Waste Management 2011 Annual Report Download - page 204

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the unamortized fair value adjustments related to terminated hedge arrangements and fair value adjustments of
debt instruments that are currently hedged.
The estimated fair value of our debt was approximately $10.8 billion at December 31, 2011 and approximately
$9.2 billion at December 31, 2010. 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 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 increase in the fair value of our debt when comparing December 31, 2011
with December 31, 2010 is primarily related to $753 million of net borrowings during 2011 associated with our
senior notes. Increases in market prices for corporate debt securities and decreases in current market rates on fixed-
rate tax-exempt bonds also contributed to the increase in the fair value of debt for the reported period.
Although we have determined the estimated fair value amounts using available market information and
commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that
we, or holders of the instruments, could realize in a current market exchange. The use of different assumptions
and/or estimation methodologies could have a material effect on the estimated fair values. The fair value
estimates are based on information available as of December 31, 2011 and December 31, 2010. These amounts
have not been revalued since those dates, and current estimates of fair value could differ significantly from the
amounts presented.
19. Acquisitions and Divestitures
Current Year 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. In 2011, we acquired businesses primarily related to our
collection and recycling operations, including the acquisition of Oakleaf discussed below. Total consideration,
net of cash acquired, for all acquisitions was $893 million, which included $839 million in cash payments, a
liability for additional cash payments with a preliminarily estimated fair value of $47 million, and assumed
liabilities of $7 million. In 2011, we paid $8 million in deposits for acquisitions that had not closed as of
December 31, 2011. The additional cash payments are contingent upon achievement by the acquired businesses
of certain negotiated goals, which generally included targeted revenues. At the dates of acquisition, our estimated
maximum obligations for the contingent cash payments were $49 million. As of December 31, 2011, we had paid
$12 million of this contingent consideration. In 2011, we also paid $8 million of contingent consideration
associated with acquisitions completed in 2010 and 2009.
The allocation of purchase price was primarily to “Property and equipment,” which had an estimated fair
value of $225 million; “Other intangible assets,” which had an estimated fair value of $225 million; and
“Goodwill” of $497 million. Goodwill is primarily a result of expected synergies from combining the acquired
businesses with our existing operations and is tax deductible, except for the $327 million recognized from the
Oakleaf acquisition, which is not deductible for income tax purposes. Other intangible assets included $166
million of customer contracts and customer lists, $29 million of covenants not-to-compete and $30 million of
licenses, permits and other.
Acquisition of Oakleaf Global Holdings
On July 28, 2011, we paid $432 million, net of cash received of $4 million and inclusive of certain
adjustments, to acquire Oakleaf. Oakleaf provides outsourced waste and recycling services through a nationwide
network of third-party haulers. The operations we acquired generated approximately $580 million in revenues in
2010. We acquired Oakleaf to advance our growth and transformation strategies and increase our national accounts
customer base while enhancing our ability to provide comprehensive environmental solutions. For the year ended
December 31, 2011, we incurred $1 million of acquisition-related costs, which are classified as “Selling, general
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