Waste Management 2007 Annual Report Download - page 73

amortization periods to align the lives of the landfills for amortization purposes with the terms of the
underlying contractual agreements supporting their operations; and (iii) higher landfill amortization expense
as a result of changes in certain estimates related to our final capping, closure and post-closure obligations.
Western — The Group’s 2007 operating results were negatively affected by $37 million as a result of
various labor disputes, which are discussed in the Operating Expenses section above. Gains on divestitures of
operations were $16 million for the year ended December 31, 2007 as compared with $48 million for 2006 and
$24 million for 2005.
Wheelabrator — The decline in operating income for the year ended December 31, 2007 was driven by a
$21 million charge recorded in the first quarter of 2007 for the early termination of a lease agreement. The
early termination was due to the Group’s purchase of an independent power production plant that it had
previously operated through a lease agreement. Additionally, the termination of an operating and maintenance
agreement in May 2007 resulted in a decline in revenue and operating income compared with the prior years.
WMRA — The Group’s 2007 operating income has benefited from substantial increases in market prices
for commodities and $7 million of net gains on divestitures. In addition, the Group has experienced significant
returns from operational improvements, including an increased focus on maintaining or reducing rebates made
to suppliers. During 2006, the Group recognized $10 million of charges for a loss from a divestiture and an
impairment of certain under-performing operations, which were slightly more than offset by savings asso-
ciated with the Group’s cost control efforts. Income from operations in our WMRA Group during 2005
includes costs related to the deployment of new software.
Significant items affecting the comparability of the remaining components of our results of operations for the
years ended December 31, 2007, 2006 and 2005 are summarized below:
Other — The changes in operating results for the periods presented are largely related to certain year-end
adjustments recorded in consolidation related to our reportable segments that were not included in the measure
of segment income from operations used to assess their performance for the periods disclosed. The unfavorable
change in operating results in 2007 when compared with 2006 can also be attributed, in part, to the
deconsolidation of a variable interest entity in April 2006. The favorable operating results in 2005 were
also significantly affected by a $39 million pre-tax gain resulting from the divestiture of one of our landfills in
Ontario, Canada. This impact is included in “(Income) expense from divestitures, asset impairments and
unusual items” within our Consolidated Statement of Operations. As this landfill had been divested at the time
of our 2005 reorganization, historical financial information associated with its operations has not been
allocated to our remaining reportable segments. Accordingly, these impacts have been included in Other.
Corporate and Other — In 2007 and 2006 we experienced significantly lower risk management costs
largely due to our focus on safety and controlling costs. Other significant items occurring in 2007 include (i) a
reduction in expenses from the discontinuation of depreciation for certain enterprise-wide software that is now
fully depreciated; (ii) increased spending on the support and development of our information technology,
people and pricing strategic initiatives; (iii) increased labor and related benefits costs; and (iv) restructuring
charges.
When comparing 2006 operating results with 2005, in addition to lower risk management costs, we
experienced lower employee health and welfare plan costs, also as a result of our focus on controlling costs.
These cost savings were largely offset by: (i) a $20 million charge recorded to recognize unrecorded
obligations associated with unclaimed property, which is discussed in the Selling, General and Administrative
section above; (ii) increased incentive compensation expense; (iii) higher consulting fees and sales commis-
sions primarily related to our pricing initiatives; (iv) an increase in our marketing costs due to our national
advertising campaign; (v) the centralization of support functions that were provided by our Group offices prior
to our 2005 reorganization; and (vi) a $26 million charge associated with an arbitration ruling against us related
to a joint venture relationship that terminated in 2000.
Our 2005 operating results include impairment charges of $68 million associated with capitalized
software costs and $31 million of net charges associated with various legal and divestiture matters. Also
contributing to expenses during 2005 were costs at Corporate associated with our July 2005 restructuring
charge and other organizational changes, which were partially offset by the associated savings at Corporate.
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