Waste Management 2006 Annual Report Download - page 36

Revenue Growth
Our revenue growth through pricing excellence objective centers around attaining a return on invested capital
that appropriately considers our cost of capital, the risks we take in our business and the value of our disposal assets.
We have been using an increasingly more disciplined approach to pricing, where we carefully analyze our
operations and make decisions based on market specific information. In addition, we are rolling out comprehensive
fee programs that are designed to recover the costs we incur for items such as collection of past due balances,
container deliveries and infrequent pick-ups. We believe our success in increasing internal revenue growth from
yield is a direct result of our pricing objectives.
Cost Control
We remain committed to finding the best practices throughout our organization and standardizing those
practices and processes throughout the Company. In 2006, we were able to reduce our operating expenses for the
first time in several years, demonstrating the progress we are making on our operational excellence initiatives such
as improving productivity, reducing fleet maintenance costs, standardizing operating practices, and improving
safety, as well as our divestiture of under-performing operations, which is discussed below.
We also believe that we must make investments in our business that will provide for longer-term cost savings
and efficiencies. During 2006, we have made significant investments in our information technology, our people and
our pricing strategies. Certain costs associated with these investments have increased our selling, general and
administrative costs, but are being incurred to provide long-term returns. The most noteworthy investment we made
in 2006 relates to our new revenue management software. During the last year, we focused on tailoring this revenue
management software to our business and processes so that, when implemented, it will provide our employees with
the information resources they need to serve our customers more effectively and efficiently. This implementation
process will continue to be a focus of our people in 2007.
Improve Operations through Divestitures, Acquisitions and Investments
In the third quarter of 2005, we announced that our Board of Directors had approved a plan to divest under-
performing and non-strategic operations. As of December 31, 2006, we had divested operations representing annual
gross revenues of over $235 million. The ultimate sale of any of the operations identified for divestiture is dependent
on several factors, including identifying interested purchasers, negotiating the terms and conditions of the sales, and
obtaining regulatory approvals. We believe that we have made significant progress in 2006 in executing our “fix or
seek exit” strategy.
In addition to our focus on divesting under-performing operations, we continue to look for acquisitions and
other investments to improve our current operations’ performance and enhance and expand our services. In
particular, we intend to make investments in our landfill gas-to-energy programs as well as other purchases that we
believe will benefit future expansion efforts, all of which are complementary to our existing operations.
Return Value to Shareholders
We continue to use the cash that we generate not only to reinvest in our business, but also to return value to our
shareholders through common stock repurchases and dividend payments. Our current, three-year capital allocation
program authorizes up to $1.2 billion of combined stock repurchases and dividend payments for each of 2005, 2006
and 2007. Our Board of Directors approved an additional $350 million for stock repurchases in 2006. Accordingly,
we repurchased over $1 billion of our common stock and paid dividends of $476 million in 2006. We recently
announced that our Board of Directors expects that future quarterly dividend payments will be increased to $0.24 per
share, although our Board of Directors must first declare each dividend payment. This will result in an increase in
the amount of free cash flow that we expect to pay out as dividends for the fourth straight year.
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