Waste Management 2006 Annual Report Download - page 145
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(e) As discussed in Note 8, the Company qualifies for Section 45K tax credits as a result of methane gas projects at
its landfills and its investments in two coal-based synthetic fuel production facilities. The credits are phased-
out if the price of crude oil exceeds an annual average price threshold as determined by the U.S. Internal
Revenue Service. On a quarterly basis, we develop our estimate of the phase-out of credits using market
information for crude oil prices. The impact of any revision in our estimates is reflected in both “Equity in net
losses of unconsolidated entities” and “Provision for (benefit from) income taxes” for the quarter.
(f) ‘‘(Income) expense from divestitures, asset impairments and unusual items” significantly affected our income
from operations in each quarter of 2005. In the first and second quarters of 2005, “(Income) expense from
divestitures, asset impairments and unusual items” increased our income from operations by $23 million and
$6 million, respectively. In the third and fourth quarters of 2005, our income from operations was unfavorably
affected by net charges for “(Income) expense from divestitures, asset impairments and unusual items” of
$86 million and $11 million, respectively. Information related to the nature of these adjustments is included in
Note 12.
(g) Our income from operations for the third and fourth quarters of 2005 includes pre-tax charges of $27 million
and $1 million, respectively, associated with our 2005 restructuring. These charges were primarily related to
employee severance and benefit costs. Refer to Note 11 for additional information regarding the reorganization
and simplification of our organizational structure.
(h) The settlement of several tax audits during 2005 resulted in significant reductions in income tax expense. Tax
audit settlements reduced our income tax expense by $2 million during the first quarter, $345 million, or
$0.61 per diluted share, during the second quarter, $28 million, or $0.05 per diluted share, during the third
quarter and $23 million, or $0.04 per diluted share, during the fourth quarter. Refer to Note 8 for additional
information.
Basic and diluted earnings per common share for each of the quarters presented above is based on the
respective weighted average number of common and dilutive potential common shares outstanding for each quarter
and the sum of the quarters may not necessarily be equal to the full year basic and diluted earnings per common
share amounts.
111
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)