Waste Management 2015 Annual Report Download - page 173

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• Before the divestiture of our Wheelabrator business, WM had guaranteed certain operational and
financial performance obligations of Wheelabrator and its subsidiaries in the ordinary course of
business. In conjunction with the divestiture, certain WM guarantees of Wheelabrator obligations were
terminated, but others continued and are now guarantees of third-party obligations. Wheelabrator is
working with the various third-party beneficiaries to release WM from these guarantees, but until they
are successful, WM has agreed to retain the guarantees and, in exchange, receive a credit support fee.
The most significant of these guarantees specifically define WM’s maximum financial obligation over
the course of the relevant agreements, and as of December 31, 2015, WM’s maximum future payments
associated with those guarantees are $106 million. WM’s exposure under certain of the performance
guarantees is variable and a maximum exposure is not defined. We have recorded the fair value of the
financial and performance guarantees, some of which could extend through 2038 if not sooner
terminated, in our December 31, 2015 Consolidated Balance Sheet. The estimated fair value of WM’s
potential obligation associated with guarantees of Wheelabrator obligations (net of the credit support
fee) at December 31, 2015 and 2014 was $13 million and $18 million, respectively. We currently do
not expect the financial impact of such performance and financial guarantees to materially exceed the
recorded fair value.
• We have guaranteed certain financial obligations of unconsolidated entities. The related obligations,
which mature through 2020, are not recorded on our Consolidated Balance Sheets. As of December 31,
2015, our maximum future payments associated with these guarantees are approximately $7 million.
Any requirement to act under these guarantees would not materially impact our financial position,
results of operations or cash flows.
• Certain of our subsidiaries have guaranteed the market or contractually-determined 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, if any, between the sale value and the guaranteed market or contractually-determined value
of the homeowners’ properties. As of December 31, 2015, we have agreements guaranteeing certain
market value losses for approximately 850 homeowners’ properties adjacent to or near 21 of our
landfills. 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 or other
market conditions are achieved post-closing and we have recognized liabilities for these contingent
obligations based on an estimate of the fair value of these contingencies at the time of acquisition. We
do not currently believe that contingent obligations to provide indemnification or pay additional post-
closing consideration in connection with our divestitures or acquisitions will have a material adverse
effect on the Company’s business, financial condition, results of operations or cash flows.
• WM 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.
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