Waste Management 2006 Annual Report Download - page 124

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the terms and conditions of long-term contracts. Our purchase agreements have been established based on
the plants’ anticipated fuel supply needs to meet the demands of our customers under these long-term
electricity sale contracts. Under our fuel supply take-or-pay contracts, we are generally obligated to pay for a
minimum amount of waste or conventional fuel at a stated rate even if such quantities are not required in our
operations.
•Disposal — We have several agreements expiring at various dates through 2024 that require us to dispose of
a minimum number of tons at third-party disposal facilities. Under these put-or-pay agreements, we are
required to pay for the agreed upon minimum volumes regardless of the actual number of tons placed at the
facilities.
•Waste Paper — We are party to a waste paper purchase agreement that requires us to purchase a minimum
number of tons of waste paper from the counterparty. The cost per ton of waste paper purchased is based on
market prices plus the cost of delivery of the product to our customers. We currently expect to fulfill our
purchase obligation in 2012.
•Royalties — Certain of our landfill operating agreements require us to make minimum royalty payments to
the prior land owners, lessors or host community where the landfill is located. Our obligations under these
agreements expire at various dates through 2031. Although the agreements provide for minimum payments,
the actual payments we expect to make under the agreements, which are based on per ton rates for waste
received at the landfill, are significantly higher.
Our unconditional obligations are established in the ordinary course of our business and are structured in a
manner that provides us with access to important resources at competitive, market-driven rates. Our actual future
obligations under these outstanding agreements are generally quantity driven, and, as a result, our associated
financial obligations are not fixed as of December 31, 2006. We currently expect the products and services provided
by these agreements to continue to meet the needs of our ongoing operations. Therefore, we do not expect these
established arrangements to materially impact our future financial position, results of operations or cash flows.
Guarantees — We have entered into the following guarantee agreements associated with our operations:
• As of December 31, 2006, WM Holdings, one of WMI’s wholly-owned subsidiaries, has fully and
unconditionally guaranteed all of WMI’s senior indebtedness, which matures through 2032. WMI has
fully and unconditionally guaranteed all of the senior indebtedness of WM Holdings, which matures through
2026. Performance under these guarantee agreements would be required if either party defaulted on their
respective obligations. No additional liability has been recorded for these guarantees because the underlying
obligations are reflected in our Consolidated Balance Sheets. See Note 22 for further information.
• WMI and WM Holdings have guaranteed the tax-exempt bonds and other debt obligations of their
subsidiaries. If a subsidiary fails to meet its obligations associated with its debt agreements as they come
due, WMI or WM Holdings will be required to perform under the related guarantee agreement. No
additional liability has been recorded for these guarantees because the underlying obligations are reflected in
our Consolidated Balance Sheets. See Note 7 for information related to the balances and maturities of our
tax-exempt bonds.
• We have guaranteed certain financial obligations of unconsolidated entities. The related obligations, which
mature through 2020, are not recorded on our Consolidated Balance Sheets. As of December 31, 2006, our
maximum future payments associated with these guarantees are approximately $20 million. We do not
believe that it is likely that we will be required to perform under these guarantees.
• WM Holdings has guaranteed all reimbursement obligations of WMI under its $350 million letter of credit
facility and $295 million letter of credit and term loan agreements. Under those facilities, WMI must
reimburse the entities funding the facilities for any draw on a letter of credit supported by the facilities. As of
December 31, 2006, we had $641 million in outstanding letters of credit under these facilities.
90
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)