Waste Management 2014 Annual Report Download - page 212

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
as part of our initiative to improve or divest certain non-strategic or underperforming operations. The remaining
amounts reported in the Consolidated Statement of Cash Flows generally relate to the sale of fixed assets.
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; (ii) those that represent a significant interest in an
unconsolidated entity and (iii) trusts for final capping, closure, post-closure or environmental remediation
obligations for both consolidated and unconsolidated variable interest entities.
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 leased, operated and
maintained. Prior to the acquisitions of the noncontrolling interests, we owned 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
(“Hancock”) owned 99.5% of LLC I and 99.75% of LLC II was owned by LLC I and the CIT Group (“CIT”).
In December 2014, we purchased the noncontrolling interests in the LLCs from Hancock and CIT in
anticipation of our sale of our Wheelabrator business. The LLCs were then subsequently sold as part of the
divestment. See Note 19 for further discussion of the sale of our Wheelabrator business.
Prior to the acquisitions of the noncontrolling interests, we had determined that we were the primary
beneficiary of the LLCs and consolidated these entities in our Consolidated Financial Statements because (i) all
of the equity owners of the LLCs were considered related parties for purposes of applying this accounting
guidance; (ii) the equity owners shared power over the significant activities of the LLCs and (iii) we were the
entity within the related party group whose activities were most closely associated with the LLCs.
As of December 31, 2013, our Consolidated Balance Sheets included $284 million of net property and
equipment associated with the LLCs’ waste-to-energy facilities and $239 million in noncontrolling interests
associated with Hancock’s and CIT’s interests in the LLCs. During the years ended December 31, 2014, 2013
and 2012, we recognized reductions in earnings of $39 million, $43 million and $45 million, respectively, for
Hancock’s and CIT’s noncontrolling interests in the LLCs’ earnings, which are included in our consolidated net
income. The LLCs’ earnings related to the rental income generated from leasing the facilities to our subsidiaries,
reduced by depreciation expense. The LLCs’ rental income is eliminated in WM’s consolidation.
Significant Unconsolidated Variable Interest Entities
Investment in U.K. Waste-to-Energy and Recycling Entity — In the first quarter of 2012, we formed a U.K.
joint venture (the “JV”), together with a commercial waste management company (“Partner”), to develop,
construct, operate and maintain a waste-to-energy and recycling facility in England. We owned a 50% interest in
the JV. We determined that we were not the primary beneficiary of the JV, as all major decisions of the JV
require either majority vote or unanimous consent of the directors (who were appointed in equal numbers by us
and our Partner) or unanimous consent of the two shareholders of the JV. As such, our Partner shared equally in
the power to direct the activities of the JV that most significantly impacted its economic performance.
Accordingly, we accounted for this investment under the equity method of accounting and did not consolidate
this entity.
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