Waste Management 2007 Annual Report Download - page 77

Cash and cash equivalents — Cash and cash equivalents consist primarily of cash on deposit, certificates of
deposit, money market accounts, and investment grade commercial paper purchased with original maturities of
three months or less.
Short-term investments available for use — Periodically, we have invested in auction rate securities and
variable rate demand notes, which are debt instruments with long-term scheduled maturities and periodic interest
rate reset dates. The interest rate reset mechanism for these instruments results in a periodic remarketing of the
underlying securities through an auction process. Due to the liquidity provided by the interest rate reset mechanism
and the short-term nature of our investment in these securities, they have been classified as current assets in our
Consolidated Balance Sheets. Due to the decline in our overall cash balances near the end of 2007, we did not hold
any of these investments as of December 31, 2007.
Restricted trust and escrow accounts — Restricted trust and escrow accounts consist primarily of funds held in
trust for the construction of various facilities or repayment of our debt obligations, funds deposited for purposes of
settling landfill closure, post- closure and environmental remediation obligations and insurance escrow deposits.
These balances are primarily included within long-term “Other assets” in our Consolidated Balance Sheets. See
Note 3 to the Consolidated Financial Statements for additional discussion.
Debt — We use long-term borrowings in addition to the cash we generate from operations as part of our overall
financial strategy to support and grow our business. We primarily use senior notes and tax-exempt bonds to borrow
on a long-term basis, but also use other instruments and facilities when appropriate. The components of our long-
term borrowings as of December 31, 2007 are described in Note 7 to the Consolidated Financial Statements.
Changes in our outstanding debt balances from December 31, 2006 to December 31, 2007 can primarily be
attributed to (i) the cash repayment of $1,200 million of outstanding borrowings at their scheduled maturities;
(ii) $944 million of cash borrowings, generally to refinance amounts repaid in cash during the year; (iii) non-cash
proceeds from tax-exempt borrowings, net of principal payments made directly from trust funds of $144 million;
(iv) a $53 million increase in the carrying value of our debt due to hedge accounting for interest rate swaps; and
(v) the impacts of accounting for other non-cash changes in our balances due to foreign currency translation, interest
and capital leases.
We have approximately $1.2 billion of scheduled debt maturities during the next twelve months. We have
classified approximately $840 million of these borrowings as long-term as of December 31, 2007 based on our
intent and ability to refinance these borrowings on a long-term basis.
Summary of Cash Flow Activity
The following is a summary of our cash flows for the year ended December 31 for each respective period (in
millions):
2007 2006 2005
Net cash provided by operating activities ..................... $2,439 $ 2,540 $ 2,391
Net cash used in investing activities ......................... $ (761) $ (788) $(1,062)
Net cash used in financing activities......................... $(1,946) $(1,803) $(1,090)
Net Cash Provided by Operating Activities — The comparability of our operating cash flows for the periods
presented is affected by our adoption of SFAS No. 123(R) on January 1, 2006. SFAS No. 123(R) requires reductions
in income taxes payable attributable to excess tax benefits associated with equity-based transactions to be included
in cash flows from financing activities, which are discussed below. Prior to adopting SFAS No. 123(R), our excess
tax benefits associated with equity-based transactions were included within cash flows from operating activities as a
change in “Accounts payable and accrued liabilities.” During 2005, these excess tax benefits improved our
operating cash flows by approximately $17 million.
The most significant items affecting the comparison of our operating cash flows for 2007 and 2006 are
summarized below:
•Earnings improvements — Our income from operations, net of depreciation and amortization, increased by
$150 million, on a year-over-year basis, which positively affected our cash flows from operations in 2007.
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