Waste Management 2008 Annual Report Download - page 55
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Please find page 55 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.(a) For more information regarding these financial data, see the Management’s Discussion and Analysis of
Financial Condition and Results of Operations section included in this report. For disclosures associated with
the impact of the adoption of new accounting pronouncements and changes in our accounting policies on the
comparability of this information, see Note 2 of the Consolidated Financial Statements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section includes a discussion of our operations for the three years ended December 31, 2008. This
discussion may contain forward-looking statements that anticipate results based on management’s plans that are
subject to uncertainty. We discuss in more detail various factors that could cause actual results to differ from
expectations in Item 1A, Risk Factors. The following discussion should be read in light of that disclosure and
together with the Consolidated Financial Statements and the notes to the Consolidated Financial Statements.
Overview
In 2008, we saw significant changes in the environment in which we operate, including severe economic
uncertainty, increasing market volatility and continued tightening of credit markets, as well as a merger of two of the
largest industry competitors. The market conditions in 2008 contributed to record high fuel and commodity prices
during most of the year and nearly unprecedented drops in these commodity prices in the second half of the year. We
often note that we are a recession resilient industry, but in challenging economic times, reduced consumer and
business spending means less waste is being produced. Additionally, businesses across the country are experiencing
slower demands for their products and services and a tightening of the credit markets, which makes it more difficult
for many of our customers to pay their bills, leading to decreases in the services they request and, in some cases,
cancelling our services all together.
Against this backdrop, we believe that our results of operations show just how successful we have been in
improving our business. The highlights in 2008 include:
• An increase in revenues of $78 million in 2008 as compared with the prior year, driven by internal revenue
growth on base business due to yield of 2.8%;
• Income from operations as a percentage of revenue of 16.7% in 2008 as compared with 16.9% in 2007, in
spite of:
• the dislocation in the recycling commodities markets experienced during the fourth quarter of 2008;
• sharply higher fuel costs throughout most of 2008; and
• higher operating expenses in the current year for non-recurring items, including
(i) a $33 million non-cash charge for an increase in the estimated present value of recorded obligations
for environmental remediation liabilities due to a sharp decline in risk-free interest rates at year-
end; and
(ii) $50 million of costs associated with labor related matters, which were primarily for the withdrawal of
certain collective bargaining units from underfunded multi-employer pension funds, compared with
$33 million of costs incurred for labor disruptions in 2007;
• Strong and consistent diluted earnings per share, which was $2.19 in 2008 compared with $2.23 in 2007; and
• An increase in cash flow generated from operating activities of 5.6%, from $2,439 million in 2007 to
$2,575 million in 2008.
We experienced revenue increases during each of the first three quarters of 2008 as compared with 2007,
followed by a significant decline in revenues in the fourth quarter caused primarily by the effect of the recycling
commodities markets and the decrease in revenues from our fuel surcharge program. Our pricing program, which
focuses on ensuring that we receive appropriate pricing for all of our services, continued to provide significant
increases in our revenues from base business yield during 2008, reflecting our commitment to pricing discipline
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