Waste Management 2006 Annual Report Download - page 72

those incurred and all estimated future costs for landfill development, construction, closure and post-closure, on a
units-of-consumption method as landfill airspace is consumed over the remaining permitted and expansion capacity
of a site; (iii) amortization of landfill asset retirement costs arising from final capping obligations on a
units-of-consumption method as airspace is consumed over the estimated capacity associated with each final
capping event; and (iv) amortization of intangible assets with a definite life, either using a 150% declining balance
approach or a straight-line basis over the definitive terms of the related agreements, which are from two to ten years
depending on the type of asset.
Depreciation and amortization expense decreased by $27 million during 2006 when compared with 2005. The
decrease was due in part to the suspension of depreciation on assets held-for-sale, divestitures and the discon-
tinuation of depreciation on enterprise-wide software that is now fully depreciated.
The comparability of our depreciation and amortization expense for the years ended December 31, 2006, 2005
and 2004 has also been significantly affected by (i) a $21 million charge to landfill amortization recognized in 2005
to adjust the amortization periods of nine of our leased landfills and (ii) adjustments to landfill airspace and landfill
asset retirement cost amortization recorded in each year for changes in estimates related to our final capping,
closure and post-closure obligations. During the years ended December 31, 2006, 2005 and 2004, landfill
amortization expense was reduced by $1 million, $13 million and $18 million, respectively, for the effects of
these changes in estimate. In each year, the majority of the reduced expense resulting from the revised estimates was
associated with final capping changes.
Restructuring
Management continuously reviews our organization to determine if we are operating under the most
advantageous structure. These reviews have highlighted efficiencies and cost savings we could capture by
restructuring. The most significant cost savings we have obtained through our restructurings have been attributable
to the labor and related benefits component of our “Selling, general and administrative” expenses.
During the third quarter of 2005, we reorganized and simplified our organizational structure by eliminating
certain support functions performed at the Group or Corporate office. We also eliminated the Canadian Group
office, which reduced the number of our operating Groups from seven to six. This reorganization has reduced costs
at the Group and Corporate offices and increased the accountability of our Market Areas. We recorded $28 million
of pre-tax charges for costs associated with the implementation of the new structure, principally for employee
severance and benefit costs.
(Income) Expense from Divestitures, Asset Impairments and Unusual Items
The following table summarizes the major components of “(Income) expense from divestitures, asset
impairments and unusual items” for the year ended December 31 for the respective periods (in millions):
2006 2005 2004
Years Ended
December 31,
Asset impairments ............................................ $42 $116 $ 17
(Income) expense from divestitures ................................ (44) (79) (12)
Other ...................................................... 27 31 (18)
$ 25 $ 68 $(13)
Year Ended December 31, 2006
Asset impairments — During the second and third quarters of 2006, we recorded impairment charges of
$13 million and $5 million, respectively, for operations we intend to sell as part of our divestiture program. The
charges were required to reduce the carrying values of the operations to their estimated fair values less the cost to
sell in accordance with the guidance provided by SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, for assets to be disposed of by sale.
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