Waste Management 2008 Annual Report Download - page 79
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Please find page 79 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.Amortization of landfill airspace, which is included as a component of “Depreciation and amortization”
expense, includes the following:
• the amortization of landfill capital costs, including (i) costs that have been incurred and capitalized and
(ii) estimated future costs for landfill development and construction required to develop our landfills to their
remaining permitted and expansion airspace; and
• the amortization of asset retirement costs arising from landfill final capping, closure and post-closure
obligations, including (i) costs that have been incurred and capitalized and (ii) projected asset retirement
costs.
Amortization expense is recorded on a units-of-consumption basis, applying cost as a rate per ton. The rate per
ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to
fill the corresponding asset’s airspace. Landfill capital costs and closure and post-closure asset retirement costs are
generally incurred to support the operation of the landfill over its entire operating life, and are, therefore, amortized
on a per ton basis using a landfill’s total airspace capacity. Final capping asset retirement costs are attributed to a
specific final capping event, and are, therefore, amortized on a per ton basis using each discrete capping event’s
estimated airspace capacity. Accordingly, each landfill has multiple per ton amortization rates.
The following table calculates our landfill airspace amortization expense on a per ton basis:
2008 2007 2006
Years Ended December 31,
Landfill airspace amortization expense (in millions).................. $429 $440 $479
Tons received, net of redirected waste (in millions) .................. 107 114 126
Average landfill airspace amortization expense per ton................ $4.01 $3.86 $3.80
Different per ton amortization rates are applied at each of our 273 landfills, and per ton amortization rates vary
significantly from one landfill to the next due to (i) inconsistencies that often exist in construction costs and
provincial, state and local regulatory requirements for landfill development and landfill final capping, closure and
post-closure activities; and (ii) differences in the cost basis of landfills that we develop versus those that we acquire.
Accordingly, our landfill airspace amortization expense measured on a per ton basis can fluctuate due to changes in
the mix of volumes received across the Company year-over-year. The comparability of our total Company average
landfill airspace amortization expense per ton for the years ended December 31, 2008, 2007 and 2006 has also been
affected by the recognition of reductions to amortization expense for changes in our estimates related to our final
capping, closure and post-closure obligations. Landfill amortization expense was reduced by $3 million in 2008,
$17 million in 2007 and $1 million in 2006, for the effects of these changes in estimates. In each year, the majority of
the reduced expense resulted from revisions in the estimated timing or cost of final capping events that were
generally the result of (i) concerted efforts to improve the operating efficiencies of our landfills and volume
declines, both of which have allowed us to delay spending for final capping activities; (ii) landfill expansions that
resulted in reduced or deferred final capping costs; or (iii) completed final capping construction that cost less than
anticipated.
Liquidity and Capital Resources
We continually monitor our actual and forecasted cash flows, our liquidity and our capital resources, enabling
us to plan for our present needs and fund unbudgeted business activities that may arise during the year as a result of
changing business conditions or new opportunities. In addition to our working capital needs for the general and
administrative costs of our ongoing operations, we have cash requirements for: (i) the construction and expansion of
our landfills; (ii) additions to and maintenance of our trucking fleet; (iii) construction, refurbishments and
improvements at waste-to-energy and materials recovery facilities; (iv) the container and equipment needs of
our operations; (v) capping, closure and post-closure activities at our landfills; and (vi) repaying debt and
discharging other obligations. We also are committed to providing our shareholders with a return on their
investment through our capital allocation program that provides for dividend payments, share repurchases and
investments in acquisitions that we believe will be accretive and provide continued growth in our business.
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