Waste Management 2006 Annual Report Download - page 137

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The following table reconciles the number of common shares outstanding at December 31 of each year to the
number of weighted average basic common shares outstanding and the number of weighted average diluted
common shares outstanding for the purposes of calculating basic and diluted earnings per common share. The table
also provides the number of shares of common stock potentially issuable at the end of each period and the number of
potentially issuable shares excluded from the diluted earnings per share computation for each period (shares in
millions):
2006 2005 2004
Years Ended December 31,
Number of common shares outstanding at year-end .................. 533.7 552.3 570.2
Effect of using weighted average common shares outstanding .......... 6.7 9.2 6.1
Weighted average basic common shares outstanding ................. 540.4 561.5 576.3
Dilutive effect of equity-based compensation awards, warrants, and other
contingently issuable shares.................................. 5.7 3.6 4.8
Weighted average diluted common shares outstanding ................ 546.1 565.1 581.1
Potentially issuable shares..................................... 26.0 36.3 44.8
Number of anti-dilutive potentially issuable shares excluded from diluted
common shares outstanding .................................. 4.6 13.9 16.8
17. Fair Value of Financial Instruments
We have determined the estimated fair value amounts of our financial instruments using available market
information and commonly accepted valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily
indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The use
of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.
The fair value estimates are based on information available as of December 31, 2006 and 2005. These amounts have
not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts
presented.
The carrying values of cash and cash equivalents, short-term investments, trade accounts receivable, trade
accounts payable, financial instruments included in other receivables and certain financial instruments included in
other assets or other liabilities are reflected in our Consolidated Financial Statements at historical cost, which is
materially representative of their fair value principally because of the short-term maturities of these instruments.
Long-term investments — Included as a component of “Other assets” in our Consolidated Balance Sheets at
December 31, 2006 and December 31, 2005 is $72 million and $70 million, respectively, for the cost basis of
restricted investments in equity-based mutual funds. At December 31, 2006 and December 31, 2005, our “Other
assets” also included $22 million and $51 million, respectively, for the cost basis of restricted investments in
U.S. government agency debt securities. Unrealized holding gains and losses on these instruments are recorded as
either an increase or decrease to the asset balance and deferred as a component of “Accumulated other compre-
hensive income” in the equity section of our Consolidated Balance Sheets. The net unrealized holding gains on
these instruments, net of taxes, were $10 million as of December 31, 2006 and $5 million as of December 31, 2005.
Refer to Note 13.
Debt and interest rate derivatives — At December 31, 2006 and 2005, the carrying value of our debt was
approximately $8.3 billion and $8.7 billion, respectively. The carrying value includes adjustments for both the
unamortized fair value adjustments related to terminated hedge arrangements and fair value adjustments of debt
instruments that are currently hedged. See Note 7. For active hedge arrangements, the fair value of the derivative is
included in other current assets, other long-term assets, accrued liabilities or other long-term liabilities, as
appropriate. The estimated fair value of our debt was approximately $8.7 billion at December 31, 2006 and
103
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)