Waste Management 2011 Annual Report Download - page 120

changes. Revenue growth from collection and disposal average yield during both years includes not only base
rate changes and environmental and service fee increases, but also (i) certain average price changes related to the
overall mix of services, which are due to both the types of services provided and the geographic locations where
our services are provided; (ii) changes in average price from new and lost business; and (iii) price decreases to
retain customers.
In both 2011 and 2010, our revenue growth from collection and disposal average yield demonstrates our
commitment to our pricing strategies. This increase in revenue from yield was primarily driven by our collection
operations, which experienced yield growth in all lines of business and in every geographic Group. As discussed
below, increased collection revenues due to average yield have been more than offset by revenue declines from
lower collection volumes. However, revenue growth from yield on base business and our efforts toward
controlling variable costs continue to favorably influence margin changes in our collection line of business.
In 2011, revenue growth from collection and disposal average yield was $193 million, or 1.8%, as compared
with the prior year. This revenue increase from yield was primarily driven by our collection operations; however,
we also experienced yield growth from our disposal operations. Our 1.8% increase for 2011 is less than the 2.3%
increase for 2010. This is due in large part to our residential line of business, in which we have experienced
downward pressure on our revenue growth from yield across most of our geographic Groups, most notably in our
Eastern and Southern Groups. Due to competition, it has become increasingly difficult to retain customers and to
win new contracts at current average rates; as a result, in many instances, the Company has offered increased
services, principally recycling services, when bidding on or renewing residential contracts and pursuing
residential subscription business. Additional recycling services are typically at lower rates.This combination of
increased competition and bundling of complementary services, such as recycling, in the residential line of
business has put added pressure on our revenue growth from yield.
Our total collection and disposal revenue growth from yield has also been negatively affected during 2011,
by factors including the changes in the mix of our temporary and permanent customers in our industrial business,
particularly in North and South Florida. Additionally, we saw a $5 million yield decline in our waste-to-energy
facilities, primarily driven by the expiration of a long-term contract at one of our waste-to-energy operations in
South Florida in August 2011. We expect this negative trend to continue into 2012 due to the expiration of a
similar long-term contract that will occur at the end of March 2012. Although these factors discussed above
negatively affected our revenue growth from yield in 2011 as compared with 2010, we did see a favorable rate of
revenue growth from yield in our commercial line of business during 2011 as compared with the prior year. This
favorable impact was driven by both price increases and additional service fees. Overall, we have found that
increasing our revenue growth from yield in today’s market is a challenge given the reduced volume levels
resulting from the economic slowdown, the increased service offerings in many of our new contracts, and the
highly competitive environment. Despite these headwinds, we continue to maintain our pricing discipline in
order to improve yield on our base business.
Revenues from our environmental fee, which are included in average yield on collection and disposal,
increased by $37 million and $33 million for the years ended December 31, 2011 and 2010, respectively.
Environmental fee revenues totaled $288 million in 2011 as compared with $251 million in 2010 and
$218 million in 2009.
Recycling commodities — Increases in the prices of the recycling commodities we sold resulted in an
increase in revenues of $216 million in 2011 as compared with 2010. For the first nine months of 2011, our
overall commodity prices increased approximately 26% as compared with the first nine months of the prior year.
However, during the fourth quarter of 2011, we saw a decline of approximately 8% in commodity prices due to
increased supply and lower demand.
In 2010, higher recycling commodity prices were the principal driver of our revenue increase of $423
million as compared with 2009. Market prices for recyclable commodities increased significantly from the near-
historic lows experienced in late 2008 and early 2009. For the twelve months of 2010, overall commodity prices
increased approximately 57% as compared with 2009.
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