Waste Management 2006 Annual Report Download - page 48

margin businesses. If we are not able to fully implement our plans for any reason, many of which are out of our
control, we may not see the expected improvements in our income from operations or our operating margins.
The seasonal nature of our business and changes in general and local economic conditions cause our
quarterly results to fluctuate, and prior performance is not necessarily indicative of our future results.
Our operating revenues tend to be somewhat higher in the warmer months of the year, primarily due to the
higher volume of construction and demolition waste in those months. The volumes of industrial and residential
waste in certain regions where we operate also tend to increase during the summer months. Our second and third
quarter revenues and results of operations typically reflect these seasonal trends. Additionally, the storm conditions
during hurricane season, which is generally June through November, can increase our revenues in the areas affected.
However, for several reasons, including significant start-up costs, storm-related revenue often generates compar-
atively lower margins. Certain weather conditions may result in the temporary suspension of our operations, which
can significantly affect the operating results of the affected regions. The operating results of our first quarter also
often reflect higher repair and maintenance expenses because we perform scheduled maintenance at our
waste-to-energy facilities in the slower winter months, when electrical demand is generally lower.
Our business is affected by changes in national and general economic factors that are also outside of our
control, including interest rates and consumer confidence. We have $3.0 billion of debt as of December 31, 2006
that is exposed to changes in market interest rates because of the combined impact of our variable rate tax-exempt
bonds and our interest rate swap agreements. Therefore, any increase in interest rates can significantly increase our
expenses. Additionally, although our services are of an essential nature, a weak economy generally results in
decreases in volumes of waste generated, which decreases our revenues. We also face risks related to other adverse
external factors, such as the ability of our insurers to meet their commitments in a timely manner and the effect that
significant claims or litigation against insurance companies may have on such ability.
Any of the factors described above could materially adversely affect our results of operations and cash flows.
Additionally, due to these and other factors, operating results in any interim period are not necessarily indicative of
operating results for an entire year, and operating results for any historical period are not necessarily indicative of
operating results for a future period.
We cannot predict with certainty the extent of future costs under environmental, health and safety laws,
and cannot guarantee that they will not be material.
We could be liable if our operations cause environmental damage to our properties or to the property of other
landowners, particularly as a result of the contamination of air, drinking water or soil. Under current law, we could
even be held liable for damage caused by conditions that existed before we acquired the assets or operations
involved. Also, we could be liable if we arrange for the transportation, disposal or treatment of hazardous substances
that cause environmental contamination, or if a predecessor owner made such arrangements and under applicable
law we are treated as a successor to the prior owner. Any substantial liability for environmental damage could have a
material adverse effect on our financial condition, results of operations and cash flows.
In the ordinary course of our business, we have in the past, and may in the future, become involved in a variety
of legal and administrative proceedings relating to land use and environmental laws and regulations. These include
proceedings in which:
• agencies of federal, state, local or foreign governments seek to impose liability on us under applicable
statutes, sometimes involving civil or criminal penalties for violations, or to revoke or deny renewal of a
permit we need; and
• local communities and citizen groups, adjacent landowners or governmental agencies oppose the issuance of
a permit or approval we need, allege violations of the permits under which we operate or laws or regulations
to which we are subject, or seek to impose liability on us for environmental damage.
We generally seek to work with the authorities or other persons involved in these proceedings to resolve any
issues raised. If we are not successful, the adverse outcome of one or more of these proceedings could result in,
among other things, material increases in our costs or liabilities as well as material charges for asset impairments.
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