Waste Management 2008 Annual Report Download - page 73
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Please find page 73 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.The expense declines noted above were largely offset by the impacts of the following:
• a $32 million charge to landfill operating costs for the closed landfills that are managed by our closed
sites management group through our Corporate organization, due to a sharp decline in United States
Treasury rates in late 2008, which caused an increase in the present value of our environmental
remediation obligations; and
• costs incurred for the potential acquisition of Republic during the third quarter of 2008.
The decline in expenses when comparing 2007 with 2006 was primarily due to:
• significantly lower risk management costs largely due to our focus on safety and controlling costs;
• a reduction in expenses from the discontinuation of depreciation for certain enterprise-wide
software; and
• a $20 million charge recorded in 2006 to recognize unrecorded obligations associated with unclaimed
property.
The expense declines noted above were offset, in part, by the impacts of the following:
• increased spending on the support and development of our information technology, people and pricing
strategic initiatives;
• increased labor and related benefits costs; and
• restructuring charges recognized during the first quarter of 2007.
Other Components of Net Income
The following table summarizes the other major components of our income for the year ended December 31
for each respective period (dollars in millions):
2008
Period-to-
Period Change 2007
Period-to-
Period Change 2006
Interest expense ......................... $(455) $ 66 (12.7)% $(521) $ 24 (4.4)% $(545)
Interest income .......................... 19 (28) (59.6) 47 (22) (31.9) 69
Equity in net losses of unconsolidated entities . . . (4) 31 * (35) 1 (2.8) (36)
Minority interest ......................... (41) 5 (10.9) (46) (2) 4.5 (44)
Other, net .............................. 3 (1) (25.0) 4 3 * 1
Provision for income taxes ................. 669 129 * 540 215 * 325
* Percentage change does not provide a meaningful comparison. Refer to the explanations of these items below for
a discussion of the relationship between current year and prior year activity.
Interest Expense
Although our outstanding debt balances are relatively consistent year-over-year, the decline in interest costs
when comparing 2008 with 2007 is generally related to (i) the maturity of higher rate debt that we have refinanced at
lower interest rates; (ii) significant declines in market interest rates, which impact the interest expense associated
with our interest rate swaps and our variable rate debt; and (iii) the early redemption of $244 million of 8.75% senior
notes during the second quarter of 2008, which resulted in the recognition of a reduction in interest expense of
approximately $10 million for the immediate recognition of fair value adjustments associated with terminated
interest rate swaps that had been deferred and were being amortized over the life of the debt. The decrease in interest
expense when comparing 2007 with 2006 is largely related to a decrease in our average debt balances.
We use interest rate derivative contracts to manage our exposure to changes in market interest rates. The
combined impact of active and terminated interest rate swap agreements resulted in a net interest expense decrease
of $50 million for 2008 and net interest expense increases of $11 million for 2007 and $4 million for 2006. Our
active interest rate swaps decreased our interest expense in 2008 by $8 million compared with an increase in interest
expense in 2007 from active hedges of $48 million. The significant change in the impact of our active interest rate
swaps when comparing 2008 with 2007 has been driven by the decrease in short-term market interest rates, which
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