Waste Management 2008 Annual Report Download - page 138
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Please find page 138 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.purchase the three waste-to-energy facilities and assume the seller’s indebtedness. Under the LLC agreements, the
LLCs shall be dissolved upon the occurrence of any of the following events: (i) a written decision of all members of
the LLCs; (ii) December 31, 2063; (iii) a court’s dissolution of the LLCs; or (iv) the LLCs ceasing to own any
interest in the waste-to-energy facilities.
Income, losses and cash flows of the LLCs are allocated to the members based on their initial capital account
balances until Hancock and CIT achieve targeted returns; thereafter, we will receive 80% of the earnings of each of
the LLCs and Hancock and CIT will be allocated the remaining 20% based on their respective equity interests. All
capital allocations made through December 31, 2008 have been based on initial capital account balances as the
target returns have not yet been achieved.
Our obligations associated with our interests in the LLCs are primarily related to the lease of the facilities. In
addition to our minimum lease payment obligations, we are required to make cash payments to the LLCs for differences
between fair market rents and our minimum lease payments. These payments are subject to adjustment based on factors
that include the fair market value of rents for the facilities and lease payments made through the re-measurement dates.
In addition, we may be required under certain circumstances to make capital contributions to the LLCs based on
differences between the fair market value of the facilities and defined termination values as provided for by the
underlying lease agreements, although we believe the likelihood of the occurrence of these circumstances is remote.
We determined that we are the primary beneficiary of the LLCs because our interest in the entities is subject to
variability based on changes in the fair market value of the leased facilities, while Hancock’s and CIT’s interests are
structured to provide targeted returns based on their respective initial investments. As of December 31, 2008, our
Consolidated Balance Sheet includes $342 million of net property and equipment associated with the LLCs’
waste-to-energy facilities and $228 million in minority interest associated with Hancock’s and CIT’s interests in the
LLCs. During the years ended December 31, 2008, 2007 and 2006, we recognized minority interest expense of
$41 million, $35 million and $33 million, respectively, for Hancock’s and CIT’s interests in the LLCs’ earnings,
which are largely eliminated in WMI’s consolidation.
Trusts for Closure, Post-Closure or Environmental Remediation Obligations — We have determined that we
are the primary beneficiary of trust funds that were created to settle certain of our closure, post-closure or
environmental remediation obligations. Although we are not always the sole beneficiary of these trust funds, we
have determined that we are the primary beneficiary because we retain a majority of the risks and rewards associated
with changes in the fair value of the assets held in trust. As the trust funds are expected to continue to meet the
statutory requirements for which they were established, we do not believe that there is any material exposure to loss
associated with the trusts. The consolidation of these variable interest entities has not materially affected our
financial position or results of operations.
Significant unconsolidated variable interest entities
Investments in Coal-Based Synthetic Fuel Production Facilities — As discussed in Note 8, through
December 31, 2007, we owned an interest in two coal-based synthetic fuel production facilities. Along with
the other equity investors, we supported the operations of the entities in exchange for a pro-rata share of the tax
credits generated by the facilities. Our obligation to support the facilities’ operations was, therefore, limited to the
tax benefit we received. We were not the primary beneficiary of either of these entities. As such, we accounted for
these investments under the equity method of accounting and did not consolidate the facilities.
20. Segment and Related Information
We manage and evaluate our operations primarily through our Eastern, Midwest, Southern, Western,
Wheelabrator and WMRA Groups. These six Groups are presented below as our reportable segments. Our
segments provide integrated waste management services consisting of collection, disposal (solid waste and
hazardous waste landfills), transfer, waste-to-energy facilities and independent power production plants that are
managed by Wheelabrator, recycling services and other services to commercial, industrial, municipal and
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)