Waste Management 2014 Annual Report Download - page 178

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(a) In conjunction with the amendment and restatement of our $2.25 billion revolving credit facility in July
2013, the maximum ratio was increased from 3.50:1 to 3.75:1 for quarters ending before September 30,
2015. After such time, the covenant ratio will revert back to 3.50:1 for each fiscal quarter through maturity
of the facility in July 2018.
Our credit facilities and senior notes also contain certain restrictions intended to monitor our level of
subsidiary indebtedness, types of investments and net worth. We monitor our compliance with these restrictions,
but do not believe that they significantly impact our ability to enter into investing or financing arrangements
typical for our business. As of December 31, 2014 and 2013, we were in compliance with the covenants and
restrictions under all of our debt agreements that may have a material effect on our Consolidated Financial
Statements.
8. Derivative Instruments and Hedging Activities
The following table summarizes the fair values of derivative instruments recorded in our Consolidated
Balance Sheet (in millions):
December 31,
Derivatives Designated as Hedging Instruments Balance Sheet Location 2014 2013
Foreign currency derivatives ............... Long-term other assets $ 28 $ 2
Total derivative assets ................ $ 28 $ 2
Electricity commodity derivatives(a) ........ Current accrued liabilities $— $ 3
Interest rate derivatives ................... Current accrued liabilities — 28
Total derivative liabilities ............. $— $31
(a) Our electricity commodity derivatives were associated with our Wheelabrator business and were divested in
conjunction with the sale of that business in December 2014.
We have not offset fair value amounts recognized for our derivative instruments. For information related to
the inputs used to measure our derivative assets and liabilities at fair value, refer to Note 18.
Fair Value Hedges
Interest Rate Swaps
In prior years, we entered into interest rate swaps to maintain a portion of our debt obligations at variable
market interest rates. We designated these interest rate swaps as fair value hedges of our fixed-rate senior notes.
Fair value hedge accounting for interest rate swap contracts increased the carrying value of our debt instruments
by $45 million as of December 31, 2014 and $59 million as of December 31, 2013. These fair value adjustments
to long-term debt are being amortized as a reduction to interest expense using the effective interest method over
the remaining term of the related senior notes, which extend through 2028.
Gains or losses on the derivatives as well as the offsetting gains or losses on the hedged items attributable to
our interest rate swaps are recognized in current earnings. We include gains and losses on our interest rate swaps
as adjustments to interest expense, which is the same financial statement line item where offsetting gains and
losses on the related hedged items are recorded. The fair value adjustment from active interest rate swaps and the
offsetting gain on the related hedged items was immaterial during the year ended December 31, 2012. We did not
have any active swaps outstanding in 2014 and 2013.
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