Waste Management 2008 Annual Report Download - page 137
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Please find page 137 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.$5 million as of December 31, 2007. The fair value of our remaining available-for-sale securities approximates our
cost basis in the investments.
Debt and interest rate derivatives — At December 31, 2008 and 2007, the carrying value of our debt was
approximately $8.3 billion. The carrying value includes adjustments for both the unamortized fair value adjust-
ments related to terminated hedge arrangements and fair value adjustments of debt instruments that are currently
hedged. 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 $7.7 billion at December 31, 2008 and approximately
$8.5 billion at December 31, 2007. The estimated fair value of our senior notes is based on quoted market prices.
The carrying value of remarketable debt approximates fair value due to the short-term nature of the attached interest
rates. The fair value of our other debt is estimated using discounted cash flow analysis, based on rates we would
currently pay for similar types of instruments. The significant decline in the fair value of our debt when comparing
2008 with 2007 is primarily related to (i) the sharp decrease in market prices for corporate debt securities in late
2008 due to the overall condition of the credit markets, which caused a substantial decrease in the fair value of our
publicly-traded senior notes; and (ii) a significant increase in current market rates on fixed-rate tax-exempt bonds.
18. Acquisitions and Divestitures
Acquisitions
We continue to pursue the acquisition of businesses that are accretive to our solid waste operations and enhance
and expand our existing service offerings. We have seen the greatest opportunities for realizing superior returns
from tuck-in acquisitions, which are primarily the purchases of collection operations that enhance our existing route
structures and are strategically located near our existing disposal operations. During the years ended December 31,
2008, 2007 and 2006 we completed several acquisitions for a cost, net of cash acquired, of $280 million,
$90 million, and $32 million, respectively.
Divestitures
The aggregate sales price for divestitures of operations was $59 million in 2008, $224 million in 2007, and
$184 million in 2006. The proceeds from these sales were comprised substantially of cash. We recognized net gains
on these divestitures of $33 million in 2008, $59 million in 2007, and $26 million in 2006. These divestitures have
been made as part of our initiative to improve or divest certain under-performing and non-strategic operations. As
disclosed in Note 3, we analyze operations that have been divested in order to determine if they qualify for
discontinued operations reporting. We have determined that the operations that qualify for discontinued operations
accounting are not material to our Consolidated Statements of Operations for the years ended December 31, 2008,
2007 and 2006. Additional information related to our divestitures activity is included in Note 12.
19. Variable Interest Entities
We have financial interests in various variable interest entities. Following is a description of all interests that
we consider significant. For purposes of applying FASB Interpretation No. 46 (revised December 2003), Con-
solidation of Variable Interest Entities, we are considered the primary beneficiary of certain of these entities. Such
entities have been consolidated into our financial statements as noted below.
Consolidated variable interest entities
Waste-to-Energy LLCs — On June 30, 2000, two limited liability companies were established to purchase
interests in existing leveraged lease financings at three waste-to-energy facilities that we lease, operate and
maintain. We own a 0.5% interest in one of the LLCs (“LLC I”) and a 0.25% interest in the second LLC (“LLC II”).
John Hancock Life Insurance Company owns 99.5% of LLC I and 99.75% of LLC II is owned by LLC I and the CIT
Group. In 2000, Hancock and CIT made an initial investment of $167 million in the LLCs, which was used to
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)