Waste Management 2013 Annual Report Download - page 116

In addition, to fulfill our financial assurance obligations with respect to variable-rate tax-exempt debt, final
capping, closure, post-closure and environmental remediation obligations, we generally obtain letters of credit or
surety bonds, rely on insurance, including captive insurance, fund trust and escrow accounts or rely upon WM
financial guarantees. We currently have in place all financial assurance instruments necessary for our operations.
Our financial position, which can be negatively affected by asset impairments, our credit profile and general
economic factors, may adversely affect the cost of our current financial assurance instruments, and changes in
regulations may impose stricter requirements on the types of financial assurance that will be accepted.
Additionally, in the event we are unable to obtain sufficient surety bonding, letters of credit or third-party
insurance coverage at reasonable cost, or one or more states cease to view captive insurance as adequate
coverage, we would need to rely on other forms of financial assurance. It is possible that we could be forced to
deposit cash to collateralize our obligations. Other forms of financial assurance could be more expensive to
obtain, and any requirements to use cash to support our obligations would negatively impact our liquidity and
capital resources and could affect our ability to meet our obligations as they become due.
We may record material charges against our earnings due to any number of events that could cause
impairments to our assets.
In accordance with GAAP, we capitalize certain expenditures and advances relating to disposal site
development, expansion projects, acquisitions, software development costs and other projects. Events that could,
in some circumstances, lead to an impairment include, but are not limited to, shutting down a facility or operation
or abandoning a development project or the denial of an expansion permit. Additionally, declining waste volumes
and development of, and customer preference for, alternatives to traditional waste disposal could warrant asset
impairments. If we determine an asset or expansion project is impaired, we will charge against earnings any
unamortized capitalized expenditures and advances relating to such asset or project reduced by any portion of the
capitalized costs that we estimate will be recoverable, through sale or otherwise. We also carry a significant
amount of goodwill on our Consolidated Balance Sheet, which is required to be assessed for impairment
annually, and more frequently in the case of certain triggering events. We may be required to incur charges
against earnings if such impairment tests indicate that the fair value of a reporting unit is below its carrying
value. Any such charges could have a material adverse effect on our results of operations.
Our capital requirements and our business strategy could increase our expenses, cause us to change our
growth and development plans, or fail to maintain our desired credit profile.
If economic conditions or other risks and uncertainties cause a significant reduction in our cash flows from
operations, we may reduce or suspend capital expenditures, growth and acquisition activity, implementation of
our business strategy, dividend declarations or share repurchases. We may choose to incur indebtedness to pay
for these activities, although our access to capital markets is not assured and we may not be able to incur
indebtedness at a cost that is consistent with current borrowing rates. We also may need to incur indebtedness to
refinance scheduled debt maturities, and it is possible that the cost of financing could increase significantly,
thereby increasing our expenses and decreasing our net income. Further, our ability to execute our financial
strategy and our ability to incur indebtedness is somewhat dependent upon our ability to maintain investment
grade ratings on our senior debt. The credit rating process is contingent upon our credit profile, as well as a
number of other factors, many of which are beyond our control, including methodologies established and
interpreted by third party rating agencies. If we were unable to maintain our investment grade credit ratings in the
future, our interest expense would increase and our ability to obtain financing on favorable terms could be
adversely affected.
Additionally, we have $2.4 billion of debt as of December 31, 2013 that is exposed to changes in market
interest rates within the next 12 months because of the combined impact of our tax-exempt bonds and borrowings
outstanding under our $2.25 billion revolving credit facility and Canadian credit facility and term loan. If interest
rates increase, our interest expense would also increase, lowering our net income and decreasing our cash flow.
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