Waste Management 2008 Annual Report Download - page 72
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Please find page 72 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.were divestiture gains of $4 million in 2008 and $1 million in 2007 and reductions in landfill amortization
expense resulting from changes in certain estimates related to our final capping, closure and post-closure
obligations.
Southern — During 2008, the increase in the Group’s operating income is largely due to $29 million of
divestiture gains, offset, in part, by a $3 million landfill impairment charge. During 2007, the Group recorded
$12 million of impairment charges attributable to two of its landfills. These charges were largely offset by
gains on divestitures of $11 million.
Western — The Group’s 2008 operating results were negatively affected by an increase in landfill
amortization expense as a result of changes in certain estimates related to our final capping, closure and post-
closure obligations. In 2007, labor disputes negatively affected the Group’s operating results by $37 million,
principally as a result of “Operating” expenses incurred for security, deployment and lodging costs for
replacement workers. Gains on divestitures of operations were $16 million for the year ended December 31,
2007 as compared with $48 million for 2006.
Wheelabrator — The Group’s 2008 operating results were favorably affected by increases in market rates
for energy during the second half of 2008. The decline in operating income for the year ended December 31,
2007 was driven by a $21 million charge recorded in the first quarter of 2007 for the early termination of a lease
agreement. The early termination was due to the Group’s purchase of an independent power production plant
that it had previously operated through a lease agreement. Additionally, the termination of an operating and
maintenance agreement in May 2007 resulted in a decline in revenue and operating income compared with the
prior year.
WMRA — During the first nine months of 2008 and throughout all of 2007, the Group’s operating income
benefited from substantial increases in market prices for commodities. Also during these periods, the Group
experienced income growth due to an increased focus on maintaining or reducing rebates made to suppliers.
During the fourth quarter of 2008, however, commodity prices dropped sharply as a result of a significant
decrease in the demand for commodities both domestically and internationally. This significant decline in
commodity prices resulted in operating losses that more than offset the income generated during the first nine
months of the year. Higher than normal operating expenses, including higher subcontractor, repair and
maintenance, and facility start-up costs, also negatively affected the Group’s operating income throughout
2008. The comparison of the Group’s operating income for the periods presented has also been affected by
(i) $7 million of net gains on divestitures in 2007 and (ii) the recognition in 2006 of $10 million of charges for a
loss from a divestiture and an impairment of certain under-performing operations, which were slightly more
than offset by savings associated with the Group’s cost control efforts.
Significant items affecting the comparability of the remaining components of our results of operations for the
years ended December 31, 2008, 2007 and 2006 are summarized below:
Other — The unfavorable change in operating results in 2008 when compared with 2007 is the result of
costs being incurred to support our increased focus on the identification and development of new lines of business
that will complement our core business. The unfavorable change in operating results in 2007 when compared
with 2006 is largely related to (i) certain year-end adjustments recorded in consolidation related to our reportable
segments that were not included in the measure of segment income from operations used to assess their
performance for the periods disclosed; and (ii) the deconsolidation of a variable interest entity in April 2006.
Corporate and Other — The decline in expenses in 2008 as compared with 2007 was primarily due to:
• lower bonus expense in 2008;
• the recognition of approximately $6 million of restructuring charges during the first quarter of 2007 for
employee severance and benefit costs;
• reduced risk management costs in 2008, which is attributable to reduced actuarial projections of claim
losses for workers’ compensation and auto and general liability claims; and
• higher employee healthcare coverage expenses in the third quarter of 2007 due to unusually high claims
activity.
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