Waste Management 2011 Annual Report Download - page 143

Liquidity Impacts of Uncertain Tax Positions
As discussed in Note 9 of our Consolidated Financial Statements, we have liabilities associated with
unrecognized tax benefits and related interest. These liabilities are primarily included as a component of long-
term “Other liabilities” in our Consolidated Balance Sheet because the Company generally does not anticipate
that settlement of the liabilities will require payment of cash within the next twelve months. We are not able to
reasonably estimate when we would make any cash payments required to settle these liabilities, but do not
believe that the ultimate settlement of our obligations will materially affect our liquidity.
Off-Balance Sheet Arrangements
We are party to guarantee arrangements with unconsolidated entities as discussed in the Guarantees section
of Note 11 to the Consolidated Financial Statements. These arrangements have not materially affected our
financial position, results of operations or liquidity during the year ended December 31, 2011 nor are they
expected to have a material impact on our future financial position, results of operations or liquidity.
Inflation
While inflationary increases in costs, including the cost of diesel fuel, have affected our operating margins
in recent years, we believe that inflation generally has not had, and in the near future is not expected to have, any
material adverse effect on our results of operations. However, as of December 31, 2011, over 17% of our
collection revenues are generated under long-term agreements with price adjustments based on various indices
intended to measure inflation. Additionally, management’s estimates associated with inflation have had, and will
continue to have, an impact on our accounting for landfill and environmental remediation liabilities.
New Accounting Pronouncements
Fair Value Measurements — In May 2011, the FASB amended authoritative guidance associated with fair
value measurements. This amended guidance defines certain requirements for measuring fair value and for
disclosing information about fair value measurements in accordance with U.S. generally accepted accounting
principles. The amendments to authoritative guidance associated with fair value measurements were effective for
the Company on January 1, 2012 and are to be applied prospectively. We do not expect that the adoption of this
guidance will have a material impact on our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, we are exposed to market risks, including changes in interest rates,
Canadian currency rates and certain commodity prices. From time to time, we use derivatives to manage some
portion of these risks. Our derivatives are agreements with independent counterparties that provide for payments
based on a notional amount. As of December 31, 2011, all of our derivative transactions were related to actual or
anticipated economic exposures. We are exposed to credit risk in the event of non-performance by our derivative
counterparties. However, we monitor our derivative positions by regularly evaluating our positions and the
creditworthiness of the counterparties.
Interest Rate Exposure — Our exposure to market risk for changes in interest rates relates primarily to our
financing activities, although our interest costs can also be significantly affected by our on-going financial
assurance needs, which are discussed in the Financial Assurance and Insurance Obligations section of Item 1.
As of December 31, 2011, we had $9.7 billion of long-term debt when excluding the impacts of accounting
for fair value adjustments attributable to interest rate derivatives, discounts and premiums. The effective interest
rates of approximately $2.2 billion of our outstanding debt obligations are subject to change during 2012. The
most significant components of our variable-rate debt obligations are (i) $1 billion of “receive fixed, pay
variable” interest rate swaps associated with outstanding fixed-rate senior notes; (ii) $611 million of tax-exempt
bonds that are subject to re-pricing on either a daily or weekly basis through a remarketing process;
(iii) $305 million of tax-exempt bonds with term interest rate periods that are subject to re-pricing within twelve
months; (iv) $150 million of borrowings outstanding under our $2.0 billion revolving credit facility; and
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