Waste Management 2007 Annual Report Download - page 78

•Decreased income tax payments and refunds — Cash paid for income taxes, net of excess tax benefits
associated with equity-based transactions, was approximately $80 million lower on a year-over-year basis,
largely due to excess tax payments in 2006, which reduced our estimated tax payment made in the third
quarter of 2007. Cash tax refunds attributable to audit settlements decreased by approximately $40 million
on a year-over-year basis.
•Risk management assets and liabilities — During 2007, we have been able to reduce risk management
liabilities by approximately $80 million, primarily as a result of reduced actuarial projections of claim losses
for auto and general liability and worker’s compensation claims, which can be attributed to our continued
focus on safety and reduced accident and injury rates. While this non-cash reserve reduction has had a
positive impact on income from operations, it did not have a significant impact on our cash flow from
operations.
•Trade receivables — The change in our receivables balances, net of effects of acquisitions and divestitures,
negatively affected the comparison of our cash flows from operations by approximately $70 million. This
decline is primarily attributable to increased trade receivables when comparing 2007 and 2006 as compared
to decreased trade receivables when comparing 2006 to 2005.
•Increased bonus payments — Our bonus payments for 2006, which were paid in the first quarter of 2007,
were higher than bonus payments for 2005 paid in 2006 due to the relative strength of our financial
performance against incentive plan measures in 2006 as compared with 2005. The comparative changes in
our liabilities for bonuses negatively affected the comparison of our cash flow from operations by
approximately $60 million.
•Liabilities for unclaimed property — In 2007, we made significant cash payments for our obligations
associated with unclaimed property, reducing our liabilities. In 2006, our liabilities for unclaimed property
increased, primarily due to the charge to earnings required to fully record our obligations. The changes in our
recorded obligations for unclaimed property negatively affected the comparison of our cash flow from
operations by approximately $30 million.
The most significant items affecting the comparison of our operating cash flows for 2006 and 2005 are
summarized below:
•Earnings improvements — Our income from operations, net of depreciation and amortization, increased by
$292 million, on a year-over-year basis. This increase positively affected our cash flows from operations in
2006.
•Receivables — The change in our receivables balances, net of effects of acquisitions and divestitures,
provided a source of cash of $12 million in 2006, compared to a use of cash in 2005 of $102 million. In 2006,
our receivables balances declined in part due to a decrease in fourth quarter revenues as compared with the
prior year, but also due to improved efficiency of collections as a result of new processes we implemented to
assist our Market Areas with collections. The increases in our receivables balances, and resulting uses of
cash in the Consolidated Statements of Cash Flows, in 2005 were primarily related to increased revenues.
•Increased tax payments — We made income tax payments of $475 million in 2006 and $233 million in 2005.
The increase in 2006 is primarily the result of improved earnings and a decline in the tax benefit of Section
45K tax credits. The decline in the benefit of Section 45K tax credits when comparing 2006 with 2005 was
largely due to a 36% phase-out of the credits generated during 2006 and the temporary shutdown of our two
coal-based synthetic fuel production facilities, which generate a significant portion of the credits, from May
2006 to late-September 2006. There was no phase-out of Section 45K tax credits or temporary shutdown of
the coal-based synthetic fuel production facilities in 2005.
Net Cash Used in Investing Activities — The most significant items affecting the comparison of our investing
cash flows for the periods presented are summarized below:
•Capital expenditures — We used $1,211 million during 2007 for capital expenditures, compared with
$1,329 million in 2006 and $1,180 million in 2005. Increased capital expenditures in 2006 were due to
relatively high levels of fleet capital spending in order to adequately prepare for any potential operational
difficulties that could be encountered as a result of significant mandated changes in heavy-duty truck engines
beginning in January 2007.
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