorized, issued and outstanding, liquidation
preference of $1,247 and $1,169 per share |                                            |   | 1,246,904    |            |      |   | 1,169,044 |           
|Stockholders Equity                                                                                                                              
|Common stock; $0.01 par value; 300,000 authorized shares;
196,215 and 196,236 shares issued and outstanding                                         |                                            |   | 1,962        |            |      |   | 1,962     |           
|Additional paid-in capital                                                                                                                          |                                            |   | 989,647      |            |      |   | 1,055,353 |           
|Accumulated other comprehensive loss                                                                                                                |                                            |   | (131,206     | )          |      |   | (85,120   | )         
|Retained deficit                                                                                                                                    |                                            |   | (171,305     | )          |      |   | (386,416  | )         
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|                                                                                                                                                    | Total stockholders equity                 |   |              | 689,098    |      |   |           | 585,779    | 
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           
|                                                                                                                                                    | Total liabilities and stockholders equity |   | $            | 13,928,922 |      |   | $         | 14,347,093 | 
|                                                                                                                                                    |                                            |   |              |            |      |   |           |           

The accompanying Notes to Consolidated Financial Statements are an integral part of these
balance sheets.

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ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |           | 
|-------------------------------------------------------------------------------------------- | -------------------------------------------------- | - | ------------------------ | --------- | ---- | - | --------- | --------- | - | - | --------- | --------- | 
|                                                                                             |                                                    |   | Years Ended December 31,
|                                                                                             |                                                    |   |                         
|                                                                                             |                                                    |   | 2002                     |           | 2001 |   | 2000     
|                                                                                             |                                                    |   |                          |           |      |   |          
|Revenues                                                                                     |                                                    | $ | 5,517,306                |           |      | $ | 5,565,260 |           |   | $ | 5,707,485 |          
|Cost of operations                                                                           |                                                    |   | 3,289,616                |           |      |   | 3,205,638 |           |   |   | 3,367,580 |          
|Selling, general and administrative expenses                                                 |                                                    |   | 484,502                  |           |      |   | 456,100   |           |   |   | 430,846   |          
|Depreciation and amortization                                                                |                                                    |   | 496,489                  |           |      |   | 466,323   |           |   |   | 450,794   |          
|Goodwill amortization                                                                        |                                                    |   |                         |           |      |   | 226,713   |           |   |   | 223,244   |          
|Non-cash (gain) loss on divestiture of assets                                                |                                                    |   | (9,339                   | )         |      |   | 107,011   |           |   |   | 26,486    |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Operating income                                   |   |                          | 1,256,038 |      |   |           | 1,103,475 |   |   |           | 1,208,535 | 
|Equity in earnings of unconsolidated affiliates                                              |                                                    |   |                         |           |      |   | (14,072   | )         |   |   | (50,788   | )        
|Interest expense and other                                                                   |                                                    |   | 845,327                  |           |      |   | 847,581   |           |   |   | 878,155   |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Income before income taxes                         |   |                          | 410,711   |      |   |           | 269,966   |   |   |           | 381,168   | 
|Income tax expense                                                                           |                                                    |   | 183,614                  |           |      |   | 190,834   |           |   |   | 237,540   |          
|Minority interest                                                                            |                                                    |   | 1,891                    |           |      |   | 3,673     |           |   |   | 5,975     |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Income before extraordinary loss                   |   |                          | 225,206   |      |   |           | 75,459    |   |   |           | 137,653   | 
|Extraordinary loss,
net of income tax benefit                                                |                                                    |   | 10,095                   |           |      |   | 16,973    |           |   |   | 13,266    |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Net income                                         |   |                          | 215,111   |      |   |           | 58,486    |   |   |           | 124,387   | 
|Dividends on preferred stock                                                                 |                                                    |   | 77,874                   |           |      |   | 73,012    |           |   |   | 68,452    |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Net income (loss) available to common shareholders |   | $                        | 137,237   |      |   | $         | (14,526   | ) |   | $         | 55,935    | 
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Basic EPS:                                                                                   |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Income available to common shareholders before
extraordinary loss, net of income tax benefit |                                                    | $ | 0.77                     |           |      | $ | 0.01      |           |   | $ | 0.37      |          
|Extraordinary loss, net of income tax benefit                                                |                                                    |   | (0.05                    | )         |      |   | (0.08     | )         |   |   | (0.07     | )        
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Net income (loss) available to common shareholders |   | $                        | 0.72      |      |   | $         | (0.07     | ) |   | $         | 0.30      | 
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Weighted average common shares                                                               |                                                    |   | 190,210                  |           |      |   | 189,583   |           |   |   | 188,814   |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Diluted EPS:                                                                                 |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Income available to common shareholders before
extraordinary loss, net of income tax benefit |                                                    | $ | 0.76                     |           |      | $ | 0.01      |           |   | $ | 0.36      |          
|Extraordinary loss, net of income tax benefit                                                |                                                    |   | (0.05                    | )         |      |   | (0.08     | )         |   |   | (0.07     | )        
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|                                                                                             | Net income (loss) available to common shareholders |   | $                        | 0.71      |      |   | $         | (0.07     | ) |   | $         | 0.29      | 
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          
|Weighted average common and common equivalent shares                                         |                                                    |   | 193,508                  |           |      |   | 194,906   |           |   |   | 191,122   |          
|                                                                                             |                                                    |   |                          |           |      |   |           |           |   |   |           |          

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands)

|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |         |         |  
|------------------------------- | ----------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | -- | ------ | - | ------------------ | ------- | ------------------ | - | -------- | - | ------------- | ------- | ----------------------- | ------- | - | - | ------- | ------- | ------- | ------- | ------------------------------- | ------- | ------- | ------- | -
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         | Total   |         | Comprehensive Income/(Loss) for
|                                |                                                                   |                                                                |                                                                |    | Common |   | Additional Paid-In |         | Accumulated        |   | Retained |   | Stockholders |         | the Twelve Months Ended
|                                |                                                                   |                                                                |                                                                |    | Stock  |   | Capital            |         | Comprehensive Loss |   | Deficit  |   | Equity        |         | December 31,           
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                        
|Balance as of December 31, 1999 |                                                                   | $                                                              | 1,885                                                          |    |        | $ | 1,179,181          |         |                    | $ |         |   |               | $       | (569,289                | )       |   | $ | 611,777 |         |         |         |                                 |        
|                                | Common stock issued, net                                          |                                                                |                                                                | 73 |        |   |                    | 2,670   |                    |   |          |  |               |         |                         |        |   |   |         | 2,743   |         |         |                                 |         |        
|                                | Stock options, net                                                |                                                                |                                                                | 3  |        |   |                    | 1,155   |                    |   |          |  |               |         |                         |        |   |   |         | 1,158   |         |         |                                 |         |        
|                                | Dividends declared on Series A senior
convertible preferred stock |                                                                |                                                                |   |        |   |                    | (68,452 | )                  |   |          |  |               |         |                         |        |   |   |         | (68,452 | )       |         |                                 |         |        
|                                | Net income                                                        |                                                                |                                                                |   |        |   |                    |        |                    |   |          |  |               |         |                         | 124,387 |   |   |         | 124,387 |         |         | $                               | 124,387 |        
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|Balance as of December 31, 2000 |                                                                   | $                                                              | 1,961                                                          |    |        | $ | 1,114,554          |         |                    | $ |         |   |               | $       | (444,902                | )       |   | $ | 671,613 |         |         | $       | 124,387                         |        
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|                                | Common stock issued, net                                          |                                                                |                                                                | (6 | )      |   |                    | 5,477   |                    |   |          |  |               |         |                         |        |   |   |         | 5,471   |         |         |                                 |         |        
|                                | Stock options, net                                                |                                                                |                                                                | 7  |        |   |                    | 8,334   |                    |   |          |  |               |         |                         |        |   |   |         | 8,341   |        
|                                | Dividends declared on Series A senior
convertible preferred stock |                                                                |                                                                |   |        |   |                    | (73,012 | )                  |   |          |  |               |         |                         |        |   |   |         | (73,012 | )       |         |                                 |         |        
|                                | Net income                                                        |                                                                |                                                                |   |        |   |                    |        |                    |   |          |  |               |         |                         | 58,486  |   |   |         | 58,486  |         |         | $                               | 58,486  |        
|                                | Other comprehensive
loss, net of tax:                             |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|                                |                                                                   | Cumulative effect of change in
accounting principle            |                                                                |    |       |   |                    |         |                   |   |          |   | (45,193       | )       |                         |         |  |   |         |         | (45,193 | )       |                                 |         | (45,193 | )      
|                                |                                                                   | Net loss deferred
on hedging derivatives                       |                                                                |    |       |   |                    |         |                   |   |          |   | (89,194       | )       |                         |         |  |   |         |         | (89,194 | )       |                                 |         | (89,194 | )      
|                                |                                                                   | Less: Net loss on
hedging derivatives
reclassified to earnings |                                                                |    |       |   |                    |         |                   |   |          |   | 49,267        |         |                         |         |  |   |         |         | 49,267  |         |                                 |         | 49,267  |        
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|Balance as of December 31, 2001 |                                                                   | $                                                              | 1,962                                                          |    |        | $ | 1,055,353          |         |                    | $ | (85,120  | ) |               | $       | (386,416                | )       |   | $ | 585,779 |         |         | $       | (26,634                         | )      
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|                                | Common stock issued, net                                          |                                                                |                                                                | (3 | )      |   |                    | 6,577   |                    |   |          |  |               |         |                         |        |   |   |         | 6,574   |         |         |                                 |         |        
|                                | Stock options, net                                                |                                                                |                                                                | 3  |        |   |                    | 5,591   |                    |   |          |  |               |         |                         |        |   |   |         | 5,594   |         |         |                                 |         |        
|                                | Dividends declared on Series A senior
convertible preferred stock |                                                                |                                                                |   |        |   |                    | (77,874 | )                  |   |          |  |               |         |                         |        |   |   |         | (77,874 | )       |         |                                 |         |        
|                                | Net income                                                        |                                                                |                                                                |   |        |   |                    |        |                    |   |          |  |               |         |                         | 215,111 |   |   |         | 215,111 |         |         | $                               | 215,111 |        
|                                | Other comprehensive
loss, net of tax:                             |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|                                |                                                                   |                                                                | Net gain deferred
on hedging derivatives                       |    |        |  |                    |         |                    |  |          |   |               | 7,346   |                         |         |   |  |         |         |         | 7,346   |                                 |         |         | 7,346   |  
|                                |                                                                   |                                                                | Less: Net loss on
hedging derivatives
reclassified to earnings |    |        |  |                    |         |                    |  |          |   |               | 21,328  |                         |         |   |  |         |         |         | 21,328  |                                 |         |         | 21,328  |  
|                                |                                                                   |                                                                | Minimum pension
liability adjustment                           |    |        |  |                    |         |                    |  |          |   |               | (74,760 | )                       |         |   |  |         |         |         | (74,760 | )                               |         |         | (74,760 | )
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        
|Balance as of December 31, 2002 |                                                                   | $                                                              | 1,962                                                          |    |        | $ | 989,647            |         |                    | $ | (131,206 | ) |               | $       | (171,305                | )       |   | $ | 689,098 |         |         | $       | 169,025                         |        
|                                |                                                                   |                                                                |                                                                |    |        |   |                    |         |                    |   |          |   |               |         |                         |         |   |   |         |         |         |         |                                 |         |        

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |            |  
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | - | ------------------------ | ---------- | ---- | - | -------- | ---------- | - | - | -------- | ---------- | -
|                                                                                            |                                                                                                       |   | Years Ended December 31,
|                                                                                            |                                                                                                       |   |                         
|                                                                                            |                                                                                                       |   | 2002                     |            | 2001 |   | 2000    
|                                                                                            |                                                                                                       |   |                          |            |      |   |         
|Operating activities                                                                      
|                                                                                            | Net income                                                                                            | $ | 215,111                  |            |      | $ | 58,486   |            |   | $ | 124,387  |           
|Adjustments to reconcile net
income to cash provided by operating activities              
|Provisions
for:                                                                            
|                                                                                            | Depreciation and amortization                                                                         |   |                          | 496,489    |      |   |          | 693,036    |   |   |          | 674,038    |  
|                                                                                            | Non-cash (gain) loss on divestiture of assets                                                         |   |                          | (9,339     | )    |   |          | 107,011    |   |   |          | 26,486     |  
|                                                                                            | Undistributed earnings of equity investment in unconsolidated
affiliates                              |   |                          |           |      |   |          | (14,072    | ) |   |          | (38,190    | )
|                                                                                            | Doubtful accounts                                                                                     |   |                          | 18,528     |      |   |          | 23,937     |   |   |          | 19,463     |  
|                                                                                            | Accretion of debt and amortization of debt issuance costs                                             |   |                          | 43,210     |      |   |          | 42,658     |   |   |          | 44,219     |  
|                                                                                            | Deferred income tax                                                                                   |   |                          | 163,816    |      |   |          | 169,533    |   |   |          | 193,054    |  
|                                                                                            | Gain on sale of fixed assets                                                                          |   |                          | (7,074     | )    |   |          | (13,862    | ) |   |          | (10,513    | )
|                                                                                            | Extraordinary loss due to early extinguishments of debt,
net of income tax benefit                    |   |                          | 8,256      |      |   |          | 12,348     |   |   |          | 13,266     |  
|                                                                                            | Non-cash gain on de-designated interest rate swap
contracts                                           |   |                          | (2,416     | )    |   |          |           |   |   |          |           |  
|                                                                                            | Amortization of accumulated other comprehensive income for
de-designated interest rate swap contracts |   |                          | 35,400     |      |   |          |           |   |   |          |           |  
|Change in operating assets and liabilities, excluding the effects
of purchase acquisitions
|                                                                                            | Accounts receivable, prepaid expenses, inventories and other                                          |   | 59,484                   |            |      |   | (8,376   | )          |   |   | 3,238    |           
|                                                                                            | Accounts payable, accrued liabilities, unearned revenue,
stock option tax benefits and other          |   |                          | 134,105    |      |   |          | (21,951    | ) |   |          | (41,859    | )
|                                                                                            | Expenditures against non-recurring acquisition accruals                                               |   |                          | (88,655    | )    |   |          | (115,106   | ) |   |          | (167,542   | )
|                                                                                            | Closure and post-closure provision                                                                    |   |                          | 70,786     |      |   |          | 67,202     |   |   |          | 61,727     |  
|                                                                                            | Closure, post-closure and environmental expenditures                                                  |   |                          | (104,952   | )    |   |          | (95,630    | ) |   |          | (98,458    | )
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Cash provided by operating activities                                                       |                                                                                                       |   | 1,032,749                |            |      |   | 905,214  |            |   |   | 803,316  |           
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Investing activities                                                                      
|                                                                                            | Cost of acquisitions, net of cash acquired                                                            |   | (51,366                  | )          |      |   | (249,462 | )          |   |   | (802,876 | )         
|                                                                                            | Proceeds
from divestitures and other, net of cash divested                                            |   |                          | 82,629     |      |   |          | 359,866    |   |   |          | 1,039,182  |  
|                                                                                            | Accruals for acquisition price and severance costs                                                    |   |                          |           |      |   |          | (1,668     | ) |   |          | (27,820    | )
|                                                                                            | Net distributions from unconsolidated affiliates                                                      |   |                          |           |      |   |          |           |   |   |          | 15,372     |  
|                                                                                            | Capital expenditures, excluding acquisitions                                                          |   |                          | (542,324   | )    |   |          | (500,912   | ) |   |          | (389,918   | )
|                                                                                            | Capitalized interest                                                                                  |   |                          | (20,622    | )    |   |          | (45,704    | ) |   |          | (45,352    | )
|                                                                                            | Proceeds from sale of fixed assets                                                                    |   |                          | 30,250     |      |   |          | 30,879     |   |   |          | 42,874     |  
|                                                                                            | Change in deferred acquisition costs, notes receivable and other                                      |   |                          | (22,344    | )    |   |          | (27,047    | ) |   |          | (41,413    | )
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Cash used for investing activities                                                          |                                                                                                       |   | (523,777                 | )          |      |   | (434,048 | )          |   |   | (209,951 | )         
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Financing activities                                                                      
|                                                                                            | Net proceeds from sale of common stock and exercise of
stock options                                  |   | 2,803                    |            |      |   | 6,401    |            |   |   | 1,724    |           
|                                                                                            | Change in disbursement account                                                                        |   |                          | (87,055    | )    |   |          |           |   |   |          |           |  
|                                                                                            | Proceeds from long-term debt, net of issuance costs                                                   |   |                          | 1,044,264  |      |   |          | 2,755,829  |   |   |          | 2,202,000  |  
|                                                                                            | Repayments of long-term debt                                                                          |   |                          | (1,447,540 | )    |   |          | (3,196,649 | ) |   |          | (2,796,400 | )
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Cash used for financing activities                                                          |                                                                                                       |   | (487,528                 | )          |      |   | (434,419 | )          |   |   | (592,676 | )         
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Increase in cash and cash equivalents                                                       |                                                                                                       |   | 21,444                   |            |      |   | 36,747   |            |   |   | 689      |           
|Cash and cash equivalents, beginning of year                                                |                                                                                                       |   | 158,841                  |            |      |   | 122,094  |            |   |   | 121,405  |           
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           
|Cash and cash equivalents, end of year                                                      |                                                                                                       | $ | 180,285                  |            |      | $ | 158,841  |            |   | $ | 122,094  |           
|                                                                                            |                                                                                                       |   |                          |            |      |   |          |            |   |   |          |           

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Allied Waste Industries, Inc., (Allied, we or the Company), a Delaware
corporation, is the second largest, non-hazardous solid waste management
company in the United States, as measured by revenues. We provide non-hazardous
waste collection, transfer, recycling and disposal services in 39 states
geographically identified as the Central, Eastern, Southern and Western areas
of the United States.

Principles of consolidation and presentation 

The Consolidated Financial Statements
include the accounts of Allied and its
subsidiaries. All significant intercompany
accounts and transactions are eliminated
in consolidation.

Certain reclassifications have been made
to the prior period financial statements
to conform to the current year
presentation.

Cash and cash equivalents 

We use a cash management system under
which our book balance reflects a credit
for our primary disbursement account.
This amount represents uncleared checks
which have not been presented to our bank.
Our funds are transferred as checks are
presented. At December 31, 2002 and 2001,
the book credit balance of $60.0 million and
$147.0 million, respectively, in our
primary disbursement account was reported
in accounts payable. We consider any
liquid investments with an original
maturity of three months or less to be
cash equivalents. Amounts are stated at
quoted market prices.

Concentration of credit risk 

Financial instruments that potentially
subject us to concentrations of credit
risk consist of cash and cash equivalents
and trade receivables. We place our cash
and cash equivalents with high quality
financial institutions and manage the
amount of credit exposure with any one
financial institution. Concentrations of
credit risk with respect to trade
receivables are limited due to the large
number of customers comprising our
customer base.

Allowance for doubtful accounts 

We provide services to approximately 10
million customers throughout the United
States. We perform credit evaluations of
our significant customers and establish an
allowance for doubtful accounts based on
the aging of our receivables, payment
performance factors, historical trends and
other information. In general, we reserve
50% of those receivables outstanding 90 to
120 days and 100% of those outstanding
over 120 days. We also review outstanding
balances on an account specific basis and
fully reserve the receivable prior to 120
days if information becomes available
indicating we will not receive payment.
Our reserve is evaluated and revised on a
monthly basis. The allowance as of
December 31, 2002 and 2001 was
approximately $23.7 million and $31.9
million, respectively.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other assets 

The following table shows the balances included in other assets as of December 31 (in millions):

|                                                      |  |      |       |      |  |   |       | 
|----------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                                                      |  | 2002 |       | 2001
|                                                      |  |      |       |     
|Investments in unconsolidated affiliates
(see Note 4) |  | $    |      |      |  | $ | 179.9 | 
|Deferred financing costs                              |  |      | 137.4 |      |  |   | 175.0 | 
|Prepaid
pension asset (see Note 9)                    |  |      |      |      |  |   | 100.0 | 
|Landfill closure deposits                             |  |      | 27.3  |      |  |   | 36.6  | 
|Deferred contract costs                               |  |      | 6.6   |      |  |   | 21.9  | 
|Other                                                 |  |      | 73.7  |      |  |   | 67.4  | 
|                                                      |  |      |       |      |  |   |       | 
|Total                                                 |  | $    | 245.0 |      |  | $ | 580.8 | 
|                                                      |  |      |       |      |  |   |       | 

Upon funding of debt offerings, deferred financing costs are capitalized and amortized using the effective interest method over
the life of the related debt. Deferred financing costs represent transaction costs directly attributable to obtaining
financings. We amortize deferred financing costs over the term of the associated debt. In 2002 and 2001, we wrote off $13.8
million, and $28.0 million, respectively, in deferred financing costs in connection with the repayment of debt before its
maturity date.

Deferred contract costs are certain direct and incremental costs related to long-term revenue producing contracts. Deferred
contract costs are recognized as operating expense over the period of benefit and are periodically reviewed for realization.

Other accrued liabilities 

At December 31, 2002 and 2001, respectively, other liabilities include the current portion of non-recurring acquisition accruals
of approximately $55.0 million and $75.0 million, accrued payroll of $65.7 million and $49.8 million, accrued income taxes
payable of approximately $23.3 million and $23.8 million, and accrued insurance of approximately $93.7 million and $127.4
million, and other miscellaneous current liabilities.

Accrued closure and post-closure costs 

Accrued closure and post-closure costs represent an estimate of the present value of the future obligation associated with
closure and post-closure monitoring of non-hazardous solid waste landfills we currently own and/or operate or have retained upon
divestiture. Site specific closure and post-closure engineering cost estimates are prepared annually for landfills owned and/or
operated by us for which we are responsible for closure and post-closure. For active landfills, the impact of changes determined
to be changes in estimates, based on the annual update, are accounted for on a prospective basis except for instances where the
cost expenditure will occur within 12 months. The present value of estimated future costs are accrued on a per unit basis as
landfill disposal capacity is consumed. Discounting of future costs is applied where we believe that both the amounts and timing
of related payments are reliably determinable. Changes in estimates for closed landfill sites are recognized when determined.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Environmental costs 

We accrue for costs associated with environmental remediation obligations when
such costs are probable and reasonably estimable. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value, as the timing of cash payments is not reliably
determinable. Recoveries of environmental remediation costs from other parties
are recorded when their receipts are deemed probable. Environmental liabilities
and apportionment of responsibility among potentially responsible parties are
accounted for in accordance with the guidance provided by the American
Institute of Certified Public Accountants Statement of Position 96-1 (SOP 96-1)
Environmental Remediation Liabilities.

Self-Insurance 

We are partially self-insured for general liability, automobile and workers
compensation insurance with varying loss thresholds up to $3 million and fully
self-insured for employee group health claims. The self-insured portion of the
liability for unpaid claims and associated expenses, including claims incurred
but not reported, is determined using actuarial valuations provided by
independent companies. We use a third party administrator to track and
evaluate actual claims experience for consistency of data used in the annual
actuarial valuation.

The following tables show the activity and balances related to accrued
self-insurance for the year ended December 31, (in thousands):

|                             |  |      |          |      |  |   |          |  
|---------------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                             |  | 2002 |          | 2001
|                             |  |      |          |     
|Balance at beginning of year |  | $    | 88,081   |      |  | $ | 22,376   |  
|Expense incurred             |  |      | 249,523  |      |  |   | 229,629  |  
|Claims paid                  |  |      | (191,404 | )    |  |   | (163,924 | )
|                             |  |      |          |      |  |   |          |  
|Balance at end of year       |  | $    | 146,200  |      |  | $ | 88,081   |  
|                             |  |      |          |      |  |   |          |  

Other long-term obligations 

At December 31, 2002 and 2001, respectively, other long-term obligations
include the minority interest in consolidated subsidiaries of $4.6 million and
$182.3 million (see Note 4), the non-current portion of non-recurring
acquisition accruals of $145.9 million and $217.6 million, derivative
liabilities for interest rate swap contracts of $125.7 million and $140.7
million (see Note 6), and other obligations of $84.1 million and $83.8 million.
Additionally, the balance at December 31, 2002 includes net pension liability
of $16.5 million and $73.1 million self-insurance obligation.

Revenue 

Our revenues result primarily from fees charged to customers for waste
collection, transfer, recycling and disposal services. We generally provide
collection services under direct agreements with our customers or pursuant to
contracts with municipalities. Commercial and municipal contract terms
generally range from one to five years and commonly have renewal options. Our
landfill operations include both company-owned landfills and landfills that we
operate on behalf of municipalities and others.

Advance billings are recorded as unearned revenue, and revenue is recognized
when services are provided, usually within 90 days.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss contracts

We review our revenue producing contracts in the ordinary
course of business to determine if the direct costs,
exclusive of any fixed costs, to service the contractual
arrangements exceed the revenues to be produced by the
contract. Any resulting excess direct costs over the life
of the contract are expensed at the time of such
determination.

Change in accounting principle  derivatives

Effective January 1, 2001, we changed our method of accounting for derivative
financial instruments in accordance with the adoption of SFAS 133, Accounting
for Derivatives Instruments and Hedging Activities(SFAS 133), as amended by
SFAS 138, Accounting for Certain Derivative Instruments and Hedging Activities
(SFAS 138). See Note 6 on Derivative Instruments and Hedging Activities.

Non-recurring acquisition accruals 

At the time of an acquisition accounted for under the purchase method of
accounting, we evaluate and adjust existing accruals to represent our estimate
of the future costs to settle the assumed liabilities. Assumed liabilities are
considered in the allocation of purchase price and goodwill valuation.
Liabilities related to restructuring and abandonment activities, loss contracts
or changes in estimates of environmental, litigation and regulatory compliance
costs are charged to expense in the period in which the acquisition is
completed. Any subsequent changes to these estimates are also charged to
expense in the same line item as the original charge was recorded. At December
31, 2002 and 2001, we had approximately $200.9 million and $292.6 million,
respectively, of non-recurring acquisition accruals remaining on our
consolidated balance sheets, consisting primarily of loss contract, litigation,
insurance liabilities and other commitments associated with the acquisition of
BFI. Expenditures against non-recurring acquisition accruals, including
severance costs in 2002 and 2001 were $88.7 million and $116.8 million,
respectively.

During the years ended
December 31, 2001 and 2000, the Company recorded costs related
to acquisitions accruals and other acquisition related costs on a separate
line titled Acquisition related and unusual costs in the Consolidated
Statements of Operations. Costs reported on this line have been reclassified to cost of operations in the amount of
approximately $10.4 million and $87.6 million,
respectively, and selling, general and
administrative expenses in the amount of approximately $17.4 and $13.3 million,
respectively.

Non-cash (gain) loss on divestiture of assets 

In October 2002, we sold certain
non-integrated collection
operations for net proceeds of
approximately $77.5 million. In
connection with our strategic
business model and ongoing review
of the operations, we determined
that the sale of such assets would
allow us to deploy proceeds from
the sale to purchase more
productive assets in other markets
that improve our market density and
internalization. We initially used
the proceeds to repay debt and plan
to redeploy the proceeds to
purchase other assets. The
carrying value of the assets sold
was approximately $68.2 million at
the time of the sale. In
connection with the sale we
recorded a non-cash gain of
approximately $9.3 million ($8.2
million loss, net of income tax
expense). Approximately $45
million of the carrying value of
the assets sold was goodwill of
which approximately 76% was
non-deductible for tax purposes.
Revenues and net operating income
of the sold operations represent
approximately 1% of our
consolidated revenue and net
operating income for the period
prior to the sale during 2002. The
assets were held for use and were
not previously impaired based on
the criteria and analysis under
SFAS 144, Accounting for the
Impairment or Disposal of
Long-Lived Assets.

In February 2001, we sold assets of
certain non-integrated operations
with a carrying value of
approximately $160 million in the
Northeast region for approximately
$53 million. In connection with
this sale, we recorded a non-cash
loss of approximately $107 million
($65 million, net of income tax
benefit).

During 2000, we recorded $26.5
million of non-cash impairment
related to divestitures of certain
operations.

If we have changes in events or
circumstances including the
determination to divest of certain
assets, we could incur other
non-cash charges to earnings.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Interest expense capitalized

We capitalize interest in connection with the construction of our landfill assets. Actual acquisition permitting and construction costs incurred related to
landfill assets under active development qualify for interest capitalization. Interest capitalization ceases when the construction of a landfill asset is
complete and available for use.

During the years ended December 31, 2002, 2001 and 2000, we incurred gross interest expense
(including payments under interest rate swap contracts) of $794.6 million, $856.7 million and
$908.2 million of which $20.6 million, $45.7 million and $45.4 million was capitalized.

Extraordinary losses

In November 2002, we repaid $370.6 million of our tranche A, B and C term loan facility
before its maturity date, with the proceeds from the issuance of $375 million senior notes.
In connection with this repayment, we recognized an extraordinary charge for the early
extinguishment of the debt of approximately $4.6 million ($2.8 million, net of income tax
benefit) related to the write-off of deferred debt issuance costs.

Additionally, during 2002, we prepaid approximately $105.0 million of our tranche A, B and C
term loan before its maturity date from cash from operations. In connection with this
prepayment, we recognized an extraordinary charge of approximately $1.3 million ($0.8
million, net of income tax benefit) related to the write-off of deferred debt issuance costs.

In August 2002, we repaid our 2001 subsidiary line of credit before its maturity. In
connection with the repayment, we recognized an extraordinary loss of approximately $10.9
million ($6.5 million, net of tax) related to the write-off of $7.7 million of deferred debt
issuance costs and for a $3.2 million prepayment penalty paid. The 2001 subsidiaries line of
credit was repaid with the cash from operations and the Revolving Credit Facility.

During 2001, we repaid $1,326.4 million of our tranche A, B and C term loan facility before
its maturity date, with net proceeds from the issuance of $600 million and $750 million
senior notes. In connection with these repayments, we recognized an extraordinary charge for
the early extinguishment of the debt of approximately $28.0 million ($17.0 million, net of
income tax benefit) related to the write-off of deferred debt issuance costs.

During 2000, we repaid our asset sale term loan and tranche D term loan facilities before the respective maturity date. In connection with these repayments, we
recognized extraordinary charges for the early extinguishment of the debt of approximately $21.9 million ($13.3 million, net of income tax benefit) related to
the write-off of deferred debt issuance costs.

Statements of cash flows

The supplemental cash flow disclosures and non-cash transactions for the three years ended December 31 are as follows
(in thousands):

|                           |                                                 |   |         |        |      |   |         |         |  |   |         |        | 
|-------------------------- | ----------------------------------------------- | - | ------- | ------ | ---- | - | ------- | ------- |  | - | ------- | ------ | 
|                           |                                                 |   | 2002    |        | 2001 |   | 2000   
|                           |                                                 |   |         |        |      |   |        
|Supplemental Disclosures -
|                           | Interest paid (net of amounts capitalized)      | $ | 782,897 |        |      | $ | 784,423 | (1)     |  | $ | 853,770 |       
|                           | Income taxes paid, net of refunds               |   |         | 1,102  |      |   |         | 56,914  |  |   |         | 27,876 | 
|                          
|Non-Cash Transactions -   
|                           | Debt incurred or assumed in acquisitions        | $ | 85      |        |      | $ | 2,146   |         |  | $ | 5,326   |       
|                           | Liabilities incurred or assumed in acquisitions |   |         | 5,951  |      |   |         | 176,632 |  |   |         | 88,142 | 
|                           | Capital lease obligations incurred              |   |         | 6,711  |      |   |         |        |  |   |         |       | 
|                           | Dividends on preferred stock                    |   |         | 77,874 |      |   |         | 73,012  |  |   |         | 68,452 | 



|(1) |  | Cash interest includes the receipt of $27.2 million related to the unwind of a fair value interest rate swap.
|--- |  | -------------------------------------------------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of estimates -

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting periods. Although we believe that our estimates
and assumptions are reasonable, they are based upon information presently available. Actual results may differ significantly from the
estimates under different assumptions or conditions.

Fair value of financial instruments 

The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS 107,
Disclosures About Fair Value of Financial Instruments(SFAS 107). Our financial instruments as defined by SFAS 107 include cash, money market
funds, accounts receivable, accounts payable and long-term debt. We have determined the estimated fair value amounts at December 31, 2002
using available market information and valuation methodologies. Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates may not be indicative of the amounts that could be realized in a current market exchange.
The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

The carrying value of cash, money market funds, accounts receivable and accounts payable approximate fair values due to the short-term
maturities of these instruments (see Notes 5 and 6 for fair value of debt and derivative instruments).

Business combinations 

All acquisitions in 2002, 2001, and 2000 were accounted for under the purchase method and are reflected in the
results of operations since the effective date of the acquisition. Under the purchase method, we allocate the
cost of the acquired business to the assets acquired and liabilities assumed based upon their estimated fair
values. These estimates are revised during the allocation period as necessary when, and if, information regarding
contingencies becomes available to further define and quantify assets acquired and liabilities assumed. The
allocation period generally does not exceed one year. To the extent contingencies are resolved or settled during
the allocation period, such items are included in the revised allocation of the purchase price. Purchase
accounting adjustments, acquisition related costs and other possible charges that may arise from the acquisitions
may materially impact our future Consolidated Balance Sheets and Statements of Operations.

The following table summarizes acquisitions for the three years ended December 31, 2002:

|                                  |  |      |      |      |  |      |       |  |  |   |       | 
|--------------------------------- |  | ---- | ---- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                  |  | 2002 |      | 2001 |  | 2000
|                                  |  |      |      |      |  |     
|Number of businesses acquired     |  |      | 13   |      |  |      | 53    |  |  |   | 50    | 
|Total consideration (in millions) |  | $    | 55.4 |      |  | $    | 264.4 |  |  | $ | 853.9 | 

Our reported revenues, net income and earnings per share, excluding extraordinary losses,
for the years ended December 31, 2002 were not significantly impacted by the pro
forma effect of these acquisitions.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation plans

We account for our stock-based compensation plans under Accounting Principles Board Opinion 25, (APB 25) Accounting for Stock Issued to
Employeesand the related interpretations, for which no compensation cost is recorded in the statement of operations for the estimated
fair value of stock options issued with an exercise price equal to the fair value of the common stock on the date of grant. SFAS 123,
Accounting for Stock-based Compensation(SFAS 123), requires that companies, which do not elect to account for stock-based compensation
as prescribed by this statement, disclose the pro forma effects on earnings and earnings per share as if SFAS 123 had been adopted. In
addition, we have adopted the disclosure requirements of SFAS 148, Accounting for Stock-Based Compensation  Transition and Disclosure
(SFAS 148).

In accordance with the SFAS 123, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted
average assumptions:

|                        |  |                                  |   |              |  |              |   |   |  |  |   |  
|----------------------- |  | -------------------------------- | - | ------------ |  | ------------ | - | - |  |  | - | -
|                        |  | For the Years Ended December 31,
|                        |  |                                 
|                        |  | 2002                             |   | 2001         |  | 2000        
|                        |  |                                  |   |              |  |             
|Risk free interest rate |  | 2.2% to 4.6%                     |   | 4.8% to 5.2% |  | 5.3% to 6.9%
|Expected life           |  | 4 to 6 years                     |   | 5 years      |  | 5 years     
|Dividend rate           |  |                                  | 0 | %            |  |              | 0 | % |  |  | 0 | %
|Expected volatility     |  | 66% to 69%                       |   | 55% to 61%   |  | 52% to 55%  

Using these assumptions, pro forma net income (loss) and pro forma net income (loss) per share would reflect additional compensation expense recognized over the
vesting periods of the options. If we applied the recognition provisions of SFAS 123 and SFAS 148 disclosures, the resulting pro forma net income (loss), and pro
forma net income (loss) per share is a follows (in thousands, except per share data):

|                                                                                                             |             |  |  |   |      |                                  |         |      |       |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------ | ----------- |  |  | - | ---- | -------------------------------- | ------- | ---- | ----- | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                             |             |  |  |   |      | For the Years Ended December 31,
|                                                                                                             |             |  |  |   |      |                                 
|                                                                                                             |             |  |  |   |      | 2002                             |         | 2001 |       | 2000
|                                                                                                             |             |  |  |   |      |                                  |         |      |       |     
|Net income (loss), as reported                                                                               |             |  |  |   |      | $                                | 137,237 |      |       | $    | (14,526 | ) |      | $ | 55,935  |  
|Deduct: Total stock-based
employee compensation
expense determined under
fair value based method, net of tax |             |  |  |   |      |                                  | (13,590 | )    |       |      | (16,092 | ) |      |   | (13,951 | )
|                                                                                                             |             |  |  |   |      |                                  |         |      |       |      |         |   |      |   |         |  
|Pro forma, net income (loss)                                                                                 |             |  |  |   |      | $                                | 123,647 |      |       | $    | (30,618 | ) |      | $ | 41,984  |  
|                                                                                                             |             |  |  |   |      |                                  |         |      |       |      |         |   |      |   |         |  
|                                                                                                            
|Basic earnings (loss) per share:                                                                             | As reported |  |  | $ | 0.72 |                                  |         | $    | (0.07 | )    |         | $ | 0.30 |  
|                                                                                                             | Pro forma   |  |  |   | 0.65 |                                  |         |      | (0.16 | )    |         |   | 0.22 |  
|                                                                                                            
|Diluted earnings (loss) per share:                                                                           | As reported |  |  | $ | 0.71 |                                  |         | $    | (0.07 | )    |         | $ | 0.29 |  
|                                                                                                             | Pro forma   |  |  |   | 0.64 |                                  |         |      | (0.16 | )    |         |   | 0.22 |  

During the last three years, we have recorded no compensation expense for stock options granted to employees.

Additionally, see Note 12 for other disclosures with respect to stock compensation.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently issued accounting pronouncements

The Financial Accounting Standards Board (FASB) issued SFAS 143, Accounting for
Asset Retirement Obligations(SFAS 143) in June 2001, which outlines standards for
accounting for obligations associated with the retirement of long-lived tangible
assets. The standard is effective beginning January 1, 2003 and will impact the
accounting for landfill retirement obligations, which we have historically
referred to as closure and post-closure. The adoption of the standard will have
no impact on our cash requirements.

SFAS 143 does not change the basic accounting principles that the waste industry
has historically followed for accounting for these types of obligations. In
general, the industry has followed the accounting practice of recognizing a
liability on the balance sheet and related expense as waste is consumed at the
landfill to match operating costs with revenues. We refer to this practice as
life cycle accounting. For the most part, life cycle accounting will still be
followed.

For us, the new rules are a refinement to our practices and have caused a change
in the mechanics of calculating landfill retirement obligations and the
classification of where amounts are recorded in the financial statements.
Landfill retirement obligations are no longer accrued through a provision to cost
of operations, but rather by an increase to landfill assets. Under SFAS 143, the
amortizable landfill asset includes (i) landfill development costs incurred, (ii)
landfill development costs expected to be incurred over the life of the landfill,
(iii) the recorded capping, closure and post-closure liabilities and (iv) the cost
estimates for future capping, closure and post-closure costs. The landfill asset
is amortized over the total capacity of the landfill as volume is consumed during
the life of the landfill, with one exception. The exception applies to capping
costs for which both the recognition of the liability and the amortization of
these costs are based instead on the capacity of the specific capping event as
volume is consumed.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Following are the key changes from our current accounting practices:

|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|---------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                     |  | Current Practice                                                                                                                                                                                               |  | Upon Adoption of SFAS 143                                                                                                                                                                                                                                                                                                          
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Definitions:                                         |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Capping                                              |  | Capping is included
in the closure
liability.                                                                                                                                                                  |  | Capping is identified as
its own discrete,
separate liability.
Capping primarily
includes installation of
liners, drainage,
compacted soil layers
and topsoil over areas
of a landfill where
total airspace has been
consumed and waste is no
longer being received.
Capping activities occur
throughout the life of
the landfill. 
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Closure                                              |  | Closure primarily
includes the
application of
capping materials,
the construction of
methane gas
collection systems
and costs incurred
after a site stops
receiving waste but
prior to being
certified closed. |  | Costs for capping
activities are no longer
considered a cost of
closure, but instead are
a separately
identifiable liability.
Costs for methane gas
collection system
installation are no
longer considered a cost
of closure, but instead
are now considered a
development cost of our
landfill assets (i.e.
capital expenditure).
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Post Closure                                         |  | Post-closure
primarily includes
groundwater
sampling, gas
systems operations
and maintenance and
leachate disposal
after the landfill
has been certified
closed.                                               |  | No change.                                                                                                                                                                                                                                                                                                                         
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Recognition of Liability:                            |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|                                                     |  |                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                    
|Methane Gas
     Collection System
     Installation |  | All gas system
costs are accrued
over the life of
landfill as part of
the closure
liability.                                                                                                                   |  | The costs for methane
gas collection systems
are recorded as a
landfill development
asset when pur-chased
(capital expenditure).                                                                                                                                                                                                   

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|-------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |  | Current Practice                                                                                                                                                                                                                                           |  | Upon Adoption of SFAS 143                                                                                                                                                                                                                     
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Capping                          |  | Capping costs are
accrued as part of
the closure liability
over life of the
landfill.                                                                                                                                                                      |  | The discounted cash flow
associated with each
capping event is
recorded to the accrued
liability (balance
sheet) with a
corresponding increase
to the landfill asset
(balance sheet) as tons
are consumed for that
capping event.             
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Closure and
Post-Closure         |  | The discounted cash
flow associated with
closure and
post-closure is
recorded to the
accrued liability
(balance sheet) with
a corresponding
charge to the cost of
operations (statement
of operations) as
tons are consumed
over the life of the
landfill. |  | The discounted cash flow
associated with closure
and post-closure is
recorded to the accrued
liability (balance
sheet) with a
corresponding increase to
the landfill asset
(balance sheet) as tons
are consumed over the
life of the landfill.
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Discount Rate                    |  | Risk-free rate (7.0%).                                                                                                                                                                                                                                     |  | Credit-adjusted
risk-free rate (9.0%).                                                                                                                                                                                                        
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Cost Estimates                   |  | Costs are estimated
for the period of
performance. Capping,
closure and
post-closure
activities are
predom-inantly
performed by
third-parties and a
small portion
performed by Allied.                                                                     |  | Costs are estimated for
the period of
performance utilizing
estimates that a third-
party would charge if
they were to manage and
perform all capping,
closure and post-closure
activities.                                                   
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Inflation                        |  | Cost is inflated to
period of performance
(2.5%).                                                                                                                                                                                                          |  | No change.                                                                                                                                                                                                                                    
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Statement of
Operations Expense: |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Liability Accrual                |  | Cost of operations is
charged at the same
amount accrued to the
liability.                                                                                                                                                                                 |  | The liability is no
longer accrued through a
charge to cost of
operations.                                                                                                                                                                    
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Landfill Asset
     Amortization |  | The total cost of
landfill development
is amortized over the
total capacity of the
landfill as tons are
consumed.                                                                                                                                          |  | The total cost of the
landfill development plus the recorded and
future costs for
capping, closure and
post-closure are
amortized as tons are
consumed.                                                                                       
|                                 |  |                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                               
|Accretion                        |  | Liability is accreted
at risk-free rate
(7.0%) using the
effective interest
method and accretion
expense is recorded
in cost of
operations.                                                                                                                |  | Liability is accreted at
credit-adjusted
risk-free rate (9.0%)
using the effective
interest-method and
accretion expense is
recorded in cost of
operations.                                                                                   

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, liabilities associated with divested landfills that were historically accounted for in closure and
post-closure liability were reclassified to other long-term obligations because they were not within the scope of
SFAS 143.

Upon adoption, SFAS 143 requires a cumulative change in accounting for landfill obligations retroactive to the date
of the inception of the landfill. Inception of the landfill is the date operations commenced or the date the asset
was acquired. To do this, SFAS 143 requires the creation of the related landfill asset, net of accumulated
amortization and an adjustment to the capping, closure and post-closure liabilities for cumulative accretion.

The adjustments that occur upon adoption are required to be accounted for as a cumulative effect of a change in
accounting principle. Upon adoption of SFAS 143 on January 1, 2003, we expect a decrease in our capping closure and
post-closure liabilities of approximately $57 million, an increase in other long term obligations of approximately
$27 million, and a decrease in our net landfill assets of approximately $30 million. We expect the cumulative
effect of change in accounting principle will not be material.

Following is a summary of the expected balance sheet changes for landfill assets and capping, closure and
post-closure liabilities at January 1, 2003 (in millions):

|                                               |  |                              |         |        |  |                            |        |   |  |   |          |  
|---------------------------------------------- |  | ---------------------------- | ------- | ------ |  | -------------------------- | ------ | - |  | - | -------- | -
|                                               |  | Balance at December 31, 2002 |         | Change |  | Balance at January 1, 2003
|                                               |  |                              |         |        |  |                           
|Landfill assets                                |  | $                            | 2,533.8 |        |  | $                          | 448.1  |   |  | $ | 2,981.9  |  
|Accumulated amortization                       |  |                              | (659.5  | )      |  |                            | (477.6 | ) |  |   | (1,137.1 | )
|                                               |  |                              |         |        |  |                            |        |   |  |   |          |  
|Net landfill assets                            |  | $                            | 1,874.3 |        |  | $                          | (29.5  | ) |  | $ | 1,844.8  |  
|                                               |  |                              |         |        |  |                            |        |   |  |   |          |  
|                                              
|Capping, closure, and post-closure liabilities |  | $                            | 594.8   |        |  | $                          | (56.5  | ) |  | $ | 538.3    |  
|                                               |  |                              |         |        |  |                            |        |   |  |   |          |  

Following is a reconciliation of 2002 amortization and accretion expense after the expected impact of the adoption
of SFAS 143 related to capping, closure and post-closure liabilities as compared to what would have been recorded
to operating expense under our historical accounting practice (in millions).

|                                             |  |          |       |           |  |          |       |   |  |   |       | 
|-------------------------------------------- |  | -------- | ----- | --------- |  | -------- | ----- | - |  | - | ----- | 
|                                             |  | As       |       | Impact of |  |          |       |  
|                                             |  | Reported |       | SFAS 143  |  | Proforma
|                                             |  |          |       |           |  |         
|Capping, closure and post-
closure provision |  | $        | 32.6  |           |  | $        | (32.6 | ) |  | $ |      | 
|Capping, closure and post-
closure accretion |  |          | 38.2  |           |  |          | 7.7   |   |  |   | 45.9  | 
|Landfill amortization                        |  |          | 164.1 |           |  |          | 48.5  |   |  |   | 212.6 | 
|                                             |  |          |       |           |  |          |       |   |  |   |       | 
|Total                                        |  | $        | 234.9 |           |  | $        | 23.6  |   |  | $ | 258.5 | 
|                                             |  |          |       |           |  |          |       |   |  |   |       | 
|Tons accepted                                |  |          | 72.5  |           |  |          |       |   |  |   | 72.5  | 
|                                             |  |          |       |           |  |          |       |   |  |   |       | 
|Rate per ton                                 |  | $        | 3.24  |           |  |          |       |   |  | $ | 3.57  | 
|                                             |  |          |       |           |  |          |       |   |  |   |       | 

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements 4, 44 and 64, amendment of FASB Statement 13, and Technical Corrections(SFAS 145), which among other things, restricts the classification of gains and losses from extinguishment of debt as extraordinary, therefore, certain debt extinguishment gains and losses will no longer be classified as extraordinary. SFAS 145 is effective January 1, 2003.
Under SFAS 145, generally gains and losses on future debt extinguishments, if any, will be recorded in
interest expense and other. Upon adoption, extraordinary losses of $10.1 million, $17.0 million and $13.3 million as previously reported, net of tax for the years ended December 31, 2002, 2001 and 2000, respectively, will be reclassified on a pre-tax basis to interest expense and other to conform to the requirements under SFAS 145.

In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated with
Exit or Disposal Activities(SFAS 146), which prescribes the financial accounting and reporting for costs associated
with exit or disposal activities, such as, contract terminations, consolidation of facilities and termination benefits to
involuntarily terminated employees. SFAS 146 excludes from its scope exit and disposal activities that are in connection
with a business combination and those activities to which SFAS 143 and 144, Accounting for the Impairment
or Disposal of Long-Lived Assets(SFAS 144) are applicable. Under SFAS 146, certain costs associated with exit and
disposal activities are to be recognized as liabilities at the time they meet the definition of a liability (as defined in FASB Concepts Statement No. 6) as opposed to at the time a plan is committed, which is the current practice.
SFAS 146 is effective for exit and disposal activities that are initiated after December 31, 2002. SFAS 146
will have no impact on our consolidated financial statements at the time of adoption.

In November 2002, the FASB issued FASB Interpretation 45, Guarantors Accounting
and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others(FIN 45). FIN 45
expands on the accounting guidance of Statements 5, 57, and 107 and incorporates without change the provisions of FASB
Interpretation 34, which is being superceded. FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees
such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for
the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial
statements. The recognition requirements of FIN 45 are effective for any guarantees entered into subsequent to January 1, 2003. We anticipate that
the adoption of FIN 45 will have no impact on our consolidated financial statements. We have
complied with the disclosure requirements of FIN 45 as of December 31, 2002.

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation  Transition and Disclosure(SFAS 148). SFAS 148 amends FASB statement 123, providing alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, the statement requires prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. As of December 31, 2002, we have complied with the disclosure requirements of SFAS 148.
The adoption of SFAS 148 will have no impact on our consolidated financial statements.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently adopted accounting pronouncements 

Effective January 1, 2002, we adopted SFAS 142, Goodwill and Other Intangibles(SFAS 142),
which among other things, eliminates the amortization of goodwill and instead requires an
annual assessment of goodwill impairment by applying a fair value based test to each of our
four operating segments. See Note 3 for additional discussion.

Effective January 1, 2002, we adopted SFAS 144 which supercedes SFAS 121. SFAS 144 provides a
single accounting model for impairment of long-lived assets held for use and for
long-lived assets that are to be disposed of by sale (including discontinued
operations). In addition, the statement broadens the presentation for discontinued
operations to include certain divestiture transactions that have been previously
recorded in operating income. SFAS 144 retained the requirements under SFAS 121 to
recognize impairment on long-lived assets excluding goodwill. The adoption of SFAS
144 had no impact on our consolidated financial statements.

2.     Property and Equipment

Property and equipment are recorded at cost, which includes
interest to finance the acquisition and construction of major
capital additions during the development phase, primarily
landfills and transfer stations, until they are completed and
ready for their intended use. Depreciation is provided on the
straight-line method over the estimated useful lives of buildings
and improvements (30-40 years), vehicles and equipment (3-15
years), containers and compactors (5-10 years) and furniture and
office equipment (3-8 years). We do not assume a residual value
on our depreciable assets. In accordance with SFAS 144, we
evaluate long-lived assets, such as property and equipment, and
certain identifiable intangibles for impairment whenever events
or changes in circumstances indicate the carrying amount of an
asset may not be recoverable.

The cost of landfill
airspace, including
original acquisition
cost and incurred
and projected
landfill
construction costs,
is amortized over
the capacity of the
landfill based on a
per unit basis as
landfill airspace is
consumed. We
periodically review
the realizability of
our investment in
operating landfills.
Should events and
circumstances
indicate that any of
our landfills be
reviewed for
possible impairment,
such review for
recoverability will
be made in
accordance with
Emerging Issues Task
Force (EITF)
Discussion Issue
95-23, The Treatment
of Certain Site
Restoration/Environmental Exit Costs When
Testing a Long-Lived
Asset for Impairment
(EITF 95-23). The
EITF outlines how
cash flows for
environmental exit
costs should be
determined and
measured.

Expenditures for
major renewals and
betterments are
capitalized, while
expenditures for
maintenance and
repairs, which do
not improve assets
or extend their
useful lives, are
charged to expense
as incurred. For
example, under
certain
circumstances, the
replacement of
vehicle
transmissions or
engine rebuilds are
capitalized whereas
repairs to vehicle
brakes are expensed.
For the years ended
December 31, 2002,
2001 and 2000,
maintenance and
repair expenses
charged to cost of
operations were
$419.8 million,
$410.6 million and
$430.0 million,
respectively. When
property is retired
or sold, the related
cost and accumulated
depreciation are
removed from the
accounts and any
resulting gain or
loss is recognized
in cost of
operations. For the
years ended December
31, 2002, 2001 and
2000, we recognized
net pre-tax gains on
the disposal of
fixed assets of $7.1
million, $13.9
million and $10.5
million,
respectively.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables show the activity and balances related to property and equipment from December 31, 2000 through December 31, 2002 (in millions):

|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |       |            |  |   |       |   |  |   |         | 
|------------------------------------- |  | ---------------------- | ------- | --------- |  | ----------- | ----- | ------------ |  | --------- | ----- | ------------- |  | --------- | ----- | ---------- |  | - | ----- | - |  | - | ------- | 
|                                      |  | Property and Equipment
|                                      |  |                       
|                                      |  | Balance at             |         |           |  |             |       |              |  |           |       | Acquisitions, |  | Transfers |       | Balance at
|                                      |  | Dec. 31,               |         | Capital   |  | Sales and   |       | Net of       |  | and       |       | Dec. 31,     
|                                      |  | 2001                   |         | Additions |  | Retirements |       | Divestitures |  | Other (1) |       | 2002         
|                                      |  |                        |         |           |  |             |       |              |  |           |       |              
|Land and
improvements                 |  | $                      | 432.9   |           |  | $           | 13.2  |              |  | $         | (6.0  | )             |  | $         | 0.5   |            |  | $ | 3.6   |   |  | $ | 444.2   | 
|Land held for
permitting as
landfills |  |                        | 131.5   |           |  |             |      |              |  |           | (0.2  | )             |  |           |      |            |  |   | (16.7 | ) |  |   | 114.6   | 
|Landfills                             |  |                        | 2,269.4 |           |  |             | 207.3 |              |  |           |      |               |  |           | 16.1  |            |  |   | 41.0  |   |  |   | 2,533.8 | 
|Buildings and
improvements            |  |                        | 443.1   |           |  |             | 25.6  |              |  |           | (10.4 | )             |  |           | (1.0  | )          |  |   | (1.1  | ) |  |   | 456.2   | 
|Vehicles and
equipment                |  |                        | 1,563.4 |           |  |             | 226.1 |              |  |           | (47.1 | )             |  |           | (13.5 | )          |  |   | 4.6   |   |  |   | 1,733.5 | 
|Containers and
compactors             |  |                        | 731.2   |           |  |             | 66.1  |              |  |           | (7.1  | )             |  |           | (6.9  | )          |  |   | 0.3   |   |  |   | 783.6   | 
|Furniture and office
equipment        |  |                        | 42.2    |           |  |             | 4.0   |              |  |           | (2.7  | )             |  |           | (0.1  | )          |  |   | 0.7   |   |  |   | 44.1    | 
|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |       |            |  |   |       |   |  |   |         | 
|Total                                 |  | $                      | 5,613.7 |           |  | $           | 542.3 |              |  | $         | (73.5 | )             |  | $         | (4.9  | )          |  | $ | 32.4  |   |  | $ | 6,110.0 | 
|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |       |            |  |   |       |   |  |   |         | 

|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|------------------------------ |  | ----------------------------------------- | -------- | ------------ |  | ------------ | ------ | ------------ |  | ------------- | ----- | --------- |  | ---------- | ---- |  |  | - | ---- | - |  | - | -------- | -
|                               |  | Accumulated Depreciation and Amortization
|                               |  |                                          
|                               |  |                                           |          |              |  | Depreciation |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |  
|                               |  | Balance at                                |          | and          |  |              |        |              |  | Acquisitions, |       | Transfers |  | Balance at
|                               |  | Dec. 31,                                  |          | Amortization |  | Sales and    |        | Net of       |  | and           |       | Dec. 31, 
|                               |  | 2001                                      |          | Expense      |  | Retirements  |        | Divestitures |  | Other (1)     |       | 2002     
|                               |  |                                           |          |              |  |              |        |              |  |               |       |          
|Land and
improvements          |  | $                                         | (13.7    | )            |  | $            | (4.5   | )            |  | $             | 0.4   |           |  | $          | 0.1  |  |  | $ | (0.1 | ) |  | $ | (17.8    | )
|Landfills                      |  |                                           | (494.9   | )            |  |              | (164.1 | )            |  |               |      |           |  |            |     |  |  |   | (0.5 | ) |  |   | (659.5   | )
|Buildings and
improvements     |  |                                           | (70.9    | )            |  |              | (21.7  | )            |  |               | 2.8   |           |  |            | 0.4  |  |  |   | (0.8 | ) |  |   | (90.2    | )
|Vehicles and
equipment         |  |                                           | (683.5   | )            |  |              | (204.5 | )            |  |               | 36.7  |           |  |            | 10.7 |  |  |   | 3.3  |   |  |   | (837.3   | )
|Containers and
compactors      |  |                                           | (315.6   | )            |  |              | (92.4  | )            |  |               | 6.3   |           |  |            | 5.5  |  |  |   | (0.2 | ) |  |   | (396.4   | )
|Furniture and office
equipment |  |                                           | (24.2    | )            |  |              | (5.7   | )            |  |               | 2.5   |           |  |            | 0.2  |  |  |   | (0.2 | ) |  |   | (27.4    | )
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|Total                          |  | $                                         | (1,602.8 | )            |  | $            | (492.9 | )            |  | $             | 48.7  |           |  | $          | 16.9 |  |  | $ | 1.5  |   |  | $ | (2,028.6 | )
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|Property and
equipment, net    |  | $                                         | 4,010.9  |              |  | $            | 49.4   |              |  | $             | (24.8 | )         |  | $          | 12.0 |  |  | $ | 33.9 |   |  | $ | 4,081.4  |  
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  



|(1) |  | Relates primarily to (i) amounts transferred between land held for permitting as landfills and landfills resulting from classifying additional disposal capacity as probable
expansion, (ii) capitalized interest, (iii) capitalized leases and (iv) purchase accounting adjustments during the allocation period.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |      |            |  |   |       |   |  |   |         | 
|------------------------------------- |  | ---------------------- | ------- | --------- |  | ----------- | ----- | ------------ |  | --------- | ----- | ------------- |  | --------- | ---- | ---------- |  | - | ----- | - |  | - | ------- | 
|                                      |  | Property and Equipment
|                                      |  |                       
|                                      |  | Balance at             |         |           |  |             |       |              |  |           |       | Acquisitions, |  | Transfers |      | Balance at
|                                      |  | Dec. 31,               |         | Capital   |  | Sales and   |       | Net of       |  | and       |       | Dec. 31,     
|                                      |  | 2000                   |         | Additions |  | Retirements |       | Divestitures |  | Other (1) |       | 2001         
|                                      |  |                        |         |           |  |             |       |              |  |           |       |              
|Land and
improvements                 |  | $                      | 406.7   |           |  | $           | 11.5  |              |  | $         | (16.7 | )             |  | $         | 22.5 |            |  | $ | 8.9   |   |  | $ | 432.9   | 
|Land held for
permitting as
landfills |  |                        | 127.8   |           |  |             |      |              |  |           |      |               |  |           |     |            |  |   | 3.7   |   |  |   | 131.5   | 
|Landfills                             |  |                        | 1,997.7 |           |  |             | 181.9 |              |  |           |      |               |  |           | 8.6  |            |  |   | 81.2  |   |  |   | 2,269.4 | 
|Buildings and
improvements            |  |                        | 444.3   |           |  |             | 24.4  |              |  |           | (9.7  | )             |  |           | (2.5 | )          |  |   | (13.4 | ) |  |   | 443.1   | 
|Vehicles and
equipment                |  |                        | 1,411.1 |           |  |             | 217.4 |              |  |           | (35.7 | )             |  |           | (6.3 | )          |  |   | (23.1 | ) |  |   | 1,563.4 | 
|Containers and
compactors             |  |                        | 672.2   |           |  |             | 55.9  |              |  |           | (5.7  | )             |  |           | 15.4 |            |  |   | (6.6  | ) |  |   | 731.2   | 
|Furniture and office
equipment        |  |                        | 39.6    |           |  |             | 9.8   |              |  |           | (0.7  | )             |  |           | (0.3 | )          |  |   | (6.2  | ) |  |   | 42.2    | 
|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |      |            |  |   |       |   |  |   |         | 
|Total                                 |  | $                      | 5,099.4 |           |  | $           | 500.9 |              |  | $         | (68.5 | )             |  | $         | 37.4 |            |  | $ | 44.5  |   |  | $ | 5,613.7 | 
|                                      |  |                        |         |           |  |             |       |              |  |           |       |               |  |           |      |            |  |   |       |   |  |   |         | 

|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|------------------------------ |  | ----------------------------------------- | -------- | ------------ |  | ------------ | ------ | ------------ |  | ------------- | ----- | --------- |  | ---------- | ---- |  |  | - | ---- | - |  | - | -------- | -
|                               |  | Accumulated Depreciation and Amortization
|                               |  |                                          
|                               |  |                                           |          |              |  | Depreciation |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |  
|                               |  | Balance at                                |          | and          |  |              |        |              |  | Acquisitions, |       | Transfers |  | Balance at
|                               |  | Dec. 31,                                  |          | Amortization |  | Sales and    |        | Net of       |  | and           |       | Dec. 31, 
|                               |  | 2000                                      |          | Expense      |  | Retirements  |        | Divestitures |  | Other (1)     |       | 2001     
|                               |  |                                           |          |              |  |              |        |              |  |               |       |          
|Land and
improvements          |  | $                                         | (10.4    | )            |  | $            | (4.1   | )            |  | $             | 0.2   |           |  | $          |     |  |  | $ | 0.6  |   |  | $ | (13.7    | )
|Landfills                      |  |                                           | (348.7   | )            |  |              | (149.2 | )            |  |               |      |           |  |            |     |  |  |   | 3.0  |   |  |   | (494.9   | )
|Buildings and
improvements     |  |                                           | (56.3    | )            |  |              | (19.5  | )            |  |               | 12.2  |           |  |            | 0.7  |  |  |   | (8.0 | ) |  |   | (70.9    | )
|Vehicles and
equipment         |  |                                           | (571.8   | )            |  |              | (195.7 | )            |  |               | 33.1  |           |  |            | 12.2 |  |  |   | 38.7 |   |  |   | (683.5   | )
|Containers and
compactors      |  |                                           | (231.4   | )            |  |              | (89.5  | )            |  |               | 5.5   |           |  |            | 1.0  |  |  |   | (1.2 | ) |  |   | (315.6   | )
|Furniture and office
equipment |  |                                           | (20.3    | )            |  |              | (4.6   | )            |  |               | 0.5   |           |  |            | 0.2  |  |  |   |     |   |  |   | (24.2    | )
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|Total                          |  | $                                         | (1,238.9 | )            |  | $            | (462.6 | )            |  | $             | 51.5  |           |  | $          | 14.1 |  |  | $ | 33.1 |   |  | $ | (1,602.8 | )
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  
|Property and
equipment, net    |  | $                                         | 3,860.5  |              |  | $            | 38.3   |              |  | $             | (17.0 | )         |  | $          | 51.5 |  |  | $ | 77.6 |   |  | $ | 4,010.9  |  
|                               |  |                                           |          |              |  |              |        |              |  |               |       |           |  |            |      |  |  |   |      |   |  |   |          |  



|(1) |  | Relates primarily to (i) amounts transferred between land held for permitting as landfills and landfills resulting from classifying additional disposal capacity as probable
expansion, (ii) capitalized interest, (iii) capitalized leases and (iv) purchase accounting adjustments during the allocation period.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 30, 2001, four subsidiaries were created to purchase fixed
assets including vehicles, equipment, containers and compactors
employed in our business. We owned 1% of these subsidiaries and the
remaining 99% was owned by subsidiaries of American Ref-Fuel Company
LLC. We had an option to exchange our minority interest in the four
Ref-Fuel facilities for the 99% interest in our equipment purchasing
subsidiaries owned by subsidiaries of American Ref-Fuel Company LLC.
We exercised the exchange option and completed the exchange on April
30, 2002. We now own 100% of the equipment purchasing subsidiaries.

Since we have always exercised full control of these entities, the
assets, liabilities and operations of these equipment purchasing
subsidiaries have been and continue to be fully consolidated. The
Consolidated Balance Sheets include the fixed assets purchased by
these entities and related debt to fund these purchases. The
Consolidated Statements of Operations include the depreciation expense
related to the fixed assets purchased and interest expense related to
the debt. Additionally, the Consolidated Statements of Cash Flows
reflect all purchases of equipment by these entities as capital
expenditures.

3.     Goodwill and Intangible Assets

As discussed in Note 1, we adopted SFAS 142, effective
January 1, 2002. SFAS 142 eliminates the amortization of
goodwill and instead requires an annual assessment of
goodwill impairment by applying a fair value based test
to each of our reporting units, which we define as our
four geographic operating segments. We completed our
annual assessment of goodwill as of December 31, 2002 and
no impairment was recorded. We evaluate goodwill for
impairment based on fair value of each geographic
operating segment. The calculation of fair value is
subject to judgments and estimates. We estimate fair
value of our operating segments based on net cash flows
discounted using a weighted-average cost of capital of
approximately 8%. In addition, consideration is also
given to an earnings multiple approach, enterprise value,
and overall company market capitalization to evaluate the
reasonableness of our discounted cash flows. The
estimated fair value could change if there were future
changes in our capital structure, cost of debt, interest
rates, capital expenditure levels, ability to perform at
levels that were forecasted or a permanent change to the
market capitalization of our Company.

We tested our existing goodwill at January 1, 2002 for
realizability and determined that we had no impairment of
goodwill and therefore SFAS 142 had no impact to our
consolidated financial statements upon adoption (other
than the elimination of goodwill amortization discussed
above). The impairment test of goodwill will be completed
more frequently than annually under certain conditions.
For example, a significant adverse change in liquidity or
the business environment, unanticipated competition, a
significant adverse action by a regulator or a disposal
of a significant portion of an operating segment could
prompt an impairment test between annual assessments.

Under SFAS 142, we evaluate goodwill impairment at our
geographic operating segment level, which is an aggregate
of several vertically integrated businesses with similar
operational characteristics. A divestiture of any
individual asset below the geographic operating segment
level could result in a loss. At the time of a
divestiture of an individual business within a geographic
operating segment, goodwill is allocated to that business
and a gain or loss on disposal is derived. Subsequently,
the remaining goodwill in the geographic operating
segment that the assets were divested from would be
re-evaluated for realizability, which could result in an
additional loss being recognized.

In the past, we have incurred non-cash losses on sales of
assets when we believed that re-deployment of the
proceeds from the sale of such assets could improve
operations and was economically beneficial. If such
decisions are made in the future, we could incur
additional non-cash losses on asset sales.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following calculations adjust net income before extraordinary loss to exclude goodwill amortization
expense (in thousands, except per share data):

|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |         | 
|------------------------------------------------------------------------------ | -------------------------------------------------------------------------------- | - | -------------------------------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | 
|                                                                               |                                                                                  |   | For the years ended December 31,
|                                                                               |                                                                                  |   |                                 
|                                                                               |                                                                                  |   | 2002                             |         | 2001 |   | 2000   
|                                                                               |                                                                                  |   |                                  |         |      |   |        
|Reported net income before extraordinary loss                                  |                                                                                  | $ | 225,206                          |         |      | $ | 75,459  |         |   | $ | 137,653 |        
|                                                                               | Add: goodwill amortization, net of tax effect                                    |   |                                  |        |      |   |         | 205,061 |   |   |         | 202,831 | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|Adjusted income before extraordinary loss                                      |                                                                                  |   | 225,206                          |         |      |   | 280,520 |         |   |   | 340,484 |        
|                                                                               | Less: dividends on preferred stock                                               |   |                                  | 77,874  |      |   |         | 73,012  |   |   |         | 68,452  | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|Adjusted net income available to common
shareholders before extraordinary loss |                                                                                  |   | 147,332                          |         |      |   | 207,508 |         |   |   | 272,032 |        
|Extraordinary loss, net of taxes                                               |                                                                                  |   | 10,095                           |         |      |   | 16,973  |         |   |   | 13,266  |        
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|Adjusted net income available to common
shareholders                           |                                                                                  | $ | 137,237                          |         |      | $ | 190,535 |         |   | $ | 258,766 |        
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|EPS before extraordinary loss:                                                 |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Basic as reported                                                                |   | $                                | 0.77    |      |   | $       | 0.01    |   |   | $       | 0.37    | 
|                                                                               | Goodwill amortization, net of tax effect                                         |   |                                  |        |      |   |         | 1.08    |   |   |         | 1.07    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Basic as adjusted to exclude goodwill
amortization                               |   | $                                | 0.77    |      |   | $       | 1.09    |   |   | $       | 1.44    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Diluted as reported                                                              |   | $                                | 0.76    |      |   | $       | 0.01    |   |   | $       | 0.36    | 
|                                                                               | Goodwill amortization, net of tax effect                                         |   |                                  |        |      |   |         | 1.05    |   |   |         | 1.00    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Diluted as adjusted to exclude goodwill
amortization                             |   | $                                | 0.76    |      |   | $       | 1.06    |   |   | $       | 1.36    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|EPS:                                                                           |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Basic as reported                                                                |   | $                                | 0.72    |      |   | $       | (0.07   | ) |   | $       | 0.30    | 
|                                                                               | Goodwill amortization, net of tax effect                                         |   |                                  |        |      |   |         | 1.08    |   |   |         | 1.07    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Basic as adjusted to exclude goodwill
amortization                               |   | $                                | 0.72    |      |   | $       | 1.01    |   |   | $       | 1.37    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Diluted as reported                                                              |   | $                                | 0.71    |      |   | $       | (0.07   | ) |   | $       | 0.29    | 
|                                                                               | Goodwill amortization, net of tax effect                                         |   |                                  |        |      |   |         | 1.05    |   |   |         | 1.02    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Diluted as adjusted to exclude goodwill
amortization                             |   | $                                | 0.71    |      |   | $       | 0.98    |   |   | $       | 1.31    | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Weighted average common shares outstanding
for basic EPS                         |   |                                  | 190,210 |      |   |         | 189,583 |   |   |         | 188,814 | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        
|                                                                               | Weighted average common and common
equivalent shares outstanding for diluted EPS |   |                                  | 193,508 |      |   |         | 194,906 |   |   |         | 249,618 | 
|                                                                               |                                                                                  |   |                                  |         |      |   |         |         |   |   |         |        

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the activity and balances related to goodwill from December 31, 2001 through December 31, 2002 (in millions):

|              |  |               |         |              |  |              |      |                 |  |      |       |   |  |   |      |               |  |   |         | 
|------------- |  | ------------- | ------- | ------------ |  | ------------ | ---- | --------------- |  | ---- | ----- | - |  | - | ---- | ------------- |  | - | ------- | 
|              |  | Balance as of |         |              |  |              |      |                 |  |      |       |   |  |   |      | Balance as of
|              |  | December 31,  |         |              |  |              |      |                 |  |      |       |   |  |   |      | December 31, 
|              |  | 2001          |         | Acquisitions |  | Divestitures |      | Adjustments (1) |  | 2002
|              |  |               |         |              |  |              |      |                 |  |     
|Western Area  |  | $             | 1,423.6 |              |  | $            | 7.1  |                 |  | $    | (1.1  | ) |  | $ | (8.8 | )             |  | $ | 1,420.8 | 
|Central Area  |  |               | 1,900.2 |              |  |              | 12.6 |                 |  |      | (7.9  | ) |  |   | (0.1 | )             |  |   | 1,904.8 | 
|Eastern Area  |  |               | 2,449.3 |              |  |              | 5.1  |                 |  |      | (1.4  | ) |  |   | 0.7  |               |  |   | 2,453.7 | 
|Southern Area |  |               | 2,783.8 |              |  |              | 1.8  |                 |  |      | (36.8 | ) |  |   | 2.4  |               |  |   | 2,751.2 | 
|              |  |               |         |              |  |              |      |                 |  |      |       |   |  |   |      |               |  |   |         | 
|Total         |  | $             | 8,556.9 |              |  | $            | 26.6 |                 |  | $    | (47.2 | ) |  | $ | (5.8 | )             |  | $ | 8,530.5 | 
|              |  |               |         |              |  |              |      |                 |  |      |       |   |  |   |      |               |  |   |         | 



|(1) |  | Amounts primarily relate to purchase accounting adjustments during the allocation period.
|--- |  | -----------------------------------------------------------------------------------------

In addition, we have other amortizable intangible assets that consist primarily of the following at December 31, 2002 (in millions):

|                       |       |   |          |      |              |   |          |      |     |   |     |     | 
|---------------------- | ----- | - | -------- | ---- | ------------ | - | -------- | ---- | --- | - | --- | --- | 
|                       |       |   | Gross    |      |              |   |          |      | Net
|                       |       |   | Carrying |      | Accumulated  |   | Carrying
|                       |       |   | Value    |      | Amortization |   | Value   
|                       |       |   |          |      |              |   |         
|Non-compete agreements |       | $ | 15.7     |      |              | $ | (8.9     | )    |     | $ | 6.8 |    
|Other                  |       |   | 2.4      |      |              |   | (.5      | )    |     |   | 1.9 |    
|                       |       |   |          |      |              |   |          |      |     |   |     |    
|                       | Total |   | $        | 18.1 |              |   | $        | (9.4 | )   |   | $   | 8.7 | 
|                       |       |   |          |      |              |   |          |      |     |   |     |    

Amortization expense for the three years ended December 31, 2002 was $2.9 million, $3.2 million and $2.0 million, respectively. Based upon the amortizable assets recorded in the balance sheet
at December 31, 2002, amortization expense for each of the next five years is estimated to be between $0.2 million and $2.6 million.

4.     Investments In Unconsolidated Affiliates

On April 30, 2001, American Ref-Fuel Company LLC, a joint venture of Duke Energy North America and United American Energy
Corporation, acquired our 100% ownership interest in the Ref-Fuel Chester, Pennsylvania facility; our 50% interest in the
Rochester, Massachusetts facility; and our 51% interest in Ref-Fuels marketing company. The ownership structure of four
Ref-Fuel facilities located in New York, New Jersey, and Connecticut was modified to give American Ref-Fuel Company LLC
operational control of those entities. This transaction allowed us to reduce our debt requirements by approximately $300
million and reduced our letter of credit requirements by $200 million. During the year ended 2001, we reported approximately
$23 million in revenues, $3 million in operating income and $14 million of equity earnings from American Ref-Fuel. In 2000,
these operations generated approximately $70 million in revenues, $15 million in operating income and $50 million of equity
earnings. Dividends received from equity investees were approximately $12.6 million in 2000 and there were no dividends
received during 2001.

At December 31, 2001, our equity investment in the four remaining Ref-Fuel facilities was approximately $180 million, which was
included in other assets on the Consolidated Balance Sheets. In connection with the modification of the ownership structure,
we had an option to exchange our minority interest in the four Ref-Fuel facilities for the 99% interest in our equipment
purchasing subsidiaries owned by subsidiaries of American Ref-Fuel Company LLC. At December 31, 2001, the minority interest
that represented the outside ownership interests in our equipment purchasing subsidiaries was approximately $180 million, which
was included in other long-term obligations on the Consolidated Balance Sheets. We exercised the exchange option and completed
the exchange on April 30, 2002. We no longer have any interest in the Ref-Fuel entities and we own 100% of the equipment
purchasing subsidiaries.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The assets, liabilities and operations of the equipment purchasing
subsidiaries have been and continue to be fully consolidated. The
equipment purchasing subsidiaries were established to purchase fixed
assets, including vehicles, equipment, containers and compactors, to be
used in our operations.

We used the equity method of accounting for investments in
unconsolidated subsidiaries over which we exercised significant
influence. The Summarized Combined Balance Sheet Data and the
Statement of Operations Data presented in the table below indicate
amounts related to the following equity investees in which we exercised
significant influence through a 50% ownership interest during January
through April 2001: American Ref-Fuel Company of Hempstead, American
Ref-Fuel Company of Essex, American Ref-Fuel Company of Southeastern
Connecticut, and American Ref-Fuel Company of Niagara, LP.

Summarized Combined Balance Sheet Data
(in thousands)

|                                                        |  |                      |         |  
|------------------------------------------------------- |  | -------------------- | ------- | -
|                                                        |  | December 31, 2001(1)
|                                                        |  |                     
|Current assets                                          |  | $                    | 115,768 |  
|Property and equipment, net of accumulated
depreciation |  |                      | 764,496 |  
|Other non-current assets                                |  |                      | 194,002 |  
|Current liabilities                                     |  |                      | 114,848 |  
|Long-term debt, net of current portion                  |  |                      | 707,243 |  
|Other long-term liabilities                             |  |                      | 178,246 |  
|Retained earnings                                       |  |                      | (13,147 | )

Summarized Combined Statement of Operations Data
(in thousands)

|                 |  |              |         |              |  |   |         | 
|---------------- |  | ------------ | ------- | ------------ |  | - | ------- | 
|                 |  | For the      |         | For the     
|                 |  | Year Ended   |         | Year Ended  
|                 |  | December 31, |         | December 31,
|                 |  | 2001(1)      |         | 2000        
|                 |  |              |         |             
|Total revenue    |  | $            | 250,023 |              |  | $ | 363,719 | 
|Operating income |  |              | 116,816 |              |  |   | 159,113 | 
|Net income       |  |              | 59,383  |              |  |   | 95,118  | 



|(1) |  | These amounts exclude the results of Semass, LP and American Ref-Fuel Company, for which our ownership interest was divested
on April 30, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

Differences between the equity in earnings we reported and our proportionate share of the combined earnings of the related investees result
principally from differences in the recognition of expenses, goodwill amortization and the elimination of intercompany transactions.

83



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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.     Long-term Debt

The effective rate includes our interest cost incurred, the effect of interest rate swap contracts, amortization of deferred debt issuance cost
and the amortization or accretion of discounts or premiums.

Long-term debt at December 31, 2002 and 2001 consists of the following (in thousands):

|                                                                                                                                                                                                                                                              |  |      |           |      |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                                                                              |  | 2002 |           | 2001
|                                                                                                                                                                                                                                                              |  |      |           |     
|Revolving credit facility, weighted average rate of 5.97%                                                                                                                                                                                                     |  | $    |          |      |  | $ |          | 
|Tranche A term loan facility, effective rate of 9.09% and 9.48%,
respectively                                                                                                                                                                                 |  |      | 899,061   |      |  |   | 1,157,785 | 
|Tranche B term loan facility, effective rate of 8.38% and 9.37%,
respectively                                                                                                                                                                                 |  |      | 670,941   |      |  |   | 864,018   | 
|Tranche C term loan facility, effective rate of 9.46% and 9.94%,
respectively                                                                                                                                                                                 |  |      | 805,129   |      |  |   | 1,036,822 | 
|Senior subordinated notes, interest at 10.00%, effective rate of
10.18%, including unamortized premium of $5,578 and $6,425,
respectively                                                                                                                     |  |      | 2,005,578 |      |  |   | 2,006,425 | 
|Senior notes, interest at 7.88%, effective rate of 8.14%, net of
unamortized discount of $1,056 and $1,188, respectively                                                                                                                                      |  |      | 873,944   |      |  |   | 873,812   | 
|Senior notes, interest at 7.63%, effective rate of 7.99%                                                                                                                                                                                                      |  |      | 600,000   |      |  |   | 600,000   | 
|Senior notes, interest at 7.38%, effective rate of 7.90%, net of
unamortized discount of $77 and $150, respectively                                                                                                                                           |  |      | 224,923   |      |  |   | 224,850   | 
|Senior notes, interest at 8.88%, effective rate of 9.16%                                                                                                                                                                                                      |  |      | 600,000   |      |  |   | 600,000   | 
|Senior notes, interest at 8.50%, effective rate of 8.77%                                                                                                                                                                                                      |  |      | 750,000   |      |  |   | 750,000   | 
|Senior notes, interest at 9.25%, effective rate of 9.45%, including
unamortized premium of $2,396                                                                                                                                                             |  |      | 377,396   |      |  |   |          | 
|Debentures, interest at 7.40%, effective rate of 10.17%, net of
unamortized discount of $74,688 and $76,969, respectively                                                                                                                                     |  |      | 285,312   |      |  |   | 283,031   | 
|Senior notes, interest at 6.10%, effective rate of 8.35%, net of
unamortized discount of $163 and $3,679, respectively                                                                                                                                        |  |      | 156,526   |      |  |   | 153,010   | 
|Senior notes, interest at 6.38%, effective rate of 9.31%, net of
unamortized discount of $15,977 and $19,141, respectively                                                                                                                                    |  |      | 145,223   |      |  |   | 142,059   | 
|Debentures, interest at 9.25%, effective rate of 9.90%, net of
unamortized discount of $4,107 and $4,331, respectively                                                                                                                                        |  |      | 95,393    |      |  |   | 95,169    | 
|Senior notes, interest at 7.88%, effective rate of 8.97%, net of
unamortized discount of $1,376 and $1,999, respectively                                                                                                                                      |  |      | 68,125    |      |  |   | 67,502    | 
|Solid waste revenue bond obligations, weighted average interest
rate of 5.05% and 5.40%, weighted average effective rate of
6.18% and 7.06%, respectively, net of unamortized discount of
$4,167 and $4,491, respectively, and principal payable through
2031 |  |      | 307,268   |      |  |   | 313,831   | 
|2001 subsidiaries line of credit, effective rate of 8.72%,
secured by equipment                                                                                                                                                                               |  |      |          |      |  |   | 65,925    | 
|Notes payable to banks, finance companies, and individuals,
interest rates of 4.00% to 12.23%, and principal payable through
2010, secured by vehicles, equipment, real estate, accounts
receivable or stock of certain subsidiaries                          |  |      | 6,731     |      |  |   | 11,553    | 
|Obligations under capital leases of vehicles and equipment,
weighted average interest of 9.97%                                                                                                                                                                |  |      | 8,942     |      |  |   | 11,355    | 
|Notes payable to individuals and a commercial company,
interest rates of 8.00% to 9.50%, principal payable through 2007,
unsecured                                                                                                                            |  |      | 1,676     |      |  |   | 2,486     | 
|                                                                                                                                                                                                                                                              |  |      |           |      |  |   |           | 
|                                                                                                                                                                                                                                                              |  |      | 8,882,168 |      |  |   | 9,259,633 | 
|Less: Current portion                                                                                                                                                                                                                                         |  |      | 163,526   |      |  |   | 22,130    | 
|                                                                                                                                                                                                                                                              |  |      |           |      |  |   |           | 
|                                                                                                                                                                                                                                                              |  | $    | 8,718,642 |      |  | $ | 9,237,503 | 
|                                                                                                                                                                                                                                                              |  |      |           |      |  |   |           | 

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank credit facility 

At December 31, 2002, we have a senior
secured credit facility (the 1999
Credit Facility) that provides a $1.3
billion revolving credit facility, due
July 2005 (the Revolving Credit
Facility) and $2.375 billion in funded,
amortizing senior secured term loans
with varying maturity dates through
2007.

The 1999 Credit Facility bears interest, at (a) an Alternate Base
Rate, or (b) a Eurodollar Rate, both terms defined in the 1999
Credit Facility, plus, in either case, an applicable margin and
may be used for working capital and other general corporate
purposes, acquisitions, and the issuance of letters of credit. Of
the $1.3 billion available under the Revolving Credit Facility at
December 31, 2002, the entire amount may be used to support the
issuance of letters of credit. As of December 31, 2002,
approximately $567.2 million was available on the Revolving Credit
Facility.

We are required to make prepayments on
the 1999 Credit Facility upon
completion of certain asset sales and
issuances of debt or equity securities.
Proceeds from asset sales are to be
applied first to reduce borrowings
under the Tranche A, B and C term loans
on a pro rata basis. Required
prepayments are to be made based on a
percentage of the net proceeds of any
debt incurrence or equity issuance. In
addition, we are required to make
prepayments on the 1999 Credit Facility
based on excess cash flows from
operations, as defined.

Senior subordinated notes 

In July 1999, Allied Waste North
America, Inc. (Allied NA), a wholly
owned consolidated subsidiary of
Allied, issued $2.0 billion of senior
subordinated notes (the 1999 Notes)
that mature in 2009. Interest accrues
on the 1999 Notes at an interest rate
of 10% per annum, payable semi-annually
on May 1 and November 1. We used the
proceeds from the 1999 Notes as partial
financing of the acquisition of BFI.

Senior notes and debentures 

In November 2002, we issued $375.0 million of 9.25% senior notes due 2012 (the
2002 Senior Notes), in a private placement under Rule 144A of the Securities
Act of 1933. The senior notes were issued at a premium of $2.4 million. These
senior notes have a no call provision until 2007. Interest is payable
semi-annually on March 1 and September 1. We used the net proceeds of $370.6
million from the sale of these notes to ratably repay portions of tranches A, B
and C of the term loans under the 1999 Credit Facility prior to maturity. We
will initiate the registration of these notes with the SEC under the
Securities Act of 1933 shortly after the filing of this Form 10-K.
Additionally, during 2002, we prepaid approximately $105.0 million of the
tranche A, B and C term loan prior to maturity with cash from operations.
These prepayments reduced amounts maturing in 2003 by approximately $104
million.

In August 2002, we repaid the 2001
subsidiaries line of credit prior to
its maturity in 2006 with cash from
operations and borrowings under the
Revolving Credit Facility. In
connection with this repayment, we paid
a prepayment penalty of $3.2 million.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2001, we issued $750 million of 8.50% senior notes, due 2008 and $600 million of 8.875% senior notes, due 2008 (together the 2001
Senior Notes). Interest on the 2001 senior notes is payable semi-annually on June 1 and September 1. In connection with the issuance of
the notes, we amended our 1999 Credit Facility to change certain financial covenants to provide us with greater flexibility and to reduce
the total revolving line by $200 million, from $1.5 billion to $1.3 billion. This reduction in the revolver was effective as of June 29,
2001.

In connection with the BFI acquisition on July 30, 1999, we assumed all of BFIs debt securities with the exception of commercial paper
that was paid off in connection with the acquisition. BFIs debt securities were recorded at their fair market values as of the date of
the acquisition in accordance with Emerging Issues Task Force Issue
98-1  Valuation of Debt Assumed in a Purchase Business Combination
(EITF 98-1). The effect of revaluing the debt securities resulted in an aggregate discount from the historic face amount of $137.0
million. At December 31, 2002, the remaining unamortized net discount related to the debt securities of BFI was $100.5 million.

The 6.10% senior notes, 6.375% senior notes and 9.25% debentures assumed from BFI are not redeemable prior to maturity and are not
subject to any sinking fund. In January 2003, the 6.10% senior notes were repaid upon maturity with cash flow from operations and
application of our ending cash balance.

The 7.40% Debentures assumed from BFI are not subject to any sinking fund and may be redeemed as a whole or in part, at our option at any
time. The redemption price is equal to the greater of (i) the principal amount of the debentures and (ii) the present value of future
principal and interest payments discounted at a rate specified under the terms of the indenture.

In December 1998, Allied NA issued an aggregate of $1.7 billion of senior notes consisting of $225 million
7.375% senior notes due 2004, $600 million 7.625% senior notes due 2006 and $875 million 7.875% senior
notes due 2009 (together, the 1998 Senior Notes). Interest accrued on the 1998 Senior Notes is payable
semi-annually on January 1 and July 1.

Future maturities of long term debt

Aggregate future scheduled maturities of long-term debt are as follows (in thousands):

|                |  |                    |           |  
|--------------- |  | ------------------ | --------- | -
|                |  | As of December 31,
|Maturity        |  | 2002              
|                |  |                   
|2003            |  | $                  | 163,526   |  
|2004            |  |                    | 603,839   |  
|2005            |  |                    | 609,420   |  
|2006            |  |                    | 1,275,967 |  
|2007            |  |                    | 805,923   |  
|Thereafter      |  |                    | 5,517,130 |  
|                |  |                    |           |  
|Gross Principal |  |                    | 8,975,805 |  
|Discount, net   |  |                    | (93,637   | )
|                |  |                    |           |  
|Total Debt      |  | $                  | 8,882,168 |  
|                |  |                    |           |  

Future payments under capital leases, the principal amounts of which are included above in future maturities of long-term
debt, are as follows at December 31, 2002 (in thousands):

|           |  |           |       |          |  |       |       |  |  |   |        | 
|---------- |  | --------- | ----- | -------- |  | ----- | ----- |  |  | - | ------ | 
|Maturity   |  | Principal |       | Interest |  | Total
|           |  |           |       |          |  |      
|2003       |  | $         | 2,799 |          |  | $     | 772   |  |  | $ | 3,571  | 
|2004       |  |           | 2,130 |          |  |       | 549   |  |  |   | 2,679  | 
|2005       |  |           | 1,001 |          |  |       | 364   |  |  |   | 1,365  | 
|2006       |  |           | 207   |          |  |       | 295   |  |  |   | 502    | 
|2007       |  |           | 153   |          |  |       | 290   |  |  |   | 443    | 
|Thereafter |  |           | 2,652 |          |  |       | 2,050 |  |  |   | 4,702  | 
|           |  |           |       |          |  |       |       |  |  |   |        | 
|           |  | $         | 8,942 |          |  | $     | 4,320 |  |  | $ | 13,262 | 
|           |  |           |       |          |  |       |       |  |  |   |        | 

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value of debt and interest rate protection agreements

The fair value of our debt and hedging instruments are subject to change as a result of potential changes in market rates and prices. The table below provides information about our long-term debt and
interest rate hedges by aggregate principal or notional amounts and weighted average interest rates for instruments that are sensitive to changes in interest rates. The financial instruments are grouped
by market risk exposure category (in thousands, except percentages):

|                       |                     |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |   |           |  
|---------------------- | ------------------- | --------------------------------- |  | ------------ | --------- | ------------- |  | ------------ | --------- | ------------- |  | - | --------- | - |  | - | --------- | -
|                       |                     |                                   |  | Balance at   |           | Fair Value at |  | Balance at   |           | Fair Value at
|                       |                     |                                   |  | December 31, |           | December 31,  |  | December 31, |           | December 31, 
|                       |                     |                                   |  | 2002         |           | 2002          |  | 2001         |           | 2001         
|                       |                     |                                   |  |              |           |               |  |              |           |              
|Long-Term Debt         |                     |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |  
|                       | Fixed Rate Debt:    |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |   |          
|                       |                     | Principal amount                  |  | $            | 6,410,255 |               |  | $            | 6,350,156 |               |  | $ | 6,038,303 |   |  | $ | 6,038,977 |  
|                       |                     | Weighted average
interest rate    |  |              | 8.73      | %             |  |              |           |               |  |   | 8.71      | % |  |   |           |  
|                       | Variable Rate Debt: |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |   |          
|                       |                     | Principal amount                  |  | $            | 2,471,911 |               |  | $            | 2,441,015 |               |  | $ | 3,221,330 |   |  | $ | 3,172,340 |  
|                       |                     | Weighted average
interest rate(1) |  |              | 4.14      | %             |  |              |           |               |  |   | 4.61      | % |  |   |           |  
|Interest Rate Swaps(2) |                     |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |  
|                       | Non-Cancelable:     |                                   |  |              |           |               |  |              |           |               |  |   |           |   |  |   |          
|                       |                     | Notional amount                   |  | $            | 2,300,000 |               |  | $            | (125,746  | )             |  | $ | 2,886,822 |   |  | $ | (140,693  | )
|                       |                     | Weighted average
interest rate    |  |              | 6.06      | %             |  |              |           |               |  |   | 6.29      | % |  |   |           |  



|(1) |  | Reflects the rate in effect as of December 31, 2002 and 2001 before the effects of swaps and includes all applicable margins. Actual future rates may vary.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | All interest rate swaps enable us to pay a fixed interest rate in exchange for receiving variable interest rates at LIBOR. (See Note 6).                   

Debt covenants

We are subject to the following financial covenants under the 1999 Credit Facility, as amended:

|                                                                                                     |  |                                                                                                             |  |                                     |  |                                    
|---------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ----------------------------------- |  | -----------------------------------
|From the                                                                                             |  | Through the                                                                                                 |  | Total                               |  |                                    
|Quarter Ending                                                                                       |  | Quarter Ending                                                                                              |  | Debt/EBITDA (1)                     |  | EBITDA/Interest (1)                
|                                                                                                     |  |                                                                                                             |  |                                     |  |                                    
|December 31, 2002
March 31, 2003
December 31, 2003
June 30, 2004
December 31, 2004
December 31, 2005 |  | December 31, 2002
September 30, 2003
March 31, 2004
September 30, 2004
September 30, 2005
December 31, 2005 |  | 5.75x
5.50x
5.25x
5.00x
4.50x
4.25x |  | 2.00x
2.00x
2.25x
2.25x
2.50x
2.75x



|(1) |  | EBITDA and interest used for this calculation are defined in the 1999 Credit Facility (filed in conjunction
with this form 10-K, see Exhibit 10.18) and are based on twelve months trailing amounts.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At December 31, 2002, we were in compliance with all financial covenants. At December 31, 2002, Total Debt/EBITDA ratio was 5.01:1 and our EBITDA/Interest ratio was 2.20:1. We are not subject to any
minimum net worth covenants.

87



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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our ability to pay dividends on preferred and common stock is most significantly limited by the 1999 Credit
Facility, which specifies that in order to pay cash dividends, the ratio of Total Debt/EBITDA, as defined, must
be less than 4:1. At December 31, 2002, that ratio was 5.01:1, precluding the payment of cash dividends.
Currently, dividends on our Series A Senior Convertible Preferred Stock are not being paid in cash and instead
are being accrued to the liquidation preference. Shares of preferred stock are entitled to cumulative quarterly
dividends in an amount equal to 6.5% per annum. Beginning July 30, 2004, the dividend rate on the Series A
Senior Convertible Preferred Stock increases to 12% per annum for any dividends that are not paid in cash.
There are circumstances under which we would not be required to accrue dividends at the rate of 12% rate. As
long as we have a Total Debt/EBITDA ratio of less than 4:1, under the current 1999 Credit Facility, we would be
able to pay cash dividends at the 6.5% rate.

The 1998 Senior Notes, the 1999 Notes, the 2001 Senior Notes and the 2002 Senior Notes contain certain financial
covenants and restrictions, which may, in certain circumstances, limit our ability to complete acquisitions, pay
dividends, incur indebtedness, make investments and take certain other corporate actions. At December 31, 2002,
we were in compliance with all applicable covenants.

Guarantees 

Substantially all of our subsidiaries are jointly and severally liable for the obligations
under the 1998 Senior Notes, the 1999 Notes, the 2001 Senior Notes, the 2002 Senior Notes,
and the 1999 Credit Facility through unconditional guarantees issued by current and future
subsidiaries. At December 31, 2002, the maximum potential amount of future payments under
the guarantees is the outstanding amount of the debt identified above and the amount for
letters of credit issued under the credit facility. In accordance with FIN 45, the
guarantees are not recorded in our consolidated financial statements as they represent
parent-subsidiary guarantees. We do not guarantee any third party debt.

Collateral 

The 1999 Credit Facility is secured by substantially all the personal property and a pledge
of the stock of substantially all of our present and future subsidiaries. The 2002 Senior
Notes, 2001 Senior Notes, 1998 Senior Notes and certain of the debt assumed in connection
with the acquisition of BFI are secured by a pledge of the stock of substantially all of BFI
and certain other Allied subsidiaries and a security of interest in the assets of BFI, its
domestic subsidiaries and certain other Allied subsidiaries. In accordance with the SECs
Rule 3-16 of Regulation S-X, separate financial statements for BFI are presented under Item
15 of this Form 10-K. Following is a summary of the balance sheets for BFI and the other
Allied subsidiaries that serve as collateral as of December 31, 2002 (in thousands):

|                                                |                                      |     |           |            |   |          |              |             |  |   |           |           | 
|----------------------------------------------- | ------------------------------------ | --- | --------- | ---------- | - | -------- | ------------ | ----------- |  | - | --------- | --------- | 
|                                                |                                      |     |           |            |   |          | Other Allied |             |  |   |          
|Condensed Balance Sheet:                        |                                      | BFI |           | Collateral |   | Combined
|                                                |                                      |     |           |            |   |          |             
|                                                | Current assets                       |     | $         | 230,893    |   |          | $            | 242,389     |  |   | $         | 473,282   | 
|                                                | Property and equipment, net          |     |           | 944,026    |   |          |              | 637,434     |  |   |           | 1,581,460 | 
|                                                | Goodwill, net                        |     |           | 3,745,304  |   |          |              | 2,926,876   |  |   |           | 6,672,180 | 
|                                                | Other assets, net                    |     |           | 131,940    |   |          |              | 6,085       |  |   |           | 138,025   | 
|                                                | Due
from Parent                      |     |           | 2,423,692  |   |          |              | (2,451,688) |  |   |           | (27,996)  | 
|                                                |                                      |     |           |            |   |          |              |             |  |   |           |          
|                                                | Total assets                         |     | $         | 7,475,855  |   |          | $            | 1,361,096   |  |   | $         | 8,836,951 | 
|                                                |                                      |     |           |            |   |          |              |             |  |   |           |          
|                                                | Current liabilities                  |     | $         | 694,571    |   |          | $            | 198,726     |  |   | $         | 893,297   | 
|                                                | Long-term debt, less
current portion |     |           | 6,944,193  |   |          |              | 1,627       |  |   |           | 6,945,820 | 
|                                                | Other long-term obligations          |     |           | 972,129    |   |          |              | 13,113      |  |   |           | 985,242   | 
|                                                | Total stockholders equity           |     |           | (1,135,038 | ) |          |              | 1,147,630   |  |   |           | 12,592    | 
|                                                |                                      |     |           |            |   |          |              |             |  |   |           |          
|Total liabilities and
stockholders liabilities |                                      | $   | 7,475,855 |            |   | $        | 1,361,096    |             |  | $ | 8,836,951 |          
|                                                |                                      |     |           |            |   |          |              |             |  |   |           |          

All transactions between BFI and the other
Allied collateral have been eliminated.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.     Derivative Instruments and Hedging Activities

Our risk management policy requires 75% of our total debt
to be fixed, either directly or effectively through
interest rate swap contracts. At December 31, 2002,
approximately 98% of our debt was fixed, 72% directly, and
26% through interest rate swap contracts. Our interest
rate swap portfolio continues to fix 98% of our variable
rate interest payment obligation, protecting us from cash
flow variations arising from changes in short term interest
rates. Given our capital structure, we believe it is
prudent to minimize interest expense volatility. At
December 31, 2002, the notional value of our interest rate
swap contracts was $2.3 billion with a weighted average of
15 months to maturity. These contracts expire as follows:
$650 million during 2003, $1.4 billion during 2004, and
$250 million during 2005.

Consistent with our risk
management policy, we enter
into floating-rate to
fixed-rate swap agreements
for the purpose of hedging
variability of interest
expense and interest payments
on our long-term variable
rate bank debt. Our strategy
is to use floating to fixed
interest rate swap agreements
when such transactions will
serve to reduce our aggregate
exposure. We enter into
these contracts solely for
the purpose of reducing
variable interest rate risk;
positions are not taken for
trading purposes. Our risk
management policy requires
that we evaluate the credit
of our counterparties and
that we monitor counterparty
exposure. At December 31,
2002, counterparties for 91%
of our interest rate swap
portfolio were rated Aa3.
The counterparty for the
remaining 9% is rated A1.

At December 31, 2002, a liability of $125.7 million is
included in the Consolidated Balance Sheets in other
long-term obligations reflecting the fair market value of
our entire interest rate swap portfolio on that date. The
liability will fluctuate with market interest rates but
will reduce to zero over the terms of each of our interest
rate swap contracts. Approximately $10.1 million of the
liability at December 31, 2002 relates to contracts
maturing within 12 months. Fair value variations over the
life of the interest rate swap contracts arise from changes
in forecasted interest rates and the time value of money.

On December 31, 2001, we de-designated $1.5 billion of
notional amount interest rate swap contracts due to the
possibility that future interest rate payments on the
underlying variable rate debt may cease prior to the
expiration of the related interest rate swap contracts.
There were no de-designated interest rate swap contracts
prior to December 31, 2001. No additional interest rate
swap contracts were de-designated during 2002.

Designated interest rate swap contracts 

Our designated cash flow interest rate swap contracts are effective as hedges
of our variable rate debt. The notional amounts, indices, repricing dates, and
all other significant terms of the swap agreements are matched to the
provisions and terms of the variable rate debt being hedged achieving 100%
effectiveness. If significant terms do not match we will assess any
ineffectiveness and any ineffectiveness is immediately recorded in interest
expense in our statement of operations.

Changes in fair value of our interest rate swap contracts are reflected in
Accumulated Other Comprehensive Income (AOCI). At December 31, 2002,
approximately $63.4 million ($38.3 million, net of tax) is included in AOCI.

Expense or income related to swap settlements are recorded in interest expense
for the related variable rate debt over the term of the agreements.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

De-designated interest rate swap contracts 

Settlement payments and periodic changes in market values of our de-designated interest rate
swap contracts are recorded as a gain or loss on derivative contracts included in interest
expense and other in our statement of operations. We recorded $2.4 million of net gain related
to changes in market values and $59.6 million of settlement costs during the year ended
December 31, 2002.

When interest rate swap hedging relationships are de-designated or terminated, any accumulated
gains or losses in AOCI at the time of de-designation are isolated and amortized over the
remaining original hedged interest payment. For contracts de-designated, the total amount of
loss in AOCI at December 31, 2001 was approximately $65.2 million ($39.5 million, net of tax),
and $29.8 million ($18.1 million, net of tax) remains in AOCI at December 31, 2002. For the
year ended December 31, 2002, we recorded $35.4 million of amortization expense related to the
accumulated losses in AOCI for interest rate swap contracts that were de-designated at December
31, 2001. In 2003, we expect to record approximately $23.1 million of amortization expense
related to the accumulated losses in AOCI for the de-designated swap contracts. The
amortization expense is recorded in interest expense.

7.     Comprehensive Income (Loss)

The components of the ending balances of
accumulated other comprehensive loss, as reflected
in stockholders equity are shown as follows (in
thousands):

|                                                                                     |                                      |   |              |          |              |   |         |         |  
|------------------------------------------------------------------------------------ | ------------------------------------ | - | ------------ | -------- | ------------ | - | ------- | ------- | -
|                                                                                     |                                      |   | December 31, |          | December 31,
|                                                                                     |                                      |   | 2002         |          | 2001        
|                                                                                     |                                      |   |              |          |             
|Minimum pension liability adjustment, net of taxes of $49,840                        |                                      | $ | (74,760      | )        |              | $ |        |        
|Interest rate swap contracts designated,
unrealized loss, net of taxes of $25,065    |                                      |   | (38,322      | )        |              |   | (45,668 | )      
|Interest rate swap contracts de-designated,
unrealized loss, net of taxes of $11,686 |                                      |   | (18,124      | )        |              |   | (39,452 | )      
|                                                                                     |                                      |   |              |          |              |   |         |        
|                                                                                     | Accumulated other comprehensive loss |   | $            | (131,206 | )            |   | $       | (85,120 | )
|                                                                                     |                                      |   |              |          |              |   |         |        

8.     Landfill Accounting

The following discussion of landfill accounting
pertains to our 2002 accounting practices.
Effective January 1, 2003, we adopted SFAS 143
which will require changes to certain elements of
these practices. Refer to Note 1 for a discussion
on the impact of the adoption of SFAS 143 on our
landfill accounting.

We have a network of 169 owned or operated active
landfills with a net book value of approximately
$1.9 billion at December 31, 2002. The landfills
have operating lives ranging from 1 to over 150
years based on available capacity using current
annual volumes. The average life of our landfills
approximates 38 years.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We use a life-cycle accounting method for landfills
and the related closure and post-closure
liabilities. This method applies the costs
associated with acquiring, developing, closing and
monitoring the landfills over the associated
landfill capacity and associated consumption. On an
annual basis, we update the development cost
estimates (which include the costs to develop the
site as well as the individual cell construction
costs), closure and post-closure cost estimates and
future capacity estimates (sometimes referred to as
airspace) for each landfill. The cost estimates are
prepared by our local management and third-party
engineers based on the applicable local, state and
federal regulations and site specific permit
requirements. Future capacity estimates are updated
using aerial surveys of each landfill to estimate
utilized disposal capacity and remaining disposal
capacity. These cost and capacity estimates are
reviewed and approved by senior operations
management annually.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Landfill assets

We use the units of production method for purposes of calculating the amortization rate at each landfill. This methodology divides the costs
associated with acquiring, permitting and developing the entire landfill by the total remaining disposal capacity of that landfill. The
resulting per unit amortization rate is applied to each unit disposed at the landfill and is recorded as expense for that period. We expensed
approximately $164.1 million and $149.2 million or an average of $2.26 per ton and $2.10 per ton consumed, related to landfill amortization
during the years ended December 31, 2002 and 2001, respectively. The following is a rollforward of our investment in our landfill assets
excluding land held for permitting as landfills (in thousands):

|                  |  |                 |        |             |  |              |         |           |  |      |          |              |  |    |        |                |  |   |           | 
|----------------- |  | --------------- | ------ | ----------- |  | ------------ | ------- | --------- |  | ---- | -------- | ------------ |  | -- | ------ | -------------- |  | - | --------- | 
|                  |  | Net Book Value  |        |             |  |              |         |           |  |      |          |              |  |    |        |                |  |  
|                  |  | of Landfills    |        |             |  |              |         |           |  |      |          |              |  |    |        | Net Book Value
|                  |  | Acquired During |        | Landfill    |  |              |         |           |  |      |          |              |  | at
|Net Book Value at |  | 2002, net of    |        | Development |  | Landfill     |         |           |  |      |          | December 31,
|December 31, 2001 |  | Divestitures    |        | Costs       |  | Amortization |         | Other (1) |  | 2002
|                  |  |                 |        |             |  |              |         |           |  |     
|$1,774,529        |  |                 | 16,084 |             |  |              | 227,951 |           |  |      | (164,114 | )            |  |    | 19,868 |                |  | $ | 1,874,318 | 



|(1) |  | Relates primarily to amounts transferred between land held for permitting as landfills and landfill resulting from classifying
additional disposal capacity as probable expansion during 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Costs associated with developing the landfill include direct costs such as excavation, liners, leachate collection systems, engineering and
legal fees, and capitalized interest. Estimated total future development costs for our 169 active landfills is approximately $3.7 billion,
excluding capitalized interest, and we expect that this amount will be spent over the remaining operating lives of the landfills. We have
available disposal capacity of approximately 2.5 billion tons, as of December 31, 2002. We classify this total disposal capacity as either
permitted (having received the final permit from the governing authorities) or probable expansion. Probable expansion disposal capacity has
not yet received final approval from the regulatory agencies, but we have determined that certain critical criteria have been met and the
successful completion of the expansion is highly probable. Our internal requirements to classify disposal capacity as probable expansion are
as follows:



| | 1. |  | We have control of and access to the land where the expansion permit is being sought.                                                                                                
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | All geologic and other technical siting criteria for a landfill have been met, or a variance from such requirements has been
received (or can reasonably be expected to be achieved).
|
| | 3. |  | The political process has been assessed and there are no identified impediments that cannot be resolved.                                                                             
|
| | 4. |  | We are actively pursuing the expansion permit and have an expectation that the final local, state and federal permits will be
received within the next five years.                   
|
| | 5. |  | Senior operations management approval has been obtained.                                                                                                                             

Upon successfully meeting the preceding criteria, the costs associated with developing, constructing, closing and monitoring the total
additional future disposal capacity are considered in the life-cycle cost of the landfill and reflected in the calculation of the
amortization and closure and post-closure rates. At December 31, 2002, we had 1.9 billion tons of permitted disposal capacity, and at 35
of our landfills, 580.1 million tons of probable expansion disposal capacity.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reflects disposal capacity activity for active landfills we owned or operated for the twelve months ended December 31, 2002 (disposal capacity in millions of tons):

|                                                  |  |           |         |           |  |           |     |           |  |          |       |           |  |  |    |   |  |  |         |       |  |  |     | 
|------------------------------------------------- |  | --------- | ------- | --------- |  | --------- | --- | --------- |  | -------- | ----- | --------- |  |  | -- | - |  |  | ------- | ----- |  |  | --- | 
|                                                  |  |           |         |           |  |           |     |           |  | Probable |       |           |  |  |    |   |  |  |         | Total
|                                                  |  | Permitted |         | Number    |  | Expansion |     | Number    |  | Total    |       | Number   
|                                                  |  | Disposal  |         | Of        |  | Disposal  |     | of        |  | Disposal |       | of       
|                                                  |  | Capacity  |         | Landfills |  | Capacity  |     | Landfills |  | Capacity |       | Landfills
|                                                  |  |           |         |           |  |           |     |           |  |          |       |          
|Balance as of
December 31, 2001                   |  |           | 1,921.0 |           |  |           | 167 |           |  |          | 618.8 |           |  |  | 41 |   |  |  | 2,539.8 |       |  |  | 167 | 
|Acquisitions,
divestitures and
closures           |  |           | 11.1    |           |  |           | 2   |           |  |          |      |           |  |  |   |   |  |  | 11.1    |       |  |  | 2   | 
|Additions to probable
expansion disposal
capacity |  |           |        |           |  |           |    |           |  |          | 21.1  |           |  |  | 1  |   |  |  | 21.1    |       |  |  |    | 
|Additions to permitted
disposal capacity          |  |           | 74.6    |           |  |           |    |           |  |          | (57.1 | )         |  |  | (7 | ) |  |  | 17.5    |       |  |  |     | 
|Disposal capacity
consumed                        |  |           | (72.5   | )         |  |           |    |           |  |          |      |           |  |  |   |   |  |  | (72.5   | )     |  |  |    | 
|Changes in engineering
estimates                  |  |           | (7.3    | )         |  |           |    |           |  |          | (2.7  | )         |  |  |   |   |  |  | (10.0   | )     |  |  |    | 
|                                                  |  |           |         |           |  |           |     |           |  |          |       |           |  |  |    |   |  |  |         |       |  |  |     | 
|Balance as of
December 31, 2002                   |  |           | 1,926.9 |           |  |           | 169 |           |  |          | 580.1 |           |  |  | 35 |   |  |  | 2,507.0 |       |  |  | 169 | 
|                                                  |  |           |         |           |  |           |     |           |  |          |       |           |  |  |    |   |  |  |         |       |  |  |     | 

We, together with our engineering and legal consultants, continually monitor the progress of obtaining local, state and federal approval for each of its
expansion permits. If it is determined that the expansion no longer meets our criteria, the disposal capacity is removed from our total available disposal
capacity; the costs to develop that disposal capacity and the associated closure and post-closure costs are removed from the landfill amortization base, and
rates are adjusted prospectively. In addition, any value assigned to probable expansion capacity would be written-off to expense during the period in which it
is determined that the criteria are no longer met.

The following table reflects the estimated operating lives of our landfill assets based on available disposal capacity using current annual volumes:

|               |  |                      |     |                      |  |                 |     |                  |  |  |     |  |  |  |     |  
|-------------- |  | -------------------- | --- | -------------------- |  | --------------- | --- | ---------------- |  |  | --- |  |  |  | --- | -
|               |  | At December 31, 2002 |     | At December 31, 2001
|               |  |                      |     |                     
|               |  | Number of Sites      |     | Percent of Total     |  | Number of Sites |     | Percent of Total
|               |  |                      |     |                      |  |                 |     |                 
|0 to 5 years   |  |                      | 28  |                      |  |                 | 16  | %                |  |  | 27  |  |  |  | 16  | %
|5 to 10 years  |  |                      | 19  |                      |  |                 | 11  | %                |  |  | 22  |  |  |  | 13  | %
|10 to 20 years |  |                      | 30  |                      |  |                 | 18  | %                |  |  | 21  |  |  |  | 13  | %
|20 to 40 years |  |                      | 42  |                      |  |                 | 25  | %                |  |  | 46  |  |  |  | 28  | %
|40
plus years  |  |                      | 50  |                      |  |                 | 30  | %                |  |  | 51  |  |  |  | 30  | %
|               |  |                      |     |                      |  |                 |     |                  |  |  |     |  |  |  |     |  
|Total          |  |                      | 169 |                      |  |                 | 100 | %                |  |  | 167 |  |  |  | 100 | %
|               |  |                      |     |                      |  |                 |     |                  |  |  |     |  |  |  |     |  

Closure and post-closure

In addition to our portfolio of 169 active landfills, we own or have responsibility for 110 closed landfills no longer accepting waste. As individual areas within each landfill reach
capacity, we are required to cap and close the areas in accordance with the landfill site permit. Generally, closure requirements include the application of compacted clay, geosynthetic
liners and vegetative soil barriers in addition to the construction of drainage channels and methane gas collection systems among other closure activities.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

After the entire landfill site has reached capacity and is closed, we are required to
maintain and monitor the site for a post-closure period, which may extend for 30 years.
Post-closure requirements generally include maintenance of the site and monitoring the
methane gas collection systems and groundwater systems, among other post-closure activities.
Estimated costs for such closure and post-closure as required under Subtitle D regulations
are compiled and updated annually for each landfill by local and regional company engineers.
In addition, on an annual basis, senior management performs a review of the overall cost
estimates. The following table is a summary of the closure and post-closure costs (in
thousands):

|                                                                       |                                                                              |  |                   |           |                   |  |   |         | 
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | - | ------- | 
|                                                                       |                                                                              |  | December 31, 2002 |           | December 31, 2001
|                                                                       |                                                                              |  |                   |           |                  
|Discounted Closure and Post-Closure Liability Recorded (1) :           |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Current Portion                                                              |  | $                 | 78,717    |                   |  | $ | 93,218  | 
|                                                                       | Non-Current Portion                                                          |  |                   | 516,092   |                   |  |   | 516,281 | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Total                                                                        |  | $                 | 594,809   |                   |  | $ | 609,499 | 
|Estimated Remaining Closure and Post-Closure Costs to be Expended (1): |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | 2003                                                                         |  | $                 | 78,717    |                   |  |   |         | 
|                                                                       | 2004                                                                         |  |                   | 64,854    |                   |  |   |         | 
|                                                                       | 2005                                                                         |  |                   | 63,128    |                   |  |   |         | 
|                                                                       | 2006                                                                         |  |                   | 77,471    |                   |  |   |         | 
|                                                                       | 2007                                                                         |  |                   | 67,236    |                   |  |   |         | 
|                                                                       | Thereafter                                                                   |  |                   | 2,633,495 |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Remaining Undiscounted Closure and Post-Closure Costs
to be Expended         |  | $                 | 2,984,901 |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Total remaining Discounted Closure and Post-Closure Costs
to be Expended (2) |  | $                 | 1,019,351 |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        



|(1) |  | These amounts consider the effect of the adoption of SFAS 143 as of January 1, 2003 and the reflected change in
classification of methane gas collection system installation from a closure cost to landfill development cost.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The future estimated closure and post-closure costs are
discounted at a credit-adjusted risk-free rate of 9.0%,
per annum, based on the timing of the amounts to be
expended.                                                 

Our periodic closure and post-closure expense has two components. The first component is the site specific per unit closure and post-closure expense. The
per unit rate is derived by dividing the estimated total remaining discounted closure and post-closure costs by the remaining disposal capacity at each
landfill (consistent with the disposal capacity used to calculate landfill amortization rates). We use the resulting site specific rates to record expense
during a given period based upon the consumption of disposal capacity during that period.

The second component is the accretion expense necessary to increase the accrued closure and post-closure reserve balance to its future, or undiscounted,
value. To accomplish this, we accrete our closure and post-closure accrual balance using the long-term risk-free capital rate and charge this accretion as
an operating expense in that period.

We charged approximately $70.8 million and $67.2 million, or an average of $0.98 per ton and $0.95 per ton consumed, related to per unit closure and
post-closure expense and periodic accretion during the years ended December 31, 2002 and 2001, respectively. Changes in estimates of costs or disposal
capacity are treated on a prospective basis for operating landfills and are recorded immediately for closed landfills.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Environmental costs -

We engage independent environmental consulting firms to assist us in conducting environmental assessments of existing
landfills or other properties, and in connection with companies acquired from third parties.

The ultimate amounts for environmental liabilities cannot be precisely determined and estimates of such liabilities made
by us, after consultation with our independent environmental engineers and legal counsel, require assumptions about
future events due to a number of uncertainties including the extent of the contamination, the appropriate remedy, the
financial viability of other potentially responsible parties and the final apportionment of responsibility among the
potentially responsible parties. Where we have concluded that our estimated share of potential liabilities is probable,
a provision has been made in the consolidated financial statements.

Since the ultimate outcome of these matters may differ from the estimates used in our assessment to date, the recorded
liabilities are periodically evaluated, as additional information becomes available to ascertain whether the accrued
liabilities are adequate. We have determined that the recorded undiscounted liability for environmental matters as of
December 31, 2002 and 2001 of approximately $365.1 million and $395.4 million, respectively, represents the most
probable outcome of these contingent matters. We do not reduce our estimated obligations for proceeds from other
potentially responsible parties or insurance companies. If receipt is probable, proceeds are recorded as an offset to
environmental expense in operating income. There were no significant recovery receivables outstanding as of December 31,
2002 or 2001. We do not expect that adjustments to estimates, which are reasonably possible in the near term and that
may result in changes to recorded amounts, will have a material effect on our consolidated liquidity, financial position
or results of operations. However, we believe that it is reasonably possible the ultimate outcome of environmental
matters, excluding closure and post-closure could result in approximately $20 million of additional liability.

The following table shows the activity and balances related to environmental accruals and for
closure and post-closure accruals related to open and closed landfills from December 31, 1999
through December 31, 2002 (in thousands):

|                                                   |  |            |         |            |  |            |        |          |  |          |         |            |  |   |         |   |  |   |           | 
|-------------------------------------------------- |  | ---------- | ------- | ---------- |  | ---------- | ------ | -------- |  | -------- | ------- | ---------- |  | - | ------- | - |  | - | --------- | 
|                                                   |  | Balance at |         | Charges to |  | Other      |        |          |  |          |         | Balance at
|                                                   |  | 12/31/99   |         | Expense    |  | Charges(1) |        | Payments |  | 12/31/00
|                                                   |  |            |         |            |  |            |        |          |  |         
|Environmental accruals                             |  | $          | 478,194 |            |  | $          | 3,331  |          |  | $        | (9,436  | )          |  | $ | (39,636 | ) |  | $ | 432,453   | 
|Open landfills closure and
post-closure accruals   |  |            | 313,800 |            |  |            | 47,134 |          |  |          | (17,727 | )          |  |   | (18,925 | ) |  |   | 324,282   | 
|Closed landfills closure and
post-closure accruals |  |            | 203,548 |            |  |            | 14,593 |          |  |          | 98,827  |            |  |   | (39,897 | ) |  |   | 277,071   | 
|                                                   |  |            |         |            |  |            |        |          |  |          |         |            |  |   |         |   |  |   |           | 
|Total                                              |  | $          | 995,542 |            |  | $          | 65,058 |          |  | $        | 71,664  |            |  | $ | (98,458 | ) |  | $ | 1,033,806 | 
|                                                   |  |            |         |            |  |            |        |          |  |          |         |            |  |   |         |   |  |   |           | 

|                                                   |  |            |           |            |  |            |        |          |  |          |        |            |  |   |         |   |  |   |           | 
|-------------------------------------------------- |  | ---------- | --------- | ---------- |  | ---------- | ------ | -------- |  | -------- | ------ | ---------- |  | - | ------- | - |  | - | --------- | 
|                                                   |  | Balance at |           | Charges to |  | Other      |        |          |  |          |        | Balance at
|                                                   |  | 12/31/00   |           | Expense    |  | Charges(1) |        | Payments |  | 12/31/01
|                                                   |  |            |           |            |  |            |        |          |  |         
|Environmental accruals                             |  | $          | 432,453   |            |  | $          |       |          |  | $        | (641   | )          |  | $ | (36,420 | ) |  | $ | 395,392   | 
|Open landfills closure and
post-closure accruals   |  |            | 324,282   |            |  |            | 51,136 |          |  |          | (3,357 | )          |  |   | (28,322 | ) |  |   | 343,739   | 
|Closed landfills closure and
post-closure accruals |  |            | 277,071   |            |  |            | 16,066 |          |  |          | 3,511  |            |  |   | (30,888 | ) |  |   | 265,760   | 
|                                                   |  |            |           |            |  |            |        |          |  |          |        |            |  |   |         |   |  |   |           | 
|Total                                              |  | $          | 1,033,806 |            |  | $          | 67,202 |          |  | $        | (487   | )          |  | $ | (95,630 | ) |  | $ | 1,004,891 | 
|                                                   |  |            |           |            |  |            |        |          |  |          |        |            |  |   |         |   |  |   |           | 

|                                                   |  |            |           |            |  |            |        |          |  |          |         |            |  |   |          |   |  |   |         | 
|-------------------------------------------------- |  | ---------- | --------- | ---------- |  | ---------- | ------ | -------- |  | -------- | ------- | ---------- |  | - | -------- | - |  | - | ------- | 
|                                                   |  | Balance at |           | Charges to |  | Other      |        |          |  |          |         | Balance at
|                                                   |  | 12/31/01   |           | Expense    |  | Charges(1) |        | Payments |  | 12/31/02
|                                                   |  |            |           |            |  |            |        |          |  |         
|Environmental accruals                             |  | $          | 395,392   |            |  | $          |       |          |  | $        | (2,501  | )          |  | $ | (27,777  | ) |  | $ | 365,114 | 
|Open landfills closure and
post-closure accruals   |  |            | 343,739   |            |  |            | 55,026 |          |  |          | (14,987 | )          |  |   | (46,944  | ) |  |   | 336,834 | 
|Closed landfills closure and
post-closure accruals |  |            | 265,760   |            |  |            | 15,760 |          |  |          | 6,686   |            |  |   | (30,231  | ) |  |   | 257,975 | 
|                                                   |  |            |           |            |  |            |        |          |  |          |         |            |  |   |          |   |  |   |         | 
|Total                                              |  | $          | 1,004,891 |            |  | $          | 70,786 |          |  | $        | (10,802 | )          |  | $ | (104,952 | ) |  | $ | 959,923 | 
|                                                   |  |            |           |            |  |            |        |          |  |          |         |            |  |   |          |   |  |   |         | 



|(1) |  | Amounts consist primarily of liabilities related to acquired and divested companies
and changes to estimates of costs for closed landfill liabilities.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.     Employee Benefit Plans

Defined Benefit Pension Plans -

As of December 31, 2002, we have one defined benefit retirement plan as a
result of the BFI acquisition. This plan covers certain BFI employees in the
United States, including some employees subject to collective bargaining
agreements.

During 2002, the BFI Retirement Plan (BFI Pension Plan) and the Pension Plan of
San Mateo County Scavenger Company and Affiliated Divisions of Browning-Ferris
Industries of California, Inc. (San Mateo Pension Plan) were merged into one
plan. However, benefits continue to be determined under each of the two
separate benefit structures. The BFI Pension Plan was amended on July 30, 1999
to freeze future credited service, but interest credits continue to accrue.
Certain participants continue to receive 2% annual service credits in addition
to interest credits through the duration of the current collective bargaining
agreements. The benefits not frozen under this plan are based on years of
service and the employees compensation.

The San Mateo Pension Plan covers substantially all employees of this location.
Benefits are based on the employees years of service and compensation using
the average of earnings over the highest five consecutive calendar years out of
the last fifteen years of service.

Our general funding policy for each pension plan is to make annual
contributions to the plan as determined to be required by the plans actuary.
No contributions were required during 2002, 2001, or 2000. No contributions
are anticipated for 2003. The plan paid approximately $13 million, $15 million
and $20 million in benefits during December 31, 2002, 2001 and 2000,
respectively.

At our measurement date of September 30, 2002, the accumulated benefit
obligation exceeded the market value of the underlying pension assets due to an
overall decline in the fair value of the assets and an increase in our discount
rate assumption. As a result, we were required under SFAS 87 to record an
accrued benefit liability of $16.5 million. This non-cash adjustment resulted
in an after tax charge to Other Comprehensive Income of $74.8 million,
reflected as a reduction to shareholders equity. This adjustment did not
impact net income.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An actuarial valuation report was prepared as of September 30, 2002 and 2001 and used, as
permitted by SFAS 132, Employers Disclosures about Pensions and Other Postretirement Benefits
(SFAS 132), for disclosures included in the tables below (in thousands, except percentages):

The following table provides a reconciliation of the changes in the plans benefit obligations
and the fair value of plan assets for the 12 month period ended September 30, 2002 and 2001,
and a statement of the funded status for both periods then ended.

|                                                 |  |      |         |      |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | ---- |  | - | ------- | -
|                                                 |  | 2002 |         | 2001
|                                                 |  |      |         |     
|Benefit obligation at beginning of period        |  | $    | 269,589 |      |  | $ | 236,973 |  
|Service cost                                     |  |      | 938     |      |  |   | 771     |  
|Interest cost                                    |  |      | 19,289  |      |  |   | 17,697  |  
|Amendment costs                                  |  |      | 153     |      |  |   |        |  
|Actuarial loss                                   |  |      | 22,262  |      |  |   | 29,573  |  
|Benefits paid                                    |  |      | (13,048 | )    |  |   | (15,425 | )
|                                                 |  |      |         |      |  |   |         |  
|Benefit obligation at end of period              |  | $    | 299,183 |      |  | $ | 269,589 |  
|                                                
|Fair value of plan assets at beginning of period |  | $    | 305,424 |      |  | $ | 354,207 |  
|Actual return on plan assets                     |  |      | (14,733 | )    |  |   | (33,358 | )
|Benefits paid                                    |  |      | (13,048 | )    |  |   | (15,425 | )
|                                                 |  |      |         |      |  |   |         |  
|Fair value of plan assets at end of period       |  | $    | 277,643 |      |  | $ | 305,424 |  
|                                                
|Funded Status                                    |  | $    | (21,540 | )    |  | $ | 35,835  |  
|Unrecognized net actuarial loss                  |  |      | 129,630 |      |  |   | 64,225  |  
|Unrecognized prior service cost                  |  |      | 144     |      |  |   |        |  
|                                                 |  |      |         |      |  |   |         |  
|Prepaid pension asset                            |  | $    | 108,234 |      |  | $ | 100,060 |  
|                                                 |  |      |         |      |  |   |         |  

The following table provides the amounts recognized in the consolidated balance sheets as of December 31:

|                                                        |  |      |          |      |  |   |         | 
|------------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------- | 
|                                                        |  | 2002 |          | 2001
|                                                        |  |      |          |     
|Prepaid pension asset                                   |  | $    | 108,234  |      |  | $ | 100,060 | 
|Accrued benefit liability                               |  |      | (124,743 | )    |  |   |        | 
|                                                        |  |      |          |      |  |   |         | 
|Net pension liability (1)                               |  |      | (16,509  | )    |  |   |        | 
|Intangible assets                                       |  |      | 144      |      |  |   |        | 
|Accumulated other comprehensive loss
before tax benefit |  |      | 124,599  |      |  |   |        | 
|                                                        |  |      |          |      |  |   |         | 
|Net amount recognized                                   |  | $    | 108,234  |      |  | $ | 100,060 | 
|                                                        |  |      |          |      |  |   |         | 



|(1) |  | Amount is recorded in other long term obligations
|--- |  | -------------------------------------------------

The following table provides the components of net periodic benefit cost for the years ended December 31:

|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                     |  | 2002 |         | 2001 |  | 2000
|                                     |  |      |         |      |  |     
|Service cost                         |  | $    | 938     |      |  | $    | 771     |   |  | $ | 1,094   |  
|Interest cost                        |  |      | 19,289  |      |  |      | 17,697  |   |  |   | 17,965  |  
|Expected return on plan assets       |  |      | (30,391 | )    |  |      | (35,422 | ) |  |   | (34,630 | )
|Recognized net actuarial (gain) loss |  |      | 1,980   |      |  |      | (205    | ) |  |   | (1,398  | )
|Amortization of prior service cost   |  |      | 9       |      |  |      |        |   |  |   |        |  
|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Net periodic benefit cost            |  | $    | (8,175  | )    |  | $    | (17,159 | ) |  | $ | (16,969 | )
|                                     |  |      |         |      |  |      |         |   |  |   |         |  

The assumptions used in the measurement of our benefit obligations are shown in the following table (weighted average assumptions as
of September 30):

|                                      |  |      |      |      |  |      |      |   |  |  |       |  
|------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | -
|                                      |  | 2002 |      | 2001 |  | 2000
|                                      |  |      |      |      |  |     
|Discount rate                         |  |      | 6.75 | %    |  |      | 7.25 | % |  |  | 7.75  | %
|Expected return on plan assets        |  |      | 9.50 | %    |  |      | 9.75 | % |  |  | 10.25 | %
|Average rate of compensation increase |  |      | 4.00 | %    |  |      | 4.00 | % |  |  | 4.00  | %

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

401k Plan -

We sponsor the Allied Waste Industries, Inc. 401(k) Plan (401(k) Plan) a
defined contribution plan, which is available to all eligible employees except
those represented under collective bargaining agreements. Eligible employees
may contribute up to 25% of their annual compensation on a pre-tax basis.
Participants contributions are subject to certain restrictions as set forth in
the Internal Revenue Code. We match in cash 50% of employee contributions, up
to the first 5% of the employees compensation which is deferred.
Participants contributions vest immediately, and the employer contributions
vest in increments of 20% based upon years of service. Our matching
contributions totaled $9.4 million, $9.5 million, and $7.2 million for fiscal
years 2002, 2001, and 2000, respectively.

Effective July 30, 1999, in connection with the acquisition of BFI, we assumed
sponsorship of the BFI Employee Stock Ownership and Savings Plan (BFI
401(k)).
Our Board of Directors approved the merger of the BFI 401(k) plan into the
Allied 401(k) plan effective January 1, 2001.

10.     Redeemable Preferred Stock

In connection with the BFI acquisition, our Board of
Directors adopted a resolution creating a series of
one million shares of preferred stock having a par
value of $0.10 per share. These shares were
designated as Series A Senior Convertible Preferred
Stock (Preferred Stock) and are entitled to vote on,
among other things, all matters on which the holders
of common stock are entitled to vote. Each share of
Preferred Stock has the number of votes equal to the
number of shares of common stock then issuable upon
conversion. Shareholders of Preferred Stock will be
entitled to cumulative quarterly dividends in an
amount equal to the greater of (i) the Preferred Stock share of common stock
dividends paid, based on the number of shares of common stock then issuable upon conversion or (ii) the stated rate of 6.5% per annum of the sum of the
liquidation preference plus accrued but unpaid
dividends for prior quarters. We are currently restricted from the payment of
cash dividends under our 1999 Credit Facility. Beginning July 30,
2004, the stated dividend rate on the Preferred Stock
increases to 12% per annum for any dividends that
are not paid in cash. There are circumstances under
which we would not be required to accrue dividends
at the 12% rate. As long as we have a Total
Debt/EBITDA ratio of less than 4:1, under the
current 1999 Credit Facility, we would be able to
pay cash dividends at the 6.5% rate. EBITDA, used
for this calculation, is defined in the 1999 Credit
Facility and is based on twelve months trailing
amount. At December 31, 2002, that ratio was
5:01:1, prohibiting the payment of dividends. If
dividends are not paid in cash, the liquidation
preference of the Preferred Stock increases by any
accrued and unpaid dividends.

The Preferred Stock has a redemption price of its
then liquidation preference per share, together with
any accrued and unpaid dividends. Redemption of the
Preferred Stock is at our option in whole, but not
in part, at any time on or after July 30, 2004. We
currently have the right to redeem the Preferred
Stock in whole, but not in part, at the redemption
price only if the then current market price of our
common stock exceeds $27 per share.

The preferred shareholders, who are represented by
members of the board and are also holders of common
stock, have the right to convert each share of
Preferred Stock into the number of shares of common
stock obtained by dividing the redemption price plus
any accrued and unpaid dividends on the conversion
date by the conversion price of $18 per share,
subject to customary anti-dilution adjustments. At
December 31, 2002, we have reserved 69,284,794
shares of unissued common stock which represents the
number of shares that would be required if the
Preferred Stock was converted at December 31, 2002.
Upon a change in control, we are required to make an
offer to purchase for cash all shares of Preferred
Stock at 101% of liquidation preference plus accrued
but unpaid dividends.

From its issuance through December 31, 2002,
approximately $246.9 million or $247 per share has
been added to the liquidation preference of the
preferred stock for accrued but unpaid dividends.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.     Stockholders Equity

We had 300 million shares of Allied common stock authorized at December 31, 2002. The
par value of these shares are $0.01. An increase in the number of authorized shares of
Allied from 300 million to 525 million shares was approved by the stockholders in
January 2003.

The following table shows the activity and balances related to our common stock, net of
603 treasury shares in 2002, 2001 and 2000 for the year ended December 31, (in
thousands):

|                             |  |      |         |      |  |      |         |   |  |  |         | 
|---------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | 
|                             |  | 2002 |         | 2001 |  | 2000
|                             |  |      |         |      |  |     
|Balance at beginning of year |  |      | 196,236 |      |  |      | 196,109 |   |  |  | 188,519 | 
|Common stock issued, net     |  |      | (359    | )    |  |      | (558    | ) |  |  | 7,251   | 
|Stock options, net           |  |      | 338     |      |  |      | 685     |   |  |  | 339     | 
|                             |  |      |         |      |  |      |         |   |  |  |         | 
|Balance at end of year       |  |      | 196,215 |      |  |      | 196,236 |   |  |  | 196,109 | 
|                             |  |      |         |      |  |      |         |   |  |  |         | 

Warrants to purchase common stock

Warrants to purchase common shares at December 31, 2002 and 2001 are summarized as
follows:

|                         |  |      |         |      |  |   |         | 
|------------------------ |  | ---- | ------- | ---- |  | - | ------- | 
|                         |  | 2002 |         | 2001
|                         |  |      |         |     
|Number of shares         |  |      | 347,827 |      |  |   | 347,827 | 
|Purchase price per share |  | $    | 4.60    |      |  | $ | 4.60    | 
|Expiration dates         |  |      | 2003    |      |  |   | 2003    | 

12.     Stock Plans

Option plans 

The 1991 Incentive Stock Plan (1991 Plan), the 1993 Incentive Stock Plan (1993 Plan)
and the 1994 Incentive Stock Plan (1994 Plan, collectively the Plans) provide for the
grant of non-qualified stock options, incentive stock options, shares of restricted
stock, shares of phantom stock and stock bonuses. The 1991 Plan limits the maximum
number of shares that may be granted to not more than 10.5% of the number of fully
diluted shares of common stock on the date of grant of an award. The 1991 plan also
limits awards in the form of restricted stock, stock bonuses, performance awards and
phantom stock to not more than 25% of the aggregate shares available to be awarded or
granted under the plan and limits the maximum number of options granted to any
employee under the 1991 Plan to 500,000 per year. An additional maximum number of
shares of 500,000 and 2,000,000 common shares may be granted under the 1993 Plan and
the 1994 Plan, respectively. After taking into account previously granted awards,
awards covering approximately 7,584,924 shares of common stock were available under
the Plans after the amendment. The Compensation Committee of the Board of Directors
(the Compensation Committee) generally determines the exercise price, term and other
conditions applicable to each option granted. Options granted under the Plans
typically vest over 3 years and expire ten years from the grant date.

The 1994 Amended and Restated Non-Employee Director Stock Option Plan provides for the
grant of non-qualified options to each non-employee member of the Board of Directors
at a price equal to the fair market value of a common share on the date of grant. The
maximum number of shares, which may be granted under the plan, is 1,150,000 common
shares. All options granted under the plan to non-employee directors are fully vested
and exercisable on the date of grant and expire ten years from the grant date.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of our stock option plans at December 31, 2002, 2001 and 2000 and for the years then
ended is presented in the table and narrative below:

|                                       |  |                          |            |       |  |          |       |       |  |         |            |          |  |   |       |  |  |          |            |   |  |   |       | 
|-------------------------------------- |  | ------------------------ | ---------- | ----- |  | -------- | ----- | ----- |  | ------- | ---------- | -------- |  | - | ----- |  |  | -------- | ---------- | - |  | - | ----- | 
|                                       |  | Years Ended December 31,
|                                       |  |                         
|                                       |  | 2002                     |            | 2001  |  | 2000    
|                                       |  |                          |            |       |  |         
|                                       |  |                          |            |       |  | Weighted |       |       |  |         |            | Weighted |  |   |       |  |  | Weighted
|                                       |  |                          |            |       |  | Average  |       |       |  |         |            | Average  |  |   |       |  |  | Average 
|                                       |  |                          |            |       |  | Exercise |       |       |  |         |            | Exercise |  |   |       |  |  | Exercise
|                                       |  | Options                  |            | Price |  | Options  |       | Price |  | Options |            | Price   
|                                       |  |                          |            |       |  |          |       |       |  |         |            |         
|Options outstanding,
beginning of year |  |                          | 16,720,682 |       |  | $        | 12.77 |       |  |         | 15,451,642 |          |  | $ | 12.82 |  |  |          | 15,415,129 |   |  | $ | 13.37 | 
|Options granted                        |  |                          | 4,559,750  |       |  |          | 10.50 |       |  |         | 2,401,250  |          |  |   | 13.41 |  |  |          | 2,203,800  |   |  |   | 11.65 | 
|Options exercised                      |  |                          | (337,582   | )     |  |          | 8.40  |       |  |         | (690,969   | )        |  |   | 9.52  |  |  |          | (375,927   | ) |  |   | 5.90  | 
|Options forfeited
or expired           |  |                          | (1,182,792 | )     |  |          | 14.88 |       |  |         | (441,241   | )        |  |   | 14.45 |  |  |          | (1,791,360 | ) |  |   | 17.57 | 
|                                       |  |                          |            |       |  |          |       |       |  |         |            |          |  |   |       |  |  |          |            |   |  |   |       | 
|Options outstanding,
end of year       |  |                          | 19,760,058 |       |  |          | 12.20 |       |  |         | 16,720,682 |          |  |   | 12.77 |  |  |          | 15,451,642 |   |  |   | 12.82 | 
|                                       |  |                          |            |       |  |          |       |       |  |         |            |          |  |   |       |  |  |          |            |   |  |   |       | 
|Options exercisable,
end of year       |  |                          | 12,243,724 |       |  |          | 14.17 |       |  |         | 10,031,008 |          |  |   | 14.57 |  |  |          | 7,832,176  |   |  |   | 14.44 | 
|                                       |  |                          |            |       |  |          |       |       |  |         |            |          |  |   |       |  |  |          |            |   |  |   |       | 

The weighted average fair value of options granted were $5.55, $7.43, and $6.24 for the three years ended December 31,
2002. We account for our stock-based compensation plans under APB 25, under which no compensation expense has been
recognized, as all options have been granted with an exercise price equal to the fair value of our common stock upon the
date of grant.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize information about stock options outstanding at December 31, 2002, which
are fully vested, partially vested and non-vested:

Fully Vested:

|                                    |  |                    |           |                |  |                  |  |                  |       |  |  | 
|----------------------------------- |  | ------------------ | --------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding and Exercisable |  |                   
|                                    |  |                    |          
|                                    |  |                    |           |                |  | Weighted Average |  | Weighted Average
|Range of Exercise Prices            |  | Number Outstanding |           | Remaining Life |  | Exercise Price  
|                                    |  |                    |           |                |  |                 
|$4.27 - $8.38                       |  |                    | 2,162,737 |                |  | 4 years          |  | $                | 5.74  | 
|$9.50 - $12.25                      |  |                    | 3,001,845 |                |  | 5 years          |  | $                | 9.89  | 
|$12.92 - $21.97                     |  |                    | 1,757,444 |                |  | 6 years          |  | $                | 19.76 | 
|$22.84 - $27.27                     |  |                    | 130,349   |                |  | 6 years          |  | $                | 26.25 | 

Partially Vested:

|                         |  |                    |           |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | --------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding      |  |                   
|                         |  |                    |          
|                         |  |                    |           |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |           | Remaining Life |  | Exercise Price  
|                         |  |                    |           |                |  |                 
|$6.06 - $9.63            |  |                    | 362,766   |                |  | 8 years          |  | $                | 8.64  | 
|$12.92 - $15.00          |  |                    | 7,199,667 |                |  | 8 years          |  | $                | 13.39 | 
|$16.37 - $21.06          |  |                    | 647,000   |                |  | 6 years          |  | $                | 20.71 | 

|                         |  |                    |           |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | --------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Exercisable      |  |                   
|                         |  |                    |          
|                         |  |                    |           |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |           | Remaining Life |  | Exercise Price  
|                         |  |                    |           |                |  |                 
|$6.06  $9.63            |  |                    | 204,265   |                |  | 8 years          |  | $                | 8.57  | 
|$12.92 - $15.00          |  |                    | 4,493,751 |                |  | 7 years          |  | $                | 13.45 | 
|$16.37 - $21.06          |  |                    | 493,333   |                |  | 6 years          |  | $                | 20.91 | 

Non Vested:

|                         |  |                    |           |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | --------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding      |  |                   
|                         |  |                    |          
|                         |  |                    |           |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |           | Remaining Life |  | Exercise Price  
|                         |  |                    |           |                |  |                 
|$10.32 - $11.00          |  |                    | 4,022,250 |                |  | 10 years         |  | $                | 10.33 | 
|$11.57 - $13.55          |  |                    | 476,000   |                |  | 10 years         |  | $                | 12.29 | 

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stockholder rights plan 

During May 2000, our Board of Directors adopted a
Stockholder Rights Plan (the Plan). The Plan provides for
the distribution of one preferred stock purchase right on
each share of our common stock and approximately 65 rights
on each share of our Preferred Stock. Initially, the rights
will trade with the common stock and Preferred Stock and
will not be represented by separate certificates. The rights
represent the right to purchase one ten-thousandth of a
share of a newly created series of our junior preferred
stock at an exercise price of $85, but will not be
exercisable until certain events occur.

The rights will be exercisable only if a person or group
acquires 15% or more of our voting stock or announces a
tender offer which, if consummated, would result in such an
acquisition. Following an acquisition of 15% or more of our
voting stock, each right will entitle its holder, at the
rights then current exercise price, to purchase a
fractional number of junior preferred shares having a market
value of twice the exercise price.

In addition, if we are acquired in a merger or other
business combination transaction after a person has acquired
15% or more of our voting stock, each right will entitle its
holder to purchase, at the rights then current exercise
price, a number of the acquiring companys common shares
having a market value of twice such price.

Prior to the acquisition by a person or group of 15% or more
of our voting stock, the rights are redeemable at the option
of the Board of Directors.

The stock ownership of the holders of our Preferred Stock
and related parties will not cause the rights to become
exercisable or otherwise be treated as the acquisition of
15% or more of our voting power for purposes of the rights
plan. The rights expire in 2010.

Restricted stock plan 

Under the terms of the Allied Waste Industries, Inc. Amended
and Restated 1991 Incentive Stock Plan, the Compensation
Committee may award restricted stock to certain individuals.
Restricted stock is common shares of Allied that cannot be
sold or transferred and that remain subject to being
forfeited until the individual becomes vested. The
Committee has awarded restricted stock to certain
individuals pursuant to a Performance-Accelerated Restricted
Stock Agreement (PARSAP) and may make similar awards in
the future. In 2002, the PARSAP agreements were amended to
change the schedule by which an individuals shares are
vested. Under the terms of the PARSAP, an individual
becomes partially vested after 6 years (20% at year 6 and
20% each year thereafter until fully vested at year 10), but
may become partially or fully vested sooner if certain
performance goals are met or if certain events happen.
Generally, if the individual terminates employment prior to
vesting, the unvested shares are forfeited. The effective
date of this amendment is January 1, 2002. Compensation
expense for a cumulative catch-up of $2.4 million was
recorded as a result of the change in the vesting schedule.

Under the terms of the PARSAP, an individual may become
vested sooner if certain performance goals are met. The
performance goals are based on a targeted implied equity
value per share being met. Targets are set for three, four,
and five years after the date the restricted stock is
awarded with provisions for accelerated vesting for up to
100% of the shares of restricted stock by the fifth year if
the targets are met.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Vesting also may be accelerated if certain events occur. If an individuals employment is terminated due to disability or death, any
unvested shares of restricted stock become fully vested at that time. If the individuals employment is terminated after December 31,
2004, either by the company without cause or due to retirement, a portion of unvested shares may become fully vested. The portion is
determined with reference to the number of months worked since the date of grant and the total number of months in the original 10
year vesting period.

Vesting also may be accelerated in the case of a change in control. Vesting will be accelerated under circumstances whereby a change
in control occurs in combination with certain set market prices per share of stock.

During 2000, the Compensation Committee approved grants of approximately 7.0 million shares of restricted stock to approximately 60
key management employees under this plan. The weighted average grant-date fair value of shares granted during 2000 was $6.05 per
share. At December 31, 2002, 1.2 million shares, with a grant-date fair value of $5.88 have been forfeited. None of the shares are
vested at December 31, 2002. At December 31, 2002 we have $24.2 million of deferred compensation related to this plan.

13. Net Income Per Common Share

Net income per common share is calculated by dividing net income, less dividend requirements on
preferred stock, by the weighted average number of common shares and common share equivalents
outstanding during each period. The computation of basic earnings per share and diluted earnings per
share is as follows (in thousands, except per share data):

|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|---------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                                                   |  | For the Years Ended December 31,
|                                                                                   |  |                                 
|                                                                                   |  | 2002                             |         | 2001 |  | 2000
|                                                                                   |  |                                  |         |      |  |     
|Basic earnings per share computation:                                              |  |                                  |         |      |  |      |         |  |  |   |         | 
|Income before extraordinary loss                                                   |  | $                                | 225,206 |      |  | $    | 75,459  |  |  | $ | 137,653 | 
|Less: dividends on preferred stock                                                 |  |                                  | 77,874  |      |  |      | 73,012  |  |  |   | 68,452  | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Income available to common shareholders before
extraordinary loss                  |  | $                                | 147,332 |      |  | $    | 2,447   |  |  | $ | 69,201  | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Weighted average common shares outstanding                                         |  |                                  | 190,210 |      |  |      | 189,583 |  |  |   | 188,814 | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Basic earnings per share before extraordinary loss                                 |  | $                                | 0.77    |      |  | $    | 0.01    |  |  | $ | 0.37    | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Diluted earnings per share computation:                                            |  |                                  |         |      |  |      |         |  |  |   |         | 
|Income before extraordinary loss                                                   |  | $                                | 225,206 |      |  | $    | 75,459  |  |  | $ | 137,653 | 
|Less: dividends on preferred stock                                                 |  |                                  | 77,874  |      |  |      | 73,012  |  |  |   | 68,452  | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Income available to common shareholders before
extraordinary loss                  |  | $                                | 147,332 |      |  | $    | 2,447   |  |  | $ | 69,201  | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Weighted average common shares outstanding                                         |  |                                  | 190,210 |      |  |      | 189,583 |  |  |   | 188,814 | 
|Dilutive effect of stock, stock options, warrants and
contingently issuable shares |  |                                  | 3,298   |      |  |      | 5,323   |  |  |   | 2,308   | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Weighted average common and common equivalent
shares outstanding                   |  |                                  | 193,508 |      |  |      | 194,906 |  |  |   | 191,122 | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 
|Diluted earnings per share before extraordinary
losses                             |  | $                                | 0.76    |      |  | $    | 0.01    |  |  | $ | 0.36    | 
|                                                                                   |  |                                  |         |      |  |      |         |  |  |   |         | 

Conversion has not been assumed for the Preferred Stock into 66,547, 62,392 and 58,496 common shares
and stock options of 14,560, 2,767 and 2,683 in 2002, 2001 and 2000, respectively as the effects
would not be dilutive.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Income Taxes

We account for income taxes using a balance sheet approach whereby deferred tax
assets and liabilities are determined based on the differences in financial
reporting and income tax basis of assets, other than non-deductible goodwill,
and liabilities. The differences are measured using the income tax rate in
effect during the year of measurement.

The acquisition of BFI in 1999, which was accounted for as a purchase business
combination, resulted in approximately $6.8 billion of goodwill, $6.5 billion
of which is not amortizable for income tax purposes. The impact of the
non-deductible amortization is reflected in the reconciliation of the federal
statutory tax rate to the effective tax rate.

As of December 31, 2002, approximately $93 million of capital loss
carryforward, with an estimated tax effect of $37 million, remains unused that
will expire if not used by the end of 2003. We have established a full
valuation allowance for the possibility that the capital loss carryforward may
not be used. We also have federal net operating losses of $139 million, with
an estimated tax effect of $49 million, available at December 31, 2002. If
unused, material portions of these losses will begin to expire in 2018.
Additionally, we have state net operating loss carryforwards available at
December 31, 2002 that we expect will generate future tax savings of
approximately $102 million. The state net operating losses will expire at
various times between 2003 and 2019 if not used. We have established a
valuation allowance of $80 million for the possibility that some of these state
carryforwards may not be used. In addition to the net operating loss
carryforwards, we have federal minimum tax credit carryforwards of
approximately $8 million as of December 31, 2002, which are not subject to
expiration. The total valuation allowance at December 31, 2002, 2001 and 2000 was $117.3
million, $144.8 million and $84.6 million, respectively. The change in the
valuation allowance between years is attributable to adjustments made related
to acquired companies.

The balance sheet classification and amount of the tax accounts established
relating to acquisitions are based on certain assumptions that could possibly
change based on the ultimate outcome of certain tax matters. As these tax
accounts were established in purchase accounting, any future changes relating
to these amounts will result in balance sheet reclassifications, which may
include an adjustment to the goodwill. The valuation allowance at December 31,
2002 includes approximately $51 million related to the BFI acquisition, the
subsequent reduction of which would result in an adjustment to goodwill.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the income tax provision consist of the following (in thousands):

|                      |  |                         |         |      |  |      |         |  |  |   |         | 
|--------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                      |  | Year Ended December 31,
|                      |  |                        
|                      |  | 2002                    |         | 2001 |  | 2000
|                      |  |                         |         |      |  |     
|Current tax provision |  | $                       | (142    | )    |  | $    | 21,301  |  |  | $ | 44,486  | 
|Deferred provision    |  |                         | 183,756 |      |  |      | 169,533 |  |  |   | 193,054 | 
|                      |  |                         |         |      |  |      |         |  |  |   |         | 
|Total                 |  | $                       | 183,614 |      |  | $    | 190,834 |  |  | $ | 237,540 | 
|                      |  |                         |         |      |  |      |         |  |  |   |         | 

The reconciliation of the federal statutory tax rate to our effective tax rate is as follows:

|                                                                    |  |                         |      |      |  |      |      |   |  |  |      |  
|------------------------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                                    |  | Year Ended December 31,
|                                                                    |  |                        
|                                                                    |  | 2002                    |      | 2001 |  | 2000
|                                                                    |  |                         |      |      |  |     
|Federal statutory tax rate                                          |  |                         | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|Consolidated state taxes, net of federal benefit                    |  |                         | 5.9  |      |  |      | 8.2  |   |  |  | 7.2  |  
|Amortization of goodwill                                            |  |                         |     |      |  |      | 22.6 |   |  |  | 16.0 |  
|Non-deductible write-off of goodwill and business
combination costs |  |                         | 3.0  |      |  |      | 1.5  |   |  |  | 1.8  |  
|Other permanent differences                                         |  |                         | 1.0  |      |  |      | 4.4  |   |  |  | 3.3  |  
|                                                                    |  |                         |      |      |  |      |      |   |  |  |      |  
|Effective tax rate                                                  |  |                         | 44.9 | %    |  |      | 71.7 | % |  |  | 63.3 | %
|                                                                    |  |                         |      |      |  |      |      |   |  |  |      |  

Tax benefits for the extraordinary
items were based on our ordinary combined federal and state rates of
40% in 2002 and 39.5% in 2001 and 2000.

The components of the net deferred tax liability are as follows (in thousands):

|                                                                                                                                                   |  |              |          |      |  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | ---- |  | - | -------- | -
|                                                                                                                                                   |  | December 31,
|                                                                                                                                                   |  |             
|                                                                                                                                                   |  | 2002         |          | 2001
|                                                                                                                                                   |  |              |          |     
|Deferred tax liability relating primarily to property consisting
of landfill and fixed assets and contingencies related to other
basis differences |  | $            | (875,597 | )    |  | $ | (800,618 | )
|                                                                                                                                                   |  |              |          |      |  |   |          |  
|Deferred Tax Assets Relating To:                                                                                                                   |  |              |          |      |  |   |          |  
|Environmental, closure and post-closure reserves                                                                                                   |  |              | 264,771  |      |  |   | 330,755  |  
|Other reserves                                                                                                                                     |  |              | 126,659  |      |  |   | 145,193  |  
|Net
operating loss, capital loss, foreign-tax credit, and minimum
tax credit
carryforwards                                                         |  |              | 195,951  |      |  |   | 206,870  |  
|Valuation allowance                                                                                                                                |  |              | (117,273 | )    |  |   | (144,833 | )
|                                                                                                                                                   |  |              |          |      |  |   |          |  
|Total deferred tax asset                                                                                                                           |  |              | 470,108  |      |  |   | 537,985  |  
|                                                                                                                                                   |  |              |          |      |  |   |          |  
|Net deferred tax liability                                                                                                                         |  | $            | (405,489 | )    |  | $ | (262,633 | )
|                                                                                                                                                   |  |              |          |      |  |   |          |  

Deferred income taxes have not been provided as of December 31, 2002 and 2001, on approximately $36 million and $28 million, respectively, of undistributed earnings of Puerto Rican
affiliates, which are considered to be permanently reinvested. A determination of the U.S. income and foreign withholding taxes, if these earnings were remitted as dividends, is not
practicable.

We are currently under examination by various state and federal taxing authorities for certain tax years. A federal income tax audit for the years ended December 31, 1998
and 1999 is ongoing. A federal income tax audit for BFIs tax years ended September 30, 1996 through July 30, 1999 is completed with the exception of the matter discussed
below.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2002, we received notification from the IRS
disallowing all of a capital loss included in BFIs July
30, 1999 tax return. If such disallowance is upheld, we
estimate it could have a federal and state income tax
effect of up to $310 million plus accrued interest
through December 31, 2002 of approximately $40 million.
We also received a notification from the IRS assessing a
penalty of between 20% and 40% of the additional income
tax resulting from the disallowance. Because of several
meritorious defenses, we believe the successful assertion
of penalties is remote.

In October 2002, the IRS issued a revenue procedure
outlining two resolution alternatives related to this
matter. Taxpayers could elect to participate under this
revenue procedure if certain eligibility requirements
were met. We decided not to participate under this IRS
issuance. We continue to believe our position is well
supported and we will vigorously contest the
disallowance. The resolution of this matter may entail
efforts including administrative appeals and litigation
which could extend over several years. An unfavorable
result could require future cash expenditures but should
have minimal, if any, impact on our consolidated results
of operations as the amount has been fully reserved on
our consolidated balance sheet.

15. Commitments and Contingencies

Litigations 

We are subject to extensive and evolving laws and regulations and have
implemented our own environmental safeguards to respond to regulatory
requirements. In the normal course of conducting our operations, we may
become involved in certain legal and administrative proceedings. Some of
these actions may result in fines, penalties or judgments against us,
which may have an impact on earnings for a particular period. We accrue
for litigation and regulatory compliance contingencies when such costs are
probable and can reasonably be estimated. We expect that matters in
process at December 31, 2002, which have not been accrued in the
Consolidated Balance Sheets, will not have a material adverse effect on
our consolidated liquidity, financial position or results from operations.

Royalties 

In connection with certain acquisitions, we have entered into agreements
to pay royalties based on waste tonnage disposed at specified landfills.
The payments are generally payable quarterly and amounts earned, but not
paid, are accrued in the accompanying Consolidated Balance Sheets.

Lease agreements 

We have operating lease agreements for service facilities, office space
and equipment. Future minimum payments under non-cancelable operating
leases with terms in excess of one year are as follows (in thousands):

|           |  |                   |        | 
|---------- |  | ----------------- | ------ | 
|           |  | December 31, 2002
|           |  |                  
|2003       |  | $                 | 24,937 | 
|2004       |  |                   | 22,984 | 
|2005       |  |                   | 19,020 | 
|2006       |  |                   | 16,571 | 
|2007       |  |                   | 11,474 | 
|Thereafter |  |                   | 50,963 | 

Rental expense under such operating leases was approximately $27.8
million, $26.3 million and $31.0 million for each of the three years ended
December 31, 2002, respectively.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employment agreements 

We have entered into employment agreements with certain of our executive officers for periods up to three years. Under these agreements, in some circumstances, we may be obligated to pay an amount equal to the largest annual bonus paid to the
employee for any of the last three years preceding the date of termination and to continue making base salary payments through the term of the agreement. Additionally, under certain circumstances, including a change in control, as defined in
the employment agreements, we have agreed to pay severance amounts equal to a multiple of defined compensation. If a termination occurs in conjunction with a change in control as defined in the employment agreements, we are obligated to pay an
additional amount equal to two times the sum of the employees base salary on the date of termination and the bonus paid to the employee for the previous year.

Financial assurances 

We are required to provide financial assurances to governmental agencies under applicable environmental regulations relating to our landfill operations for closure and post-closure costs and performance under certain collection, landfill and
transfer station contracts. We satisfy the financial assurance requirements by providing performance bonds, letters of credit, insurance policies or trust deposits. Additionally, we are required to provide financial assurances for our
self-insurance program and collateral required for certain performance obligations. During 2003, we expect no material increase in financial assurance obligations.

At December 31, 2002, we had the following financial assurance instruments (in thousands):

|                      |  |                   |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 
|--------------------- |  | ----------------- | --------- | ----------- |  | ------------- | ------- | -------------- |  | ----- | ------- |  |  | - | ------- |  |  | - | --------- | 
|                      |  | Landfill Closure/ |           | Contract    |  | Risk/Casualty |         | Collateral for |  |       |         | 
|                      |  | Post-Closure      |           | Performance |  | Insurance     |         | Obligations    |  | Total
|                      |  |                   |           |             |  |               |         |                |  |      
|Insurance Policies    |  | $                 | 997,901   |             |  | $             |        |                |  | $     |        |  |  | $ |        |  |  | $ | 997,901   | 
|Surety Bonds          |  |                   | 341,747   |             |  |               | 625,142 |                |  |       |        |  |  |   |        |  |  |   | 966,889   | 
|Trust Deposits        |  |                   | 62,742    |             |  |               |        |                |  |       |        |  |  |   |        |  |  |   | 62,742    | 
|Letters
of Credit (1) |  |                   | 234,471   |             |  |               | 48,484  |                |  |       | 211,802 |  |  |   | 229,306 |  |  |   | 724,063   | 
|                      |  |                   |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 
|Total                 |  | $                 | 1,636,861 |             |  | $             | 673,626 |                |  | $     | 211,802 |  |  | $ | 229,306 |  |  | $ | 2,751,595 | 
|                      |  |                   |           |             |  |               |         |                |  |       |         |  |  |   |         |  |  |   |           | 



---

| |  | (1) These amounts are issued under the Revolving Credit Facility of our 1999 Credit Facility.
| |  | ---------------------------------------------------------------------------------------------

These financial instruments are issued in the normal course of business. They are not debt and, therefore, are not reflected in the accompanying Consolidated Balance Sheets. The underlying obligations of the financial assurance instruments
would be valued and recorded in the Consolidated Balance Sheets if it is probable that we would be unable to perform our obligations under the financial assurance contracts. 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 discussed above which are not debt. We have no transactions or obligations
with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third party debt.

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Guarantees 

We enter into contracts in the normal course of business that include
indemnification clauses. Indemnifications relating to known liabilities are
recorded in the Consolidated Financial Statements based on our best estimate of
required future payments. We are not able to determine potential future payments
for indemnifications that relate to contingent events or occurrences, such as the
imposition of additional taxes due to a change in the tax law or adverse
interpretation of the tax law, and indemnifications made in divestiture agreements
where we indemnify the buyer for liabilities that may become known in the future
but that relate to our activities prior to the divestiture.

We have entered into agreements to
guarantee the value of certain
property that is adjacent to landfills. These
agreements have varying terms over varying periods. Currently, liabilities associated with
these guarantees are accounted for in accordance with
SFAS No. 5, Accounting for Contingencies in the
Consolidated Financial Statements.

16. Related Party Transactions

Transactions with related parties are entered into only upon approval by a majority of our
independent directors and only upon terms comparable to those that would be available from
unaffiliated parties. At December 31, 2002 and 2001, employee loans of $9.3 million and $11.2
million were outstanding to current or former employees.

During November 2002, our Chief Executive Officer repaid a $2.3 million loan from the Company
by tendering 232,390 shares of our common stock at the market price. The loan was made in
1996 for the purpose of acquiring 246,154 shares of Allied Waste common stock at the market
price at that time.

In addition to the above amounts, in December 2002, we extended a note receivable
in the amount of $2.2 million due from a former board member from a maturity date
of December 31, 2002 to December 31, 2004. Interest on the loan is accruing at the
applicable federal rate.

In February 2003, our Chief Financial Officer repaid a $3.3 million loan from the
Company. The loan was made in July 2001, pursuant to a relocation agreement and
was secured by real estate. Interest on the loan was at the applicable federal
rate.

17. Segment Reporting

Our revenues are derived from one industry segment, which includes the
collection, transfer, recycling and disposal of non-hazardous solid
waste. We evaluate performance based on several factors, of which the
primary financial measure is EBITDA and is defined as earnings before
interest, taxes, depreciation and amortization. EBITDA is not a
measure of operating income, operating performance or liquidity under
GAAP and may not be comparable to similarly titled measures reported
by other companies. Consistent with our decentralized operating
structure, management of the company uses EBITDA in the evaluation of
field operating performance as it represents operational cash flows
and is a profit measure of components that are within the control of
the operating units. The accounting policies of the business segments
are the same as those described in the Organization and Summary of
Significant Accounting Policies (See Note 1).

As of January 1, 2002, we expanded our existing infrastructure by increasing the number of
areas, regions and districts. As a result of the change in our infrastructure, we manage our
operations through four geographic operating segments: Eastern, Southern, Central and Western.
Each area is responsible for managing several vertically integrated operations, which are
comprised of three regions. Results by segment have been restated for previous periods to
reflect this change. The tables below reflect certain geographic information relating to our
operations (in thousands):

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|                              |  |         |           |          |  |         |           |         |  |           |           |       |  |   |           |  |  |   |         |   |  |   |            | 
|----------------------------- |  | ------- | --------- | -------- |  | ------- | --------- | ------- |  | --------- | --------- | ----- |  | - | --------- |  |  | - | ------- | - |  | - | ---------- | 
|                              |  | Eastern |           | Southern |  | Central |           | Western |  | Other
(1) |           | Total
|                              |  |         |           |          |  |         |           |         |  |           |           |      
|2002:                         |  |         |           |          |  |         |           |         |  |           |           |       |  |   |           |  |  |   |         |   |  |   |            | 
|Revenues                      |  | $       | 1,560,317 |          |  | $       | 1,335,058 |         |  | $         | 1,398,462 |       |  | $ | 1,194,192 |  |  | $ | 29,277  |   |  | $ | 5,517,306  | 
|Depreciation and amortization |  |         | 125,587   |          |  |         | 122,084   |         |  |           | 150,042   |       |  |   | 90,177    |  |  |   | 8,599   |   |  |   | 496,489    | 
|EBITDA(2)                     |  |         | 437,502   |          |  |         | 465,401   |         |  |           | 505,493   |       |  |   | 420,194   |  |  |   | (85,402 | ) |  |   | 1,743,188  | 
|Total assets                  |  |         | 3,515,409 |          |  |         | 3,741,323 |         |  |           | 3,221,821 |       |  |   | 2,592,235 |  |  |   | 858,134 |   |  |   | 13,928,922 | 
|Capital expenditures          |  |         | 116,084   |          |  |         | 129,610   |         |  |           | 169,825   |       |  |   | 122,860   |  |  |   | 3,945   |   |  |   | 542,324    | 
|2001:                         |  |         |           |          |  |         |           |         |  |           |           |       |  |   |           |  |  |   |         |   |  |   |            | 
|Revenues                      |  | $       | 1,614,794 |          |  | $       | 1,370,964 |         |  | $         | 1,381,464 |       |  | $ | 1,158,402 |  |  | $ | 39,636  |   |  | $ | 5,565,260  | 
|Depreciation and amortization |  |         | 192,113   |          |  |         | 171,142   |         |  |           | 195,123   |       |  |   | 127,313   |  |  |   | 7,345   |   |  |   | 693,036    | 
|EBITDA(2)                     |  |         | 491,084   |          |  |         | 525,833   |         |  |           | 524,160   |       |  |   | 442,476   |  |  |   | (80,031 | ) |  |   | 1,903,522  | 
|Total assets                  |  |         | 3,873,583 |          |  |         | 3,272,710 |         |  |           | 3,466,630 |       |  |   | 2,859,120 |  |  |   | 875,050 |   |  |   | 14,347,093 | 
|Capital expenditures          |  |         | 113,275   |          |  |         | 119,403   |         |  |           | 157,334   |       |  |   | 101,563   |  |  |   | 9,337   |   |  |   | 500,912    | 



---

|(1) |  | Amounts relate primarily to our subsidiaries which provide services throughout the organization and not on an area basis.
|--- |  | -------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | EBITDA is before non-cash (gain) loss on divestiture of assets.                                                          

Reconciliation of reportable segment primary financial measure to net income before income taxes (in thousands):

|                                                |                            |   |                          |         |         |   |           |         | 
|----------------------------------------------- | -------------------------- | - | ------------------------ | ------- | ------- | - | --------- | ------- | 
|                                                |                            |   | Years ended December 31,
|                                                |                            |   |                         
|                                                |                            |   | 2002                     |         | 2001(1)
|                                                |                            |   |                          |         |        
|Income before income taxes:                     |                            |   |                          |         |         |   |           |        
|Total EBITDA for reportable segments            |                            | $ | 1,743,188                |         |         | $ | 1,903,522 |        
|Depreciation and amortization                   |                            |   | 496,489                  |         |         |   | 693,036   |        
|Non-cash (gain) loss on divestiture asset       |                            |   | (9,339                   | )       |         |   | 107,011   |        
|Equity in earnings of unconsolidated affiliates |                            |   |                         |         |         |   | (14,072   | )      
|Interest expense and other                      |                            |   | 845,327                  |         |         |   | 847,581   |        
|                                                |                            |   |                          |         |         |   |           |        
|                                                | Income before income taxes |   | $                        | 410,711 |         |   | $         | 269,966 | 
|                                                |                            |   |                          |         |         |   |           |        



---

|(1) |  | Total EBITDA for reportable segments is before non-cash loss on asset sale.
|--- |  | ---------------------------------------------------------------------------

Results for year end December 2000 were not disclosed due to the impracticability of gathering such information.
In addition, results for year ended December 31, 2002 have not been presented based on the prior organizational
structure due to the impracticability of gathering such information.

Results by our geographic operating segments for 2001 and 2000 reflecting our organizational structure prior
to January 1, 2002 are reflected in the tables below (in thousands):

|            |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|----------- |  | -------- | --------- | ------------ |  | ---------------- | ------- | --------- |  | ------------ | --------- | ------- |  | - | ---------- |  |  | - | ------- | 
|            |  |          |           |              |  |                  |         |           |  | EBITDA       |           |         |  |   |            |  |  |  
|            |  |          |           |              |  |                  |         |           |  | before non-  |           |         |  |   |            |  |  |  
|            |  |          |           |              |  | Depreciation and |         | recurring |  | Total        |           | Capital
|            |  | Revenues |           | amortization |  | charges          |         | Assets    |  | Expenditures
|            |  |          |           |              |  |                  |         |           |  |             
|2001:       |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|Atlantic    |  | $        | 575,627   |              |  | $                | 66,042  |           |  | $            | 210,090   |         |  | $ | 1,262,315  |  |  | $ | 48,179  | 
|Central     |  |          | 520,095   |              |  |                  | 71,306  |           |  |              | 179,959   |         |  |   | 1,326,558  |  |  |   | 53,079  | 
|Great Lakes |  |          | 611,982   |              |  |                  | 92,732  |           |  |              | 266,708   |         |  |   | 1,522,332  |  |  |   | 56,830  | 
|Midwest     |  |          | 479,711   |              |  |                  | 74,726  |           |  |              | 221,635   |         |  |   | 1,394,440  |  |  |   | 59,635  | 
|Northeast   |  |          | 832,004   |              |  |                  | 86,454  |           |  |              | 191,019   |         |  |   | 1,843,380  |  |  |   | 48,394  | 
|Southeast   |  |          | 780,578   |              |  |                  | 91,089  |           |  |              | 260,925   |         |  |   | 1,830,776  |  |  |   | 54,386  | 
|Southwest   |  |          | 792,106   |              |  |                  | 105,134 |           |  |              | 285,751   |         |  |   | 1,862,702  |  |  |   | 88,147  | 
|West        |  |          | 933,376   |              |  |                  | 98,204  |           |  |              | 371,169   |         |  |   | 2,375,444  |  |  |   | 82,925  | 
|Other
(1)   |  |          | 39,781    |              |  |                  | 7,349   |           |  |              | (55,949   | )       |  |   | 12,703,327 |  |  |   | 9,337   | 
|            |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|Total       |  | $        | 5,565,260 |              |  | $                | 693,036 |           |  | $            | 1,931,307 |         |  | $ | 26,121,274 |  |  | $ | 500,912 | 
|            |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|2000:       |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|Atlantic    |  | $        | 604,334   |              |  | $                | 64,949  |           |  | $            | 211,525   |         |  | $ | 1,237,401  |  |  | $ | 38,202  | 
|Central     |  |          | 529,003   |              |  |                  | 68,111  |           |  |              | 180,711   |         |  |   | 1,332,753  |  |  |   | 47,833  | 
|Great Lakes |  |          | 638,100   |              |  |                  | 95,513  |           |  |              | 250,669   |         |  |   | 1,708,010  |  |  |   | 46,162  | 
|Midwest     |  |          | 483,240   |              |  |                  | 71,600  |           |  |              | 228,711   |         |  |   | 1,531,835  |  |  |   | 33,276  | 
|Northeast   |  |          | 943,281   |              |  |                  | 84,546  |           |  |              | 244,217   |         |  |   | 2,083,952  |  |  |   | 36,196  | 
|Southeast   |  |          | 772,027   |              |  |                  | 81,011  |           |  |              | 296,104   |         |  |   | 1,627,026  |  |  |   | 39,841  | 
|Southwest   |  |          | 754,432   |              |  |                  | 96,663  |           |  |              | 297,181   |         |  |   | 1,772,697  |  |  |   | 60,737  | 
|West        |  |          | 950,664   |              |  |                  | 104,972 |           |  |              | 354,788   |         |  |   | 2,663,654  |  |  |   | 82,431  | 
|Other
(1)   |  |          | 32,404    |              |  |                  | 6,673   |           |  |              | (54,006   | )       |  |   | 12,042,318 |  |  |   | 5,240   | 
|            |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 
|Total       |  | $        | 5,707,485 |              |  | $                | 674,038 |           |  | $            | 2,009,900 |         |  | $ | 25,999,646 |  |  | $ | 389,918 | 
|            |  |          |           |              |  |                  |         |           |  |              |           |         |  |   |            |  |  |   |         | 



|(1) |  | Amounts relate primarily to our subsidiaries which provide services throughout the organization and not on an area basis.
|--- |  | -------------------------------------------------------------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of reportable segment primary financial measure and assets to
income before income taxes and total assets, respectively (in thousands):

|                                                                                  |                            |   |                          |         |      |   |           |         | 
|--------------------------------------------------------------------------------- | -------------------------- | - | ------------------------ | ------- | ---- | - | --------- | ------- | 
|                                                                                  |                            |   | Years Ended December 31,
|                                                                                  |                            |   |                         
|                                                                                  |                            |   | 2001                     |         | 2000
|                                                                                  |                            |   |                          |         |     
|Income before income taxes:                                                       |                            |   |                          |         |      |   |           |        
|Total EBITDA before acquisition related and unusual costs
for reportable segments |                            | $ | 1,931,307                |         |      | $ | 2,009,900 |        
|Depreciation and amortization                                                     |                            |   | 693,036                  |         |      |   | 674,038   |        
|Acquisition related and unusual costs                                             |                            |   | 27,785                   |         |      |   | 100,841   |        
|Non-cash loss on asset sale                                                       |                            |   | 107,011                  |         |      |   | 26,486    |        
|Equity in earnings of unconsolidated affiliates                                   |                            |   | (14,072                  | )       |      |   | (50,788   | )      
|Interest expense and other                                                        |                            |   | 847,581                  |         |      |   | 878,155   |        
|                                                                                  |                            |   |                          |         |      |   |           |        
|                                                                                  | Income before income taxes |   | $                        | 269,966 |      |   | $         | 381,168 | 
|                                                                                  |                            |   |                          |         |      |   |           |        

|                                     |              |   |              |            |      |   |             |            | 
|------------------------------------ | ------------ | - | ------------ | ---------- | ---- | - | ----------- | ---------- | 
|                                     |              |   | December 31,
|                                     |              |   |             
|                                     |              |   | 2001         |            | 2000
|                                     |              |   |              |            |     
|Assets:                              |              |   |              |            |      |   |             |           
|Total assets for reportable segments |              | $ | 26,121,274   |            |      | $ | 25,999,646  |           
|Elimination of investments           |              |   | (11,774,181  | )          |      |   | (11,486,012 | )         
|                                     |              |   |              |            |      |   |             |           
|                                     | Total assets |   | $            | 14,347,093 |      |   | $           | 14,513,634 | 
|                                     |              |   |              |            |      |   |             |           

Amounts and percentages of our total revenue attributable to services provided (in thousands, except percentages):

|                  |  |      |            |      |  |      |  |  |  |  |       |   |  |                          |            |   |  |  |  |  |  |  |       |   |  |   |            |   |  |  |  |  |  |  |       |  
|----------------- |  | ---- | ---------- | ---- |  | ---- |  |  |  |  | ----- | - |  | ------------------------ | ---------- | - |  |  |  |  |  |  | ----- | - |  | - | ---------- | - |  |  |  |  |  |  | ----- | -
|                  |  |      |            |      |  |      |  |  |  |  |       |   |  | Years Ended December 31, |            |   |  |  |  |  |  |  |       |   |  |  
|                  |  |     
|                  |  | 2002 |            | 2001 |  | 2000
|                  |  |      |            |      |  |     
|Collection        |  | $    | 4,172,723  |      |  |      |  |  |  |  | 62.2  | % |  | $                        | 4,203,897  |   |  |  |  |  |  |  | 62.4  | % |  | $ | 4,227,680  |   |  |  |  |  |  |  | 61.7  | %
|Disposal(1)       |  |      | 2,121,896  |      |  |      |  |  |  |  | 31.6  |   |  |                          | 2,104,467  |   |  |  |  |  |  |  | 31.3  |   |  |   | 1,993,276  |   |  |  |  |  |  |  | 29.1  |  
|Recycling         |  |      | 243,080    |      |  |      |  |  |  |  | 3.6   |   |  |                          | 231,995    |   |  |  |  |  |  |  | 3.4   |   |  |   | 384,027    |   |  |  |  |  |  |  | 5.6   |  
|Other             |  |      | 173,882    |      |  |      |  |  |  |  | 2.6   |   |  |                          | 196,496    |   |  |  |  |  |  |  | 2.9   |   |  |   | 242,196    |   |  |  |  |  |  |  | 3.6   |  
|                  |  |      |            |      |  |      |  |  |  |  |       |   |  |                          |            |   |  |  |  |  |  |  |       |   |  |   |            |   |  |  |  |  |  |  |       |  
|                  |  |      | 6,711,581  |      |  |      |  |  |  |  | 100.0 | % |  |                          | 6,736,855  |   |  |  |  |  |  |  | 100.0 | % |  |   | 6,847,179  |   |  |  |  |  |  |  | 100.0 | %
|                  |  |      |            |      |  |      |  |  |  |  |       |   |  |                          |            |   |  |  |  |  |  |  |       |   |  |   |            |   |  |  |  |  |  |  |       |  
|Intercompany      |  |      | (1,194,275 | )    |  |      |  |  |  |  |       |   |  |                          | (1,171,595 | ) |  |  |  |  |  |  |       |   |  |   | (1,139,694 | ) |  |  |  |  |  |  |       |  
|                  |  |      |            |      |  |      |  |  |  |  |       |   |  |                          |            |   |  |  |  |  |  |  |       |   |  |   |            |   |  |  |  |  |  |  |       |  
|Reported revenues |  | $    | 5,517,306  |      |  |      |  |  |  |  |       |   |  | $                        | 5,565,260  |   |  |  |  |  |  |  |       |   |  | $ | 5,707,485  |   |  |  |  |  |  |  |       |  
|                  |  |      |            |      |  |      |  |  |  |  |       |   |  |                          |            |   |  |  |  |  |  |  |       |   |  |   |            |   |  |  |  |  |  |  |       |  



---

|(1) |  | Revenues from landfills and transfer stations are included in disposal.
|--- |  | -----------------------------------------------------------------------

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Selected Quarterly Financial Data (unaudited)

The following tables summarize the unaudited consolidated quarterly results of
operations as reported for 2002 and 2001 (in thousands, except per share amounts):

|                                                                           |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |       |  
|-------------------------------------------------------------------------- | ---------------------------------------------------- | - | ------------- | ----- | -------------- | - | ------------- | ---- | -------------- | - | --------- | ---- |  | - | --------- | ----- | -
|                                                                           |                                                      |   | First Quarter |       | Second Quarter |   | Third Quarter |      | Fourth Quarter
|                                                                           |                                                      |   |               |       |                |   |               |      |               
|2002                                                                       |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|Revenues                                                                   |                                                      | $ | 1,315,675     |       |                | $ | 1,401,920     |      |                | $ | 1,429,186 |      |  | $ | 1,370,525 |      
|Income before extraordinary loss                                           |                                                      |   | 51,118        |       |                |   | 53,207        |      |                |   | 63,655    |      |  |   | 57,226    |      
|Net income available to
common shareholders                                |                                                      |   | 32,378        |       |                |   | 33,955        |      |                |   | 37,339    |      |  |   | 33,565    |      
|Basic earnings per common share
available to common stockholders:          |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|                                                                           | Before extraordinary loss,
net of income tax benefit |   |               | 0.17  |                |   |               | 0.18 |                |   |           | 0.23 |  |   |           | 0.20  |  
|                                                                           | Net income available to
common shareholders          |   |               | 0.17  |                |   |               | 0.18 |                |   |           | 0.20 |  |   |           | 0.18  |  
|Diluted earnings per common share
available to common stockholders:        |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|                                                                           | Before extraordinary loss,
net of income tax benefit |   |               | 0.17  |                |   |               | 0.18 |                |   |           | 0.23 |  |   |           | 0.19  |  
|                                                                           | Net income available to
common shareholders          |   |               | 0.17  |                |   |               | 0.18 |                |   |           | 0.19 |  |   |           | 0.17  |  
|2001                                                                       |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|Revenues                                                                   |                                                      | $ | 1,353,838     |       |                | $ | 1,412,865     |      |                | $ | 1,413,400 |      |  | $ | 1,385,157 |      
|Income (loss) before extraordinary loss                                    |                                                      |   | (8,998        | )     |                |   | 53,158        |      |                |   | 18,292    |      |  |   | 13,007    |      
|Net income (loss) available to common
shareholders                         |                                                      |   | (36,021       | )     |                |   | 35,108        |      |                |   | (252      | )    |  |   | (13,361   | )    
|Basic earnings (loss) per common share
available to common stockholders:   |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|                                                                           | Before extraordinary loss, net of
income tax benefit |   |               | (0.14 | )              |   |               | 0.19 |                |   |           |     |  |   |           | (0.03 | )
|                                                                           | Net income (loss) available to
common shareholders   |   |               | (0.19 | )              |   |               | 0.19 |                |   |           |     |  |   |           | (0.07 | )
|Diluted earnings (loss) per common
share available to common stockholders: |                                                      |   |               |       |                |   |               |      |                |   |           |      |  |   |           |      
|                                                                           | Before extraordinary loss, net of
income tax benefit |   |               | (0.14 | )              |   |               | 0.18 |                |   |           |     |  |   |           | (0.03 | )
|                                                                           | Net income (loss) available to
common shareholders   |   |               | (0.19 | )              |   |               | 0.18 |                |   |           |     |  |   |           | (0.07 | )

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Condensed Consolidating Financial Statements

The 1998 Senior Notes, 1999 Notes, 2001 Senior Notes and 2002 Senior Notes
issued by Allied NA (our wholly owned subsidiary) and certain debt of BFI (all
of which are no longer registered under the Securities Exchange Act of 1934)
are guaranteed by us. All guarantees (including those of the guarantor
subsidiaries) are full, unconditional and joint and several of Allied NAs and
BFIs debt. Presented below are Consolidating Balance Sheets as of December 31,
2002 and 2001 and the related Condensed Consolidating Statements of Operations
and Cash Flows for the years ended December 31, 2002, 2001 and 2000 of Allied
Waste Industries, Inc. (Parent), Allied NA (Issuer), the guarantor subsidiaries
(Guarantors) and the subsidiaries which are not guarantors (Non-guarantors):

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING BALANCE SHEET
(in millions)

|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |          | 
|----------------------------------------------------- | ------------------------------------------ | - | ----------------- | ------- | ------ | - | ---------- | -------- | ---------- | - | ------------ | -------- | ------------ | - | ----- | ----- |  | - | --------- | --------- | - | - | ------- | -------- | 
|                                                      |                                            |   | December 31, 2002
|                                                      |                                            |   |                  
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   | Non-  |       |  |   |           |           |   |   |        
|                                                      |                                            |   | Parent            |         | Issuer |   | Guarantors |          | Guarantors |   | Eliminations |          | Consolidated
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |             
|ASSETS                                                |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|Current Assets                                      
|Cash and cash
equivalents                             |                                            | $ | 0.1               |         |        | $ | 5.4        |          |            | $ | 173.2        |          |              | $ | 1.6   |       |  | $ |          |           |   | $ | 180.3   |         
|Accounts receivable, net                              |                                            |   |                  |         |        |   |           |          |            |   | 675.4        |          |              |   | 12.2  |       |  |   |          |           |   |   | 687.6   |         
|Prepaid and other current
assets                      |                                            |   |                  |         |        |   |           |          |            |   | 62.3         |          |              |   | 37.5  |       |  |   |          |           |   |   | 99.8    |         
|Deferred income taxes, net                            |                                            |   |                  |         |        |   |           |          |            |   | 100.2        |          |              |   | 4.2   |       |  |   |          |           |   |   | 104.4   |         
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|                                                      | Total current assets                       |   |                   | 0.1     |        |   |            | 5.4      |            |   |              | 1,011.1  |              |   |       | 55.5  |  |   |           |          |   |   |         | 1,072.1  | 
|Property and equipment,
net                           |                                            |   |                  |         |        |   |           |          |            |   | 4,061.2      |          |              |   | 20.2  |       |  |   |          |           |   |   | 4,081.4 |         
|Goodwill, net                                         |                                            |   |                  |         |        |   |           |          |            |   | 8,458.0      |          |              |   | 72.4  |       |  |   |          |           |   |   | 8,530.4 |         
|Investment in subsidiaries                            |                                            |   | 3,510.7           |         |        |   | 12,527.3   |          |            |   |             |          |              |   |      |       |  |   | (16,038.0 | )         |   |   |        |         
|Other assets, net                                     |                                            |   |                  |         |        |   | 146.7      |          |            |   | 83.0         |          |              |   | 113.7 |       |  |   | (98.4     | )         |   |   | 245.0   |         
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|                                                      | Total assets                               |   | $                 | 3,510.8 |        |   | $          | 12,679.4 |            |   | $            | 13,613.3 |              |   | $     | 261.8 |  |   | $         | (16,136.4 | ) |   | $       | 13,928.9 | 
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY                  |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|Current Liabilities                                 
|Current portion of long-
term debt                    |                                            | $ |                  |         |        | $ |           |          |            | $ | 163.5        |          |              | $ |      |       |  | $ |          |           |   | $ | 163.5   |         
|Accounts payable                                      |                                            |   |                  |         |        |   | 0.8        |          |            |   | 425.8        |          |              |   | 4.6   |       |  |   |          |           |   |   | 431.2   |         
|Accrued closure, post-closure and
environmental costs |                                            |   |                  |         |        |   |           |          |            |   | 95.3         |          |              |   |      |       |  |   |          |           |   |   | 95.3    |         
|Accrued interest                                      |                                            |   |                  |         |        |   | 157.2      |          |            |   | 24.8         |          |              |   |      |       |  |   |          |           |   |   | 182.0   |         
|Other accrued liabilities                             |                                            |   | 50.4              |         |        |   |           |          |            |   | 159.8        |          |              |   | 139.3 |       |  |   |          |           |   |   | 349.5   |         
|Unearned revenue                                      |                                            |   |                  |         |        |   |           |          |            |   | 225.9        |          |              |   | 2.4   |       |  |   |          |           |   |   | 228.3   |         
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|                                                      | Total current liabilities                  |   |                   | 50.4    |        |   |            | 158.0    |            |   |              | 1,095.1  |              |   |       | 146.3 |  |   |           |          |   |   |         | 1,449.8  | 
|Long-term debt, less
current portion                  |                                            |   |                  |         |        |   | 7,807.0    |          |            |   | 911.6        |          |              |   |      |       |  |   |          |           |   |   | 8,718.6 |         
|Deferred income taxes                                 |                                            |   |                  |         |        |   |           |          |            |   | 519.8        |          |              |   | (9.9  | )     |  |   |          |           |   |   | 509.9   |         
|Accrued closure, post-closure and
environmental costs |                                            |   |                  |         |        |   |           |          |            |   | 862.1        |          |              |   | 2.6   |       |  |   |          |           |   |   | 864.7   |         
|Due to/(from) parent                                  |                                            |   | 1,509.2           |         |        |   | 1,103.5    |          |            |   | (2,554.7     | )        |              |   | (58.0 | )     |  |   |          |           |   |   |        |         
|Other long-term
obligations                           |                                            |   | 15.2              |         |        |   | 125.8      |          |            |   | 407.3        |          |              |   |      |       |  |   | (98.4     | )         |   |   | 449.9   |         
|Commitments and
contingencies                        
|Series A Senior
Convertible
Preferred Stock           |                                            |   | 1,246.9           |         |        |   |           |          |            |   |             |          |              |   |      |       |  |   |          |           |   |   | 1,246.9 |         
|Stockholders Equity                                  |                                            |   | 689.1             |         |        |   | 3,485.1    |          |            |   | 12,372.1     |          |              |   | 180.8 |       |  |   | (16,038.0 | )         |   |   | 689.1   |         
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         
|                                                      | Total liabilities and
stockholders equity |   | $                 | 3,510.8 |        |   | $          | 12,679.4 |            |   | $            | 13,613.3 |              |   | $     | 261.8 |  |   | $         | (16,136.4 | ) |   | $       | 13,928.9 | 
|                                                      |                                            |   |                   |         |        |   |            |          |            |   |              |          |              |   |       |       |  |   |           |           |   |   |         |         

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING BALANCE SHEET
(in millions)

|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |          | 
|------------------------------------------------------------------------- | ------------------------------------------ | - | ----------------- | ------- | ------ | - | ---------- | ------- | ---------- | - | ------------ | -------- | ------------ | - | ----- | ----- |  | - | -------- | -------- | - | - | ------- | -------- | 
|                                                                          |                                            |   | December 31, 2001
|                                                                          |                                            |   |                  
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   | Non-  |       |  |   |          |          |   |   |        
|                                                                          |                                            |   | Parent            |         | Issuer |   | Guarantors |         | Guarantors |   | Eliminations |          | Consolidated
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |             
|ASSETS                                                                    |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|Current Assets                                                          
|Cash and cash
equivalents                                                 |                                            | $ | 0.1               |         |        | $ | 8.9        |         |            | $ | 115.7        |          |              | $ | 34.1  |       |  | $ |         |          |   | $ | 158.8   |         
|Accounts receivable, net                                                  |                                            |   |                  |         |        |   |           |         |            |   | 734.3        |          |              |   | 17.2  |       |  |   |         |          |   |   | 751.5   |         
|Prepaid and other current
assets                                          |                                            |   |                  |         |        |   |           |         |            |   | 90.7         |          |              |   | 41.3  |       |  |   |         |          |   |   | 132.0   |         
|Deferred income taxes, net                                                |                                            |   |                  |         |        |   |           |         |            |   | 156.2        |          |              |   |      |       |  |   |         |          |   |   | 156.2   |         
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|                                                                          | Total current assets                       |   |                   | 0.1     |        |   |            | 8.9     |            |   |              | 1,096.9  |              |   |       | 92.6  |  |   |          |         |   |   |         | 1,198.5  | 
|Property and equipment,
net                                               |                                            |   |                  |         |        |   |           |         |            |   | 3,776.7      |          |              |   | 234.2 |       |  |   |         |          |   |   | 4,010.9 |         
|Goodwill, net                                                             |                                            |   |                  |         |        |   |           |         |            |   | 8,484.5      |          |              |   | 72.4  |       |  |   |         |          |   |   | 8,556.9 |         
|Investment in subsidiaries                                                |                                            |   | 2,703.1           |         |        |   | 4,372.3    |         |            |   |             |          |              |   |      |       |  |   | (7,075.4 | )        |   |   |        |         
|Other assets, net                                                         |                                            |   |                  |         |        |   | 165.3      |         |            |   | 364.5        |          |              |   | 51.0  |       |  |   |         |          |   |   | 580.8   |         
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|                                                                          | Total assets                               |   | $                 | 2,703.2 |        |   | $          | 4,546.5 |            |   | $            | 13,722.6 |              |   | $     | 450.2 |  |   | $        | (7,075.4 | ) |   | $       | 14,347.1 | 
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY                                      |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|Current Liabilities                                                     
|Current portion of long-
term debt                                        |                                            | $ |                  |         |        | $ |           |         |            | $ | 11.8         |          |              | $ | 10.3  |       |  | $ |         |          |   | $ | 22.1    |         
|Accounts payable                                                          |                                            |   |                  |         |        |   |           |         |            |   | 447.2        |          |              |   | 8.9   |       |  |   |         |          |   |   | 456.1   |         
|Accrued closure, post-closure and
environmental costs                     |                                            |   |                  |         |        |   |           |         |            |   | 126.9        |          |              |   |      |       |  |   |         |          |   |   | 126.9   |         
|Accrued interest                                                          |                                            |   |                  |         |        |   | 165.6      |         |            |   | 27.3         |          |              |   |      |       |  |   |         |          |   |   | 192.9   |         
|Other accrued liabilities                                                 |                                            |   | 30.7              |         |        |   |           |         |            |   | 293.0        |          |              |   | 79.1  |       |  |   |         |          |   |   | 402.8   |         
|Unearned revenue                                                          |                                            |   |                  |         |        |   |           |         |            |   | 230.3        |          |              |   | 2.5   |       |  |   |         |          |   |   | 232.8   |         
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|                                                                          | Total current liabilities                  |   |                   | 30.7    |        |   |            | 165.6   |            |   |              | 1,136.5  |              |   |       | 100.8 |  |   |          |         |   |   |         | 1,433.6  | 
|Long-term debt, less
current portion                                      |                                            |   |                  |         |        |   | 8,113.7    |         |            |   | 1,068.2      |          |              |   | 55.6  |       |  |   |         |          |   |   | 9,237.5 |         
|Deferred income taxes                                                     |                                            |   |                  |         |        |   |           |         |            |   | 418.8        |          |              |   |      |       |  |   |         |          |   |   | 418.8   |         
|Accrued closure, post-closure and
environmental costs                     |                                            |   |                  |         |        |   |           |         |            |   | 875.6        |          |              |   | 2.4   |       |  |   |         |          |   |   | 878.0   |         
|Due to/(from) parent                                                      |                                            |   | 903.7             |         |        |   | (6,414.7   | )       |            |   | 5,564.5      |          |              |   | (53.5 | )     |  |   |         |          |   |   |        |         
|Other long-term obligations                                               |                                            |   | 14.0              |         |        |   |           |         |            |   | 609.9        |          |              |   | 0.5   |       |  |   |         |          |   |   | 624.4   |         
|Commitments and
contingencies
Series A Senior
Convertible
Preferred Stock |                                            |   | 1,169.0           |         |        |   |           |         |            |   |             |          |              |   |      |       |  |   |         |          |   |   | 1,169.0 |         
|Stockholders Equity                                                      |                                            |   | 585.8             |         |        |   | 2,681.9    |         |            |   | 4,049.1      |          |              |   | 344.4 |       |  |   | (7,075.4 | )        |   |   | 585.8   |         
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         
|                                                                          | Total liabilities and
stockholders equity |   | $                 | 2,703.2 |        |   | $          | 4,546.5 |            |   | $            | 13,722.6 |              |   | $     | 450.2 |  |   | $        | (7,075.4 | ) |   | $       | 14,347.1 | 
|                                                                          |                                            |   |                   |         |        |   |            |         |            |   |              |          |              |   |       |       |  |   |          |          |   |   |         |         

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF OPERATIONS
(in millions)

|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |         | 
|--------------------------------------------- | -------------------------------------------------- | - | ---------------------------- | ----- | ------ | - | ---------- | ----- | ---------- | - | ------------ | ------- | ------------ | - | ----- | ---- |  | - | ------ | ------ | - | - | ------- | ------- | 
|                                              |                                                    |   | Year Ended December 31, 2002
|                                              |                                                    |   |                             
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   | Non-  |      |  |   |        |        |   |   |        
|                                              |                                                    |   | Parent                       |       | Issuer |   | Guarantors |       | Guarantors |   | Eliminations |         | Consolidated
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |             
|Revenues                                      |                                                    | $ |                             |       |        | $ |           |       |            | $ | 5,309.1      |         |              | $ | 208.2 |      |  | $ |       |        |   | $ | 5,517.3 |        
|Cost of operations and unusual
costs          |                                                    |   |                             |       |        |   |           |       |            |   | 3,138.5      |         |              |   | 151.1 |      |  |   |       |        |   |   | 3,289.6 |        
|Selling, general and
administrative expenses  |                                                    |   | 11.9                         |       |        |   | 0.5        |       |            |   | 464.6        |         |              |   | 7.5   |      |  |   |       |        |   |   | 484.5   |        
|Depreciation and amortization                 |                                                    |   |                             |       |        |   |           |       |            |   | 481.9        |         |              |   | 14.6  |      |  |   |       |        |   |   | 496.5   |        
|Non-cash gain on divestiture of
assets        |                                                    |   |                             |       |        |   |           |       |            |   | (9.3         | )       |              |   |      |      |  |   |       |        |   |   | (9.3    | )      
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        
|                                              | Operating (loss) income                            |   |                              | (11.9 | )      |   |            | (0.5  | )          |   |              | 1,233.4 |              |   |       | 35.0 |  |   |        |       |   |   |         | 1,256.0 | 
|Equity in earnings of
subsidiaries            |                                                    |   | (187.6                       | )     |        |   | (620.1     | )     |            |   |             |         |              |   |      |      |  |   | 807.7  |        |   |   |        |        
|Interest expense (income) and
other           |                                                    |   | 1.6                          |       |        |   | 745.7      |       |            |   | 103.9        |         |              |   | (5.9  | )    |  |   |       |        |   |   | 845.3   |        
|Intercompany interest
expense (income)        |                                                    |   | (56.0                        | )     |        |   | (24.0      | )     |            |   | 78.7         |         |              |   | 1.3   |      |  |   |       |        |   |   |        |        
|Management fees                               |                                                    |   | (5.0                         | )     |        |   |           |       |            |   | 4.0          |         |              |   | 1.0   |      |  |   |       |        |   |   |        |        
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        
|Income (loss) before income
taxes             |                                                    |   | 235.1                        |       |        |   | (102.1     | )     |            |   | 1,046.8      |         |              |   | 38.6  |      |  |   | (807.7 | )      |   |   | 410.7   |        
|Income tax expense (benefit)                  |                                                    |   | 20.0                         |       |        |   | (288.9     | )     |            |   | 435.5        |         |              |   | 17.0  |      |  |   |       |        |   |   | 183.6   |        
|Minority interest                             |                                                    |   |                             |       |        |   |           |       |            |   | 1.9          |         |              |   |      |      |  |   |       |        |   |   | 1.9     |        
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        
|                                              | Income before extraordinary
loss                   |   |                              | 215.1 |        |   |            | 186.8 |            |   |              | 609.4   |              |   |       | 21.6 |  |   |        | (807.7 | ) |   |         | 225.2   | 
|Extraordinary loss, net of
income tax benefit |                                                    |   |                             |       |        |   | 3.6        |       |            |   | 6.5          |         |              |   |      |      |  |   |       |        |   |   | 10.1    |        
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        
|                                              | Net income                                         |   |                              | 215.1 |        |   |            | 183.2 |            |   |              | 602.9   |              |   |       | 21.6 |  |   |        | (807.7 | ) |   |         | 215.1   | 
|Dividends on preferred stock                  |                                                    |   | 77.9                         |       |        |   |           |       |            |   |             |         |              |   |      |      |  |   |       |        |   |   | 77.9    |        
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        
|                                              | Net income (loss)
available to common
shareholders |   | $                            | 137.2 |        |   | $          | 183.2 |            |   | $            | 602.9   |              |   | $     | 21.6 |  |   | $      | (807.7 | ) |   | $       | 137.2   | 
|                                              |                                                    |   |                              |       |        |   |            |       |            |   |              |         |              |   |       |      |  |   |        |        |   |   |         |        

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF OPERATIONS
(in millions)

|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |         |  
|----------------------------------------------- | -------------------------------------------------- | - | ---------------------------- | ----- | ------ | - | ---------- | ------ | ---------- | - | ------------ | ------- | ------------ | - | ----- | ---- |  | - | ----- | ------ | - | - | ------- | ------- | -
|                                                |                                                    |   | Year Ended December 31, 2001
|                                                |                                                    |   |                             
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   | Non-  |      |  |   |       |        |   |   |        
|                                                |                                                    |   | Parent                       |       | Issuer |   | Guarantors |        | Guarantors |   | Eliminations |         | Consolidated
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |             
|Revenues                                        |                                                    | $ |                             |       |        | $ |           |        |            | $ | 5,363.2      |         |              | $ | 202.1 |      |  | $ |      |        |   | $ | 5,565.3 |        
|Cost of operations                              |                                                    |   |                             |       |        |   |           |        |            |   | 3,079.5      |         |              |   | 126.2 |      |  |   |      |        |   |   | 3,205.7 |        
|Selling, general and
administrative expenses    |                                                    |   | 10.9                         |       |        |   |           |        |            |   | 439.2        |         |              |   | 6.0   |      |  |   |      |        |   |   | 456.1   |        
|Depreciation and amortization                   |                                                    |   |                             |       |        |   |           |        |            |   | 451.4        |         |              |   | 14.9  |      |  |   |      |        |   |   | 466.3   |        
|Goodwill amortization                           |                                                    |   |                             |       |        |   |           |        |            |   | 224.6        |         |              |   | 2.1   |      |  |   |      |        |   |   | 226.7   |        
|Non-cash loss on divestiture of
assets          |                                                    |   |                             |       |        |   |           |        |            |   | 107.0        |         |              |   |      |      |  |   |      |        |   |   | 107.0   |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        
|                                                | Operating (loss) income                            |   |                              | (10.9 | )      |   |            |       |            |   |              | 1,061.5 |              |   |       | 52.9 |  |   |       |       |   |   |         | 1,103.5 |  
|Equity in earnings of
unconsolidated affiliates |                                                    |   |                             |       |        |   |           |        |            |   | (14.1        | )       |              |   |      |      |  |   |      |        |   |   | (14.1   | )      
|Equity in earnings of
subsidiaries              |                                                    |   | (15.9                        | )     |        |   | (455.9     | )      |            |   |             |         |              |   |      |      |  |   | 471.8 |        |   |   |        |        
|Interest expense and other                      |                                                    |   | 0.3                          |       |        |   | 747.5      |        |            |   | 97.3         |         |              |   | 2.5   |      |  |   |      |        |   |   | 847.6   |        
|Intercompany interest
expense (income)          |                                                    |   | (78.8                        | )     |        |   | (38.1      | )      |            |   | 115.8        |         |              |   | 1.1   |      |  |   |      |        |   |   |        |        
|Management fees                                 |                                                    |   | (5.0                         | )     |        |   |           |        |            |   | 4.3          |         |              |   | 0.7   |      |  |   |      |        |   |   |        |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        
|                                                | Income (loss) before income
taxes                  |   |                              | 88.5  |        |   |            | (253.5 | )          |   |              | 858.2   |              |   |       | 48.6 |  |   |       | (471.8 | ) |   |         | 270.0   |  
|Income tax expense (benefit)                    |                                                    |   | 30.0                         |       |        |   | (280.2     | )      |            |   | 422.5        |         |              |   | 18.5  |      |  |   |      |        |   |   | 190.8   |        
|Minority interest                               |                                                    |   |                             |       |        |   |           |        |            |   | 3.7          |         |              |   |      |      |  |   |      |        |   |   | 3.7     |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        
|                                                | Income before extraordinary
loss                   |   |                              | 58.5  |        |   |            | 26.7   |            |   |              | 432.0   |              |   |       | 30.1 |  |   |       | (471.8 | ) |   |         | 75.5    |  
|Extraordinary loss, net of
income tax benefit   |                                                    |   |                             |       |        |   | 17.0       |        |            |   |             |         |              |   |      |      |  |   |      |        |   |   | 17.0    |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        
|                                                | Net income                                         |   |                              | 58.5  |        |   |            | 9.7    |            |   |              | 432.0   |              |   |       | 30.1 |  |   |       | (471.8 | ) |   |         | 58.5    |  
|Dividends on preferred stock                    |                                                    |   | 73.0                         |       |        |   |           |        |            |   |             |         |              |   |      |      |  |   |      |        |   |   | 73.0    |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        
|                                                | Net income (loss)
available to common
shareholders |   | $                            | (14.5 | )      |   | $          | 9.7    |            |   | $            | 432.0   |              |   | $     | 30.1 |  |   | $     | (471.8 | ) |   | $       | (14.5   | )
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |       |      |  |   |       |        |   |   |         |        

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##### Table of Contents



ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATING STATEMENT OF OPERATIONS
(in millions)

|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |         | 
|----------------------------------------------- | -------------------------------------------------- | - | ---------------------------- | ----- | ------ | - | ---------- | ------ | ---------- | - | ------------ | ------- | ------------ | - | ---- | ---- |  | - | ----- | ------ | - | - | ------- | ------- | 
|                                                |                                                    |   | Year Ended December 31, 2000
|                                                |                                                    |   |                             
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   | Non- |      |  |   |       |        |   |   |        
|                                                |                                                    |   | Parent                       |       | Issuer |   | Guarantors |        | Guarantors |   | Eliminations |         | Consolidated
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |             
|Revenues                                        |                                                    | $ |                             |       |        | $ |           |        |            | $ | 5,631.4      |         |              | $ | 76.1 |      |  | $ |      |        |   | $ | 5,707.5 |        
|Cost of operations                              |                                                    |   |                             |       |        |   |           |        |            |   | 3,315.7      |         |              |   | 51.9 |      |  |   |      |        |   |   | 3,367.6 |        
|Selling, general and
administrative expenses    |                                                    |   | 8.4                          |       |        |   |           |        |            |   | 417.4        |         |              |   | 5.0  |      |  |   |      |        |   |   | 430.8   |        
|Depreciation and amortization                   |                                                    |   |                             |       |        |   |           |        |            |   | 446.2        |         |              |   | 4.6  |      |  |   |      |        |   |   | 450.8   |        
|Goodwill amortization                           |                                                    |   |                             |       |        |   |           |        |            |   | 220.3        |         |              |   | 2.9  |      |  |   |      |        |   |   | 223.2   |        
|Non-cash loss on divestiture of
assets          |                                                    |   |                             |       |        |   |           |        |            |   | 26.5         |         |              |   |     |      |  |   |      |        |   |   | 26.5    |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        
|                                                | Operating (loss) income                            |   |                              | (8.4  | )      |   |            |       |            |   |              | 1,205.3 |              |   |      | 11.7 |  |   |       |       |   |   |         | 1,208.6 | 
|Equity in earnings of
unconsolidated affiliates |                                                    |   |                             |       |        |   |           |        |            |   | (50.8        | )       |              |   |     |      |  |   |      |        |   |   | (50.8   | )      
|Equity in earnings of
subsidiaries              |                                                    |   | (83.9                        | )     |        |   | (555.1     | )      |            |   |             |         |              |   |     |      |  |   | 639.0 |        |   |   |        |        
|Interest expense and other                      |                                                    |   |                             |       |        |   | 799.0      |        |            |   | 79.2         |         |              |   |     |      |  |   |      |        |   |   | 878.2   |        
|Intercompany interest
expense (income)          |                                                    |   | (72.5                        | )     |        |   | (42.1      | )      |            |   | 116.4        |         |              |   | (1.8 | )    |  |   |      |        |   |   |        |        
|Management fees                                 |                                                    |   | (5.0                         | )     |        |   |           |        |            |   | 2.4          |         |              |   | 2.6  |      |  |   |      |        |   |   |        |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        
|                                                | Income (loss) before income
taxes                  |   |                              | 153.0 |        |   |            | (201.8 | )          |   |              | 1,058.1 |              |   |      | 10.9 |  |   |       | (639.0 | ) |   |         | 381.2   | 
|Income tax expense (benefit)                    |                                                    |   | 28.6                         |       |        |   | (299.0     | )      |            |   | 504.1        |         |              |   | 3.8  |      |  |   |      |        |   |   | 237.5   |        
|Minority interest                               |                                                    |   |                             |       |        |   |           |        |            |   | 6.0          |         |              |   |     |      |  |   |      |        |   |   | 6.0     |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        
|                                                | Income before extraordinary
loss                   |   |                              | 124.4 |        |   |            | 97.2   |            |   |              | 548.0   |              |   |      | 7.1  |  |   |       | (639.0 | ) |   |         | 137.7   | 
|Extraordinary loss, net of
income tax benefit   |                                                    |   |                             |       |        |   | 13.3       |        |            |   |             |         |              |   |     |      |  |   |      |        |   |   | 13.3    |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        
|                                                | Net income                                         |   |                              | 124.4 |        |   |            | 83.9   |            |   |              | 548.0   |              |   |      | 7.1  |  |   |       | (639.0 | ) |   |         | 124.4   | 
|Dividends on preferred stock                    |                                                    |   | 68.5                         |       |        |   |           |        |            |   |             |         |              |   |     |      |  |   |      |        |   |   | 68.5    |        
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        
|                                                | Net income (loss)
available to common
shareholders |   | $                            | 55.9  |        |   | $          | 83.9   |            |   | $            | 548.0   |              |   | $    | 7.1  |  |   | $     | (639.0 | ) |   | $       | 55.9    | 
|                                                |                                                    |   |                              |       |        |   |            |        |            |   |              |         |              |   |      |      |  |   |       |        |   |   |         |        

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions)

| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | ------------------------------------------------ | -------------------------------------------------------------- | - | ---- | - | ---------------------------- | - | ------ | -------- | ---------- | - | ---------- | ------ | ------------ | - | ------------ | ------ | - | - | - | - | ---- | - | ------- | -------- | - |  | 
| |                                                  |                                                                |   |      |   | Year Ended December 31, 2002
| |                                                  |                                                                |   |      |   |                             
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   | Non- |   |         |          |  
| |                                                  |                                                                |   |      |   | Parent                       |   | Issuer |          | Guarantors |   | Guarantors |        | Eliminations |   | Consolidated
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |             
| | Cash provided by (used for)
operating activities |                                                                | $ | (2.8 | ) |                              | $ | 104.0  |          |            | $ | 900.8      |        |              |   | 30.8         |        |   | $ |  |   |      | $ | 1,032.8 |         
| | Investing activities                            |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |         
| |                                                  | Cost of acquisitions, net of
cash acquired                     |   |     |   |                              |   |       |          |            |   | (51.4      | )      |              |   |             |        |   |   |  |   |      |   | (51.4   | )       
| |                                                  | Proceeds from divestitures,
net of cash divested               |   |     |   |                              |   |       |          |            |   | 82.6       |        |              |   |             |        |   |   |  |   |      |   | 82.6    |         
| |                                                  | Capital expenditures,
excluding acquisition                    |   |      |  |                              |   |        |         |            |   |            | (344.1 | )            |   |              | (198.2 | ) |   |   |  |      |   |         | (542.3   | )
| |                                                  | Capitalized interest                                           |   |      |  |                              |   |        |         |            |   |            | (20.6  | )            |   |              |       |   |   |   |  |      |   |         | (20.6    | )
| |                                                  | Proceeds from sale of fixed
assets                             |   |      |  |                              |   |        |         |            |   |            | 28.8   |              |   |              | 1.4    |   |   |   |  |      |   |         | 30.2     |  
| |                                                  | Other investing activities                                     |   |      |  |                              |   |        |         |            |   |            | (22.3  | )            |   |              |       |   |   |   |  |      |   |         | (22.3    | )
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | Cash
used for investing activities               |                                                                |   |     |   |                              |   |       |          |            |   | (327.0     | )      |              |   | (196.8       | )      |   |   |  |   |      |   | (523.8  | )       
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | Financing activities                            |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |         
| |                                                  | Net proceeds from exercise of
stock options                    |   | 2.8  |   |                              |   |       |          |            |   |           |        |              |   |             |        |   |   |  |   |      |   | 2.8     |         
| |                                                  | Change in disbursement
account                                 |   |      |  |                              |   |        |         |            |   |            | (87.1  | )            |   |              |       |   |   |   |  |      |   |         | (87.1    | )
| |                                                  | Proceeds from long-term debt,
net of issuance costs            |   |      |  |                              |   |        | 861.7    |            |   |            | (10.1  | )            |   |              | 192.7  |   |   |   |  |      |   |         | 1,044.3  |  
| |                                                  | Repayments of long-term debt                                   |   |      |  |                              |   |        | (1,167.7 | )          |   |            | (267.8 | )            |   |              | (12.0  | ) |   |   |  |      |   |         | (1,447.5 | )
| |                                                  | Intercompany and capital
funding between issuer and
subsidiary |   |      |  |                              |   |        | 198.5    |            |   |            | (151.3 | )            |   |              | (47.2  | ) |   |   |  |      |   |         |         |  
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | Cash provided by (used for)
financing activities |                                                                |   | 2.8  |   |                              |   | (107.5 | )        |            |   | (516.3     | )      |              |   | 133.5        |        |   |   |  |   |      |   | (487.5  | )       
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | Increase (decrease) in cash and
cash equivalents |                                                                |   |     |   |                              |   | (3.5   | )        |            |   | 57.5       |        |              |   | (32.5        | )      |   |   |  |   |      |   | 21.5    |         
| | Cash and cash equivalents,
beginning of year     |                                                                |   | 0.1  |   |                              |   | 8.9    |          |            |   | 115.7      |        |              |   | 34.1         |        |   |   |  |   |      |   | 158.8   |         
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 
| | Cash and cash equivalents,
end of year           |                                                                | $ | 0.1  |   |                              | $ | 5.4    |          |            | $ | 173.2      |        |              | $ | 1.6          |        |   | $ |  |   |      | $ | 180.3   |         
| |                                                  |                                                                |   |      |   |                              |   |        |          |            |   |            |        |              |   |              |        |   |   |   |   |      |   |         |          |   |  | 

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions)

| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |              |        |        |   |   |   |   |  |   |        |          |   | 
| | ------------------------------------------------ | --------------------------------------------------- | - | ---- | ---------------------------- |  | ------ | ------ | ---------- | - | -------------- | -------- | ------------ | - | ------------ | ------ | ------ | - | - | - | - |  | - | ------ | -------- | - | 
| |                                                  |                                                     |   |      | Year Ended December 31, 2001
| |                                                  |                                                     |   |      |                             
| |                                                  |                                                     |   |      | Parent                       |  | Issuer |        | Guarantors |   | Non-Guarantors |          | Eliminations |   | Consolidated
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| | Cash provided by (used for)
operating activities |                                                     | $ | (7.2 | )                            |  |        | (553.9 | )          |   |                | 1,431.0  |              |   | $            | 35.3   |        |   | $ |  |   |  | $ | 905.2  |         
| | Investing activities                            |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |              |        |        |   |   |   |   |  |   |        |         
| |                                                  | Cost of acquisitions, net of
cash acquired          |   |      |                             |  |        |        |           |   |                |          | (249.5       | ) |              |        |       |   |   |   |  |  |   |        | (249.5   | )
| |                                                  | Proceeds from divestitures,
net of cash divested    |   |      |                             |  |        |        |           |   |                |          | 359.9        |   |              |        |       |   |   |   |  |  |   |        | 359.9    |  
| |                                                  | Accruals for acquisition
price and severance costs  |   |      |                             |  |        |        |           |   |                |          | (1.7         | ) |              |        |       |   |   |   |  |  |   |        | (1.7     | )
| |                                                  | Capital expenditures,
excluding acquisitions        |   |      |                             |  |        |        |           |   |                |          | (275.2       | ) |              |        | (225.7 | ) |   |   |  |  |   |        | (500.9   | )
| |                                                  | Capitalized interest                                |   |      |                             |  |        |        |           |   |                |          | (45.7        | ) |              |        |       |   |   |   |  |  |   |        | (45.7    | )
| |                                                  | Proceeds from sale of fixed
assets                  |   |      |                             |  |        |        |           |   |                |          | 30.7         |   |              |        | 0.2    |   |   |   |  |  |   |        | 30.9     |  
| |                                                  | Other investing activities                          |   |      |                             |  |        |        |           |   |                |          | (28.3        | ) |              |        | 1.3    |   |   |   |  |  |   |        | (27.0    | )
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| | Cash used for investing activities               |                                                     |   |     |                              |  |        |       |            |   |                | (209.8   | )            |   |              | (224.2 | )      |   |   |  |   |  |   | (434.0 | )       
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| |                                                  | Net proceeds from exercise of
stock options         |   |      | 6.4                          |  |        |        |           |   |                |          |             |   |              |        |       |   |   |   |  |  |   |        | 6.4      |  
| |                                                  | Proceeds from long-term debt,
net of issuance costs |   |      |                             |  |        |        | 2,729.0    |   |                |          | (42.2        | ) |              |        | 69.0   |   |   |   |  |  |   |        | 2,755.8  |  
| |                                                  | Repayments of long-term debt                        |   |      |                             |  |        |        | (3,180.4   | ) |                |          | (13.1        | ) |              |        | (3.1   | ) |   |   |  |  |   |        | (3,196.6 | )
| |                                                  | Intercompany between issuer
and subsidiary          |   |      |                             |  |        |        | 1,011.5    |   |                |          | (1,168.0     | ) |              |        | 156.5  |   |   |   |  |  |   |        |         |  
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| | Cash provided by (used for)
financing activities |                                                     |   | 6.4  |                              |  |        | 560.1  |            |   |                | (1,223.3 | )            |   |              | 222.4  |        |   |   |  |   |  |   | (434.4 | )       
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| | Increase
(decrease) in cash and cash equivalents |                                                     |   | (0.8 | )                            |  |        | 6.2    |            |   |                | (2.1     | )            |   |              | 33.5   |        |   |   |  |   |  |   | 36.8   |         
| | Cash and cash equivalents,
beginning of year     |                                                     |   | 0.9  |                              |  |        | 2.7    |            |   |                | 117.8    |              |   |              | 0.6    |        |   |   |  |   |  |   | 122.0  |         
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             
| | Cash and cash equivalents,
end of year           |                                                     | $ | 0.1  |                              |  | $      | 8.9    |            |   | $              | 115.7    |              |   | $            | 34.1   |        |   |   |  |   |  | $ | 158.8  |         
| |                                                  |                                                     |   |      |                              |  |        |        |            |   |                |          |              |   |             

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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(in millions)

|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |              |       |   |   |   |   |  |   |        |          |   |  | 
|------------------------------------------------ | -------------------------------------------------------------------- | - | ---- | --- | ---------------------------- | - | ------ | -------- | ---------- | - | -------------- | ------- | ------------ |  | ------------ | ----- | - | - | - | - |  | - | ------ | -------- | - |  | 
|                                                 |                                                                      |   |      |     | Year Ended December 31, 2000
|                                                 |                                                                      |   |      |     |                             
|                                                 |                                                                      |   |      |     | Parent                       |   | Issuer |          | Guarantors |   | Non-Guarantors |         | Eliminations |  | Consolidated
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Cash provided by (used for)
operating activities |                                                                      | $ | (4.5 | )   |                              | $ | (656.5 | )        |            | $ | 1,494.1        |         |              |  | (29.8        | )     |   | $ |  |   |  | $ | 803.3  |         
|Investing activities                           
|                                                 | Cost of acquisitions, net of
cash acquired                           |   |      |    |                              |   |        |         |            |   |                | (802.9  | )            |  |              |      |   |   |   |  |  |   |        | (802.9   | )
|                                                 | Proceeds from divestitures,
of cash divested                         |   |      |    |                              |   |        |         |            |   |                | 1,039.2 |              |  |              |      |   |   |   |  |  |   |        | 1,039.2  |  
|                                                 | Accruals for acquisition price
and severance costs                   |   |      |    |                              |   |        |         |            |   |                | (27.8   | )            |  |              |      |   |   |   |  |  |   |        | (27.8    | )
|                                                 | Capital expenditures, excluding
acquisitions                         |   |      |    |                              |   |        |         |            |   |                | (388.1  | )            |  |              | (1.8  | ) |   |   |  |  |   |        | (389.9   | )
|                                                 | Capitalized interest                                                 |   |      |    |                              |   |        |         |            |   |                | (45.4   | )            |  |              |      |   |   |   |  |  |   |        | (45.4    | )
|                                                 | Proceeds from sale of fixed assets                                   |   |      |    |                              |   |        |         |            |   |                | 42.9    |              |  |              |      |   |   |   |  |  |   |        | 42.9     |  
|                                                 | Other investing activities                                           |   |      |    |                              |   |        |         |            |   |                | (73.7   | )            |  |              | 47.7  |   |   |   |  |  |   |        | (26.0    | )
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Cash provided by (used for)
investing activities |                                                                      |   |     |     |                              |   |       |          |            |   | (255.8         | )       |              |  | 45.9         |       |   |   |  |   |  |   | (209.9 | )       
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Financing activities                           
|                                                 | Net proceeds from sale of common
stock and exercise of stock options |   |      | 1.6 |                              |   |        |         |            |   |                |        |              |  |              |      |   |   |   |  |  |   |        | 1.6      |  
|                                                 | Proceeds from long-term debt,
net of issuance costs                  |   |      |    |                              |   |        | 2,202.0  |            |   |                |        |              |  |              |      |   |   |   |  |  |   |        | 2,202.0  |  
|                                                 | Repayments of long-term debt                                         |   |      |    |                              |   |        | (2,506.5 | )          |   |                | (289.9  | )            |  |              |      |   |   |   |  |  |   |        | (2,796.4 | )
|                                                 | Intercompany between issuer and
subsidiaries                         |   |      |    |                              |   |        | 963.7    |            |   |                | (950.7  | )            |  |              | (13.0 | ) |   |   |  |  |   |        |         |  
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Cash provided by (used in)
financing activities  |                                                                      |   | 1.6  |     |                              |   | 659.2  |          |            |   | (1,240.6       | )       |              |  | (13.0        | )     |   |   |  |   |  |   | (592.8 | )       
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Increase (decrease) in cash and
cash equivalents |                                                                      |   | (2.9 | )   |                              |   | 2.7    |          |            |   | (2.3           | )       |              |  | 3.1          |       |   |   |  |   |  |   | 0.6    |         
|Cash and cash equivalents,
beginning of year     |                                                                      |   | 3.8  |     |                              |   |       |          |            |   | 120.1          |         |              |  | (2.5         | )     |   |   |  |   |  |   | 121.4  |         
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             
|Cash and cash equivalents,
end of year           |                                                                      | $ | 0.9  |     |                              | $ | 2.7    |          |            |   | 117.8          |         |              |  | 0.6          |       |   | $ |  |   |  | $ | 122.0  |         
|                                                 |                                                                      |   |      |     |                              |   |        |          |            |   |                |         |              |  |             

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Item 9.Changes in and Disagreements on Accounting and Financial Disclosure

Not applicable.




PART III

Item 10.Directors and Executive Officers of the Registrant

Information required by this item is incorporated by reference to the material appearing under the heading Election of
Directors in the Proxy Statement for the 2003 Annual Meeting of Stockholders.




Item 11.Executive Compensation

Information required by this item is incorporated by reference to the material appearing under the heading Executive
Compensation in the Proxy Statement for the 2003 Annual Meeting of Stockholders.




Item 12.Security Ownership of Certain Beneficial Owners and Management

Information required by this item is incorporated by reference to the material appearing under the heading Other
Information  Principal Stockholders in the Proxy Statement for the 2003 Annual Meeting of Stockholders.




Item 13.Certain Relationships and Related Transactions

Information required by this item is incorporated by reference to the material appearing under the heading Certain
Relationships and Related Transactions in the Proxy Statement for the 2003 Annual Meeting of Stockholders.




Item 14.Controls and Procedures

Evaluation of disclosure controls and procedures.We maintain disclosure controls and procedures and internal controls designed to
ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed,
evaluated, summarized and reported accurately within the time periods specified in the Securities and Exchange Commissions (SEC)
rules and forms. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. An evaluation was performed under the supervision and with the participation of management, including the
Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure
controls and procedures (pursuant to Exchange Act Rule 13a-14) on January 24, 2003. Based upon that evaluation, the CEO and CFO
concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be
included in our periodic SEC filings. The conclusions of the CEO and CFO from this evaluation were communicated to the Audit
Committee. In connection with this evaluation, there were no breaches of such controls that would require disclosure to the Audit
Committee or our auditors.

Changes in Internal Controls.There were no significant changes in our internal controls or in other factors that could
significantly affect these internal controls subsequent to January 24, 2003. There were no significant deficiencies or material
weaknesses; therefore, there were no corrective actions to be taken.

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PART IV




Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K

Financial Statement Schedules -

Schedule II  Valuation and Qualifying Accounts

|                                |  |          |        |         |  |            |        |             |  |          |       |  |  |         |         |   |  |   |        | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ------ | ----------- |  | -------- | ----- |  |  | ------- | ------- | - |  | - | ------ | 
|                                |  | Balance  |        | Charges |  |            |        |             |  |          |       |  |  | Balance
|                                |  | at       |        | to      |  | Other      |        | Write-offs/ |  | at      
|                                |  | 12/31/99 |        | Expense |  | Charges(1) |        | Payments    |  | 12/31/00
|                                |  |          |        |         |  |            |        |             |  |         
|Allowance for doubtful
accounts |  | $        | 59,490 |         |  | $          | 19,463 |             |  | $        | 6,421 |  |  | $       | (42,275 | ) |  | $ | 43,099 | 
|Severance and termination
costs |  |          | 31,423 |         |  |            |       |             |  |          |      |  |  |         | (27,041 | ) |  |   | 4,382  | 
|Restructuring costs             |  |          | 2,504  |         |  |            | 6,074  |             |  |          |      |  |  |         | (2,630  | ) |  |   | 5,948  | 

|                                |  |          |        |         |  |            |        |             |  |          |       |  |  |         |         |   |  |   |        | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ------ | ----------- |  | -------- | ----- |  |  | ------- | ------- | - |  | - | ------ | 
|                                |  | Balance  |        | Charges |  |            |        |             |  |          |       |  |  | Balance
|                                |  | at       |        | to      |  | Other      |        | Write-offs/ |  | at      
|                                |  | 12/31/00 |        | Expense |  | Charges(1) |        | Payments    |  | 12/31/01
|                                |  |          |        |         |  |            |        |             |  |         
|Allowance for doubtful
accounts |  | $        | 43,099 |         |  | $          | 23,937 |             |  | $        | 2,372 |  |  | $       | (37,532 | ) |  | $ | 31,876 | 
|Severance and termination
costs |  |          | 4,382  |         |  |            | 3,816  |             |  |          | 120   |  |  |         | (4,163  | ) |  |   | 4,155  | 
|Restructuring costs             |  |          | 5,948  |         |  |            | 7,994  |             |  |          | 2,210 |  |  |         | (2,889  | ) |  |   | 13,263 | 

|                                |  |          |        |         |  |            |        |             |  |          |        |   |  |         |         |   |  |   |        | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ------ | ----------- |  | -------- | ------ | - |  | ------- | ------- | - |  | - | ------ | 
|                                |  | Balance  |        | Charges |  |            |        |             |  |          |        |   |  | Balance
|                                |  | at       |        | to      |  | Other      |        | Write-offs/ |  | at      
|                                |  | 12/31/01 |        | Expense |  | Charges(1) |        | Payments    |  | 12/31/02
|                                |  |          |        |         |  |            |        |             |  |         
|Allowance for doubtful
accounts |  | $        | 31,876 |         |  | $          | 18,528 |             |  | $        | (735   | ) |  | $       | (25,977 | ) |  | $ | 23,692 | 
|Severance and termination
costs |  |          | 4,155  |         |  |            |       |             |  |          |       |   |  |         | (2,121  | ) |  |   | 2,034  | 
|Restructuring costs             |  |          | 13,263 |         |  |            |       |             |  |          | (3,095 | ) |  |         | (6,940  | ) |  |   | 3,228  | 



---

|(1) |  | Amounts primarily relate to acquired companies.
|--- |  | -----------------------------------------------

Valuation and qualifying accounts not included above have been shown in Notes 1, 8 and 14 of our financial
statements included in Part II Item 8 of this Form 10-K.

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Financial Statements of Browning-Ferris Industries, Inc.-

Following are the stand-alone financial statements for our wholly-owned subsidiary, Browning-Ferris Industries, Inc.
(BFI). We are required to provide these financial statements under
the SECs Rule 3-16 of Regulation S-X. The stock of BFI,
along with certain of our other wholly-owned subsidiaries, collateralizes certain of our outstanding debt
obligations. In Note 5 of our consolidated Financial Statements, included under Item 8 of this Form 10-K, we have
provided information on both BFI and the other Allied subsidiaries that serve as collateral, both on an individual
and combined basis. As of December 31, 2002, the book value of
the assets of the combined entities whose stock serves as
collateral was approximately $8.8 billion, of which $7.5 billion was BFI and the remaining amount was other Allied
subsidiaries.

Financial Statements and Supplementary Data



| | Report of Independent Accountants.
| | ----------------------------------



| | Consolidated Balance Sheets as of December 31, 2002 and 2001.
| | -------------------------------------------------------------



| | Consolidated Statements of Operations for the Three Years Ended December 31, 2002.
| | ----------------------------------------------------------------------------------



| | Consolidated Statements of Stockholders Deficit for the Three Years Ended
December 31, 2002.
| | ---------------------------------------------------------------------------------------------



| | Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2002.
| | ----------------------------------------------------------------------------------



| | Notes to Consolidated Financial Statements.
| | -------------------------------------------



| | Financial Statement Schedule.
| | -----------------------------

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Report of Independent Accountants

To the Board of Directors and Shareholders
of Allied Waste Industries, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders deficit and of cash
flows present fairly, in all material respects, the financial position of
Browning-Ferris Industries, Inc. (the Company), a wholly-owned
subsidiary of Allied Waste Industries, Inc., and its subsidiaries at December 31, 2002 and
2001, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. In
addition, in our opinion, the 2002 and 2001 information included in
the financial statement schedule included herein presents fairly, in
all material respects, the 2002 and 2001 information set forth
therein when read in conjunction with the related consolidated
financial statements. These financial
statements and financial statement schedule are the responsibility of the Companys management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company
has restated its consolidated financial statements as of December 31, 2001 and
for each of the two years in the period ended December 31, 2001, previously
audited by other independent accountants who have ceased operations, to reflect
a different reporting entity.

Also as discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for derivative instruments as of
January 1, 2001, and the Company changed its method of accounting for goodwill
and other intangible assets as of January 1, 2002.

PricewaterhouseCoopers LLP
Phoenix, Arizona
March 25, 2003

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BROWNING-FERRIS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                            |                                             |   |              |           |      |   |           |           | 
|--------------------------------------------------------------------------- | ------------------------------------------- | - | ------------ | --------- | ---- | - | --------- | --------- | 
|                                                                            |                                             |   | December 31,
|                                                                            |                                             |   |             
|                                                                            |                                             |   | 2002         |           | 2001
|                                                                            |                                             |   |              |           |     
|ASSETS                                                                      |                                             |   |              |           |      |   |           |          
|Current Assets                                                             |                                             |   |              |           |      |   |           |          
|Cash and cash equivalents                                                   |                                             | $ | 7,933        |           |      | $ | 17,649    |          
|Accounts receivable, net of allowance $7,589 and
$11,710                    |                                             |   | 199,309      |           |      |   | 222,628   |          
|Prepaid and other current assets                                            |                                             |   | 23,651       |           |      |   | 42,206    |          
|                                                                            |                                             |   |              |           |      |   |           |          
|                                                                            | Total current assets                        |   |              | 230,893   |      |   |           | 282,483   | 
|Property and equipment, net                                                 |                                             |   | 944,026      |           |      |   | 958,056   |          
|Goodwill, net                                                               |                                             |   | 3,745,304    |           |      |   | 3,769,167 |          
|Other assets, net                                                           |                                             |   | 131,940      |           |      |   | 445,674   |          
|Due
from parent                                                             |                                             |   | 2,423,692    |           |      |   | 2,669,281 |          
|                                                                            |                                             |   |              |           |      |   |           |          
|                                                                            | Total assets                                |   | $            | 7,475,855 |      |   | $         | 8,124,661 | 
|                                                                            |                                             |   |              |           |      |   |           |          
|LIABILITIES
AND STOCKHOLDERS DEFICIT                                       |                                             |   |              |           |      |   |           |          
|Current Liabilities                                                        |                                             |   |              |           |      |   |           |          
|Current portion of long-term debt                                           |                                             | $ | 157,741      |           |      | $ | 837       |          
|Accounts payable                                                            |                                             |   | 123,882      |           |      |   | 104,032   |          
|Current portion of accrued closure, post-closure and
environmental costs    |                                             |   | 77,298       |           |      |   | 83,608    |          
|Accrued interest                                                            |                                             |   | 113,684      |           |      |   | 122,394   |          
|Other accrued liabilities                                                   |                                             |   | 154,321      |           |      |   | 198,317   |          
|Unearned revenue                                                            |                                             |   | 67,645       |           |      |   | 69,724    |          
|                                                                            |                                             |   |              |           |      |   |           |          
|                                                                            | Total current liabilities                   |   |              | 694,571   |      |   |           | 578,912   | 
|Long-term debt, less current portion                                        |                                             |   | 6,944,193    |           |      |   | 7,396,709 |          
|Accrued closure, post-closure and
environmental costs, less current portion |                                             |   | 577,689      |           |      |   | 641,273   |          
|Other long-term obligations                                                 |                                             |   | 394,440      |           |      |   | 402,462   |          
|Commitments and contingencies                                               |                                             |   |              |           |      |   |           |          
|Common stock                                                                |                                             |   |             |           |      |   |          |          
|Additional paid-in capital                                                  |                                             |   |             |           |      |   |          |          
|Accumulated other comprehensive loss                                        |                                             |   | (131,206     | )         |      |   | (85,120   | )        
|Retained deficit                                                            |                                             |   | (1,003,832   | )         |      |   | (809,575  | )        
|                                                                            |                                             |   |              |           |      |   |           |          
|Total stockholders deficit                                                 |                                             |   | (1,135,038   | )         |      |   | (894,695  | )        
|                                                                            |                                             |   |              |           |      |   |           |          
|                                                                            | Total liabilities and stockholders deficit |   | $            | 7,475,855 |      |   | $         | 8,124,661 | 
|                                                                            |                                             |   |              |           |      |   |           |          

The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.

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BROWNING-FERRIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

|                                                |                                |   |                         |          |      |   |           |          |   |   |           |          |  
|----------------------------------------------- | ------------------------------ | - | ----------------------- | -------- | ---- | - | --------- | -------- | - | - | --------- | -------- | -
|                                                |                                |   | Year Ended December 31,
|                                                |                                |   |                        
|                                                |                                |   | 2002                    |          | 2001 |   | 2000     
|                                                |                                |   |                         |          |      |   |          
|Revenues                                        |                                | $ | 1,763,770               |          |      | $ | 1,814,154 |          |   | $ | 1,926,818 |         
|Cost of operations                              |                                |   | 1,081,733               |          |      |   | 1,052,290 |          |   |   | 1,189,605 |         
|Selling, general and administrative expenses    |                                |   | 148,830                 |          |      |   | 151,327   |          |   |   | 99,926    |         
|Depreciation and amortization                   |                                |   | 126,880                 |          |      |   | 127,461   |          |   |   | 129,667   |         
|Goodwill amortization                           |                                |   |                        |          |      |   | 100,542   |          |   |   | 98,572    |         
|Non-cash gain on divestiture of assets          |                                |   | (1,415                  | )        |      |   |          |          |   |   |          |         
|                                                |                                |   |                         |          |      |   |           |          |   |   |           |         
|                                                | Operating income               |   |                         | 407,742  |      |   |           | 382,534  |   |   |           | 409,048  |  
|Equity in earnings of unconsolidated
affiliates |                                |   | (4,849                  | )        |      |   | (30,772   | )        |   |   | (50,787   | )       
|Interest expense and other                      |                                |   | 703,135                 |          |      |   | 728,918   |          |   |   | 765,474   |         
|                                                |                                |   |                         |          |      |   |           |          |   |   |           |         
|                                                | Loss before income taxes       |   |                         | (290,544 | )    |   |           | (315,612 | ) |   |           | (305,639 | )
|Income tax benefit                              |                                |   | (101,050                | )        |      |   | (79,884   | )        |   |   | (84,801   | )       
|Minority interest                               |                                |   | 1,205                   |          |      |   | 2,681     |          |   |   | 4,997     |         
|                                                |                                |   |                         |          |      |   |           |          |   |   |           |         
|                                                | Loss before extraordinary loss |   |                         | (190,699 | )    |   |           | (238,409 | ) |   |           | (225,835 | )
|Extraordinary losses, net of income tax benefit |                                |   | 3,558                   |          |      |   | 16,973    |          |   |   | 13,266    |         
|                                                |                                |   |                         |          |      |   |           |          |   |   |           |         
|                                                | Net loss                       |   | $                       | (194,257 | )    |   | $         | (255,382 | ) |   | $         | (239,101 | )
|                                                |                                |   |                         |          |      |   |           |          |   |   |           |         

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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BROWNING-FERRIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
(in thousands)

|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |          |                    |         |  
|------------------------------- | ------------------------------------- | -------------------------------------------------------------- | -------------------------------------------------------- | - | ------ | - | ------- | - | ------------- | - | ----------- | -------- | ------------- | ------- | ------------ | ---------- | ----- | - | -------------- | ---------- | ------ | ------- | -------- | -------- | ------------------ | ------- | -
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |          | Comprehensive Loss
|                                |                                       |                                                                |                                                          |   |        |   |         |   | Additional    |   | Accumulated |          |               |         |              |            | Total |   | for the Twelve
|                                |                                       |                                                                |                                                          |   | Common |   | Paid-In |   | Comprehensive |   | Retained    |          | Stockholders |         | Months Ended
|                                |                                       |                                                                |                                                          |   | Stock  |   | Capital |   | Loss          |   | Deficit     |          | Deficit       |         | December 31,
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |             
|Balance as of
December 31, 1999 |                                       | $                                                              |                                                         |   |        | $ |        |   |               | $ |            |          |               | $       | (315,092     | )          |       | $ | (315,092       | )          |        |         |          |         
|                                | Net loss                              |                                                                |                                                          |  |        |   |         |  |               |   |             |         |               |         |              | (239,101   | )     |   |                | (239,101   | )      |         | $        | (239,101 | )                 
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         
|Balance as of
December 31, 2000 |                                       | $                                                              |                                                         |   |        | $ |        |   |               | $ |            |          |               | $       | (554,193     | )          |       | $ | (554,193       | )          |        | $       | (239,101 | )       
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         
|                                | Net loss                              |                                                                |                                                          |  |        |   |         |  |               |   |             |         |               |         |              | (255,382   | )     |   |                | (255,382   | )      |         | $        | (255,382 | )                 
|                                | Other comprehensive
loss, net of tax: |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |          |                   
|                                |                                       |                                                                | Cumulative effect of
change in accounting
principle      |   |        |  |         |   |               |  |             |          |               | (45,193 | )            |            |       |  |                |            |        | (45,193 | )        |          |                    | (45,193 | )
|                                |                                       |                                                                | Net loss deferred on
hedging derivatives                 |   |        |  |         |   |               |  |             |          |               | (89,194 | )            |            |       |  |                |            |        | (89,194 | )        |          |                    | (89,194 | )
|                                |                                       |                                                                | Net loss on hedging
derivatives
reclassified to
earnings |   |        |  |         |   |               |  |             |          |               | 49,267  |              |            |       |  |                |            |        | 49,267  |          |          |                    | 49,267  |  
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         
|                                | Balance as of
December 31, 2001       |                                                                | $                                                        |  |        |   | $       |  |               |   | $           | (85,120  | )             |         | $            | (809,575   | )     |   | $              | (894,695   | )      |         | $        | (340,502 | )                 
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         
|                                | Net loss                              |                                                                |                                                          |  |        |   |         |  |               |   |             |         |               |         |              | (194,257   | )     |   |                | (194,257   | )      |         | $        | (194,257 | )                 
|                                | Other comprehensive
loss, net of tax: |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |          |                   
|                                |                                       |                                                                | Net gain deferred on
hedging derivatives                 |   |        |  |         |   |               |  |             |          |               | 7,346   |              |            |       |  |                |            |        | 7,346   |          |          |                    | 7,346   |  
|                                |                                       | Less: Net loss on
hedging derivatives
reclassified to
earnings |                                                          |   |       |   |         |   |              |   |             |          | 21,328        |         |              |            |      |   |                |            | 21,328 |         |          |          | 21,328             |        
|                                | Minimum pension
liability adjustment  |                                                                |                                                          |  |        |   |         |  |               |   |             | (74,760  | )             |         |              |           |       |   |                | (74,760    | )      |         |          | (74,760  | )                 
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         
|                                | Balance as of
December 31, 2002       |                                                                | $                                                        |  |        |   | $       |  |               |   | $           | (131,206 | )             |         | $            | (1,003,832 | )     |   | $              | (1,135,038 | )      |         | $        | (240,343 | )                 
|                                |                                       |                                                                |                                                          |   |        |   |         |   |               |   |             |          |               |         |              |            |       |   |                |            |        |         |          |         

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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BROWNING-FERRIS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |            |  
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | - | ----------------------- | ---------- | ---- | - | -------- | ---------- | - | - | -------- | ---------- | -
|                                                                                            |                                                                                                      |   | Year Ended December 31,
|                                                                                            |                                                                                                      |   |                        
|                                                                                            |                                                                                                      |   | 2002                    |            | 2001 |   | 2000    
|                                                                                            |                                                                                                      |   |                         |            |      |   |         
|Operating activities                                                                       |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Net loss                                                                                    |                                                                                                      | $ | (194,257                | )          |      | $ | (255,382 | )          |   | $ | (239,101 | )         
|Adjustments to reconcile net loss to cash
used for operating activities                   
|Provisions for:                                                                             |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|                                                                                            | Depreciation and amortization                                                                        |   |                         | 126,880    |      |   |          | 228,003    |   |   |          | 228,239    |  
|                                                                                            | Non-cash gain on divestiture of assets                                                               |   |                         | (1,415     | )    |   |          |           |   |   |          |           |  
|                                                                                            | Undistributed earnings of equity investment in
unconsolidated subsidiaries                           |   |                         |           |      |   |          | (30,772    | ) |   |          | (38,190    | )
|                                                                                            | Doubtful accounts                                                                                    |   |                         | 3,591      |      |   |          | 7,809      |   |   |          | 4,300      |  
|                                                                                            | Accretion of debt and amortization of debt
issuance costs                                            |   |                         | 36,408     |      |   |          | 35,881     |   |   |          | 38,903     |  
|                                                                                            | Gain on sale of fixed assets                                                                         |   |                         | (2,702     | )    |   |          | (28,190    | ) |   |          | (2,455     | )
|                                                                                            | Extraordinary
losses, net of income tax benefit                                                      |   |                         | 3,558      |      |   |          | 12,348     |   |   |          | 13,266     |  
|                                                                                            | Non-cash gain on de-designated interest
rate swap contracts                                          |   |                         | (2,416     | )    |   |          |           |   |   |          |           |  
|                                                                                            | Amortization of accumulated other
comprehensive income forde-designated
interest rate swap contracts |   |                         | 35,400     |      |   |          |           |   |   |          |           |  
|Change in operating assets and liabilities,
excluding the effects of purchase acquisitions |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|                                                                                            | Accounts receivable, prepaid expenses,
inventories and other                                         |   |                         | 47,322     |      |   |          | (24,348    | ) |   |          | 211,971    |  
|                                                                                            | Accounts payable, accrued liabilities, unearned
revenue and other                                    |   |                         | 29,798     |      |   |          | 95,219     |   |   |          | (34,076    | )
|                                                                                            | Expenditures against non-recurring acquisition
accruals                                              |   |                         | (85,077    | )    |   |          | (105,085   | ) |   |          | (162,930   | )
|                                                                                            | Closure and post-closure provision                                                                   |   |                         | 33,479     |      |   |          | 24,634     |   |   |          | 33,392     |  
|                                                                                            | Closure, post-closure and environmental
expenditures                                                 |   |                         | (70,896    | )    |   |          | (71,272    | ) |   |          | (71,624    | )
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Cash used for operating activities                                                          |                                                                                                      |   | (40,327                 | )          |      |   | (111,155 | )          |   |   | (18,305  | )         
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Investing
activities                                                                       |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|                                                                                            | Cost of acquisitions, net of cash acquired                                                           |   |                         | (4,216     | )    |   |          | (44,277    | ) |   |          | (73,015    | )
|                                                                                            | Proceeds
from divestitures and other, net of cash divested                                           |   |                         | 21,065     |      |   |          | 302,115    |   |   |          | 877,033    |  
|                                                                                            | Accruals
for acquisition price and severance costs                                                   |   |                         |           |      |   |          |           |   |   |          | (27,819    | )
|                                                                                            | Net
distributions from unconsolidated affiliates                                                     |   |                         |           |      |   |          |           |   |   |          | 15,373     |  
|                                                                                            | Capital expenditures, excluding acquisitions                                                         |   |                         | (101,076   | )    |   |          | (131,896   | ) |   |          | (164,115   | )
|                                                                                            | Capitalized interest                                                                                 |   |                         | (4,499     | )    |   |          | (14,574    | ) |   |          | (15,723    | )
|                                                                                            | Proceeds from sale of fixed assets                                                                   |   |                         | 5,280      |      |   |          | 40,174     |   |   |          | 4,132      |  
|                                                                                            | Change in deferred acquisition costs, notes
receivable and other                                     |   |                         | (719       | )    |   |          | (17,098    | ) |   |          | (20,660    | )
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Cash provided by (used for) investing activities                                            |                                                                                                      |   | (84,165                 | )          |      |   | 134,444  |            |   |   | 595,206  |           
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Financing
activities                                                                       |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|                                                                                            | Change in disbursement account                                                                       |   |                         | (4,391     | )    |   |          | (51,389    | ) |   |          | (11,370    | )
|                                                                                            | Proceeds from long-term debt, net of issuance
costs                                                  |   |                         | 855,923    |      |   |          | 2,698,173  |   |   |          | 2,201,043  |  
|                                                                                            | Repayments of long-term debt                                                                         |   |                         | (1,172,584 | )    |   |          | (3,183,794 | ) |   |          | (2,754,559 | )
|                                                                                            | Change
in due from parent                                                                            |   |                         | 435,828    |      |   |          | 446,759    |   |   |          | 49,981     |  
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Cash provided by (used for) financing activities                                            |                                                                                                      |   | 114,776                 |            |      |   | (90,251  | )          |   |   | (514,905 | )         
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Increase (Decrease) in cash and cash equivalents                                            |                                                                                                      |   | (9,716                  | )          |      |   | (66,962  | )          |   |   | 61,996   |           
|Cash and cash equivalents, beginning of year                                                |                                                                                                      |   | 17,649                  |            |      |   | 84,611   |            |   |   | 22,615   |           
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Cash and cash equivalents, end of year                                                      |                                                                                                      | $ | 7,933                   |            |      | $ | 17,649   |            |   | $ | 84,611   |           
|                                                                                            |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|Supplemental disclosures:                                                                   |                                                                                                      |   |                         |            |      |   |          |            |   |   |          |           
|                                                                                            | Interest paid (net of amounts capitalized)                                                           |   | $                       | 653,181    |      |   | $        | 670,020    |   |   | $        | 720,393    |  
|                                                                                            | Income taxes paid, net of refunds                                                                    |   |                         |           |      |   |          |           |   |   |          |           |  
|                                                                                            | Capital lease obligations incurred                                                                   |   |                         | 3,817      |      |   |          |           |   |   |          |           |  
|                                                                                            | Liabilities incurred or assumed in
acquisitions                                                      |   |                         |           |      |   |          | 8,783      |   |   |          | 23,860     |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Organization and Summary of Significant Accounting Policies

Browning-Ferris Industries, Inc. (BFI) is a wholly-owned subsidiary of Allied
Waste Industries, Inc., (Allied or Parent), a Delaware corporation. Allied is
the second largest, non-hazardous solid waste management company in the United
States, as measured by revenues and provides non-hazardous waste collection,
transfer, recycling and disposal services in 39 states. The business
activities of BFI are fully integrated with the operations of Allied
which is operated solely as a consolidated entity. As such, BFI is
reliant on its Parent to provide necessary funding to support its
activities. Allied has issued a letter evidencing its intent and
ability to financially support BFI.

Purpose of financial statements 

The purpose of these financial statements is to provide information about the
assets and stock of BFI, which collateralizes certain outstanding debt
obligations of BFI and the Parent. BFI along with certain other wholly-owned
subsidiaries of Allied (herein referred to as the Other Allied Collateral) on a
combined basis represents the aggregate collateral. The combined entity
represents all assets that, upon occurrence of any triggering event or certain
other conditions under the collateral agreements, would be available to satisfy
the outstanding debt obligation. Separate stand-alone financial statements for
the Other Allied Collateral are not presented herein because none of the
subsidiaries within Other Allied Collateral meet the Securities and
Exchange Commission (the SEC) reporting criteria under Rule 3-16 of Regulation
S-X.

Transfer of assets and change in financial statement presentation 

Prior to 2001, the Other Allied Collateral was wholly-owned by BFI. During
2002 and 2001, the Other Allied Collateral was transferred to newly created subsidiaries
of Allied for organizational efficiency and other purposes. A collateral waiver was
received from the collateral trustee. The Other Allied Collateral continues to
collateralize the debt. In accordance with Accounting Principles Board Opinion No. 20
Accounting Changes, the transfers of
assets described above are accounted for as a change in reporting entity, and therefore,
the financial statements have been retroactively restated for all
prior periods presented.

Principles of consolidation and presentation 

All significant intercompany accounts and transactions are eliminated in the
accompanying consolidated financial statements. BFI is not a registrant with
the SEC and is not subject to the SECs periodic reporting requirements, except
as may be required by Rule 3-16 of Regulation S-X. Certain estimates,
including allocations from the Parent, have been made to provide financial
information for SEC and stand-alone reporting purposes as if BFI were a
registrant. We believe that the presentations and disclosures herein are
adequate to make the information not misleading. In the opinion of management,
all adjustments necessary to fairly state the financial statements have been
reflected.

Cash and cash equivalents 

We use a cash management system under which our book balance reflects a credit
for our primary disbursement account. This amount represents uncleared checks
which have not been presented to our bank. Our funds are transferred as checks
are presented. At December 31, 2001, the book credit balance of
$4.4 million in the primary disbursement account was reported in accounts
payable. There was no book credit balance in the primary disbursement
account at December 31, 2002. We consider any liquid investments with an original maturity of three
months or less to be cash equivalents. Amounts are stated at quoted market
prices.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of credit risk 

Financial instruments that potentially subject us to concentrations of credit
risk consist of cash and cash equivalents and trade receivables. We place our
cash and cash equivalents with high quality financial institutions and manage
the amount of credit exposure with any one financial institution.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising our customer base.

Allowance for doubtful accounts 

We provide services to residential, commercial and industrial customers
throughout the United States. We perform credit evaluations of our significant
customers and establish an allowance for doubtful accounts based on the aging
of our receivables, payment performance factors, historical trends and other
information. In general, we reserve 50% of those receivables outstanding 90 to
120 days and 100% of those outstanding over 120 days. We also review
outstanding balances on an account specific basis and fully reserve the
receivable prior to 120 days if information becomes available indicating we
will not receive payment. Our reserve is evaluated and revised on a monthly
basis.

Other assets 

Other assets include notes receivable, landfill closure deposits, deferred
financing costs, investments in unconsolidated affiliates (see Note 4), prepaid
pension assets (see Note 9) and miscellaneous non-current assets. Deferred
financing costs represent transaction costs directly attributable to obtaining
financing. Upon funding of debt offerings, deferred financing costs are
capitalized as debt issuance costs and amortized using the effective interest
method over the life of the related debt.

Other accrued liabilities 

Other accrued liabilities include
the current portion of non-recurring acquisition accruals, accrued payroll,
current portion of accrued insurance and other miscellaneous current
liabilities.

Accrued closure and post-closure costs 

Accrued closure and post-closure costs represent an estimate of the present
value of the future obligation associated with closure and post-closure
monitoring of non-hazardous solid waste landfills we currently own and/or
operate or have retained upon divestiture. Site specific closure and
post-closure engineering cost estimates are prepared annually for landfills
owned and/or operated by us for which we are responsible for closure and
post-closure. For active landfills, the impact of changes determined to be
changes in estimates, based on the annual update, are accounted for on a
prospective basis except for instances where the cost expenditure will occur
within 12 months. The present value of estimated future costs are accrued on a
per unit basis as landfill disposal capacity is consumed. Discounting of
future costs is applied where we believe that both the amounts and timing of
related payments are reliably determinable. Changes in estimates for closed
landfill sites are recognized when determined.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Environmental costs 

We accrue for costs associated with environmental remediation obligations when
such costs are probable and reasonably estimable. Such accruals are adjusted
as further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value, as the timing of cash payments is not reliably
determinable. Recoveries of environmental remediation costs from other parties
are recorded when their receipts are deemed probable. Environmental liabilities
and apportionment of responsibility among potentially responsible parties are
accounted for in accordance with the guidance provided by the American
Institute of Certified Public Accountants Statement of Position 96-1 (SOP 96-1)
Environmental Remediation Liabilities.

Other long-term obligations 

Other long-term obligations include the minority
interest in consolidated subsidiaries, net pension
liability (see Note 9), the non-current
portion of non-recurring acquisition accruals, the non-current portion of
insurance obligation, derivative liabilities for interest rate swap contracts
(see Note 6), and other obligations, which are not expected to be paid within
the next twelve months.

Revenue 

Revenues result primarily from fees charged to customers for waste collection,
transfer, recycling and disposal services. We generally provide collection
services under direct agreements with our customers or pursuant to contracts
with municipalities. Commercial and municipal contract terms generally range
from one to five years and commonly have renewal options. Our landfill
operations include both company-owned landfills and landfills that we operate
on behalf of municipalities and others.

Advance billings are recorded as unearned revenue, and revenue is recognized
when services are provided, usually within 90 days.

Loss contracts

We review our revenue producing contracts in the ordinary course of business to
determine if the direct costs, exclusive of any fixed costs, to service the
contractual arrangements exceed the revenues to be produced by the contract.
Any resulting excess direct costs over the life of the contract are expensed at
the time of such determination.

Change in accounting principle 
derivatives 

Effective January 1, 2001, we changed our method of accounting for derivative
financial instruments in accordance with the adoption of SFAS 133, Accounting
for Derivatives Instruments and Hedging Activities(SFAS 133), as amended by
SFAS 138, Accounting for Certain Derivative Instruments and Hedging Activities
(SFAS 138). See Note 6 on Derivative Instruments and Hedging Activities.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-recurring acquisition accruals 

At the time of an acquisition accounted for under the purchase method of
accounting, we evaluate and adjust existing accruals to represent our estimate
of the future costs to settle the assumed liabilities. Assumed liabilities are
considered in the allocation of purchase price and goodwill valuation.
Liabilities related to restructuring and abandonment activities, loss contracts
or changes in estimates of environmental, litigation and regulatory compliance
costs are charged to expense in the period in which the acquisition is
completed. Any subsequent changes to these estimates are also charged to
expense in the same line item as the original charge was recorded.

At December 31, 2002 and 2001, we had
approximately $184.5 million and $263.8
million, respectively, of non-recurring acquisition accruals on the balance
sheet, consisting primarily of loss contract, litigation, insurance liabilities
and other commitments associated with the acquisition of BFI by Allied.
Expenditures against non-recurring acquisition accruals, including severance
costs for BFI in 2002, 2001 and 2000 were $85.1 million, $105.1 million and
$190.8 million, respectively.

Interest expense capitalized 

We capitalize interest in connection with the construction of our landfill
assets. Actual acquisition, permitting and construction costs incurred related
to landfill assets under active development qualify for interest
capitalization. Interest capitalization ceases when the construction of a
landfill asset is complete and available for use.

During the years ended December 31, 2002, 2001 and 2000, we incurred gross
interest expense (including payments under interest rate swap contracts) of
$708.8 million, $708.4 million and $744.2 million of which $4.5 million, $14.6
million and $15.7 million were capitalized.

Extraordinary losses 

In November 2002, we repaid $370.6 million of our tranche A, B and C term loan
facility before its maturity date, with the proceeds from the issuance of $375
million senior notes. In connection with this repayment, we recognized an
extraordinary charge for the early extinguishments of the debt of approximately
$5.9 million ($3.6 million, net of income tax benefit) related to the write-off
of deferred debt issuance costs.

During 2001, we repaid $1,326.4 million of our tranche A, B and C term loan
facility before its maturity date, with net proceeds from the issuance of $600
million and $750 million senior notes. In connection with this repayment, we
recognized an extraordinary charge for the early extinguishment of the debt of
approximately $28.0 million ($17.0 million, net of income tax benefit) related
to the write-off of deferred debt issuance costs.

During 2000, we repaid our asset sale term loan and tranche D term loan
facilities before the respective maturity date. In connection with these
repayments, we recognized extraordinary charges for the early extinguishment of
the debt of approximately $21.9 million ($13.3 million, net of income tax
benefit) related to the write-off of deferred debt issuance costs.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of estimates 

The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Although we believe that our estimates and assumptions are reasonable, they are
based upon information presently available. Actual results may differ
significantly from the estimates under different assumptions or conditions.

Fair value of financial instruments 

The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS 107, Disclosures About Fair
Value of Financial Instruments(SFAS 107). Our financial instruments as defined
by SFAS 107 include cash, money market funds, accounts receivable, accounts
payable and long-term debt. We have determined the estimated fair value
amounts at December 31, 2002 using available market information and valuation
methodologies. Considerable judgment is required in interpreting market data
to develop the estimates of fair value. Accordingly, the estimates may not be
indicative of the amounts that could be realized in a current market exchange.
The use of different market assumptions or valuation methodologies could have a
material effect on the estimated fair value amounts.

The carrying value of cash, money market funds, accounts receivable and
accounts payable approximate fair values due to the short-term maturities of
these instruments (See Notes 5 and 6 for fair value of debt and derivative
instruments).

Business combinations 

All acquisitions in 2002, 2001 and 2000 were accounted for under the purchase
method and are reflected in the results of operations since the effective date
of the acquisition. Under the purchase method, the cost of the acquired
business is allocated to the assets acquired and liabilities assumed based upon
their estimated fair values. These estimates are revised during the allocation
period as necessary when, and if, information regarding contingencies becomes
available to further define and quantify assets acquired and liabilities
assumed. The allocation period generally does not exceed one year. To the
extent contingencies are resolved or settled during the allocation period, such
items are included in the revised allocation of the purchase price. Purchase
accounting adjustments, acquisition related costs and other possible charges
that may arise from the acquisitions may materially impact the future
Consolidated Balance Sheets and Statements of Operations.

The following table summarizes acquisitions for the
years ended December 31:

|                                  |  |      |     |      |  |      |      |  |  |   |       | 
|--------------------------------- |  | ---- | --- | ---- |  | ---- | ---- |  |  | - | ----- | 
|                                  |  | 2002 |     | 2001 |  | 2000
|                                  |  |      |     |      |  |     
|Number of businesses acquired     |  |      | 2   |      |  |      | 16   |  |  |   | 17    | 
|Total consideration (in millions) |  | $    | 4.2 |      |  | $    | 45.6 |  |  | $ | 119.9 | 

Our reported revenues and net income for the years
ended December 31, 2002 and 2001 were not significantly impacted
by the pro forma effect of these acquisitions.

Stock-based compensation plans

Certain employees are eligible to
participate in the stock option plans of the Parent. The Parent
accounts for stock-based compensation plans under Accounting Principles Board Opinion 25, Accounting for Stock Issued to
Employeesand the related interpretations (APB 25), for which no compensation cost is recorded in the statement of operations for the estimated
fair value of stock options issued with an exercise price equal to the fair value of the common stock on the date of grant. SFAS 123,
Accounting for Stock-based Compensation(SFAS 123), requires that companies, which do not elect to account for stock-based compensation
as prescribed by this statement, disclose the pro forma effects on earnings as if SFAS 123 had been adopted. In
addition, we have adopted the disclosure requirements of SFAS 148, Accounting for Stock-Based Compensation  Transition and Disclosure
(SFAS 148).

In accordance with the SFAS 123, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted
average assumptions:

|                        |  |                                  |   |              |  |              |   |   |  |  |   |  
|----------------------- |  | -------------------------------- | - | ------------ |  | ------------ | - | - |  |  | - | -
|                        |  | For the Years Ended December 31,
|                        |  |                                 
|                        |  | 2002                             |   | 2001         |  | 2000        
|                        |  |                                  |   |              |  |             
|Risk free interest rate |  | 2.2% to 4.6%                     |   | 4.8% to 5.2% |  | 5.3% to 6.9%
|Expected life           |  | 4 to 6 years                     |   | 5 years      |  | 5 years     
|Dividend rate           |  |                                  | 0 | %            |  |              | 0 | % |  |  | 0 | %
|Expected volatility     |  | 66% to 69%                       |   | 55% to 61%   |  | 52% to 55%  

Using these assumptions, pro forma net loss would reflect additional compensation expense recognized over the
vesting periods of the options by the Parent and allocated to BFI. If
the Parent applied the recognition provisions of SFAS 123 and SFAS 148 disclosures,
the resulting pro forma net loss after allocation of expenses to BFI is as follows (in thousands):

|                                                                                                             |  |  |  |  |  |                                  |          |      |  |      |          |   |  |   |          |  
|------------------------------------------------------------------------------------------------------------ |  |  |  |  |  | -------------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                             |  |  |  |  |  | For the Years Ended December 31,
|                                                                                                             |  |  |  |  |  |                                 
|                                                                                                             |  |  |  |  |  | 2002                             |          | 2001 |  | 2000
|                                                                                                             |  |  |  |  |  |                                  |          |      |  |     
|Net loss, as reported                                                                                        |  |  |  |  |  | $                                | (194,257 | )    |  | $    | (255,382 | ) |  | $ | (239,101 | )
|Deduct: Total stock-based
employee compensation
expense determined under
fair value based method, net of tax |  |  |  |  |  |                                  | (2,182   | )    |  |      | (1,266   | ) |  |   | (536     | )
|                                                                                                             |  |  |  |  |  |                                  |          |      |  |      |          |   |  |   |          |  
|Pro forma, net loss                                                                                          |  |  |  |  |  | $                                | (196,439 | )    |  | $    | (256,648 | ) |  | $ | (239,637 | )
|                                                                                                             |  |  |  |  |  |                                  |          |      |  |      |          |   |  |   |          |  

During the last three years, we have
recorded no compensation expense for stock options granted to
employees.

Additionally, see Note 10 for other
disclosures with respect to stock compensation.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently issued accounting pronouncements

The Financial Accounting Standards Board (FASB) issued SFAS 143, Accounting for
Asset Retirement Obligations(SFAS 143) in June 2001, which outlines standards
for accounting for obligations associated with the retirement of long-lived
tangible assets. The standard is effective beginning January 1, 2003 and will
impact the accounting for landfill retirement obligations, which we have
historically referred to as closure and post-closure. The adoption of the
standard will have no impact on our cash requirements.

SFAS 143 does not change the basic accounting principles that the waste
industry has historically followed for accounting for these types of
obligations. In general, the industry has followed the accounting practice of
recognizing a liability on the balance sheet and related expense as landfill
capacity is consumed to match operating costs with revenues. We refer to this
practice as life cycle accounting. For the most part, life cycle accounting
will still be followed.

For us, the new rules are a refinement to our practices and have caused a
change in the mechanics of calculating landfill retirement obligations and the
classification of where amounts are recorded in the financial statements.
Landfill retirement obligations are no longer accrued through a provision to
cost of operations, but rather by an increase to landfill assets. Under SFAS
143, the amortizable landfill asset includes (i) landfill development costs
incurred, (ii) landfill development costs expected to be incurred over the life
of the landfill, (iii) the recorded capping, closure and post-closure
liabilities and (iv) the cost estimates for future capping, closure and
post-closure costs. The landfill asset is amortized over the tons consumed during the
life of the landfill, with one exception. The exception applies to capping
costs for which both the recognition of the liability and the amortization of
these costs are based instead on the tons consumed for the specific capping
event.

Additionally, liabilities associated with divested landfills that were
historically accounted for in closure and post-closure liability were
reclassified to other long-term obligations because they were not within the
scope of SFAS 143. We will continue to account for our landfill assets using
life cycle accounting and will amortize the landfill asset under our existing
asset accounting policy.

Upon adoption, SFAS 143 requires a cumulative change in accounting for landfill
obligations retroactive to the date of the inception of the landfill.
Inception of the landfill is the date operations commenced or the date the
asset was acquired. To do this, SFAS 143 requires the creation of the related
landfill asset, net of accumulated amortization and an adjustment to the
capping, closure and post-closure liabilities for cumulative accretion.

The adjustments that occur upon adoption are required to be accounted for as a
cumulative effect of a change in accounting principle. Upon adoption of SFAS
143 on January 1, 2003, we expect a decrease in our capping, closure and
post-closure liabilities of $69 million, an increase in other long term
obligations of $25 million, and a decrease in our net landfill assets of $8
million. The cumulative effect of change in accounting principle is
approximately $22 million, net of tax.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements 4, 44
and 64, amendment of FASB Statement 13, and Technical Corrections(SFAS 145),
which among other things, restricts the classification of gains and losses from
extinguishment of debt as extraordinary, therefore, certain debt extinguishment
gains and losses will no longer be classified as extraordinary. SFAS 145 is
effective January 1, 2003. Under SFAS 145, generally gains and losses on
future debt extinguishments, if any, will be recorded in interest expense and
other. Upon adoption, extraordinary losses of $3.6 million, $17.0 million and
$13.3 million as previously reported, net of tax for the years ended December
31, 2002, 2001 and 2000, respectively, will be reclassified on a pre-tax basis
to interest expense and other to conform to the requirements under SFAS 145.

In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated with
Exit or Disposal Activities(SFAS 146), which prescribes the financial
accounting and reporting for costs associated with exit or disposal activities,
such as, contract terminations, consolidation of facilities and termination
benefits to involuntarily terminated employees. SFAS 146 excludes from its
scope exit and disposal activities that are in connection with a business
combination and those activities to which SFAS 143 and 144, Accounting for the
Impairment or Disposal of Long-Lived Assets(SFAS 144), are applicable. Under
SFAS 146, certain costs associated with exit and disposal activities are to be
recognized as liabilities at the time they meet the definition of a liability
(as defined in FASB Concepts Statement No. 6) as opposed to at the time a plan
is committed, which is the current practice. SFAS 146 is effective for exit
and disposal activities that are initiated after December 31, 2002. The
adoption of SFAS 146 will have no impact on the consolidated financial
statements at the time of adoption.

In November 2002, the FASB issued FASB Interpretation 45, Guarantors
Accounting and Disclosure requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others(FIN 45). FIN 45 expands on the accounting
guidance of Statements 5, 57, and 107 and incorporates without change the
provisions of FASB Interpretation 34, which is being superceded. FIN 45
elaborates on the existing disclosure requirements for most guarantees,
including loan guarantees such as standby letters of credit. It also clarifies
that at the time a company issues a guarantee, the company must recognize an
initial liability for the fair value, or market value, of the obligations it
assumes under that guarantee and must disclose that information in its interim
and annual financial statements. The recognition requirements of FIN 45 are
effective for any guarantees entered into subsequent to January 1, 2003. We
anticipate that the adoption of FIN 45 will have no impact on
our consolidated financial statements. We have complied with the disclosure
requirements of FIN 45 as of December 31, 2002.

In December 2002, the FASB issued SFAS 148,
Accounting for Stock-Based Compensation  Transition and
Disclosure (SFAS 148). SFAS 148 amends FASB
Statement 123, providing alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, the statement
requires prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.
As of December 31, 2002, we have complied with the disclosure
requirements of SFAS 148. The adoption of SFAS 148 will
have no impact on our consolidated financial statements.

Recently adopted accounting pronouncements 

Effective January 1, 2002, we adopted SFAS 142, Goodwill and Other Intangibles
(SFAS 142), which among other things, eliminates the amortization of goodwill
and instead requires an annual assessment of goodwill impairment by applying a
fair value based test to each of our reporting units. See Note 3 for
additional discussion.

Effective January 1, 2002, we adopted SFAS 144, which supercedes SFAS 121,
Accounting for the Impairment of Long-Lived Assets to be Disposed Of(SFAS
121). SFAS 144 provides a single accounting model for impairment of long-lived
assets held for use and for long-lived assets that are to be disposed of by
sale (including discontinued operations). In addition, the statement broadens
the presentation of discontinued operations to include certain divestiture
transactions that have been previously recorded in operating income. SFAS 144
retained the requirements under SFAS 121 to recognize impairment on long-lived
assets, excluding goodwill. The adoption of SFAS 144 had no impact on the
consolidated financial statements.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     Property and Equipment

Property and equipment are recorded at cost, which includes interest to finance the acquisition and
construction of major capital additions during the development phase, primarily landfills and
transfer stations, until they are completed and ready for their intended use. Depreciation is
provided on the straight-line method over the estimated useful lives of buildings and improvements
(30-40 years), vehicles and equipment (3-15 years), containers and compactors (5-10 years) and
furniture and office equipment (3-8 years). We do not assume a
residual value on our depreciable assets. In accordance with SFAS 144,we evaluate long-lived
assets, such as property and equipment, and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

The cost of landfill airspace, including original acquisition cost and incurred and projected
landfill construction costs, is amortized over the capacity of the landfill based on a per unit basis
as landfill airspace is consumed. We periodically review the realizability of our investment in
operating landfills. Should events and circumstances indicate that any of our landfills be reviewed
for possible impairment, such review for recoverability will be made in accordance with Emerging
Issues Task Force (EITF) Discussion Issue 95-23, The Treatment of Certain Site Restoration/Environmental
Exit Costs When Testing a Long-Lived Asset for Impairment(EITF
95-23). EITF 95-23 outlines how cash
flows for environmental exit costs should be determined and measured.

Expenditures for major renewals and betterments are capitalized, while expenditures for maintenance
and repairs, which do not improve assets or extend their useful lives, are charged to expense as
incurred. When property is retired or sold, the related cost and accumulated depreciation are removed
from the accounts and any resulting gain or loss is recognized in cost of operations. For the years
ended December 31, 2002, 2001 and 2000, we recognized net pre-tax gains on the disposal of fixed
assets of $2.7 million, $28.2 million and $2.4 million, respectively.

Property and equipment at December 31, 2002 and 2001 is as follows (in thousands):

|                                          |  |      |           |      |  |   |           |  
|----------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | -
|                                          |  | 2002 |           | 2001
|                                          |  |      |           |     
|Land and improvements                     |  | $    | 138,136   |      |  | $ | 133,072   |  
|Land held for permitting as landfills(1)  |  |      | 10,116    |      |  |   | 16,161    |  
|Landfills                                 |  |      | 656,121   |      |  |   | 564,057   |  
|Buildings and improvements                |  |      | 98,856    |      |  |   | 98,475    |  
|Vehicles, furniture and equipment         |  |      | 340,008   |      |  |   | 335,376   |  
|Containers and compactors                 |  |      | 132,615   |      |  |   | 126,357   |  
|                                          |  |      |           |      |  |   |           |  
|                                          |  |      | 1,375,852 |      |  |   | 1,273,498 |  
|Accumulated depreciation and amortization |  |      | (431,826  | )    |  |   | (315,442  | )
|                                          |  |      |           |      |  |   |           |  
|                                          |  | $    | 944,026   |      |  | $ | 958,056   |  
|                                          |  |      |           |      |  |   |           |  



|(1) |  | These properties have been approved for use as landfills, and we are
currently in the process of obtaining the necessary permits.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     Goodwill and Intangible Assets

As discussed in Note 1, we adopted SFAS 142, effective January 1, 2002. SFAS 142 eliminates the
amortization of goodwill and instead requires an annual assessment of goodwill impairment by applying a
fair value based test to each of our reporting units. We completed our annual assessment of goodwill as of December 31, 2002 and no impairment was
recorded. We evaluate goodwill for impairment using a fair value based test. The calculation of fair
value is subject to judgments and estimates. We estimate fair value based on net cash flows discounted
using a weighted-average cost of capital of approximately 8%. The estimated fair value could change if
there were future changes in our capital structure, cost of debt, interest rates, capital expenditure
levels, and ability to perform at levels that were forecasted.

We tested our existing goodwill at January 1, 2002 for realizability and determined that we had no
impairment of goodwill and therefore SFAS 142 had no impact to the consolidated financial statements upon
adoption (other than the elimination of goodwill amortization discussed above). The impairment test of
goodwill will be completed more frequently than annually under certain conditions. For example, a
significant adverse change in liquidity or the business environment, unanticipated competition, a
significant adverse action by a regulator or a disposal of a significant portion of an operating segment
could prompt an impairment test between annual assessments.

The following calculations adjust net loss before extraordinary loss to exclude goodwill amortization
expense (in thousands):

|                                              |  |   |                                  |   |      |   |          |   |  |   |          |   | 
|--------------------------------------------- |  | - | -------------------------------- | - | ---- | - | -------- | - |  | - | -------- | - | 
|                                              |  |   | For the years ended December 31,
|                                              |  |   |                                 
|                                              |  |   | 2002                             |   | 2001 |   | 2000    
|                                              |  |   |                                  |   |      |   |         
|Reported net loss before
extraordinary loss   |  | $ | (190,699                         | ) |      | $ | (238,409 | ) |  | $ | (225,835 | )
|Add: goodwill amortization, net of
tax effect |  |   |                                 |   |      |   | 96,918   |   |  |   | 95,796   |  
|                                              |  |   |                                  |   |      |   |          |   |  |   |          |  
|Adjusted net loss before
extraordinary loss   |  |   | (190,699                         | ) |      |   | (141,491 | ) |  |   | (130,039 | )
|Extraordinary loss, net of taxes              |  |   | 3,558                            |   |      |   | 16,973   |   |  |   | 13,266   |  
|                                              |  |   |                                  |   |      |   |          |   |  |   |          |  
|Adjusted net loss                             |  | $ | (194,257                         | ) |      | $ | (158,464 | ) |  | $ | (143,305 | )
|                                              |  |   |                                  |   |      |   |          |   |  |   |          |  

BFI goodwill is accounted for at the Parent company level. We make an allocation to the entities that
were acquired as part of the BFI acquisition. These entities are included in both BFI and the Other
Allied Collateral. The following table shows the activity and balances related to the aggregate BFI
goodwill as recorded by the Parent from December 31, 2001 through December 31, 2002 (in thousands):

|                  |  |   |           |  
|----------------- |  | - | --------- | -
|Beginning balance |  | $ | 3,769,167 |  
|Acquisitions      |  |   | 2,764     |  
|Divestitures      |  |   | (7,937    | )
|Adjustments (1)   |  |   | (18,690   | )
|                  |  |   |           |  
|Ending balance    |  | $ | 3,745,304 |  
|                  |  |   |           |  



| | (1) |  | Amounts primarily relate to purchase accounting adjustments during
the allocation period.
| | --- |  | -----------------------------------------------------------------------------------------

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition, we have other amortizable intangible assets that consist primarily of the
following at December 31, 2002 (in thousands):

|                       |       |   |                |     |              |   |                |      |   |   |     |     | 
|---------------------- | ----- | - | -------------- | --- | ------------ | - | -------------- | ---- | - | - | --- | --- | 
|                       |       |   | Gross Carrying |     | Accumulated  |   | Net           
|                       |       |   | Value          |     | Amortization |   | Carrying Value
|                       |       |   |                |     |              |   |               
|Non-compete agreements |       | $ | 742            |     |              | $ | (335           | )    |   | $ | 407 |    
|Other                  |       |   | 177            |     |              |   |               |      |   |   | 177 |    
|                       |       |   |                |     |              |   |                |      |   |   |     |    
|                       | Total |   | $              | 919 |              |   | $              | (335 | ) |   | $   | 584 | 
|                       |       |   |                |     |              |   |                |      |   |   |     |    

Amortization expense for each of the three years ended December 31, 2002 was $0.3 million, $0.4
million and $0.1 million, respectively. Based upon the amortizable assets recorded in the
balance sheet at December 31, 2002, amortization expense for each of the next five years is
estimated to be $0.3 million or less.

4.     Investments In Unconsolidated Affiliates

On April 30, 2001, American Ref-Fuel Company LLC, a joint venture of Duke Energy North
America and United American Energy Corporation, acquired our 100% ownership interest in the
Ref-Fuel Chester, Pennsylvania facility; our 50% interest in the Rochester, Massachusetts
facility; and our 51% interest in Ref-Fuels marketing company. The ownership structure of
four Ref-Fuel facilities located in New York, New Jersey, and Connecticut was modified to
give American Ref-Fuel Company LLC operational control of those entities. This transaction
allowed us to reduce our debt requirements by approximately $300 million and reduced our
letter of credit requirements by $200 million. During the year ended 2001, we reported
approximately $23 million in revenues, $3 million in operating income and $14 million
of equity earnings from American Ref-Fuel. In 2000, these operations generated approximate
annual revenues, operating income and equity earnings of
$70 million, $15 million, and $51 million, respectively. Dividends received from equity investees were approximately $12.6
million in 2000 and there were no dividends received during 2001.

At December 31, 2001, our equity investment in the four remaining Ref-Fuel facilities was
approximately $180 million, which was included in other assets. As part of the ownership
modification, we had an option to exchange our minority interest in the Ref-Fuel facilities
for Ref-Fuels 99% interest in Allieds equipment purchasing subsidiaries. We have exercised
this option and completed the exchange on April 30, 2002. We no longer have any interest in
the Ref-Fuel entities and our Parent owns 100% of the equipment purchasing subsidiaries.

We used the equity method of accounting for investments in unconsolidated subsidiaries over
which we exercised significant influence. The Summarized Combined Balance Sheet Data and the
Statement of Operations Data presented in the table below indicate amounts related to the
following equity investees in which we exercised significant influence through a 50%
ownership interest during January through April 2001: American Ref-Fuel Company of Hempstead,
American Ref-Fuel Company of Essex, American Ref-Fuel Company of Southeastern Connecticut,
and American Ref-Fuel Company of Niagara, LP.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summarized Combined Balance Sheet Data
(in thousands)

|                                                        |  |                      |         |  
|------------------------------------------------------- |  | -------------------- | ------- | -
|                                                        |  | December 31, 2001(1)
|                                                        |  |                     
|Current assets                                          |  | $                    | 115,768 |  
|Property and equipment, net of
accumulated depreciation |  |                      | 764,496 |  
|Other non-current assets                                |  |                      | 194,002 |  
|Current liabilities                                     |  |                      | 114,848 |  
|Long-term debt, net of current
portion                  |  |                      | 707,243 |  
|Other long-term liabilities                             |  |                      | 178,246 |  
|Retained earnings                                       |  |                      | (13,147 | )

Summarized Combined Statement of Operations Data
(in thousands)

|                 |  |                     |  |      |  |   |         |  |  |   |         | 
|---------------- |  | ------------------- |  | ---- |  | - | ------- |  |  | - | ------- | 
|                 |  | For the Years Ended
|                 |  | December 31        
|                 |  |                    
|                 |  | 2001(1)             |  | 2000
|                 |  |                     |  |     
|Total revenue    |  |                     |  |      |  | $ | 250,023 |  |  | $ | 363,719 | 
|Operating income |  |                     |  |      |  |   | 116,816 |  |  |   | 159,113 | 
|Net income       |  |                     |  |      |  |   | 59,383  |  |  |   | 95,118  | 



|(1) |  | These amounts exclude the results of Semass, LP and American Ref-Fuel, for
which our ownership interest was divested on April 30, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------

Differences between the equity in earnings we reported and our proportionate share of the combined earnings of
the related investees result principally from differences in the recognition of expenses, goodwill amortization
and the elimination of intercompany transactions.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.     Long-term Debt

Allied completed the acquisition of BFI primarily through the issuance of debt. All of the assets and stock of BFI and Other Allied
Collateral are pledged as collateral for this debt and the debt is serviced through cash flows generated by the consolidated operations
of Allied. Therefore in accordance with SEC Staff Accounting Bulletin, Topic 5-J, the debt, while held at Allied, is presented on BFIs
consolidated balance sheet, and related interest expense and debt issue costs are reflected in these financial statements.

Long-term debt at December 31, 2002 and 2001 consists of the following (in thousands):

|                                                                                                                                                                                                                                                   |  |      |           |      |  |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                                                                                                                                                                                                                                   |  | 2002 |           | 2001
|                                                                                                                                                                                                                                                   |  |      |           |     
|Revolving credit facility, weighted average rate of 5.97%                                                                                                                                                                                          |  | $    |          |      |  | $ |          | 
|Tranche A term loan facility, effective rate of 9.09% and 9.48%,
respectively                                                                                                                                                                      |  |      | 899,061   |      |  |   | 1,157,785 | 
|Tranche B term loan facility, effective rate of 8.38% and 9.37%,
respectively                                                                                                                                                                      |  |      | 670,941   |      |  |   | 864,018   | 
|Tranche C term loan facility, effective rate of 9.46% and 9.94%,
respectively                                                                                                                                                                      |  |      | 805,129   |      |  |   | 1,036,822 | 
|Senior subordinated notes, interest at 10.00%, effective rate of
10.18%, including unamortized premium of $5,578 and $6,425,
respectively                                                                                                          |  |      | 2,005,578 |      |  |   | 2,006,425 | 
|Senior
notes, interest at 8.88%, effective rate of 9.16%                                                                                                                                                                                           |  |      | 600,000   |      |  |   | 600,000   | 
|Senior notes, interest of 8.50%, effective rate of 8.77%                                                                                                                                                                                           |  |      | 750,000   |      |  |   | 750,000   | 
|Senior notes, interest at 9.25%, effective rate of 9.45%, including
unamortized premium of $2,396                                                                                                                                                  |  |      | 377,396   |      |  |   |          | 
|Debentures, interest at 7.40%, effective rate of 10.17%, net of
unamortized discount of $74,688 and $76,969, respectively                                                                                                                          |  |      | 285,312   |      |  |   | 283,031   | 
|Senior notes, interest at 6.10%, effective rate of 8.35%, net of
unamortized discount of $163 and $3,679, respectively                                                                                                                             |  |      | 156,526   |      |  |   | 153,010   | 
|Senior notes, interest at 6.38%, effective rate of 9.31%, net of
unamortized discount of $15,977 and $19,141, respectively                                                                                                                         |  |      | 145,223   |      |  |   | 142,059   | 
|Debentures, interest at 9.25%, effective rate of 9.90%, net of
unamortized discount of $4,107 and $4,331, respectively                                                                                                                             |  |      | 95,393    |      |  |   | 95,169    | 
|Senior notes, interest at 7.88%, effective rate of 8.97%, net of
unamortized discount of $1,376 and $1,999, respectively                                                                                                                           |  |      | 68,125    |      |  |   | 67,502    | 
|Solid waste revenue bond obligations, weighted average interest
rate of 4.74% and 5.00%, weighted average effective rate of
6.26% and 7.40%, respectively, net of unamortized discount of
$4,167 and $4,491, respectively                          |  |      | 238,343   |      |  |   | 236,821   | 
|Notes payable to banks, finance companies, and individuals,
interest rates of 7.16% and 6.40%, respectively,
and principal payable through 2021, secured by vehicles,
equipment, real estate, accounts receivable or stock of certain
subsidiaries |  |      | 4,907     |      |  |   | 4,904     | 
|                                                                                                                                                                                                                                                   |  |      |           |      |  |   |           | 
|                                                                                                                                                                                                                                                   |  |      | 7,101,934 |      |  |   | 7,397,546 | 
|Less: Current portion                                                                                                                                                                                                                              |  |      | 157,741   |      |  |   | 837       | 
|                                                                                                                                                                                                                                                   |  |      |           |      |  |   |           | 
|                                                                                                                                                                                                                                                   |  | $    | 6,944,193 |      |  | $ | 7,396,709 | 
|                                                                                                                                                                                                                                                   |  |      |           |      |  |   |           | 

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bank credit facility 

At December 31, 2002, we have a senior secured credit facility that provides a
$1.3 billion revolving credit facility, due July 2005 (the Revolving Credit
Facility) and $2.375 in funded amortizing senior secured term loans with
varying maturity dates through 2007 (the 1999 Credit Facility).

The 1999 Credit Facility bears interest, at (a) an Alternate Base Rate, or (b)
a Eurodollar Rate, both terms defined in the 1999 Credit Facility, plus, in
either case, an applicable margin and may be used for working capital and other
general corporate purposes, acquisitions, and the issuance of letters of
credit. Of the $1.3 billion available under the Revolving Credit Facility at
December 31, 2002, the entire amount may be used to support the issuance of
letters of credit. As of December 31, 2002, approximately $567.2 million was
available on the Revolving Credit Facility.

The 1999 Credit Facility requires prepayments upon completion of certain asset
sales and issuances of debt or equity securities. Proceeds from asset sales are
to be applied first to reduce borrowings under the tranche A, B and C term
loans on a pro rata basis. Required prepayments are to be made based on a
percentage of the net proceeds of any debt incurrence or equity issuance. In
addition, the 1999 Credit Facility requires prepayments based on excess cash
flows from operations, as defined.

Senior subordinated notes 

In July 1999, Allied Waste North America Inc. (Allied NA; a wholly owned
consolidated subsidiary of Allied) issued $2.0 billion of senior subordinated
notes (the 1999 Notes) that mature in 2009. Interest accrues on the 1999 Notes
at an interest rate of 10% per annum, payable semi-annually on May 1 and
November 1. The proceeds from the 1999 Notes were used as partial financing of
the acquisition of BFI.

Senior notes and debentures 

In November 2002, Allied NA issued $375 million of 9.25% senior notes due 2012
(the 2002 Senior Notes), in a private placement under Rule 144A of the
Securities Act of 1933. The senior notes were issued at a premium of $2.4
million. These senior notes have a no call provision until 2007. Interest is
payable semi-annually on March 1 and September 1. The net proceeds of $370.6
million from the sales of these notes was used to ratably repay portions of
tranches A, B and C of the term loans under the 1999 Credit Facility prior to
maturity. We will initiate the registration of these notes with the SEC under
the Securities Act of 1933 shortly after the filing of this Form 10-K.
Additionally, during 2002, we prepaid approximately $105.0 million of the
tranche A, B and C term loan prior to maturity with cash from operations.
These prepayments reduced amounts maturing in 2003 by approximately $104
million.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2001, Allied Waste NA issued $750
million of 8.50% senior notes, due 2008 and
$600 million 8.875% senior notes, due 2008
(together the 2001 Senior Notes). Interest on
the 2001 Senior Notes is payable semi-annually
on June 1 and September 1. In connection with
the issuance of the notes, the 1999 Credit
Facility was amended to change certain
financial covenants to provide us with greater
flexibility and to reduce the total revolving
line by $200 million, from $1.5 billion to $1.3
billion. This reduction in the revolver was
effective as of June 29, 2001.

The 6.10% senior notes, 6.375% senior notes and
9.25% debentures are not redeemable prior to
maturity and are not subject to any sinking
fund. In January 2003, the 6.10% Senior Notes
were repaid upon maturity with cash flow from
operations and borrowings on the Revolving
Credit Facility.

The 7.40% debentures are not subject to any
sinking fund and may be redeemed as a whole or
in part, at our option at any time. The
redemption price is equal to the greater of (i)
the principal amount of the debentures and (ii)
the present value of future principal and
interest payments discounted at a rate
specified under the terms of the indenture.

In December 1998, Allied NA issued an aggregate
of $1.7 billion of senior notes consisting of
$225 million 7.375% senior notes due 2004, $600
million 7.625% senior notes due 2006 and $875
million 7.875% senior notes due 2009 (together,
the 1998 Senior Notes).

In connection with the acquisition of BFI on
July 30, 1999, Allied assumed all of the
existing debt securities of BFI with the
exception of commercial paper that was paid off
in connection with the acquisition. The assumed
debt securities were recorded at their fair
market values as of the date of the acquisition
in accordance with Emerging Issues Task Force
Issue 98-1  Valuation of Debt Assumed in a
Purchase Business Combination(EITF 98-1). The
effect of revaluing the debt securities
resulted in an aggregate discount from the
historic face amount of $137.0 million. At
December 31, 2002, the remaining unamortized
net discount related to the debt securities of
the acquisition of the predecessor of BFI (Predecessor) was $100.5 million.

Future maturities of long term debt

Aggregate future scheduled maturities of
long-term debt as of December 31, 2002 are as
follows (in thousands):

|                |  |   |           |  
|--------------- |  | - | --------- | -
|2003            |  | $ | 157,741   |  
|2004            |  |   | 374,896   |  
|2005            |  |   | 595,107   |  
|2006            |  |   | 674,668   |  
|2007            |  |   | 805,325   |  
|Thereafter      |  |   | 4,586,701 |  
|                |  |   |           |  
|Gross Principal |  |   | 7,194,438 |  
|Discount, net   |  |   | (92,504   | )
|                |  |   |           |  
|Total Debt      |  | $ | 7,101,934 |  
|                |  |   |           |  

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value of debt and interest rate protection agreements

The fair value of BFIs debt and hedging instruments are subject to change as a result of potential changes in market
rates and prices. The table below provides information about BFIs long-term debt and interest rate hedges by aggregate
principal or notional amounts and weighted average interest rates for instruments that are sensitive to changes in
interest rates. The financial instruments are grouped by market risk exposure category (in thousands, except
percentages).

|                                       |                     |                                   |  |                   |           |                   |  |                   |           |                   |  |   |           |   |  |   |           |  
|-------------------------------------- | ------------------- | --------------------------------- |  | ----------------- | --------- | ----------------- |  | ----------------- | --------- | ----------------- |  | - | --------- | - |  | - | --------- | -
|                                       |                     |                                   |  | Balance at        |           | Fair Value at     |  | Balance at        |           | Fair Value at    
|                                       |                     |                                   |  | December 31, 2002 |           | December 31, 2002 |  | December 31, 2001 |           | December 31, 2001
|                                       |                     |                                   |  |                   |           |                   |  |                   |           |                  
|Long-Term Debt
Fixed Rate Debt:        |                     |                                   |  |                   |           |                   |  |                   |           |                   |  |   |           |   |  |  
|                                       |                     | Principal amount                  |  | $                 | 4,649,592 |                   |  | $                 | 4,608,110 |                   |  | $ | 4,262,327 |   |  | $ | 4,299,668 |  
|                                       |                     | Weighted average
interest rate    |  |                   | 9.11      | %                 |  |                   |           |                   |  |   | 9.13      | % |  |   |           |  
|                                       | Variable Rate Debt: |                                   |  |                   |           |                   |  |                   |           |                   |  |   |           |   |  |   |          
|                                       |                     | Principal amount                  |  | $                 | 2,452,342 |                   |  | $                 | 2,423,815 |                   |  | $ | 3,135,219 |   |  | $ | 3,089,215 |  
|                                       |                     | Weighted average
interest rate(1) |  |                   | 4.16      | %                 |  |                   |           |                   |  |   | 4.58      | % |  |   |           |  
|Interest Rate Swaps(2)
Non-Cancelable: |                     |                                   |  |                   |           |                   |  |                   |           |                   |  |   |           |   |  |  
|                                       |                     | Notional amount                   |  | $                 | 2,300,000 |                   |  | $                 | (125,746  | )                 |  | $ | 2,886,822 |   |  | $ | (140,693  | )
|                                       |                     | Weighted average
interest rate    |  |                   | 6.06      | %                 |  |                   |           |                   |  |   | 6.29      | % |  |   |           |  



|(1) |  | Reflects the rate in effect as of December 31, 2002 and 2001 before the effects of swaps and includes
all applicable margins. Actual future rates may vary.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | All interest rate swaps enable us to pay a fixed interest rate in exchange for receiving variable
interest rates at LIBOR. (See Note 6.)                   

Debt covenants

The 1998 Senior Notes, the 1999 Notes, the 2001 Senior Notes and the 2002 Senior Notes contain certain financial
covenants and restrictions, which may, in certain circumstances, limit our ability to complete acquisitions, pay
dividends, incur indebtedness, make investments and take certain other corporate actions. At December 31, 2002, we were
in compliance with all applicable covenants.

Guarantees 

Substantially all of our subsidiaries along with substantially all other subsidiaries of the Parent, are jointly and
severally liable for the obligations under the 1999 Notes, the 2001 Senior Notes, the 2002 Senior Notes and the 1999
Credit Facility through unconditional guarantees issued by current and future subsidiaries. At December 31, 2002, the
maximum potential amount of future payments under the guarantees is the outstanding amount of the debt identified above
and the amount for letters of credit issued under the credit facility. In accordance with FIN 45, the guarantees are not
recorded in our consolidated financial statements as they represent parent-subsidiary guarantees. We do not guarantee
any third party debt.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Collateral 

In addition, the 1999 Credit Facility, the 2001 Senior Notes, the 2002 Senior
Notes and certain of the debt assumed in connection with the acquisition of BFI
by Allied are secured by a pledge of the stock of substantially all of BFI and
Other Allied Collateral and a security interest in the assets of BFI, its
domestic subsidiaries and Other Allied Collateral. At December 31, 2002, on an
aggregate basis, the book value of all the assets that serve as collateral was
$8.8 billion.

6.     Derivative Instruments and Hedging Activities

Our policy is that at least 75% of our total debt to be fixed, either directly
or effectively through interest rate swap contracts. At December 31, 2002,
approximately 98% of BFIs debt was fixed, 72% directly, and 26% through
interest rate swap contracts. Our interest rate swap portfolio continues to
fix 98% of our variable rate interest payment obligation, protecting us from
cash flow variations arising from changes in short-term interest rates. At
December 31, 2002, the notional value of these interest rate swap contracts was
$2.3 billion with a weighted average of 15 months to maturity. These contracts
expire as follows: $650 million during 2003, $1.4 billion during 2004, $250
million during 2005.

Consistent with our risk management policy, we enter into floating-rate swap
agreements for the purpose of hedging variability of interest expense and
interest payments on our long-term variable rate bank debt. Our strategy is to
use floating to fixed interest rate swap agreements when such transactions will
serve to reduce our aggregate exposure. We enter into these contracts solely
for the purpose of reducing variable interest rate risk; positions are not
taken for trading purposes. Our risk management policy requires that we
evaluate the credit of our counterparties and that we monitor counterparty
exposure. At December 31, 2002, counterparties for 91% of our interest rate
swap portfolio were rated Aa3. The counterparty for the remaining 9% is rated
A1.

At December 31, 2002, a liability of $125.7 million is included in the
consolidated balance sheets in other long-term obligations reflecting the fair
market value of the entire interest rate swap portfolio on that date. The
liability will fluctuate with market interest rates but will reduce to zero
over the terms of each of our interest rate swap contracts. Approximately
$10.1 million of the liability at December 31, 2002 relates to contracts
maturing within 12 months. Fair value variations over the life of the interest
rate swap contracts arise from changes in forecasted interest rates and the
time value of money.

On December 31, 2001, we de-designated $1.5 billion of notional amount interest
rate swap contracts due to the possibility that future interest rate payments
on the underlying variable rate debt may cease prior to the expiration of the
related interest rate swap contracts. There were no de-designated interest
rate swap contracts prior to December 31, 2001. No additional interest rate
swap contracts were de-designated during 2002.

Designated interest rate swap contracts 

Our designated cash flow interest rate swap contracts are effective as hedges
of our variable rate debt. The notional amounts, indices, repricing dates, and
all other significant terms of the swap agreements are matched to the
provisions and terms of the variable rate debt being hedged achieving 100%
effectiveness. If significant terms do not match, we will assess any
ineffectiveness and any ineffectiveness is recorded in interest expense in our
statement of operations.

Changes in fair value of our interest rate swap contracts are reflected in
accumulated other comprehensive income (AOCI). At December 31, 2002,
approximately $63.4 million ($38.3 million, net of tax) is included in AOCI.

Expense or income related to swap settlements are recorded in interest expense
in earnings for the related variable rate debt over the term of the agreements.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

De-designated interest rate swap contracts 

Settlement payments and periodic changes in market values of our de-designated interest rate swap contracts
are recorded as a gain or loss on derivative contracts included in interest expense and other in our
statement of operations. We recorded $2.4 million of net gain related to changes in market values and $59.6
million of settlement costs during the year ended December 31, 2002, respectively.

When interest rate swap hedging relationships are de-designated or terminated, any accumulated gains or
losses in AOCI at the time of de-designation are isolated and amortized over the remaining original contract
term. For contracts de-designated, the total amount of loss in AOCI at December 31, 2001 was approximately
$65.2 million ($39.5 million, net of tax), and $29.8 million ($18.1 million, net of tax) remains in AOCI at
December 31, 2002. For the year ended December 31, 2002, we recorded $35.4 million of amortization expense
related to the accumulated losses in AOCI for interest rate swap contracts that were de-designated at
December 31, 2001. In 2003, we expect to record $23.1 million of amortization expense AOCI related to the
de-designation swap contracts. The amortization expense is recorded in interest expense.

7.     Comprehensive Income (Loss)

The components of the ending balances of
accumulated other comprehensive loss, as reflected in stockholders
deficit are shown as follows (in thousands):

|                                                                                  |                                      |   |                          |          |      |   |         |         |  
|--------------------------------------------------------------------------------- | ------------------------------------ | - | ------------------------ | -------- | ---- | - | ------- | ------- | -
|                                                                                  |                                      |   | Years Ended December 31,
|                                                                                  |                                      |   |                         
|                                                                                  |                                      |   | 2002                     |          | 2001
|                                                                                  |                                      |   |                          |          |     
|Minimum
pension liability adjustment, net of taxes $49,840                        |                                      | $ | (74,760                  | )        |      | $ |        |        
|Interest
rate swap contracts designated, unrealized loss, net of taxes $25,065    |                                      |   | (38,322                  | )        |      |   | (45,668 | )      
|Interest
rate swap contracts de-designated, unrealized loss, net of taxes
$11,686 |                                      |   | (18,124                  | )        |      |   | (39,452 | )      
|                                                                                  |                                      |   |                          |          |      |   |         |        
|                                                                                  | Accumulated other comprehensive loss |   | $                        | (131,206 | )    |   | $       | (85,120 | )
|                                                                                  |                                      |   |                          |          |      |   |         |        

8.     Landfill Accounting

The following discussion of landfill accounting pertains to our 2002 accounting practice. Effective January
1, 2003, we adopted SFAS 143 which will require changes to certain elements of these practices. Refer to
Note 1 for a discussion on the impact of the adoption on our landfill accounting.

We have a network of 49 owned or operated active landfills at December 31, 2002. The landfills have
operating lives ranging from 1 to over 150 years based on available capacity using current annual volumes.
The average life of our landfills is approximately 33 years.
     .

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We use a life-cycle accounting method for landfills and the related closure and
post-closure liabilities. This method applies the costs associated with
acquiring, developing, closing and monitoring the landfills over the associated
landfill capacity and associated consumption. On an annual basis, we update the
development cost estimates (which include the costs to develop the site as well
as the individual cell construction costs), closure and post-closure cost
estimates and future capacity estimates (sometimes referred to as airspace) for
each landfill. The cost estimates are prepared by our local management and
third-party engineers based on the applicable local, state and federal
regulations and site specific permit requirements. Future capacity estimates
are updated using aerial surveys of each landfill to estimate utilized disposal
capacity and remaining disposal capacity. These cost and capacity estimates are
reviewed and approved by senior operations management annually.

Landfill assets

We use the units of production method for purposes of calculating the
amortization rate at each landfill. This methodology divides the costs
associated with acquiring, permitting and developing the entire landfill by the
total remaining capacity of that landfill. The resulting per unit amortization
rate is applied to each unit disposed at the landfill and is recorded as
expense for that period. We expensed approximately $52.5 million, $48.7 million
and $44.5 million related to landfill amortization during the years ended
December 31, 2002, 2001 and 2000, respectively.

Costs associated with developing the landfill include direct costs such as
excavation, liners, leachate collection systems, engineering and legal fees,
and capitalized interest. We classify this total disposal capacity as either
permitted (having received the final permit from the governing authorities) or
probable expansion. Probable expansion disposal capacity has not yet received
final approval from the regulatory agencies, but we have determined that
certain critical criteria have been met and the successful completion of the
expansion is highly probable. Our internal requirements to classify disposal
capacity as probable expansion are as follows:



| | 1. |  | We have control of and access to the land where the expansion
permit is being sought.                                                                                                
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. |  | All geologic and other technical siting criteria for a landfill
have been met, or a variance from such requirements has been
received (or can reasonably be expected to be achieved).
| | 3. |  | The political process has been assessed and there are no
identified impediments that cannot be resolved.                                                                             
| | 4. |  | We are actively pursuing the expansion permit and have an
expectation that the final local, state and federal permits will be
received within the next five years.                   
| | 5. |  | Senior operations management approval has been obtained.                                                                                                                             

Upon successfully meeting the preceding criteria, the costs associated with
developing, constructing, closing and monitoring the total additional future
disposal capacity are considered in the life-cycle cost of the landfill and
reflected in the calculation of the amortization and closure and post-closure
rates.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allied and its engineering and legal consultants continually monitor the progress of obtaining local, state and federal
approval for each of its expansion permits. If it is determined that the expansion no longer meets our criteria, the disposal
capacity is removed from our total available disposal capacity, the costs to develop that disposal capacity and the
associated closure and post-closure costs are removed from the landfill amortization base, and rates are adjusted
prospectively. In addition, any value assigned to probable expansion capacity would be written-off to expense during the
period in which it is determined that the criteria are no longer met.

Closure and post-closure

As individual areas within each landfill reach capacity, we are required to cap and close the areas in accordance with the
landfill site permit. Generally, closure requirements include the application of compacted clay, geosynthetic liners and
vegetative soil barriers in addition to the construction of drainage channels and methane gas collection systems among other
closure activities.

After the entire landfill site has reached capacity and is closed, we are required to maintain and monitor the site for a
post-closure period, which may extend for 30 years. Post-closure requirements generally include maintenance of the site and
monitoring the methane gas collection systems and groundwater systems, among other post-closure activities. Estimated costs
for such closure and post-closure as required under Subtitle D regulations are compiled and updated annually for each
landfill by local and regional company engineers. In addition, on an annual basis, senior management performs a review of
the overall cost estimates. The future estimated closure and post-closure costs are increased at an inflation rate of 2.5%,
and discounted at a risk-free capital rate of 7.0%, per annum, based on the timing of the amounts to be expended. The
following table is a summary of the closure and post-closure costs (in thousands):

|                                                                       |                                                                              |  |                   |           |                   |  |   |         | 
|---------------------------------------------------------------------- | ---------------------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | - | ------- | 
|                                                                       |                                                                              |  | December 31, 2002 |           | December 31, 2001
|                                                                       |                                                                              |  |                   |           |                  
|Discounted Closure and Post-Closure Liability Recorded:                |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Current Portion                                                              |  | $                 | 58,200    |                   |  | $ | 59,105  | 
|                                                                       | Non-Current Portion                                                          |  |                   | 344,579   |                   |  |   | 364,816 | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Total                                                                        |  | $                 | 402,779   |                   |  | $ | 423,921 | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |         | 
|Estimated Remaining Closure and Post-Closure Costs to be
Expended (1): |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | 2003                                                                         |  | $                 | 58,200    |                   |  |   |         | 
|                                                                       | 2004                                                                         |  |                   | 45,565    |                   |  |   |         | 
|                                                                       | 2005                                                                         |  |                   | 48,067    |                   |  |   |         | 
|                                                                       | 2006                                                                         |  |                   | 48,567    |                   |  |   |         | 
|                                                                       | 2007                                                                         |  |                   | 53,063    |                   |  |   |         | 
|                                                                       | Thereafter                                                                   |  |                   | 1,307,999 |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Remaining Undiscounted Closure and Post-Closure Costs
to be Expended         |  | $                 | 1,561,461 |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        
|                                                                       | Total remaining Discounted Closure and Post-Closure Costs
to be Expended (2) |  | $                 | 586,073   |                   |  |   |         | 
|                                                                       |                                                                              |  |                   |           |                   |  |   |        



|(1) |  | These amounts consider the effect of the adoption of SFAS 143 as of January 1, 2003 and the
reflected change in classification of methane gas collection system installation from a
closure cost to landfill development cost.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The future estimated closure and post-closure costs are discounted at a credit-adjusted
risk-free rate of 9.0%, per annum, based on the timing of the amounts to be expended.                                                 

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our periodic closure and post-closure expense has two components. The first
component is the site specific per unit closure and post-closure expense. The
per unit rate is derived by dividing the estimated total remaining discounted
closure and post-closure costs by the remaining disposal capacity at each
landfill (consistent with the disposal capacity used to calculate landfill
amortization rates). We use the resulting site-specific rates to record expense
during a given period based upon the consumption of disposal capacity during
that period.

The second component is the accretion expense necessary to increase the accrued
closure and post-closure reserve balance to its future, or undiscounted, value.
To accomplish this, we accrete our closure and post-closure accrual balance
using the risk-free capital rate and charge this accretion as an operating
expense in that period.

Environmental costs -

We engage independent environmental consulting firms to assist us in conducting
environmental assessments of existing landfills or other properties, and in
connection with companies acquired from third parties.

The ultimate amounts for environmental liabilities cannot be precisely
determined and estimates of such liabilities made by us, after consultation
with our independent environmental engineers and legal counsel, require
assumptions about future events due to a number of uncertainties including the
extent of the contamination, the appropriate remedy, the financial viability of
other potentially responsible parties and the final apportionment of
responsibility among the potentially responsible parties. Where we have
concluded that our estimated share of potential liabilities is probable, a
provision has been made in the consolidated financial statements.

Since the ultimate outcome of these matters may differ from the estimates used
in our assessment to date, the recorded liabilities are periodically evaluated,
as additional information becomes available to ascertain whether the accrued
liabilities are adequate. We have determined that the recorded liability for
environmental matters as of December 31, 2002 and 2001 of approximately $252.2
million and $300.9 million, respectively, represents the most probable outcome
of these contingent matters. We do not reduce our estimated obligations for
proceeds from other potentially responsible parties or insurance companies. If
receipt is probable, proceeds are recorded as an offset to environmental
expense in operating income. There were no significant recovery receivables
outstanding as of December 31, 2002 or 2001. We do not expect that adjustments
to estimates, which are reasonably possible in the near term and that may
result in changes to recorded amounts, will have a material effect on our
consolidated liquidity, financial position or results of operations. However,
we believe that it is reasonably possible the ultimate outcome of environmental
matters, excluding closure and post-closure could result in approximately $20
million of additional liability.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.     Employee Benefit Plans

Defined Benefit Pension Plans

As of December 31, 2002, we have one defined benefit retirement plan. This
plan covers certain BFI employees in the United States, including some
employees subject to collective bargaining agreements.

During 2002, the BFI Retirement Plan (BFI Pension Plan) and the Pension Plan of
San Mateo County Scavenger Company and Affiliated Divisions of Browning-Ferris
Industries of California, Inc. (San Mateo Pension Plan) were merged into one
plan. However, benefits continue to be determined under each of the two
separate BFI structures. The BFI Pension Plan was amended on July 30, 1999 to
freeze future credited service, but interest credits continue to accrue.
Certain union participants continue to receive 2% annual service credits in
addition to interest credits through the duration of the current collective
bargaining agreements. The benefits not frozen for this plan are based on years
of service and the employees compensation.

The San Mateo Pension Plan covers certain BFI employees of this location.
Benefits are based on the employees years of service and compensation using
the average of earnings over the highest five consecutive calendar years out of
the last fifteen years of service.

Our general funding policy for each pension plan is to make annual
contributions to the plans as determined to be required by the plans actuary.
No contributions were required during 2002, 2001 and 2000. No contributions are
anticipated for 2003. The plan paid approximately $13 million, $15 million and
$20 million in benefits during December 31, 2002, 2001 and 2000, respectively.

At our measurement date of September 30, 2002, the accumulated benefit
obligation exceeded the market value of the underlying pension assets due to an
overall decline in the fair value of the assets and an increase in our discount
rate assumption. As a result, we were required under SFAS 87,
Employers accounting for Pensions, to record an
accrued benefit liability of $16.5 million. This non-cash adjustment resulted
in an after tax charge to Other Comprehensive Income of $74.8 million,
reflected as a reduction to shareholder's deficit. This adjustment did not
impact net income.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An actuarial valuation report was prepared as of September 30, 2002 and 2001 and used, as permitted by SFAS 132, Employers Disclosures about Pensions and Other
Postretirement Benefits(SFAS 132), for disclosures included in the tables below (in thousands, except percentages):

The following table provides a reconciliation of the changes in the plans benefit obligations and the fair value of plan assets for the 12 month period ended
September 30, 2002 and 2001, and a statement of the funded status for both periods then ended.

|                                                 |  |      |         |      |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | ---- |  | - | ------- | -
|                                                 |  | 2002 |         | 2001
|                                                 |  |      |         |     
|Benefit obligation at beginning of period        |  | $    | 269,589 |      |  | $ | 236,973 |  
|Service cost                                     |  |      | 938     |      |  |   | 771     |  
|Interest cost                                    |  |      | 19,289  |      |  |   | 17,697  |  
|Amendments                                       |  |      | 153     |      |  |   |        |  
|Actuarial loss                                   |  |      | 22,262  |      |  |   | 29,573  |  
|Benefits paid                                    |  |      | (13,048 | )    |  |   | (15,425 | )
|                                                 |  |      |         |      |  |   |         |  
|Benefit obligation at end of period              |  | $    | 299,183 |      |  | $ | 269,589 |  
|                                                 |  |      |         |      |  |   |         |  
|Fair value of plan assets at beginning of period |  | $    | 305,424 |      |  | $ | 354,207 |  
|Actual return on plan assets                     |  |      | (14,733 | )    |  |   | (33,358 | )
|Benefits paid                                    |  |      | (13,048 | )    |  |   | (15,425 | )
|                                                 |  |      |         |      |  |   |         |  
|Fair value of plan assets at end of period       |  | $    | 277,643 |      |  | $ | 305,424 |  
|                                                 |  |      |         |      |  |   |         |  
|Funded Status                                    |  | $    | (21,540 | )    |  | $ | 35,835  |  
|Unrecognized net actuarial loss                  |  |      | 129,630 |      |  |   | 64,225  |  
|Unrecognized prior service cost                  |  |      | 144     |      |  |   |        |  
|                                                 |  |      |         |      |  |   |         |  
|Prepaid pension asset                            |  | $    | 108,234 |      |  | $ | 100,060 |  
|                                                 |  |      |         |      |  |   |         |  

The following table provides the amounts recognized in the balance sheets as of December 31:

|                                                        |  |      |          |      |  |   |         | 
|------------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------- | 
|                                                        |  | 2002 |          | 2001
|                                                        |  |      |          |     
|Prepaid pension asset                                   |  | $    | 108,234  |      |  | $ | 100,060 | 
|Accrued benefit liability                               |  |      | (124,743 | )    |  |   |        | 
|                                                        |  |      |          |      |  |   |         | 
|Net pension liability (1)                               |  |      | (16,509  | )    |  |   |        | 
|Intangible assets                                       |  |      | 144      |      |  |   |        | 
|Accumulated other comprehensive loss
before tax benefit |  |      | 124,599  |      |  |   |        | 
|                                                        |  |      |          |      |  |   |         | 
|Net amount recognized                                   |  | $    | 108,234  |      |  | $ | 100,060 | 
|                                                        |  |      |          |      |  |   |         | 



|(1) |  | Amount is recorded in other long term obligations
|--- |  | -------------------------------------------------

The following table provides the components of net periodic benefit cost for the years ended December 31:

|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                     |  | 2002 |         | 2001 |  | 2000
|                                     |  |      |         |      |  |     
|Service cost                         |  | $    | 938     |      |  | $    | 771     |   |  | $ | 1,094   |  
|Interest cost                        |  |      | 19,289  |      |  |      | 17,697  |   |  |   | 17,965  |  
|Expected return on plan assets       |  |      | (30,391 | )    |  |      | (35,422 | ) |  |   | (34,630 | )
|Recognized net actuarial (gain) loss |  |      | 1,980   |      |  |      | (205    | ) |  |   | (1,398  | )
|Amortization of prior service cost   |  |      | 9       |      |  |      |        |   |  |   |        |  
|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Net periodic benefit cost            |  | $    | (8,175  | )    |  | $    | (17,159 | ) |  | $ | (16,969 | )
|                                     |  |      |         |      |  |      |         |   |  |   |         |  

The assumptions used in the measurement of our benefit obligations are shown in the following table (weighted average assumptions as of September 30):

|                                      |  |      |      |      |  |      |      |   |  |  |       |  
|------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | -
|                                      |  | 2002 |      | 2001 |  | 2000
|                                      |  |      |      |      |  |     
|Discount rate                         |  |      | 6.75 | %    |  |      | 7.25 | % |  |  | 7.75  | %
|Expected return on plan assets        |  |      | 9.50 | %    |  |      | 9.75 | % |  |  | 10.25 | %
|Average rate of compensation increase |  |      | 4.00 | %    |  |      | 4.00 | % |  |  | 4.00  | %

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

401k Plan 

Allied sponsors the Allied Waste Industries, Inc. 401(k) Plan (401(k) Plan) a defined
contribution plan, which is available to all eligible employees except those represented by
collective bargaining agreements. Eligible employees may contribute
up to 25% of their annual compensation on a pre-tax basis. Participants contributions
are subject to certain restrictions as set forth in the Internal Revenue Code. Allied matches
in cash 50% of employee contributions, up to the first 5% of the employees compensation which
is deferred. Participants contributions vest immediately and the employer contributions vest
in increments of 20% based upon years of service. BFIs matching contributions totaled
$2.9 million, $2.3 million, and $4.4 million for fiscal years 2002, 2001 and 2000,
respectively.

Effective July 30, 1999, in connection with the acquisition of the Predecessor, Allied assumed
the BFI Employee Stock Ownership and Savings Plan (BFI 401(k) ). The Board of Directors of
Allied approved the merger of the BFI 401(k) plan into the Allied 401(k) plan, effective
January 1, 2001.

10.     Stock Option
Plans

Certain employees of BFI are eligible to
participate in the stock option plans provided by the Parent. Below
is a description of the plans provided by the Parent.

The 1991 Incentive Stock Plan (1991 Plan), the 1993 Incentive Stock Plan (1993 Plan)
and the 1994 Incentive Stock Plan (1994 Plan, collectively the Plans) provide for the
grant of non-qualified stock options, incentive stock options, shares of restricted
stock, shares of phantom stock and stock bonuses. The 1991 Plan limits the maximum
number of shares that may be granted to not more than 10.5% of the number of fully
diluted shares of common stock on the date of grant of an award. The 1991 plan also
limits awards in the form of restricted stock, stock bonuses, performance awards and
phantom stock to not more than 25% of the aggregate shares available to be awarded or
granted under the plan and limits the maximum number of options granted to any
employee under the 1991 Plan to 500,000 per year. An additional maximum number of
shares of 500,000 and 2,000,000 common shares may be granted under the 1993 Plan and
the 1994 Plan, respectively. The Compensation Committee of the Board of Directors
(the Compensation Committee) of the Parent generally determines the exercise price, term and other
conditions applicable to each option granted. Options granted under the Plans
typically vest over 3 years and expire ten years from the grant date.

A summary of the status of the
approximate portion of Allieds stock option plans that relates
to BFI at December 31, 2002, 2001 and 2000 and for the years then
ended is presented in the table and narrative below:

|                                       |  |                         |           |       |  |          |       |       |  |         |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|-------------------------------------- |  | ----------------------- | --------- | ----- |  | -------- | ----- | ----- |  | ------- | ------- | -------- |  | - | ----- |  |  | -------- | ------- | - |  | - | ----- | 
|                                       |  | Year Ended December 31,
|                                       |  |                        
|                                       |  | 2002                    |           | 2001  |  | 2000    
|                                       |  |                         |           |       |  |         
|                                       |  |                         |           |       |  | Weighted |       |       |  |         |         | Weighted |  |   |       |  |  | Weighted
|                                       |  |                         |           |       |  | Average  |       |       |  |         |         | Average  |  |   |       |  |  | Average 
|                                       |  |                         |           |       |  | Exercise |       |       |  |         |         | Exercise |  |   |       |  |  | Exercise
|                                       |  | Options                 |           | Price |  | Options  |       | Price |  | Options |         | Price   
|                                       |  |                         |           |       |  |          |       |       |  |         |         |         
|Options outstanding,
beginning of year |  |                         | 768,281   |       |  | $        | 12.77 |       |  |         | 409,896 |          |  | $ | 12.82 |  |  |          | 146,325 |   |  | $ | 13.37 | 
|Options granted                        |  |                         | 634,689   |       |  |          | 10.50 |       |  |         | 381,973 |          |  |   | 13.41 |  |  |          | 299,145 |   |  |   | 11.65 | 
|Options exercised                      |  |                         | (743      | )     |  |          | 8.40  |       |  |         | (20,598 | )        |  |   | 9.52  |  |  |          | (32,340 | ) |  |   | 5.90  | 
|Options forfeited
or expired           |  |                         | (7,425    | )     |  |          | 14.88 |       |  |         | (2,990  | )        |  |   | 14.45 |  |  |          | (3,234  | ) |  |   | 17.57 | 
|                                       |  |                         |           |       |  |          |       |       |  |         |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|Options outstanding,
end of year       |  |                         | 1,394,802 |       |  |          | 12.20 |       |  |         | 768,281 |          |  |   | 12.77 |  |  |          | 409,896 |   |  |   | 12.82 | 
|                                       |  |                         |           |       |  |          |       |       |  |         |         |          |  |   |       |  |  |          |         |   |  |   |       | 
|Options exercisable,
end of year       |  |                         | 433,488   |       |  |          | 14.17 |       |  |         | 171,960 |          |  |   | 14.57 |  |  |          | 41,513  |   |  |   | 14.44 | 
|                                       |  |                         |           |       |  |          |       |       |  |         |         |          |  |   |       |  |  |          |         |   |  |   |       | 

The approximate weighted average fair
value of options granted were $5.54, $7.28, and $6.60 for the three years ended December 31,
2002. The Parent accounts for stock-based compensation plans under
APB 25, under which no compensation expense is
recognized, as all options have been granted with an exercise price equal to the fair value of our common stock upon the
date of grant. Therefore, there has been no allocation of
compensation expense to BFI related to options granted by the
Parent.

The following tables summarize information about stock options outstanding at December 31, 2002, which
are fully vested, partially vested and non-vested:

Fully Vested:

|                                    |  |                    |        |                |  |                  |  |                  |       |  |  | 
|----------------------------------- |  | ------------------ | ------ | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding and Exercisable |  |                   
|                                    |  |                    |       
|                                    |  |                    |        |                |  | Weighted Average |  | Weighted Average
|Range of Exercise Prices            |  | Number Outstanding |        | Remaining Life |  | Exercise Price  
|                                    |  |                    |        |                |  |                 
|$7.31 - $8.00                       |  |                    | 64,032 |                |  | 7 years          |  | $                | 7.33  | 
|$12.92 - $15.00                     |  |                    | 12,210 |                |  | 1 year           |  | $                | 13.49 | 

Partially Vested:

|                         |  |                    |         |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | ------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding      |  |                   
|                         |  |                    |        
|                         |  |                    |         |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |         | Remaining Life |  | Exercise Price  
|                         |  |                    |         |                |  |                 
|$8.00
- $12.92           |  |                    | 361,963 |                |  | 9 years          |  | $                | 12.65 | 
|$12.94
- $16.92          |  |                    | 342,647 |                |  | 8 years          |  | $                | 13.67 | 

|                         |  |                    |         |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | ------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Exercisable      |  |                   
|                         |  |                    |        
|                         |  |                    |         |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |         | Remaining Life |  | Exercise Price  
|                         |  |                    |         |                |  |                 
|$8.00
- $12.92           |  |                    | 126,476 |                |  | 9 years          |  | $                | 12.43 | 
|$12.94
- $16.92          |  |                    | 230,770 |                |  | 8 years          |  | $                | 13.67 | 

Non Vested:

|                         |  |                    |         |                |  |                  |  |                  |       |  |  | 
|------------------------ |  | ------------------ | ------- | -------------- |  | ---------------- |  | ---------------- | ----- |  |  | 
|Options Outstanding      |  |                   
|                         |  |                    |        
|                         |  |                    |         |                |  | Weighted Average |  | Weighted Average |      
|Range of Exercise Prices |  | Number Outstanding |         | Remaining Life |  | Exercise Price  
|                         |  |                    |         |                |  |                 
|$10.32 - $11.00          |  |                    | 512,678 |                |  | 10 years         |  | $                | 10.32 | 
|$11.57 - $13.55          |  |                    | 101,272 |                |  | 10 years         |  | $                | 12.44 | 

11.     Stockholders
Deficit

Our authorized, issued and outstanding shares of common stock are as follows (in thousands,
except per share data):

|                                  |  |            |       |      |  |                        |       |  |  |  |       | 
|--------------------------------- |  | ---------- | ----- | ---- |  | ---------------------- | ----- |  |  |  | ----- | 
|                                  |  |            |       |      |  | Issued and Outstanding
|                                  |  |            |       |      |  | at December 31,       
|                                  |  |            |       |      |  |                       
|                                  |  | Authorized |       |      |  |                        |       |  |  | 
|                                  |  | Shares     |       | 2002 |  | 2001                  
|                                  |  |            |       |      |  |                       
|Common stock, $0.16 2/3 par value |  |            | 1,000 |      |  |                        | 1,000 |  |  |  | 1,000 | 

12.     Income Taxes

Operating results of BFI are included in the consolidated federal income tax return of Allied
for the periods ended December 31, 2002, 2001 and 2000. For purposes of determining state
income tax liabilities, we file either a consolidated or separate return based on the filing
regulations required by each state.

The allocation of consolidated taxes of Allied to BFI is determined as if we prepared a
separate tax return, in accordance with the provisions of the SFAS 109, Accounting for Income
Taxes. The income tax provision determined for BFI is reflected in due from parent on BFIs
Consolidated Balance Sheets. Deferred tax assets and liabilities (including any valuation
allowance) are recognized, realized and maintained on a corporate-wide basis by Allied. These balances
include items established relating to the acquisition of BFI that were based on certain
assumptions that could possibly change based on the ultimate outcome of certain tax matters.
As these tax accounts were established in purchase accounting, any future changes relating to
these amounts will result in balance sheet reclassifications, which may include an adjustment
to the goodwill relating to the acquisition of the predecessor entity. Allieds valuation
allowance at December 31, 2002 includes approximately $51 million related to the acquisition
of BFI, the subsequent reduction of which would result in an adjustment to goodwill. BFI was
allocated a portion of Allieds valuation allowance based on specific identification to its
deferred tax assets.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of the income tax provision (benefit) consist of the following (in thousands):

|                      |  |                                 |          |      |  |      |          |   |  |   |          |  
|--------------------- |  | ------------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                      |  | For the Year Ended December 31,
|                      |  |                                
|                      |  | 2002                            |          | 2001 |  | 2000
|                      |  |                                 |          |      |  |     
|Current tax provision |  | $                               | 3,118    |      |  | $    | 24,204   |   |  | $ | 20,936   |  
|Deferred provision    |  |                                 | (104,168 | )    |  |      | (104,088 | ) |  |   | (105,737 | )
|                      |  |                                 |          |      |  |      |          |   |  |   |          |  
|Total                 |  | $                               | (101,050 | )    |  | $    | (79,884  | ) |  | $ | (84,801  | )
|                      |  |                                 |          |      |  |      |          |   |  |   |          |  

The reconciliation of our income tax provision (benefit) at the federal statutory tax
rate to our effective tax rate is as follows (in thousands):

|                                                                    |  |                                 |          |      |  |      |          |   |  |   |          |  
|------------------------------------------------------------------- |  | ------------------------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                    |  | For the Year Ended December 31,
|                                                                    |  |                                
|                                                                    |  | 2002                            |          | 2001 |  | 2000
|                                                                    |  |                                 |          |      |  |     
|Federal statutory tax rate                                          |  | $                               | (102,112 | )    |  | $    | (111,403 | ) |  | $ | (108,723 | )
|Consolidated state taxes,
net of federal benefit                    |  |                                 | (11,350  | )    |  |      | (9,100   | ) |  |   | (9,660   | )
|Amortization of goodwill                                            |  |                                 |         |      |  |      | 31,979   |   |  |   | 32,040   |  
|Non-deductible write-off of
goodwill and business
combination costs |  |                                 | 2,100    |      |  |      |         |   |  |   |         |  
|Effect of foreign operations                                        |  |                                 | 2,523    |      |  |      | 2,975    |   |  |   | 1,050    |  
|Other reserves                                                      |  |                                 | 8,685    |      |  |      |         |   |  |   |         |  
|Other permanent
differences                                         |  |                                 | (896     | )    |  |      | 5,665    |   |  |   | 492      |  
|                                                                    |  |                                 |          |      |  |      |          |   |  |   |          |  
|Effective tax rate                                                  |  | $                               | (101,050 | )    |  | $    | (79,884  | ) |  | $ | (84,801  | )
|                                                                    |  |                                 |          |      |  |      |          |   |  |   |          |  

The tax benefit for the extraordinary items were based on our ordinary combined federal and state rates of 40% in 2002 and 39.5% in 2001 and 2000.

|                                                                                                                            |  |              |          |      |  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | ---- |  | - | -------- | -
|                                                                                                                            |  | December 31,
|                                                                                                                            |  |             
|                                                                                                                            |  | 2002         |          | 2001
|                                                                                                                            |  |              |          |     
|Cumulative Tax-Effected Temporary Differences:                                                                              |  |              |          |      |  |   |          |  
|Relating primarily to property consisting of landfill and fixed assets
and contingencies related to other basis differences |  | $            | (624,737 | )    |  | $ | (526,891 | )
|Environmental, closure and post-closure reserves                                                                            |  |              | 279,267  |      |  |   | 282,432  |  
|Other reserves                                                                                                              |  |              | 54,762   |      |  |   | 53,646   |  
|                                                                                                                            |  |              |          |      |  |   |          |  
|Total                                                                                                                       |  | $            | (290,708 | )    |  | $ | (190,813 | )
|                                                                                                                            |  |              |          |      |  |   |          |  
|Tax-effected capital loss, foreign tax credit and state
net operating loss carryforwards                                    |  | $            | 64,841   |      |  | $ | 92,510   |  
|Valuation allowance                                                                                                         |  |              | (51,183  | )    |  |   | (75,331  | )
|                                                                                                                            |  |              |          |      |  |   |          |  
|Net carryforwards                                                                                                           |  | $            | 13,658   |      |  | $ | 17,179   |  
|                                                                                                                            |  |              |          |      |  |   |          |  

The interest expense reflected in BFIs Consolidated Statement of Operations relates to debt that is held at Allied and reflected in the BFI Balance Sheets for separate
financial reporting purposes (See Note 5). BFIs federal net operating
loss carryovers arising from such interest expense have been
recognized in the deferred tax provision and realized through the
Allied intercompany account as Allied on a consolidated return basis
has recognized all such losses as recoverable.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes have not been provided as of December 31, 2002 and 2001
on approximately $36 million and $28 million, respectively, of undistributed
earnings of Puerto Rican affiliates, which are considered to be permanently
reinvested. A determination of the U.S. income and foreign withholding taxes,
if these earnings were remitted as dividends, is not practicable.

We are currently under examination by various state and federal taxing
authorities for certain tax years. A federal income tax audit for BFIs tax
years ended September 30, 1996 through July 30, 1999 is completed with the
exception of the matter discussed below.

During 2002, we received notification from the IRS disallowing all of a
capital loss included in BFIs July 30, 1999 tax return. If such disallowance
is upheld, we estimate it could have a federal and state income tax effect of
up to $310 million plus accrued interest through December 31, 2002 of
approximately $40 million. We also received notification from the IRS
assessing a penalty of between 20% and 40% of the additional income tax
resulting from the disallowance. Because of several meritorious defenses, we
believe the successful assertion of penalties is remote.

In October 2002, the IRS issued a revenue procedure outlining two resolution
alternatives related to this matter. Taxpayers could elect to participate
under this revenue procedure if certain eligibility requirements were met. We
decided not to participate under this IRS issuance. We continue to believe our
position is well supported and we will vigorously contest the disallowance.
The resolution of this matter may entail efforts including administrative
appeals and litigation which could extend over several years. An unfavorable
result could require future cash expenditures. The amount has been fully reserved on
Allieds consolidated balance sheet.

13.     Commitments and Contingencies

Litigations 

We are subject to extensive and evolving laws and regulations and have
implemented our own environmental safeguards to respond to regulatory
requirements. In the normal course of conducting our operations, we may become
involved in certain legal and administrative proceedings. Some of these
actions may result in fines, penalties or judgments against us, which may have
an impact on earnings for a particular period. We accrue for litigation and
regulatory compliance contingencies when such costs are probable and can
reasonably be estimable. We expect that matters in process at December 31,
2002, which have not been accrued in the Consolidated Balance Sheets, will not
have a material adverse effect on our consolidated liquidity, financial
position or results from operations.

Royalties 

In connection with certain acquisitions, we have entered into agreements to pay
royalties based on waste tonnage disposed at specified landfills. The payments
are generally payable quarterly and amounts earned, but not paid, are accrued
in the accompanying Consolidated Balance Sheets.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease agreements 

We have operating lease agreements for service
facilities, office space and equipment. Future
minimum payments under non-cancelable operating
leases with terms in excess of one year are as
follows (in thousands):

|           |  |                   |        | 
|---------- |  | ----------------- | ------ | 
|           |  | December 31, 2002
|           |  |                  
|2003       |  | $                 | 3,974  | 
|2004       |  |                   | 3,514  | 
|2005       |  |                   | 2,814  | 
|2006       |  |                   | 2,066  | 
|2007       |  |                   | 1,796  | 
|Thereafter |  |                   | 11,675 | 

Rental expense under such operating leases was
approximately $6.6 million, $5.4 million and
$4.3 million, for the years ended December 31,
2002, 2001 and 2000, respectively.

Financial assurances 

We are required to provide $1.4 billion in
financial assurances to governmental agencies
under applicable environmental regulations
relating to our landfill operations and
collection contracts. We satisfy the financial
assurance requirements by providing performance
bonds, letters of credit, insurance policies or
trust deposits to secure our obligations as they
relate to landfill closure and post-closure
costs, performance under certain collection,
landfill and transfer station contracts.
Additionally, we are required to provide
financial assurances for our risk and casualty
insurance and collateral required for certain
performance obligations. We have not
experienced difficulty in obtaining the
financial assurances that we need. However, we
cannot make any assurances that the level of
financial assurances that we are required to
provide will be available in the future.

These financial instruments are issued in the
normal course of business. They are not debt
and, therefore, are not reflected in the
accompanying Consolidated Balance Sheets. The
underlying obligations of the financial
assurance instruments would be valued and
recorded in the Consolidated Balance Sheets
based on the likelihood of performance being
required. We do not expect this to occur.

Guarantees 

We enter into contracts in the normal course of
business that include indemnification clauses.
Indemnifications relating to known liabilities
are recorded in the Consolidated Financial
Statements based on our best estimate of
required future payments. We are not able to
determine potential future payments for
indemnifications that relate to contingent
events or occurrences, such as the imposition of
additional taxes due to a change in the tax law
or adverse interpretation of the tax law, and
indemnifications made in divestiture agreements
where we indemnify the buyer for liabilities
that may become known in the future but that
relates to our activities prior to the
divestiture.

We have entered into agreements to guarantee the
market value of certain property
that are adjacent to landfills. These
agreements have varying terms over varying periods. Liabilities associated with these guarantees
are recorded in the Consolidated Financial
Statements in accordance with SFAS No. 5, Accounting for
Contingencies.

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BROWNING-FERRIS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.     Related Party Transactions

All treasury functions are maintained at the
Parent. The amount due from parent
represents proceeds Allied received from the issuance of Series A Senior
Convertible Preferred Stock and certain debt issued in connection with the
financing of the BFI acquisition, in addition to the net advances to Parent in
excess of obligations paid by the parent on behalf of BFI.

We are charged for management, financial and other administrative services
provided during the year by Allied, including allocations for overhead. Related
charges for the years ended December 31, 2002, 2001 and 2000 were approximately
$27.0 million, $18.3 million and $31.0 million, respectively, recorded in
selling, general and administrative expenses. In addition, our Parent
maintains insurance coverage for us and we were charged for the cost of
insurance $92.4 million, $107.2 million and $68.4 million during 2002, 2001 and
2000, respectively.

In addition, we provide services to, and receive services from, our Parent and
subsidiaries of our Parent, which are recorded in our Consolidated Statement of
Operations. Related revenues and expenses for the years ended December 31,
2002, 2001 and 2000 were approximately $229.4 million,
$181.5 million and $175.1 million, respectively, recorded in revenues,
and $51.4 million, $48.9 million
and $41.7 million, respectively, recorded in cost of operations.

In 2001, we entered into lease agreements with
certain subsidiaries of Allied for
equipment and vehicles. The associated lease expense is included in cost of
operations for 2002 and 2001 of approximately $11.0 million and $3.0 million.

Financial Statement Schedule -

Schedule II  Valuation and Qualifying Accounts

|                                |  |          |        |         |  |            |       |             |  |          |        |   |  |         |         |   |  |   |        | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ----- | ----------- |  | -------- | ------ | - |  | ------- | ------- | - |  | - | ------ | 
|                                |  | Balance  |        | Charges |  |            |       |             |  |          |        |   |  | Balance
|                                |  | at       |        | to      |  | Other      |       | Write-offs/ |  | at      
|                                |  | 12/31/99 |        | Expense |  | Charges(1) |       | Payments    |  | 12/31/00
|                                |  |          |        |         |  |            |       |             |  |         
|Allowance for doubtful
accounts |  | $        | 30,490 |         |  | $          | 4,300 |             |  | $        | (4,359 | ) |  | $       | (8,814  | ) |  | $ | 21,617 | 
|Severance and termination
costs |  |          | 30,200 |         |  |            | 2,002 |             |  |          |       |   |  |         | (27,820 | ) |  |   | 4,382  | 
|Restructuring costs             |  |          |       |         |  |            | 6,074 |             |  |          |       |   |  |         | (126    | ) |  |   | 5,948  | 

|                                |  |          |        |         |  |            |       |             |  |          |        |   |  |         |        |   |  |   |        | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ----- | ----------- |  | -------- | ------ | - |  | ------- | ------ | - |  | - | ------ | 
|                                |  | Balance  |        | Charges |  |            |       |             |  |          |        |   |  | Balance
|                                |  | at       |        | to      |  | Other      |       | Write-offs/ |  | at      
|                                |  | 12/31/00 |        | Expense |  | Charges(1) |       | Payments    |  | 12/31/01
|                                |  |          |        |         |  |            |       |             |  |         
|Allowance for doubtful
accounts |  | $        | 21,617 |         |  | $          | 7,818 |             |  | $        | (8,161 | ) |  | $       | (9,564 | ) |  | $ | 11,710 | 
|Severance and termination
costs |  |          | 4,382  |         |  |            |      |             |  |          | 120    |   |  |         | (1,668 | ) |  |   | 2,834  | 
|Restructuring costs             |  |          | 5,948  |         |  |            | 7,994 |             |  |          | 2,210  |   |  |         | (2,889 | ) |  |   | 13,263 | 

|                                |  |          |        |         |  |            |       |             |  |          |        |   |  |         |        |   |  |   |       | 
|------------------------------- |  | -------- | ------ | ------- |  | ---------- | ----- | ----------- |  | -------- | ------ | - |  | ------- | ------ | - |  | - | ----- | 
|                                |  | Balance  |        | Charges |  |            |       |             |  |          |        |   |  | Balance
|                                |  | at       |        | to      |  | Other      |       | Write-offs/ |  | at      
|                                |  | 12/31/01 |        | Expense |  | Charges(1) |       | Payments    |  | 12/31/02
|                                |  |          |        |         |  |            |       |             |  |         
|Allowance for doubtful
accounts |  | $        | 11,710 |         |  | $          | 3,647 |             |  | $        | 647    |   |  | $       | (8,415 | ) |  | $ | 7,589 | 
|Severance and termination
costs |  |          | 2,834  |         |  |            |      |             |  |          |       |   |  |         | (1,409 | ) |  |   | 1,425 | 
|Restructuring costs             |  |          | 13,263 |         |  |            |      |             |  |          | (3,095 | ) |  |         | (6,940 | ) |  |   | 3,228 | 

(1) Amounts primarily relate to acquired
companies.

Valuation and qualifying accounts
not included above have been shown in notes 1 and 8 of our
consolidated financial statements included herein.

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|              |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.   |  |  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.1           |  |  |  | Amended and Restated Agreement and Plan of Reorganization between Allied
Waste Industries, Inc. and Rabanco Acquisition Company, Rabanco Acquisition
Company Two, Rabanco Acquisition Company Three, Rabanco Acquisition Company
Four, Rabanco Acquisition Company Five, Rabanco Acquisition Company Six,
Rabanco Acquisition Company Seven, Rabanco Acquisition Company Eight, Rabanco
Acquisition Company Nine, Rabanco Acquisition Company Ten, Rabanco
Acquisition Company Eleven, and Rabanco Acquisition Company Twelve. Exhibit
2.4 to Allieds Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 is incorporated herein by reference.
|2.2           |  |  |  | Agreement and Plan of Merger dated as of August 10, 1998 by and among Allied
Waste Industries, Inc., AWIN II Acquisition Corporation and American Disposal
Services, Inc. Exhibit 2 to Allieds Report on Form 8-K filed August 21, 1998
is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                
|2.3           |  |  |  | Agreement and Plan of Merger dated as of March 7, 1999 by and among Allied
Waste Industries, Inc., AWIN I Acquisition Corporation and Browning-Ferris
Industries, Inc. Exhibit 2 to Allieds Report on Form 8-K filed March 16,
1999 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                    
|3.1           |  |  |  | Amended Certificate of Incorporation of Allied (Incorporated herein by
reference to Exhibit 3.1 to the Companys Report on Form 10-K/A for the
fiscal year ended December 31, 1996).                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.1(i)        |  |  |  | Amendment to Amended Certificate of Incorporation of Allied dated October 15,
1998. Exhibit 3.4 to the Companys Report on Form 10-Q for the quarter ended
September 30, 1998 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.1(ii)     * |  |  |  | Certificate of Amendment to Restated Certificate of Incorporation of Allied
dated January 23, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.2           |  |  |  | Amended and Restated Bylaws of the Company as of May 13, 1997. Exhibit 3.2
to the Companys Report on Form 10-Q for the quarter ended June 30, 1997 is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2(i)        |  |  |  | Amendment to the Bylaws of the Company, effective June 30, 1999. Exhibit 3.2
to Allieds Report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.1          |  |  |  | Purchase Agreement dated November 15, 2001, by and along the Company, the
Guarantors and the initial purchases, with respect to the $750 million 8-1/2%
Senior Notes due 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.2          |  |  |  | Purchase Agreement dated January 25, 2001, by and among the Company, the
Guarantors and the initial purchasers, with respect to the $600 million
8-7/8% Senior Notes due 2008. Exhibit 10.1 to Allieds Report on Form 10-Q
for the quarter ended March 31, 2001 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                        
|10.3          |  |  |  | Securities Purchase Agreement dated April 21, 1997 between Apollo Investment
Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.)
Partners III, L.P.; Blackstone Capital Partners II Merchant Banking Fund
L.P., Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P.; Laidlaw Inc. and Laidlaw Transportation,
Inc.; and Allied Waste Industries, Inc. Exhibit 10.1 to Allieds Report on
Form 10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.                                                                                                                
|10.4          |  |  |  | Consulting Agreement between Allied and Larry D. Henk dated November 1, 2001.
Exhibit 10.2 to Allieds Report on Form 10-Q for the quarter ended September
30, 2001 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.5          |  |  |  | Executive Employment Agreement between Allied and Thomas H. Van Weelden dated
January 1, 1999. Exhibit 10.9 to Allieds Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.6          |  |  |  | Executive Employment Agreement between Allied and Steven M. Helm dated June
6, 1997. Exhibit 10.5 to Allieds Report on Form 10-Q for the quarter ended
June 30, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.7          |  |  |  | Executive Employment Agreement between Allied and Donald W. Slager dated
January 1, 1999. Exhibit 10.12 to Allieds Report on Form 10-Q for the
quarter ended March 31, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.8          |  |  |  | Executive Employment Agreement between Allied and Peter S. Hathaway dated
June 6, 1997. Exhibit 10.14 to Allieds Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                             

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|      |  |   |  |                                                                                                                                                                                                                                                                                                                                                                    
|----- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  |   |  | Executive Employment Agreement between Allied and Michael G. Hannon dated
June 6, 1997. Exhibit 10.15 to Allieds Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by reference.                                                                                                                                                   
|10.10 |  |   |  | Executive Employment Agreement between Allied and Thomas W. Ryan dated August
1, 2000. Exhibit 10 to Allieds Report on Form 10-Q for the quarter ended
June 30, 2000 is incorporated herein by reference.                                                                                                                                                         
|10.11 |  |   |  | Registration Rights Agreement, dated as of January 30, 2001, by and among the
Company, the Guarantors and the initial purchasers, relating to the $600
million 8-7/8% Senior Notes due 2008. Exhibit 4-3 to Allieds Report on Form
10-Q for the quarter ended March 31, 2001 is incorporated herein by
reference.                                                 
|10.12 |  |   |  | Registration Rights Agreement, dated as of July 30, 1999, by and among
Allied, the Guarantors and the initial purchasers, relating to the
$2,000,000,000 10% Senior Subordinated Notes due 2009. Exhibit 10.3 to
Allieds Report on Form 8-K dated August 10, 1999, is incorporated herein by
reference.                                                           
|10.13 |  |   |  | Purchase Agreement dated July 27, 1999, by and among Allied, the Guarantors
and the initial purchasers, with respect to the $2,000,000,000 10% Senior
Subordinated Notes due 2009. Exhibit 10.4 to Allieds Report on Form 8-K
dated August 10, 1999, is incorporated herein by reference.                                                                         
|10.14 |  |   |  | Credit Facility dated as of July 21, 1999. Exhibit 10.1 to Allieds Report on
Form 8-K dated August 10, 1999, is incorporated herein by reference.                                                                                                                                                                                                                 
|10.15 |  |   |  | Amendment to the Credit Facility dated as of January 25, 2001. Exhibit 10.1
to Allieds Report on Form 10-Q for the quarter ended September 30, 2001 is
incorporated herein by reference.                                                                                                                                                                          
|10.16 |  |   |  | Amendment to the
Credit Facility dated as of April 23, 2002. Exhibit 10.1 to
Allieds Quarterly Report on Form 10-Q dated August 14,
2002, is incorporated herein by reference.                                                                                                                                                                                    
|10.17 |  |   |  | Second Amendment to the Credit Facility dated as of November 20, 2001.                                                                                                                                                                                                                                                                                             
|10.18 |  | * |  | Amendment to the Credit Facility dated December 17, 2002.                                                                                                                                                                                                                                                                                                          
|10.19 |  |   |  | Non-Shared Collateral Security Agreement, dated July 30, 1999, among Allied,
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Agent, Exhibit 10.2 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                     
|10.20 |  |   |  | Non-Shared Collateral Pledge Agreement, dated July 30, 1999, among Allied,
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Agent, Exhibit 10.3 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                       
|10.21 |  |   |  | Second Amended and Restated Shareholders Agreement, dated as of July 30,
1999, between Allied and the purchasers of the Series A Senior Convertible
Preferred Stock and related parties. Exhibit 10.2 to Allieds Report on Form
8-K dated August 10, 1999, is incorporated herein by reference.                                                                   
|10.22 |  |   |  | Amended and Restated Registration Rights Agreement dated as of July 30, 1999,
between Allied and the purchasers of the Series A Senior Convertible
Preferred Stock and related parties. Exhibit 10.3 to Allieds Report on Form
8-K dated August 10, 1999, is incorporated herein by reference.                                                                    
|10.23 |  |   |  | Eighth Supplemental Indenture relating to the 8-1/2% Senior Notes due 2008,
dated November 27, 2001, among Allied NA, certain guarantors signature
thereto, and U.S. Bank National Association, formerly U.S. Bank Trust
National Association, as Trustee. Exhibit 4.1 to Allieds
Registration Statement on Form S-4 (No. 333-82362) is
incorporated by reference.
|10.24 |  |   |  | Form of 8-1/2%
Senior Notes due 2008 (included in Exhibit 10.23).                                                                                                                                                                                                                                                                                                  
|10.25 |  |   |  | Registration Rights Agreement, dated as of November 27, 2001, by and among
the Company, the Guarantors and the initial purchasers, relating to the $750
million 8-1/2% Senior Notes due 2008. Exhibit 4.3 to Allieds
Registration Statement on Form S-4 (No. 333-82362) is
incorporated by reference.                                                             
|10.26 |  |   |  | Sixth Supplemental Indenture relating to the 8-7/8% Senior Notes 2008, dated
January 30, 2001, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.1 to Allieds
Report on Form 10-Q for the quarter ended March 31, 2001 is incorporated
herein by reference.                                  
|10.27 |  |   |  | Amendment No. 1 to Sixth Supplemental Indenture relating to the 8-7/8% Senior
Notes due 2008, dated as of June 29, 2001, among Allied NA, certain
guarantors signatory thereto, and U.S. Bank Trust National Association, as
Trustee. Exhibit 4.2 to Allieds Registration Statement on Form S-4 (No.
333-61744) is incorporated herein by reference.              
|10.28 |  |   |  | Form 8-7/8%
Senior Notes due 2008. Exhibit 4.3 to Allieds
Registration. Statement on Form S-4 (No. 333-61744) is incorporated herein by reference.                                                                                                                                                                                                                
|10.29 |  |   |  | 1991 Incentive Stock Plan of Allied. Exhibit 10.T to Allieds Form 10 dated
May 14, 1991, is incorporated herein by reference.                                                                                                                                                                                                                                     

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|      |  |   |  |                                                                                                                                                                                                                                                                                                                                         
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.30 |  |   |  | 1991 Non-Employee Director Stock Plan of Allied. Exhibit 10.U to Allieds
Form 10 dated May 14, 1991, is incorporated herein by reference.                                                                                                                                                                                              
|10.31 |  |   |  | 1994 Amended and Restated Non-Employee Director Stock Option Plan of Allied.
Exhibit B to Allieds Definitive Proxy Statement in accordance with Schedule
14A dated April 28, 1994, is incorporated herein by reference.                                                                                                                
|10.32 |  |   |  | Amendment to the 1994 Amended and Restated Non-Employee Director Stock Option
Plan. Exhibit 10.2 to Allieds Quarterly Report on Form 10-Q dated August 10,
1995, is incorporated herein by reference.                                                                                                                                  
|10.33 |  |   |  | Amended and Restated 1994 Incentive Stock Plan. Exhibit 10.1 to Allieds
Quarterly Report on Form 10-Q dated May 31, 1996, is incorporated herein by
reference.                                                                                                                                                                         
|10.34 |  |   |  | Amended and Restated 1991 Incentive Stock Plan. Exhibit 3 to Allieds
Definitive Proxy Statement in accordance with Schedule 14A dated April 18,
2001, is incorporated herein by reference.                                                                                                                                             
|10.35 |  |   |  | Amendment No. 1 to the 1991 Incentive Stock Plan dated August 8, 2001.                                                                                                                                                                                                                                                                  
|10.36 |  |   |  | Second Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan of Allied. Exhibit A to Allieds Definitive Proxy
Statement in accordance with Schedule 14A dated April 25, 1995, is
incorporated herein by reference.                                                                                      
|10.37 |  |   |  | Third Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated January 1, 1998. Exhibit 4.41 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                       
|10.38 |  |   |  | Fourth Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated January 1, 1998. Exhibit 4.42 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                      
|10.39 |  |   |  | Fifth Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated May 26, 1999. Exhibit 4.43 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                          
|10.40 |  |   |  | First Amendment to the 1994 Amended and Restated Incentive Stock Plan dated
January 1, 1998. Exhibit 4.44 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                                            
|10.41 |  |   |  | 1993 Incentive Stock Plan of Allied, Exhibit 10.3 to Allieds Registration
Statement on Form S-1 (No. 33-73110) is incorporated herein by reference.                                                                                                                                                                                    
|10.42 |  |   |  | Amendment No. 1 to the 1993 Incentive Stock Option Plan dated January 1, 1998.                                                                                                                                                                                                                                                          
|10.43 |  |   |  | Amendment to the Allied Waste Industries, Inc. 1993 Incentive Stock Plan
dated June 20, 2000.                                                                                                                                                                                                                                           
|10.44 |  | * |  | Second Amendment to the 1993 Incentive Stock Plan dated December 12, 2002.                                                                                                                                                                                                                                                              
|10.45 |  |   |  | First Amendment to the 1994 Incentive Stock Plan dated June 20, 2000 is
incorporated herein by reference.                                                                                                                                                                                                                               
|10.46 |  | * |  | Second Amendment to the 1994 Incentive Stock Plan dated December 12, 2002.                                                                                                                                                                                                                                                              
|10.47 |  |   |  | Restated 1994 Non-Employee Director Stock Plan dated April 3, 2002
incorporated herein by reference.                                                                                                                                                                                                                                    
|10.48 |  |   |  | Sixth Amendment to the 1994 Amended and Restated Non-Employee Director Stock
Plan dated April 3, 2002 incorporated herein by reference.                                                                                                                                                                                                 
|10.49 |  | * |  | Second Amendment to Restated 1991 Incentive Stock Plan dated December
12, 2002.                                                                                                                                                                                                                                                         
|10.50 |  |   |  | Senior Indenture relating to the 1998 Senior Notes dated as of December 23,
1998, by and among Allied NA and U.S. Bank Trust National Association, as
Trustee, with respect to the 1998 Senior Notes and Exchange Notes. Exhibit
4.1 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.
|10.51 |  |   |  | Five Year Series Supplemental Indenture relating to the 1998 Five Year Notes,
dated December 23, 1998, among Allied NA, the Guarantors and the Trustee.
Exhibit 4.2 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.                                                                 
|10.52 |  |   |  | Form of
Series B Five Year Notes (included in Exhibit 10.51). Exhibit 4.3 to
Allieds Registration Statement on Form S-4 (No. 333-70709) is incorporated
herein by reference.                                                                                                                                                           
|10.53 |  |   |  | Seven Year Series Supplemental Indenture relating to the 1998 Seven Year
Notes, dated December 23, 1998, among Allied NA, the Guarantors and the
Trustee. Exhibit 4.4 to Allieds Registration Statement on Form S-4 (No.
333-70709) is incorporated herein by reference.                                                               
|10.54 |  |   |  | Form of Series B Seven Year Notes (included in Exhibit 4.25). Exhibit 4.5 to
Allieds Registration Statement on Form S-4 (No. 333-70709) is incorporated
herein by reference.                                                                                                                                                           
|10.55 |  |   |  | Ten Year Series Supplemental Indenture relating to the 1998 Ten Year Notes,
dated December 23, 1998, among Allied NA, the Guarantors and the Trustee.
Exhibit 4.6 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.                                                                   

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|      |  |  |  |                                                                                                                                                                                                                                                                                                                                                               
|----- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.56 |  |  |  | Form of Series B Ten Year Notes. Exhibit 4.7 to Allieds Registration
Statement on Form S-4 (No. 333-70709) is incorporated herein by reference.                                                                                                                                                                                                              
|10.57 |  |  |  | Fourth Supplemental Indenture relating to the 1998 Senior Notes, dated as of
July 30, 1999, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.26 to Allieds
Report on Form 10-Q for the quarter ended June 30, 2000, is incorporated
herein by reference.                               
|10.58 |  |  |  | Fifth Supplemental Indenture relating to the 1998 Senior Notes, dated as of
December 29, 1999, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.27 to Allieds
Report on Form 10-Q for the quarter ended June 30, 2000, is incorporated
herein by reference.                            
|10.59 |  |  |  | Seventh Supplemental Indenture relating to the 1998 Senior Notes and the
8-7/8% Senior Notes due 2008, dated as of June 29, 2001, among Allied NA,
certain guarantors signatory thereto and U.S. Bank Trust National
Association, as Trustee. Exhibit 4.21 to Allieds Registration Statement on
Form S-4 (no. 333-61744) is incorporated herein by reference.
|10.60 |  |  |  | Restated Indenture relating to debt issued by Browning-Ferris Industries,
Inc., dated September 1, 1991, among BFI and First City, Texas-Houston,
National Association, as Trustee Exhibit 4.22 to Allieds Registration
Statement on Form S-4 (No. 333-61744) is incorporated herein by reference.                                                           
|10.61 |  |  |  | First Supplemental Indenture relating to the debt issued by Browning-Ferris
Industries, Inc., dated July 30, 1999, among Allied, Allied NA,
Browning-Ferris Industries, Inc. and Chase Bank of Texas, National
Association, as Trustee, Exhibit 4.23 to Allieds Registration Statement on
Form S-4 (No. 333-61744) is incorporated herein by reference.      
|10.62 |  |  |  | Collateral Trust Agreement, dated July 30, 1999, among Allied NA, certain of
its subsidiaries, and The Chase Manhattan Bank, as Collateral Trustee, is
incorporated herein by reference.                                                                                                                                                                      
|10.63 |  |  |  | Amendment to the Collateral Trust Agreement, dated January 25, 2001, among
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Trustee, Exhibit 4.5 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                 
|10.64 |  |  |  | Shared Collateral Pledge Agreement, dated July 30, 1999, among Allied NA,
certain of its subsidiaries, and The Chase Manhattan Bank, as Collateral
Trustee, is incorporated herein by reference.                                                                                                                                                              
|10.65 |  |  |  | Amendment to the Shared Collateral Pledge Agreement, dated January 25, 2001,
among Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank,
as Collateral Trustee. Exhibit 4.7 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                         
|10.66 |  |  |  | Shared Collateral Security Agreement, dated July 30, 1999, among Allied NA,
certain of its subsidiaries, and The Chase Manhattan Bank, as Collateral
Trustee, is incorporated herein by reference.                                                                                                                                                            
|10.67 |  |  |  | Amendment to the Shared Collateral Security Agreement, dated January 25,
2001, among Allied NA, certain of its subsidiaries, and The Chase Manhattan
Bank, as Collateral Trustee. Exhibit 4.9 to Allieds Report on Form 10-Q for
the quarter ended March 31, 2001 is incorporated herein by reference.                                                       
|10.68 |  |  |  | Certificate of Designation for Series A Senior Convertible Preferred Stock.
Exhibit 4.1 to Allieds Report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.                                                                                                                                                                            
|10.69 |  |  |  | Certificate of Designation for Series B Junior Preferred Stock. Exhibit 4.2
to Allieds Report on Form 8-K dated August 10, 1999, is incorporated herein
by reference.                                                                                                                                                                                        
|10.70 |  |  |  | Subordinated Indenture, dated July 30, 1999, among Allied NA, certain
guarantors signatory thereto, and U.S. Bank Trust National Association, as
Trustee, regarding the 10% Senior Subordinated Notes due 2009 of Allied NA.
Exhibit 4.1 to Allieds Registration Statement on Form S-4 (No. 333-91539),
is incorporated herein by reference.                 
|10.71 |  |  |  | First Supplemental Indenture, dated July 30, 1999 among Allied NA, certain
subsidiaries of Allied NA and U.S. Bank Trust, National Association, as
Trustee, regarding 10% Senior Subordinated Notes due 2009 of Allied NA.
Exhibit 4.3 to Allieds Report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.                             

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|      |  |   |  |                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.72 |  |   |  | Second Supplemental Subordinated Indenture relating to the 10% Senior
Subordinated Notes due 2009 of Allied NA, dated December 29, 1999, among
Allied NA, certain guarantors signatory thereto, and U.S. Bank Trust National
Association, as Trustee. Exhibit 4.2 to Allieds Registration Statement on
Form S-4 (No. 333-91539), is incorporated herein by reference.
|10.73 |  |   |  | Form of 10% Series B Senior Subordinated Notes due 2009 (included in Exhibit
10.70), is incorporated herein by reference.                                                                                                                                                                                                                                             
|10.74 |  |   |  | Rights Agreement, dated as of May 25, 2000, between Allied and American Stock
Transfer & Trust Company, as Rights Agent. Exhibit 1 to Allieds Registration
Statement on Form 8-A filed May 31, 2000, is incorporated herein by
reference.                                                                                                                            
|10.75 |  | * |  | Ninth Supplemental Indenture relating to the 91/4% Senior Notes due 2012,
dated November 15, 2002, among Allied NA, certain guarantors signatory
thereto, and U.S. Bank National Association as Trustee.                                                                                                                                                              
|10.76 |  | * |  | Registration Rights Agreement, dated as of November 15, 2002, by and among
the Company, the Guarantors and the initial purchasers, relating to $300
million aggregate principal amount of 91/4% Senior Notes due 2012.                                                                                                                                                
|10.77 |  | * |  | Registration Rights Agreement, dated as of November 26, 2002, by and among
the Company, the Guarantors and the initial purchasers, relating to $75
million aggregate principal amount of 91/4% Senior Notes due 2012.                                                                                                                                                 
|10.78 |  |   |  | Form of 9 1/4% Senior Notes due 2012 (included in Exhibit 10.70).                                                                                                                                                                                                                                                                                                     
|12.1  |  | * |  | Ratio of earnings to fixed charges and preferred stock dividends.                                                                                                                                                                                                                                                                                                     
|14    |  | * |  | Allied Waste Industries Code of Ethics                                                                                                                                                                                                                                                                                                                                
|21    |  | * |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                       
|23.1  |  | * |  | Consent of Pricewaterhouse Coopers LLP.                                                                                                                                                                                                                                                                                                                              
|99.1  |  | * |  | Certification Pursuant to 18 U.S.C§1350 of Thomas H. Van Weelden, Chairman of
the Board of Directors and Chief Executive Officer.                                                                                                                                                                                                                                     
|99.2  |  | * |  | Certification Pursuant to 18 U.S.C.§1350 of Thomas W. Ryan, Executive Vice
President and Chief Financial Officer.                                                                                                                                                                                                                                                     
|      |  | * |  | Filed herewith                                                                                                                                                                                                                                                                                                                                                        

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Reports on Form 8-K during the Quarter Ended December 31, 2002

|                  |  |                                                                                                                                                       
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|October 23, 2002  |  | Our current report on Form 8-K to announce the asset sales.                                                                                           
|October 30, 2002  |  | Our current report on Form 8-K reports the financial
results for the third quarter of 2002.                                                           
|November 12, 2002 |  | Our current report on Form 8-K to announce the intention
to offer $250 million in Senior Notes.                                                       
|November 13, 2002 |  | Our current report on Form 8-K to announce the pricing of
the Senior Notes offering.                                                                  
|November 22, 2002 |  | Our current report on Form 8-K to announce the tack on
offering to the $300 million Senior Notes.                                                     
|December 2, 2002  |  | Our current report on Form 8-K to announce the CEO repaid
loans to the Company.                                                                       
|December 3, 2002  |  | Our current report on Form 8-K to announce the filing of
the universal shelf registration statement and proxy
statement to increase authorized shares.
|December 3, 2002  |  | Our current report on Form 8-K to announce two new members
to the Board of Directors.                                                                 

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Signatures

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

|      |  |         |  |                               |  |                                                                   
|----- |  | ------- |  | ----------------------------- |  | ------------------------------------------------------------------
|      |  |         |  | ALLIED WASTE INDUSTRIES, INC.
|Date: |  | 3/17/03 |  | By:                           |  | /s/ Thomas W. Ryan                                                
|      |  |         |  |                               |  |                                                                   
|      |  |         |  |                               |  | Thomas W. Ryan
Executive Vice President and
Chief FinancialOfficer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.

|                                               |  |                                                                                                        |  |        
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | -------
|Signature                                      |  | Title                                                                                                  |  | Date   
|                                              
|/s/ Thomas H. Van WeeldenThomas H. Van Weelden |  | Director, Chairman of the Board of
Directors and Chief Executive Officer
(Principal Executive officer) |  | 3/14/03
|                                              
|/s/ Thomas W. RyanThomas W. Ryan               |  | Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)                     |  | 3/17/03
|                                              
|/s/ James E. GrayJames E. Gray                 |  | Vice President, Controller, Chief
Accounting Officer
(Principal Accounting Officer)                    |  | 3/17/03
|                                              
|/s/ Michael GrossMichael Gross                 |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Dennis HendrixDennis Hendrix               |  | Director                                                                                               |  | 3/11/03
|                                              
|/s/ Leon D. BlackLeon D. Black                 |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Nolan LehmannNolan Lehmann                 |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Howard A. LipsonHoward A. Lipson           |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ James W. CrownoverJames W. Crownover       |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Antony P. ResslerAntony P. Ressler         |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Warren B. RudmanWarren B. Rudman           |  | Director                                                                                               |  | 3/13/03
|                                              
|/s/ Lawrence V. JacksonLawrence V. Jackson     |  | Director                                                                                               |  | 3/14/03
|                                              
|/s/ J. Tomilson HillJ. Tomilson Hill           |  | Director                                                                                               |  | 3/14/03
|                                              
|/s/ Robert AgateRobert Agate                   |  | Director                                                                                               |  | 3/13/03

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CERTIFICATIONS

I, Thomas H. Van Weelden, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Allied Waste Industries, Inc.;                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:                                                                                                  



| | a) |  | designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures
as of a date within 90 days prior to the filing date of this annual report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation,
to the registrants auditors and the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which
could adversely affect the registrants ability to record, process, summarize and
report financial data and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether there
were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ALLIED WASTE INDUSTRIES, INC.By:
    
    /s/ THOMAS H. VAN WEELDENThomas H. Van Weelden
Chairman of the Board of Directors and
Chief Executive Officer


Date: March 26, 2003

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CERTIFICATIONS

I, Thomas W. Ryan, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Allied Waste Industries, Inc.;                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this quarterly report;                
|  
|4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                  



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent
functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal controls which could
adversely affect the registrants ability to record, process, summarize and report financial
data and have identified for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ALLIED WASTE INDUSTRIES, INC.By:
    
    /s/ THOMAS W. RYANThomas W. Ryan
Executive Vice President and Chief Financial Officer


Date: March 26, 2003

164



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EXHIBIT INDEX

|              |  |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.   |  |  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.1           |  |  |  | Amended and Restated Agreement and Plan of Reorganization between Allied
Waste Industries, Inc. and Rabanco Acquisition Company, Rabanco Acquisition
Company Two, Rabanco Acquisition Company Three, Rabanco Acquisition Company
Four, Rabanco Acquisition Company Five, Rabanco Acquisition Company Six,
Rabanco Acquisition Company Seven, Rabanco Acquisition Company Eight, Rabanco
Acquisition Company Nine, Rabanco Acquisition Company Ten, Rabanco
Acquisition Company Eleven, and Rabanco Acquisition Company Twelve. Exhibit
2.4 to Allieds Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 is incorporated herein by reference.
|2.2           |  |  |  | Agreement and Plan of Merger dated as of August 10, 1998 by and among Allied
Waste Industries, Inc., AWIN II Acquisition Corporation and American Disposal
Services, Inc. Exhibit 2 to Allieds Report on Form 8-K filed August 21, 1998
is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                
|2.3           |  |  |  | Agreement and Plan of Merger dated as of March 7, 1999 by and among Allied
Waste Industries, Inc., AWIN I Acquisition Corporation and Browning-Ferris
Industries, Inc. Exhibit 2 to Allieds Report on Form 8-K filed March 16,
1999 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                    
|3.1           |  |  |  | Amended Certificate of Incorporation of Allied (Incorporated herein by
reference to Exhibit 3.1 to the Companys Report on Form 10-K/A for the
fiscal year ended December 31, 1996).                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.1(i)        |  |  |  | Amendment to Amended Certificate of Incorporation of Allied dated October 15,
1998. Exhibit 3.4 to the Companys Report on Form 10-Q for the quarter ended
September 30, 1998 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.1(ii)     * |  |  |  | Certificate of Amendment to Restated Certificate of Incorporation of Allied
dated January 23, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3.2           |  |  |  | Amended and Restated Bylaws of the Company as of May 13, 1997. Exhibit 3.2
to the Companys Report on Form 10-Q for the quarter ended June 30, 1997 is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2(i)        |  |  |  | Amendment to the Bylaws of the Company, effective June 30, 1999. Exhibit 3.2
to Allieds Report on Form 10-K for the year ended December 31, 1999 is
incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.1          |  |  |  | Purchase Agreement dated November 15, 2001, by and along the Company, the
Guarantors and the initial purchases, with respect to the $750 million 8-1/2%
Senior Notes due 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.2          |  |  |  | Purchase Agreement dated January 25, 2001, by and among the Company, the
Guarantors and the initial purchasers, with respect to the $600 million
8-7/8% Senior Notes due 2008. Exhibit 10.1 to Allieds Report on Form 10-Q
for the quarter ended March 31, 2001 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                        
|10.3          |  |  |  | Securities Purchase Agreement dated April 21, 1997 between Apollo Investment
Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.)
Partners III, L.P.; Blackstone Capital Partners II Merchant Banking Fund
L.P., Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P.; Laidlaw Inc. and Laidlaw Transportation,
Inc.; and Allied Waste Industries, Inc. Exhibit 10.1 to Allieds Report on
Form 10-Q for the quarter ended March 31, 1997, is incorporated herein by
reference.                                                                                                                
|10.4          |  |  |  | Consulting Agreement between Allied and Larry D. Henk dated November 1, 2001.
Exhibit 10.2 to Allieds Report on Form 10-Q for the quarter ended September
30, 2001 is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.5          |  |  |  | Executive Employment Agreement between Allied and Thomas H. Van Weelden dated
January 1, 1999. Exhibit 10.9 to Allieds Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.6          |  |  |  | Executive Employment Agreement between Allied and Steven M. Helm dated June
6, 1997. Exhibit 10.5 to Allieds Report on Form 10-Q for the quarter ended
June 30, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.7          |  |  |  | Executive Employment Agreement between Allied and Donald W. Slager dated
January 1, 1999. Exhibit 10.12 to Allieds Report on Form 10-Q for the
quarter ended March 31, 1999, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.8          |  |  |  | Executive Employment Agreement between Allied and Peter S. Hathaway dated
June 6, 1997. Exhibit 10.14 to Allieds Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                             





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##### Table of Contents



|      |  |   |  |                                                                                                                                                                                                                                                                                                                                                                    
|----- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9  |  |   |  | Executive Employment Agreement between Allied and Michael G. Hannon dated
June 6, 1997. Exhibit 10.15 to Allieds Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by reference.                                                                                                                                                   
|10.10 |  |   |  | Executive Employment Agreement between Allied and Thomas W. Ryan dated August
1, 2000. Exhibit 10 to Allieds Report on Form 10-Q for the quarter ended
June 30, 2000 is incorporated herein by reference.                                                                                                                                                         
|10.11 |  |   |  | Registration Rights Agreement, dated as of January 30, 2001, by and among the
Company, the Guarantors and the initial purchasers, relating to the $600
million 8-7/8% Senior Notes due 2008. Exhibit 4-3 to Allieds Report on Form
10-Q for the quarter ended March 31, 2001 is incorporated herein by
reference.                                                 
|10.12 |  |   |  | Registration Rights Agreement, dated as of July 30, 1999, by and among
Allied, the Guarantors and the initial purchasers, relating to the
$2,000,000,000 10% Senior Subordinated Notes due 2009. Exhibit 10.3 to
Allieds Report on Form 8-K dated August 10, 1999, is incorporated herein by
reference.                                                           
|10.13 |  |   |  | Purchase Agreement dated July 27, 1999, by and among Allied, the Guarantors
and the initial purchasers, with respect to the $2,000,000,000 10% Senior
Subordinated Notes due 2009. Exhibit 10.4 to Allieds Report on Form 8-K
dated August 10, 1999, is incorporated herein by reference.                                                                         
|10.14 |  |   |  | Credit Facility dated as of July 21, 1999. Exhibit 10.1 to Allieds Report on
Form 8-K dated August 10, 1999, is incorporated herein by reference.                                                                                                                                                                                                                 
|10.15 |  |   |  | Amendment to the Credit Facility dated as of January 25, 2001. Exhibit 10.1
to Allieds Report on Form 10-Q for the quarter ended September 30, 2001 is
incorporated herein by reference.                                                                                                                                                                          
|10.16 |  |   |  | Amendment to the
Credit Facility dated as of April 23, 2002. Exhibit 10.1 to
Allieds Quarterly Report on Form 10Q dated August 14,
2002, is incorporated herein by reference.                                                                                                                                                                                     
|10.17 |  |   |  | Second Amendment to the Credit Facility dated as of November 20, 2001.                                                                                                                                                                                                                                                                                             
|10.18 |  | * |  | Amendment to the Credit Facility dated December 17, 2002.                                                                                                                                                                                                                                                                                                          
|10.19 |  |   |  | Non-Shared Collateral Security Agreement, dated July 30, 1999, among Allied,
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Agent, Exhibit 10.2 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                     
|10.20 |  |   |  | Non-Shared Collateral Pledge Agreement, dated July 30, 1999, among Allied,
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Agent, Exhibit 10.3 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                       
|10.21 |  |   |  | Second Amended and Restated Shareholders Agreement, dated as of July 30,
1999, between Allied and the purchasers of the Series A Senior Convertible
Preferred Stock and related parties. Exhibit 10.2 to Allieds Report on Form
8-K dated August 10, 1999, is incorporated herein by reference.                                                                   
|10.22 |  |   |  | Amended and Restated Registration Rights Agreement dated as of July 30, 1999,
between Allied and the purchasers of the Series A Senior Convertible
Preferred Stock and related parties. Exhibit 10.3 to Allieds Report on Form
8-K dated August 10, 1999, is incorporated herein by reference.                                                                    
|10.23 |  |   |  | Eighth Supplemental Indenture relating to the 8-1/2% Senior Notes due 2008,
dated November 27, 2001, among Allied NA, certain guarantors signature
thereto, and U.S. Bank National Association, formerly U.S. Bank Trust
National Association, as Trustee. Exhibit 4.1 to Allieds
Registration Statement on Form S-4 (No. 333-82362) is
incorporated by reference.
|10.24 |  |   |  | Form of 8-1/2%
Senior Notes due 2008 (included in Exhibit 10.23).                                                                                                                                                                                                                                                                                                  
|10.25 |  |   |  | Registration Rights Agreement, dated as of November 27, 2001, by and among
the Company, the Guarantors and the initial purchasers, relating to the $750
million 8-1/2% Senior Notes due 2008. Exhibit 4.3 to Allieds
Registration Statement on Form S-4 (No. 333-82362) is
incorporated by reference.                                                             
|10.26 |  |   |  | Sixth Supplemental Indenture relating to the 8-7/8% Senior Notes 2008, dated
January 30, 2001, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.1 to Allieds
Report on Form 10-Q for the quarter ended March 31, 2001 is incorporated
herein by reference.                                  
|10.27 |  |   |  | Amendment No. 1 to Sixth Supplemental Indenture relating to the 8-7/8% Senior
Notes due 2008, dated as of June 29, 2001, among Allied NA, certain
guarantors signatory thereto, and U.S. Bank Trust National Association, as
Trustee. Exhibit 4.2 to Allieds Registration Statement on Form S-4 (No.
333-61744) is incorporated herein by reference.              
|10.28 |  |   |  | Form 8-7/8%
Senior Notes due 2008. Exhibit 4.3 to Allieds
Registration. Statement on Form S-4 (No. 333-61744) is incorporated herein by reference.                                                                                                                                                                                                                
|10.29 |  |   |  | 1991 Incentive Stock Plan of Allied. Exhibit 10.T to Allieds Form 10 dated
May 14, 1991, is incorporated herein by reference.                                                                                                                                                                                                                                     





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##### Table of Contents



|      |  |   |  |                                                                                                                                                                                                                                                                                                                                         
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.30 |  |   |  | 1991 Non-Employee Director Stock Plan of Allied. Exhibit 10.U to Allieds
Form 10 dated May 14, 1991, is incorporated herein by reference.                                                                                                                                                                                              
|10.31 |  |   |  | 1994 Amended and Restated Non-Employee Director Stock Option Plan of Allied.
Exhibit B to Allieds Definitive Proxy Statement in accordance with Schedule
14A dated April 28, 1994, is incorporated herein by reference.                                                                                                                
|10.32 |  |   |  | Amendment to the 1994 Amended and Restated Non-Employee Director Stock Option
Plan. Exhibit 10.2 to Allieds Quarterly Report on Form 10-Q dated August 10,
1995, is incorporated herein by reference.                                                                                                                                  
|10.33 |  |   |  | Amended and Restated 1994 Incentive Stock Plan. Exhibit 10.1 to Allieds
Quarterly Report on Form 10-Q dated May 31, 1996, is incorporated herein by
reference.                                                                                                                                                                         
|10.34 |  |   |  | Amended and Restated 1991 Incentive Stock Plan. Exhibit 3 to Allieds
Definitive Proxy Statement in accordance with Schedule 14A dated April 18,
2001, is incorporated herein by reference.                                                                                                                                             
|10.35 |  |   |  | Amendment No. 1 to the 1991 Incentive Stock Plan dated August 8, 2001.                                                                                                                                                                                                                                                                  
|10.36 |  |   |  | Second Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan of Allied. Exhibit A to Allieds Definitive Proxy
Statement in accordance with Schedule 14A dated April 25, 1995, is
incorporated herein by reference.                                                                                      
|10.37 |  |   |  | Third Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated January 1, 1998. Exhibit 4.41 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                       
|10.38 |  |   |  | Fourth Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated January 1, 1998. Exhibit 4.42                                                                                                                                                                                                         
|10.39 |  |   |  | Fifth Amendment to the 1994 Amended and Restated Non-Employee Directors
Stock Option Plan dated May 26, 1999. Exhibit 4.43 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                          
|10.40 |  |   |  | First Amendment to the 1994 Amended and Restated Incentive Stock Plan dated
January 1, 1998. Exhibit 4.44 to
Allieds Quarterly Report on Form 10-Q dated May 15, 2002,
is incorporated herein by reference.                                                                                                                            
|10.41 |  |   |  | 1993 Incentive Stock Plan of Allied, Exhibit 10.3 to Allieds Registration
Statement on Form S-1 (No. 33-73110) is incorporated herein by reference.                                                                                                                                                                                    
|10.42 |  |   |  | Amendment No. 1 to the 1993 Incentive Stock Option Plan dated January 1, 1998.                                                                                                                                                                                                                                                          
|10.43 |  |   |  | Amendment to the Allied Waste Industries, Inc. 1993 Incentive Stock Plan
dated June 20, 2000.                                                                                                                                                                                                                                           
|10.44 |  | * |  | Second Amendment to the 1993 Incentive Stock Plan dated December 12, 2002.                                                                                                                                                                                                                                                              
|10.45 |  |   |  | First Amendment to the 1994 Incentive Stock Plan dated June 20, 2000 is
incorporated herein by reference.                                                                                                                                                                                                                               
|10.46 |  | * |  | Second Amendment to the 1994 Incentive Stock Plan dated December 12, 2002.                                                                                                                                                                                                                                                              
|10.47 |  |   |  | Restated 1994 Non-Employee Director Stock Plan dated April 3, 2002
incorporated herein by reference.                                                                                                                                                                                                                                    
|10.48 |  |   |  | Sixth Amendment to the 1994 Amended and Restated Non-Employee Director Stock
Plan dated April 3, 2002 incorporated herein by reference.                                                                                                                                                                                                 
|10.49 |  | * |  | Second Amendment to Restated 1991 Incentive Stock Plan dated December
12, 2002.                                                                                                                                                                                                                                                         
|10.50 |  |   |  | Senior Indenture relating to the 1998 Senior Notes dated as of December 23,
1998, by and among Allied NA and U.S. Bank Trust National Association, as
Trustee, with respect to the 1998 Senior Notes and Exchange Notes. Exhibit
4.1 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.
|10.51 |  |   |  | Five Year Series Supplemental Indenture relating to the 1998 Five Year Notes,
dated December 23, 1998, among Allied NA, the Guarantors and the Trustee.
Exhibit 4.2 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.                                                                 
|10.52 |  |   |  | Form of
Series B Five Year Notes (included in Exhibit 10.51). Exhibit 4.3 to
Allieds Registration Statement on Form S-4 (No. 333-70709) is incorporated
herein by reference.                                                                                                                                                           
|10.53 |  |   |  | Seven Year Series Supplemental Indenture relating to the 1998 Seven Year
Notes, dated December 23, 1998, among Allied NA, the Guarantors and the
Trustee. Exhibit 4.4 to Allieds Registration Statement on Form S-4 (No.
333-70709) is incorporated herein by reference.                                                               
|10.54 |  |   |  | Form of Series B Seven Year Notes (included in Exhibit 4.25). Exhibit 4.5 to
Allieds Registration Statement on Form S-4 (No. 333-70709) is incorporated
herein by reference.                                                                                                                                                           
|10.55 |  |   |  | Ten Year Series Supplemental Indenture relating to the 1998 Ten Year Notes,
dated December 23, 1998, among Allied NA, the Guarantors and the Trustee.
Exhibit 4.6 to Allieds Registration Statement on Form S-4 (No. 333-70709) is
incorporated herein by reference.                                                                   





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|      |  |  |  |                                                                                                                                                                                                                                                                                                                                                               
|----- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.56 |  |  |  | Form of Series B Ten Year Notes. Exhibit 4.7 to Allieds Registration
Statement on Form S-4 (No. 333-70709) is incorporated herein by reference.                                                                                                                                                                                                              
|10.57 |  |  |  | Fourth Supplemental Indenture relating to the 1998 Senior Notes, dated as of
July 30, 1999, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.26 to Allieds
Report on Form 10-Q for the quarter ended June 30, 2000, is incorporated
herein by reference.                               
|10.58 |  |  |  | Fifth Supplemental Indenture relating to the 1998 Senior Notes, dated as of
December 29, 1999, among Allied NA, certain guarantors signatory thereto, and
U.S. Bank Trust National Association, as Trustee. Exhibit 4.27 to Allieds
Report on Form 10-Q for the quarter ended June 30, 2000, is incorporated
herein by reference.                            
|10.59 |  |  |  | Seventh Supplemental Indenture relating to the 1998 Senior Notes and the
8-7/8% Senior Notes due 2008, dated as of June 29, 2001, among Allied NA,
certain guarantors signatory thereto and U.S. Bank Trust National
Association, as Trustee. Exhibit 4.21 to Allieds Registration Statement on
Form S-4 (no. 333-61744) is incorporated herein by reference.
|10.60 |  |  |  | Restated Indenture relating to debt issued by Browning-Ferris Industries,
Inc., dated September 1, 1991, among BFI and First City, Texas-Houston,
National Association, as Trustee Exhibit 4.22 to Allieds Registration
Statement on Form S-4 (No. 333-61744) is incorporated herein by reference.                                                           
|10.61 |  |  |  | First Supplemental Indenture relating to the debt issued by Browning-Ferris
Industries, Inc., dated July 30, 1999, among Allied, Allied NA,
Browning-Ferris Industries, Inc. and Chase Bank of Texas, National
Association, as Trustee, Exhibit 4.23 to Allieds Registration Statement on
Form S-4 (No. 333-61744) is incorporated herein by reference.      
|10.62 |  |  |  | Collateral Trust Agreement, dated July 30, 1999, among Allied NA, certain of
its subsidiaries, and The Chase Manhattan Bank, as Collateral Trustee, is
incorporated herein by reference.                                                                                                                                                                      
|10.63 |  |  |  | Amendment to the Collateral Trust Agreement, dated January 25, 2001, among
Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank, as
Collateral Trustee, Exhibit 4.5 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                                 
|10.64 |  |  |  | Shared Collateral Pledge Agreement, dated July 30, 1999, among Allied NA,
certain of its subsidiaries, and The Chase Manhattan Bank, as Collateral
Trustee, is incorporated herein by reference.                                                                                                                                                              
|10.65 |  |  |  | Amendment to the Shared Collateral Pledge Agreement, dated January 25, 2001,
among Allied NA, certain of its subsidiaries, and The Chase Manhattan Bank,
as Collateral Trustee. Exhibit 4.7 to Allieds Report on Form 10-Q for the
quarter ended March 31, 2001 is incorporated herein by reference.                                                         
|10.66 |  |  |  | Shared Collateral Security Agreement, dated July 30, 1999, among Allied NA,
certain of its subsidiaries, and The Chase Manhattan Bank, as Collateral
Trustee, is incorporated herein by reference.                                                                                                                                                            
|10.67 |  |  |  | Amendment to the Shared Collateral Security Agreement, dated January 25,
2001, among Allied NA, certain of its subsidiaries, and The Chase Manhattan
Bank, as Collateral Trustee. Exhibit 4.9 to Allieds Report on Form 10-Q for
the quarter ended March 31, 2001 is incorporated herein by reference.                                                       
|10.68 |  |  |  | Certificate of Designation for Series A Senior Convertible Preferred Stock.
Exhibit 4.1 to Allieds Report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.                                                                                                                                                                            
|10.69 |  |  |  | Certificate of Designation for Series B Junior Preferred Stock. Exhibit 4.2
to Allieds Report on Form 8-K dated August 10, 1999, is incorporated herein
by reference.                                                                                                                                                                                        
|10.70 |  |  |  | Subordinated Indenture, dated July 30, 1999, among Allied NA, certain
guarantors signatory thereto, and U.S. Bank Trust National Association, as
Trustee, regarding the 10% Senior Subordinated Notes due 2009 of Allied NA.
Exhibit 4.1 to Allieds Registration Statement on Form S-4 (No. 333-91539),
is incorporated herein by reference.                 
|10.71 |  |  |  | First Supplemental Indenture, dated July 30, 1999 among Allied NA, certain
subsidiaries of Allied NA and U.S. Bank Trust, National Association, as
Trustee, regarding 10% Senior Subordinated Notes due 2009 of Allied NA.
Exhibit 4.3 to Allieds Report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.                             





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##### Table of Contents



|      |  |   |  |                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.72 |  |   |  | Second Supplemental Subordinated Indenture relating to the 10% Senior
Subordinated Notes due 2009 of Allied NA, dated December 29, 1999, among
Allied NA, certain guarantors signatory thereto, and U.S. Bank Trust National
Association, as Trustee. Exhibit 4.2 to Allieds Registration Statement on
Form S-4 (No. 333-91539), is incorporated herein by reference.
|10.73 |  |   |  | Form of 10% Series B Senior Subordinated Notes due 2009 (included in Exhibit
10.70), is incorporated herein by reference.                                                                                                                                                                                                                                             
|10.74 |  |   |  | Rights Agreement, dated as of May 25, 2000, between Allied and American Stock
Transfer & Trust Company, as Rights Agent. Exhibit 1 to Allieds Registration
Statement on Form 8-A filed May 31, 2000, is incorporated herein by
reference.                                                                                                                            
|10.75 |  | * |  | Ninth Supplemental Indenture relating to the 91/4% Senior Notes due 2012,
dated November 15, 2002, among Allied NA, certain guarantors signatory
thereto, and U.S. Bank National Association as Trustee.                                                                                                                                                              
|10.76 |  | * |  | Registration Rights Agreement, dated as of November 15, 2002, by and among
the Company, the Guarantors and the initial purchasers, relating to $300
million aggregate principal amount of 91/4% Senior Notes due 2012.                                                                                                                                                
|10.77 |  | * |  | Registration Rights Agreement, dated as of November 26, 2002, by and among
the Company, the Guarantors and the initial purchasers, relating to $75
million aggregate principal amount of 91/4% Senior Notes due 2012.                                                                                                                                                 
|10.78 |  |   |  | Form of 9 1/4% Senior Notes due 2012 (included in Exhibit 10.70).                                                                                                                                                                                                                                                                                                     
|12.1  |  | * |  | Ratio of earnings to fixed charges and preferred stock dividends.                                                                                                                                                                                                                                                                                                     
|14    |  | * |  | Allied Waste Industries Code of Ethics                                                                                                                                                                                                                                                                                                                                
|21    |  | * |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                       
|23.1  |  | * |  | Consent of Pricewaterhouse Coopers LLP.                                                                                                                                                                                                                                                                                                                              
|99.1  |  | * |  | Certification Pursuant to 18 U.S.C§1350 of Thomas H. Van Weelden, Chairman of
the Board of Directors and Chief Executive Officer.                                                                                                                                                                                                                                     
|99.2  |  | * |  | Certification Pursuant to 18 U.S.C.§1350 of Thomas W. Ryan, Executive Vice
President and Chief Financial Officer.                                                                                                                                                                                                                                                     
|      |  | * |  | Filed herewith