Waste Management 2006 Annual Report Download - page 125

• In connection with the $350 million letter of credit facility, WMI and WM Holdings guaranteed the interest
rate swaps entered into by the entity funding the letter of credit facility. The probability of loss for the
guarantees was determined to be remote and the fair value of the guarantees is immaterial to our financial
position and results of operations.
• Certain of our subsidiaries have guaranteed the market value of certain homeowners’ properties that are
adjacent to certain of our landfills. These guarantee agreements extend over the life of the respective landfill.
Under these agreements, we would be responsible for the difference between the sale value and the
guaranteed market value of the homeowners’ properties, if any. Generally, it is not possible to determine the
contingent obligation associated with these guarantees, but we do not believe that these contingent
obligations will have a material effect on our financial position, results of operations or cash flows.
• We have indemnified the purchasers of businesses or divested assets for the occurrence of specified events
under certain of our divestiture agreements. Other than certain identified items that are currently recorded as
obligations, we do not believe that it is possible to determine the contingent obligations associated with these
indemnities. Additionally, under certain of our acquisition agreements, we have provided for additional
consideration to be paid to the sellers if established financial targets are achieved post-closing. The costs
associated with any additional consideration requirements are accounted for as incurred.
• WMI and WM Holdings guarantee the service, lease, financial and general operating obligations of certain
of their subsidiaries. If such a subsidiary fails to meet its contractual obligations as they come due, the
guarantor has an unconditional obligation to perform on its behalf. No additional liability has been recorded
for service, financial or general operating guarantees because the subsidiaries’ obligations are properly
accounted for as costs of operations as services are provided or general operating obligations as incurred. No
additional liability has been recorded for the lease guarantees because the subsidiaries’ obligations are
properly accounted for as operating or capital leases, as appropriate.
We currently believe that it is not reasonably likely that we will be required to perform under these guarantee
agreements or that any performance requirement would have a material impact on our consolidated financial
statements.
Environmental matters — Our business is intrinsically connected with the protection of the environment. As
such, a significant portion of our operating costs and capital expenditures could be characterized as costs of
environmental protection. Such costs may increase in the future as a result of legislation or regulation. However, we
believe that we tend to benefit when environmental regulation increases, because such regulations increase the
demand for our services, and we have the resources and experience to manage environmental risk.
Estimating our degree of responsibility for remediation of a particular site is inherently difficult and
determining the method and ultimate cost of remediation requires that a number of assumptions be made. Our
ultimate responsibility may differ materially from current estimates. It is possible that technological, regulatory or
enforcement developments, the results of environmental studies, the inability to identify other PRPs, the inability of
other PRPs to contribute to the settlements of such liabilities, or other factors could require us to record additional
liabilities that could be material. Additionally, our ongoing review of our remediation liabilities could result in
revisions that could cause upward or downward adjustments to income from operations. These adjustments could
also be material in any given period.
As of December 31, 2006, we had been notified that we are a PRP in connection with 75 locations listed on the
EPA’s National Priorities List (“NPL”). Of the 75 sites at which claims have been made against us, 16 are sites we
own. Each of the NPL sites we own were initially developed by others as land disposal facilities. At each of these
facilities, we are working in conjunction with the government to characterize or remediate identified site problems,
and we have either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or
are pursuing resolution of an allocation formula. We generally expect to receive any amounts due from these parties
at, or near, the time that we make the remedial expenditures. The 59 NPL sites at which claims have been made
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)