Waste Management 2008 Annual Report Download - page 67
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Please find page 67 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.•Union-related labor issues — Our 2008 operating expenses were significantly affected by a labor disruption
associated with the renegotiation of a collective bargaining agreement in Milwaukee, Wisconsin and the
related agreement of the bargaining unit to withdraw from the underfunded Central States Pension Fund,
which is discussed in Note 10 to the Consolidated Financial Statements. These activities increased the
operating expenses of our Midwest Group by $32 million during the third and fourth quarters of 2008.
Approximately $24 million of these costs have been included in the “Labor and related benefits” category,
$21 million of which were associated with charges related to the bargaining unit agreeing to our proposal to
withdraw them from the underfunded Central States Pension Fund. The remaining $8 million has been
included in our “Other” category and was related to security and the deployment and lodging costs incurred
for the Company’s replacement workers who were brought to Milwaukee from across the organization.
Additionally, during the fourth quarter of 2008, we incurred another $18 million in “Labor and related
benefits” charges associated with the withdrawal of certain bargaining units in our Midwest and Eastern
Groups from underfunded multi-employer pension plans.
In 2007, our Western Group incurred “Other” operating expenses of $33 million for security, labor, lodging,
travel and other costs incurred as a result of labor disruptions in Oakland and Los Angeles, California.
•Changes in risk-free interest rates — We recognized a $33 million charge to landfill operating costs during
the fourth quarter of 2008 due to a sharp decline in United States Treasury rates, which are used to estimate
the present value of our environmental remediation obligations. During the fourth quarter of 2008, the
discount rate used was reduced from 4.00% to 2.25%. During 2007, we recorded an $8 million charge to
reduce the discount rate from 4.75% to 4.00% and during 2006 we recorded a $6 million decrease in expense
to reflect an increase in the rate from 4.25% to 4.75%.
Many of the cost increases summarized above are due to general economic and market conditions over which
we have little or no control. After considering the significant impacts of market-driven factors, we are encouraged
that our results continue to reflect our focus on (i) identifying operational efficiencies that translate into cost
savings; (ii) managing our fixed costs and reducing our variable costs as volumes decline due to our pricing program
and the downturn in the economy; and (iii) reducing our costs in light of recent divestitures.
Other items affecting the comparability of our operating expenses by category for the three years presented
include the following:
Labor and related benefits
• In each year, wages increased due to annual merit adjustments, although these higher costs have been more
than offset by headcount reductions due to operational efficiencies and divestitures.
• We experienced additional overtime and other labor costs due to severe winter weather conditions during the
first quarter of 2008 in our Midwest Group.
• Our accrued bonus expenses were lower in 2008 because our performance against targets established by our
incentive plans was not as strong as it had been in either 2007 or 2006.
Transfer and disposal costs
• During 2008 and 2007, these costs decreased due to volume declines and divestitures.
• During 2008 and 2007, these costs further decreased due to our focus on improving internalization.
Disposal and franchise fees and taxes
• The favorable resolution of a disposal tax matter in our Eastern Group reduced these expenses by $18 million
during 2007 and $3 million during 2008.
Landfill operating costs
• In 2008, these costs included the unfavorable impact of the January 1, 2008 adoption of SFAS No. 157,
which resulted in a $6 million charge.
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