Waste Management 2013 Annual Report Download - page 140

which anniversaried in July 2012. Additionally, in 2012, acquisitions increased our revenues in our collection
line of business, due in part to our Energy Service and recycling lines of business. These acquisitions
demonstrate our focus on identifying strategic growth opportunities in new, complementary lines of business.
Operating Expenses
Our operating expenses include (i) labor and related benefits (excluding labor costs associated with
maintenance and repairs discussed below), which include salaries and wages, bonuses, related payroll taxes,
insurance and benefits costs and the costs associated with contract labor; (ii) transfer and disposal costs, which
include tipping fees paid to third-party disposal facilities and transfer stations; (iii) maintenance and repairs
relating to equipment, vehicles and facilities and related labor costs; (iv) subcontractor costs, which include the
costs of independent haulers who transport waste collected by us to disposal facilities and are affected by
variables such as volumes, distance and fuel prices; (v) costs of goods sold, which are primarily rebates paid to
suppliers associated with recycling commodities; (vi) fuel costs, which represent the costs of fuel and oil to
operate our truck fleet and landfill operating equipment; (vii) disposal and franchise fees and taxes, which
include landfill taxes, municipal franchise fees, host community fees, contingent landfill lease payments and
royalties; (viii) landfill operating costs, which include interest accretion on landfill liabilities, interest accretion
on and discount rate adjustments to environmental remediation liabilities and recovery assets, leachate and
methane collection and treatment, landfill remediation costs and other landfill site costs; (ix) risk management
costs, which include auto liability, workers’ compensation, general liability and insurance and claim costs and
(x) other operating costs, which include telecommunications, equipment and facility rent, property taxes, utilities
and supplies.
Our operating expenses increased $233 million, or 2.6%, when comparing 2013 with 2012 and increased
$338 million, or 4.0%, when comparing 2012 with 2011. Operating expenses as a percentage of revenues were
65.2% in 2013, 65.1% in 2012 and 63.8% in 2011. The increases in our operating expenses during the years
ended December 31, 2013 and 2012 can largely be attributed to the following:
Acquisitions — During the three years ended December 31, 2013, we made three acquisitions that were
the most significant drivers of our operating expense increases. In January 2013, we acquired Greenstar, an
operator of recycling and resource recovery facilities. The acquisition primarily increased cost of goods sold
and, to a lesser extent, labor and related benefits and other categories. In July 2013, we acquired RCI, a
waste management company comprised of collection, transfer, recycling and disposal operations. The
acquisition increased operating costs, primarily in subcontractor costs and, to a lesser extent, cost of goods
sold. The Oakleaf acquisition contributed to higher operating costs in 2012 when compared to the prior year
period, primarily impacting subcontractor costs. The increase in operating expenses was incurred in
connection with the related acquisition revenues discussed above in Operating Revenues.
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