Waste Management 2015 Annual Report Download - page 108

• Our 2014 revenue growth from yield in our industrial line of business was aided by the expansion of
our oilfield services business. These services typically have higher average rates due to extended
transportation distances, special waste handling costs and higher disposal costs as compared with our
other industrial business. However, in 2015, reduced drilling and auxiliary activities due to the
continued decline in oil and gas prices negatively affected our oilfield services business, which in turn
affected our revenue growth in our industrial line of business.
• In our residential line of business, we continue to focus on bidding on contracts that improve our yield
performance and increase our overall returns.
• Yield growth from our landfill and transfer station operations also improved for both 2015 and 2014.
Recycling commodities — The continuing declines in recycling commodities prices resulted in revenue
declines of $138 million and $53 million for the years ended December 31, 2015 and 2014, respectively,
compared with the prior year.
Fuel surcharges and mandated fees — These revenues, which are predominantly generated by our fuel
surcharge program, decreased $171 million and $2 million for the years ended December 31, 2015 and 2014,
respectively. These revenues fluctuate in response to changes in the national average prices for diesel fuel on
which our surcharge is based. We experienced a dramatic fuel price decline of approximately 30% in 2015 versus
the 2.4% fuel price decline in 2014, which caused a much more significant decline in our fuel surcharge revenues
in the current year. The mandated fees included in this line item are primarily related to pass-through fees and
taxes assessed by various state, county and municipal government agencies at our landfills and transfer stations.
Volume — Declines in our volumes caused our revenue to decrease $215 million, or 1.6%, and $188
million, or 1.4%, for the years ended December 31, 2015 and 2014, respectively, as compared with the prior year.
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 $771 million, or 8.6%, when comparing 2015 with 2014 and decreased
$110 million, or 1.2%, when comparing 2014 with 2013. Operating expenses as a percentage of revenues were
63.5% in 2015, 64.3% in 2014, and 65.2% in 2013.
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