Waste Management 2014 Annual Report Download - page 125

Operating Expenses
Our operating expenses are comprised of (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 decreased $110 million, or 1.2%, when comparing 2014 with 2013 and increased
$233 million, or 2.6%, when comparing 2013 with 2012. Operating expenses as a percentage of revenues were
64.3% in 2014, 65.2% in 2013, and 65.1% in 2012.
Divestitures — During 2014, we divested our Wheelabrator business in the fourth quarter, our Puerto
Rico operations and certain other collection and landfill assets in the second quarter, and certain landfill and
collection operations in our Eastern Canada Area in the third quarter. As mentioned above, we estimate that
divestitures reduced our annual revenues by $90 million. Commensurately, we estimate our operating
expenses decreased by approximately $56 million due to divestitures when compared to the prior year
period. The decreases in costs were primarily in (i) labor and related benefits and (ii) maintenance and
repairs.
The following table summarizes the major components of our operating expenses, including the impact of
foreign currency translation, for the years ended December 31 (dollars in millions), with significant changes in
our operating expenses discussed below:
2014 Period-to-Period Change 2013 Period-to-Period Change 2012
Labor and related benefits ............... $2,452 $ (54) (2.2)% $2,506 $ 99 4.1% $2,407
Transfer and disposal costs .............. 935 (38) (3.9) 973 9 0.9 964
Maintenance and repairs ................ 1,181 — — 1,181 24 2.1 1,157
Subcontractor costs .................... 1,223 41 3.5 1,182 (8) (0.7) 1,190
Cost of goods sold ..................... 974 (26) (2.6) 1,000 81 8.8 919
Fuel ................................. 553 (50) (8.3) 603 (46) (7.1) 649
Disposal and franchise fees and taxes ...... 669 16 2.5 653 23 3.7 630
Landfill operating costs ................. 266 34 14.7 232 8 3.6 224
Risk management ...................... 219 (25) (10.2) 244 14 6.1 230
Other ................................ 530 (8) (1.5) 538 29 5.7 509
$9,002 $(110) (1.2)% $9,112 $233 2.6% $8,879
Labor and related benefits — The following significant items affected the comparability of expenses
for the periods presented.
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