Waste Management 2014 Annual Report Download - page 207

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The estimated fair value of our debt was approximately $10.6 billion at December 31, 2014 and
approximately $11.0 billion at December 31, 2013. The estimated fair value of our senior notes is based on
quoted market prices. The carrying value of remarketable debt and borrowings under our revolving credit
facilities 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 current market rates for similar types of instruments.
The decrease in the fair value of our debt when comparing December 31, 2014 with December 31, 2013 is
primarily related to $751 million of net repayments during 2014, partially offset by increases in the fair value
attributable to an increase in market prices for fixed-rate corporate debt securities as a result of recent decreases
in long-term interest rates.
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 Level 2 inputs of the fair value hierarchy available as of December 31, 2014 and 2013.
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
Pending Acquisition
On September 17, 2014, the Company signed a definitive agreement to acquire the outstanding stock of
Deffenbaugh Disposal, Inc., one of the largest privately owned collection and disposal firms in the Midwest.
Closing of the acquisition is expected to occur in early 2015, subject to the receipt of regulatory approvals and
the satisfaction of customary closing conditions.
Current Year Acquisitions
We continue to pursue the acquisition of businesses that are accretive to our Solid Waste business and
enhance and expand our existing service offerings. During the year ended December 31, 2014, we acquired 15
businesses related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was
$32 million, which included $26 million in cash paid in 2014 and a liability for contingent consideration with a
preliminary estimated fair value of $6 million. The contingent consideration is primarily based on achievement
by the acquired businesses of certain negotiated goals, which generally include targeted revenues. Our estimated
maximum obligations for the contingent cash payments were $6 million at the dates of acquisition. As of
December 31, 2014, we had paid $4 million of this contingent consideration. In 2014, we also paid $5 million of
contingent consideration associated with acquisitions completed prior to 2014.
The allocation of purchase price for 2014 acquisitions was primarily to “Property and equipment,” which
had an estimated fair value of $6 million; “Other intangible assets,” which had an estimated fair value of $9
million; and “Goodwill” of $17 million. Other intangible assets included $7 million of customer and supplier
relationships and $2 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.
Prior Year Acquisitions
During the year ended December 31, 2013, we acquired Greenstar and substantially all of the assets of RCI,
which are discussed further below. Additionally, we acquired 14 other businesses primarily related to our Solid
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