Waste Management 2015 Annual Report Download - page 132

hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. An
instantaneous, one percentage point increase in interest rates across all maturities attributable to these instruments
would have decreased the fair value of our debt by approximately $600 million at December 31, 2015.
We are also exposed to interest rate market risk because we have cash and cash equivalent balances as well
as assets held in restricted trust funds and escrow accounts. These assets are generally invested in high quality,
liquid instruments including money market funds that invest in U.S. government obligations with original
maturities of three months or less. Because of the short terms to maturity of these investments, we believe that
our exposure to changes in fair value due to interest rate fluctuations is insignificant.
Commodity Price Exposure — In the normal course of our business, we are subject to operating agreements
that expose us to market risks arising from changes in the prices for commodities such as diesel fuel; recyclable
materials, including old corrugated cardboard, old newsprint and plastics; and electricity, which generally
correlates with natural gas prices in many of the markets in which we operate. During the three years ended
December 31, 2015, we generally have not entered into derivatives to hedge the risks associated with changes in
the market prices of these commodities, with the exception of electricity commodity derivatives divested in
conjunction with the sale of our Wheelabrator business in December 2014. Alternatively, we attempt to manage
these risks through operational strategies that focus on capturing our costs in the prices we charge our customers
for the services provided. Accordingly, as the market prices for these commodities increase or decrease, our
revenues also increase or decrease.
Currency Rate Exposure — We have operations in Canada as well as a cost center in India and investments
in Hong Kong. Where significant, we have quantified and described the impact of foreign currency translation on
components of income, including operating revenue and operating costs. However, the impact of foreign
currency has not materially affected our results of operations. During 2015, we did see a reduction in
stockholders’ equity of $159 million due to the fluctuations in the Canadian dollar within accumulated other
comprehensive income (loss). We hedge a portion of our foreign currency risk using currency derivatives to
mitigate the impact of currency translation on cash flows of intercompany Canadian-currency denominated debt
transactions. Our foreign currency derivatives have not materially affected our financial position or results of
operations for the periods presented. In addition, while changes in foreign currency exchange rates could
significantly affect the fair value of our foreign currency derivatives, we believe these changes in fair value
would not have a material impact to the Company. The foreign currency exposure associated with these
investments has not been material. Refer to Notes 8 and 14 to the Consolidated Financial Statements for
additional information regarding our foreign currency derivatives and translation.
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