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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, 1999

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


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

          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.

          The aggregate  market value of the  registrant's  voting stock held by
nonaffiliates of the registrant was $646,557,350 as of March 27, 2000.

          The number of shares of the registrant's common stock, $.01 par value,
outstanding at March 27, 2000 was 189,010,989.

         The registrant's  proxy statement is to be filed in connection with the
registrant's  2000  annual  meeting  of  stockholders,  portions  of  which  are
incorporated by reference into Part III of this report.

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<PAGE>

<TABLE>
<CAPTION>


                                                  TABLE OF CONTENTS

PART I

<S>       <C>                                                                                                                <C>
     Item 1.      Business...........................................................................................        3

     Item 2.      Properties.........................................................................................       10

     Item 3.      Legal Proceedings..................................................................................       10

     Item 4.      Submission of Matters to a Vote of Security Holders................................................       11




PART II

     Item 5.      Market Price and Dividends on the Common Stock and Related Stockholder Matters.....................       12

     Item 6.      Selected Financial Data............................................................................       14

     Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations..............       16

     Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.........................................       34

     Item 8.      Financial Statements and Supplementary Data........................................................       35

     Item 9.      Changes in and Disagreements on Accounting and Financial Disclosure................................       78




PART III

     Item 10.     Directors and Executive Officers of the Registrant.................................................       78

     Item 11.     Executive Compensation.............................................................................       78

     Item 12.     Security Ownership of Certain Beneficial Owners and Management.....................................       78

     Item 13.     Certain Relationships and Related Transactions.....................................................       78




PART IV

     Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................       78




                  Signatures.........................................................................................       82

</TABLE>




                                       2
<PAGE>

                                     PART I

Item 1.       Business

Allied Waste Industries, Inc., a Delaware corporation ("Allied" or "we"), is the
second  largest,  non-hazardous  solid  waste  management  company in the United
States,   and  operates  as  a  vertically   integrated  company  that  provides
collection,   transfer,   recycling  and  disposal   services  for  residential,
commercial  and  industrial  customers.   We  serve  approximately  9.9  million
customers through a network of 340 collection companies,  148 transfer stations,
151 active  landfills  and 95  recycling  facilities  within 42  states.  We are
organized by eight geographic operating regions of the United States:  Atlantic,
Central,  Great Lakes,  Midwest,  Northeast,  Southeast,  Southwest and West. We
reported revenues of approximately  $3.3 billion and approximately  $1.6 billion
for the years ended December 31, 1999 and 1998, respectively.

On July 30, 1999, we completed the  acquisition of  Browning-Ferris  Industries,
Inc.  ("BFI")  for  approximately  $7.7  billion of cash and the  assumption  of
approximately  $1.9 billion of BFI debt. Prior to the  acquisition,  BFI was the
second largest  non-hazardous  solid waste company in North America and provided
integrated solid waste management services,  including  residential,  commercial
and industrial collection,  transfer,  disposal and recycling. As of the date of
acquisition,  BFI serviced approximately 7.3 million customers through a network
of 221  collection  companies,  86  transfer  stations,  84  landfills,  and 102
recycling facilities and had annual revenues of approximately $4.2 billion.

Industry Trends

Based on  industry  data,  we  estimate  that the  total  1998  revenues  of the
non-hazardous  solid waste industry in the United States were  approximately $37
billion.  The  non-hazardous  solid waste industry has  traditionally  been very
fragmented,  particularly  in the collection  segment of the business.  Publicly
traded  companies,   municipalities  and  privately  held  companies,  generated
approximately 46%, 33% and 21% of the industry's  revenue,  respectively.  After
our  acquisition of BFI, the three largest  publicly traded  companies,  Allied,
Waste  Management,  Inc. and Republic  Services,  Inc.,  represent a substantial
majority of the publicly traded company revenues.

The non-hazardous solid waste industry has undergone cycles of consolidation. We
believe  that  several  factors  will  lead  to  continuing   acquisitions   and
consolidation  in the industry  albeit at a slower pace than the last few years.
Rising costs,  regulatory  complexities and increased capital  requirements will
create  opportunities  for  large  integrated  public  companies  that  have the
requisite  management  expertise  and ready  access to  capital.  The  following
factors continue to contribute to consolidation within the industry:

1.   Subtitle  D of the Resource  Conservation  and Recovery Act of 1976, as
     amended,  ("Subtitle D") and similar state  regulations have  significantly
     increased the amount of capital,  technical expertise,  operating costs and
     financial  assurance  obligations  required to own and operate  solid waste
     landfills.  As a result,  many landfill  operators  that lack the necessary
     capital or expertise are electing to sell their landfills as an alternative
     to closing them.  Industry  data show that, in recent years,  the number of
     landfills  in the  United  States has been  decreasing.  In 1989 there were
     approximately  7,500  landfills;  by 1992, the number had dropped to 5,000;
     and in 1997 there were less than 2,500 landfills.




                                       3
<PAGE>


2.   As an  alternative  to funding  the  changes  required  by Subtitle D, many
     municipalities  are  electing  to  privatize  their  municipal  solid waste
     landfill  operations.  A survey  cited  in a 1996  industry  trade  journal
     indicated that of the 1,600  municipalities  surveyed,  which  collectively
     represent  80% of the United States  population,  11%, 35%, 27% and 22% are
     considering  privatization  of solid waste  collection  services,  material
     recovery   facilities,   landfill   operations   and   transfer   stations,
     respectively.

3.   As a result of heightened  sensitivity to environmental  conditions in many
     communities,   it  is  becoming  increasingly  desirable  for  solid  waste
     management  companies to provide  waste  recycling  programs in addition to
     conventional collection and disposal services.

These developments,  as well as more stringent financial assurance  requirements
being  imposed on solid waste  management  companies by various  municipalities,
have  increased  the  amount of  capital  generally  required  for  solid  waste
management operations, causing smaller companies that lack the requisite capital
to sell their operations to better-capitalized companies.

Generally,  revenue  growth  within the  industry has been a function of overall
economic and population  growth and changing  demographics.  Industry growth has
also been  impacted  by changes in state and federal  regulations  supply of and
demand for disposal  capacity and consumer  awareness of environmental  matters.
While the  companies  within the  industry  provide  essential  services,  their
revenue  growth has been, and will continue to be impacted by changes in general
economic and industry specific trends.

Business Strategy

The  major  components  of our  business  strategy  consist  of:  (1)  operating
vertically  integrated  non-hazardous solid waste service businesses with a high
rate of waste  internalization,  by which we mean  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 our market
position  through  internal  development and incremental  acquisitions;  and (4)
maintaining the financial capacity,  management  capabilities and administrative
systems and controls to support on-going operations and future growth.

Vertical  Integration and  Internalization.  The vertical  integration  business
model  has  been  and  will  continue  to be the key  element  of our  operating
philosophy  and growth  strategy.  The  fundamental  objective  of the  vertical
integration  business  model is to control  the waste  stream  from the point of
collection through disposal and to achieve a high rate of waste internalization.
We have and will  continue  to build,  through  acquisitions  and  other  market
development  initiatives,  market  specific,  vertically  integrated  operations
typically  consisting  of collection  companies,  transfer  stations,  recycling
facilities  and  landfills.  Within  our  markets,  we  seek to  strengthen  our
competitive  position and improve our financial returns by acquiring  additional
operating assets,  typically through "tuck-in" collection company  acquisitions.
We believe  that we can  realize  competitive  advantages  and future  growth 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 61% in 1999.

Focus on Operations.  Decentralized operations and local management characterize
our  operations-oriented  business strategy.  We only recruit operating managers
with extensive industry experience, usually with significant experience in their
geographic markets. Our senior executive management, senior operating management
and regional vice presidents currently average approximately 18, 22 and 24 years
of  industry  experience,   respectively.  By  continuing  to  hire  and  retain
experienced,  local  market-oriented  managers,  we  believe  that  we are  well
positioned  to react to changes in our  markets  and are able to  capitalize  on
growth opportunities.




                                       4
<PAGE>


Achieving a Sustainable  Long-Term  Growth Rate.  With the completion of the BFI
acquisition,  our focus is on achieving a sustainable rate of long-term  growth.
Although we will continue to acquire "tuck-in" businesses and may enter selected
new markets,  we will  concentrate on  efficiently  operating the assets we have
accumulated over the last eight years.  Therefore,  we anticipate future revenue
growth  will slow to a lower,  sustainable  rate.  This is  consistent  with the
strategic  plan we have  articulated  in the past.  We intend to grow  primarily
through internal development by acquiring privately owned solid waste companies.
We also intend to take  selective  advantage of  opportunities  when  government
entities privatize the operation of all or part of their solid waste systems. In
addition, we seek to achieve broad geographic  diversification in our operations
and market  development  activities.  Our revenue mix for 1999 was approximately
61% collection, 25% disposal, 6% transfer, 5% recycling and 3% other.

Maintaining  Capacity  for Future  Growth.  We seek to  implement  our  business
strategy by maintaining effective internal controls,  experienced management and
sufficient financial capacity. While we expect operating cash flows to fund most
of our working capital and capital expenditure requirements, we intend to access
the public and private capital markets,  as appropriate,  to fund our continuing
growth and market development activities.

Operations

Collection.   Collection   operations   involve   collecting  and   transporting
non-hazardous  waste from the point of generation to the transfer station or the
site of  disposal.  We  generally  provide  solid  waste  collection  under  the
following two primary  types of  arrangements,  depending on the customer  being
served.

         Commercial. We provide containerized non-hazardous solid waste disposal
         services to a wide variety of commercial and industrial  customers.  We
         provide these  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. We determine fees relating to
         those contracts by general  competitive  and prevailing  local economic
         conditions and  considerations  such as collection  frequency,  type of
         equipment  furnished,  distance traveled to the disposal site, the cost
         of disposal and the type and volume or weight of the waste collected.

         Residential.   We  perform   residential   collection   services  under
         individual  monthly  subscriptions  directly  to  households  or  under
         contracts with municipal  governments  that give us exclusive rights to
         service  all  or a  portion  of the  homes  in  the  municipalities  at
         established  rates. 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. At the end of the
         term of most municipal  contracts,  we will attempt to renegotiate  the
         contract,  and if unable to do so, will re-bid the contract on a sealed
         bid basis. We also make  residential  collection  service  arrangements
         with  households  directly  with the  customer.  We seek to enter  into
         residential  service  arrangements  where  the route  density  is high,
         thereby creating  additional  economic benefit.  We set collection fees
         based on general  competitive and prevailing local economic  conditions
         and other  considerations  such as collection  frequency,  the type and
         volume or weight of the waste  collected,  the distance to the disposal
         facility, and cost of disposal.  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,   and  is  an
increasingly  common  procedure  in the  solid  waste  management  industry.  We
generally  base fees upon such  factors  as the type and volume or weight of the
waste  transferred  and the  transport  distance  involved.  We believe  that as
increased  regulations and public pressure restrict the development of landfills
in urban and suburban areas,  transfer  stations will increasingly be used as an
efficient means to transport waste over longer distances to available landfills.

                                       5
<PAGE>


Landfills.  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  federal,  state and local  regulations
pursuant to Subtitle D.  Operating  procedures  include  excavation,  continuous
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  places 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 ensures access on favorable terms
and allows us to internalize disposal fees.

Recycling.  We include  recycling  as a component of our  vertically  integrated
solid  waste  business  strategy.   Services  include  curbside   collection  of
recyclable  materials  for  residential  customers,  commercial  and  industrial
collection  of  recyclable  materials,   and,  to  a  lesser  extent,   material
recovery/waste  reduction.  We  generally  charge  recycling  fees  based on the
service  sought by the  customer.  The  customer  pays for the cost of removing,
processing and disposing of potentially recyclable materials.  In most cases, we
receive mixed waste materials at a materials recovery  facility,  which is often
integrated  into, or contiguous to, a transfer  operation.  At the facility,  we
sort,  separate,  accumulate,  bind  or  place  in a  container  and  ready  for
transportation materials such as paper, cardboard,  plastic,  aluminum and other
metals.  The purchaser  generally  pays for the materials  based on  fluctuating
spot-market prices. We dispose of material,  for which there is no market or for
which the market price is insufficient to warrant  processing,  at a landfill or
other disposal  facility.  We seek to avoid  exposure to  fluctuating  commodity
prices by passing through  substantially all of the profit or loss from the sale
of  recyclables  to  customers.  We also engage in organic  materials  recycling
and/or disposal and other alternative energy concepts such as biomass fuels.

Organization, Marketing and Sales

Our management  philosophy  utilizes a decentralized  business model. We believe
that this  method is best suited to maximize  the  opportunities  in each market
that we operate in and has largely contributed to our success.

We implement this philosophy through a regional and district infrastructure.  We
have  organized our  operations  into eight regions:  Atlantic,  Central,  Great
Lakes, Midwest,  Northeast,  Southeast,  Southwest and West. Consistent with the
vertical  integration  model,  each region is organized  into several  operating
districts and each district  comprises  specific  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  districts to maximize  the  internalization  of
waste.

The districts consist of a collection of stand-alone companies usually operating
as  a  vertically  integrated  operation  within  a  common  marketplace.  These
districts  range  in  size  from   approximately   $50  million  in  revenue  to
approximately  $250  million in  revenue.  Each  district  reports to a regional
office.   Each  regional  office  has  approximately  six  districts  under  its
management.

A regional vice president  supported by a staff including a regional  controller
manages each region. All regional vice presidents and most regional  controllers
have significant  industry  experience (in the case of regional vice presidents,
an average of 24 years of  experience).  Most regional  offices are located in a
district  facility  in order to reduce  overhead  costs  and to  promote a close
working  relationship  between  the  regional  management  and field  operations
personnel.  In  addition,  we  generally  make it a practice  to fill  operating
management positions from within the organization.

We also align the  responsibilities  of our field  management  with the vertical
integration  model. All regional  managers and generally most district  managers
have  responsibility for all phases of the vertical  integration model including
collection,  transfer,  recycling and  disposal.  Regional  management  also has
responsibility  for increasing  regional  revenues  through both acquisition and
internal  development  initiatives.  We believe that this approach  promotes the
most efficient  handling of waste by increasing  internalization  and results in
reduced costs and increased  profits.  In addition to base salary, we compensate
regional and district  management through a bonus program and stock option plan.
Compensation  pursuant to the bonus and stock option plans is largely contingent
upon meeting or exceeding  various  goals in the  manager's  geographic  area of
responsibility.




                                       6
<PAGE>


Each of our districts has staff responsible for sales and marketing.  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.

In addition,  we have a municipal  marketing  coordinator in most service areas,
who is responsible  for  communicating  with each  municipality  or community to
which  we  provide   residential   service  to  ensure  customer   satisfaction.
Additionally,  the municipal  coordinators  organize and handle bids for renewal
and new municipal contracts in their service area.

Competition

The non-hazardous  waste collection and disposal industry is highly competitive.
The industry is currently  comprised of three national waste companies:  Allied,
Waste Management,  Inc. and Republic  Services,  Inc. We also compete with local
and regional companies of varying sizes and competitive resources and with those
counties and municipalities that maintain their own waste collection or disposal
operations.  These counties and  municipalities  may have  financial  advantages
through their access to tax revenues and tax-exempt  financing and their ability
to  mandate  the  disposal  of waste  collected  within  the  jurisdiction  at a
municipal landfill or incineration  facility. We may also experience competition
from companies using alternative  methods of managing solid waste streams,  such
as incineration.

The solid  waste  collection  and  disposal  industry is  continuing  to undergo
consolidation  and we encounter  competition  through pricing and service and in
our efforts to acquire landfills and collection operations.  Accordingly, it may
become  uneconomical for us to make further  acquisitions or we may be unable to
locate or acquire suitable  acquisition  candidates at price levels and on terms
and conditions that we consider  appropriate,  particularly in markets we do not
already serve.

Environmental and Other Regulations

We are subject to extensive and evolving environmental laws and regulations. The
Environmental  Protection Agency,  (the "EPA") and various other federal,  state
and local  environmental,  zoning,  health and safety  agencies  administer  the
regulations.  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.  We cannot definitively  predict whether or not
we will be able to obtain the governmental  approvals necessary to establish new
or expand existing landfills.




                                       7
<PAGE>


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

     The Resource  Conservation  and Recovery Act of 1976 ("RCRA"),  as amended.
     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.  States may impose  requirements  for landfill units that are more
     stringent than the requirements of Subtitle D. Once a state has an approved
     program,  it must review all existing  landfill permits to ensure that they
     comply with Subtitle D.

     The Federal Water Pollution Control Act of 1972 (the "Clean Water Act"), as
     amended.  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  ("CERCLA"),  as amended.  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 (the "Clean Air Act"), as amended.  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  propose  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  may be
     implemented  by the states after the EPA approves  the  individual  state's
     program.  These  guidelines,  combined  with  the new  permitting  programs
     established under the recent Clean Air Act amendments,  will likely subject
     solid waste  landfills to significant new permitting  requirements  and, in
     some instances,  require  installation  of methane gas recovery  systems to
     reduce emissions to allowable limits.




                                       8
<PAGE>


     The Occupational Safety and Health Act of 1970 ("OSHA"),  as amended.  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  legislation
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  recently  enacted laws that will 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  within the next few years.  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.

In connection  with acquiring  companies,  we engage  independent  environmental
consulting firms to assist in conducting  environmental  assessments of the real
property  of  companies  acquired  or leased from third  parties.  Through  this
process,  we identified a number of contaminated  landfills and other properties
that  require  us to  incur  costs  for  incremental  closure  and  post-closure
measures, remediation activities and litigation costs in the future. We recorded
a provision of $267.0 million and $41.1 million for environmental matters in our
1999 and 1998  statement  of  operations,  respectively.  These costs  primarily
related  to  matters   associated   with  acquired   companies  prior  to  their
acquisition. We expect these amounts to be disbursed over the next 30 years.

We have  implemented  and  will  continue  to  implement  our own  environmental
safeguards that seek to comply with or exceed these  governmental  requirements.
Additionally, our policy is to obtain an environmental assessment prepared by an
independent environmental consulting firm or from our internal engineers for all
real  estate  acquired or leased.  For  calendar  year 2000,  we expect to spend
approximately   $135  million  for   closure,   post-closure   and   remediation
expenditures.




                                       9
<PAGE>


Liability Insurance and Bonding

We  carry   general   liability,   comprehensive   property   damage,   workers'
compensation,   employer's   liability,   directors'  and  officers'  liability,
environmental  impairment liability and other coverages we believe are customary
to the industry. Except as discussed in Legal Proceedings below, management does
not expect the impact of any known casualty,  property,  environmental insurance
or other contingencies to be material to our consolidated  liquidity,  financial
position or results of operations.

We are required to provide certain financial assurances to governmental agencies
under  applicable  environmental   regulations  relating  to  our  landfill  and
collection  operations.  These financial  assurances include  performance bonds,
letters of credit,  insurance contracts and trust deposits required  principally
to secure our  estimated  landfill  closure  and  post-closure  obligations  and
collection  contracts.  We expect to be required to provide  approximately  $1.5
billion in financial assurance  obligations  relating to our landfill operations
by the end of  fiscal  year  2000.  We expect  that  financial  assurances  will
increase  in the future as we  acquire  and  expand  our  activities  and that a
greater percentage of the financial  assurances will be comprised,  directly and
indirectly, of letters of credit.

Employees

We employ approximately 32,500 persons.  Certain of our employees are covered by
collective  bargaining  agreements.  We believe relations with our employees are
satisfactory.

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
42,500   square  feet  of  office   space.   We  currently   maintain   regional
administrative offices in Arizona, Illinois,  Indiana, Missouri,  Georgia, South
Carolina, Colorado and Massachusetts.

Our principal property and equipment consists of land (primarily landfill sites,
transfer stations, and bases for collection operations), buildings, and vehicles
and  equipment,  substantially  all of which are secured by liens to our primary
lenders.  We own or lease  real  property  in the  states  in which we are doing
business.  At December  31,  1999,  we owned and operated 151 active solid waste
landfills, aggregating approximately 64,117 total acres, including approximately
22,723 permitted acres. In addition, we own or operate 340 collection companies,
148 transfer stations and 95 recycling facilities.

Item 3. Legal Proceedings

We are currently  involved in certain  routine  litigation.  We believe that all
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.

Federal,  state and  local  provisions  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, 1999, we
were not involved in any such proceedings  where we believe sanctions imposed by
governmental  authorities  may exceed  $100,000 or which we believe  will have a
material  effect on our  consolidated  liquidity 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.

                                       10
<PAGE>


We have been notified that we are considered a potentially  responsible party at
a number of sites  under  CERCLA or other  environmental  laws.  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, after  consultation  with our independent  environmental
engineers,  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, 1999 of  approximately  $478.2 million
represents  the most probable  outcome of these  contingent  matters.  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.

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

On November  17,1999,  we held a special  stockholders  meeting.  The holders of
Common  Stock  (as  defined  in Item  5) and the  Series  A  Senior  Convertible
Preferred Stock  collectively  representing  200,518,096  shares were present in
person or represented by proxy at the meeting. At the meeting,  the stockholders
took the following actions:

<TABLE>
<CAPTION>
                                                                    Number of          Number of          Number of
                                                                      Votes          Votes Against          Votes
                                                                       For                                Withheld
                                                                 ----------------    --------------     --------------

<S>                                                                <C>                 <C>                 <C>
Authorization of the issuance of common stock upon
  conversion of the Series A Senior Convertible
  Preferred Stock......................................            196,013,940         3,777,431           726,725

Authorization to increase the maximum number of
  shares of common stock under the 1991 Incentive
  Stock Plan...........................................            173,595,417        26,047,120           875,559

</TABLE>



                                       11
<PAGE>

                                     PART II

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

Price Range of Common Stock

The Common  Stock (as  defined  below) is traded on the New York Stock  Exchange
under the symbol "AW".  Prior to December 30, 1998,  the Common Stock was traded
on the NASDAQ  National  Market tier of The NASDAQ Stock Market under the symbol
"AWIN." The high and low sales prices per share for the periods  indicated  were
as follows:

<TABLE>
<CAPTION>

                                                                                       High                 Low
                                                                                  ----------------     ---------------
<S>                                                                                      <C>  <C>           <C>  <C>
Year Ended December 31, 1998:
First Quarter.............................................................               25 7/8             19 1/2
Second Quarter............................................................               28 7/8             23 3/8
Third Quarter.............................................................               31 5/8             18
Fourth Quarter............................................................               24 1/8             16 1/8

Year Ended December 31, 1999:
First Quarter.............................................................               24 1/16            12 3/4
Second Quarter............................................................               20                 13 1/8
Third Quarter.............................................................               20 5/8             11 1/16
Fourth Quarter............................................................               11 15/16           6 1/2

<FN>
As of March 27,  2000,  there were  approximately  742  holders of record of our
Common Stock.
</FN>
</TABLE>

Dividend Policy

We have not paid  dividends  on our common  stock,  $0.01 par value (the "Common
Stock"),  do not  anticipate  paying any  dividends  thereon in the  foreseeable
future and are  prohibited  under the terms of our long-term  indebtedness  from
paying such dividends.




                                       12
<PAGE>


Recent Sales of Unregistered Securities

The following  table reflects sales of our  unregistered  securities  during the
fiscal  year  ended  December  31,  1999.  Except as  otherwise  disclosed,  the
issuances of the securities sold in the  transactions  referenced below were not
registered under the Securities Act of 1933, as amended (the "Securities  Act"),
pursuant to the exemptions contemplated in Section 4(2), Rule 144A, Regulation S
and Section 3(a)(9)  thereof,  or Regulation D thereunder,  for transactions not
involving a public  offering.  The  consideration we received in respect of each
issuance was cash, unless otherwise indicated.

<TABLE>
<CAPTION>

                            Number of Shares
                             or Principal
    Description/Date           Amount                 Consideration                       Underwriters and Other Purchasers
-------------------------  ------------------     ----------------------      ------------------------------------------------------

Common Stock

<S>                                  <C>               <C>
July 26, 1999                        125,000           $     625,000          Equus II Incorporated (exercise of expiring warrant)
September 9, 1999                     29,104                 262,500          Ben Ipema (cashless exercise of expiring warrant)
November 29, 1999                     33,750                 315,000          Lee Brandsma (cashless exercise of expiring warrant)
November 29, 1999                     35,415                 315,000          Larry Groot (cashless exercise of expiring warrant)
November 29, 1999                      2,951                  26,250          John Garrity (cashless exercise of expiring warrant)

Notes

July 30, 1999                 $2,000,000,000      $  1,993,360,000(1)         1999 Notes(2) due 2009

Preferred Stock

July 30, 1999                     1,000,000       $  1,000,000,000            Series A Senior Convertible Preferred Stock(3)
<FN>

(1)     The 1999 Notes (as defined herein) were issued at a discounted price to investors of 99.668%.

(2)     The 1999 Notes were subsequently exchanged for registered senior notes on January 28, 2000.

(3)     The shares of Series A Senior Convertible  Preferred Stock were sold for
        $1.0 billion in cash, as part of our financing of our acquisition of BFI
        on July 30, 1999 to investors led by affiliates of, and persons  related
        to, Apollo Advisors II, L.P. or Blackstone  Capital Partners II Merchant
        Banking Fund L.P.  Reference is made to our proxy statement for our 2000
        annual  meeting  of  stockholders,   which  is  incorporated  herein  by
        reference,  for  additional  information  relating to the  purchasers of
        these  shares.  Shares  of  Series A  Convertible  Preferred  Stock  are
        convertible,  at the option of the  holders,  into  shares of our common
        stock. The conversion price is $18.00 per share and the number of shares
        into which the holders of the Series A Convertible  Preferred  Stock may
        convert their shares is obtained by dividing the liquidation  preference
        of the  preferred  stock,  which  increases  at an  annual  rate of 6.5%
        compounded  quarterly,  until we pay cash dividends on this stock,  plus
        accrued and unpaid dividends by $18.00 subject to customary antidilution
        adjustments.  As of December 31, 1999,  the 1,000,000  preferred  shares
        were convertible into 57,099,364 shares of our common stock.
</FN>
</TABLE>




                                       13
<PAGE>


Item 6. Selected Financial Data

The selected  financial data presented  below as of and for the five years ended
December 31, 1999 are derived from our Consolidated Financial Statements,  which
have been audited by Arthur Andersen LLP,  independent public  accountants.  The
selected financial data as of December 31, 1995 is derived from our Consolidated
Financial  Statements,  which have not been audited subsequent to being restated
for business combinations accounted for as  pooling-of-interests  consummated in
1998.  See  Note 2 to our  Consolidated  Financial  Statements.  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 notes thereto, included elsewhere herein.
(All amounts are in thousands, except per share amounts and percentages.)

<TABLE>
<CAPTION>

                                           1999               1998                1997                1996              1995
                                      ---------------    ----------------    ----------------    ----------------  ----------------
Statement of Operations Data:

<S>                                   <C>                <C>                 <C>                 <C>               <C>
Revenues............................  $    3,341,071     $     1,575,612     $     1,340,661     $       619,548   $       580,784
Cost of operations..................       1,948,964             892,273             777,289             386,001           366,980
Selling, general and administrative
  expenses..........................         231,366             155,835             177,396             102,416            97,031
Depreciation and amortization.......         273,368             149,260             131,658              63,638            50,398
Goodwill amortization...............         110,726              30,705              26,580               4,185             5,016
Acquisition related and unusual
  costs(1)..........................         588,855             317,616               3,934              96,508             1,531
                                      ---------------    ----------------    ----------------    ----------------  ----------------
  Operating income (loss)...........         187,792              29,923             223,804            (33,200)            59,828
Equity in earnings of unconsolidated
  affiliates........................        (20,785)                  --                  --                  --                --
Interest income.....................         (7,212)             (4,030)             (1,765)             (2,479)             (735)
Interest expense....................         443,044              88,431             108,045              21,347            20,443
                                      ---------------    ----------------    ----------------    ----------------  ----------------
  Income (loss) before income taxes.       (227,255)            (54,478)             117,524            (52,068)            40,120
Income tax expense (benefit)........         (8,756)              43,773              40,277                 354            10,904
Minority interest...................           2,751                  --                  --                  --                --
                                      ---------------    ----------------    ----------------    ----------------  ----------------
  Income (loss) before extraordinary
  losses and cumulative effect of
  change in accounting principle....       (221,250)            (98,251)              77,247            (52,422)            29,216
Extraordinary losses, net of income
  tax benefit(2)....................           3,223             124,801              53,205              13,887               908
Cumulative effect of change in
  accounting principle, net of income
  tax benefit(3)....................          64,255                  --                  --                  --                --
                                      ---------------    ----------------    ----------------    ----------------  ----------------
  Net income (loss).................       (288,728)           (223,052)              24,042            (66,309)            28,308
Dividends on preferred stock........          27,789                  --                 381               1,073             4,070
Conversion fee on equity securities
  converted(4)......................              --                  --                  --                  --             2,151
                                      ---------------    ----------------    ----------------    ----------------  ----------------
  Net income (loss) available to
  common shareholders...............  $    (316,517)     $     (223,052)     $        23,661     $      (67,382)   $        22,087
                                      ===============    ================    ================    ================  ================
Basic EPS:
Income (loss) available to
  common shareholders before
  extraordinary losses and
  cumulative effect of change in
  accounting principle..............  $       (1.33)     $        (0.54)     $          0.47     $        (0.40)   $          0.21
Extraordinary losses, net of income
  tax benefit.......................          (0.02)              (0.68)              (0.33)              (0.11)            (0.01)
Cumulative effect of change in
  accounting principle, net of income
  tax benefit.......................          (0.34)                  --                  --                  --                --

                                      ---------------    ----------------    ----------------    ----------------  ----------------
Net income (loss) available to
  common shareholders...............  $       (1.69)     $        (1.22)     $          0.14     $        (0.51)   $          0.20

                                      ===============     ================   ================    ================  ================
Weighted average common shares......         187,801             182,796             164,888             132,967           112,162
                                      ===============    ================    ================    ================  ================
</TABLE>






                                       14
<PAGE>

<TABLE>
<CAPTION>
                                           1999                 1998                1997                1996              1995
                                      ---------------      ----------------    ---------------     ---------------   ---------------
<S>                                   <C>                  <C>                 <C>                 <C>               <C>
Diluted EPS:
Income (loss) available to
  common shareholders before
  extraordinary losses and
  cumulative effect of change in
  accounting principle..............  $       (1.33)       $        (0.54)     $         0.44      $        (0.40)   $         0.20
Extraordinary loss, net of income
  tax benefit.......................          (0.02)                (0.68)             (0.30)               (0.11)           (0.01)
Cumulative effect of change in
  accounting principle, net of income
  tax benefit.......................          (0.34)                    --                 --                   --               --

                                      ---------------      ----------------    ---------------     ---------------   ---------------
Net income (loss) available to
  common shareholders...............  $       (1.69)       $        (1.22)     $         0.14      $        (0.51)   $         0.19
                                      ===============      ================    ===============     ===============   ===============
Weighted average common and
  common equivalent shares..........         187,801               182,796            172,958              132,967          115,903
                                      ===============      ================    ===============     ===============   ===============
Pro forma amounts, assuming the
change in accounting principle is
  applied retroactively:
Net income (loss) available to
  common shareholders...............                             (256,265)              5,085             (73,909)           16,147
Diluted earnings (loss) per share...                                (1.40)               0.03               (0.56)             0.14
</TABLE>

<TABLE>
<CAPTION>

Balance Sheet Data:

                                                                               December 31,
                                      ---------------------------------------------------------------------------------------------
                                           1999                 1998                1997                1996              1995
                                      ---------------      ----------------    ---------------     ---------------   ---------------
<S>                                   <C>                  <C>                 <C>                 <C>               <C>
Cash and cash equivalents...........  $      121,405       $        39,742     $       33,320      $        70,015   $       26,038
Working capital (deficit)...........       (381,077)                45,031           (75,054)               26,410         (47,211)
Property and equipment, net.........       3,738,388             1,776,025          1,583,133              932,110          497,284
Goodwill, net.......................       8,238,929             1,327,470          1,082,750              888,648           90,301
Total assets........................      14,963,101             3,752,592          3,073,820            2,662,200          763,979
Long-term debt, less current
  portion...........................       9,240,291             2,118,927          1,492,360            1,283,327          304,114
Stockholders' equity including
  Preferred Stock...................       1,639,555               930,074            962,465              385,218          223,333
Long-term debt to total
  capitalization(5).................             85%                   69%                61%                  77%              58%
<FN>

(1)     Acquisition related and unusual costs relate to management's  changes in
        strategic  plans and  restructuring  resulting  from  acquisitions.  The
        charges  primarily  consist  of  transaction  or  deal  costs,  employee
        severance  and  transition  costs,  changes  in  estimates  relating  to
        environmental,  legal matters and regulatory  compliance,  restructuring
        costs related to the  consolidation  or relocation of operations,  costs
        for the abandonment or sale of non-revenue producing assets,  provisions
        for losses on contractual obligations, and asset impairments.

(2)     The  extraordinary  losses were  incurred as a result of premiums  paid
        for the early  extinguishment  of debt  and  the write-off  of   related
        deferred debt issue costs.

(3)     During the third  quarter of 1999,  we changed our method of  accounting
        for capitalized  interest.  According to generally  accepted  accounting
        principles,  this change is applied from the beginning of 1999. A charge
        for the  cumulative  effect of the  change in  accounting  principle  of
        $106.2  million  ($64.3  million  net  of  income  taxes)  was  recorded
        effective January 1, 1999.

(4)     A non-cash  conversion  fee of $2.2  million was  incurred in the fourth
        quarter  of 1995 as a result of an  inducement  to  holders  of  certain
        convertible  preferred  stock  and  convertible  subordinated  notes  to
        exercise their conversion option to receive our common stock.

(5)     At  December  31,  1999,  the  long-term  debt  to  total capitalization
        excluding the Preferred Stock is 94%.
</FN>
</TABLE>


                                       15
<PAGE>


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.

Introduction

We have experienced significant growth, primarily resulting from the acquisition
of solid  waste  businesses.  Since  January  1,  1993,  we have  completed  225
acquisitions  including 55  acquisitions  in 1999.  Our  Consolidated  Financial
Statements have been restated to reflect the acquisition of companies  accounted
for using the pooling-of-interests  method for business combinations in 1997 and
1998.  The results of operations  for the  acquisitions  accounted for under the
purchase  method  for  business  combinations  are  included  in  our  financial
statements only from the applicable date of acquisition. As a result, we believe
our historical  results of operations for the periods presented are not directly
comparable to our current results of operations.

In June 1998,  we acquired the Rabanco  Companies  ("Rabanco")  in a transaction
accounted for using the  pooling-of-interests  method for business combinations.
Rabanco provided solid waste collection, recycling,  transportation and disposal
services in the Pacific  Northwest and generated annual revenue of approximately
$160 million, excluding the effects of the internalization of waste volumes.

In August 1998, we acquired Illinois Recycling Services, Inc. and its affiliates
("Illinois    Recycling")   in   a   transaction   accounted   for   using   the
pooling-of-interests  method  for  business  combinations.   Illinois  Recycling
provided solid waste collection, recycling and transportation services primarily
in the Chicago  metropolitan  area and  northern  Indiana and  generated  annual
revenue  of   approximately   $80   million,   excluding   the  effects  of  the
internalization of waste volumes.

In October 1998, we acquired  American  Disposal  Services,  Inc.  ("ADSI") in a
transaction  accounted  for using the  pooling-of-interests  method for business
combinations.  ADSI was a vertically  integrated solid waste management  company
providing collection, transfer, recycling and disposal services to approximately
485,000  customers in 12 states,  primarily in the Midwest and Northeast  United
States and generated annual revenue of approximately $240 million, excluding the
effects of the internalization of waste volumes.

In December  1998,  we  completed a private  offering  of an  aggregate  of $1.7
billion of senior  notes.  The  proceeds  were used to retire  indebtedness  and
leases and for general corporate purposes.

On July 30, 1999, we completed the acquisition of BFI in a transaction accounted
for as a  purchase.  As a result of the  acquisition,  each  share of BFI common
stock was converted into the right to receive $45 in cash. Including assumed and
refinanced  debt,  the cost of acquiring  BFI was  approximately  $9.6  billion.
Financing  for the  acquisition  was  obtained  from draws of $4.7  billion from
credit facilities with a capacity of $7.1 billion (the "1999 Credit  Facility"),
the sale of $1.0 billion of newly issued senior convertible preferred stock (the
"Preferred Stock") and the sale of $2.0 billion of 10% Senior Subordinated Notes
due 2009 (the "1999 Notes").  With the completion of the  acquisition of BFI, we
operate  in 42  states  and  serve  approximately  9.9  million  commercial  and
residential customers from a base of assets including 151 active landfills,  148
transfer stations, 95 recycling facilities and 340 collection companies.

In connection  with the  acquisition  of BFI, we initiated an asset  divestiture
program,  whereby we would sell, for cash or through  simultaneous  buy and sell
transactions,  certain  non-core  assets  that  do not  fit  with  our  vertical
integration  operating  strategy.  The net  proceeds  from this  initiative  are
expected to generate  approximately  $1.6  billion  (net of  approximately  $150
million of tax). As of December 31, 1999, we had completed  divestitures,  which
generated  $926 million of proceeds and were comprised of the sale of the shares
of SITA,  S.A.,  the sale of the BFI medical  waste  operations  and the sale of
certain non-core, non-integrated assets.

Additionally,  we have  entered  into  various  agreements  to  divest  of BFI's
Canadian operations, BFI Gas Services and other non-core, non-integrated assets,
which are expected to generate  approximately  $892  million of proceeds.  These
divestitures  are  recorded  as  "Assets  Held  for  Sale"  in the  Consolidated
Financial  Statements  as of December  31, 1999 and are expected to be completed
during  2000.  In  connection  with  the  sale of these  identified  assets,  we
anticipate  entering into definitive  agreements to acquire certain assets which
would further integrate existing markets. We anticipate  spending  approximately
$575 million on such acquisitions during 2000.




                                       16
<PAGE>


We also  intend to divest  other  non-core  assets  during  2000  which we would
anticipate generating  approximately $535 million of proceeds. These assets have
not been  specifically  identified  and approved for sale by management  and the
board of directors  and are not  classified  as Assets Held for Sale at December
31, 1999.

As of February 22, 2000, we had completed the sales of assets subsequent to year
end for approximately  $137 million and acquired assets for  approximately  $107
million, which were pending as noted above.

Status of Integration of BFI. In connection  with the acquisition of BFI on July
30, 1999, we anticipated  annual cost savings of  approximately  $360 million by
the end of 2000  resulting  from  corporate and field SG&A  savings,  operations
labor cost savings, market cost savings and asset buy and sell agreements. As of
December 31, 1999,  we had  achieved  approximately  $335 million in annual cost
savings through  headcount  reductions of  approximately  2,900  employees,  the
closure of 51  facilities,  96 route  rationalizations  and other cost  savings.
Internalization  increased  from  57% at the time of the  acquisition  to 61% at
December 31, 1999.  The  remaining $25 million of cost savings is expected to be
achieved  in  2000  in  connection   with  the  completion  of  the  divestiture
initiative, which includes asset buy and sell agreements.

Additionally,  as of  December  31,  1999,  we  have  completed  the  management
information  systems  conversions  from BFI's  systems to  Allied's  systems for
financial reporting,  payroll, fixed assets and maintenance tracking. Subsequent
to December 31, 1999,  we completed  the  conversion  of the general  ledger and
accounts  payable  from  BFI's  SAP  system  to  Allied's  system.  We have  not
experienced any significant operational,  accounting or reporting issues related
to these conversions.

Accounting  Policies.  Subsequent  to the  acquisition  of BFI, we evaluated our
capitalized  interest policy to assess the  methodology of the calculation  with
the change in the business  strategy  resulting from the acquisition.  Under the
new methodology,  the area of the landfill under  development is defined as only
the  portion  of  the  permitted  acreage   currently   undergoing  active  cell
development.  The costs upon which interest is  capitalized  continue to include
the actual  acquisition,  permitting  and  construction  costs incurred for cell
development.  Consistent  with the prior policy,  as  construction of an area is
completed and the area becomes  available for use, the cell no longer  qualifies
for interest  capitalization.  The adoption of this method,  which was accounted
for as a change in  accounting  principle,  reflects the change in our operating
strategy  as a result  of the BFI  acquisition.  The  impact  of the  change  in
accounting  principle  was a cumulative  charge in 1999 of  approximately  $64.3
million, net of related income tax benefit.

General

Revenues.  Our revenues are attributable  primarily to 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  automatic
renewal options.  Our landfill  operations include both company-owned  landfills
and those operated for  municipalities  for a fee. In each geographic  region in
which we are located, we provide collection, transfer and disposal services. The
following  tables show for the periods  indicated  the  percentage  of our total
reported revenues attributable to services provided and revenues attributable to
geographic  regions.  The  data  below  has  been  restated  to give  effect  to
acquisitions that were accounted for using the  pooling-of-interests  method for
business combinations.




                                       17
<PAGE>

<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                        -----------------------------------------
                                                                          1999          1998         1997
                                                                        ---------     ---------     --------
<S>       <C>                                                              <C>           <C>           <C>
Collection(1)......................................................        60.7   %      55.7   %      57.2  %
Transfer...........................................................        5.6           7.1            6.7
Landfill(1)........................................................        25.3          29.9          26.4
Other..............................................................        8.4           7.3            9.7
                                                                        ---------     ---------     --------
  Total revenues...................................................        100.0  %      100.0  %     100.0  %
                                                                        =========     =========     ========
</TABLE>

<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                        -----------------------------------------

                                                                          1999          1998         1997
                                                                        ---------     ---------     --------
<S>                                                                         <C>           <C>             <C>
Atlantic...........................................................         10    %       7     %         6  %
Central............................................................         12            19             19
Great Lakes........................................................         13            19             15
Midwest............................................................         10            10             10
Northeast..........................................................         16            11             14
Southeast..........................................................         9             4               4
Southwest..........................................................         12            9              11
West...............................................................         18            21             21
                                                                        ---------     ---------     --------
  Total revenues...................................................         100   %       100   %       100  %
                                                                        =========     =========     ========
<FN>

(1)    The portion of collection and third-party transfer revenues  attributable
       to  disposal  charges  for  waste  collected  by us and  disposed  at our
       landfills  has been excluded from  collection  and transfer  revenues and
       included in landfill revenues.
</FN>
</TABLE>

Our  strategy  is  to  develop  vertically   integrated   operations  to  ensure
internalization of the waste we collect and thus realize higher margins from our
operations. By disposing of waste at company-owned and/or operated landfills, we
retain the margin generated through disposal  operations that would otherwise be
earned by third-party  landfills.  Approximately  61% of the waste we collect as
measured by disposal  volumes was disposed of at landfills we own and/or operate
in 1999 which  includes the results of operations of BFI since July 30, 1999. In
addition,  transfer  stations are an integral part of the disposal  process.  We
locate our  transfer  stations in areas where our  landfills  are outside of the
population  centers in which we collect  waste.  Such  waste is  transferred  to
long-haul trailers and economically transported to our landfills.

Expenses. Cost of operations includes labor, maintenance and repairs,  equipment
and  facility  rent,  utilities  and taxes,  the costs of ongoing  environmental
compliance,  safety  and  insurance,  disposal  costs and  costs of  independent
haulers  transporting  our waste to the disposal  site.  Disposal  costs include
certain  landfill  taxes,  host community fees,  payments under  agreements with
respect to landfill sites that are not owned,  landfill site  maintenance,  fuel
and other equipment  operating  expenses and accruals for estimated  closure and
post-closure  monitoring  expenses  anticipated to be incurred in the future. 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  based on  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 for each landfill.  The cost estimates
are prepared by local company 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
performed  annually,  by  third-party  engineers to estimate  utilized  disposal
capacity and remaining disposal capacity.  These cost and capacity estimates are
reviewed and approved by senior operations management annually.

Selling,  general and administrative  expenses include management,  clerical and
administrative  compensation  and  overhead,  sales cost,  community  relations'
expenses and provisions for estimated uncollectible accounts receivable.

                                       18
<PAGE>


Depreciation  and  amortization   includes  depreciation  of  fixed  assets  and
amortization of other intangible assets and landfill airspace.  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.  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 cost for our 151 active landfills
is  approximately  $2.6 billion,  excluding  interest to be capitalized,  and we
expect that this amount will be spent over the remaining  operating lives of the
landfills.  We have available  disposal  capacity of  approximately  2.7 billion
cubic yards of capacity as of December 31, 1999.

Goodwill  amortization  includes the amortization of costs paid in excess of the
net assets acquired in purchase business combinations.

In connection  with  potential  acquisitions,  we incur and  capitalize  certain
transaction  costs and  integration  costs,  which include  stock  registration,
legal,  accounting,  consulting,  engineering  and other direct  costs.  When an
acquisition  is completed  and is accounted  for using the  pooling-of-interests
method for business  combinations,  these costs are charged to the  statement of
operations  as  acquisition  related  costs.  When a  completed  acquisition  is
accounted for using the purchase method for business  combinations,  these costs
are capitalized.  We routinely evaluate capitalized  transaction and integration
costs,  and we expense those costs related to acquisitions  not likely to occur.
We expense  indirect  acquisition  costs,  such as executive  salaries,  general
corporate overhead and other corporate services, as incurred.

We capitalize  certain direct landfill  development  costs, such as engineering,
construction and permitting costs, and amortize based on consumed  airspace.  We
believe  that the  costs  associated  with  engineering,  owning  and  operating
landfills  will  increase in the future as a result of federal,  state and local
regulation and a growing community awareness of the landfill permitting process.
We cannot  assure you whether we will be able to raise  prices  sufficiently  to
offset these increased  expenses.  We expense all indirect landfill  development
costs, such as executive salaries,  general corporate  overhead,  public affairs
and other corporate services, as incurred.

Closure and  post-closure  costs  represents  our financial  commitment  for the
regulatory  required  costs  associated  with our future  obligations  for final
closure, which is the closure of a cell of a landfill once the cell is no longer
receiving waste, and post-closure monitoring and maintenance of landfills, which
is usually  required for up to 30 years after a  landfill's  final  closure.  We
establish  closure  and  post-closure  requirements  based on the  standards  of
Subtitle  D as  implemented  on a  state-by-state  basis.  We base  closure  and
post-closure  accruals on cost  estimates  for capping and  covering a landfill,
methane gas control,  leachate management and groundwater monitoring,  and other
operational  and  maintenance  costs to be incurred after the site  discontinues
accepting waste. We prepare site-specific  closure and post-closure  engineering
cost estimates  annually for landfills  owned and/or operated by us for which we
are responsible for closure and post-closure.

We accrue and charge closure and post-closure costs based on accepted tonnage as
landfill  airspace is consumed to ensure that the total closure and post-closure
obligations  are  fully  accrued  for each  landfill  at the time  that the site
discontinues  accepting waste and is closed. For landfills purchased,  we assess
and accrue the closure and post-closure  liability at the time we assume closure
responsibility  based upon the estimated closure and post-closure  costs and the
percentage of airspace utilized as of the date of acquisition. After the date of
acquisition,  we accrue and charge closure and post-closure costs as airspace is
consumed.  We update and approve estimated closure and post-closure  liabilities
annually   based  on   assessments   performed  by  in-house   and   independent
environmental  engineers.  Such  costs may  change in the  future as a result of
permit modifications or changes in legislative or regulatory requirements.

We accrue closure and post-closure  cost estimates based on the present value of
the future  obligation.  We discount future costs where we believe that both the
amounts and timing of related  payments are reliably  determinable.  We annually
update our estimates of future closure and  post-closure  costs.  We account for
the impact of changes,  which are  determined to be changes in  estimates,  on a
prospective basis.



                                       19
<PAGE>


In 1999,  we calculated  the net present  value of the closure and  post-closure
commitment  assuming  inflation of 2.5% and a risk-free capital rate of 7.0%. We
accrete  discounted  amounts  previously  recorded to reflect the effects of the
passage of time.  We currently  estimate  total future  payments for closure and
post-closure  to be $2.7  billion.  The present  value of such  estimate is $1.0
billion.  At  December  31, 1999 and 1998,  accruals  for  landfill  closure and
post-closure   costs  (including  costs  assumed  through   acquisitions)   were
approximately  $517.3  million and $154.5  million,  respectively.  The accruals
reflect a portfolio  of  landfills  with  estimated  remaining  lives,  based on
current  waste  flows,  that range from one to over 150 years,  and an estimated
average remaining life of approximately 39 years.

Year 2000 Update.  We did not experience any significant  malfunctions or errors
in our  operating  or business  systems when the date changed from 1999 to 2000.
Based on  operations  since  January 1, 2000,  we do not expect any  significant
impact to our ongoing business as a result of the "Year 2000 issue." However, it
is possible that the full impact of the date change, which was of concern due to
computer  programs  that use two digits  instead of four digits to define years,
has not been fully recognized. We believe that any future problems are likely to
be minor and correctable.  In addition, we could still be negatively affected if
the Year 2000 or similar issues adversely affect our customers or suppliers.  We
currently are not aware of any  significant  Year 2000 or similar  problems that
have arisen for our  customers and  suppliers.  We will continue to monitor Year
2000  matters in our ongoing  operations  and as a part of our  acquisition  due
diligence. We spent less than $500,000 on Year 2000 readiness efforts.

Results of Operations

The  following  table sets forth the  percentage  relationship  that the various
items bear to  revenues  and the  percentage  change in dollar  amounts  for the
periods  indicated.  We have restated the  statement of operations  data to give
effect to  acquisitions  that were accounted for using the  pooling-of-interests
method  for  business  combinations.  See Note 2 to our  Consolidated  Financial
Statements.

<TABLE>
<CAPTION>

                                                                          Year Ended December 31,
                                       ---------------------------------------------------------------------------------------------
                                                                               1999 Compared                           1998 Compared
                                                                                  to 1998                                 to 1997
                                                                                % Change in                             % Change in
                                                                                  Amounts                                 Amounts
                                            1999                1998                                    1997
                                       ---------------     ---------------     ---------------     ---------------    --------------
Statement of Operations Data:

<S>                                          <C>                <C>                 <C>                 <C>                  <C>
Revenues............................         100.0%             100.0%              112.0%              100.0%               17.5%
Cost of operations..................         58.3                56.6               118.4                58.0                14.8
Selling, general and administrative
  expenses..........................         6.9                  9.9                48.5                13.2               (12.2)
Depreciation and amortization.......         8.2                  9.5                83.1                 9.8                13.4
Goodwill amortization...............         3.3                  1.9               260.6                 2.0                15.5
Acquisition related and unusual
  costs.............................        17.7                 20.1                85.4                 0.3             7,973.6
                                       ---------------     ---------------     ---------------     ---------------    --------------
  Operating income..................         5.6                  2.0               527.6                16.7               (86.6)
Equity in earnings of unconsolidated
  affiliates........................        (0.6)                --                 100.0                --                  --
Interest expense, net...............        13.0                  5.4               416.4                 7.9               (20.6)
                                       ---------------     ---------------     ---------------     ---------------    --------------
  Income (loss) before income taxes.       (6.8)                 (3.4)             (317.1)                8.8              (146.4)
Income tax expense (benefit)........       (0.3)                  2.8                --                   3.0                 8.7
Minority interest...................         0.1                 --                 100.0                --                  --
                                       ---------------     ---------------     ---------------     ---------------    --------------
  Income (loss) before extraordinary
  losses and cumulative effect of
  change in accounting principle....       (6.6)                 (6.2)             (125.2)                5.8              (227.2)
Extraordinary losses, net of income
  tax benefit.......................         0.1                  7.9               (97.4)                4.0               134.6
Cumulative effect of change in
  accounting principle, net of income
  tax benefit.......................         2.0                 --                 100.0                --                  --
                                       ---------------     ---------------     ---------------     ---------------    --------------
  Net income (loss).................       (8.7)                (14.1)              (29.4)                1.8            (1,027.8)
Dividends on Preferred Stock........         0.8                 --                 100.0                --                (100.0)
                                       ---------------     ---------------     ---------------     ---------------    --------------
    Net income (loss) available to
    common shareholders.............         (9.5)%             (14.1)%             (41.9)%               1.8%           (1,042.7)%
                                       ===============     ===============     ===============     ===============    ==============
</TABLE>

                                       20
<PAGE>


      Years Ended December 31, 1999 and 1998

      Revenues.  Revenues in 1999 were $3.3 billion  compared to $1.6 billion in
      1998,  an  increase  of  112%.  The  increase  in  revenues  is  primarily
      attributable  to the acquisition of BFI on July 30, 1999 and the inclusion
      in our  results of BFI  revenues  for the  period  July 31,  1999  through
      December 31, 1999.  BFI's 1998 pro forma  revenue  adjusted to reflect the
      sale of  BFI's  Canadian  operations  and  Medical  Waste  operations  was
      approximately $3.8 billion.

      Cost of Operations.  Cost of operations in 1999 was $1.9 billion  compared
      to $892.3 million in 1998, an increase of 118.4%.  The increase in cost of
      operations  was primarily  attributable  to the inclusion of BFI's cost of
      operations  associated  with  the  revenues  from  July 31,  1999  through
      December  31,  1999.  As a  percentage  of  revenues,  cost of  operations
      increased to 58.3% in 1999 from 56.6% in 1998, primarily due to the change
      in revenue mix resulting  from the  acquisition  of BFI. BFI's revenue mix
      was more heavily  weighted  towards  collection  revenue,  which has lower
      margins than landfill revenues.

      Selling,  General and Administrative  Expenses. SG&A expenses in 1999 were
      $231.4  million  compared to $155.8 million in 1998, an increase of 48.5%,
      and reflects our  acquisition  of BFI. As a percentage  of revenues,  SG&A
      decreased to 6.9% in 1999 from 9.9% in 1998.  This  decrease is the result
      of achieving the cost savings  associated  with the acquisition of BFI and
      significantly increasing the revenues as noted above.

      Depreciation and  Amortization.  Depreciation and amortization in 1999 was
      $273.4  million  compared to $149.3 million in 1998, an increase of 83.1%,
      and  reflects  our  acquisition  of  BFI.  As a  percentage  of  revenues,
      depreciation and amortization  expense decreased to 8.2% in 1999 from 9.5%
      in 1998.  The decrease is  primarily  due to the  significant  increase in
      revenues  from  our   acquisition  of  BFI  which  more  than  offset  the
      corresponding  increase in  depreciation  due to the  acquisition  of BFI.
      Additionally,  as required by generally accepted accounting principles, we
      ceased  recording  depreciation  on assets held for sale during 1999. Such
      depreciation would have been approximately $6.3 million.

      Goodwill  Amortization.  Goodwill  amortization in 1999 was $110.7 million
      compared to $30.7 million in 1998, an increase of 260.6%.  The increase in
      goodwill  amortization was due to an increase in goodwill of approximately
      $7 billion primarily resulting from the acquisition of BFI.

      Acquisition  Related and Unusual Costs. During the year ended December 31,
      1999, we recorded $588.9 million of acquisition  related and unusual costs
      primarily  associated with the $9.6 billion  acquisition of BFI, which was
      accounted for as a purchase.  The costs primarily  relate to environmental
      related matters, litigation liabilities, risk management liabilities, loss
      contract  provisions,  transition  costs,  the write-off of deferred costs
      relating to the acquisition. These costs are comprised of the following:

      We recorded a charge of approximately $267.0 million related to changes in
      estimates of environmental  liabilities  associated with BFI's operations.
      In connection with our due diligence and integration process,  assessments
      of the acquired  operations  were  performed by  third-party  and in-house
      engineers.  Based on these  assessments,  we made  changes  in  accounting
      estimates  of  approximately  (i)  $133.7  million   associated  with  the
      Superfund  accrual  for over 150 CERCLA  cases in which BFI was  involved,
      (ii) $30.3 million associated with the remedial accrual for sites in which
      BFI  was  involved  with  remedial  action  plans,   (iii)  $56.3  million
      associated  with the  environmental  accrual for various  containment  and
      treatment  matters  at 76 active or closed BFI  landfills,  and (iv) $46.7
      million   associated  with  the  accrual  for  the  remedial  and  closure
      requirements of four BFI hazardous waste facilities.



                                       21
<PAGE>


      Management  believes  the  environmental  accrual as of December  31, 1999
      represents the most probable  outcome of these  matters.  We do not expect
      that adjustments to these 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.  As of December  31,  1999,  we believe that it is
      possible  that the ultimate  outcome of the  environmental  matters  could
      result in approximately $33 million of additional liability.

      We recorded a charge of approximately  $93.5 million related to changes in
      estimates of litigation liabilities  associated with BFI's operations.  In
      connection with our due diligence and integration process,  assessments of
      the acquired  operations  and  outstanding  litigation  were  performed by
      third-party  and  in-house  legal  counsel.  We  evaluated  over 150 cases
      involving employee-related matters, insurance related matters,  regulatory
      matters,  collection  matters  and  contract  disputes.   Accordingly,  we
      increased  the  litigation  accrual  based on the most probable loss to be
      incurred.

      Management  believes  the  litigation  accrual  as of  December  31,  1999
      represents the most probable  outcome of outstanding  assessments,  claims
      and cases.  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. As of December 31,
      1999,  we believe  that it is possible  that the  ultimate  outcome of the
      litigation matters could result in approximately $10 million of additional
      liability.

      We  recorded  an  increase   of   approximately   $20.0   million  to  the
      self-insurance  accruals  based on the results of a third party  actuarial
      review  performed in connection  with due diligence and integration of the
      BFI acquisition. As of September 30, 1999, we instituted a guaranteed cost
      insurance program for all casualty  insurance  coverages.  As a result, we
      are fully insured for any such claims occurring subsequent to that date.

      In connection with the integration of the BFI acquisition, we reviewed the
      existing contracts of the business for  recoverability.  Several contracts
      were  identified  which  were in a loss  position  when the  direct  costs
      (excluding  any  non-variable  costs)  attributable  to the contract  were
      deducted from the revenue to be generated by the contract. Consistent with
      our  accounting  policies,  we  recorded a charge of  approximately  $32.6
      million to operations for the anticipated excess of costs over revenues of
      the identified contracts.

      As a result of the acquisition of BFI, management  reassessed the level of
      acquisitions  that it would  pursue in the future and decided that certain
      companies  that  were  being   considered   will  no  longer  be  pursued.
      Accordingly,  we wrote off $26.1  million of deferred  charges  previously
      incurred in connection with these potential acquisitions. Additionally, we
      wrote off $33.8  million  of  commitment  fees paid in  connection  with a
      portion  of  the  financing  of  the  BFI  acquisition.  These  fees  were
      associated  with funds that were not  ultimately  drawn due to alternative
      sources of financing becoming available. However, as secured financing for
      the  entire  purchase  price of the  acquisition  was a  condition  of the
      signing of the merger  agreement  with BFI, and the debt  associated  with
      these fees was not  incurred,  the cost was written off at the time of the
      acquisition.

      In  connection  with  the  integration  plan for BFI,  we  identified  and
      notified  approximately  1,500 employees that they would be retained for a
      specified  period,  generally not exceeding 12 months from the acquisition
      date, to perform transition related functions. Subsequent to the specified
      time period, they will be terminated.  Additionally, we identified certain
      offices and operations,  which are duplicative,  and we are in the process
      of  consolidating  these  operations.  As these  transition  costs are not
      accruable  until  committed  or  paid,   approximately  $67.4  million  of
      transition  costs were  expensed  during  1999.  Additionally,  we accrued
      approximately $10.0 million of committed transition costs during the year.
      We estimate  that we may incur  approximately  $115 million of  additional
      transition  expenses  associated  with the  integration of BFI through the
      completion of our plan.

      Additionally,  we recorded  approximately  $43.5 million of non-cash asset
      impairments  related  to the  valuation  of Allied  Assets  Held for Sale,
      approximately  $1.8  million  of  non-cash  asset  impairments  related to
      duplicate facilities,  and approximately $0.4 million of restructuring and
      abandonment costs related to other 1999 acquisitions.



                                       22
<PAGE>


      Any  subsequent  changes in estimates of  acquisition  related and unusual
      costs will be  included  in the  acquisition  related  and  unusual  costs
      caption of the  statement of  operations in the period in which the change
      in estimate is made.  During 1999,  approximately  $7.2 million of accrued
      acquisition  related costs associated with 1998 acquisitions were reversed
      to acquisition related and unusual costs.

      The following table reflects the cash activity  related to the acquisition
      related and unusual costs accrued during 1999 (in thousands):

<TABLE>
<CAPTION>

                                                1999
                                             Additions            1999                                       Balance
                                              through           Non-Cash              1999                  Remaining
                                            Expense(1)          Charges           Expenditures          December 31, 1999
                                           --------------    ---------------     ----------------     -----------------------
<S>                                        <C>               <C>                 <C>                         <C>
Transition costs....................       $    77,350       $          --       $      (74,654)             $     2,696
Restructuring and abandonment
  costs.............................               387                  --                    --                     387
Loss contracts......................            32,643                  --               (6,058)                  26,585
Environmental, litigation, and
  regulatory compliance costs.......           380,500                  --               (9,455)                 371,045
Asset impairments...................           105,186           (105,186)                    --                      --
                                           --------------     --------------     ----------------       -----------------
  Total.............................       $   596,066       $   (105,186)       $      (90,167)             $   400,713
                                           ==============    ===============     ================       =================
<FN>

(1)     Additionally  during 1999,  we reversed  approximately  $7.2 million of accruals to  acquisition  related and
        unusual costs related to 1998 acquisitions.
</FN>
</TABLE>

      Interest Expense, Net. Interest expense, net of interest income was $435.8
      million in 1999  compared to $84.4 million in 1998, an increase of 416.4%.
      The increase in interest  expense is primarily due to the increase in debt
      of  approximately  $8  billion  from the  acquisition  of BFI,  which  was
      outstanding for five months in 1999.  Additionally,  capitalized  interest
      decreased to $25.5  million in 1999 from $67.5  million in 1998 due to the
      change in accounting principle.

      Income Taxes. Income taxes reflect an effective tax rate of (3.9)% in 1999
      and 80.3% in 1998. The effective income tax rate in 1999 deviates from the
      federal statutory rate of 35% primarily due to the  non-deductible  nature
      of certain  acquisition related charges and the  non-deductibility  of the
      amortization  related to $6.7 billion of goodwill  recorded in  connection
      with  the  acquisition  of BFI.  The  effective  income  tax  rate in 1998
      deviates  from the federal  statutory  rate  primarily due to applying the
      pooling-of-interests   method  of  accounting  for  business  combinations
      (including   the  initial   recording   of  deferred   income   taxes  and
      non-deductible  transaction  costs,  partially  offset by the  absence  of
      income  taxes  on   S-Corporation   pre-combination   earnings).   Without
      considering  the  effect  of  the  acquisition-related  charges  the  1999
      effective tax rate is 47.5%.

      Extraordinary Loss, Net. In July 1999, in connection with our financing of
      the BFI  acquisition,  we replaced our credit  facility and  recognized an
      extraordinary  charge of  approximately  $5.3 million ($3.2 million net of
      income tax benefit)  related to the write-off of previously  deferred debt
      issuance costs.

      Cumulative  Effect of Change in Accounting  Principle,  Net. In connection
      with the acquisition of BFI, we changed our capitalized interest policy to
      more accurately reflect our long-term  business strategy.  As a result, we
      recorded a charge of $64.3  million,  net of related tax,  during 1999, to
      reflect the  cumulative  effect on prior years of the change in the method
      of interest capitalization.

      Dividends on  Preferred  Stock.  Dividends  on Preferred  Stock were $27.8
      million in 1999 and  reflect  the 6.5%  dividend  on 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.



                                       23
<PAGE>


      Years Ended December 31, 1998 and 1997

      Revenues.  Revenues in 1998 were $1.6 billion  compared to $1.3 billion in
      1997,  an increase of 17.5%.  The  increase  in revenues  attributable  to
      existing  operations  ("Internal  Growth")  was 8% with  approximately  5%
      attributable to net volume increases and  approximately 3% attributable to
      price  increases.   The  additional  revenue  growth  is  attributable  to
      companies acquired net of revenues sold,  subsequent to the same period in
      the prior year.

      Cost of Operations. Cost of operations in 1998 was $892.3 million compared
      to $777.3 million in 1997, an increase of 14.8%.  This increase in cost of
      operations  was  primarily   attributable  to  the  increase  in  revenues
      described above. As a percentage of revenues, cost of operations decreased
      to 56.6% in 1998 from 58.0% in 1997. The 1997 operating  margin  decreased
      from the previously  reported margin due to the restatements for companies
      acquired  subsequent  to  December  31, 1997 and  accounted  for using the
      pooling-of-interests method for business combinations.  The 1998 operating
      margin  was  favorably  impacted  by an  increase  in  internalization  of
      third-party  disposal  volumes  to 68% in 1998 from  approximately  53% in
      1997,  as restated,  increased  volumes at the  landfills,  and other cost
      savings from the integration of acquisitions.

      Selling,  General and  Administrative  Expenses.  SG&A expense in 1998 was
      $155.8 million compared to $177.4 million in 1997, a decrease of 12.2%. As
      a  percentage  of revenues,  SG&A  decreased to 9.9% in 1998 from 13.2% in
      1997. The 1997 SG&A expense increased from the previously  reported amount
      due to the restatements for companies acquired  subsequent to December 31,
      1997 and accounted for using the pooling-of-interests  method for business
      combinations.  The 1998  SG&A  expense  decreased  due to a  reduction  in
      certain  sales  and   administrative   functions  and  related  facilities
      completed  at the  beginning of the second  quarter of 1998 in  accordance
      with  our  continuing  acquisition  integration  plan.  Additionally,  the
      decrease  in SG&A as a  percentage  of  revenues  is due to the  continued
      increase in revenues while reducing overhead costs.

      Depreciation and  Amortization.  Depreciation and amortization in 1998 was
      $149.3  million  compared to $131.7 million in 1997, an increase of 13.4%.
      In addition to the depreciation  and  amortization of acquired  companies,
      the increase in depreciation  and  amortization was due to a 7.6% increase
      in  internalized  landfill  tonnage  and  an  11.1%  increase  in  capital
      expenditures.  As a percentage of revenues,  depreciation and amortization
      did not change significantly.

      Goodwill  Amortization.  Goodwill  amortization  in 1998 was $30.7 million
      compared to $26.6 million in 1997,  an increase of 15.5%.  The increase in
      goodwill  amortization  was  due to a 22.6%  increase  in  goodwill.  As a
      percentage   of   revenues,   goodwill   amortization   did   not   change
      significantly.

      Acquisition  Related and Unusual Costs. During the year ended December 31,
      1998, we recorded  acquisition  related and unusual costs in the amount of
      $317.6  million.  These  costs  consist  of  transaction  and deal  costs,
      employee  severance and transition costs,  environmental  related matters,
      litigation liabilities,  regulatory compliance matters,  restructuring and
      abandonment costs, loss contract  provisions and non-cash asset impairment
      charges.  We do  not  anticipate  that  future  costs  to be  incurred  in
      connection with the 1998 acquisitions will be significant as restructuring
      and transition  activities  associated  with these  acquisitions  had been
      substantially  completed  as of December 31,  1998.  The 1998  acquisition
      related  and  unusual  costs  discussed  below  predominantly   relate  to
      acquisitions  accounted  for as  poolings-of-interests  and consist of the
      following:

      Direct  transaction and deal costs of $51.2 million  including  investment
      banker,   attorney,   accountant,   environmental   assessment  and  other
      third-party fees.  Approximately $11.7 million was accrued at December 31,
      1998 and was paid in the first six months of 1999.



                                       24
<PAGE>


      Employee  severance and transition costs of $73.6 million consist of $39.3
      million in  termination  payments made to employees of acquired  companies
      based on change of control  provisions in preexisting  contracts and $34.3
      million  of  costs  associated  with  severance  payments  under  exit  or
      integration  plans implemented in connection with acquisitions made during
      1998.  Exit  plans  primarily  related  to the  elimination  of  duplicate
      corporate and administrative  offices of companies  acquired.  Integration
      plans  included the  combination of field  activities for human  resource,
      accounting,   facility  maintenance,  health  and  safety  compliance  and
      customer  service  activities of companies  acquired with field activities
      similar to ours. The exit and integration plans called for the termination
      of   approximately   800  employees  who  performed   managerial,   sales,
      administrative  support,  maintenance and repair,  or hauling and landfill
      operations  duties.  All employees  were  identified and notified of their
      severance or transition benefits at the time management approved the plan,
      which  occurred at or around the time of the  acquisitions.  Approximately
      $10.1 million was accrued at December 31, 1998,  the majority of which has
      been paid in 1999.

      Environmental  related  matters,  litigation  liabilities  and  regulatory
      compliance   matters  assumed  in  acquisitions   totaled  $73.4  million.
      Subsequent  to the  acquisitions,  we made certain  changes in  accounting
      estimates  due to  events  and  new  information  becoming  available  for
      environmental  liabilities  of  approximately  $41.1  million,  litigation
      liabilities  of  approximately  $20.8  million and  regulatory  compliance
      liabilities of approximately $11.5 million.

      As  part  of  our   acquisition  due  diligence   process,   environmental
      assessments  were performed at the time of acquisition by third-party  and
      in-house  engineers.  The assessments were performed at over 150 operating
      sites  owned  or used by the 54  companies  acquired  by  Allied  in 1998.
      Additional environmental  liabilities were accrued based on the results of
      the  assessments  and  represent  the  most  probable   outcome  of  these
      identified contingent matters.  Additional accrued environmental liability
      of $27.1 million was comprised of required remedial activities  identified
      at 28 separate locations. These locations include eight landfills acquired
      by Allied,  15  landfills  not owned by Allied,  but used for  disposal by
      collection  companies  acquired,  and transfer  stations  and  maintenance
      facilities acquired. Required remedial activities include containment, the
      removal of waste  improperly  disposed  of,  extraction  and  treatment of
      landfill gas,  removal and disposal of  contaminated  soil and groundwater
      treatment  and  legal  and  administrative  costs  of  the  settlement  of
      Superfund  claims.  The additional $14 million of  environmental  accruals
      related to removal and  treatment of leachate at  landfills,  the level of
      which exceeded  permitted amounts at seven of the acquired  landfills.  At
      December  31,  1998,  approximately  $41.1  million and $15.8  million was
      accrued  for  environmental  matters and legal and  regulatory  compliance
      matters,  respectively,  which  are  expected  to be  disbursed  in future
      periods.

      The change in estimate  relating to litigation and  regulatory  compliance
      liabilities was accrued based on legal due diligence performed by in-house
      and  outside  legal  counsel  for  acquired   companies  at  the  time  of
      acquisition and the determination of the most probable loss incurred. As a
      result of this legal due diligence, we identified 14 companies acquired in
      business combinations accounted for as  poolings-of-interest  which had an
      aggregate of 54 asserted and unasserted  claims involving  matters such as
      contract disputes, employment related disputes, real and personal property
      and sales tax issues and billing  disputes.  Additionally,  we  identified
      regulatory  compliance  issues  related to 12  companies  acquired,  which
      included  citations  for  certain  state and  federal  health,  safety and
      transportation  violations and the associated costs of fines,  assessments
      and required  maintenance  costs to bring  facilities  and equipment  into
      compliance.




                                       25
<PAGE>


      Restructuring  and  abandonment  costs  were  $42.1  million  in  business
      combinations  accounted  for as  pooling-of-interests.  Costs to  relocate
      redundant  operations and to transition them to common information systems
      were $23.1 million. Redundant operations consisted primarily of activities
      for human resources,  accounting,  facility maintenance, health and safety
      compliance  and customer  service which were performed in field offices of
      companies  acquired.  Abandonment  costs  and  losses on the  disposal  of
      duplicate  revenue  producing  assets relating to specifically  identified
      transfer stations and recycling facilities were $8.8 million.  Revenue and
      net operating income of the abandoned operations represented less than one
      percent of our consolidated amounts. Additionally,  $10.2 million of costs
      were  incurred  for the  disposition  of redundant  non-revenue  producing
      assets.  This  includes $7.6 million that was accrued at December 31, 1998
      in accordance with exit and  integration  plans and is expected to be paid
      in  1999.  This  accrual  is  for  payments  under   non-cancelable  lease
      agreements  for  corporate  offices to be vacated and other costs to close
      corporate  facilities  after  operations  have  ceased  under  exit  plans
      implemented during 1998 at five companies acquired.

      Loss  contract  provisions  were $7.6 million for losses  associated  with
      collection   contracts  and  other  contractual   obligations  assumed  in
      acquisitions.  Approximately  $5 million was accrued at December  31, 1998
      and was paid as of September 30, 1999.

      Non-cash asset impairment charges  aggregating $69.7 million were recorded
      during the fourth  quarter of 1998,  related to assets held for future use
      and assets,  which were  disposed of, in the first and second  quarters of
      1999.

      Interest  Expense,  Net. Interest expense net of interest income was $84.4
      million  in 1998 as  compared  to $106.3  million in 1997,  a decrease  of
      20.6%.  The  decrease  in net  interest  expense was due to an increase in
      capitalized  interest to $67.5 million in 1998 from $37.6 million in 1997.
      The increase in capitalized  interest is a result of the acquisition of 21
      landfills during 1998 primarily  financed with our common stock instead of
      cash. Therefore, we had a significant increase in assets under development
      without a corresponding  increase in interest bearing debt.  Additionally,
      net interest  expense was impacted by an overall  reduction in the average
      interest rate partially offset by a net increase in outstanding debt.

      Income Taxes.  Income taxes reflect an effective tax rate of 80.3% in 1998
      and 34.3% in 1997.  The  increase  is  primarily  caused by the income tax
      accounting    effects   of   asset    write-downs    and    applying   the
      pooling-of-interests   method  of  accounting  for  business  combinations
      (including   the  initial   recording   of  deferred   income   taxes  and
      non-deductible  transaction  costs,  partially  offset by the  absence  of
      income taxes on S-Corporation  pre-combination earnings). This resulted in
      a one-time income tax provision of $61.1 million.  Without considering the
      effect of pooled companies and asset  write-downs,  the 1998 effective tax
      rate is 40.5%,  which deviates from the federal statutory rate of 35%, due
      to the effects of  differences  in the  treatment of goodwill for book and
      tax purposes, state income taxes, and other permanent differences.

      Extraordinary  Loss, Net. In December 1998, we replaced our 1996 Notes and
      Senior  Discount  Notes with $1.7 billion in senior notes and recognized a
      charge of  approximately  $201.2 million ($121.7 million net of income tax
      benefit)  related to premiums paid for the early payment of the 1996 Notes
      and the Senior  Discount  Notes and the write-off of  previously  deferred
      debt issuance  costs.  In June 1998,  we replaced our credit  facility and
      recognized an  extraordinary  charge of  approximately  $5.1 million ($3.1
      million net of income tax benefit)  related to the write-off of previously
      deferred debt issuance costs.



                                       26
<PAGE>


      In September  1997,  we sold 18.6 million  shares of common stock with net
      proceeds of approximately $327.4 million (the "Equity Offering").  We used
      $203  million  of the net  proceeds  to retire a portion  of the term loan
      facility of the 1997 Credit  Agreement (as defined  below) and $71 million
      to repay the entire amount  outstanding on the revolving  credit facility.
      As a result of the early repayment of debt outstanding under the term loan
      facility,  we recognized an  extraordinary  charge in the third quarter of
      1997 of  approximately  $1.3  million  ($0.8  million  net of  income  tax
      benefit) for the write-off of previously deferred debt issuance costs.

      In May 1997, we  repurchased  from Laidlaw,  Inc. two junior  subordinated
      debentures  with an aggregate face amount of $318 million and a warrant to
      acquire 20.4 million shares of common stock, used as partial consideration
      for the acquisition of the solid waste operations of Laidlaw, Inc., for an
      aggregate purchase price of $230 million in cash. An extraordinary  charge
      to earnings  related to the  repurchase  of  approximately  $65.7  million
      ($39.4  million net of income tax benefit) was recorded.  In addition,  we
      replaced our $1.275  billion bank  agreement  with the $900 million senior
      credit facility (the "1997 Credit  Agreement") in June 1997 and recognized
      an extraordinary  charge of approximately $21.6 million ($13.0 million net
      of income tax benefit).

      Liquidity and Capital Resources

      Historically,  we have satisfied our acquisition,  capital expenditure and
      working  capital  needs  primarily   through  bank  financing  and  public
      offerings and private  placements of debt and equity  securities.  Between
      January 1992 and December  1999,  we completed  total debt  financings  in
      excess of $14.3  billion and equity  financings in excess of $1.4 billion,
      excluding stock issued for consideration in business combinations.

      Due to acquisitions and the capital  requirements of our previous business
      strategy,  we have  used  amounts  in excess  of the cash  generated  from
      operations to fund acquisitions and capital expenditures. In the future we
      anticipate that cash flow from operations,  less  acquisitions and capital
      requirements,  will be sufficient to service our long-and short-term debt.
      However, over the next several quarters,  transition and integration costs
      associated  with the BFI  acquisition  may cause us to have  negative cash
      flow from operations or may cause us to incur additional  amounts of debt.
      In connection with acquisitions,  we have assumed or incurred indebtedness
      with relatively  short-term  repayment  schedules,  thereby increasing our
      current and  medium-term  liabilities.  Also,  for  certain  acquisitions,
      current liabilities are recorded for acquisition related and unusual costs
      that require payment in the near term.  Current  liabilities  periodically
      include  scheduled  payments  required under our 1999 Credit Facility.  In
      addition,  we have acquired  operating  equipment using financing  leases,
      which have  short,  and  medium-term  maturities.  Also we use excess cash
      generated  from  operations to pay down amounts owed on our revolving line
      of  credit,  which is  classified  as  long-term  debt.  As a  result,  we
      periodically  have low  levels  of  working  capital  or  working  capital
      deficits.




                                       27
<PAGE>


      During the years ended  December 31, 1999,  1998 and 1997,  our cash flows
      from  operating,  investing and financing  activities  were as follows (in
      millions):

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                       -----------------------------------------------
                                                                           1999             1998             1997
                                                                       -------------     ------------    -------------
Operating Activities:

<S>                                                                    <C>               <C>             <C>
Net income (loss).................................................     $    (288.7)      $   (223.1)     $       24.0
Non-cash acquisition related and unusual costs and
 asset impairments................................................            105.2             88.2               --
Non-cash operating expenses(1)....................................            318.8            245.8            187.3
Cumulative effect of change in accounting principle...............             64.3               --               --
Gain on sale of assets............................................            (5.3)            (3.5)            (7.2)
Extraordinary losses due to early extinguishments of debt,
  net of income tax benefit and cash premium paid.................              3.2            119.0             50.5
Cash premium paid due to early extinguishments of debt............               --          (173.2)           (64.4)
Change in operating assets and liabilities, net...................            291.5            116.2           (62.7)
                                                                       -------------     ------------    -------------
  Cash provided by operating activities...........................            489.0            169.4            127.5
                                                                       -------------     ------------    -------------
Investing Activities:

Cost of acquisitions, net of cash acquired........................        (7,574.4)          (313.0)          (498.7)
Capital expenditures and net contributions to unconsolidated
  subsidiaries....................................................          (356.2)          (301.7)          (188.0)
Capitalized interest..............................................           (25.5)           (67.5)           (37.6)
Proceeds from sale of assets......................................            522.1             12.1            530.1
Change in deferred acquisition costs and notes
  receivable......................................................           (28.5)            (8.2)            (7.9)
                                                                       ------------      ------------    -------------
  Cash used for investing activities..............................        (7,462.5)          (678.3)          (202.1)
                                                                       ------------      ------------    -------------
Financing Activities:

Net proceeds from sale of common stock and exercise of
  stock options and warrants......................................             10.2             11.3            329.0
Net proceeds from sale of Preferred Stock.........................            973.9               --               --
Net proceeds from long-term debt, net of issuance costs...........          8,672.3          2,725.3          1,336.8
Repayments of long-term debt......................................        (2,601.2)        (2,265.7)        (1,791.8)
Other.............................................................               --             44.4            163.9
                                                                       -------------     ------------    -------------
  Cash provided by financing activities...........................          7,055.2            515.3             37.9
                                                                       -------------     ------------    -------------
Increase (decrease) in cash and cash equivalents..................     $       81.7      $       6.4     $     (36.7)
                                                                       =============     ============    =============
<FN>

(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.
</FN>
</TABLE>

      As of  December  31,  1999,  we had cash and cash  equivalents  of  $121.4
      million.  Our capital  expenditure and working capital  requirements  have
      increased  significantly,  reflecting our rapid growth through acquisition
      and development of revenue  producing  assets,  and will increase  further
      compared  to the  years  ended  December  31,  1999  and  1998  due to the
      acquisition  of BFI.  During  1999,  we acquired  solid waste  operations,
      excluding the BFI acquisition,  representing  approximately $381.2 million
      in annual revenues ($332.7 million net of intercompany eliminations),  and
      sold  operations  representing  approximately  $372.5  million  in  annual
      revenues.  Subsequent  to December 31, 1999,  we sold certain  assets with
      annual  revenues  of  approximately  $120  million  for  consideration  of
      approximately $137 million. For the calendar year 2000, we expect to spend
      approximately   $675  million  for  capital   expenditures,   closure  and
      post-closure,  and  remediation  expenditures  relating  to  our  landfill
      operations.  We also  expect to spend  approximately  $300  million  after
      tax,for non-recurring  integration and transaction costs primarily related
      to the acquisition of BFI. The acquisition of additional  waste operations
      would  require   additional   capital  amounts  and  capital   expenditure
      requirements.



                                       28
<PAGE>


      As of December 31, 1999,  our debt structure  consisted  primarily of $5.2
      billion  outstanding  under the 1999 Credit Facility,  $2.0 billion of the
      1999 Notes, $1.7 billion of the 1998 Senior Notes and $1.3 billion of debt
      assumed in connection  with the BFI  acquisition.  As of December 31, 1999
      there is aggregate availability under the revolving credit facility of the
      1999 Credit Facility of approximately  $1.0 billion to be used for working
      capital,  letters  of credit,  acquisitions  and other  general  corporate
      purposes.  The indentures relating to the 1999 Credit Agreement,  the 1999
      Notes and the 1998 Senior Notes contain financial and operating  covenants
      and restrictions on our ability to complete  acquisitions,  pay dividends,
      incur  indebtedness,  make  investments  and take certain other  corporate
      actions.  A substantial  portion of our available cash will be required to
      service this  indebtedness.  For fiscal 2000, our debt service is expected
      to be approximately  $1.2 billion consisting of approximately $371 million
      in  principal  repayments  and  approximately  $870  million  in  interest
      payments. These amounts may vary depending upon changes in interest rates.

      We are also  required  to provide  financial  assurances  to  governmental
      agencies  under  applicable  environmental  regulations  relating  to  our
      landfill operations and collection  contracts.  We satisfy these financial
      assurance  requirements by issuing  performance bonds,  letters of credit,
      insurance  policies or trust  deposits as they relate to landfill  closure
      and post-closure costs and performance under certain collection contracts.
      At December 31, 1999,  we had  outstanding  approximately  $1.5 billion in
      financial  assurance   instruments,   represented  by  $701.7  million  of
      performance bonds, $656.6 million of insurance policies,  $52.1 million of
      trust  deposits  and $105.8  million  of  letters  of  credit.  During the
      calendar year 2000, we expect to be required to provide approximately $1.5
      billion  in  financial  assurance  instruments  relating  to our  landfill
      operations.

      We have lease facilities (the "Lease  Facilities")  that allow us to enter
      into  equipment  leases at rates  ranging from similar term  treasury note
      rates  plus 1.55% for terms of 36 to 84 months.  We had  equipment  leases
      outstanding  at  December  31,  1999 and 1998 of $14.8  million  and $36.6
      million, respectively.

      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.

      Our  ability  to meet  future  capital  expenditure  and  working  capital
      requirements, to make scheduled payments of principal, to pay interest, or
      to refinance our  indebtedness,  and to fund capital amounts  required for
      the expansion of the existing business depends on our future  performance,
      which, to a certain  extent,  is subject to general  economic,  financial,
      competitive, legislative, regulatory and other factors beyond our control.
      On  the  basis  of  historical  financial  information,  including  recent
      operating  history of both Allied and BFI, we believe that  available cash
      flow,  together with available  borrowings  under the new credit facility,
      our lease  facilities and other sources of liquidity,  will be adequate to
      meet our anticipated future requirements for working capital,  acquisition
      related and integration costs,  letters of credit,  capital  expenditures,
      scheduled  payments of principal and interest on debt  incurred  under the
      new credit facility, the assumed BFI debt, the 1998 Senior Notes, the 1999
      Notes and other debt, and capital amounts required for growth. However, we
      may have to refinance the principal payment at maturity on the 1998 Senior
      Notes,  the 1999  Notes and other  debt.  We  cannot  assure  you that our
      business will generate sufficient cash flow from operations,  that we will
      be able to avail ourselves to future financings in an amount sufficient to
      enable  us to  service  our  indebtedness  or to  make  necessary  capital
      expenditures,  or that any refinancing  would be available on commercially
      reasonable terms, if at all. Further,  depending on the timing, amount and
      structure of any possible  future  acquisitions  and the  availability  of
      funds  under  the new  credit  facility,  we may need to raise  additional
      capital.  We may raise such funds through  additional  bank  financings or
      public or private offerings of our debt and equity  securities.  We cannot
      assure you that we will be able to secure such funding,  if necessary,  on
      favorable  terms,  if at all. If we are not  successful  in securing  such
      funding,  our ability to pursue our business  strategy may be impaired and
      results of operations for future periods may be negatively affected.  (See
      Note 6 to Allied's Consolidated Financial Statements).



                                       29
<PAGE>


      Significant Financing Events

      In July 1999, in connection with the completion of the acquisition of BFI,
      we entered into new financing arrangements and repaid all amounts borrowed
      under the then existing  credit  facility and all amounts  borrowed by BFI
      under its commercial paper program.  The new financing  arrangements  were
      (i) the 1999 Credit  Facility for Allied NA, which is guaranteed by us and
      substantially   all  of  our   subsidiaries   (including   BFI   and   its
      subsidiaries), from a bank group for $7.1 billion to provide financing for
      the   acquisition  of  BFI  and  working  capital  for  us  following  the
      acquisition, (ii) the sale of the $2.0 billion principal amount 1999 Notes
      by Allied  NA which  are  guaranteed  by us and  substantially  all of our
      subsidiaries (including BFI and its subsidiaries),  and (iii) the sale for
      $1.0 billion of the Preferred  Stock. In connection with the completion of
      the acquisition of BFI, we also guaranteed certain of BFI's remaining debt
      and,  for the 1998 Senior Notes and for certain of BFI's  remaining  debt,
      provided collateral (pari passu with the 1999 Credit Facility)  consisting
      of certain of BFI's  assets.  Both the New  Credit  Facility  and the 1999
      Notes  contain  restrictions  on  Allied's  ability to make  acquisitions,
      purchase  fixed  assets  above  certain  amounts,  pay  dividends,   incur
      additional indebtedness,  make investments,  loans or advances, enter into
      certain transactions with affiliates or enter into a merger, consolidation
      or sale of all or a  substantial  portion  of  Allied's  assets.  The 1999
      Credit   Facility,   the  1999  Notes  and  the  Preferred  Stock  contain
      provisions, which could require repayment, in some cases at a premium upon
      a defined  "change  of  control"  of Allied and the  Preferred  Stock also
      contain  restrictions on Allied's  ability to pay cash dividends on common
      stock.

      In December 1998,  Allied NA issued an aggregate  principal amount of $1.7
      billion of senior  notes in a Rule 144A  offering  which was  subsequently
      registered  for public  trading with the SEC in January  1999. We used the
      net proceeds from the 1998 Senior Notes to fund the purchase of all of the
      outstanding  1996 Notes and Senior  Discount  Notes,  to repay  borrowings
      outstanding  under the Senior  Credit  Facility and certain  capital lease
      obligations  and for general  corporate  purposes.  We guarantee  the 1998
      Senior  Notes and  substantially  all of Allied  NA's  current  and future
      subsidiaries,  the guarantees of which are expressly  subordinated  to the
      guarantees of Allied NA's Credit Agreement.

      In June 1998, we repaid $486.8 million  outstanding  under the 1997 Credit
      Agreement   and  entered  into  a  new  credit   agreement   (the  "Credit
      Agreement").  The Credit  Agreement  provides  an $800  million  five year
      senior  secured  revolving  credit  facility  and a $300 million five year
      senior  secured term loan facility  (together  with the  revolving  credit
      facility,  the  "Senior  Credit  Facility").  The term loan  facility is a
      funded, amortizing senior secured term loan with annual principal payments
      increasing  from $75 million in 2001, to $105 million in 2002, and to $120
      million in 2003. Principal under the revolving credit facility is due upon
      maturity.

      On September 30, 1997, we repaid $203 million  outstanding  under the term
      loan  facility  and $71 million  outstanding  under the  revolving  credit
      facility of the 1997 Credit Agreement.  In connection with this repayment,
      we amended the 1997 Credit Agreement in October 1997,  providing for a six
      and one-half year senior secured $297 million funded term loan facility, a
      senior  secured  $200 million  delayed draw term loan  facility to finance
      certain  acquisitions  prior to March 31, 1998,  and a senior secured $600
      million revolving credit facility due December 2003.

      In June 1997,  we repaid our senior  credit  facility and entered into the
      1997  Credit  Agreement.  The 1997  Credit  Agreement  provides  a six and
      one-half year senior secured $500 million term loan facility and a six and
      one-half year senior secured $400 million revolving credit facility.

      In May 1997, Allied, pursuant to the Laidlaw Securities Purchase Agreement
      with the Laidlaw Group and certain  private  securities  investment  funds
      affiliated with either (i) Apollo Advisors II, L.P. or (ii) the Blackstone
      Group (the  "Apollo/Blackstone  Investors"),  repurchased from the Laidlaw
      Group the Allied  Debentures  and the  Warrant for an  aggregate  purchase
      price of $230  million in cash.  Also  pursuant to the Laidlaw  Securities
      Purchase Agreement,  the Apollo/Blackstone  Investors purchased all of the
      Common Stock held by Laidlaw.  In connection with the  Repurchase,  Allied
      issued $418 million  aggregate face amount of the Senior Discount Notes in
      a private  offering on May 15,  1997.  The net  proceeds  of $230  million
      realized from the sale of the Senior  Discount  Notes were used to pay the
      cash consideration in the Repurchase.



                                       30
<PAGE>


      New Accounting Standards

      In June 1999, the Financial Accounting Standards Board issued Statement of
      Financial   Accounting   Standards  No.  137,  Accounting  for  Derivative
      Instruments  and Hedging  Activities - Deferral of the  Effective  Date of
      FASB  Statement  No. 133, and  amendment of SFAS No. 133.  This  statement
      defers, for one-year,  the effective date of SFAS No. 133,  Accounting for
      Derivative  Instruments  and Hedging  Activities,  to those  fiscal  years
      beginning after June 15, 2000. SFAS No. 133 requires all derivatives to be
      recorded  as  either  assets  or  liabilities  and the  instruments  to be
      measured  at fair value.  Gains or losses  resulting  from  changes in the
      values of those derivatives are to be recognized  immediately or deferred,
      depending on the use of the derivative, and whether or not it qualifies as
      a hedge.  We will adopt SFAS No. 133 by January 1, 2001,  as required.  We
      are  currently  assessing  the impact of this  statement on our results of
      operations and financial position.

      Disclosure Regarding Forward Looking Statements

      This annual report 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  statements  relate to business plans or
      strategies,  projected or anticipated  benefits or other  consequences  of
      such  plans  or  strategies,  number  of  acquisitions  and  projected  or
      anticipated  benefits from  acquisitions,  including  whether and when the
      acquisitions  will be accretive to earnings,  made by or to be made by us,
      or projections involving anticipated revenues, earnings, levels of capital
      expenditures  or other  aspects of  operating  results and the  underlying
      assumptions  including  internal  growth as well as general  economic  and
      financial market conditions. 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 and whether Forward
      Looking  Statements  made by us  ultimately  prove  to be  accurate.  Such
      important factors ("Important Factors") that could cause actual results to
      differ  materially from our expectations are disclosed in this section and
      elsewhere in this report.  All subsequent written and oral Forward Looking
      Statements  attributable  to  us or  persons  acting  on  our  behalf  are
      expressly  qualified in their entirety by the Important  Factors described
      below that could cause  actual  results to differ  from our  expectations.
      Shareholders,  potential investors and other readers are urged to consider
      these factors in evaluating  Forward Looking  Statements and are cautioned
      not to place  undue  reliance on these  Forward  Looking  Statements.  The
      forward-looking  statements  made  herein  are only made as of the date of
      this  filing and we  undertake  no  obligation  to  publicly  update  such
      forward-looking statements to reflect subsequent events or circumstances.

      Leverage  Ability to Service Debt. We have substantial  indebtedness  with
      significant  debt  service   requirements.   At  December  31,  1999,  our
      consolidated debt was approximately $10.2 billion.  The degree to which we
      are leveraged has important consequences,  including the following (i) our
      ability to obtain additional financing in the future may be impaired, (ii)
      a portion of our cash flow from  operations is required to be dedicated to
      the payment of principal and interest on our debt,  thereby reducing funds
      available  to us for other  purposes,  (iii) we may be  vulnerable  in the
      event of an economic downturn in our business,  and (iv) to the extent our
      outstanding  debt under our 1999 Credit Facility is at variable rates that
      have not been  hedged,  we will be  vulnerable  to  increases  in interest
      rates.  In addition,  a portion of our bank debt  provides for  increasing
      interest   rates  if  that  portion  is  not  repaid  by  July  30,  2000.
      Accordingly,  if we are unable to repay this  portion from the proceeds of
      asset divestitures or otherwise,  our vulnerability to changes in interest
      rates will be greater.

      Our ability to meet our debt service obligations will depend on our future
      operating performance and financial results, which will be subject in part
      to factors beyond our control. Although we believe that our cash flow will
      be adequate to meet our interest  payments,  we cannot assure that we will
      continue to generate  earnings in the future sufficient to cover our fixed
      charges and if we are unable to borrow  sufficient  funds under either the
      1999  Credit  Facility  or  from  other  sources,  we may be  required  to
      refinance all or a portion of our assets. There can be no assurance that a
      refinancing  would be possible,  nor can there be any  assurance as to the
      timing  of any  asset  sales  or the  proceeds,  which  we  could  realize
      therefrom.



                                       31
<PAGE>


      If for any reason,  including a shortfall in anticipated operating results
      or proceeds  from asset  sales,  we were  unable to meet our debt  service
      obligations, we would be in default under the terms of certain of our debt
      agreements. In the event of such a default, the holders of such debt could
      elect to declare all of such debt  immediately due and payable,  including
      accrued and unpaid  interest,  and to  terminate  their  commitments  with
      respect to funding obligations under such debt. In addition,  such holders
      could proceed against any collateral which, in the case of the 1999 Credit
      Facility,   consists  of  the  capital  stock  of  our   subsidiaries  and
      substantially  all of our assets and the assets of our  subsidiaries.  Any
      default  with  respect  to any of our debt could  result in default  under
      other debt or result in bankruptcy.

      Competition.  The solid waste  collection and disposal  business is highly
      competitive and requires  substantial  amounts of capital. We compete with
      numerous waste management companies, one of which has significantly larger
      operations and greater resources.  We also compete with those counties and
      municipalities  that  maintain  their own waste  collection  and  disposal
      operations.  Forward  Looking  Statements  assume  that we will be able to
      effectively  compete  with  the  other  waste  management   companies  and
      municipalities and that we will be able to maintain or improve margins (or
      pricing of services) on existing or acquired  operations  and  effectively
      compete with government  owned and operated  landfills which enjoy certain
      competitive   advantages  from   tax-exempt   financing  and  tax  revenue
      subsidies.

      Availability of Acquisition  Targets.  Our ongoing  acquisition program is
      part of our growth strategy.  In addition,  obtaining landfill permits has
      become  increasingly  difficult,  time consuming and expensive.  We cannot
      assure  that we will  succeed in  obtaining  landfill  permits or locating
      appropriate  acquisition  candidates  that can be acquired at price levels
      that we consider appropriate. The Forward Looking Statements assume that a
      number of  acquisition  candidates and landfill  properties  sufficient to
      meet our goals will be available  and that we will be able to complete the
      acquisitions at prices that we have  experienced in the past two years. In
      addition,  federal and state antitrust and similar  policies may limit our
      ability to pursue acquisitions.

      Divestitures.  Our Forward Looking  Statements assume that we will be able
      to  exit  certain   regional   markets  and  sell  certain   non-strategic
      businesses.  There can be no assurance as to whether or when  transactions
      will close or the amounts to be received in such  transactions,  including
      transactions under definitive agreement, and whether we will be successful
      in  negotiating  asset sales at a pace and on terms  sufficient to achieve
      our goals.

      Integration.  Our financial position and results of operations depend to a
      large extent on the integration of recently acquired businesses  including
      the acquisition of BFI completed on July 30, 1999.  Before the acquisition
      of BFI, Allied and BFI operated as separate  entities.  We may not be able
      to  maintain  the levels of  operating  efficiency  that Allied or BFI had
      achieved or might  achieve  separately.  Successful  integration  of BFI's
      operations will depend upon our ability to manage those  operations and to
      eliminate redundant and excess costs. Because of difficulties in combining
      operations,  we may not be able to achieve the cost savings,  increases in
      internalization  rates,  and other size related  benefits  that we hope to
      achieve after the acquisition. Failure to achieve effective integration in
      the anticipated  time period or at all could have an adverse effect on our
      future results of operations.

      Ongoing Capital Requirements. To the extent that internally generated cash
      and cash available under our existing credit facilities are not sufficient
      to provide the cash required for future operations,  capital expenditures,
      acquisitions,   debt  repayment  obligations  and/or  financial  assurance
      obligations,  we will require  additional  equity and/or debt financing in
      order to provide such cash. We have incurred  significant debt obligations
      in the last two years,  which entail  substantial  debt service costs. The
      Forward  Looking  Statements  assume  that we will  be able to  raise  the
      capital  necessary to finance such  requirements at rates that are as good
      as or better than those we are currently  experiencing.  We cannot assure,
      however,  that  such  financing  and  hedging  and  other  means of fixing
      interest  rates on our debt will be available  or, if  available,  that we
      will find such terms  regarding  debt  service  costs and  interest  rates
      consistent with the assumptions of Forward Looking Statements or otherwise
      satisfactory. See "Liquidity and Capital Resources".



                                       32
<PAGE>


      Economic  Conditions.   Our  business  is  affected  by  general  economic
      conditions.  The Forward Looking Statements assume that we will be able to
      achieve  internal  volume and price  growth,  which is not  impacted by an
      economic downturn.  As our revenue continues to grow it is likely that the
      rates of internal  growth will reflect  growth rates,  which are less than
      those experienced in 1999. We cannot assure that an economic downturn will
      not result in a reduction in the volume of waste being  disposed of at our
      operations and/or the price that we can charge for our services.

      Weather Conditions.  Protracted periods of inclement weather may adversely
      affect  our  operations  by  interfering   with  collection  and  landfill
      operations,  delaying the development of landfill capacity and/or reducing
      the volume of waste generated by our customers. In addition,  particularly
      harsh weather conditions may result in the temporary suspension of certain
      of our operations.  The Forward Looking Statements do not assume that such
      weather conditions will occur.

      Dependence on Senior  Management.  We are highly dependent upon our senior
      management team. In addition, as we continue to grow, our requirements for
      operations  management with waste industry  experience will also increase.
      The  availability of such  experienced  management is not known. Our Chief
      Financial Officer announced his forthcoming  resignation in February 2000.
      The Forward Looking Statements assume that experienced  management will be
      available  when  needed  by us at  compensation  levels  that  are  within
      industry norms. We may also encounter  difficulty in the  assimilation and
      retention of  employees.  The loss of the services of any member of senior
      management  or the  inability to hire  experienced  operations  management
      could have a material adverse effect on us.

      Influence of  Government  Regulation  and Other Third Party  Actions.  Our
      operations are subject to and substantially affected by extensive federal,
      state and local  laws,  regulations,  orders  and  permits,  which  govern
      environmental  protection,  health and safety,  zoning and other  matters.
      These  regulations  may  impose  restrictions  on  operations  that  could
      adversely  affect our results,  such as  limitations  on the  expansion of
      disposal  facilities,  limitations  on  or  the  banning  of  disposal  of
      out-of-state  waste or certain  categories of waste or mandates  regarding
      the  disposal  of solid  waste.  Because  of  heightened  public  concern,
      companies in the waste management  business may become subject to judicial
      and administrative proceedings involving federal, state or local agencies.
      These governmental  agencies may seek to impose fines or to revoke or deny
      renewal of operating  permits or licenses for violations of  environmental
      laws or regulations,  or to require remediation of environmental  problems
      at  sites  or  nearby   properties   resulting  from   transportation   or
      predecessors' transportation and collection operations, all of which could
      have a  material  adverse  effect on us.  Liability  may also  arise  from
      actions  brought by other third parties such as  individuals  or community
      groups in connection  with the permitting or licensing of operations,  any
      alleged  violations  of such  permits and licenses or other  matters.  The
      Forward  Looking  Statements  assume  that  there  will  be no  materially
      negative  impact on our operations  due to government  regulation or other
      third-party actions.

      Potential  Environmental  Liability.  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.
      The Forward Looking  Statements assume that we will not incur any material
      environmental  liabilities other than those for which a provision has been
      recorded in the  Consolidated  Financial  Statements  and disclosed in the
      notes thereto.

      Inflation and Prevailing Economic Conditions

      To date,  inflation  has not had a significant  impact on our  operations.
      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  therefore  believe we should be
      able to implement price increases sufficient to offset most cost increases
      resulting from inflation.  However,  competitive factors may require us to
      absorb cost increases resulting from inflation. We are unable to determine
      the future impact of a sustained economic slowdown.



                                       33
<PAGE>


      Seasonality

      We believe that our  collection,  transfer and landfill  operations can be
      adversely  affected by protracted periods of inclement weather which could
      delay the  development  of landfill  capacity or transfer of waste  and/or
      reduce the volume of waste generated.

      Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

      We are subject to interest rate risk on our variable rate long-term  debt.
      To modify 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.

      At December 31, 1998, our variable rate debt consisted of our $300 million
      Senior  Credit  Facility  which had an average  interest  rate of 6.0% and
      scheduled maturities of $75 million in 2001, $105 million in 2002 and $120
      million in 2003. The book value at December 31, 1998 approximated its fair
      market value.

      We have  effectively  converted our long-term debt, which requires payment
      at variable rates of interest,  to fixed rate obligations through interest
      rate swap transactions.  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 impact  earnings  and cash flow as all variable  rate
      debt had been swapped for fixed rates. In addition, decreases in long-term
      market  interest  rates would have the effect of increasing the fair value
      of our long-term debt and other  long-term,  fixed rate  obligations.  The
      following  interest  rate table shows the interest rate swaps that were in
      effect and their fair value as of December 31, 1998:

<TABLE>
<CAPTION>

                                                                                                                       Fair Market
Notional Principal                          Interest                                                   Interest           Value
  (in thousands)            Maturity          Paid                Underlying Obligations               Received      (in thousands)
-------------------    -------------------  ---------      --------------------------------------     -----------    ---------------
<S>                    <C>                      <C>        <C>                                          <C>          <C>
$        50,000        April 1999               5.12  %    Credit Agreement Term Loan Facility          Libor        $          6.0
         50,000        October 1999             6.02       Credit Agreement Term Loan Facility          Libor                 497.4
         50,000        November 1999            5.90       Credit Agreement Term Loan Facility          Libor                 442.9
         50,000        November 1999            5.91       Credit Agreement Term Loan Facility          Libor                 439.5
         50,000        March 2000               6.06       Credit Agreement Term Loan Facility          Libor                 618.5
         50,000        September 2000           6.08       Credit Agreement Term Loan Facility          Libor                 894.3
<FN>

      See Note 6 to our Consolidated Financial Statements in Item 8 of this Form
      10-K for additional information regarding how we manage interest rate risk
      at December 31, 1999.
</FN>
</TABLE>




                                       34
<PAGE>


      Item 8. Financial Statements and Supplementary Data

           Report of Independent Public Accountants.

           Consolidated Balance Sheets as of December 31, 1999 and 1998.

           Consolidated Statements of Operations for the Three Years Ended
           December 31, 1999.

           Consolidated  Statements of Stockholders'  Equity for the Three Years
           Ended December 31, 1999.

           Consolidated  Statements  of Cash  Flows  for the Three  Years  Ended
           December 31, 1999.

           Notes to Consolidated Financial Statements.




                                       35
<PAGE>


      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, 1999 and 1998,  and the related  consolidated  statements  of
      operations,  stockholders'  equity  and cash  flows  for each of the three
      years in the period ended December 31, 1999.  These  financial  statements
      and Schedule II referred to below are the responsibility  of the Company's
      management. Our responsibility is to express an opinion on these financial
      statements and Schedule II referred to below 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, 1999 and 1998, and
      the results of their operations and their cash flows for each of the three
      years in the period ended December 31, 1999, 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.

      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 22, 2000



                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                  ALLIED WASTE INDUSTRIES, INC.
                                                   CONSOLIDATED BALANCE SHEETS

                                             (in thousands, except per share amount)


                                                                                          December 31,
                                                                            ------------------------------------------
                                                                                  1999                    1998
                                                                            ------------------      ------------------
ASSETS
Current Assets --

<S>                                                                         <C>                     <C>
Cash and cash equivalents...............................................    $       121,405         $        39,742
Accounts receivable, net of allowance of $59,490 and $13,907............            867,667                 225,087
Prepaid and other current assets........................................            252,187                  47,184
Deferred income taxes, net..............................................            115,263                  44,141
Assets held for sale....................................................            891,900                 143,750
                                                                            ------------------      ------------------
  Total current assets..................................................          2,248,422                 499,904
Property and equipment, net.............................................          3,738,388               1,776,025
Goodwill, net ..........................................................          8,238,929               1,327,470
Other assets, net.......................................................            737,362                 149,193
                                                                            ------------------      ------------------
  Total assets..........................................................    $    14,963,101         $     3,752,592
                                                                            ==================      ==================


      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities --
Current portion of long-term debt.......................................     $     1,002,928         $        21,516
Accounts payable........................................................             481,318                 106,082
Accrued closure, post-closure and environmental costs...................             134,968                  41,938
Accrued interest........................................................             158,251                   7,892
Other accrued liabilities...............................................             613,663                 228,934
Unearned revenue........................................................             238,371                  48,511
                                                                             -----------------       -----------------
  Total current liabilities.............................................           2,629,499                 454,873
Long-term debt, less current portion....................................           9,240,291               2,118,927
Deferred income taxes...................................................             204,786                      --
Accrued closure, post-closure and environmental costs...................             860,574                 205,982
Other long-term obligations.............................................             388,396                  42,736
Commitments and contingencies
Series A senior convertible preferred stock, 1,000 shares
  authorized, issued and outstanding, liquidation
  preference of $1,028 per share........................................           1,001,559                      --
Stockholders' Equity --
Common stock............................................................               1,885                   1,845
Additional paid-in capital..............................................           1,205,399               1,208,906
Retained deficit........................................................            (569,288)               (280,677)
                                                                             -----------------       -----------------
  Total stockholders' equity............................................             637,996                 930,074
                                                                             -----------------       -----------------
  Total liabilities and stockholders' equity............................     $    14,963,101         $     3,752,592
                                                                             =================       =================

<FN>

      The  accompanying  Notes  to  Consolidated  Financial  Statements  are  an
integral part of these balance sheets.
</FN>
</TABLE>




                                       37
<PAGE>

<TABLE>
<CAPTION>
                                            ALLIED WASTE INDUSTRIES, INC.
                                        CONSOLIDATED STATEMENTS OF OPERATIONS

                                    (in thousands, except for per share amounts)

                                                                                        Year Ended December 31,
                                                                         -------------------------------------------------------
                                                                              1999                1998                1997
                                                                         ---------------     ---------------     ---------------
<S>                                                                      <C>                 <C>                 <C>
Revenues............................................................     $    3,341,071      $    1,575,612      $    1,340,661
Cost of operations excluding acquisition related and unusual costs..          1,948,964             892,273             777,289
Selling, general and administrative expenses excluding acquisition
  related and unusual costs.........................................            231,366             155,835             177,396
Depreciation and amortization.......................................            273,368             149,260             131,658
Goodwill amortization...............................................            110,726              30,705              26,580
Acquisition related and unusual costs...............................            588,855             317,616               3,934
                                                                         ---------------     ---------------     ---------------
  Operating income..................................................            187,792              29,923             223,804
Equity in earnings of unconsolidated affiliates.....................           (20,785)                  --                  --
Interest income.....................................................            (7,212)             (4,030)             (1,765)
Interest expense....................................................            443,044              88,431             108,045
                                                                         ---------------     ---------------     ---------------
  Income (loss) before income taxes.................................          (227,255)            (54,478)             117,524
Income tax expense (benefit)........................................            (8,756)              43,773              40,277
Minority Interest...................................................              2,751                  --                  --
                                                                         ---------------     ---------------     ---------------
  Income (loss) before extraordinary losses and cumulative effect of
    change in accounting principle..................................          (221,250)            (98,251)              77,247
Extraordinary losses, net of income tax benefit.....................              3,223             124,801              53,205
Cumulative effect of change in accounting principle, net of income
  tax benefit.......................................................             64,255                  --                  --
                                                                         ---------------     ---------------     ---------------
  Net income (loss).................................................          (288,728)           (223,052)              24,042
Dividends on preferred stock........................................             27,789                  --                 381
                                                                         ---------------     ---------------     ---------------
  Net income (loss) available to common shareholders................     $    (316,517)      $    (223,052)      $       23,661
                                                                         ===============     ===============     ===============

Basic EPS:
Income (loss) available to common shareholders before  extraordinary
  losses and cumulative effect of change in accounting principle, net

  of income tax benefit.............................................     $       (1.33)      $       (0.54)      $         0.47
Extraordinary losses, net of income tax benefit.....................             (0.02)              (0.68)              (0.33)
Cumulative effect of change in accounting principle, net of income
  tax benefit.......................................................             (0.34)                  --                  --
                                                                         ---------------     ---------------     ---------------
  Net income (loss) available to common shareholders................     $       (1.69)      $       (1.22)      $         0.14
                                                                         ===============     ===============     ===============
Weighted average common shares......................................            187,801             182,796             164,888
                                                                         ===============     ===============     ===============

Diluted EPS:
Income (loss) available to common shareholders before  extraordinary
  losses and cumulative effect of change in accounting principle, net

  of income tax benefit.............................................     $       (1.33)      $       (0.54)      $         0.44
Extraordinary losses, net of income tax benefit.....................             (0.02)              (0.68)              (0.30)
Cumulative effect of change in accounting principle, net of income
  tax benefit.......................................................             (0.34)                  --                  --
                                                                         ---------------     ---------------     ---------------
  Net income (loss) available to common shareholders................     $       (1.69)      $       (1.22)      $         0.14
                                                                         ===============     ===============     ===============
Weighted average common and common equivalent shares................            187,801             182,796             172,958
                                                                         ===============     ===============     ===============

Pro forma  amounts,  assuming  the  change in  accounting  principle
  is applied retroactively:

Net income (loss) available to common shareholders..................                         $    (256,265)      $        5,085
Diluted earnings (loss) per share...................................                         $       (1.40)      $         0.03
<FN>

The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</FN>
</TABLE>




                                       38
<PAGE>

<TABLE>
<CAPTION>
                                            ALLIED WASTE INDUSTRIES, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                   (in thousands)

                                                                                  Additional                              Total
                                                 Preferred        Common            Paid-In          Retained         Stockholders'
                                                   Stock           Stock            Capital           Deficit            Equity
                                                ------------    ------------     --------------    --------------    ---------------
<S>                                             <C>             <C>              <C>               <C>               <C>
Balance as of December 31, 1996...............  $         1     $     1,501      $   439,060       $   (55,344)      $       385,218
  Common stock issued, net....................           --             221          357,798                --               358,019
  Warrants repurchased........................           --              --          (49,000)               --              (49,000)
  Stock grant amortization....................           --              --              381                --                   381
  Stock options and warrants exercised........           --              13            4,195                --                 4,208
  9% Cumulative Convertible preferred
    stock and convertible notes converted.....          (1)              17            2,174                --                 2,190
  Dividends declared on preferred stock.......           --              --             (381)               --                 (381)
  Equity transactions of pooled companies.....           --              62          245,050            (7,324)              237,788
  Net income..................................           --              --               --            24,042                24,042
                                                ------------    ------------     --------------    --------------    ---------------

Balance as of December 31, 1997...............           --           1,814          999,277          (38,626)               962,465
  Common stock issued, net....................           --              13           26,474                --                26,487
  Stock grant amortization....................           --              --            1,251                --                 1,251
  Stock options and warrants exercised........           --              18           23,547                --                23,565
  Equity transactions of pooled companies.....           --              --          158,357           (18,999)              139,358
  Net loss....................................           --              --               --          (223,052)            (223,052)
                                                ------------    ------------     --------------    --------------    ---------------

Balance as of December 31, 1998...............           --           1,845        1,208,906          (280,677)              930,074
  Common stock issued, net....................           --               2              220                --                   222
  Stock options and warrants exercised........           --              14           20,480                --                20,494
  Dividends declared on Series A Senior

    Convertible Preferred Stock...............           --              --          (27,789)               --              (27,789)
  Equity transactions of pooled companies.....           --              24            3,582               117                 3,723
  Net loss....................................           --              --               --          (288,728)            (288,728)
                                                ------------    ------------     --------------    --------------    ---------------
Balance as of December 31, 1999...............  $        --     $     1,885      $1,205,399        $  (569,288)      $       637,996
                                                ============    ============     ==============    ==============    ===============
<FN>

   The accompanying Notes to Consolidated  Financial  Statements are an integral
part of these statements.
</FN>
</TABLE>




                                       39
<PAGE>

<TABLE>
<CAPTION>

                                            ALLIED WASTE INDUSTRIES, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   (in thousands)

                                                                                               Year Ended December 31,
                                                                                 ---------------------------------------------------
                                                                                      1999               1998               1997
                                                                                 ---------------    ---------------    -------------
Operating activities --
<S>                                                                              <C>                <C>                <C>
Net income (loss)...........................................................     $  (288,728)       $   (223,052)      $      24,042
Adjustments to reconcile net income (loss) to cash provided by operating
  activities--
Provisions for:
  Depreciation and amortization.............................................          384,094             179,965            158,238
  Non-cash acquisition related and unusual costs and asset impairments......          105,186              88,228                 --
  Cumulative effect of change in accounting principle, net of income tax               64,255                  --                 --
benefit.....................................................................
  Undistributed earnings of equity investment in unconsolidated subsidiary..           13,217                  --                 --
  Doubtful accounts.........................................................           10,305               8,086              4,228
  Accretion of senior discount notes and amortization of debt issuance costs           27,155              33,057             26,630
  Deferred income tax provision (benefit)...................................        (115,964)              24,636            (1,794)
  Gain on sale of assets....................................................          (5,346)             (3,521)            (7,250)
  Extraordinary losses due to early extinguishments of debt, net of income tax
  benefit and cash premium paid.............................................            3,223             118,957             50,518
Cash premium paid due to early extinguishments of debt......................               --           (173,159)           (64,439)
Change in operating assets and liabilities, excluding the effects of purchase
  acquisitions--
  Accounts receivable, prepaid expenses, inventories and other..............        (100,586)            (58,517)          (131,840)
  Accounts payable, accrued liabilities, unearned income, and other.........           13,099             159,862             70,803
  Acquisition related accruals..............................................          382,643              20,244                 --
  Closure and post-closure provision........................................           35,242              17,607             12,920
  Closure, post-closure and environmental expenditures......................         (38,784)            (23,000)           (14,590)
                                                                                 -------------      -------------      -------------
Cash provided by operating activities.......................................          489,011             169,393            127,466
                                                                                 -------------      -------------      -------------

Investing activities --
  Cost of acquisitions, net of cash acquired................................      (7,589,597)           (312,986)          (498,706)
  Accruals for acquisition price............................................           15,171                  --                 --
  Net contributions to unconsolidated subsidiaries..........................         (17,011)                  --                 --
  Capital expenditures, excluding acquisitions..............................        (339,192)           (301,742)          (188,005)
  Capitalized interest......................................................         (25,474)            (67,499)           (37,568)
  Proceeds from sale of assets..............................................           53,246              12,070              5,404
  Proceeds from sale of assets held for sale................................          468,880                  --            524,716
  Change in deferred acquisition costs and notes receivable.................         (28,555)             (8,184)            (7,926)
                                                                                 -------------      -------------      -------------
Cash used for investing activities..........................................      (7,462,532)           (678,341)          (202,085)
                                                                                 -------------      -------------      -------------

Financing activities --
  Net proceeds from sale of common stock and exercise of stock options
    and warrants............................................................           10,198              11,324            329,019
  Net proceeds from sale of preferred stock.................................          973,881                  --                 --
  Proceeds from long-term debt, net of issuance costs.......................        8,672,295           2,725,262          1,336,780
  Repayments of long-term debt..............................................      (2,601,190)         (2,265,741)        (1,791,799)
  Repurchase of warrant.....................................................               --                  --           (49,000)
  Other long-term obligations...............................................               --               2,745             12,886
  Dividends paid............................................................               --                  --              (525)
  Equity transactions of pooled companies...................................               --              41,780            200,563
                                                                                 -------------      -------------      -------------
Cash provided by financing activities.......................................        7,055,184             515,370             37,924
                                                                                 -------------      -------------      -------------
Increase (decrease) in cash and cash equivalents............................           81,663               6,422           (36,695)
Cash and cash equivalents, beginning of period..............................           39,742              33,320             70,015
                                                                                 -------------      -------------      -------------
Cash and cash equivalents, end of period....................................     $    121,405       $      39,742      $      33,320
                                                                                 =============      =============      =============

<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</FN>
</TABLE>



                                       40
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   1. Organization and Summary of Significant Accounting Policies

   Allied Waste Industries, Inc., a Delaware corporation,  ("Allied" or "we") 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 42 states located
   primarily  in  the  Atlantic,   Central,  Great  Lakes,  Midwest,  Northeast,
   Southeast, Southwest and West regions of the United States.

   On July 30, 1999, we completed the acquisition of Browning-Ferris Industries,
   Inc.  ("BFI") for  approximately  $7.7 billion of cash and the  assumption of
   approximately $1.9 billion of BFI debt. Prior to the acquisition, BFI was the
   second  largest  non-hazardous  solid  waste  company  in North  America  and
   provided integrated solid waste management services,  including  residential,
   commercial and industrial collection, transfer, disposal and recycling. As of
   the date of acquisition,  BFI serviced  approximately  7.3 million  customers
   through a network of 221  collection  companies,  86  transfer  stations,  84
   landfills,   and  102  recycling   facilities  and  had  annual  revenues  of
   approximately $4.2 billion.

   Principles of consolidation and presentation --

   The Consolidated  Financial Statements include the accounts of Allied and our
   subsidiaries.  All significant  intercompany  accounts and  transactions  are
   eliminated  in  consolidation.  The  Consolidated  Financial  Statements  and
   accompanying  notes have also been restated to reflect material  acquisitions
   accounted for as poolings-of-interests (See Note 2).

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

   Cash and cash equivalents --

   Cash  equivalents  are investments  with original  maturities of less than 90
   days and are stated at quoted market prices.  Cash and cash  equivalents  are
   net of approximately  $169.2 million and $32.7 million of outstanding  checks
   and deposits in transit at December 31, 1999 and 1998, respectively.

   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 limit
   the amount of credit exposure with any one financial institution.

   We provide services to approximately 9.9 million residential,  commercial and
   industrial customers  throughout the United States.  Concentrations of credit
   risk with respect to trade receivables are limited due to the large number of
   customers comprising our customer base. We perform ongoing credit evaluations
   of  our  customers,  but  do  not  require  collateral  to  support  customer
   receivables. We establish an allowance for doubtful accounts based on factors
   surrounding  the credit risk of  specific  customers,  historical  trends and
   other information.




                                       41
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   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 (30-40
   years), vehicles and equipment (3-15 years),  containers and compactors (5-10
   years) and furniture and office equipment (3-8 years). Statement of Financial
   Accounting  Standard No. 121 ("SFAS 121"),  Accounting  for the Impairment of
   Long-lived  Assets and  Long-lived  Assets to be Disposed of,  requires  that
   long-lived assets, such as property and equipment,  and certain  identifiable
   intangibles  be  reviewed  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  Discussion  Issue
   No.    95-23    ("EITF    95-23")    The    Treatment    of   Certain    Site
   Restoration/Environmental  Exit Costs  When  Testing a  Long-Lived  Asset for
   Impairment.  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 the years
   ended  December  31, 1999,  1998 and 1997,  maintenance  and repair  expenses
   charged to cost of operations  were $275.6  million,  $99.8 million and $80.9
   million,  respectively.  When  property  is  retired,  the  related  cost and
   accumulated depreciation are removed from the accounts and any resulting gain
   or loss is recognized.

   Goodwill --

   Goodwill  is the cost in  excess  of fair  value of  identifiable  assets  in
   purchase business combinations and is amortized on a straight-line basis over
   40 years. We allocate  goodwill when appropriate,  to the district  operating
   the  assets  based  on a  percentage  of  acquired  assets'  earnings  before
   interest,  taxes,  depreciation  and  amortization  ("EBITDA")  to the  total
   acquired  EBITDA.  In  accordance  with SFAS 121, we  continually  review for
   impairment  whenever  events or changes in  circumstances  indicate  that the
   remaining  estimated  useful life of goodwill might warrant  revision or that
   the  balance  may not be  recoverable.  We evaluate  possible  impairment  by
   comparing  estimated  future cash flows,  before  interest  expense and on an
   undiscounted basis, and the net book value of assets including  goodwill.  If
   undiscounted cash flows are insufficient to recover assets,  further analysis
   is performed in order to determine the amount of the impairment. We record an
   impairment  loss  equal to the  amount  by which the  carrying  amount of the
   assets  exceeds  their  fair  market  value.  Fair  market  value is  usually
   determined based on the present value of estimated expected future cash flows
   using a discount  rate  commensurate  with the risks  involved.  In instances
   where  goodwill is  identified  with assets that are subject to an impairment
   loss, the carrying amount of the identified goodwill is reduced before making
   any reduction to the carrying amounts of impaired long-lived assets. See Note
   1 -  Acquisition  related and unusual  costs for a discussion of current year
   asset impairments recorded.  Goodwill  amortization of $110.7 million,  $30.7
   million and $26.6 million was recorded for the years ended December 31, 1999,
   1998 and 1997,  respectively.  Accumulated  goodwill  amortization was $185.3
   million and $74.6 million at December 31, 1999 and 1998, respectively.




                                       42
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   Other assets --

   Other assets include notes receivable,  landfill closure  deposits,  deferred
   charges,  investments in unconsolidated  subsidiaries,  prepaid pension costs
   and miscellaneous non-current assets. Deferred charges include costs incurred
   to acquire  businesses and to obtain debt financing.  Upon consummation of an
   acquisition,  deferred costs relating to acquired businesses accounted for as
   purchases are allocated to goodwill or landfill airspace while costs relating
   to acquired businesses accounted for as  poolings-of-interests  are expensed.
   Direct costs related to  acquisitions  under  evaluation are  capitalized and
   reviewed for realization on a periodic  basis.  These costs are expensed when
   management  determines that the capitalized  costs provide no future benefit.
   Upon  funding  of debt  offerings,  deferred  costs are  capitalized  as debt
   issuance costs and amortized  using the interest  method over the life of the
   related debt.  Miscellaneous  assets include  consulting and  non-competition
   agreements,  which  are  amortized  in  accordance  with  the  terms  of  the
   respective agreements and contracts, generally not exceeding five years.

   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.  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.   The  impact  of  changes
   determined  to be  changes in  estimates,  based on the  annual  update,  are
   accounted for on a prospective  basis.  The present value of estimated future
   costs are  accrued  on a per unit basis as  landfill  airspace  is  consumed.
   Discounting of future costs is applied where we believe that both the amounts
   and timing of related payments are reliably determinable.

   Environmental costs --

   We accrue for costs  associated with  environmental  remediation  obligations
   when such costs are probable and reasonably estimable. Accruals for estimated
   losses from environmental remediation obligations generally are recognized no
   later than completion of the remedial  feasibility  study.  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 AICPA  Statement  of  Position  96-1 ("SOP  96-1")
   Environmental Remediation Liabilities.

   Other long-term obligations --

   Other long-term  obligations  include the  non-current  portions of insurance
   accruals,  legal accruals, loss contract and restructuring accruals and other
   obligations not expected to be paid within the following year.

   Revenue --

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




                                       43
<PAGE>

                          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  non-variable  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 --

   We evaluated our capitalized  interest policy to assess the  comparability of
   the calculation with the change in the business  strategy  resulting from the
   acquisition of BFI. As a result of this assessment,  we changed the method of
   calculating   capitalization   of  interest  under   Statement  of  Financial
   Accounting  Standard  No. 34,  Capitalization  of Interest  Cost ("SFAS 34").
   Previously,  interest was capitalized using a method that defined the area of
   a  landfill  under  development  as  all  acreage  considered  available  for
   development.  Actual acquisition,  permitting and construction costs incurred
   related to the area under development qualified for interest  capitalization.
   Any costs incurred related to areas already  developed and accepting waste no
   longer qualified for interest capitalization.  Under the new methodology, the
   area of a landfill  under  development  is defined as only the portion of the
   permitted acreage currently undergoing active cell development. The effect of
   this change in definition is to substantially  reduce the acreage  qualifying
   for interest  capitalization.  The costs upon which  interest is  capitalized
   continue to include the actual acquisition, permitting and construction costs
   incurred  for  cell  development.   Consistent  with  the  prior  policy,  as
   construction of an area is completed and the area becomes  available for use,
   the cell no longer qualifies for interest capitalization.

   The adoption of this method, which is accounted for as a change in accounting
   principle,  reflects the change in our operating  strategy as a result of the
   BFI  acquisition.  Previously our strategy was focused on the acquisition and
   development  of waste  disposal  capacity.  Through the BFI  acquisition,  we
   substantially  achieved  our  previous  strategy  and are now focusing on the
   increased utilization of landfill capacity.

   The impact of the change in  accounting  principle is a cumulative  charge of
   approximately  $106.2 million ($64.3 million net of income taxes). The effect
   of the change on the year ended  December 31, 1999 was to decrease net income
   before cumulative effect of a change in accounting principle by $14.8 million
   ($0.08  per  share) and net  income  after  cumulative  effect of a change in
   accounting  principle  by $79.1  million  ($0.42  per  share).  The pro forma
   amounts shown on our Consolidated Statements of Operations reflect the effect
   of retroactive  application on capitalized interest in the prior periods that
   would have been  recorded  had the new  method  been in effect  during  these
   periods and the related income tax benefit.




                                       44
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   Acquisition related and unusual costs --

   1999:

      During the year ended  December 31, 1999,  we recorded  $588.9  million of
      acquisition  related and unusual costs primarily  associated with the $9.6
      billion  acquisition  of BFI,  which was  accounted for as a purchase (See
      Note 2). The costs  primarily  relate to  environmental  related  matters,
      litigation  liabilities,   risk  management  liabilities,   loss  contract
      provisions,  transition costs and the write-off of deferred costs relating
      to the acquisition. These costs are comprised of the following:

      We recorded a charge of approximately $267.0 million related to changes in
      estimates of environmental  liabilities  associated with BFI's operations.
      In connection with our due diligence and integration process,  assessments
      of the acquired  operations  were  performed by  third-party  and in-house
      engineers.  Based on these  assessments,  we made  changes  in  accounting
      estimates  of  approximately  (i)  $133.7  million   associated  with  the
      Superfund  accrual  for over 150 CERCLA  cases in which BFI was  involved,
      (ii) $30.3 million associated with the remedial accrual for sites in which
      BFI  was  involved  with  remedial  action  plans,   (iii)  $56.3  million
      associated  with the  environmental  accrual for various  containment  and
      treatment  matters  at 76 active or closed BFI  landfills,  and (iv) $46.7
      million   associated  with  the  accrual  for  the  remedial  and  closure
      requirements of four BFI hazardous waste facilities.

      Management  believes  the  environmental  accrual as of December  31, 1999
      represents  the  most  probable  outcome  of  these  matters  based on our
      intended  remediation  plans.  We do not expect that  adjustments to these
      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.

      We recorded a charge of approximately  $93.5 million related to changes in
      estimates of litigation liabilities  associated with BFI's operations.  In
      connection with our due diligence and integration process,  assessments of
      the acquired  operations  and  outstanding  litigation  were  performed by
      third-party  and  in-house  legal  counsel.  We  evaluated  over 150 cases
      involving employee-related matters, insurance related matters,  regulatory
      matters,  collection  matters  and  contract  disputes.   Accordingly,  we
      increased  the  litigation  accrual  based on the most probable loss to be
      incurred.

      Management  believes  the  litigation  accrual  as of  December  31,  1999
      represents the most probable  outcome of outstanding  assessments,  claims
      and cases.  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. As of December 31,
      1999,  we believe  that it is possible  that the  ultimate  outcome of the
      litigation matters could result in approximately $10 million of additional
      liability.

      We  recorded  an  increase   of   approximately   $20.0   million  to  the
      self-insurance  accruals  based on the results of a third-party  actuarial
      review  performed in connection  with due diligence and integration of the
      BFI acquisition. As of September 30, 1999, we instituted a guaranteed cost
      insurance program for all casualty  insurance  coverages.  As a result, we
      are fully insured for any such claims occurring subsequent to that date.

      In connection with the integration of the BFI acquisition, we reviewed the
      existing contracts of the business for  recoverability.  Several contracts
      were  identified  which  were in a loss  position  when the  direct  costs
      (excluding any non-variable type costs)  attributable to the contract were
      deducted from the revenue to be generated by the contract. Consistent with
      our  accounting  policies,  we  recorded a charge of  approximately  $32.6
      million  to  operations  for the  excess  of costs  over  revenues  of the
      identified contracts.



                                       45
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      As a result of the acquisition of BFI, management  reassessed the level of
      acquisitions  that it would  pursue in the future and decided that certain
      companies that were being targeted will no longer be pursued. Accordingly,
      we wrote off $26.1  million of  deferred  charges  previously  incurred in
      connection with these potential acquisitions.  Additionally,  we wrote off
      $33.8 million of commitment  fees paid in connection with a portion of the
      financing of the BFI  acquisition.  These fees were  associated with funds
      that were not  ultimately  drawn due to  alternative  sources of financing
      becoming available.  However, as secured financing for the entire purchase
      price of the  acquisition  was a  condition  of the  signing of the merger
      agreement  with  BFI,  and the debt  associated  with  these  fees was not
      incurred, the cost was written off in the third quarter.

      In  connection  with  the  integration  plan for BFI,  we  identified  and
      notified  approximately  1,500 employees that they would be retained for a
      specified period, generally not exceeding nine months from the acquisition
      date, to perform transition related functions. Subsequent to the specified
      time period, they will be terminated.  Additionally, we identified certain
      offices and operations,  which are duplicative,  and we are in the process
      of  consolidating  these  operations.  As these  transition  costs are not
      accruable  until  committed  or  paid,   approximately  $67.4  million  of
      transition  costs were  expensed  during  1999.  Additionally,  we accrued
      approximately $10.0 million of committed transition costs during the year.
      We estimate  that we may incur  approximately  $115 million of  additional
      transition  expenses  associated  with  the  integration  of BFI  over the
      subsequent quarters.

      Additionally,  we recorded  approximately  $43.5 million of non-cash asset
      impairments  related  to the  valuation  of Allied  assets  held for sale,
      approximately  $1.8  million  of  non-cash  asset  impairments  related to
      duplicative  facilities,  and approximately  $0.4 million of restructuring
      and abandonment costs related to other 1999 acquisitions.

      Any  subsequent  changes in estimates of  acquisition  related and unusual
      costs will be  included  in the  acquisition  related  and  unusual  costs
      caption of the  statement of  operations in the period in which the change
      in estimate is made.  During 1999,  approximately  $7.2 million of accrued
      acquisition  related costs associated with 1998 acquisitions were reversed
      to acquisition related and unusual costs.

      The following table reflects the cash activity  related to the acquisition
      related and unusual costs accrued during 1999 (in thousands):

<TABLE>
<CAPTION>

                                               1999
                                             Additions            1999                                       Balance
                                              through           Non-Cash              1999                  Remaining
                                            Expense(1)          Charges           Expenditures          December 31, 1999
                                           --------------    ---------------     ----------------     -----------------------
<S>                                        <C>               <C>                 <C>                         <C>
Transition costs....................       $    77,350       $          --       $      (74,654)             $     2,696
Restructuring and abandonment
  costs.............................               387                  --                    --                     387
Loss contracts......................            32,643                  --               (6,058)                  26,585
Environmental, litigation, and
  regulatory compliance costs.......           380,500                  --               (9,455)                 371,045
Asset impairments...................           105,186           (105,186)                    --                      --
                                           --------------    --------------      ---------------             --------------
  Total.............................       $   596,066       $   (105,186)       $      (90,167)             $   400,713
                                           ==============    ==============      ===============             ==============

<FN>
(1)     Additionally  during 1999,  we reversed  approximately  $7.2 million of accruals to  acquisition  related and
        unusual costs related to 1998 acquisitions.
</FN>
</TABLE>

                                       46
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   1998:

      During the year ended December 31, 1998, we recorded  acquisition  related
      and unusual costs in the amount of $317.6 million.  These costs consist of
      transaction  and deal costs,  employee  severance  and  transition  costs,
      environmental   related  matters,   litigation   liabilities,   regulatory
      compliance  matters,  restructuring  and abandonment  costs, loss contract
      provisions and non-cash  asset  impairment  charges.  We do not anticipate
      that future costs to be incurred in connection with the 1998  acquisitions
      will be significant as restructuring and transition  activities associated
      with these  acquisitions had been  substantially  completed as of December
      31, 1998. The 1998  acquisition  related and unusual costs discussed below
      predominantly     relate    to     acquisitions     accounted    for    as
      poolings-of-interests and consist of the following:

      Direct  transaction and deal costs of $51.2 million  including  investment
      banker,   attorney,   accountant,   environmental   assessment  and  other
      third-party fees.  Approximately $11.7 million was accrued at December 31,
      1998 and was paid during the first six months of 1999.

      Employee  severance and  transition  costs of $73.6  million  consisted of
      $39.3  million in  termination  payments  made to  employees  of  acquired
      companies based on change of control  provisions in preexisting  contracts
      and $34.3 million of costs  associated with severance  payments under exit
      or integration  plans  implemented in connection  with  acquisitions  made
      during 1998. Exit plans primarily  related to the elimination of duplicate
      corporate and administrative  offices of companies  acquired.  Integration
      plans  included the  combination of field  activities for human  resource,
      accounting,   facility  maintenance,  health  and  safety  compliance  and
      customer  service  activities of companies  acquired with field activities
      similar to ours. The exit and integration plans called for the termination
      of   approximately   800  employees  who  performed   managerial,   sales,
      administrative  support,  maintenance and repair,  or hauling and landfill
      operations  duties.  All employees  were  identified and notified of their
      severance or transition benefits at the time management approved the plan,
      which  occurred at or around the time of the  acquisitions.  Approximately
      $10.1 million was accrued at December 31, 1998, substantially all of which
      has been paid in 1999.

      Environmental  related  matters,  litigation  liabilities  and  regulatory
      compliance   matters  assumed  in  acquisitions   totaled  $73.4  million.
      Subsequent  to the  acquisitions,  we made certain  changes in  accounting
      estimates  due to  events  and  new  information  becoming  available  for
      environmental  liabilities  of  approximately  $41.1  million,  litigation
      liabilities  of  approximately  $20.8  million and  regulatory  compliance
      liabilities of approximately $11.5 million.

      As  part  of  our   acquisition  due  diligence   process,   environmental
      assessments  were performed at the time of acquisition by third-party  and
      in-house  engineers.  The assessments were performed at over 150 operating
      sites  owned  or used by the 54  companies  acquired  by  Allied  in 1998.
      Additional environmental  liabilities were accrued based on the results of
      the  assessments  and  represent  the  most  probable   outcome  of  these
      identified contingent matters.  Additional accrued environmental liability
      of $27.1 million was comprised of required remedial activities  identified
      at 28 separate locations. These locations include eight landfills acquired
      by Allied,  15  landfills  not owned by Allied,  but used for  disposal by
      collection  companies  acquired,  and transfer  stations  and  maintenance
      facilities acquired.  Required remedial activities include the removal and
      treatment of waste  improperly  disposed of,  containment and abatement of
      landfill  gas  migration,  removal and disposal of  contaminated  soil and
      hazardous  waste and legal and  administrative  costs of the settlement of
      Superfund  claims.  The additional $14 million of  environmental  accruals
      related to removal and  treatment of leachate at  landfills,  the level of
      which exceeded  permitted amounts at seven of the acquired  landfills.  At
      December  31,  1998,  approximately  $41.1  million and $15.8  million was
      accrued  for  environmental  matters and legal and  regulatory  compliance
      matters,  respectively,  which  are  expected  to be  disbursed  in future
      periods.




                                       47
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      The change in estimate  relating to litigation and  regulatory  compliance
      liabilities was accrued based on legal due diligence performed by in-house
      and  outside  legal  counsel  for  acquired   companies  at  the  time  of
      acquisition and the determination of the most probable loss incurred. As a
      result of this legal due diligence, we identified 14 companies acquired in
      business combinations accounted for as  poolings-of-interest  which had an
      aggregate of 54 asserted and unasserted  claims involving  matters such as
      contract disputes, employment related disputes, real and personal property
      and sales tax issues and billing  disputes.  Additionally,  we  identified
      regulatory  compliance  issues  related to 12  companies  acquired,  which
      included  citations  for  certain  state and  federal  health,  safety and
      transportation  violations and the associated costs of fines,  assessments
      and required  maintenance  costs to bring  facilities  and equipment  into
      compliance.

      Restructuring  and  abandonment  costs  were  $42.1  million  in  business
      combinations  accounted  for as  pooling-of-interests.  Costs to  relocate
      redundant  operations and to transition them to common information systems
      were $23.1 million. Redundant operations consisted primarily of activities
      for human resources,  accounting,  facility maintenance, health and safety
      compliance  and customer  service which were performed in field offices of
      companies  acquired.  Abandonment  costs  and  losses on the  disposal  of
      duplicate  revenue  producing  assets relating to specifically  identified
      transfer stations and recycling facilities were $8.8 million.  Revenue and
      net operating income of the abandoned operations represented less than one
      percent of our consolidated amounts. Additionally,  $10.2 million of costs
      were  incurred  for the  disposition  of redundant  non-revenue  producing
      assets.  This  includes $7.6 million that was accrued at December 31, 1998
      in accordance with exit and integration plans,  substantially all of which
      has been paid in 1999. This accrual was for payments under  non-cancelable
      lease  agreements for corporate  offices that were vacated and other costs
      to close  corporate  facilities  after  operations  have ceased under exit
      plans implemented during 1998 at five companies acquired.

      Loss  contract  provisions  were $7.6 million for losses  associated  with
      collection   contracts  and  other  contractual   obligations  assumed  in
      acquisitions.  Approximately  $5 million was accrued at December  31, 1998
      and was paid during 1999.

      During the fourth quarter of 1998, we recognized non-cash asset impairment
      charges  aggregating  $69.7 million.  These charges related to assets held
      for future use and assets which were disposed  during the first six months
      of 1999. An impairment  charge of $45.9  million,  with no associated  tax
      benefit,  was recorded  relating to goodwill recorded by American Disposal
      Services,   Inc.   ("ADSI")  in  connection  with  ADSI's  September  1997
      acquisition  of Fred  Barbara  Trucking,  a private  waste  transportation
      business. Additionally, an impairment charge of $23.8 million was recorded
      for the write-down to net realizable value less cost of disposal of assets
      to be sold relating to non-core or non-integrated operating districts.

Any  subsequent  changes in estimates of  acquisition  related and unusual costs
will be included in the  acquisition  related and unusual  costs  caption of the
statement of  operations  in the period in which the change in estimate is made.
During  1999,  approximately  $7.2  million  accrued  acquisition-related  costs
associated  with 1998  acquisitions  were  reversed to  acquisition  related and
unusual costs.




                                       48
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The  following  table  reflects  the  activity  related to the 1998  acquisition
related and unusual costs (in thousands):

<TABLE>
<CAPTION>

                                                                                                                  Balance
                                                  1998                                                           Remaining
                                  1998          Non-cash        1998             1999             1999         December 31,
                                 Expense        Charges     Expenditures     Expenditures     Adjustments          1999
                               ------------  -------------  --------------  ---------------  ---------------  ----------------
<S>                            <C>           <C>            <C>             <C>              <C>              <C>
Transaction and deal costs...  $    51,200   $        --    $    (39,529)   $    (10,952)    $       (719)    $            --
Severance and transition costs      73,619            --         (63,493)         (8,800)            (854)                472
Restructuring and abandonment

  costs......................       42,098      (18,514)         (15,954)         (2,353)          (4,680)                597
Loss contracts...............        7,569            --          (2,587)         (4,623)            (359)                 --
Environmental, litigation and
  regulatory compliance costs       73,416            --         (16,482)        (16,589)            (599)             39,746
Asset impairments............       69,714      (69,714)               --              --               --                 --
                               ------------  -------------  --------------  ---------------  ---------------  ----------------
Total........................  $   317,616   $  (88,228)    $   (138,045)   $    (43,317)    $     (7,211)    $        40,815
                               ============  =============  ==============  ===============  ===============  ================
</TABLE>

      Extraordinary Losses --

      1999:

      In  July  1999,  we  replaced  our  credit   facility  and  recognized  an
      extraordinary  charge of  approximately  $5.3 million ($3.2 million net of
      income tax benefit)  related to the write-off of previously  deferred debt
      issuance costs.

      1998:

      In December  1998,  we replaced our 1996 Notes and Senior  Discount  Notes
      with $1.7 billion in senior notes and recognized a charge of approximately
      $201.2  million  ($121.7  million  net of income tax  benefit)  related to
      premiums  paid for the early  payment  of the 1996  Notes  and the  Senior
      Discount  Notes and the  write-off of  previously  deferred  debt issuance
      costs.  In June 1998,  we replaced our credit  facility and  recognized an
      extraordinary  charge of  approximately  $5.1 million ($3.1 million net of
      income tax benefit)  related to the write-off of previously  deferred debt
      issuance costs.




                                       49
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      1997:

      In May 1997, we repurchased from the Laidlaw, Inc. two junior subordinated
      debentures  with an aggregate face amount of $318 million and a warrant to
      acquire 20.4 million shares of common stock, used as partial consideration
      for the acquisition of the solid waste operations of Laidlaw, Inc., for an
      aggregate purchase price of $230 million in cash. An extraordinary  charge
      to earnings  related to the  repurchase  of  approximately  $65.7  million
      ($39.4  million net of income tax benefit) was recorded.  In addition,  we
      replaced our $1.275  billion Bank  Agreement  with the $900 million senior
      credit facility (the "1997 Credit  Agreement") in June 1997 and recognized
      an extraordinary  charge of approximately $21.6 million ($13.0 million net
      of income tax benefit).

      In September  1997,  we sold 18.6 million  shares of common stock with net
      proceeds from the equity offering of approximately $327.4 million. We used
      $203  million of the net  proceeds  from the equity  offering  to retire a
      portion of the term loan  facility  of the 1997 Credit  Agreement  and $71
      million to repay the entire amount  outstanding  on the  revolving  credit
      facility. As a result of the early repayment of debt outstanding under the
      term loan  facility,  we recognized an  extraordinary  charge in the third
      quarter of 1997 of approximately  $1.3 million ($0.8 million net of income
      tax benefit) for the write-off of previously deferred debt issuance costs.

      Statements of cash flows --

      The supplemental  cash flow disclosures and non-cash  transactions for the
      three years ended December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                  ----------------------------------------------------
                                                                       1999               1998              1997
                                                                  ---------------    ---------------    --------------
Supplemental Disclosures -
<S>                                                               <C>                <C>                <C>
  Interest paid (net of amounts capitalized)..................    $     312,623      $      62,386      $      86,125
  Income taxes paid (proceeds received).......................          (74,855)            33,653             17,244

Non-Cash Transactions -
  Common stock, preferred stock or warrants
    issued in acquisitions or as commissions..................    $       1,573      $     124,854      $      73,570
  Capital leases..............................................               --              1,187             38,693
  Debt and liabilities incurred or assumed in
    acquisitions..............................................        1,850,162             65,409            207,806
  Debt converted to common stock..............................               --                 --              2,265
  Non-cash purchase and sale of operating
    business..................................................               --                 --            181,434
</TABLE>

      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.  Final settlement amounts could differ from
      those estimates.




                                       50
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      Interest rate protection agreements --

      Interest rate protection agreements are used to reduce interest rate risks
      and interest costs of our debt portfolio.  We enter into these  agreements
      to change the fixed/variable  interest rate mix of the portfolio to reduce
      our aggregate  exposure to increases in interest  rates. We do not hold or
      issue  derivative  financial  instruments  for  trading  purposes.   Hedge
      accounting treatment is applied to interest rate derivative contracts that
      are designated as hedges of specified debt  positions.  Amounts payable or
      receivable   under  interest  rate  swap   agreements  are  recognized  as
      adjustments to interest  expense in the periods in which they accrue.  Net
      premiums  paid for  derivative  financial  instruments  are  deferred  and
      recognized  ratably  over  the  life  of  the  instruments.   Under  hedge
      accounting  treatment,  current  period  income  is  not  affected  by the
      increase or decrease in the fair market value of derivative instruments as
      interest rates change because these  instruments  are not reflected in the
      financial statements at fair market value.

      Fair value of financial instruments --

      The  following  disclosure  of  the  estimated  fair  value  of  financial
      instruments is made in accordance  with the  requirements  of Statement of
      Financial  Accounting  Standards No. 107 ("SFAS 107"),  Disclosures  About
      Fair Value of Financial Instruments.  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, 1999 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 Note 6 for fair value of debt).

      Stock-based compensation plans --

      We  account  for  our  stock-based  compensation  plans  under  Accounting
      Principles  Board  Opinion  No. 25,  ("APB  25") which does not  require a
      charge to 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.  Statement  of  Financial  Accounting
      Standards No. 123 ("SFAS 123"),  Accounting for  Stock-based  Compensation
      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.  Additionally,  certain other  disclosures  with respect to stock
      compensation  and the related  assumptions  are used to determine  the pro
      forma effects of SFAS 123 (See Note 11).

      Recently issued accounting pronouncements --

      In June 1999, the Financial Accounting Standards Board issued Statement of
      Financial   Accounting   Standards  No.  137,  Accounting  for  Derivative
      Instruments  and Hedging  Activities - Deferral of the  Effective  Date of
      FASB  Statement  No. 133, an  amendment  of SFAS No. 133.  This  statement
      defers, for one-year,  the effective date of SFAS No. 133,  Accounting for
      Derivative  Instruments  and Hedging  Activities,  to those  fiscal  years
      beginning after June 15, 2000. SFAS No. 133 requires all derivatives to be
      recorded  as  either  assets  or  liabilities  and the  instruments  to be
      measured  at fair value.  Gains or losses  resulting  from  changes in the
      values of those derivatives are to be recognized  immediately or deferred,
      depending on the use of the derivative, and whether or not it qualifies as
      a hedge.  We will adopt SFAS No. 133 by January 1, 2001,  as required.  We
      are  currently  assessing  the impact of this  statement on our results of
      operations and financial position.




                                       51
<PAGE>


                  ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      2. Business Combinations and Divestitures

      Acquisitions  accounted  for under the  poolings-of-interests  method  are
      reflected in the results of operations as if the  acquisition  occurred on
      the first day of the earliest year presented.  Acquisitions  accounted for
      under the purchase method are reflected in the results of operations since
      the effective date of the acquisition.  For those  acquisitions  accounted
      for  using 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 varies but 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  financial
      position and consolidated financial results of operations.

      The  acquisition  of  BFI  has  been  accounted  for  as a  purchase  and,
      accordingly,  the  operating  results  of BFI have  been  included  in our
      consolidated  financial  statements  since  the date of  acquisition.  The
      excess of the aggregate  purchase  price over the fair market value of net
      assets was acquired of approximately $6.7 billion.

      The following  table  reflects the  allocation  of purchase  price for the
      acquisition of BFI, giving effect to asset divestitures  described in Note
      3 (in thousands):

<TABLE>
<CAPTION>

<S>                                                                                               <C>
Current assets, including assets classified as held for sale.................................     $       2,584,387
Property and equipment, net..................................................................             1,943,906
Goodwill.....................................................................................             6,672,992
Non-current assets...........................................................................               678,139
Current liabilities..........................................................................            (1,142,469)
Long-term debt...............................................................................            (1,755,501)
Other long-term obligations..................................................................            (1,327,003)
                                                                                                  --------------------
    Total net assets.........................................................................     $       7,654,451
                                                                                                  ====================
</TABLE>

      Included in current  liabilities above is approximately  $139.7 million of
      transaction, severance and transition costs of which $99.0 million remains
      to be paid as of December 31, 1999.

      During 1999,  we acquired two companies in  transactions  accounted for as
      poolings-of-interests.  As the  impact of these  poolings  on net  assets,
      revenues and net income was less than one percent of our  consolidated net
      assets,  revenues and net income,  prior period financial  statements were
      not  restated  to include  historical  operating  results of the  acquired
      companies.

      The  following  table  summarizes  acquisitions  for the three years ended
      December 31, 1999, excluding the acquisition of BFI:

<TABLE>
<CAPTION>

                                                                       1999              1998               1997
                                                                   --------------    --------------     --------------
Number of businesses acquired accounted for as:

<S>                                                                <C>               <C>                <C>
Poolings-of-interests.........................................                2                 19                  9
Purchases.....................................................               52                 35                 26
                                                                   ------------      -------------      -------------
Total acquisitions............................................               54                 54                 35
Total consideration (in millions).............................     $      467.5      $     2,329.0      $       730.8
Shares of common stock issued (in millions)...................              1.6               79.5                7.0

</TABLE>



                                       52
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

      Unaudited pro forma statement of operations data --

      The following  table  compares,  for the years ended December 31, 1999 and
      1998, reported  consolidated  results of operations to unaudited pro forma
      consolidated  data as if all of the  companies  acquired  in 1999 and 1998
      accounted  for using the purchase  method for business  combinations  were
      acquired as of January 1, 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                           1999                                  1998
                                                            -----------------------------------    ---------------------------------
                                                              Reported           Pro Forma(1)         Reported         Pro Forma(1)
                                                            --------------      ---------------    ---------------    --------------
<S>                                                         <C>                 <C>                <C>                <C>
Revenues.........................................           $  3,341,071        $    5,434,956     $   1,575,612      $    5,179,803
Net loss before extraordinary losses and cumulative
  effect of change in accounting principle.................     (221,250)            (383,870)           (98,251)          (347,633)
Net loss available to common shareholders before
  extraordinary losses and cumulative effect of change
  in accounting principle..................................     (249,039)            (453,286)           (98,251)          (414,235)
Net loss available to common shareholders before
  extraordinary losses and cumulative effective of
  change in accounting principle per common
  share - basic............................................        (1.33)               (2.42)             (0.54)             (2.25)
Net loss available to common shareholders before
  extraordinary losses and cumulative effective of
  change in accounting principle per common
  share - diluted..........................................        (1.33)               (2.42)             (0.54)             (2.25)

<FN>
(1)     The pro forma  results of operations  exclude  planned  divestitures  of
        certain BFI operations resulting from the acquisition of BFI and exclude
        any projected annual cost savings.
</FN>

      This data does not purport to be  indicative  of our results of operations
      that might have occurred, nor which might occur in the future.

</TABLE>

   3.       Assets Held for Sale

   The ability to successfully  implement our vertical integration business plan
   is a key consideration in determining  whether we will continue to operate in
   a specific market.  In the normal course of business,  we have exited markets
   in which the  execution of the  vertical  integration  business  plan was not
   practicable.

   In  October  1998,  we  formalized  plans to  dispose  of  certain  operating
   districts  (the  "Operating   Districts")   that   represented   non-core  or
   non-integrated   operations.   We  entered  into  agreements  to  sell  these
   operations  and in accordance  with SFAS 121 recorded an  impairment  loss to
   reduce the carrying value of the assets to net realizable  value including an
   accrual  for the cost of  disposal.  We  completed  the sale of these  assets
   during the first six months of 1999.

   In July 1999,  management  formalized plans to dispose of certain  operations
   required to be divested by governmental  order as a condition for approval of
   the acquisition of BFI (the "Allied Divestitures").  Additionally, management
   identified  other Allied  operating  districts (the "Allied  Operations")  in
   which our vertical  integration  plan was not  practicable as a result of the
   BFI   transaction   and  therefore   these   districts  were  identified  for
   divestiture.  All of these operations had been owned prior to the acquisition
   of BFI. In accordance  with SFAS 121, an impairment loss of $43.5 million was
   recorded  during 1999 to reduce the  carrying  value of the assets to the net
   realizable value including an accrual for the cost of disposal.

   We  completed  the sale of  certain  assets of the  Allied  Divestitures  for
   approximately  $23.0 million during the fourth quarter of 1999.  Accordingly,
   this  amount  is not  included  in assets  held for sale in the  consolidated
   balance sheets at December 31, 1999.




                                       53
<PAGE>
                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   The results of operations before  depreciation and amortization,  acquisition
   related expenses and other  income/expense  of the Operating  Districts,  the
   Allied Divestitures and Allied Operations included in consolidated  operating
   income, in accordance with SFAS 121, was  approximately  $11.1 million during
   the 12  months  ended  December  31,  1999.  From the date  the  assets  were
   classified as held for sale, we excluded from our Consolidated  Statements of
   Operations, in accordance with SFAS 121, depreciation and amortization in the
   amount of $6.3 million.

   BFI Assets --

   Concurrent  with  the  acquisition  of  BFI,   certain  BFI  operations  were
   identified  by management as non-core or  non-integrated  operations  and are
   expected  to  be  divested   along  with  certain   operations   required  by
   governmental  order to be divested.  These operations  include BFI's Canadian
   operations  ("BFI Canada"),  medical waste  operations ("BFI Medical Waste"),
   gas systems  operations  ("BFI Gas") and certain solid waste operations ("BFI
   Solid Waste Divestitures") (collectively, the "BFI Divestitures").  The sales
   of these  operations  are being  accounted  for in  accordance  with Emerging
   Issues Task Force Issue 87-11 -- Allocation of Purchase Price to Assets to Be
   Sold.  The BFI  Divestitures  are being carried at the net  realizable  value
   based on the  current  terms of  transactions  expected  to be closed in 2000
   including  accruals  for cost of  disposal,  operating  income and  allocable
   interest expense.  Accordingly,  approximately  $49.7 million of consolidated
   operating income excluding  acquisition  related charges and other income and
   approximately  $45.5 million of allocable interest expense related to the BFI
   Divestitures were excluded from the consolidated statements of operations for
   the 12 months  ended  December  31, 1999 and was  included in assets held for
   sale on the consolidated balance sheet.

   We  completed  the  sale  of  BFI  Medical  Waste  to  Stericycle,  Inc.  for
   approximately  $410.5  million  in cash and  certain  assets of the BFI Solid
   Waste Divestitures for approximately  $27.7 million during the fourth quarter
   of 1999. Accordingly,  these amounts are not included in assets held for sale
   in the Consolidated Balance Sheets at December 31, 1999.

   At December  31,  1999,  and 1998,  the assets held for sale  totaled  $891.9
   million  and $143.8  million,  respectively,  and are  classified  as current
   assets on the  Consolidated  Balance Sheets and are summarized as follows (in
   thousands):

<TABLE>
<CAPTION>
                                                                 December 31, 1999                December 31, 1998
                                                                ---------------------            ---------------------
<S>                                                             <C>                              <C>
Accounts receivable, net..................................      $        90,396                  $        16,608
Other current assets......................................               16,478                            4,460
Property and equipment, net...............................              616,973                           55,869
Goodwill, net.............................................              247,383                          106,214
Other long-term assets....................................                5,405                            1,595
Current liabilities.......................................              (64,682)                          (1,785)
Long-term liabilities.....................................              (20,053)                         (39,211)
                                                               ---------------------            ---------------------
  Total net assets........................................      $       891,900                  $       143,750
                                                               =====================            =====================
</TABLE>
   4.       Property and Equipment

   Property  and  equipment  at  December  31,  1999 and 1998 is as follows  (in
thousands):
<TABLE>
<CAPTION>
                                                                        1999                             1998
                                                                ---------------------            ---------------------
<S>                                                             <C>                              <C>
Land and improvements.....................................      $       437,119                  $       168,569
Land held for permitting as landfills(1)..................               98,914                           95,463
Landfills.................................................            1,637,782                        1,063,598
Buildings and improvements................................              454,416                          162,989
Vehicles and equipment....................................            1,114,130                          500,811
Containers and compactors.................................              611,889                          247,173
Furniture and office equipment............................              120,636                           18,655
                                                                ---------------------            ---------------------
                                                                      4,474,886                        2,257,258
Accumulated depreciation and amortization.................             (736,498)                        (481,233)
                                                                ---------------------            ---------------------
                                                                $     3,738,388                  $     1,776,025
                                                                =====================            =====================
<FN>
(1)    These  properties  have been approved for use as  landfills,  and we are currently in the process of obtaining
       the necessary permits.
</FN>
</TABLE>
                                       54
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   5.       Investments In Unconsolidated Subsidiaries

   We use the equity  method of accounting  for  investments  in  unconsolidated
   subsidiaries  over which we exercise  control  through a 20% to 50% ownership
   interest.  The  summarized  combined  balance  sheet,  and the  statement  of
   operations data presented in the table below indicates amounts related to the
   following  equity  investees  acquired  in the BFI  acquisition  in  which we
   exercise control through a 50% ownership interest: American Ref-Fuel Company,
   American  Ref-Fuel Company of Hempstead,  American Ref-Fuel Company of Essex,
   American  Ref-Fuel  Company of Southeastern  Connecticut,  American  Ref-Fuel
   Company of Niagara,  LP, American  Ref-Fuel  Company of SEMASS,  LP, American
   Ref-Fuel   Operations   of  SEMASS,   LP.  There  were  no   investments   in
   unconsolidated subsidiaries prior to the acquisition of BFI (in thousands).

<TABLE>
<CAPTION>

                     Summarized Combined Balance Sheet Data

                                                                                                 December 31, 1999
                                                                                            --------------------------
<S>                                                                                              <C>
Current assets........................................................................           $         147,863
Property and equipment, net of accumulated depreciation...............................                   1,116,711
Other non-current assets..............................................................                     248,378
Current liabilities...................................................................                     127,989
Long-term debt, net of current portion................................................                   1,123,414
Other long-term liabilities...........................................................                     199,828
Retained earnings.....................................................................                      61,721
</TABLE>

<TABLE>
<CAPTION>

                Summarized Combined Statement of Operations Data

                                                                                               For the Period
                                                                                                July 31, 1999
                                                                                                    through
                                                                                                December 31, 1999
                                                                                            --------------------------
                                                                                                   (unaudited)
<S>                                                                                              <C>
Total revenue.........................................................................           $         146,940
Operating income......................................................................                      52,216
Net income............................................................................                      27,328
</TABLE>

   Our  investments  in and  advances to equity  investees  approximates  $274.7
   million  at  December  31,  1999,  consisting  of  investments  in  excess of
   underlying equity of $170.1 million,  subordinated note and other receivables
   of $73.7 million, and our proportional share of net assets of $30.9 million.

   For the period from July 31, 1999 through  December  31, 1999,  our equity in
   earnings of equity  investees  and dividends  received from equity  investees
   were approximately $20.8 million and $34.0 million, respectively. Differences
   between  the equity in  earnings  of equity  investees  we  reported  and our
   proportionate  share of the combined  earnings of the related  investees have
   resulted  principally  from  accounting  differences  in the  recognition  of
   expenses,   goodwill   amortization   and  the  elimination  of  intercompany
   transactions.




                                       55
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   6.       Long-term Debt

   Long-term  debt at December 31, 1999 and 1998  consists of the  following (in
thousands):

<TABLE>
<CAPTION>

                                                                                                     1999                1998
                                                                                                ---------------     ---------------
<S>                                                                                             <C>                 <C>
Senior credit facility, weighted average interest and effective rate of 6.00%.............      $           --      $      300,000
Revolving credit facility, effective rate of 9.00%........................................              65,000                  --
Senior notes, interest at 7.38%, effective rate of 7.41%, net of unamortized discount
  of $274 and $331........................................................................             224,726             224,669
Senior notes, interest and effective rate of 7.63%........................................             600,000             600,000
Senior notes, interest at 7.88%, effective rate of 7.91%, net of unamortized discount
  of $1,417 and $1,522....................................................................             873,583             873,478
Asset sale term loan facility, effective rate of 9.00%....................................              99,496                  --
Tranche A term loan facility, effective rate of 8.68%.....................................           1,750,000                  --
Tranche B term loan facility, effective rate of 8.88%.....................................           1,250,000                  --
Tranche C term loan facility, effective rate of 9.13%.....................................           1,500,000                  --
Tranche D term loan facility, effective rate of 10.50%....................................             500,000                  --
Senior subordinated notes, interest at 10.00%, effective rate of 9.92%, including
  unamortized premium of $8,119...........................................................           2,008,119                  --
Senior notes, interest at 6.10%, effective rate of 8.63%, net of unamortized discount
  of $10,671..............................................................................             146,018                  --
Senior notes, interest at 6.38%, effective rate of 9.78%, net of unamortized discount
  of $25,446..............................................................................             135,754                  --
Senior notes, interest at 7.88%, effective rate of 9.08%, net of unamortized discount
  of $3,240...............................................................................              66,261                  --
Debentures, interest at 7.40%, effective rate of 10.38%, net of unamortized discount
  of $81,526..............................................................................             278,474                  --
Debentures, interest at 9.25%, effective rate of 9.95%, net of unamortized discount
  of $4,778...............................................................................              94,722                  --
Market value put securities, interest at 6.08%, effective rate of 6.32%, net of
  unamortized discount of $295............................................................             249,705                  --
Solid waste revenue bond obligations, weighted average interest rate of 6.30% and 7.02%,
weighted average effective rate of 6.50% and 7.02% at December 31, 1999 and 1998,
respectively, net of unamortized discount of $5,131 and $0, respectively..................             316,299              81,050
Notes payable to banks, finance companies, and individuals, weighted average
  interest rates of 5% - 10%, and principle payable through 2007, secured by vehicles,
  equipment, real estate, accounts receivable or stock of certain subsidiaries............              54,648               6,326
Notes payable to individuals and a commercial company, interest of 5%-10%,
  principal and interest payable through 2006, unsecured..................................              15,624              18,296
Obligations under capital leases of vehicles and equipment, weighted average
  interest of 8.00% and 8.10% at December 31, 1999 and 1998, respectively.................              14,790              36,624
                                                                                                ---------------     ---------------
                                                                                                    10,243,219           2,140,443
Current portion...........................................................................           1,002,928              21,516
                                                                                                ---------------     ---------------
                                                                                                $    9,240,291      $    2,118,927
                                                                                                ===============     ===============
</TABLE>





                                       56
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   In  connection  with the BFI  acquisition  in July 1999, we repaid the Senior
   Credit  Facility  and entered  into a new credit  facility  (the "1999 Credit
   Facility").  The  1999  Credit  Facility  provides  a $1.5  billion  six-year
   revolving credit facility,  a $556 million two-year asset sale term loan (the
   "Asset Sale Term Loan"),  a $1,750 million  six-year Tranche A term loan (the
   "Tranche A Term Loan"), a $1,250 million  seven-year Tranche B term loan (the
   "Tranche B Term Loan"), a $1,500 million  eight-year Tranche C term loan (the
   "Tranche C Term Loan") and a $500 million eight-year Tranche D term loan (the
   "Tranche D Term Loan").

   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  acquisitions,  the
   issuance of letters of credit,  working  capital and other general  corporate
   purposes.  Of the $1.5 billion available under the Revolving Credit Facility,
   no more than $800  million may be used to support the  issuance of letters of
   credit. As of December 31, 1999,  approximately $1.0 billion was available on
   this 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 Asset Sale Term Loan,  second to reduce the borrowings  under the Tranche
   A, B and C Term  Loans  on a pro  rata  basis  or the  Tranche  D Term  Loan.
   Required prepayments are to be made based on a percentage of the net proceeds
   of any debt incurrence or equity issuance. Proceeds of an issuance of debt or
   equity are first applied to reduce  borrowings under the Tranche D Term Loan,
   second to  reduce  borrowings  under  the  Asset  Sale Term Loan and third to
   reduce the  borrowings  under the Tranche A, B and C Term Loans on a pro rata
   basis.

   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") in a Rule 144A  offering.  In January  2000,  these
   notes  were  exchanged  for  substantially  identical  notes  (which are also
   referred as the 1999 Notes)  registered under the Securities  Exchange Act of
   1933.  Interest  accrues  on the 1999  Notes at an  interest  rate of 10% per
   annum, payable semi-annually on May 1 and November 1 beginning on November 1,
   1999.  We used the proceeds  from the 1999 Notes as partial  financing of the
   acquisition of BFI. We, together with  substantially all of our subsidiaries,
   guarantee the 1999 Notes.

   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.  The effect of revaluing the debt securities
   formerly owned by BFI resulted in an aggregate  discount from the face amount
   of $137.0 million.

   The debt assumed in connection  with the  acquisition,  includes 6.08% Market
   Value Put Securities  ("MVPs") with a face amount of $250 million due January
   18, 2002, 6.10% Senior Notes with a face amount of $156.7 million due January
   15,  2003,  6.375%  Senior  Notes with a face  amount of $161.2  million  due
   January 15, 2008,  7.875%  Senior  Notes with a face amount of $69.5  million
   that mature on March 15, 2005,  9.25%  Debentures with a face amount of $99.5
   million that mature on May 1, 2021,  7.40%  Debentures  with a face amount of
   $360.0   million  due  September  15,  2035  and  solid  waste  revenue  bond
   obligations  with an  aggregate  face  amount of $236.2  million,  a weighted
   average  interest  rate of  approximately  6.06% and various  maturity  dates
   through the year 2027.

   The MVPs have a mandatory  put on January 18, 2000.  First  National  Bank of
   Chicago  holds an option to purchase the MVPs.  We repaid the MVPs on January
   18, 2000 when First  National  Bank of Chicago did not exercise its option to
   purchase the MVPs.



                                       57
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   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.

   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 in
   a Rule 144A offering  which were  subsequently  registered for public trading
   with the SEC in January  1999.  Interest  accrued on the 1998 Senior Notes is
   payable  semi-annually  on January 1 and July 1 beginning on July 1, 1999. We
   used the net proceeds  from the 1998 Senior Notes to fund the  redemption  of
   the 1996 Notes and the Senior  Discount  Notes  pursuant to tender  offers we
   commenced  in  November  1998  and  completed  in  December  1998,  to  repay
   borrowings  outstanding  under the Senior Credit Facility and certain capital
   lease  obligations,  and for general  corporate  purposes.  We, together with
   substantially all of our subsidiaries, guarantee the 1998 Senior Notes.

   In June 1998,  we repaid  $486.8  million  outstanding  under the 1997 Credit
   Agreement and entered into a new credit  agreement (the "Credit  Agreement").
   The  Credit  Agreement  provides  a $800  million  five year  senior  secured
   revolving  credit  facility and a $300 million five year senior  secured term
   loan facility  (together  with the  revolving  credit  facility,  the "Senior
   Credit  Facility").  The term loan  facility is a funded,  amortizing  senior
   secured term loan with annual principal payments  increasing from $75 million
   in 2001,  to $105  million in 2002,  and to $120  million in 2003.  Principal
   under the revolving credit facility is due upon maturity.

   Future maturities of long tem debt --

   Aggregate  future  maturities of long-term  debt  outstanding at December 31,
1999 (in thousands):

<TABLE>
<CAPTION>
                         Maturity                  1999
                  ---------------------     ------------------
                  <S>                       <C>
                  2000                      $    1,002,928(1)
                  2001                               118,889
                  2002                               271,783
                  2003                               510,977
                  2004                               689,417
                  Thereafter                       7,649,225
                                            ------------------
                                            $     10,243,219
                                            ==================
<FN>
(1)    Consists of $111.0 million that will be repaid in 2000 based on the terms
       of  the  indebtedness  and  $891.9  million  of  other  non-current  debt
       classified  as  current  related  to the  amounts  to be repaid  from the
       proceeds of the asset divestitures  classified as assets held for sale in
       current assets on the balance sheet.
</FN>
</TABLE>
   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, 1999 (in thousands):
<TABLE>
<CAPTION>

      Maturity         Principal              Interest              Total
------------------  ---------------       ----------------    ---------------
 <S>              <C>                   <C>                  <C>
 2000             $        3,495        $        1,030       $        4,525
 2001                      3,585                   848                4,433
 2002                      3,837                   480                4,317
 2003                      1,875                   252                2,127
 2004                      1,216                   123                1,339
 Thereafter                  782                    79                  861
                  ---------------       ----------------     ---------------
                  $       14,790        $        2,812       $       17,602
                  ===============       ================     ===============

</TABLE>

                                       58
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   Fair value of debt and interest rate protection agreements --

   We have  interest  rate risk  relating to long-term  variable  rate debt.  To
   manage the potential  interest rate  volatility,  we enter into interest rate
   swaps.  Interest  rate swaps are used to manage the  proportion  of fixed and
   variable  rate  debt  based  on  market  conditions.  We do not hold or issue
   derivative instruments for trading purposes.

   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 (dollars
   in thousands).

<TABLE>
<CAPTION>
                                                       Balance at               Fair Value at
                                                   December 31, 1999          December 31, 1999
                                                 -----------------------    ----------------------
Long Term Debt
  Fixed Rate Debt:

<S>                                              <C>                        <C>
    Principal amount........................     $     4,725,018            $      4,280,180
    Weighted average interest rate..........                 8.44%
  Variable Rate Debt:
    Principal amount........................     $     5,518,201            $      5,518,201
    Weighted average interest rate(2).......                 8.84%

Interest Rate Swaps(3)
  Callable:
    Notional amount.........................     $     2,650,000            $         14,402
    Weighted average interest rate..........                 5.74%
  Non-Callable:
    Notional amount.........................     $       450,000            $          1,049
    Weighted average interest rate..........                 5.78%
</TABLE>

<TABLE>
<CAPTION>

                                        2000          2001         2002        2003        2004        Thereafter          Total
                                    ------------  ------------  ----------  ----------  ----------    ------------     ------------
Long Term Debt
  Fixed Rate Debt:
<S>                                  <C>           <C>           <C>         <C>         <C>           <C>              <C>
    Principal amount............     $  25,048     $   6,409     $  9,303    $148,497    $227,917      $ 4,307,844      $ 4,725,018
    Weighted average interest rate         7.63%        8.02%        7.95%       6.13%       7.38%           8.71%            8.44%
  Variable Rate Debt:
    Principal amount............     $977,880(1)   $ 112,480     $262,480    $362,480    $461,500      $ 3,341,381      $ 5,518,201
    Weighted average interest
    rate(2).....................           9.67%        8.63%        8.66%       8.67%       8.68%           8.73%            8.84%


Interest Rate Swaps(3)
  Callable:
    Notional amount.............     $1,500,000    $1,150,000           --          --          --              --      $ 2,650,000
    Weighted average interest rate         5.68%        5.81%           --          --          --              --            5.74%
  Non-Callable:
    Notional amount.............     $ 450,000             --           --          --          --              --      $   450,000
    Weighted average interest rate         5.78%           --           --          --          --              --            5.78%


<FN>
   (1)   Consists  of $86.0  million  of  principal  that will be repaid in 2000
         based on the terms of the  indebtedness and $891.9 million of long-term
         debt to be repaid from the proceeds of the asset divestitures.

   (2)   Reflects  the  rate  in effect as of December 31, 1999 and includes all
         applicable  margins.  Actual future rates  may vary.

   (3)   All  interest  rate  swaps  enable us to pay a fixed  interest  rate in
         exchange  for  receiving  variable  interest  rates at  LIBOR.  We have
         assumed that interest rate swaps that are callable by the  counterparty
         will be called on the exercise date.
</FN>
</TABLE>


                                       59
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   Debt covenants --

   Our 1999 Credit Facility contains certain financial covenants, including, but
   not  limited  to, an EBITDA  ratio and an interest  expense  coverage  ratio.
   Additionally,  these covenants limit among other things,  our ability and our
   subsidiaries'  ability  to  incur  additional  indebtedness  and  liens  make
   acquisitions and purchase fixed assets above certain amounts,  pay dividends,
   make  optional  prepayments  on  certain  subordinated   indebtedness,   make
   investments,   loans  or  advances,  enter  into  certain  transactions  with
   affiliates  or  consummate  a  merger,   consolidation  or  sale  of  all  or
   substantially all of our assets.

   The 1998  Senior  Notes and the 1999  Notes  contain  certain  financial  and
   operating  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, 1999, we were in compliance with all applicable covenants.

   Substantially  all of our  subsidiaries  are jointly and severally liable for
   the  obligations  under the 1998  Senior  Notes,  the 1999 Notes and the 1999
   Credit Facility through unconditional guarantees issued by current and future
   subsidiaries which are all, except in one minor case,  wholly-owned by us. In
   addition,  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.

   7.       Landfill Accounting

   We have a network of 151 owned or operated  active  landfills with a net book
   value of approximately  $1.4 billion at December 31, 1999. The landfills have
   operating  lives  ranging  from one to over  150  years  based  on  available
   capacity  using  current  annual  volumes.  The average life of our landfills
   approximates  39 years. 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
   for each  landfill.  The cost  estimates  are  prepared by local  company 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  performed  annually by
   third-party  engineers to estimate  utilized  disposal capacity and remaining
   disposal  capacity.  These  cost and  capacity  estimates  are  reviewed  and
   approved by senior operations management annually.




                                       60
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   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 $81.5 million,
   or an  average  of  $1.28  per  cubic  yard  consumed,  related  to  landfill
   amortization  during the year ended  December  31, 1999.  The  following is a
   rollforward of our investment in our landfill assets  excluding land held for
   permitting as landfills (in thousands):

<TABLE>
<CAPTION>

                                            Net Book Value
                          Cumulative         of Landfills
        Net Book          Change in        Acquired During         Landfill                              Net Book
        Value at         Accounting         1999, net of         Development        Landfill             Value at
   December 31, 1998    Principle(1)      Divestitures (2)          Costs         Amortization       December 31, 1999
----------------------- --------------  ---------------------- ----------------- ---------------- -----------------------

    <S>                   <C>                  <C>                 <C>              <C>               <C>
    $      924,698        (85,965)             501,735             162,754          (81,549)          $    1,421,673

<FN>
(1)     Amount  relates to the charge  resulting  from the change in  accounting
        principle for interest  previously  capitalized at our active  landfills
        (See Note1).

(2)     Landfills classified as assets held for sale are included as divestitures.

   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 cost for our 151
   active  landfills  is  approximately  $2.6  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  2.7 billion  cubic yards as of December 31, 1999.  We classify
   this total disposal  capacity as either permitted  (having received the final
   permit from the governing  authorities)  and deemed  permitted.  Our internal
   requirements to classify capacity as deemed permitted are as follows:
</FN>
</TABLE>

   1.       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 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
   capacity are considered in the  calculation of the  amortization  and closure
   and post-closure rates. At December 31, 1999, we had 2.11 billion cubic yards
   of permitted capacity, and at 37 of our landfills,  545.0 million cubic yards
   of deemed permitted capacity.




                                       61
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   The following table reflects  landfill airspace activity for active landfills
   we owned or operated for the twelve months ended  December 31, 1999 (airspace
   in millions of cubic yards):


<TABLE>
<CAPTION>

                                                                            Additions
                                 Balance      Acquisitions,     Additions       To                       Changes in      Balance
                                  as of         net of         to Deemed    Permitted    Airspace       Engineering       as of
                                 12/31/98    Divestitures(1)    Airspace    Airspace     Consumed        Estimates       12/31/99
                                ---------- -----------------  ------------  ----------  ------------   ---------------  -----------

<S>                              <C>            <C>                           <C>         <C>               <C>          <C>
  Permitted airspace........     1,167.3        976.3             --          20.2        (63.8)            8.0          2,108.0
  Number of landfills.......       76             75              --           --           --               --            151

  Deemed airspace...........      268.3         273.7            35.6        (16.2)         --             (16.4)         545.0
  Number of landfills.......       21             13               3           --           --               --             37
                                ---------- -----------------  ------------  ----------  ------------   ---------------  -----------

  Total airspace............     1,435.6       1,250.0           35.6          4.0        (63.8)           (8.4)         2,653.0
  Number of landfills.......       76             75              --           --           --               --            151

<FN>
(1)     Landfills classified as assets held for sale are included as divestitures.
</FN>
</TABLE>

   Allied and its engineering  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  capacity  is removed  from our total  available  capacity,  the costs to
   develop that 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 deemed permitted capacity
   would be  written-off  to expense during the period in which it is determined
   that the criteria are no longer met.

   Management  periodically  reviews the  realizability of its investment in our
   landfill  asset base.  As part of our annual  review,  we will  evaluate  any
   events and  circumstances  which may indicate that a landfill be reviewed for
   impairment.  Such review for  recoverability  will be made using undiscounted
   cash flows to measure recoverability in accordance with EITF 95-23.

   Closure and Post-Closure --

   Estimated   costs  for  closure  and   post-closure  as  required  under  the
   Environmental  Protection  Agency's  Subtitle D regulations  are compiled and
   updated annually for each landfill from local and regional company  engineers
   and  reviewed  by  senior  management.   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):

<TABLE>
<CAPTION>

                                                                              December 31, 1999     December 31, 1998
                                                                              ------------------    ------------------
Discounted Closure and  Post-Closure Liability Recorded:
<S>                                                                           <C>                   <C>
  Current Portion.........................................................    $        75,316       $        28,938
  Non-Current Portion.....................................................            442,032               125,609
                                                                              ------------------    ------------------
  Total...................................................................    $       517,348       $       154,547

Estimated Remaining Closure and Post-Closure Costs to be Expended:
  Discounted..............................................................    $     1,046,538       $       396,520
  Undiscounted............................................................          2,689,485             1,227,792

Estimated Total Future Payments:
2000......................................................................    $        75,316
2001......................................................................             66,652
2002......................................................................             56,688
2003......................................................................             68,166
2004......................................................................             56,514
Thereafter................................................................          2,366,149
</TABLE>

                                       62
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   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  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 current  risk-free  capital rate and
   charge this  accretion  as an operating  expense in that  period.  We charged
   approximately  $35.2 million, or an average of $0.55 per cubic yard consumed,
   related to per unit closure and post-closure  expense and periodic  accretion
   during the year ended  December  31,  1999.  Changes in estimates of costs or
   capacity are treated on a prospective basis.

   Environmental costs --

   In  connection  with the  acquisition  of  companies,  we engage  independent
   environmental  consulting  firms to assist  in  conducting  an  environmental
   assessment of companies  acquired from third  parties.  Several  contaminated
   landfills  and other  properties  were  identified  during 1999 and 1998 that
   would  require us to incur costs for  incremental  closure  and  post-closure
   measures, remediation activities and litigation costs in the future. Based on
   information  available,  we recorded a provision of $267.0 and $41.1  million
   for  environmental  matters,  in the 1999 and 1998  statements of operations,
   respectively,  and  expect  these  amounts to be  disbursed  over the next 30
   years.

   The ultimate amounts for environmental  liabilities  cannot be determined and
   estimates  of  such  liabilities  made by us,  after  consultation  with  our
   independent environmental engineers,  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   will  be  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,  1999 and 1998 of  approximately
   $478.2 million and $93.4 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, 1999 and
   1998. 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  $33  million  of  additional
   liability.




                                       63
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   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, 1996 through December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
                                                  Balance at       Charges to         Other                            Balance at
                                                   12/31/96          Expense        Charges(1)        Payments          12/31/97
                                                 -------------   ----------------  -------------    --------------    --------------
<S>                                              <C>             <C>               <C>              <C>               <C>
Environmental costs............................  $     45,100    $           --    $     20,895     $    (2,233)      $     63,762
Open landfills closure and post-closure costs..        81,572             9,579          21,287          (8,687)           103,751
Closed landfills closure and post-closure costs        41,209             3,341              --          (3,670)            40,880

                                                  Balance at       Charges to         Other                            Balance at
                                                   12/31/97          Expense        Charges(1)        Payments          12/31/98
                                                 -------------   ----------------  -------------    --------------    --------------
Environmental costs............................  $     63,762    $       41,100    $         --     $   (11,489)      $     93,373
Open landfills closure and post-closure costs..       103,751            15,384           3,820          (1,596)           121,359
Closed landfills closure and post-closure costs        40,880             2,223              --          (9,915)            33,188

                                                  Balance at       Charges to         Other                            Balance at
                                                   12/31/98          Expense        Charges(1)        Payments          12/31/99
                                                 -------------   ----------------  -------------    --------------    --------------
Environmental costs............................  $     93,373    $      267,034    $    131,909     $   (14,122)      $    478,194
Open landfills closure and post-closure costs..       121,359            28,163         175,955         (11,677)           313,800
Closed landfills closure and post-closure costs        33,188             7,079         176,266         (12,985)           203,548

<FN>
   (1)    Amounts consist primarily of liabilities related to acquired companies.
</FN>
</TABLE>

   8.       Employee Benefit Plans

   Effective  July 30,  1999,  in  connection  with the  acquisition  of BFI, we
   assumed two defined benefit  retirement plans covering  substantially all BFI
   employees  in the United  States,  except for  certain  employees  subject to
   collective bargaining agreements. The BFI retirement plan was amended on July
   30,  1999 to freeze  future  credited  service,  but  interest  credits  will
   continue to accrue.  Certain union  participants  will 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.  Our
   general funding policy for each pension plan is to make annual  contributions
   to the plans as determined to be required by the plans' actuary.

   The BFI 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.




                                       64
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   For both plans,  an actuarial  valuation  report was prepared as of September
   30,  1999 and  used,  as  permitted  by  Statement  of  Financial  Accounting
   Standards  No.  132,   Employers'   Disclosures   about  Pensions  and  Other
   Postretirement  Benefits  ("SFAS  132"),  for the following  disclosures  (in
   millions):

<TABLE>
<CAPTION>
                                                                                                         December 31,
                                                                                                             1999

                                                                                                       -----------------
<S>                                                                                                      <C>
Actuarial present value of projected benefit obligation............................................      $   (249.1)
Plan assets at fair market value, primarily commercial paper, common stocks and
  mutual funds.....................................................................................            304.3
                                                                                                         ------------
Projected benefit obligation less than plan assets (prepaid pension costs).........................      $      55.2
                                                                                                         ------------
 Discount rate......................................................................................          7.75   %
 Rate of increase in compensation levels............................................................           4.0   %
 Expected long-term rate of return on assets........................................................         10.25   %
</TABLE>

   The net pension  benefit  for the period  from July 30, 1999 to December  31,
   1999 of $4.7 million is  comprised  of the expected  return on plan assets of
   $13.2 million less interest cost of $8.5 million. Actual loss on plan assets,
   benefits paid, and actuarial gains recognized during the period from July 30,
   1999 to December 31, 1999 were $2.6  million,  $2.2 million and $5.0 million,
   respectively.

   9.       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.
   Shares of Preferred Stock will be entitled to cumulative  quarterly dividends
   in an  amount  equal to 6.5% per annum of the sum of  liquidation  preference
   plus accrued but unpaid  dividends for prior  quarters.  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.  After July 30,  2002,  we 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 exceeds $27 per share.

   The Preferred  Shareholders 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.  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.

   The amounts added to the liquidation  preference during the five months ended
   December 31, 1999 of the Preferred Stock were approximately  $27.6 million or
   $27.61 per share.




                                       65
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   10.      Stockholders' Equity

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

<TABLE>
<CAPTION>
                                                                                         Issued and Outstanding
                                                                                             At December 31,
                                                                                    ----------------------------------

                                                                   Authorized

                                                                     Shares              1999               1998
                                                                  --------------    ----------------    --------------
<S>                                                                    <C>                <C>                 <C>
Common stock, $0.01 par, net of 570
  treasury shares.............................................         300,000            188,519             184,495
</TABLE>

   Warrants to purchase common stock --

   Warrants  to  purchase  common  shares  at  December  31,  1999  and 1998 are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                1999                     1998
                                                                          --------------------     -------------------
<S>                                                                             <C>                     <C>
Number of shares......................................................          347,827                 647,827
Purchase price per share..............................................           $4.60               $4.60 - $5.25
Expiration dates......................................................           2003                 1999 - 2003
</TABLE>

   11. Stock 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. During 1999, the 1991 Plan was amended so that the maximum number of
   shares that may be granted may not exceed 8.0% of the number of fully diluted
   shares  of  common  stock on the date of grant  of an  award.  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
   7,649,575  shares  of common  stock  were  available  under  the  Plans.  The
   Compensation  Committee of the Board of Directors  generally  determines  the
   exercise price, term and other conditions applicable to each option granted.

   The 1994  Amended  and  Restated  Non-Employee  Director  Stock  Option  Plan
   provides for the grant of  non-qualified  options to each member of the Board
   of  Directors,  who is not also our  employee,  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 are fully vested and  exercisable on the date
   of grant and expire ten years from the grant date.




                                       66
<PAGE>

                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

  A  summary  of the status of our stock option plans at December 31, 1999, 1998
  and  1997  and  for  the  years then ended is presented in the table below and
  narrative below:

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                          1999                              1998                                1997
                              ------------------------------   --------------------------------    --------------------------------
                                                 Weighted                           Weighted                            Weighted
                                                  Average                           Average                             Average
                                                 Exercise                           Exercise                            Exercise
                                Options            Price          Options            Price            Options            Price
                              -------------     ------------   ---------------    -------------    ---------------    -------------
<S>                             <C>             <C>               <C>             <C>                 <C>             <C>
Options outstanding,
  beginning of period.......    10,786,000      $     12.97       8,831,266       $       8.19        5,449,036       $       6.10
Options granted.............     6,085,000            13.11       3,656,562              22.29        3,961,100              10.86
Options exercised...........   (1,231,771)             7.97    (1,701,828)                8.50         (437,780)              6.04
Options terminated..........     (224,100)            16.88              --                 --         (141,090)              9.10
Options outstanding, end      -------------                    ---------------                     ---------------
  of period.................    15,415,129            13.37      10,786,000              12.97        8,831,266               8.19
                              =============                    ===============                     ===============
Options exercisable, end
  of period.................     6,628,574            12.52       6,220,735              11.02        3,498,598               6.67
</TABLE>

   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.  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:

<TABLE>
<CAPTION>
                                                                         For the Years Ended December 31,
                                                           -------------------------------------------------------------
                                                                 1999                  1998                 1997
                                                           -----------------     -----------------    ------------------
<S>                                                          <C>                   <C>                  <C>
  Risk free interest rate.............................       5.2% to 6.3%          4.7% to 5.6%         5.8% to 7.6%
  Expected life.......................................         5 years               5 years               5 years
  Dividend rate.......................................            0%                    0%                   0%
  Expected volatility.................................        47% to 50%            44% to 46%           25% to 50%
</TABLE>

   Using these  assumptions,  pro forma net income  (loss) and net income (loss)
   per share would reflect additional  compensation  expense recognized over the
   vesting  periods of the options.  The pro forma income for 1997  includes the
   impact of certain of our options whose vesting  accelerated  in 1997 due to a
   change in control  related to an equity  financing  transaction in connection
   with the acquisition of the solid waste assets of Laidlaw, Inc. The pro forma
   loss for 1998 includes the impact of certain ADSI options that vested in 1998
   due to a change in control  related to the acquisition of ADSI. The resulting
   pro forma net income (loss),  and pro forma net income (loss) per share is as
   follows (in thousands, except per share data):

 <TABLE>
<CAPTION>
                                                                    For the Years Ended December 31,
                                                            -----------------------------------------------------
                                                                1999               1998                1997
                                                            --------------    ----------------    ---------------
<S>                                                         <C>               <C>                 <C>
   Net Income (loss):                       As reported     $  (288,728)      $    (223,052)      $      24,042
                                            Pro forma          (298,184)           (229,928)             11,329

   Net Income (loss) Per Share:             As reported     $     (1.54)      $       (1.22)      $        0.14
                                            Pro forma             (1.59)              (1.26)               0.07
</TABLE>

                                       67
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   The following tables summarize information about stock options outstanding at
   December 31, 1999 which are fully vested, partially vested and non-vested:

<TABLE>
<CAPTION>

   Fully Vested:

                                         Options Outstanding and Exercisable
   ---------------------------------------------------------------------------------------------------------------------
                                                                          Weighted Average           Weighted Average
        Range of Exercise Prices          Number Outstanding               Remaining Life             Exercise Price
   --------------------------------      -------------------           -----------------------    -----------------------
        <S>                                    <C>                                 <C>         <C>
         $4.27 - $8.38                         2,070,515                           5 years     $                 5.23
        $8.50 - $12.25                         1,413,399                           7 years     $                 9.71
        $16.44 - $21.97                          516,132                           8 years     $                19.71
        $22.84 - $27.27                          933,139                           1 year      $                26.12



   Partially Vested:

                                                  Options Outstanding
   ---------------------------------------------------------------------------------------------------------------------
                                                                         Weighted Average            Weighted Average
       Range of Exercise Prices           Number Outstanding               Remaining Life              Exercise Price
   --------------------------------      --------------------         ------------------------    -----------------------
        $4.49 - $10.00                         2,244,144                          8 years      $                 9.80
        $11.38 - $15.88                          160,000                          8 years      $                14.75
        $18.94 - $21.19                        2,207,800                          9 years      $                21.06

                                                 Options Exercisable
   ---------------------------------------------------------------------------------------------------------------------
                                                                          Weighted Average            Weighted Average
       Range of Exercise Prices            Number Outstanding              Remaining Life              Exercise Price
   --------------------------------      --------------------         ------------------------    -----------------------
        $4.49 - S10.00                           989,455                          8 years      $                 9.60
        $11.38 - $15.88                           74,667                          8 years      $                14.27
        $18.94 - $21.19                          631,267                          9 years      $                21.06



   Non Vested:

                                                 Options Outstanding
   ---------------------------------------------------------------------------------------------------------------------
                                                                         Weighted Average            Weighted Average
       Range of Exercise Prices          Number Outstanding              Remaining Life              Exercise Price
   --------------------------------      --------------------         ------------------------    -----------------------
         $4.27 - $7.31                           801,067                         10 years      $                 7.16
        $9.50 - $13.31                         3,833,300                         10 years      $                13.24
        $15.00 - $21.19                        1,235,633                         12 years      $                20.01


</TABLE>



                                       68
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   12.      Net Income (Loss) Per Common Share

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

<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                   ---------------------------------------------------
                                                                        1999               1998              1997
                                                                   ----------------    --------------     ------------
<S>                                                                <C>                 <C>                <C>
Basic earnings per share computation:
Income (loss) before extraordinary losses and cumulative
  effect of change in accounting principle......................   $     (221,250)     $    (98,251)      $    77,247
Less: preferred stock dividends.................................           27,789                 --              381
                                                                   ---------------    ---------------     -----------
Income (loss) available to common shareholders before
  extraordinary losses and cumulative effect of change in
  accounting principle available to common shareholders.........   $     (249,039)     $    (98,251)      $    76,866
                                                                   ===============     ==============     ============
Weighted average common shares outstanding......................          187,801            182,796          164,888
                                                                   ===============     ==============     ============
Basic earnings per share before extraordinary losses and
  cumulative effect of change in accounting principle...........   $        (1.33)     $      (0.54)      $      0.47
                                                                   ================    ==============     ============

Diluted earnings per share computation:
Income (loss) before extraordinary losses and cumulative
  effect of change in accounting principle......................   $     (221,250)     $    (98,251)      $    77,247
Preferred dividends.............................................           27,789                 --              381
                                                                   ----------------    --------------     ------------
Income (loss) available to common shareholders before
  extraordinary losses and cumulative effect of change in
  accounting principle available to common shareholders.........   $     (249,039)     $    (98,251)      $    76,866
                                                                   ================    ==============     ============
Weighted average common shares outstanding......................          187,801            182,796          164,888
Effect of stock options and warrants, assumed
  exercisable...................................................               --                 --            6,657
Effect of shares assumed pursuant to hold-back
  arrangements..................................................               --                 --            1,413
                                                                   ----------------    --------------     ------------
Weighted average common and common equivalent
  shares outstanding............................................          187,801            182,796          172,958
                                                                   ================    ==============     ============
Diluted earnings per share before extraordinary losses and
  cumulative effect of change in accounting principle...........   $        (1.33)     $      (0.54)      $      0.44
                                                                   ================    ==============     ============
</TABLE>

   Conversion has not been assumed for the Series A Senior Convertible Preferred
   Stock in 1999 into  57,099,364  common  shares,  as the effects  would not be
   dilutive.  Conversion  has  not  been  assumed  for 7%  preferred  stock  and
   convertible notes in 1997, as the effects would not be dilutive.




                                       69
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   13. 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. We file a consolidated federal
   tax return that will include BFI after July 30, 1999.

   The  acquisition  of BFI,  which was  accounted  for as a  purchase  business
   combination, resulted in approximately $6.7 billion of goodwill, $6.5 billion
   of which is not  amortizable  for  income  tax  purposes.  The  impact of the
   non-deductible amortization during 1999 is reflected in the reconciliation of
   the federal  statutory tax rate to the  effective tax rate.  The tax accounts
   established  at July 30, 1999,  relating to BFI purchase  accounting  include
   approximately  $100 million of net operating  losses,  which will result in a
   $35 million refund of prior period tax payments,  and $768 million of capital
   loss carryforward. As of December 31, 1999, approximately $400 million of BFI
   capital loss carryforward  remains unused that will expire if not used by the
   end of 2003.  We believe that  anticipated  divestitures  relating to the BFI
   acquisition  will  generate  sufficient  capital  gains to offset most of the
   capital loss  carryforward  and we have  established a $49 million  valuation
   allowance  against the deferred tax asset for the amount of the  carryforward
   which may not offset  capital  gains.  As of December 31, 1999  approximately
   $1.9 billion of BFI state net operating loss carryforwards remain unused that
   will  expire at  various  times  between  2000 and 2019 if not used.  We have
   established a $78 million  valuation  allowance for the possibility that some
   of these state carryforwards may not be used.

   In addition to the BFI  carryforwards,  we have state net operating losses of
   approximately  $289  million as of December  31,  1999,  which will expire at
   various times between 2000 and 2019 if not used. We also have federal minimum
   tax credit  carryforwards of  approximately  $15.6 million as of December 31,
   1999, which are not subject to expiration. The net current deferred tax asset
   includes  the  current  benefit we expect to receive  from the use of our net
   operating loss, capital loss and minimum tax credit carryforwards.

   The balance sheet  classification and amount of the tax accounts  established
   relating to BFI 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  relating to BFI. The increase in total  valuation
   allowance  during  the year of $136  million  is  principally  due to the BFI
   acquisition.  Subsequent  recognition  of tax  benefits  would  result  in an
   adjustment  to goodwill in an amount up to $127  million.  In addition to the
   valuation  allowance relating to the BFI capital loss and state net operating
   loss carryforward,  the net deferred tax asset includes a valuation allowance
   of $12 million and $3 million as of December 31, 1999 and 1998, respectively,
   to  reflect  possible  limitations  on our  ability  to use  other  state net
   operating loss carryforwards.




                                       70
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                    --------------------------------------------------
                                                                        1999                1998             1997
                                                                   ----------------    ---------------    ------------

<S>                                                                <C>                 <C>                <C>
Current tax provision.........................................     $       65,300      $       2,000      $    78,418
Deferred provision (benefit)..................................            (74,056)            41,773         (38,141)
                                                                   ----------------    ---------------    ------------
Total.........................................................     $       (8,756)     $      43,773      $    40,277
                                                                   ================    ===============    ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                    --------------------------------------------------
                                                                      1999             1998              1997
                                                                    ----------      -----------        ----------

<S>                                                                    <C>              <C>                 <C>
Federal statutory tax rate....................................         (35.0)  %        (35.0)  %           35.0  %
Consolidated state taxes, net of federal benefit..............          (0.4)              9.2               3.1
Taxes of pooled companies.....................................          (0.1)             70.6             (5.1)
Amortization of goodwill......................................           11.2              3.7               0.6
Non-deductible write-off of goodwill and business
  combination costs...........................................           16.2             28.8                --
Other permanent differences...................................            4.2              3.0               0.7
                                                                    ----------      ----------         ----------
Effective tax rate............................................          (3.9)  %          80.3  %           34.3  %
                                                                    ==========      ===========        ==========
</TABLE>
   Tax benefits for the extraordinary items in 1999, 1998 and 1997 were based on
   our then ordinary  combined federal and state rates of 39.5%,  39.5% and 40%,
   respectively.  Tax benefit for the cumulative  effect of change in accounting
   principle in 1999 was based on our ordinary  combined  federal and state rate
   of 39.5%.

   The components of the net deferred tax asset  (liability)  are as follows (in
thousands):
<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                            ------------------------------------------
                                                                                   1999                   1998
                                                                            -------------------    -------------------
<S>                                                                         <C>                    <C>
Deferred tax liability relating primarily to property consisting
  of landfill assets, fixed assets and debt basis differences..........     $       (608,894)      $       (120,942)
                                                                            -------------------    -------------------
Deferred Tax Assets Relating To:
Environmental, closure and post-closure reserves.......................               61,982                 23,995
Other reserves.........................................................              317,769                120,293
Net operating loss, capital loss and minimum tax credit
  carryforwards........................................................              278,232                 35,940
Valuation allowance....................................................             (138,612)                (3,076)
                                                                            -------------------    -------------------
Total deferred tax asset...............................................              519,371                177,152
                                                                            -------------------    -------------------
Net deferred tax asset (liability).....................................     $        (89,523)      $         56,210
                                                                            ===================    ===================
</TABLE>

   The change in the non-current  deferred tax liability includes deferred taxes
   related to 1999  acquisitions,  the most  significant of which was BFI, where
   the financial basis of assets  acquired  differed from the tax basis of those
   assets.

   Deferred  income taxes have not been  provided as of December  31,  1999,  on
   approximately  $21 million of  undistributed  earnings of foreign  affiliates
   which are considered to be permanently reinvested.


                                       71
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   14.      Commitments and Contingencies

   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  reasonably  estimable.  We expect  that  matters in process at
   December 31, 1999,  which have not been accrued in the  consolidated  balance
   sheet, will not have a material adverse effect on our consolidated liquidity,
   financial position or results from operations.

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

   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, 1999
                                         -------------------------
                      2000                   $          32,749
                      2001                              29,266
                      2002                              26,831
                      2003                              24,364
                      2004                              19,263
                      Thereafter                        58,904

   Rental expense under such operating leases was  approximately  $26.9 million,
   $13.9 million and $12.2 million for the three years ended  December 31, 1999,
   respectively.

   We have  entered into  employment  agreements  with certain of our  executive
   officers  for  periods up to three  years.  We have  agreed to pay  severance
   amounts   equal  to  a  multiple  of  defined   compensation   under  certain
   circumstances.  In the event of a material  change in control,  as defined in
   the employment  agreements,  or  termination of all executive  officers under
   such agreements, we would be required to make payments of approximately $12.3
   million,  in addition to a  reimbursement  payment to eliminate the effect of
   any excise taxes associated with this payment.

   As a condition of the merger  agreement among Allied and BFI, we are required
   to provide  severance  benefits to certain  employees  of BFI who do not have
   employment  agreements and who would not otherwise receive severance pay upon
   termination,   if  terminated   within  12  months   following  the  date  of
   acquisition.

   We carry a broad range of insurance coverage for protection of our assets and
   operations from certain risks including  environmental  impairment  liability
   insurance for certain landfills.

   We are also required to provide financial assurances to governmental agencies
   under  applicable   environmental   regulations   relating  to  our  landfill
   operations and collection contracts.  These financial assurance  requirements
   are satisfied by us issuing performance bonds,  letters of credit,  insurance
   policies  or trust  deposits  to secure  our  obligations  as they  relate to
   landfill  closure  and  post-closure  costs  and  performance  under  certain
   collection contracts. At December 31, 1999, we had outstanding  approximately
   $1.5  billion  in  financial  assurance  instruments,  represented  by $701.7
   million of performance  bonds,  $656.6 million of insurance  policies,  $52.1
   million of trust  deposits  and $105.8  million of letters of credit.  During
   calendar  year 2000,  we expect no material  increase in financial  assurance
   obligations relating to our landfill operations and collection contracts.




                                       72
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   We  have  issued  bank  letters  of  credit  in  the   aggregate   amount  of
   approximately  $539.2 million at December 31, 1999,  including  approximately
   $105.8 million relating to financial assurances to government agencies. These
   financial instruments are issued in the normal course of business and are not
   reflected in the accompanying  balance sheets. The underlying  obligations of
   the financial  instruments  are valued based on the likelihood of performance
   being required. We do not expect any material losses to result from these off
   balance sheet instruments based on historical results, and therefore,  we are
   of the opinion that the fair value of these instruments is zero.

   Certain of our subsidiaries have 50% ownership interests in American Ref-Fuel
   partnerships  that construct,  own and operate  facilities which generate and
   sell electricity from the incineration of solid waste.  Substantially  all of
   the  remaining  ownership  interests  are held by Duke/UAE  Ref-Fuel  LLC, an
   entity indirectly owned 65% by Duke Capital  Corporation ("Duke Capital") and
   35% by United American Energy Corporation.  The five facilities  currently in
   commercial operation under this ownership structure are located in Hempstead,
   New York, Essex County in New Jersey,  Preston,  Connecticut,  Niagara Falls,
   New York and Rochester,  Massachusetts.  Financing  arrangements  for four of
   these  projects  include  agreements  with  Allied  and Duke  Capital to each
   severally fund one-half of each  partnership's  cash  deficiencies  resulting
   from the partnership's failure to perform.

   With respect to the facilities  located in Hempstead,  New York, Essex County
   in New Jersey and Preston,  Connecticut,  Allied and Duke  Capital  generally
   will  not be  required  to  fund  cash  deficiencies  associated  with  waste
   deliveries  by the  sponsoring  municipality  below certain  minimum  levels,
   changes in law or termination of incineration  service for reasons other than
   default by the respective partnership.  In the event of a partnership default
   which  results  in  termination  of  incineration  service,  we may limit our
   financial obligations by partnership as follows:

      Hempstead,  New York -- Funding  of 50% of  periodic  payments  related to
      outstanding debt.  Average annual debt service on 50% of the debt over the
      next  five  years  is $12  million.  We have  guaranteed  $15  million  of
      additional  partnership  debt and  annual  debt  service  on such  debt is
      estimated to be $0.5 million.

      Essex  County  in New  Jersey  --  Funding  of 50%  of  cash  deficiencies
      including  debt  service  up to $50 to $100  million,  depending  upon the
      circumstances.  Average  annual  debt  service on 50% of the debt over the
      next five years is $10 million.

      Preston,  Connecticut  -- Funding of 50% of periodic  payments  related to
      outstanding debt.  Average annual debt service on 50% of the debt over the
      next five years is $5 million.

   With  respect  to the  facilities  located  in  Niagara  Falls,  New York and
   Rochester,   Massachusetts,   we  may  limit  our  financial  obligations  by
   partnership as follows:

      Niagara Falls, New York -- Funding of 50% of partnership cash deficiencies
      relating to debt service.  Average  annual debt service on 50% of the debt
      over the next five years is estimated to be $3 million.

      SEMASS  in  Rochester,  Massachusetts  --  Under  support  agreements  and
      guarantees  (i) lending up to 50% of $5 million to the SEMASS  Partnership
      under  certain  circumstances,  (ii)  deferring up to 50% of $7 million of
      operating cost reimbursement, and (iii) funding up to 50% of $5 million in
      operating  damages.  These  obligations have been assigned to the lenders.
      Average annual debt service on 50% of the debt over the next five years is
      approximately $20 million.




                                       73
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   15.      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.

   In  connection  with the  receipt in April 1995 of all permits  necessary  to
   develop a landfill  on certain  real estate  acquired  in July 1992,  we were
   obligated  to pay $5.6  million to the  previous  owners of the real  estate,
   which  included  certain of our then current  stockholders.  During the years
   ended  December  31, 1998 and 1997,  we paid  principal  of $1.7  million and
   $136,000,  respectively,  to  our  stockholders  related  to the  receipt  of
   permits. We fully repaid these promissory notes in 1998.

   In 1998, we sold certain assets to a relative of an officer for approximately
   $1.5 million. No gain or loss was recognized on this transaction.

   16.      Segment Reporting

   We classify our  operations  into eight U.S.  geographic  regions:  Atlantic,
   Central, Northeast,  Southeast, Great Lakes, Midwest, Southwest and West. 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  before  acquisition   related  and  unusual  costs.  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). The tables below reflect certain geographic  information  relating to our
   operations (in thousands):

<TABLE>
<CAPTION>
                                                Great
                         Atlantic   Central     Lakes     Midwest   Northeast  Southeast   Southwest   West     Other(1)    Total
                        ---------   -------    -------    -------   ---------  ---------   ---------  ------    -------   ---------
<S>                     <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>       <C>        <C>
1999:
Revenues from external
  customers..........   $ 313,656  $ 405,557  $ 437,978  $ 323,984  $ 516,517  $ 308,742  $ 400,557  $616,799  $   17,281 $3,341,071
Intersegment revenues      56,841     94,918    119,244     72,353     94,704     49,315     79,606   104,529          --    671,510
Depreciation and
  amortization.......      38,322     43,960     64,549     45,131     47,784     35,020     58,385    50,943          --    384,094
EBITDA before non-
  recurring charges..     105,563    124,251    182,995    139,132    124,179    101,610    159,094   212,204      11,713  1,160,741
Total assets.........   1,467,231  1,005,625  1,801,617  1,464,808  2,233,476  1,670,626  1,928,064  2,065,265 11,904,199 25,540,911
Capital expenditures.      49,363     57,931     64,966     40,381     20,821     16,784     27,593    54,699       6,654    339,192
1998:
Revenues from external
  Customers..........   $ 104,587  $ 300,183  $ 296,894  $ 159,344  $ 164,701  $  57,274  $ 148,768  $338,058  $    5,803 $1,575,612
Intersegment revenues      14,728     56,522     68,675     37,524     21,314     12,743     35,626    34,289          --    281,421
Depreciation and
  amortization.......      11,858     29,566     41,794     22,533     13,006      5,829     20,111    28,397       6,871    179,965
EBITDA before non-
  Recurring charges..      31,348     89,360    132,002     67,561     33,580     14,337     58,026   116,661    (15,371)    527,504
Total assets.........     198,064    547,108    747,767    445,185    439,215     98,729    376,442   595,290   2,108,367  5,556,167
Capital expenditures.      48,752     42,416     67,987     31,023      8,064     10,302     35,142    54,149       3,907    301,742
1997:
Revenues from external
  customers..........   $  80,484  $ 238,831  $ 205,701  $ 132,973  $ 185,107  $  47,320  $ 148,544  $275,721  $   25,980 $1,340,661
Intersegment revenues       2,987     28,263     34,120     30,996     20,938     12,765     28,576    17,579          --    176,224
Depreciation and
  amortization.......       6,152     25,203     29,384     20,607     16,296      5,345     20,923    23,088      11,240    158,238
EBITDA before non-
  recurring charges..      19,104     59,134     78,864     58,988     39,050     12,345     56,642    62,000       (151)    385,976
Total assets.........     126,974    668,175    590,671    353,235    214,507     81,606    384,467   553,735   1,108,428  4,081,798
Capital expenditures.      21,263     21,830     57,650     20,710      9,974     10,362     19,157    23,151       3,908    188,005

<FN>
(1)    Amounts  relate  primarily to our  subsidiaries  which  provide  services
       throughout the organization and not on a regional basis.
</FN>
</TABLE>




                                       74
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                   ---------------------------------------------------
                                                                        1999                1998             1997
                                                                   ----------------    ---------------    ------------
<S>                                                                <C>                 <C>                <C>
Operating Income:
Total EBITDA before acquisition related and unusual costs
  for reportable segments.....................................     $    1,160,741      $     527,504      $   385,976
Depreciation and amortization for reportable
  segments....................................................            384,094            179,965          158,238
Acquisition related and unusual costs.........................            588,855            317,616            3,934
                                                                   ----------------    ---------------    ------------
  Operating Income............................................     $      187,792      $      29,923      $   223,804
                                                                   ================    ===============    ============
</TABLE>

<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                   -----------------------------------
                                                                                        1999                1998
                                                                                   ----------------    ---------------
<S>                                                                                <C>                 <C>
Assets:
Total assets for reportable segments...........................................    $   25,540,911      $   5,556,167
Elimination of investments.....................................................       (10,577,810)        (1,803,575)
                                                                                   ----------------    ---------------
  Total assets.................................................................    $   14,963,101      $   3,752,592
                                                                                   ================    ===============
</TABLE>

<TABLE>
<CAPTION>

   Percentage of our total revenue attributable to services provided:

                                                                                Year Ended December 31,
                                                                  ----------------------------------------------------
                                                                     1999              1998              1997
                                                                  ------------      ------------      ------------
<S>                                                                      <C>               <C>               <C>
Collection..................................................             60.7  %           55.7  %           57.2  %
Transfer....................................................              5.6               7.1               6.7
Landfill(1).................................................             25.3              29.9              26.4
Other.......................................................              8.4               7.3               9.7
                                                                  ------------      ------------      ------------
  Total revenues............................................            100.0  %          100.0  %          100.0  %
                                                                  ============      ============      ============

<FN>
(1)    The portion of collection and third-party transfer revenues  attributable
       to  disposal  charges  for  waste  collected  by us and  disposed  at our
       landfills have been excluded from  collection  and transfer  revenues and
       included in landfill revenues.
</FN>
</TABLE>




                                       75
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   17.      Selected Quarterly Financial Data (unaudited)

   The following table summarizes the unaudited  consolidated  quarterly results
   of  operations  as  reported  for 1999 and as reported  and as  restated  for
   poolings-of-interests for 1998 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                     First             Second            Third             Fourth
                                                    Quarter           Quarter         Quarter(2)           Quarter
                                                  -------------     -------------    --------------     --------------
<S>                                               <C>               <C>              <C>                <C>
1999
Operating revenues:...........................    $    408,045      $    463,357     $   1,085,628      $   1,384,041

Gross profit:.................................         178,031           206,345           449,937            557,794

Income (loss) before income taxes,
  extraordinary items and cumulative effect
  of change in accounting principle:(1).......          56,237            79,277         (432,710)             69,941

Net income (loss): (1)........................        (31,081)            46,894         (335,553)             31,012

Basic earnings (loss) per common
  share:(1)...................................          (0.17)              0.25            (1.84)               0.08

Diluted earnings (loss) per common
  share:(1)...................................          (0.17)              0.25            (1.84)               0.08

<FN>
(1)     The first and second quarters have been restated to reflect the effect of the change in accounting  principle
        (See Note 1).

(2)     Includes approximately $548.7 million of acquisition related and unusual costs.

</FN>
</TABLE>

<TABLE>
<CAPTION>
                                                      First             Second            Third            Fourth
                                                     Quarter            Quarter          Quarter           Quarter
                                                  --------------    -------------     --------------    ---------------
<S>                                               <C>               <C>               <C>               <C>
1998
 Operating Revenues:
   As reported.................................   $    223,755      $    299,692      $     334,290     $     407,119
   As restated.................................        357,900           394,853            415,740           407,119

 Gross profit:
   As reported.................................        104,504           135,096            147,379           178,686
   As restated.................................        152,084           171,998            180,571           178,686

 Income (loss) before income taxes and extraordinary
 items:
   As reported.................................         28,387             8,565             28,245          (165,457)
   As restated.................................         46,292            22,690             41,997          (165,457)

 Net income (loss):
   As reported.................................         16,749           (9,501)             11,123          (274,817)
   As restated.................................         31,565             1,589             18,611          (274,817)

 Basic earnings (loss) per common share:
   As reported.................................           0.16            (0.08)               0.08             (1.50)
   As restated.................................           0.17              0.01               0.10             (1.50)

 Diluted earnings (loss) per common share:
   As reported.................................           0.16            (0.07)               0.08             (1.50)
   As restated.................................           0.17              0.01               0.10             (1.50)

</TABLE>



                                       76
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

   18.      Summarized Financial Data of Allied Waste North America, Inc.

   As  discussed  in Note 6, the 1998 Senior  Notes and the 1999 Notes issued by
   Allied NA (our wholly owned subsidiary) and certain debt of BFI (all of which
   is  no  longer  registered  under  the  Securities  Exchange Act of 1934) are
   guaranteed by us. Our guarantee is full, unconditional and joint and  several
   of Allied NA's  and  BFI's debt. The separate complete  financial  statements
   of Allied NA and BFI have not been  included  herein  as we  have  determined
   that such disclosure is not considered to  be material.  However,  summarized
   balance sheet data for Allied NA and subsidiaries as of December 31, 1999 and
   1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                   Summarized Consolidated Balance Sheet Data

                                                                    December 31, 1999           December 31, 1998
                                                                 ------------------------    -------------------------
<S>                                                                 <C>                          <C>
Current assets...............................................       $      2,248,422             $         499,904
Property and equipment, net..................................              3,738,388                     1,776,025
Goodwill, net................................................              8,238,929                     1,327,470
Other non-current assets.....................................                737,362                       149,193
Current liabilities..........................................              2,629,499                       445,528
Long-term debt, net of current portion.......................              9,240,291                     2,118,927
Due to parent................................................              2,091,951                     1,083,515
Other long-term obligations..................................              1,453,756                       268,407
Retained earnings (deficit)..................................               (452,396)                     (163,785)
</TABLE>

<TABLE>
<CAPTION>

                     Summarized Statement of Operations Data

                                                                               Year Ended December 31,
                                                                 -----------------------------------------------------
                                                                          1999                         1998
                                                                 -----------------------     -------------------------
<S>                                                                 <C>                          <C>
Revenue......................................................       $      3,341,071             $       1,575,612
Operating costs and expenses.................................              3,153,279                     1,545,689
Operating income.............................................                187,792                        29,923
Net loss before extraordinary loss and cumulative effect of
change in accounting principle...............................               (221,250)                      (80,338)
Extraordinary loss, net......................................                  3,223                        72,202
Cumulative effect of change in accounting principle, net.....                 64,255                            --
Net loss.....................................................               (288,728)                     (152,540)
</TABLE>

   19.      Subsequent Events

   On January 18, 2000,  we  repurchased  the $250 million 6.08% MVPs when First
   National  Bank of  Chicago  did not  exercise  its  option  to  purchase  the
   securities.  The proceeds to repurchase the MVPs were obtained from a draw on
   our revolving credit facility.




                                       77
<PAGE>


                          ALLIED WASTE INDUSTRIES, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 2000 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 2000 Annual Meeting of Stockholders.

Item 12.        Security Ownership of Certain Beneficial Owners and Management

                             PRINCIPAL STOCKHOLDERS

   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  2000  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  2000  Annual  Meeting  of
   Stockholders.

                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K

   Financial Statement Schedules -

   Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                            Balance at           Charges to           Other          Write-offs/        Balance at
                                             12/31/96              Expense         Charges(1)         Payments           12/31/97
                                           --------------       --------------    --------------    --------------     -------------
<S>                                        <C>                  <C>               <C>               <C>                <C>
Allowance for doubtful accounts.........   $     8,391          $       4,228     $      1,624      $     (4,895)      $      9,348
Restructuring costs.....................         5,381                     --               --            (5,381)                --

                                            Balance at           Charges to           Other          Write-offs/        Balance at
                                             12/31/97              Expense         Charges(1)         Payments           12/31/98
                                           --------------       --------------    --------------    --------------     -------------
Allowance for doubtful accounts.........   $     9,348          $       8,086     $      1,912      $     (5,439)      $     13,907
Severance and termination costs.........            --                 34,328               --           (24,202)            10,126
Restructuring costs.....................            --                 10,152               --            (2,522)             7,630
</TABLE>

<TABLE>
<CAPTION>
                                                                         Additions
                                        Balance at      Charges to        through          Other        Write-offs/     Balance at
                                         12/31/98         Expense         Goodwill      Charges(1)       Payments        12/31/99
                                       -------------   --------------   -------------  --------------  --------------  -------------
<S>                                    <C>             <C>              <C>            <C>             <C>             <C>
  Allowance for doubtful accounts...   $    13,907     $      10,305    $         --   $     51,341    $    (16,063)   $     59,490
  Severance and termination costs...        10,126               499          52,254             --         (31,456)         31,423
  Restructuring costs...............         7,630               565           1,426             --          (7,117)          2,504

<FN>
(1)     Amounts consist primarily of liabilities related to acquired companies.
</FN>
</TABLE>

   Valuation and qualifying accounts not included above have been shown in Notes
   1 and 7 of our financial  statements  included in Part II Item 8 of this Form
   10-K.


                                       78
<PAGE>


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 Current 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 Current 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 for the
          fiscal year ended December 31, 1996).
3.2   *   Amended and Restated Bylaws of Allied as of July 30, 1999.
3.3       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.
4.1       Specimen  certificate  for  shares of Common  Stock par value $.01 per
          share. Exhibit 4.2 of Allied's Registration Statement on Form S-1 (No.
          33-48507) is incorporated herein by reference.
4.2       Indenture  relating to the 1996 Notes dated  February 28, 1997 between
          Allied and First Trust. Exhibit 4.1 to Allied's Registration Statement
          on Form S-4 (No. 333-22575) is incorporated herein by reference.
4.3       1991 Incentive Stock Plan of Allied.  Exhibit 10.T to Allied's Form 10
          dated May 14, 1991, is incorporated herein by reference.
4.4       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.
4.5       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.
4.6       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.
4.7       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.
4.8       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.
4.9       Indenture,  dated as of May 15,  1997,  by and among the  Company  and
          First Bank National  Association  with respect to the Senior  Discount
          Notes  and  Exchange  Notes.  Exhibit  4.1  to  Allied's  Registration
          Statement  on Form S-4  (No.  333-31231)  is  incorporated  herein  by
          reference.
4.10      Indenture,  dated as of December  1, 1996,  by and among  Allied,  the
          Guarantors  and First Bank  National  Association  with respect to the
          1996 Notes and Exchange  Notes.  Exhibit 4.1 to Allied's  Registration
          Statement  on Form S-4  (No.  333-22575)  is  incorporated  herein  by
          reference.
4.11      First  Supplemental  Indenture  dated December 30, 1996 related to the
          1996 Notes. Exhibit 4.2 to Allied's Registration Statement on Form S-4
          (No. 333-22575) is incorporated herein by reference.
4.12      Second Supplemental Indenture dated April 30, 1997 related to the 1996
          Notes. Exhibit 4.3 to Allied's Registration Statement on Form S-4 (No.
          333-22575) is incorporated herein by reference.




                                       79
<PAGE>

4.13      Senior Subordinated  Guarantee dated as of December 1, 1996 related to
          the 1996 Notes. Exhibit 4.5 to the Company's Registration Statement on
          Form S-4 (No. 333-22575) is incorporated herein by reference.
4.14      Amendment  No. 1 to the 1991  Incentive  Stock Plan dated  November 1,
          1996.  Exhibit 4.20 to Allied's Annual Report on Form 10-K dated March
          31, 1998 is incorporated herein by reference.
4.15      Indenture  relating to the 1998 Senior Notes, dated as of December 23,
          1998, by and among Allied 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.
4.16      Five Year Series Supplement  Indenture  relating to the 1998 Five Year
          Notes, dated December 23, 1998, among the Company,  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.
4.17      Form of Series B Five Year Notes  (included in Exhibit 4.22).  Exhibit
          4.3 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.18      Seven Year Series Supplement Indenture relating to the 1998 Seven Year
          Notes, dated December 23, 1998, among the Company,  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.
4.19      Form of Series B Seven Year Notes (included in Exhibit 4.24).  Exhibit
          4.5 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.20      Ten Year  Series  Supplement  Indenture  relating to the 1998 Ten Year
          Notes, dated December 23, 1998, among the Company,  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.
4.21      Form of Series B Ten Year Notes  (included in Exhibit  4.26).  Exhibit
          4.7 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.22      Certificate of Designation for Series A Senior  Convertible  Preferred
          Stock. Exhibit 4.1 to Allied's current report on Form 8-K dated August
          10, 1999, is incorporated herein by reference.
4.23      Certificate  of  Designation  for  Series  B Junior  Preferred  Stock.
          Exhibit 4.2 to Allied's  current  report on Form 8-K dated  August 10,
          1999, is incorporated herein by reference.
4.24      First  Supplemental  Indenture,  dated  July 30,  1999  among  Allied,
          certain  subsidiaries of Allied and U.S. Bank Trust, N.A., as trustee,
          regarding 10% Senior Subordinated Notes due 2009 of Allied Waste North
          America, Inc. Exhibit 4.3 to Allied's current report on Form 8-K dated
          August 10, 1999, is incorporated herein by reference.
10.1      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.
10.2      Shareholders Agreement dated as of April 14, 1997 between Allied Waste
          Industries, Inc. and 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.  Exhibit 10.2 to Allied's  Report on Form 10-Q for the quarter
          ended March 31, 1997 is incorporated herein by reference.
10.3      Amended and Restated Shareholders Agreement dated as of April 21, 1997
          between Allied Waste Industries,  Inc. and 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. Exhibit 10.3 to Allied's Report on Form
          10-Q for the quarter  ended March 31, 1997 is  incorporated  herein by
          reference.



                                       80
<PAGE>

10.4      Registration  Rights  Agreement  dated as of April  12,  1997  between
          Allied Waste  Industries,  Inc. and 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.  Exhibit 10.4 to Allied's  Report on
          Form 10-Q for the quarter ended March 31, 1997 is  incorporated herein
          by reference.
10.5   *  Executive  Employment  Agreement  between  Allied and with Henry L.
          Hirvela dated February 23, 2000.
10.6      Executive  Employment  Agreement between Allied and with 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.
10.7      Executive  Employment  Agreement between Allied and with Larry D. Henk
          dated June 6, 1997.  Exhibit 10.4 to Allied's  Report on Form 10-Q for
          the quarter ended June 30, 1997 is incorporated herein by reference.
10.8      Executive  Employment Agreement between Allied and with 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.
10.9      Executive  Employment  Agreement  between  Allied  and with  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.
10.10     Executive  Employment  Agreement  between  Allied  and  with  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.
10.11     Executive  Employment  Agreement  between  Allied and with  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.
10.12     Credit  Agreement  dated as of June 18, 1998 among  Allied Waste North
          America, Inc., Allied Waste Industries,  Inc., certain lenders, Credit
          Suisse,  First  Boston and Goldman  Sachs  Credit  Partners  L.P.,  as
          Co-Syndication  Agents,  Citibank,  N.A., as Issuing Bank and Citicorp
          USA, Inc., as Administrative Agent. Exhibit 10.1 to Allied's Quarterly
          Report  on  Form  10-Q  for  the  quarter   ended  June  30,  1998  is
          incorporated herein by reference.
10.13     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  Current  Report on Form 8-K dated August 10, 1999 is
          incorporated herein by reference.
10.14     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  Current  Report  on  Form  8-K  dated  August  10,  1999  is
          incorporated herein by reference.
10.15     Credit  Facility  dated as of July 30, 1999.  Exhibit 10.1 to Allied's
          current  report on Form 8-K dated  August 10,  1999,  is  incorporated
          herein by reference.
10.16     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  current  report  on Form  8-K  dated  August  10,  1999,  is
          incorporated herein by reference.

10.17     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  current  report  on Form  8-K  dated  August  10,  1999,  is
          incorporated herein by reference.
12    *   Ratio of earnings to fixed charges.
21    *   Subsidiaries of the Registrant.
23.1  *   Consent of Arthur Andersen LLP.
27    *   Financial Data Schedule for the year ended December 31, 1999.

      *   Filed herewith

   Reports on Form 8-K during the Quarter Ended December 31, 1999

November 22, 1999      Our  Current  Report  on  Form 8-K  reports the pro forma
                       financial  statements  related  to  the  BFI acquisition.




                                       81
<PAGE>





                                   Signatures

   Pursuant  to the  requirements  of  Sections  13 or 15(d)  of the  Securities
   Exchange Act of 1934, as amended,  the Registrant,  Allied Waste  Industries,
   Inc.,  has caused this Report to be signed on its behalf by the  undersigned,
   in the City of Scottsdale, State of Arizona, on March 30, 2000.

                     ALLIED WASTE INDUSTRIES, INC.

                     By:                  /s/HENRY L. HIRVELA
                            ------------------------------------------------
                                           Henry L. Hirvela
                                Vice President-Chief Financial Officer
                                     (Principal Financial Officer)

                     By:                 /s/PETER S. HATHAWAY
                            ------------------------------------------------
                                           Peter S. Hathaway
                                Vice President-Chief Accounting Officer
                                    (Principal Accounting Officer)

   Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  the
   following  persons in the capacities  indicated on March 30, 2000 have signed
   this report.

          Signature                                      Title
        -----------                                   ----------

  /s/THOMAS H. VAN WEELDEN          Director, Chairman of the Board of Directors
----------------------------------  President and Chief Executive Officer
    Thomas H. Van Weelden           (Principal Executive Officer)


     /s/HENRY L. HIRVELA            Vice President-Chief Financial Officer
----------------------------------  (Principal Financial Officer)
      Henry L. Hirvela

    /s/PETER S. HATHAWAY            Vice President-Chief Accounting Officer
----------------------------------  (Principal Accounting Officer)
      Peter S. Hathaway

                                    Director
----------------------------------
        Michael Gross

      /s/DENNIS HENDRIX             Director
----------------------------------
       Dennis Hendrix

     /s/DAVID B. KAPLAN             Director
----------------------------------
       David B. Kaplan

      /s/NOLAN LEHMANN              Director
----------------------------------
        Nolan Lehmann

     /s/HOWARD A. LIPSON            Director
----------------------------------
      Howard A. Lipson

     /s/ROGER A. RAMSEY             Director
----------------------------------
       Roger A. Ramsey

    /s/ANTONY P. RESSLER            Director
----------------------------------
      Antony P. Ressler

     /s/WARREN B. RUDMAN            Director
----------------------------------
      Warren B. Rudman

                                    Director
----------------------------------
        Vincent Tese

      /s/DAVID BLITZER              Director
----------------------------------
        David Blitzer

                                       82
<PAGE>


                                  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 Current 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 Current 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 for the
          fiscal year ended December 31, 1996).
3.2   *   Amended and Restated Bylaws of Allied as of July 30, 1999.
3.3       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.
4.1       Specimen  certificate  for  shares of Common  Stock par value $.01 per
          share. Exhibit 4.2 of Allied's Registration Statement on Form S-1 (No.
          33-48507) is incorporated herein by reference.
4.2       Indenture  relating to the 1996 Notes dated  February 28, 1997 between
          Allied and First Trust. Exhibit 4.1 to Allied's Registration Statement
          on Form S-4 (No. 333-22575) is incorporated herein by reference.
4.3       1991 Incentive Stock Plan of Allied.  Exhibit 10.T to Allied's Form 10
          dated May 14, 1991, is incorporated herein by reference.
4.4       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.
4.5       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.
4.6       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.
4.7       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.
4.8       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.
4.9       Indenture,  dated as of May 15,  1997,  by and among the  Company  and
          First Bank National  Association  with respect to the Senior  Discount
          Notes  and  Exchange  Notes.  Exhibit  4.1  to  Allied's  Registration
          Statement  on Form S-4  (No.  333-31231)  is  incorporated  herein  by
          reference.
4.10      Indenture,  dated as of December  1, 1996,  by and among  Allied,  the
          Guarantors  and First Bank  National  Association  with respect to the
          1996 Notes and Exchange  Notes.  Exhibit 4.1 to Allied's  Registration
          Statement  on Form S-4  (No.  333-22575)  is  incorporated  herein  by
          reference.
4.11      First  Supplemental  Indenture  dated December 30, 1996 related to the
          1996 Notes. Exhibit 4.2 to Allied's Registration Statement on Form S-4
          (No. 333-22575) is incorporated herein by reference.


<PAGE>

4.12      Second Supplemental Indenture dated April 30, 1997 related to the 1996
          Notes. Exhibit 4.3 to Allied's Registration Statement on Form S-4 (No.
          333-22575) is incorporated herein by reference.
4.13      Senior Subordinated  Guarantee dated as of December 1, 1996 related to
          the 1996 Notes. Exhibit 4.5 to the Company's Registration Statement on
          Form S-4 (No. 333-22575) is incorporated herein by reference.
4.14      Amendment  No. 1 to the 1991  Incentive  Stock Plan dated  November 1,
          1996.  Exhibit 4.20 to Allied's Annual Report on Form 10-K dated March
          31, 1998 is incorporated herein by reference.
4.15      Indenture  relating to the 1998 Senior Notes, dated as of December 23,
          1998, by and among Allied 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.
4.16      Five Year Series Supplement  Indenture  relating to the 1998 Five Year
          Notes, dated December 23, 1998, among the Company,  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.
4.17      Form of Series B Five Year Notes  (included in Exhibit 4.22).  Exhibit
          4.3 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.18      Seven Year Series Supplement Indenture relating to the 1998 Seven Year
          Notes, dated December 23, 1998, among the Company,  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.
4.19      Form of Series B Seven Year Notes (included in Exhibit 4.24).  Exhibit
          4.5 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.20      Ten Year  Series  Supplement  Indenture  relating to the 1998 Ten Year
          Notes, dated December 23, 1998, among the Company,  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.
4.21      Form of Series B Ten Year Notes  (included in Exhibit  4.26).  Exhibit
          4.7 to Allied's Registration  Statement on Form S-4 (No. 333-70709) is
          incorporated herein by reference.
4.22      Certificate of Designation for Series A Senior  Convertible  Preferred
          Stock. Exhibit 4.1 to Allied's current report on Form 8-K dated August
          10, 1999, is incorporated herein by reference.
4.23      Certificate  of  Designation  for  Series  B Junior  Preferred  Stock.
          Exhibit 4.2 to Allied's  current  report on Form 8-K dated  August 10,
          1999, is incorporated herein by reference.
4.24      First  Supplemental  Indenture,  dated  July 30,  1999  among  Allied,
          certain  subsidiaries of Allied and U.S. Bank Trust, N.A., as trustee,
          regarding 10% Senior Subordinated Notes due 2009 of Allied Waste North
          America, Inc. Exhibit 4.3 to Allied's current report on Form 8-K dated
          August 10, 1999, is incorporated herein by reference.
10.1      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.
10.2      Shareholders Agreement dated as of April 14, 1997 between Allied Waste
          Industries, Inc. and 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.  Exhibit 10.2 to Allied's  Report on Form 10-Q for the quarter
          ended March 31, 1997 is incorporated herein by reference.
10.3      Amended and Restated Shareholders Agreement dated as of April 21, 1997
          between Allied Waste Industries,  Inc. and 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. Exhibit 10.3 to Allied's Report on Form
          10-Q for the quarter  ended March 31, 1997 is  incorporated  herein by
          reference.


<PAGE>



10.4      Registration  Rights  Agreement  dated as of April  12,  1997  between
          Allied Waste  Industries,  Inc. and 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.  Exhibit 10.4 to Allied's  Report on
          Form 10-Q for the quarter ended March 31, 1997 is incorporated  herein
          by reference.
10.5   *  Executive  Employment  Agreement  between  Allied and with Henry L.
          Hirvela dated February 23, 2000.
10.6      Executive  Employment  Agreement between Allied and with 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.
10.7      Executive  Employment  Agreement between Allied and with Larry D. Henk
          dated June 6, 1997.  Exhibit 10.4 to Allied's  Report on Form 10-Q for
          the quarter ended June 30, 1997 is incorporated herein by reference.
10.8      Executive  Employment Agreement between Allied and with 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.
10.9      Executive  Employment  Agreement  between  Allied  and with  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.
10.10     Executive  Employment  Agreement  between  Allied  and  with  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.
10.11     Executive  Employment  Agreement  between  Allied and with  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.
10.12     Credit  Agreement  dated as of June 18, 1998 among  Allied Waste North
          America, Inc., Allied Waste Industries,  Inc., certain lenders, Credit
          Suisse,  First  Boston and Goldman  Sachs  Credit  Partners  L.P.,  as
          Co-Syndication  Agents,  Citibank,  N.A., as Issuing Bank and Citicorp
          USA, Inc., as Administrative Agent. Exhibit 10.1 to Allied's Quarterly
          Report  on  Form  10-Q  for  the  quarter   ended  June  30,  1998  is
          incorporated herein by reference.
10.13     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  Current  Report on Form 8-K dated August 10, 1999 is
          incorporated herein by reference.
10.14     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  Current  Report  on  Form  8-K  dated  August  10,  1999  is
          incorporated herein by reference.
10.15     Credit  Facility  dated as of July 30, 1999.  Exhibit 10.1 to Allied's
          current  report on Form 8-K dated  August 10,  1999,  is  incorporated
          herein by reference.
10.16     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  current  report  on Form  8-K  dated  August  10,  1999,  is
          incorporated herein by reference.
10.17     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  current  report  on Form  8-K  dated  August  10,  1999,  is
          incorporated herein by reference.
12    *   Ratio of earnings to fixed charges.
21    *   Subsidiaries of the Registrant.
23.1  *   Consent of Arthur Andersen LLP.
27    *   Financial Data Schedule for the year ended December 31, 1999.

      *   Filed herewith

   Reports on Form 8-K during the Quarter Ended December 31, 1999

November 22, 1999          Our Current Report on Form 8-K reports the pro forma
                           financial statements related to the BFI acquisition.


<PAGE>