Waste Management 2007 Annual Report Download - page 76

estimated phase-out of 69% of Section 45K tax credits generated during 2007, our income taxes for the year
ended December 31, 2007 include $50 million of non-conventional fuel tax credits. These tax credits
resulted in a 2.9 percentage point reduction in our effective tax rate for the year ended December 31, 2007.
Our income taxes for the year ended December 31, 2006 included $71 million of non-conventional fuel tax
credits, resulting in a 4.8 percentage point reduction in our effective tax rate, and our income taxes for the
year ended December 31, 2005 included $133 million of non-conventional fuel tax credits, resulting in a
12.2 percentage point reduction in our effective tax rate.
Non-conventional fuel tax credits expired at the end of 2007 pursuant to Section 45K of the Internal Revenue
Code. Accordingly, at current income levels, we expect that our 2008 effective tax rate will be approximately 40%
without the benefit of the tax credits.
Liquidity and Capital Resources
We continually monitor our actual and forecasted cash flows, our liquidity and our capital resources, enabling
us to plan for our present needs and fund unbudgeted business activities that may arise during the year as a result of
changing business conditions or new opportunities. In addition to our working capital needs for the general and
administrative costs of our ongoing operations, we have cash requirements for: (i) the construction and expansion of
our landfills; (ii) additions to and maintenance of our trucking fleet; (iii) construction, refurbishments and
improvements at waste-to-energy and materials recovery facilities; (iv) the container and equipment needs of
our operations; (v) capping, closure and post-closure activities at our landfills; and (vi) repaying debt and
discharging other obligations. We also are committed to providing our shareholders with a return on their
investment through our capital allocation program that provides for dividend payments, share repurchases and
investments in acquisitions that we believe will be accretive and provide continued growth in our business.
The American Jobs Creation Act of 2004 allowed U.S. companies to repatriate earnings from their foreign
subsidiaries at a reduced tax rate during 2005. Our Chief Executive Officer and Board of Directors approved a
domestic reinvestment plan under which we repatriated $496 million of our accumulated foreign earnings and
capital in 2005. The repatriation was funded with cash on hand and bank borrowings. For a discussion of the tax
impact and bank borrowings see Notes 7 and 8 to the Consolidated Financial Statements.
Summary of Cash, Short-Term Investments, Restricted Trust and Escrow Accounts and Debt Obligations
The following is a summary of our cash, short-term investments available for use, restricted trust and escrow
accounts and debt balances as of December 31, 2007 and December 31, 2006 (in millions):
2007 2006
Cash and cash equivalents.......................................... $ 348 $ 614
Short-term investments available for use ............................... — 184
Total cash, cash equivalents and short-term investments available for use . . . $ 348 $ 798
Restricted trust and escrow accounts:
Tax-exempt bond funds .......................................... $ 117 $ 94
Closure, post-closure and environmental remediation funds ............... 231 219
Debt service funds ............................................. 47 45
Other ....................................................... 23 19
Total restricted trust and escrow accounts........................... $ 418 $ 377
Debt:
Current portion ................................................ $ 329 $ 822
Long-term portion.............................................. 8,008 7,495
Total debt .................................................. $8,337 $8,317
Increase in carrying value of debt due to hedge accounting for interest rate
swaps ....................................................... $ 72 $ 19
41