ALLIED WASTE INDUSTRIES INC, 10-Q, 1999-08-16

ALLIED WASTE INDUSTRIES INC
10-Q, 1999-08-16
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE 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 (I.R.S. Employer
incorporation or organization.) Identification No.)

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

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

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 the number of shares outstanding of the issuer's class of
common stock, as of the latest practicable date.

Class Outstanding as of August 9, 1999
----- ---------------------------------
Common Stock.......... 188,494,886

<PAGE>

ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1999

INDEX

Part I Financial Information
<S> <C> <C>
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets................................................. 3
Condensed Consolidated Statements of Operations....................................... 4
Condensed Consolidated Statements of Cash Flows....................................... 5
Notes to Condensed Consolidated Financial Statements.................................. 6
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................. 20

Part II Other Information
Item 1-- Legal Proceedings..................................................................... 39
Item 2-- Changes in Securities................................................................. 39
Item 3-- Defaults Upon Senior Securities....................................................... 39
Item 4-- Submission of Matters to a Vote of Security Holders................................... 39
Item 5-- Other Information .................................................................. 40
Item 6-- Exhibits and Reports on Form 8-K...................................................... 41
Signature........................................................................................ 45

</TABLE>

2
<PAGE>

ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

December 31, June 30,

1998 1999
------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets --
Cash and cash equivalents............................................. $ 39,742 $ 34,896
Accounts receivable, net of allowance of $13,907
and $12,104....................................................... 225,087 301,055
Prepaid and other current assets .................................. 47,184 49,169
Deferred income taxes, net ........................................ 44,141 15,792
Assets held for sale ............................................... 143,750 --
--------------- ---------------
Total current assets ............................................ 499,904 400,912
Property and equipment, net ......................................... 1,776,025 1,940,069
Goodwill, net......................................................... 1,327,470 1,572,519
Other assets.......................................................... 149,193 150,571
--------------- ---------------
Total assets...................................................... $ 3,752,592 $ 4,064,071
============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt .................................. $ 21,516 $ 19,391
Accounts payable.................................................... 106,082 93,982
Accrued closure, post-closure and environmental costs............... 41,938 44,376
Accrued interest.................................................... 7,892 74,976
Other accrued liabilities .......................................... 228,934 203,514
Unearned revenue.................................................... 48,511 67,101
--------------- ---------------
Total current liabilities ........................................ 454,873 503,340
Long-term debt, less current portion ................................. 2,118,927 2,263,862
Accrued closure, post-closure and environmental costs ................ 205,982 202,625
Other long-term obligations .......................................... 42,736 54,381
Commitments and contingencies
Stockholders' equity................................................ 930,074 1,039,863
--------------- ---------------
Total liabilities and stockholders' equity ....................... $ 3,752,592 $ 4,064,071
=============== ==============
<FN>

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

3
<PAGE>

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

Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- ------------------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues......................................... $ 752,753 $ 871,402 $ 394,853 $ 463,357
Cost of operations............................... 428,671 487,026 222,855 257,012
Selling, general and administrative expenses .... 80,616 67,474 40,936 33,665
Depreciation and amortization ................... 73,155 82,900 37,965 44,027
Goodwill amortization............................ 14,074 18,486 7,741 9,715
Acquisition related and unusual costs............ 45,143 1,116 42,687 --
------------- ------------- ------------- -------------
Operating income................................ 111,094 214,400 42,669 118,938

Interest income ................................. (1,167) (668) (983) (293)
Interest expense................................. 43,279 55,538 20,961 27,693
------------- ------------- ------------- -------------
Income before income taxes...................... 68,982 159,530 22,691 91,538
Income tax expense............................... 32,774 64,612 18,046 37,075
------------- ------------- ------------- -------------
Income before extraordinary loss 36,208 94,918 4,645 54,463
Extraordinary loss, net of income tax benefit (3,054) -- (3,054) --
------------- ------------- ------------- -------------
Net income...................................... $ 33,154 $ 94,918 $ 1,591 $ 54,463
=========== ========== ========== ===========

Basic EPS:
Income before extraordinary items............... $ 0.20 $ 0.51 $ 0.03 $ 0.29
Extraordinary loss.............................. (0.02) -- (0.02) --
------------- ------------- ------------- -------------
Net income...................................... $ 0.18 $ 0.51 $ 0.01 $ 0.29
========== ========== ========== ===========

Weighted average common shares outstanding ...... 181,789 186,424 181,998 186,688
============= ============= ============= =============

Diluted EPS:
Income before extraordinary items............... $ 0.20 $ 0.50 $ 0.03 $ 0.29
Extraordinary loss.............................. (0.02) -- (0.02) --
------------- ------------- ------------- -------------
Net income................................... $ 0.18 $ 0.50 $ 0.01 $ 0.29
=========== ========== ========== ===========

Weighted average common and common
equivalent shares outstanding .................. 186,491 190,291 186,774 190,740
============= ============= ============= =============

<FN>

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

4
<PAGE>

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

Six Months Ended
June 30,
-------------------------------
1998 1999
---- ----
<S> <C> <C>
Operating activities --
Net income.......................................................... $ 33,154 $ 94,918
Adjustments to reconcile net income to cash
provided by operating activities--
Extraordinary items........................................... 5,103 --
Provisions for:
Depreciation and amortization ................................ 88,146 101,386
Non-cash acquisition related and unusual costs ............... 26,288 571
Doubtful accounts............................................. 827 1,525
Senior note accretion and debt discount amortization.......... 14,390 79
Deferred income taxes......................................... 11,731 25,610
Gain on sale of fixed assets ................................. (909) (3,354)
Change in operating assets and liabilities, excluding the
effects of purchase acquisitions --
Accounts receivable, prepaid expenses, inventories and other........ (44,345) (44,609)
Accounts payable, accrued liabilities, unearned income
and other........................................................... 4,328 47,379
Closure and post-closure provision.................................. 7,825 9,722
Closure, post-closure and environmental expenditures ............... (9,651) (10,852)
-------------- -------------
Cash provided by operating activities ................................ 136,887 222,375
-------------- -------------

Investing activities --
Cash expenditures for acquisitions, net of cash acquired ........... (71,829) (229,974)
Capital expenditures, other than for acquisitions .................. (93,218) (105,087)
Capitalized interest ............................................... (33,225) (32,631)
Proceeds from sale of assets........................................ 1,902 39,568
Change in deferred acquisition costs and notes receivable .......... 7,641 (15,859)
-------------- -------------
Cash used in investing activities .................................... (188,729) (343,983)
-------------- -------------

Financing activities --
Net proceeds from sale of common stock, and exercise of
stock options and warrants ....................................... 73,215 7,600
Proceeds from long-term debt,
net of issuance costs............................................. 592,620 278,729
Repayments of long-term debt........................................ (576,487) (174,964)
Other long-term obligations ........................................ (12,248) 5,397
Equity transactions of pooled companies............................. (19,189) --
-------------- -------------
Cash provided by financing activities ................................ 57,911 116,762
-------------- -------------

Increase (decrease) in cash and cash equivalents...................... 6,069 (4,846)
Cash and cash equivalents, beginning of period ....................... 33,320 39,742
-------------- -------------
Cash and cash equivalents, end of period ............................. $ 39,389 $ 34,896
=========== ==========
<FN>

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

5
<PAGE>

ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Allied Waste Industries, Inc. ("Allied" or the "Company"), is
incorporated under the laws of the state of Delaware. Allied is a solid waste
management company providing non-hazardous waste collection, transfer, recycling
and disposal services in selected markets.

The condensed consolidated financial statements include the accounts of
Allied and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. The condensed consolidated balance
sheet as of December 31, 1998, which has been derived from audited consolidated
financial statements, and the unaudited interim condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures herein are adequate to make the information
not misleading when read in conjunction with the Company's Annual Report on Form
10-K as amended on July 13, 1999 for the year ended December 31, 1998. The
condensed consolidated financial statements as of June 30, 1999 and for the
three and six months ended June 30, 1998 and 1999 reflect, in the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
such periods. (See Note 2).

Operating results for interim periods are not necessarily indicative of
the results for full years. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements of
Allied for the year ended December 31, 1998 and the related notes thereto
included in the Company's Annual Report on Form 10-K filed with the SEC on March
31, 1999 and amended on July 13, 1999.

There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1998. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the year
ended December 31, 1998 in the Company's Annual Report on Form 10-K/A.

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

Recently Issued Accounting pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards 133 Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). This statement establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
The statement, to be applied prospectively, was to have been effective for the
Company's quarter ending March 31, 2000. In June 1999, the FASB issued Statement
of Financial Accounting Standards 137 - Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133. This statement deferred the effective date of SFAS 133 to the Company's
quarter ending March 31, 2001. The Company is currently evaluating the impact of
SFAS 133 on its future results of operations and financial position.

During 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 Reporting on the Costs of Start-Up Activities
("SOP 98-5"). SOP 98-5 requires costs of start-up activities and organization
costs to be expensed as incurred. The new statement is effective for fiscal
years beginning after December 15, 1998. The Company adopted this statement
effective January 1, 1999. Initial application of SOP 98-5 is required to be
reported as the cumulative effect of a change in accounting principle. Adoption
of this standard did not have a material impact on the Company's financial
position or results of operations.

6
<PAGE>

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

Acquisition related and unusual costs

During the first six months of 1999, the Company recorded $1.1 million
in acquisition related and unusual costs. These costs consist of transaction and
integration costs directly related to acquisitions. During the first six months
of 1998, the Company recorded a $45.1 million acquisition related and
non-recurring charge associated primarily with acquisitions accounted for as
poolings-of-interests. The charge is comprised of $15.1 million of termination,
severance and retention bonuses, $9.8 million of asset impairments and
abandonments, $8.3 million of transaction related costs, $7.9 million of
environmental and compliance related costs and $4.0 million of other acquisition
related costs.

During the year ended December 31, 1998, the Company recorded
acquisition related and unusual costs in the amount of $247.9 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 and loss contract
provisions. The Company does not anticipate that future costs to be incurred in
connection with the 1998 acquisitions will be significant as restructuring and
transition activities had been substantially implemented 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.

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 relate to the
elimination of duplicate corporate and administrative offices of
companies acquired. Integration plans include 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 those of the Company. 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 and
$4.5 million was accrued at December 31, 1998 and June 30, 1999,
respectively, and are expected to be paid in 1999.

Environmental related matters, litigation liabilities and regulatory
compliance matters assumed in acquisitions totaled $73.4 million.
Subsequent to the acquisitions, the Company 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.

7
<PAGE>

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

As part of the Company's 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. $27.1 million of the
additional accrued environmental liability 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 and June 30, 1999, respectively, approximately $41.1
million and $34.6 million was accrued for environmental matters, which
is expected to be disbursed in future periods, and $15.8 million and
$13.0 million was accrued for legal and regulatory compliance
liabilities.

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, the Company
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, the Company identified
regulatory compliance issues related to 12 companies acquired, which
includes 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.

Management believes the accrual as of December 31, 1998 for legal and
regulatory compliance matters represents the most probable outcome of
outstanding assessments and claims. The Company does not expect that
adjustments to estimates related to the 1998 acquisitions, which are
reasonably possible in the near term and that may result in changes to
recorded amounts, will have a material effect on the Company's
consolidated liquidity, financial positions or results of operations.
At December 31, 1998, the Company believes that it is reasonably
possible that the ultimate outcome of the legal and regulatory
compliance matters could result in approximately $5 million of
additional liability.

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 the Company's
consolidated amounts. Additionally, $10.2 million of costs were
incurred for the disposition of redundant non-revenue producing assets.
This includes $7.6 million and $2.7 million that was accrued at
December 31, 1998 and June 30, 1999, respectively, 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.

8
<PAGE>

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

Loss contract provisions were $7.6 million for losses associated with
collection contracts and other contractual obligations assumed in
acquisitions. Approximately $5 million and $0.1 million remains accrued
at December 31, 1998 and June 30, 1999, respectively.

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

1998 Total
1998 Asset 1998 1999 Remaining
Expense Impairments Expenditures Expenditures Adjustments 6/30/99
--------- ---------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Transaction and Deal
Costs...................... $ 51,200 $ -- $ (39,529) $ (11,671) $ -- $ --
Severance and Transition
Costs...................... 73,619 -- (63,493) (5,582) -- 4,544
Environmental, Litigation
and Regulatory
Compliance Costs........... 73,416 -- (16,482) (9,305) -- 47,629
Restructuring and
Abandonment Costs.......... 42,098 (18,514) (15,954) (4,933) -- 2,697
Loss Contracts................ 7,569 -- (2,587) (4,896) -- 86
---------- ----------- ----------- ------------ ----------- ---------
Total......................... $ 247,902 $ (18,514) $(138,045) $ (36,387) $ -- $ 54,956
========= ========== ========== =========== ========== ========
</TABLE>

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. To date, no significant changes in estimates have been made related to
these costs. During the first six months of 1999, the Company expensed
approximately $0.3 million in transition salaries relating to plans implemented
in 1998.

Extraordinary items, net

In June 1998, the Company replaced its 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.

Statements of cash flows

The non-cash transactions for the six months ended June 30, 1998 and
1999 are as follows (in thousands):

<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1998 1999
---- ----
<S> <C> <C>
Non-cash Transactions:
Common stock issued in acquisitions................................. $ 7,051 $ 1,573
Debt and liabilities incurred or assumed in acquisitions............ 17,684 75,739
Non-cash purchase and sale of operating businesses.................. -- 106,188

</TABLE>

9
<PAGE>

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

2. BUSINESS COMBINATIONS AND DIVESTITURES

Acquisitions accounted for as purchases are reflected in the results of
operations since the date of purchase in Allied's condensed consolidated
financial statements. The results of operations for acquisitions accounted for
as poolings-of-interests are included in Allied's condensed consolidated
financial statements for all periods presented. Often, the final determination
of the cost, and the allocation thereof, of certain of the Company's
acquisitions is subject to resolution of certain contingencies. Once such
contingencies are resolved, the purchase price is adjusted.

In the first six months of 1999, the Company acquired 2 companies in
transactions accounted for as poolings-of-interests. As the effect of these
business combinations was not significant, prior period financial statements
were not restated to include historical operating results of the acquired
companies.

In the first six months of 1999, the Company sold certain assets for
approximately $125.8 million. These assets were included in assets held for sale
as of December 31, 1998.

The following table summarizes acquisitions for the six months ended
June 30, 1998 and 1999:
<TABLE>
<CAPTION>

Six Months Ended
June 30,
-----------------------------
1998 1999
--------- -------
(unaudited)
<S> <C> <C>
Number of businesses acquired and accounted for as:
Poolings-of-interests............................................. 11 2
Purchases......................................................... 15 33
Total consideration (in thousands).................................... $ 647,596 $ 277,893
Shares of common stock issued (in thousands).......................... 21,006(1) 1,477(2)
----------
<FN>
(1) Includes 563 shares of contingently issuable common stock. (2) Includes 169
shares of contingently issuable common stock.
</FN>
</TABLE>

10
<PAGE>

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

Unaudited pro forma income statement data

The following unaudited pro forma consolidated data for the year ended
December 31, 1998 and the six months ended June 30, 1999 presents the results of
operations of Allied as if the companies purchased and sold in 1998 and through
June 30, 1999, had all occurred as of January 1, 1998. This data does not
purport to be indicative of the results of operations of Allied that might have
occurred during the periods indicated nor that might occur in the future (in
thousands, except per share data).

<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------
Reported Pro Forma
------------ ---------------
(unaudited)
<S> <C> <C>
Revenues ............................................... $ 1,575,612 $ 1,772,992
Net loss to common shareholders......................... (98,251) (104,402)
Net loss per common share - basic....................... (0.54) (0.57)
Net loss per common share - diluted..................... (0.54) (0.57)

June 30, 1999
--------------------------------------
Reported Pro Forma
------------- --------------
(unaudited)
Revenues ............................................... $ 871,402 $ 904,126
Net income to common shareholders....................... 94,918 93,670
Net income per common share - basic..................... 0.51 0.50
Net income per common share - diluted................... 0.50 0.49

</TABLE>

3. ASSETS HELD FOR SALE

The ability to successfully implement the Company's vertical
integration business plan is a key consideration in determining whether the
Company will continue to operate in a specific market. In the normal course of
business, the Company has exited markets in which the execution of the vertical
integration business plan was not practicable. In October 1998, the Company
formalized plans to dispose of certain operating districts that represented
non-core or non-integrated assets. The Company had entered into agreements to
sell these assets and in accordance with Statement of Financial Accounting
Standard 121, Accounting for the Impairment of Long-lived Assets and Long-lived
Assets to Be Disposed Of ("SFAS 121"), recorded an impairment loss during the
fourth quarter of 1998 to reduce the carrying value of the assets to net
realizable value including an accrual for the cost of disposal. During the first
six months of 1999, the Company completed the sale of all of these assets.

11
<PAGE>

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

The results of operations before depreciation and amortization of these
operating districts included in consolidated operating income, in accordance
with SFAS 121, was approximately $4.5 million in the first six months of 1999.
During the period from January 1, 1999 through June 30, 1999, the Company
excluded from consolidated statements of operations, in accordance with SFAS
121, depreciation and amortization relating to assets held for sale in the
amount of $2.6 million. At December 31, 1998, the net assets subject to sale
totaled $143.8 million and are classified as assets held for sale in current
assets on the Condensed Consolidated Balance Sheets and are summarized as
following (in thousands):

December 31,
1998
---------------
<S> <C>
Accounts receivable, net ......................... $ 16,608
Other current assets.............................. 4,460
Property and equipment, net ...................... 55,869
Goodwill, net .................................... 106,214
Other long-term assets............................ 1,595
Current liabilities .............................. (1,785)
Long-term liabilities ............................ (39,211)
---------------
Total net assets.................................. $ 143,750
==============
</TABLE>

4. CLOSURE, POST-CLOSURE AND ENVIRONMENTAL COSTS

Closure and post-closure costs

The net present value of the closure and post-closure commitment is
calculated assuming inflation of 2.0% and a risk-free capital rate of 6.5%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. The Company's current estimate of total future payments for
closure and post-closure, in accordance with Subtitle D, is $1.2 billion,
adjusted for inflation, as shown below, while the present value of such estimate
is $396.5 million. At December 31, 1998 and June 30, 1999, accruals for landfill
closure and post-closure costs (including costs assumed through acquisitions)
were approximately $154.5 million and $155.9 million, respectively. The accruals
reflect relatively young landfills whose estimated remaining lives, based on
current waste flows, range from 1 to over 75 years, with an estimated average
remaining life of greater than 30 years.

12
<PAGE>

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

The Company's estimate of total future payments for closure and
post-closure liabilities as of December 31, 1998 for currently owned and
operated landfills is as follows (in thousands):
<TABLE>
<CAPTION>

<S> <C> <C>
1999 $ 28,938
2000 25,218
2001 13,264
2002 19,960
2003 20,646
Thereafter 1,119,766
---------------
$ 1,227,792
===============
</TABLE>

Environmental costs

In connection with the acquisition of companies, Allied engages an
independent environmental consulting firm to assist in conducting an
environmental assessment of companies acquired from third parties. The ultimate
amounts for environmental liabilities cannot be determined and estimates of such
liabilities made by the Company, after consultation with its 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 the Company has concluded that its 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 the Company's assessment to date, the recorded liabilities
will be periodically evaluated as additional information becomes available to
ascertain that the accrued liabilities are adequate. The Company has determined
that the recorded liability for environmental matters as of December 31, 1998 of
approximately $93.4 million represents the most probable outcome of these
contingent matters.

13
<PAGE>

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

5. NET INCOME PER COMMON SHARE

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

Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -----------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per share computation:
Income before extraordinary items
available to common shareholders............... $ 36,208 $ 94,918 $ 4,645 $ 54,463
========== ========== ========== ==========

Weighted average common shares
outstanding ................................... 181,789 186,424 181,998 186,688
=========== =========== =========== ===========

Basic earnings per share
before extraordinary items..................... $ 0.20 $ 0.51 $ .03 $ 0.29
========== ========== ========= ==========

Diluted earnings per share computation:
Income before extraordinary items
available to common shareholders............... $ 36,208 $ 94,918 $ 4,645 $ 54,463
========== ========== ========= ==========

Weighted average common shares
outstanding.................................... 181,789 186,424 181,998 186,688
Effect of stock options and warrants,
assumed exercisable............................ 3,808 2,862 3,862 3,047
Effect of shares assumed
pursuant to hold-back arrangements............. 894 1,005 914 1,005
----------- ----------- ---------- -----------
Weighted average common and common
equivalent shares outstanding.................. 186,491 190,291 186,774 190,740
=========== =========== ========== ===========

Diluted earnings per share
before extraordinary items..................... $ 0.20 $ 0.50 $ 0.03 $ 0.29
========== ========== ========= ==========
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

The Company is subject to extensive and evolving laws and regulations
and has implemented its own environmental safeguards to respond to regulatory
requirements. In the normal course of conducting its operations, Allied may
become involved in certain legal and administrative proceedings. Some of these
actions may result in fines, penalties or judgements against the Company which
may have an impact on earnings for a particular period. Management expects that
such matters in process at June 30, 1999 which have not been accrued in the
consolidated balance sheet will not have a material adverse effect on the
Company's consolidated liquidity, financial position or results from operations.

14
<PAGE>

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

In connection with the acquisition of Laidlaw Inc. ("Laidlaw") in the
United States and Canada ("Laidlaw Acquisition"), Laidlaw disclosed to the
Company the existence of a tax controversy relating to disallowed deductions in
income tax returns filed by Laidlaw with the United States Internal Revenue
Service (the "IRS"). As part of the Laidlaw Acquisition, Laidlaw and certain of
its subsidiaries (the "Laidlaw Group") retained responsibility for any
obligations arising out of the tax controversy and the Laidlaw Group indemnified
the Company against any liability the Company and its subsidiaries might have as
a result of certain tax liabilities, including those relating to this tax
controversy. The obligation of the Liadlaw Group to indemnify the Company in
respect of amounts at issue in the tax controversy is a general, unsecured
obligation of the Laidlaw Group. The subsidiaries of Laidlaw acquired by the
Company in 1996 could be jointly and severally liable for tax assessments
relating to periods prior to completion of the Laidlaw Acquisition. The Company
would have responsibility for any liability relating to such tax assessments if
the Laidlaw Group were unable to satisfy its obligations. In the first quarter
of 1999, Laidlaw announced a settlement of the tax case with the IRS. The total
net after tax cash cost to Laidlaw will be $226 million. The agreement satisfies
assessments upheld in the tax court opinion received on July 1, 1998. As the
Laidlaw Group has settled the tax controversy and in light of Laidlaw's
financial condition and resources disclosed in its publicly filed financial
statements, the Company believes it no longer has potential material liability
for any material tax liabilities relating to Laidlaw's operations prior to the
Laidlaw Acquisition. The Company continues to be indemnified against any such
liabilities by the Laidlaw Group.

In connection with certain acquisitions, the Company has 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.

Allied has 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):

<TABLE>
<CAPTION>
December 31, 1998
-----------------------
<S> <C> <C>
1999 $ 12,629
2000 11,606
2001 10,462
2002 8,821
2003 9,239
Thereafter 26,274
</TABLE>

Rental expense under such operating leases was approximately $13.9
million, $9.6 million and $13.3 million for the year ended December 31, 1998,
and the six months ended June 30, 1998 and 1999, respectively.

The Company has entered into employment agreements with certain of its
executive officers for periods up to five years. The Company has agreed to
severance pay amounts equal to a multiple of defined compensation under certain
circumstances. In the event of a material change in control or termination of
all executive officers under such agreements, Allied would be required to make
payments of approximately $10.7 million, in addition to a reimbursement payment
to eliminate the effect of any excise taxes associated with this payment.

Allied carries a broad range of insurance coverage for protection of
its assets and operations from certain risks including environmental impairment
liability insurance for certain landfills.

15
<PAGE>

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

The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill operations and collection contracts. These financial assurance
requirements are satisfied by the Company issuing performance bonds, letters of
credit, insurance policies or trust deposits to secure the Company's obligations
as they relate to landfill closure and post-closure costs and performance under
certain collection contracts. At June 30, 1999, the Company had outstanding
approximately $482.3 million in financial assurance instruments, represented by
$331.4 million of performance bonds, $125.5 million of insurance policies and
$25.4 million of trust deposits. During 1999, the Company expects to be required
to provide approximately $490 million in financial assurance obligations
relating to its landfill operations and collection contracts. The Company
expects that financial assurance obligations will increase in the future as it
acquires and expands its landfill activities and that a greater percentage of
the financial assurance instruments will be comprised of performance bonds and
insurance policies.

7. SUMMARIZED FINANCIAL INFORMATION OF ALLIED WASTE NORTH AMERICA, INC.

As discussed in Note 5 of the Company's Annual Report on Form 10-K/A,
the aggregate of $1.7 billion of senior notes consisting of $225 million 7 3/8%
senior notes due 2004, $600 million 7 5/8% senior notes due 2006 and $875
million 7 7/8% senior notes due 2009 (the "1998 Senior Notes") issued by Allied
Waste North America, Inc. ("Allied NA"; a wholly owned, consolidated subsidiary
of the Company) are guaranteed by the Company and substantially all subsidiaries
of the Company. In addition, $2 billion in aggregate principal amount of 10%
Senior Subordinated Notes due 2009 issued by Allied NA on July 30, 1999 are
guaranteed by the Company and substantially all of the subsidiaries of the
Company. The separate complete financial statements of Allied NA have not been
included herein as management has determined that such disclosure is not
material. However, summarized financial information for Allied NA and
subsidiaries as of December 31, 1998 and June 30, 1999 and for the six months
ended June 30, 1998 and 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
Summarized Consolidated Balance Sheet Information

December 31, 1998 June 30, 1999
----------------- -------------
(unaudited)
<S> <C> <C>
Current assets ..................................... $ 499,904 $ 400,912
Property and equipment, net......................... 1,776,025 1,940,069
Goodwill, net....................................... 1,327,470 1,572,519
Other non-current assets ........................... 149,193 150,571
Current liabilities................................. 445,528 503,340
Long-term debt, net of current portion ............. 2,118,927 2,263,862
Due to parent....................................... 1,083,515 1,108,724
Other long-term obligations......................... 268,407 257,006
Equity.............................................. (163,785) (68,861)
</TABLE>

<TABLE>
<CAPTION>
Summarized Consolidated Statement of Operations Information

Six Months
Ended June 30,
----------------------------------------------------
1998 1999
---- ----
(unaudited)
<S> <C> <C>
Revenue............................................. $ 752,753 $ 871,402
Operating costs and expenses........................ 641,659 657,002
Operating income.................................... 111,094 214,400
Net income.......................................... 37,705 94,918

</TABLE>

16
<PAGE>

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

8. SEGMENT REPORTING

The Company classifies its operations into six geographic regions:
Northeast, Southeast, Great Lakes, Midwest, Southwest and West. The Company's
revenues are derived from one industry segment, which includes the collection,
transfer, recycling and disposal of non-hazardous solid waste. The Company
evaluates performance based on several factors, of which the primary financial
measure is business segment earnings before interest, taxes, depreciation and
amortization ("EBITDA") and before acquisition related and unusual costs and
asset impairments. 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 the Company's operations for the three and six months ended June 30,
1998 and 1999 (in thousands):

Great
Northeast Southeast Lakes Midwest Southwest West Other(1) Total
------------ ---------- ----------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six Months Ended:
June 30, 1998
Revenues from
external customers. $ 106,190 $ 80,335 $244,239 $ 88,427 $ 73,081 $157,403 $ 3,078 $752,753
Intersegment
revenues........... 16,126 11,407 45,060 20,881 17,154 15,693 -- 126,321
EBITDA before
non-recurring
charges............ 25,721 22,050 83,771 36,365 28,663 52,610 (5,714) 243,466

June 30, 1999
Revenues from
external customers. $ 142,219 $ 77,183 $246,637 $109,350 $ 82,729 $211,480 $ 1,804 $871,402
Intersegment revenues
16,642 18,116 75,031 26,597 21,684 27,386 -- 185,456
EBITDA before
non-recurring
charges............ 35,033 24,994 101,212 47,250 35,608 73,273 (468) 316,902

Three Months
Ended:
June 30, 1998
Revenues from
external customers. $ 55,083 $ 41,794 $131,955 $ 42,137 $ 42,190 $ 79,924 $ 1,770 $394,853
Intersegment revenues
8,287 5,801 25,327 10,112 10,242 8,967 -- 68,736
EBITDA before
non-recurring
charges............ 13,771 11,168 47,101 17,056 16,348 28,733 (3,115) 131,062

June 30, 1999
Revenues from
external customers. $ 73,681 $ 37,641 $132,765 $ 61,079 $ 43,490 $114,156 $ 545 $463,357
Intersegment revenues
7,702 8,755 41,729 15,010 11,926 17,762 -- 102,884
EBITDA.............. 19,610 12,562 56,867 25,626 19,162 40,240 (1,387) 172,680

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

17
<PAGE>

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

Reconciliation of reportable segment primary financial measure to operating
income (amounts in thousands):
<TABLE>
<CAPTION>

Six Months Ended Three Months Ended
June 30, June 30,
----------------------------- ---------------------------------
Operating income: 1998 1999 1998 1999
----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Total EBIDTA before
non-recurring charges
for reportable segments.............. $ 243,466 $ 316,902 $ 131,062 $ 172,680
Depreciation and amortization
for reportable segments.............. 87,229 101,386 45,706 53,742
Acquisition related and
unusual costs........................ 45,143 1,116 42,687 --
--------------- ------------- --------------- ---------------
Operating income..................... $ 111,094 $ 214,400 $ 42,669 $ 118,938
============== ============ ============== ==============
</TABLE>

Percentage of Company's total revenue attributable to services provided:

Six Months Ended Three Months Ended
June 30, June 30,
----------------------------- ----------------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Collection............................... 57% 56% 56% 55%
Transfer................................. 7 7 7 8
Landfill (1)............................. 29 31 29 31
Other.................................... 7 6 8 6
--- --- --- ---
Total revenues......................... 100% 100% 100% 100%
=== === === ===

<FN>
(1) The portion of collection revenues attributable to disposal charges for
waste collected by the Company and disposed at the Company's landfills have been
excluded from collection revenues and included in landfill revenues.
</FN>
</TABLE>

18
<PAGE>

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

9. SUBSEQUENT EVENTS

In March 1999, Allied and Browning-Ferris Industries, Inc. ("BFI")
announced that they entered into a definitive merger agreement under which
Allied would acquire BFI. Subsequent to June 30, 1999, the Company entered into
definitive agreements to divest certain non-core and non-integrated assets under
which (i) the Company intends to sell certain assets of BFI Gas Services, Inc.
to Gas Recovery Systems, Inc. for approximately $78 million, (ii) the Company
arranged for the sale of BFI's investment in SITA S.A. ("SITA") to
Suez-Lyonnaise des Eaux for approximately $444 million, (iii) the Company
intends to sell certain solid waste assets to Republic Services, Inc. for
approximately $230 million and (iv) the Company intends to sell certain solid
waste assets to Superior Services, Inc. for approximately $40 million. These
announcements were in addition to the definitive agreements entered into with
Stericycle, Inc. for the sale of the medical waste operations of BFI and Waste
Management, Inc. for the sale of the Canadian operations of BFI during the
second quarter of 1999.

On July 30, 1999, the Company completed its previously announced
acquisition of BFI. 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 $9.4 billion.
Financing for the acquisition was obtained from $7.5 billion of credit
facilities, the sale of $1 billion of newly issued senior convertible preferred
stock and from the sale of $2 billion of 10% Senior Subordinated Notes due 2009.
With the completion of the acquisition of BFI, the Company operates in 46 states
and 64 markets and serves 9.9 million commercial and residential customers from
a base of assets including 166 landfills, 164 transfer stations, 129 recycling
facilities and 362 collection companies. Prior to the closing of this
transaction, the sale of BFI's investment in SITA was completed.

Subsequent to June 30, 1999, the Company acquired solid waste companies
representing approximately $55.7 million in annual revenues ($54.9 million, net
of intercompany eliminations) for consideration of approximately $128.2 million
comprised of cash.

19
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Introduction

Allied Waste Industries, Inc. ("Allied") has experienced significant
growth, a substantial portion of which has resulted from the acquisition of
solid waste businesses. Since January 1, 1992, Allied completed more than 215
acquisitions. In 1998, Allied acquired 54 businesses and, subsequent to 1998
through June 30, 1999, we have acquired 35 businesses. Allied's Condensed
Consolidated Financial Statements have been restated to reflect the acquisition
of companies accounted for using the pooling-of-interests method for business
combinations in 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,
Allied believes its historical results of operations for the periods presented
are not directly comparable to its current results of operations.

In June 1998, Allied Waste North America, Inc. ("we" or "Allied NA"; a
wholly owned, consolidated subsidiary of Allied) completed the acquisition of
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 metro 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 consisting of $225 million 7 3/8% senior notes due
2004 (the "Five Year Senior Notes"), $600 million 7 5/8% senior notes due 2006
(the "Seven Year Senior Notes") and $875 million 7 7/8% senior notes due 2009
(the "Ten Year Senior Notes", and together with the Five Year Senior Notes and
the Seven Year Senior Notes, the "1998 Senior Notes"). We used the net proceeds
from the 1998 Senior Notes to fund the purchase of the Company's $525 million of
10.25% senior subordinated notes due 2006 (the "1996 Notes") and $418 million
face value 11.3% senior discount notes (the "Senior Discount Notes") pursuant to
tender offers the Company commenced in November 1998, to repay borrowings
outstanding under the Senior Credit Facility (as defined herein) and certain
capital lease obligations, and for general corporate purposes.

20
<PAGE>

In March 1999, Allied and Browning-Ferris Industries, Inc. ("BFI")
announced that they entered into a definitive merger agreement under which
Allied would acquire BFI. Subsequent to entering into a definitive merger
agreement with BFI, we entered into definitive agreements to divest certain
non-core and non-integrated assets under which (i) we intend to sell the medical
waste operations of BFI to Stericycle, Inc. for approximately $440 million, (ii)
we intend to sell the Canadian operations of BFI to Waste Management, Inc. for
approximately $501 million, (iii) we intend to sell certain assets of BFI Gas
Services, Inc. to Gas Recovery Systems, Inc. for approximately $78 million, (iv)
we arranged for the sale of BFI's investment in SITA S.A. ("SITA") to
Suez-Lyonnaise des Eaux for approximately $444 million, (v) we intend to sell
certain solid waste assets to Republic Services, Inc. for approximately $230
million and (vi) we intend to sell certain solid waste assets to Superior
Services, Inc. for approximately $40 million. Net proceeds from these sales will
be used to repay debt.

On July 30, 1999, we completed our previously announced acquisition of
BFI. 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 $9.4 billion.
Financing for the acquisition was obtained from $7.5 billion of credit
facilities (the "New Credit Facility"), the sale of $1 billion of newly issued
senior convertible preferred stock (the "Preferred Stock") and from the sale of
$2 billion of 10% Senior Subordinated Notes due 2009 (the "1999 Notes"). With
the completion of the acquisition of BFI, Allied is in 46 states and 64 markets
and serves 9.9 million commercial and residential customers from a base of
assets including 166 landfills, 164 transfer stations, 129 recycling facilities
and 362 collection companies. Prior to the closing of this transaction, the sale
of BFI's investment in SITA was completed.

Unless otherwise noted, management's discussion and analysis of
financial condition and results of operations excludes the impact of the
acquisition of BFI which occurred on July 30, 1999.

21
<PAGE>

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, where used, generally range from 1 to 5 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. We have restated the data below to give effect to
acquisitions that were accounted for using the pooling-of-interests method for
business combinations.

<TABLE>
<CAPTION>
Six Months
Ended
Year Ended December 31, June 30,
----------------------------------------
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Collection(1)................ 58% 57% 56% 56%
Transfer..................... 6 7 7 7
Landfill (1)................. 26 26 30 31
Other........................ 10 10 7 6
--------- ------- ------- -------
Total revenues............. 100% 100% 100% 100%
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>

Six Months
Ended
Year Ended December 31, June 30,
-----------------------------------------
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Great Lakes.................. 32% 32% 32% 28%
Midwest...................... 9 13 12 13
Northeast.................... 12 15 14 16
Southeast.................... 14 9 10 9
Southwest.................... 2 10 10 10
West......................... 31 21 22 24
------- ------- ------- -------
Total revenues............. 100% 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 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 70% of the waste we collect as
measured by disposal volumes was disposed of at landfills we own and/or operate
in the first six months of 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. We
transfer this waste to long-haul trailers or railcars, which transport the waste
economically 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.

22
<PAGE>

Selling, general and administrative expenses include management,
clerical and administrative compensation and overhead, sales costs, community
relations expenses and provisions for estimated uncollectible accounts
receivable and potentially unrealizable acquisition costs.

Depreciation and amortization expense includes depreciation of fixed
assets and amortization of landfill airspace, goodwill and other intangible
assets.

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 and amortize certain direct landfill development costs,
such as engineering, construction and permitting costs, 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 represent 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 of the Resource Conservation and Recovery Act of 1976 as implemented
on a state-by-state basis. We base closure and post-closure accruals on
estimates to cap and cover 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 a 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 estimated closure and post-closure liabilities
annually based on assessments performed by in-house and independent
environmental engineers that management approves. 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.

23
<PAGE>

We calculate the net present value of the closure and post-closure
commitment assuming inflation of 2.0% and a risk-free capital rate of 6.5%. 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 $1.2 billion, adjusted for inflation. The present value of
such estimate is $396.5 million. At December 31, 1998 and June 30, 1999,
accruals for landfill closure and post-closure costs (including costs assumed
through acquisitions) were approximately $154.5 million and $155.9 million,
respectively. The accruals reflect relatively young landfills with estimated
remaining lives, based on current waste flows, that range from approximately 1
to over 75 years, and an estimated average remaining life of greater than 30
years.

Year 2000 Systems Modifications. Certain computer program software has been
written using two digits rather than four digits to define the applicable year.
If left uncorrected, a system failure or miscalculations causing disruptions of
operations could result. We are implementing a formal plan which will require
programming modifications to ensure our systems will operate properly in the
year 2000 ("Year 2000"). This plan includes four phases consisting of awareness,
assessment and renovation, validation and implementation. In our opinion, the
scope of the Year 2000 systems modifications will not be extensive and the costs
associated with addressing them are not expected to exceed $300,000. No other
information technology projects have been deferred due to Year 2000 efforts.

Awareness. Our senior management approves and our Board of Directors
evaluates and reviews as deemed necessary all Year 2000 projects if
they are expected to result in material cost.

Assessment and Renovation. The assessment and renovation phase of the
plan includes both information technology-related systems and
non-information technology areas.

Information technology-related systems. To date, we have assessed
all information technology-related systems, which includes
hardware, applications software, operating systems and databases.
Our general ledger, accounts payable and fixed asset systems have
been vendor certified as to their Year 2000 compliance. We have
made necessary modifications to our customer billing and operating
support systems. Our core business systems, including general
ledger, accounts payable, fixed assets, customer billing and
operations support function properly with respect to dates in the
year 2000.

Non-information technology areas. Our assessment of Year 2000
issues includes non-information technology areas such as facility
security and heating, ventilation and air conditioning systems and
technology embedded in equipment and tele-communications. We will
assess non-information technology systems during the third quarter
of 1999 and, if necessary, our senior management will review and
approve the plans for modifications.

Validation. Validation includes testing and verifying the performance,
functionality, and integration of the customer billing and operations
support systems. After we made the Year 2000 modifications in the first
quarter of 1999, we completed the validation phase.

Implementation. Implementation of our plan includes both
information technology-related systems and non-information
technology areas.

Information technology-related systems. We completed the
implementation of all modified information systems and vendor
supplied Local Area Network ("LAN") applications. We will complete
implementation of LAN operating-systems patches by the end of the
third quarter of 1999.

Non-Information technology areas. We plan to modify or remediate
non-information technology equipment and communications hardware
and software if the results of assessments indicate a significant

24
<PAGE>

risk exists to our business activities. We would make any required
modifications during the third and fourth quarters of 1999. In
addition, we will establish contingency plans in case of
unanticipated failures, and update existing disaster recovery
plans throughout 1999.

Upon completion of our Year 2000 plan, we expect to be Year 2000
compliant and expect to have no material exposure with respect to information
technology-related systems. However, if we do not complete our plan in a timely
manner or the level of timely compliance by our suppliers or vendors is not
sufficient, we believe that the most likely reasonable worst-case scenario would
involve the failure of one of our critical systems. This could result in a delay
or disruption in customer service and billing. As a consequence, we could lose
customers, which would result in a loss of our revenue. We could also experience
an increase in our operating costs. In response to this scenario, we expect to
implement contingency and business continuation plans, which address our
information and non-information technology related systems. We expect to develop
our contingency and business continuation plans by the fourth quarter of 1999.
These plans will include the manual performance of processes that are currently
automated.

Based on the nature of the waste management services and the
decentralized manner in which we operate, we do not consider any one vendor or
customer to be individually significant as we obtain services and goods at each
individual location and serve over 2.6 million customers. For services obtained
on a company-wide basis, such as payroll processing and financial services, we
have relied upon certification of Year 2000 compliance received directly from
these vendors. However, we cannot assure that the information systems of vendors
and customers on which we rely will be Year 2000 compliant in a timely manner
and will not have material and adverse effect on our business, financial
condition, results of operations and cash flow. We have not obtained independent
verification or validation to assure our reliability and the reliability of our
vendors' or customer information systems for the potential risks and associated
costs as they relate to the Year 2000 issue.

We continue to pursue our acquisition strategy. During the acquisition
process, we evaluate companies as to their Year 2000 compliance. We are placing
priority on integrating the acquired companies to ensure all non-Year 2000
compliant entities will be on compliant software by December 31, 1999.

25
<PAGE>

RESULTS OF OPERATIONS

Three Months Ended June 30, 1998 and 1999

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 during 1998. See Note 2 to our Condensed
Consolidated Financial Statements.
<TABLE>
<CAPTION>

Three Months Ended June 30,
-----------------------------------------
1999
Compared
to 1998
% Change
1998 1999 in Amounts
--------- ------- ------------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues ....................................... 100.0% 100.0% 17.3%
Cost of operations ............................. 56.4 55.5 15.3
Selling, general and administrative expenses ... 10.4 7.3 (17.6)
Depreciation and amortization .................. 11.6 11.6 17.5
Acquisition related and unusual costs........... 10.8 -- --
-------- --------
Operating income................................ 10.8 25.6 178.8
Interest expense, net .......................... 5.0 5.9 37.0
Income tax expense.............................. 4.6 8.0 105.4
Extraordinary loss, net......................... 0.8 -- --
-------- --------
Net income..................................... 0.4% 11.7% 3,327.5%
========= =========
</TABLE>

Revenues. Revenues in 1999 were $463.4 million compared to $394.9 million in
1998, an increase of 17.3%. The increase in revenues attributable to existing
operations ("Internal Growth") is estimated to be 7.5%, with an estimated 3.0%
attributable to net volume increases and an estimated 4.5% attributable to price
increases. The additional revenue growth is attributable to companies acquired,
net of revenues sold, subsequent to the end of the same period in the prior
year.

Cost of operations. Cost of operations in 1999 was $257.0 million compared
to $222.9 million in 1998, an increase of 15.3%. The increase in cost of
operations was attributable to the increase in revenues described above
including acquisitions. As a percentage of revenues, cost of operations
decreased to 55.5% in 1999 from 56.4% in 1998. The 1998 operating margin
decrease from the previously reported margin is due to the historical
restatements for companies acquired subsequent to June 30, 1998 and accounted
for using the pooling-of-interests method for business combinations. These
restated periods do not include the realization of anticipated cost savings
related to the acquired businesses. The operating margin was favorably impacted
by increased volumes at the landfills and other cost savings achieved from the
integration of businesses acquired.

Selling, general and administrative expenses. SG&A expenses in 1999 were
$33.7 million compared to $40.9 million in 1998, a decrease of 17.6%. As a
percentage of revenues, SG&A expenses decreased to 7.3% in 1999 compared to
10.4% in 1998. The 1998 SG&A expenses increase from the previously reported
amount is due to the historical restatements for companies acquired subsequent
to June 30, 1998 and accounted for using the pooling-of-interests method for
business combinations. These restated periods do not include the realization of
anticipated cost savings related to the acquired businesses. The 1999 SG&A
expenses decreased due to cost savings achieved from the integration of
businesses acquired. Additionally, the decrease in SG&A expenses as a percentage
of revenues can be attributed to the continued increase in revenues while
reducing overhead costs.

26
<PAGE>

Depreciation and amortization. Depreciation and amortization in 1999 was
$53.7 million compared to $45.7 million in 1998, an increase of 17.5%. The
increase in depreciation and amortization was due to an increase in goodwill of
approximately $259.2 million, increased internalized landfill tonnage and
increased capital expenditures in 1999. Depreciation and amortization as a
percentage of revenue remained flat between periods due to the increase in
depreciation and amortization being offset by an increase in revenues.

Acquisition related and unusual costs. During the second quarter of
1998, we recorded a $42.7 million acquisition related and non-recurring charge
for transaction and integration costs associated primarily with acquisitions
accounted for as poolings-of-interest. These charges consist of transaction and
deal costs, employee severance and transition costs, environmental related
matters, litigation liabilities, regulatory compliance matters, restructuring
and abandonment costs and loss contract provisions. We do not anticipate that
future costs to be incurred in connection with second quarter 1998 acquisitions
will be significant as restructuring and transition activities have been
substantially implemented as of December 31, 1998.

Interest expense, net. Interest expense, net was $27.4 million in 1999
compared to $20.0 million in 1998, an increase of 37.0%. Interest expense
increased due to an increase in the average outstanding debt due primarily to
acquisitions completed since June 30, 1998 and the refinancing of the 1996 Notes
and the Senior Discount Notes. This increase was partially offset by a reduction
in the average interest rate due to the issuance of the 1998 Senior Notes in
December 1998. Additionally, capitalized interest decreased to $16.6 million in
1999 compared to $16.9 million in 1998.

Income tax expense. Income tax expense reflects a 40.5% effective income tax
rate in 1999 and 79.5% in 1998. The high rate in 1998 was primarily caused by
the income tax accounting effects of 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 which
increased the 1998 effective tax rate). This resulted in a one-time impact and
had the effect of increasing the total income tax provision by $11.5 million.
Without considering the effect of pooled companies, the 1998 effective rate was
41%. The second quarter 1999 effective tax rate of 40.5% 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 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.

27
<PAGE>

Six Months Ended June 30, 1998 and 1999

Six Months Ended June 30,
-----------------------------------------
1999 Compared
to 1998
% Change
in Amounts
1998 1999
------- ------- ------------
<S> <C> <C> <C>
Statement of Operations Data:
Revenues ....................................... 100.0% 100.0% 15.8%
Cost of operations ............................. 56.9 55.9 13.6
Selling, general and administrative expenses ... 10.7 7.7 (16.3)
Depreciation and amortization .................. 11.6 11.6 16.2
Acquisition related and unusual costs........... 6.0 0.1 (97.5)
-------- --------
Operating income............................... 14.8 24.7 93.0
Interest expense, net .......................... 5.6 6.3 30.4
Income tax expense.............................. 4.4 7.4 97.1
Extraordinary loss, net......................... 0.4 -- --
-------- --------
Net income..................................... 4.4% 11.0% 186.3%
========= =========
</TABLE>

Revenues. Revenues in 1999 were $871.4 million compared to $752.8 million in
1998, an increase of 15.8%. The increase in revenues attributable to Internal
Growth is estimated to be 7%, with an estimated 3% attributable to net volume
increases and an estimated 4% attributable to price increases. The additional
revenue growth is attributable to companies acquired, net of revenues sold,
subsequent to the end of the same period in the prior year.

Cost of operations. Cost of operations in 1999 was $487.0 million compared
to $428.7 million in 1998, an increase of 13.6%. The increase in cost of
operations was attributable to the increase in revenues described above
including acquisitions. As a percentage of revenues, cost of operations
decreased to 55.9% in 1999 from 56.9% in 1998. The 1998 operating margin
decrease from the previously reported margin is due to the historical
restatements for companies acquired subsequent to June 30, 1998 and accounted
for using the pooling-of-interests method for business combinations. These
restated periods do not include the realization of anticipated cost savings
related to the acquired businesses. The operating margin was favorably impacted
by increased volumes at the landfills and other cost savings achieved from the
integration of businesses acquired.

Selling, general and administrative expenses. SG&A expenses in 1999 were
$67.5 million compared to $80.6 million in 1998, a decrease of 16.3%. As a
percentage of revenues, SG&A expenses decreased to 7.7% in 1999 compared to
10.7% in 1998. The 1998 SG&A expenses increase from the previously reported
amount is due to the historical restatements for companies acquired subsequent
to June 30, 1998 and accounted for using the pooling-of-interests method for
business combinations. These restated periods do not include the realization of
anticipated cost savings related to the acquired businesses. The 1999 SG&A
expenses decreased due to cost savings achieved from the integration of
businesses acquired. Additionally, the decrease in SG&A expenses as a percentage
of revenues can be attributed to the continued increase in revenues while
reducing overhead costs.

Depreciation and amortization. Depreciation and amortization in 1999 was
$101.4 million compared to $87.2 million in 1998, an increase of 16.2%. Excluded
from depreciation and amortization in the first six months of 1999 is
approximately $2.6 million associated with certain assets that were held for
sale from the beginning of the fourth quarter of 1998 to the beginning of the
second quarter of 1999 when the sales were completed. Adjusting for the
suspended depreciation and amortization associated with assets held for sale,
depreciation and amortization would have been approximately $104.1 million. The
increase in depreciation and amortization was due to an increase in goodwill of
approximately $259.2 million, increased internalized landfill tonnage and
increased capital expenditures in 1999.

28
<PAGE>

Acquisition related and unusual costs. During the first six months of
1999, the Company recorded $1.1 million in acquisition related and unusual
costs. These costs consist of transaction and integration costs directly related
to acquisitions. During the first six months of 1998, the Company recorded a
$45.1 million acquisition related and non-recurring charge associated primarily
with acquisitions accounted for as poolings-of-interests. The charge is
comprised of $15.1 million of termination, severance and retention bonuses, $9.8
million of asset impairments and abandonments, $8.3 million of transaction
related costs, $7.9 million of environmental and compliance related costs and
$4.0 million of other acquisition related costs.

29
<PAGE>

30
<PAGE>

Interest expense, net. Interest expense, net was $54.9 million in 1999
compared to $42.1 million in 1998, an increase of 30.4%. Interest expense
increased due to an increase in the average outstanding debt due primarily to
acquisitions completed since June 30, 1998 and the refinancing of the 1996 Notes
and the Senior Discount Notes. This increase was partially offset by a reduction
in the average interest rate due to the issuance of the 1998 Senior Notes in
December 1998. Additionally, capitalized interest decreased to $32.6 million in
1999 compared to $33.2 million in 1998.

Income tax expense. Income tax expense reflects a 40.5% effective income tax
rate in 1999 and 47.5% in 1998. The increased rate in 1998 was primarily caused
by the income tax accounting effects of 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 which
increased the 1998 effective tax rate). This resulted in a one-time impact and
had the effect of increasing the total income tax provision $8.0 million.
Without considering the effect of pooled companies, the 1998 effective tax rate
is 41%. The effective tax rate of 40.5% for the first six months of 1999
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.

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
June 30, 1999, we completed debt financings in excess of $6.7 billion.

Due to the acquisition driven and the capital requirements of our
business strategy, we have used, and believe that we will continue using amounts
in excess of the cash generated from operations to fund acquisitions and capital
expenditures. 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 Bank 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.

31
<PAGE>

During the six months ended June 30, 1998 and 1999, our cash flows from
operating, investing and financing activities were as follows (in millions):

Six Months Ended
June 30,
--------------------------------------
1998 1999
---- ----
<S> <C> <C>
Operating Activities:
Net income................................................... $ 33.2 $ 94.9
Non-cash operating expenses(1)............................... 154.3 138.9
Gain on sale of assets ...................................... (0.9) (3.3)
Decrease in operating assets and liabilities, net ........... (49.7) (8.1)
------------ ------------
Cash provided by operating activities .................... 136.9 222.4
------------ ------------
Investing Activities:
Cost of acquisitions, net of cash acquired .................. (71.8) (230.0)
Capital expenditures ........................................ (126.4) (137.7)
Proceeds from sale of assets ................................ 1.9 39.6
Other ....................................................... 7.6 (15.9)
------------ ------------
Cash used for investing activities ........................ (188.7) (344.0)
------------ ------------
Financing Activities:
Net proceeds from sale of common stock and exercise of
stock options and warrants .............................. 73.2 7.6
Net proceeds from long-term debt ............................ 592.6 278.7
Payments of long-term debt .................................. (576.5) (174.9)
Other........................................................ (31.4) 5.4
------------ ------------
Cash provided by financing activities ..................... 57.9 116.8
------------ ------------
Increase (decrease) in cash.................................. $ 6.1 $ (4.8)
=========== ===========
------------------
<FN>
(1) Consists principally of provisions for depreciation and amortization,
allowance for doubtful accounts, potentially unrealizable acquisition costs and
deferred income taxes.
</FN>
</TABLE>

As of June 30, 1999, we had cash and cash equivalents of $34.9 million.
Our capital expenditure and working capital requirements have increased
significantly, reflecting our rapid growth by acquisition and development of
revenue producing assets, and will increase further as we continue to pursue our
business strategy. During the six months ended June 30, 1999, we acquired solid
waste operations representing approximately $276.6 million in annual revenues
($230.1 million net of intercompany eliminations), and sold operations
representing approximately $115.0 million in annual revenue. Net consideration
of approximately $277.9 million comprised of cash, notes and common stock, was
paid in these transactions. Subsequent to June 30, 1999, we acquired solid waste
companies representing approximately $55.7 million in annual revenues ($54.9
million net of intercompany eliminations) for approximately $128.2 million
comprised of cash. For the calendar year 1999, we expect to spend approximately
$315 million for capital expenditures, closure and post-closure, and remediation
expenditures relating to our landfill operations. As we continue to acquire
waste operations in 1999, additional capital amounts will be required during
1999 for the acquisition of businesses and the capital expenditure requirements
related to those acquired businesses.

On June 30, 1999, our debt structure consisted primarily of $1.7
billion of the 1998 Senior Notes and $300 million outstanding under the Term
Loan Facility (as defined herein) and $419 million under the Revolving Credit
Facility. As of June 30, 1999 there is aggregate availability under the
Revolving Credit Facility of approximately $320 million to be used for working
capital, letters of credit, acquisitions and other general corporate purposes.
The indentures relating to the 1998 Senior Notes and the Credit Agreement
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 be applied to service indebtedness. Currently, on an
annualized basis, this is expected to include approximately $202.8 million in
annual principal and interest payments.

32
<PAGE>

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 June 30, 1999, we had
outstanding approximately $482.3 million in financial assurance instruments,
represented by $331.4 million of performance bonds, $125.5 million of insurance
policies and $25.4 million of trust deposits. During 1999, we expect to be
required to provide approximately $490 million in financial assurance
obligations relating to our landfill operations and collection contracts. We
expect that financial assurance obligations will increase in the future as we
acquire and expand our landfill activities and that a greater percentage of the
financial assurance instruments will be comprised of performance bonds and
insurance policies.

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 have equipment leases
outstanding at December 31, 1998 and June 30, 1999 of $36.6 million and $31.3
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
acquisition of businesses and the expansion of existing businesses 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, 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 and
the notes, and capital amounts required for acquisitions and expansion. However,
we may have to refinance the principal payment at maturity on the 1998 Senior
Notes and the notes. We cannot assure you that our business will generate
sufficient cash flow from operations or that we will be able to avail ourselves
of 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 future acquisitions and the
availability of funds under the new credit facility, we may need to raise
additional capital to fund the acquisition and integration of additional solid
waste businesses. 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 9 to Allied's Condensed
Consolidated Financial Statements.

Significant Financing Events

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 (the "Revolving Credit Facility") and a $300
million five year senior secured term loan facility (the "Term Loan Facility"
and 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.

33
<PAGE>

In addition to the scheduled principal payments above, we are also
required to make mandatory prepayments on the Senior Credit Facility equal to
75% or 50% of the net proceeds from certain debt issues and up to 75% or 50% of
the net proceeds from the sale of assets if our Leverage Ratio, as defined in
the Credit Agreement, exceeds 4.5 to 1.0 or 4.0 to 1.0, respectively. Mandatory
prepayments shall be applied first to the outstanding revolving credit advances
and Term Loans pro rata based on outstandings, until no revolving credit
advances are outstanding, and then to repay outstanding Term Loans.

Borrowings under the Credit Agreement may be used for acquisitions, the
issuance of letters of credit, working capital and other general corporate
purposes. Of the $800 million available under the Revolving Credit Facility, no
more than $250 million may be used to support the issuance of letters of credit.

The Senior Credit Facility bears interest, at our option, at the lesser
of (a) a Base Rate, or (b) a Eurodollar Rate, both terms defined in the Credit
Agreement, plus, in either case, an agreed upon applicable margin. The
applicable margin will be adjusted from time to time pursuant to a pricing grid
based upon our Total Debt to EBITDA ratio, as defined in the Credit Agreement,
and varies between zero percent and 0.50% for Base Rate loans, and 0.75% and
1.75% for Eurodollar loans.

The Senior Credit Facility is guaranteed by substantially all of our
present and future subsidiaries. In addition, the Senior Credit Facility is
secured by substantially all the personal property and a pledge of the stock of
substantially all of our present and future subsidiaries.

The Credit Agreement contains certain financial covenants including,
but not limited to, a Total Debt to EBITDA ratio, a Fixed Charge Coverage ratio,
and an Interest Expense Coverage ratio, all terms as defined in the Credit
Agreement. In addition, the Credit Agreement also limits our ability to make
acquisitions, purchase fixed assets above certain amounts, pay dividends, incur
additional indebtedness and liens, make optional prepayments on certain
subordinated 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 our assets. We are in compliance with
all applicable covenants at June 30, 1999.

In December 1998, Allied NA issued an aggregate of $1.7 billion of
senior notes consisting of $225 million 7 3/8% senior notes due 2004 (the "Five
Year Senior Notes"), $600 million 7 5/8% senior notes due 2006 (the "Seven Year
Senior Notes"), and $875 million 7 7/8% senior notes due 2009 (the "Ten Year
Senior Notes" and collectively the "1998 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. The Five Year Senior
Notes and Seven Year Senior Notes will be redeemable, at our option, in whole or
from time to time in part, at a redemption price equal to the greater of (i)
100% of their principal amount or (ii) the sum of the present values of the
remaining scheduled payments of principal and interest thereon discounted to
maturity on a semi-annual basis at the treasury yield plus 50 basis points, plus
in each case accrued but unpaid interest to but excluding the date of
redemption. The Ten Year Senior Notes will be redeemable at our option, in whole
or in part, at any time on or after January 1, 2004 in cash at the redemption
price plus accrued and unpaid interest to but excluding the date of redemption.
Prior to January 1, 2004, the Ten Year Senior Notes will be redeemable, at our
option, in whole or in part, at any time, in cash, at a redemption price equal
to the greater of (i) 100% of their principal amount or (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to maturity on a semi-annual basis at the treasury yield plus
50 basis points, plus accrued but unpaid interest to but excluding the date of
redemption. In addition, at any time prior to January 1, 2002, we may redeem up
to 33 1/3% of the aggregate principal amount of Ten Year Senior Notes originally
issued at a redemption price equal to 107.9% of the principal amount thereof,
plus accrued and unpaid interest to the date of redemption, with the net cash
proceeds of one or more public offerings of capital stock; provided that the
notice of redemption with respect to any such redemption is mailed within 30
days following the closing of the corresponding public offering. The 1998 Senior
Notes will not be subject to any redemption at the option of any holder thereof
prior to the final maturity of such notes except as set forth in the applicable
indenture. 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.

34
<PAGE>

In connection with the completion of the acquisition of BFI, we entered
into new financing arrangements and repaid all amounts borrowed under the Credit
Agreement and all amounts borrowed by BFI under its credit agreement. The new
financing arrangements were: (i) a new credit facility (the "New 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 led by the
Chase Manhattan Bank for $7.5 billion to provide financing for the acquisition
of BFI and working capital for us following the acquisition (ii) the sale of $2
billion of 10% Senior Subordinated Notes due 2009 (the "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 billion of
Senior Convertible Preferred Stock (the "Preferred Stock"). Copies of the New
Credit Facility, and the supplemental indenture governing the 10% Senior
Subordinated Notes due 2009 and the certificate of designation relating to the
Senior Convertible Preferred Stock have been filed as exhibits to our Current
Report on Form 8-K filed on August 10, 1999. 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 New 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 New Credit Facility, the 1999 Notes and the Preferred Stock
contain provisions which could require repayment upon a defined "change of
control" of Allied and the Preferred Stock also contains restrictions on
Allied's ability to pay cash dividends on common stock.

Disclosure Regarding Forward Looking Statements

This quarterly 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, it can
give no assurance that such expectations will prove to have been 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 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. 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. 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.

Competition. The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. We compete with
numerous waste management companies, some of which have 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.

Availability of Acquisition Targets. Our ongoing acquisition program is
a key element of our expansion 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 and that reflects historical prices. The Forward Looking
Statements assume that a number of acquisition candidates and landfill
properties sufficient to meet our goals will be available for purchase and that
we will be able to complete the acquisitions at prices that we have experienced
in the past two years.

35
<PAGE>

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 and other size related benefits that we hope to achieve after
the acquisition. The Forward Looking Statements assume that integration of
acquired companies, including the internalization of waste, will require from
three to nine months from the date the acquisition closes. 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 will be available or, if
available, that we will find such terms satisfactory. See "Liquidity and Capital
Resources".

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 1998. 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. 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 us.

Influence of Government Regulation. 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, or
resulting from transportation or

36
<PAGE>

predecessors' transportation and collection operations, all of which could have
a material adverse effect on us. Liability may also arise from actions brought
by 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.

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 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.

Year 2000 Systems Modifications. We expect to be Year 2000 compliant in
a timely manner and expect to have no material exposure with respect to
information technology-related systems. With respect to non-information
technology areas, it is uncertain what risks are associated with the Year 2000
issue and any risks that may be identified could have a material, adverse effect
on our business, financial condition, results of operations and cash flows. We
cannot assure that the systems of our customers and vendors on which we rely
will be converted in a timely manner and will not have an adverse effect on our
systems or operations. The Forward-Looking Statements assume that there will be
no material adverse effect on our systems or operations related to the Year 2000
issue.

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.

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.

37
<PAGE>

Quantitative and Qualitative Disclosures About Market Risk

We are subject to interest rate risk on our long-term debt. Although no
exposure exists with respect to our fixed rate long-term corporate debt
instruments, we run the risk of interest rate fluctuations with respect to our
LIBOR variable rate Senior Credit Facility at December 31, 1998. To modify the
risk from these 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 we are not a party to any
leveraged derivatives. The following table sets forth, as of December 31, 1998,
our long-term debt obligations, principal cash flows by scheduled maturity,
average interest rate and estimated fair market value (amounts in thousands,
except interest rates):

<TABLE>
<CAPTION>
Senior Credit Average
Facility Interest Rate
------------- ------------
<S> <C> <C>
1999........................ $ --
2000........................ --
2001........................ 75,000
2002........................ 105,000
2003........................ 120,000
Thereafter.................. --
-------------
Total....................... $ 300,000 6.0%
============
Estimated Fair Value
at December 31, 1998........ $ 300,000
============
</TABLE>

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 require us to pay fixed
rates of interest on notional amounts of principal to counter-parties. The
counter-parties, in turn, pay to us variable rates of interest on the same
notional amounts of principal. Increases or decreases in short-term market rates
would not impact earnings and cash flow as all variable rate debt has 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:

Notional Fair
Principal Underlying Interest Market Value
(in thousands) Maturity Interest Obligations Received (in thousands)
Paid
- ------------------- ------------------- ---------- ---------------------------------------- ------------ ----------------

<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
</TABLE>

Market Price Risk

We have risk exposure associated with the market price on the 1998
Senior Notes. The 1998 Senior Notes are recorded at book value, which could vary
from current market prices. At December 31, 1998, the 1998 Senior Notes had a
value of $1.7 billion based on quoted average market prices.

38
<PAGE>

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

No changes to previously reported information.

Item 2. Changes in Securities

None.

Item 3. Defaults upon Senior Securities

None.

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

On May 26, 1999, we held our annual stockholders meeting. The holders
of 150,396,534 shares of Common Stock were present in person or
represented by proxy at the meeting. At the meeting, the stockholders
took the following action:

The stockholders elected the following persons to serve as our
directors until the next annual meeting of stockholders, and until
their successors are duly elected and qualified. Votes were cast as
follows:

Number of Number of
Votes for Votes Withheld
----------- ---------------
Thomas H. Van Weelden 150,297,188 99,346
Roger A. Ramsey 150,297,188 99,346
Nolan Lehmann 150,297,188 99,346
Michael Gross 150,297,188 99,346
David B. Kaplan 150,297,188 99,346
Antony P. Ressler 150,297,188 99,346
Howard A. Lipson 150,297,188 99,346
Dennis Hendrix 150,297,188 99,346
Warren B. Rudman 150,296,888 99,646
Vincent Tese 150,297,188 99,346

39
<PAGE>

Item 5. Other Information

SUMMARIZED FINANCIAL INFORMATION OF BROWNING-FERRIS INDUSTRIES, INC. AND
SUBSIDIARIES

In connection with its acquisition of BFI on July 30, 1999, Allied
guaranteed substantially all of the public debt securities of BFI which remained
outstanding after the acquisition. Summarized financial information for BFI and
its subsidiaries as of September 30, 1998 and June 30, 1999 and for the nine
months ended June 30, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
Summarized Consolidated Balance Sheet Information

September 30, 1998 June 30, 1999
------------------ -------------
(unaudited)
<S> <C> <C>
Current assets ..................................... $ 937,667 $ 922,854
Property and equipment, net......................... 2,812,221 2,775,291
Goodwill, net....................................... 592,946 669,670
Other non-current assets ........................... 656,647 641,492
Current liabilities................................. 995,506 933,409
Long-term debt, net of current portion ............. 1,792,863 1,889,706
Other long-term obligations......................... 797,654 815,823
Equity.............................................. 1,413,458 1,370,369
</TABLE>

<TABLE>
<CAPTION>
Summarized Consolidated Statement of Operations Information

Nine Months
Ended June 30,
----------------------------------------------------
1998 1999
---- ----
(unaudited)
<S> <C> <C>
Revenue............................................. $ 3,693,107 $ 3,169,243
Operating costs and expenses........................ 3,195,139 2,718,559
Operating income.................................... 497,968 450,684
Net income.......................................... 253,740 234,101
</TABLE>

40
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits --

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 the Company'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 the Company's Current
Report on Form 8-K filed August 21, 1998 is incorporated hereby 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 the Company's Current
Report on Form 8-K filed March 16, 1999 is incorporated herein by
reference.
3.1 Amended Certificate of Incorporation of the Company (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 the Company as of May 13, 1997. Exhibit
3.2 to the Company's Report on Form 10-Q for the quarter ended June 30,
1997 is incorporated herein by reference.
3.3 Amendment to Amended Certificate of Incorporation of the Company
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 the Company'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
the Company and First Trust. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.
4.3 1991 Incentive Stock Plan of the Company. Exhibit 10.T to the Company's
Form 10 dated May 14, 1991, is incorporated herein by reference.
4.4 1991 Non-Employee Director Stock Plan of the Company. Exhibit 10.U
to the Company's Form 10 dated May 14, 1991, is incorporated herein by
reference.
4.5 1993 Incentive Stock Plan of the Company. Exhibit 10.3 to the Company'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
the Company. Exhibit B to the Company'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 the Company'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 the
Company'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 the Company'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 the Company, the
Guarantors and First Bank National Association with respect to the 1996
Notes and Exchange Notes. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.

41
<PAGE>

4.11 First Supplemental Indenture dated December 30, 1996 related to the
1996 Notes. Exhibit 4.2 to the Company'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 the Company'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 the Company'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 the Company and U.S. Bank Trust National
Association, as Trustee, with respect to the 1998 Senior Notes and
Exchange Notes. Exhibit 4.1 to the Company'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 the Company'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 the Company'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 the Company'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 the Company'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 the Company'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 the Company'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 the Company'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 the Company'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 the Company,
certain subsidiaries of the Company 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 the Company'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. Exhibit
10.1 to the Company'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 the Company'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.,

42
<PAGE>

Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P. Exhibit 10.3 to the Company's Report on
Form 10-Q for the quarter ended March 31, 1997 is incorporated herein
by reference.
10.4 Registration Rights 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 10.4 to the Company's Report on Form 10-Q
for the quarter ended March 31, 1997 is incorporated herein by
reference.
10.5 Executive Employment Agreement between the Company and with Henry
L. Hirvela dated June 6, 1997. Exhibit 10.2 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
10.6 Executive Employment Agreement between the Company and with Thomas H.
Van Weelden dated January 1, 1999.
10.7 Executive Employment Agreement between the Company and with Larry D.
Henk dated June 6, 1997. Exhibit 10.4 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
10.8 Executive Employment Agreement between the Company and with Steven
M.Helm dated June 6, 1997. Exhibit 10.5 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
10.9 Executive Employment Agreement between the Company and with Donald W.
Slager dated January 1, 1999.
10.10 Executive Employment Agreement between the Company and with Peter S.
Hathaway dated June 6, 1997. Exhibit 10.14 to the Company's Report on
Form 10-K for the year ended December 31, 1997 is incorporated herein
by reference.
10.11 Executive Employment Agreement between the Company and with Michael
G. Hannon dated June 6, 1997. Exhibit 10.15 to the Company'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 the Company'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 December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $225,000,000 7 3/8% Senior
Notes due 2004. Exhibit 10.1 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.14 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $600,000,000 7 5/8% Senior
Notes due 2006. Exhibit 10.2 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.15 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, Goldman Sachs & Co., Credit Suisse First
Boston, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley Dean Witter Incorporated, Bear, Stearns, & Co, Inc., BT Alex.
Brown, CIBC Oppenheimer, Salomon Smith Barney, Inc., relating to the
$875,000,000 7 7/8% Senior Notes due 2009. Exhibit 10.3 to the
Company's Registration Statement on Form S-4 (No.333-70709) is
incorporated herein by reference.
10.16 Purchase Agreement dated December 14, 1998, by and among the Company,
the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation,
with respect to the 1998 Senior Notes. Exhibit 10.4 to the Company's
Registration Statement on Form S-4 (No.333-70709) is incorporated
herein by reference.

43
<PAGE>

10.17 Credit Facility dated as of July 30, 1999. Exhibit 10.1 to the
Company's current report on Form 8-K dated August 10, 1999,
is incorporated herein by reference.
10.18 Second Amended and Restated Shareholders Agreement, dated as of July
30, 1999, between the Company and the purchasers of the Series A Senior
Convertible Preferred Stock and related parties. Exhibit 10.2 to the
Company's current report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.
10.19 Amended and Restated Registration Rights Agreement, dated as of July
30, 1999, between the Company and the purchasers of the Series A Senior
Convertible Preferred Stock and related parties. Exhibit 10.3 to the
Company's current report on Form 8-K dated August 10, 1999, is
incorporated herein by reference.
*12 Ratio of earnings to fixed charges.
*27 Financial Data Schedule for the six months ended June 30, 1999.

*Filed herewith.

(b) Reports on Form 8-K during the Quarter Ended June 30, 1999 --

None.

44
<PAGE>

SIGNATURE

Pursuant to the requirements 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, thereunto duly authorized.

ALLIED WASTE INDUSTRIES, INC.

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

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

Date: August 13, 1999

<PAGE>

EXHIBIT 12

ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except for ratios)

Six Months
June 30,
---------------------------------------
1998 1999
---- ----
(unaudited)
Fixed Charges:
<S> <C> <C>
Interest expense ........................ $ 41,435 $ 52,147
Interest capitalized .................... 33,225 32,631
--------------- ---------------
Total interest expense .............. 74,660 84,778
Interest component of rent expense....... 3,181 4,390
Amortization of debt issuance costs...... 1,844 3,391
--------------- ---------------
Total fixed charges.................. $ 79,685 $ 92,559
============== ==============

Earnings:
Income before income taxes .............. $ 68,982 $ 159,530
Plus fixed charges ...................... 79,685 92,559
Less interest capitalized ............... (33,225) (32,631)
--------------- ---------------
Total earnings .................... $ 115,442 $ 219,458
============== ==============

Ratio of earnings to fixed charges ........ 1.45x 2.37x
=============== ===============

</TABLE>

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