Waste Management 2008 Annual Report Download - page 69
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Please find page 69 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.partially offset by lower bonus expenses accrued in 2008 because our performance against targets established by our
incentive plan was not as strong as it had been in either 2007 or 2006.
Professional fees — We incurred significant costs in both 2008 and 2007 that are of a non-recurring nature. In
2008, we incurred over $7 million of legal and consulting costs to support our previously proposed acquisition of
Republic Services, Inc. In 2007, our consulting fees were higher due to increased spending for various strategic
initiatives, including the support and development of the SAP waste and recycling revenue management system,
which we discontinued development of in early 2008. For information related to the current status of our pending
litigation against SAP, refer to Note 10 of our Consolidated Financial Statements.
Provision for bad debts — The increase in our provision for bad debts in 2008 is due to the effects of the
weakened economy, which has increased collection risks associated with certain customers.
Other — As discussed above, our continued focus on our sales, marketing and other initiatives and identifying
new customers resulted in increases in our advertising costs and travel and entertainment costs in 2008. The
comparability of these costs for the periods presented has also been affected by net charges of approximately
$2 million in 2007 and $20 million in 2006 to record our estimated obligations for unclaimed property. Additionally,
in both 2007 and 2006, our other costs increased due to higher sales and marketing costs and higher travel and
entertainment costs due partially to the development of our revenue management system and our efforts to
implement various initiatives.
Depreciation and Amortization
Depreciation and amortization includes (i) depreciation of property and equipment, including assets recorded
due to capital leases, on a straight-line basis from three to 50 years; (ii) amortization of landfill costs, including
those incurred and all estimated future costs for landfill development, construction, asset retirement costs arising
from closure and post-closure, on a units-of-consumption method as landfill airspace is consumed over the
estimated 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 generally from two to ten years depending on the type of asset.
The following table summarizes the components of our depreciation and amortization costs for the years ended
December 31 (dollars in millions):
2008
Period-to-
Period Change 2007
Period-to-
Period Change 2006
Depreciation of tangible property and
equipment .......................... $ 785 $(11) (1.4)% $ 796 $(33) (4.0)% $ 829
Amortization of landfill airspace ........... 429 (11) (2.5) 440 (39) (8.1) 479
Amortization of intangible assets ........... 24 1 4.3 23 (3) (11.5) 26
$1,238 $(21) (1.7)% $1,259 $(75) (5.6)% $1,334
In both 2008 and 2007, the decrease in depreciation on tangible property and equipment is largely due to
(i) components of enterprise-wide software becoming fully-depreciated; and (ii) our focus on identifying oper-
ational efficiencies as we shed unprofitable business, which has allowed us to retire or sell under-utilized assets.
The decrease in amortization of landfill airspace expense in 2008 and 2007 is largely due to volume declines as
a result of (i) the slowdown in the economy; (ii) our pricing program, which has significantly reduced our collection
volumes; and (iii) the redirection of waste to third-party disposal facilities in certain regions due to either the closure
of our own landfills or the current capacity constraints of landfills where we are working on procuring an expansion
permit. The comparability of our amortization of landfill airspace for the years ended December 31, 2008, 2007, and
2006 has also been affected by adjustments recorded in each year for changes in estimates related to our final
capping, closure and post-closure obligations. During the years ended December 31, 2008, 2007 and 2006, landfill
amortization expense was reduced by $3 million, $17 million and $1 million, respectively, for the effects of these
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