Waste Management 2013 Annual Report Download - page 225

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Pro Forma Consolidated Results of Operations
The following pro forma consolidated results of operations have been prepared as if the acquisitions of RCI
and Greenstar occurred at January 1, 2012 (in millions, except per share amounts):
Years Ended December 31,
2013 2012
Operating revenues ............................................. $14,085 $14,009
Net income attributable to Waste Management, Inc. ................... 112 803
Basic earnings per common share .................................. 0.24 1.73
Diluted earnings per common share ................................ 0.24 1.73
Prior Year Acquisitions
In 2012, we paid $94 million for interests in oil and gas producing properties through two transactions. The
purchase price was allocated primarily to “Property and equipment.” Additionally, we acquired 32 other
businesses related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was
$244 million, which included $207 million in cash paid in 2012, deposits paid during 2011 for acquisitions
completed in 2012 of $7 million, a liability for additional cash payments with a preliminary estimated fair value
of $22 million, and assumed liabilities of $8 million. The additional cash payments are contingent upon
achievement by the acquired businesses of certain negotiated goals, which generally include targeted revenues.
At the dates of acquisition, our estimated maximum obligations for the contingent cash payments were $57
million. As of December 31, 2012, we had paid $9 million of this contingent consideration. In 2012, we also paid
$34 million of contingent consideration associated with acquisitions completed prior to 2012.
The allocation of purchase price for 2012 acquisitions was primarily to “Property and equipment,” which
had an estimated fair value of $126 million; “Other intangible assets,” which had an estimated fair value of $43
million; and “Goodwill” of $69 million. Other intangible assets included $34 million of customer contracts and
customer relationships and $9 million of covenants not-to-compete. Goodwill is primarily a result of expected
synergies from combining the acquired businesses with our existing operations and is tax deductible.
In 2011, we acquired businesses primarily related to our Solid Waste business, 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 preliminary 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 include 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 for 2011 acquisitions 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. Other intangible assets included $166 million of customer contracts and
customer relationships, $29 million of covenants not-to-compete and $30 million of licenses, permits and other.
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.
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. We acquired Oakleaf to advance our growth and transformation strategies and
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