Waste Management 2007 Annual Report Download - page 70

(ii) reductions in legal fees and expenses, largely as a result of higher costs in 2006 related to indemnification
obligations for former officers in legacy litigation brought by the SEC.
Other — Our “Selling, general and administrative” expenses for the years ended 2007 and 2006 included net
charges of approximately $2 million and $20 million, respectively, to record our estimated obligations for
unclaimed property. Refer to Note 10 of our Consolidated Financial Statements for additional information related
to the nature of these charges.
Additionally, in both 2007 and 2006, our other costs increased due to higher sales and marketing costs and
higher travel and entertainment costs due partially to the development of our revenue management system and our
efforts to implement various initiatives.
Depreciation and Amortization
Depreciation and amortization includes (i) depreciation of property and equipment, including assets recorded
due to capital leases, on a straight-line basis from three to 50 years; (ii) amortization of landfill costs, including
those incurred and all estimated future costs for landfill development, construction, asset retirement costs arising
from closure and post-closure, on a units-of-consumption method as landfill airspace is consumed over the
estimated remaining permitted and expansion capacity of a site; (iii) amortization of landfill asset retirement costs
arising from final capping obligations on a units-of-consumption method as airspace is consumed over the
estimated capacity associated with each final capping event; and (iv) amortization of intangible assets with a
definite life, either using a 150% declining balance approach or a straight-line basis over the definitive terms of the
related agreements, which are from two to ten years depending on the type of asset.
Depreciation and amortization expense was $1,259 million, or 9.5% of revenues, for the year ended
December 31, 2007; $1,334 million, or 10.0% of revenues, for the year ended December 31, 2006; and
$1,361 million, or 10.4% of revenues, for the year ended December 31, 2005. The $75 million decrease when
comparing 2007 with 2006 can be attributed, in part, to landfill volume declines. The $27 million decrease when
comparing 2006 with 2005 was primarily due to the suspension of depreciation on assets held-for-sale and
divestitures. Additonally, in both 2007 and 2006 there were decreases in depreciation due to components of
enterprise-wide software becoming fully depreciated.
The comparability of our depreciation and amortization expense for the years ended December 31, 2007, 2006,
and 2005 has also been significantly affected by (i) a $21 million charge to landfill amortization recognized in 2005
to adjust the amortization periods of nine of our leased landfills and (ii) adjustments to landfill airspace and landfill
asset retirement cost amortization recorded in each year for changes in estimates related to our final capping,
closure and post-closure obligations. During the years ended December 31, 2007, 2006 and 2005, landfill
amortization expense was reduced by $17 million, $1 million and $13 million, respectively, for the effects of
these changes in estimates. In each year, the majority of the reduced expense resulting from the revised estimates
was associated with final capping changes.
Restructuring
Management continuously reviews our organization to determine if we are operating under the most
advantageous structure. Our 2007 and 2005 restructurings were the result of reviews that highlighted opportunities
for efficiencies and cost savings. The most significant cost savings we have obtained through our restructurings
have been attributable to the labor and related benefits component of our “Selling, general and administrative”
expenses.
In the first quarter of 2007, we restructured certain operations and functions, resulting in the recognition of a
charge of approximately $9 million. We incurred an additional $1 million of costs for this restructuring during the
second quarter of 2007, increasing the costs incurred to date to $10 million. Approximately $7 million of our
restructuring costs was incurred by our Corporate organization, $2 million was incurred by our Midwest Group and
$1 million was incurred by our Western Group. These charges included approximately $8 million for employee
severance and benefit costs and approximately $2 million related to operating lease agreements.
During the third quarter of 2005, we reorganized and simplified our organizational structure by eliminating
certain support functions performed at the Group or Corporate office. We also eliminated the Canadian Group
office, which reduced the number of our operating Groups from seven to six. This reorganization reduced costs at
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