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Acquisitions and Divestitures | 12 Months Ended
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Dec. 31, 2016
Business Combinations [Abstract] |
Acquisitions and Divestitures | 19. Acquisitions and Divestitures 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, 2016, we acquired 30 businesses primarily related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was $604 million, which included $581 million in cash paid and other consideration of $23 million, primarily purchase price holdbacks. For businesses acquired in 2016, our estimated maximum obligations for contingent consideration was not material. In 2016, we also paid $4 million of contingent consideration for acquisitions completed prior to 2016. In addition, we paid $26 million of holdbacks, of which $16 million related to current year acquisitions. Total consideration for our 2016 acquisitions was primarily allocated to $115 million of property and equipment, $212 million of other intangible assets and $280 million of goodwill. Other intangible assets included $185 million of customer and supplier relationships, $23 million of covenants not-to-compete and $4 million for a trade name. The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing operations and is tax deductible. Southern Waste Systems/Sun Recycling (“SWS”) — On January 8, 2016, Waste Management Inc. of Florida, a wholly-owned subsidiary of WM, acquired certain operations and business assets of SWS in Southern Florida for total consideration of $525 million. The acquired business assets include residential, commercial, and industrial solid waste collection, processing/recycling and transfer operations, equipment, vehicles, real estate and customer agreements. The acquisition was funded primarily with borrowings under our $2.25 billion revolving credit facility. Total consideration for SWS was allocated to $93 million of property and equipment, $182 million of other intangible assets and $250 million of goodwill. The acquisition accounting for this transaction was finalized in the third quarter of 2016. There were no significant measurement period adjustments recorded in 2016. The goodwill has been assigned to our Florida Area, in Tier 3, and is tax deductible. Since the acquisition date in 2016, SWS contributed revenues of $148 million for the year ended December 31, 2016, which are included in our Consolidated Statement of Operations. The acquired operations have not materially affected our “Consolidated net income” for the year ended December 31, 2016. Contingent consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which generally include targeted financial metrics. As of December 31, 2016 and 2015, the balance of our estimated contingent consideration obligations was $37 million and $96 million, respectively. The decrease in this balance is primarily due to adjustments to write down our estimated obligations to fair value, including a $47 million decrease resulting from the finalization of our purchase accounting that occurred during the measurement period, see Note 21 for further discussion, and post measurement period decreases to reflect changes in the estimated achievement of the targeted financial metrics. During the year ended December 31, 2015, we acquired 27 businesses primarily related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was $646 million, which included $537 million in cash paid, purchase price holdbacks of $13 million and a liability for contingent consideration with a preliminary estimated fair value of $96 million. Our estimated maximum obligations for the contingent cash payments were $126 million at the dates of acquisition. As of December 31, 2015, we had paid $13 million of these holdbacks and contingent consideration. In 2015, we also paid $4 million of contingent consideration associated with acquisitions completed prior to 2015. Total consideration for our 2015 acquisitions was primarily allocated to $243 million of property and equipment, $145 million of other intangible assets and $325 million of goodwill. Other intangible assets included $131 million of customer and supplier relationships, $8 million of covenants not-to-compete and $6 million of trade name. The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing operations and $166 million is tax deductible and $159 million is not tax deductible. Deffenbaugh Disposal, Inc. (“Deffenbaugh”) — On March 26, 2015, we acquired Deffenbaugh, one of the largest privately owned collection and disposal firms in the Midwest, for total consideration, net of cash acquired, of $400 million. Deffenbaugh’s assets include collection operations, transfer stations, recycling facilities and landfills. The acquisition accounting for this transaction was finalized in the first quarter of 2016. There were no significant measurement period adjustments recorded in 2016. Total consideration for Deffenbaugh was allocated to $207 million of property and equipment, $159 million in goodwill, $100 million in other intangible assets, $50 million in other assets, including $15 million cash acquired, and $101 million in total liabilities. Goodwill has been assigned to our Areas, primarily Tier 3 and to a lesser extent Tier 1, and is not tax deductible. The following table presents the fair value assigned to other intangible assets for the Deffenbaugh and SWS acquisitions, respectively, (amounts in millions, except for amortization periods):
|  | Deffenbaugh |  |  | SWS |
|  | Amount |  |  | Weighted Average Amortization Periods (in Years) |  |  | Amount |  |  | Weighted Average Amortization Periods (in Years) |
Customer relationships |  | $ | 94 |  |  |  | 15.0 |  |  | $ | 160 |  |  |  | 10.0 |
Noncompete agreements |  |  | — |  |  |  | — |  |  |  | 18 |  |  |  | 5.0 |
Trade name |  |  | 6 |  |  |  | 15.0 |  |  |  | 4 |  |  |  | 10.0 |
Total other intangible assets subject to amortization |  | $ | 100 |  |  |  | 15.0 |  |  | $ | 182 |  |  |  | 9.5 |
The following pro forma consolidated results of operations for the years ended December 31 have been prepared as if the acquisitions of Deffenbaugh and SWS occurred at January 1, 2015 (in millions, except per share amounts):
|  | 2016 |  |  | 2015 |
Operating revenues |  | $ | 13,611 |  |  | $ | 13,137 |
Net income attributable to Waste Management, Inc. |  |  | 1,182 |  |  |  | 751 |
Basic earnings per common share |  |  | 2.67 |  |  |  | 1.66 |
Diluted earnings per common share |  |  | 2.65 |  |  |  | 1.65 |
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 and a liability for contingent consideration with a preliminary estimated fair value of $6 million. 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. Total consideration for our 2014 acquisitions was primarily allocated to $6 million of property and equipment, $9 million of other intangible assets and $17 million of goodwill. Other intangible assets included $7 million of customer and supplier relationships and $2 million of covenants not-to-compete. The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing operations and is tax deductible. Divestitures In 2016 and 2015, the aggregate sales price for divestitures of operations was $2 million and $79 million and we recognized net losses of $9 million and net gains of $7 million, respectively. These divestitures were made as part of our continuous focus on improving or divesting certain non-strategic or underperforming operations. The remaining amounts reported in the Consolidated Statements of Cash Flows generally relate to the sale of fixed assets. The aggregate sales price for divestitures of operations was $2.09 billion in 2014, primarily related to (i) the sale of our Wheelabrator business; (ii) the sale of our Puerto Rico operations and (iii) the sale of certain landfill and collection operations in our Eastern Canada Area, as discussed further below. We recognized net gains on these divestitures of $515 million in 2014. The remaining amounts reported in the Consolidated Statement of Cash Flows generally relate to the sale of fixed assets. On December 19, 2014, we sold our Wheelabrator business to an affiliate of Energy Capital Partners and received cash proceeds of $1.95 billion, net of cash divested, subject to certain post-closing adjustments. We recognized a gain of $519 million on this sale which is included within “(Income) expense from divestitures, asset impairments and unusual items” in the Consolidated Statement of Operations. For the year ended December 31, 2015, net adjustments to this gain were immaterial on a pre-tax basis. In conjunction with the sale, the Company entered into several agreements to dispose of a minimum number of tons of waste at certain Wheelabrator facilities. See Note 11 for further discussion of these agreements. During 2014, we also sold our Puerto Rico operations and received proceeds of $80 million, consisting of $65 million of cash and $15 million of preferred stock and recognized a loss of $25 million. In addition, we sold certain landfill and collection operations in our Eastern Canada Area and received cash proceeds of $39 million and recognized a gain of $18 million. The gain or loss on these divestitures is included within “(Income) expense from divestitures, asset impairments and unusual items” in the Consolidated Statement of Operations. The remaining proceeds from divestitures in 2014 were comprised substantially of cash.

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