Waste Management 2007 Annual Report Download - page 51

projects. If a facility or operation is permanently shut down or determined to be impaired, a pending acquisition is
not completed, a development or expansion project is not completed or is determined to be impaired, we will charge
against earnings any unamortized capitalized expenditures and advances relating to such facility, acquisition or
project. We reduce the charge against earnings by any portion of the capitalized costs that we estimate will be
recoverable, through sale or otherwise.
In future periods, we may be required to incur charges against earnings in accordance with this policy, or due to
other events that cause impairments. Any such charges could have a material adverse effect on our results of
operations.
Our revenues will fluctuate based on changes in commodity prices.
Our recycling operations process for sale certain recyclable materials, including fibers, aluminum and glass,
all of which are subject to significant market price fluctuations. The majority of the recyclables that we process for
sale are paper fibers, including old corrugated cardboard, known as OCC, and old newsprint, or ONP. In the past two
years, the year-over-year changes in the quarterly average market prices for OCC ranged from a decrease of as much
as 34% to an increase of as much as 83%. The same comparisons for ONP have ranged from a decrease of as much
as 16% to an increase of as much as 47%. These fluctuations can affect future operating income and cash flows.
Additionally, our recycling operations offer rebates to suppliers, based on the market prices of commodities we buy
to process for resale. Therefore, even if we experience higher revenues based on increased market prices for
commodities, the rebates we pay will also increase.
Additionally, there may be significant price fluctuations in the price of methane gas, electricity and other
energy related products that are marketed and sold by our landfill gas recovery, waste-to-energy and independent
power production plant operations. The marketing and sales of energy related products by our landfill gas and
waste-to-energy operations are generally pursuant to long-term sales agreements. Therefore, market fluctuations do
not have a significant effect on these operations in the short-term. However, as those agreements expire and are up
for renewal, changes in market prices may affect our revenues. Additionally, revenues from our independent power
production plants can be affected by price fluctuations. In the past two years, the year-over-year changes in the
average quarterly electricity prices have increased or decreased by as much as 5%.
The development and acceptance of alternatives to landfill disposal and waste-to-energy facilities could
reduce our ability to operate at full capacity.
Our customers are increasingly using alternatives to landfill and waste-to-energy disposal, such as recycling
and composting. In addition, some state and local governments mandate recycling and waste reduction at the source
and prohibit the disposal of certain types of waste, such as yard waste, at landfills or waste-to-energy facilities.
Although such mandates are a useful tool to protect our environment, these developments reduce the volume of
waste going to landfills and waste-to-energy facilities in certain areas, which may affect our ability to operate our
landfills and waste-to-energy facilities at full capacity, as well as the prices that we can charge for landfill disposal
and waste-to-energy services.
Efforts by labor unions to organize our employees could increase our operating expenses.
Labor unions constantly make attempts to organize our employees, and these efforts will likely continue in the
future. Certain groups of our employees have already chosen to be represented by unions, and we have negotiated
collective bargaining agreements with some of the groups. Additional groups of employees may seek union
representation in the future, and, if successful, the negotiation of collective bargaining agreements could divert
management attention and result in increased operating expenses and lower net income. If we are unable to
negotiate acceptable collective bargaining agreements, work stoppages, including strikes, could ensue. Depending
on the type and duration of any labor disruptions, our operating expenses could increase significantly, which could
adversely affect our financial condition, results of operations and cash flows.
Currently pending or future litigation or governmental proceedings could result in material adverse
consequences, including judgments or settlements.
We are involved in civil litigation in the ordinary course of our business and from time-to-time are involved in
governmental proceedings relating to the conduct of our business. The timing of the final resolutions to these types
16