Waste Management 2010 Annual Report Download - page 182

In 2009, we acquired businesses primarily related to our collection operations. Total consideration, net of cash
acquired, for acquisitions was $329 million, which included $259 million in cash payments, a liability for additional
cash payments with an estimated fair value of $46 million, and assumed liabilities of $24 million. The additional
cash payments are contingent upon achievement by the acquired businesses of certain negotiated goals, which
generally included targeted revenues. At the date of acquisition, our estimated obligations for the contingent cash
payments were between $42 million and $56 million. As of December 31, 2009, we had paid $15 million of this
contingent consideration. In 2009, we also paid $7 million of contingent consideration associated with acquisitions
completed in 2008.
The allocation of purchase price was primarily to “Property and equipment,” which had an estimated fair value
of $102 million; “Other intangible assets,” which had an estimated fair value of $105 million; and “Goodwill” of
$125 million. Goodwill is primarily a result of expected synergies from combining the acquired businesses with our
existing operations and is tax deductible.
Our 2009 acquisitions included the purchase of the remaining equity interest in one of our portable self-storage
investments, increasing our equity interest in this entity from 50% to 100%. As a result of this acquisition, we
recognized a $4 million loss for the remeasurement of the fair value of our initial equity investment, which was
determined to be $5 million. This loss was recognized as a component of “(Income) expense from divestitures, asset
impairments and unusual items” in our Statement of Operations.
In 2008, we completed several acquisitions for a cost, net of cash acquired, of $280 million.
Divestitures
The aggregate sales price for divestitures of operations was $1 million in 2010, $1 million in 2009 and
$59 million in 2008. The proceeds from these sales were comprised substantially of cash. We recognized net gains
on these divestitures of $1 million in 2010 and $33 million in 2008. The impact to our 2009 income from operations
of gains and losses on divestitures was less than $1 million. These divestitures were made as part of our initiative to
improve or divest certain underperforming and non-strategic operations.
20. Variable Interest Entities
Following is a description of our financial interests in variable interest entities that we consider significant,
including (i) those for which we have determined that we are the primary beneficiary of the entity and, therefore,
have consolidated the entities into our financial statements; and (ii) those that represent a significant interest in an
unconsolidated entity.
Consolidated Variable Interest Entities
Waste-to-Energy LLCs — In June 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 purchase the
three waste-to-energy facilities and assume the seller’s indebtedness. Under the LLC agreements, the LLCs shall be
dissolved upon the occurrence of any of the following events: (i) a written decision of all members of the LLCs;
(ii) December 31, 2063; (iii) a court’s dissolution of the LLCs; or (iv) the LLCs ceasing to own any interest in the
waste-to-energy facilities.
Income, losses and cash flows of the LLCs are allocated to the members based on their initial capital account
balances until Hancock and CIT achieve targeted returns; thereafter, we will receive 80% of the earnings of each of
the LLCs and Hancock and CIT will be allocated the remaining 20% proportionate to their respective equity
interests. All capital allocations made through December 31, 2010 have been based on initial capital account
balances as the target returns have not yet been achieved.
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)