Financial Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS

The effect of our hedging relationships and derivative instruments on the consolidated statements of income for the three months ended March 31, 2020 and 2019 follows (in millions):


	Classification and amount of gain (loss) recognized in income on hedging relationships and derivative instruments
	Three Months Ended March 31,
	2020		2019
	Interest Expense		Interest Expense

Total amount of expense line items presented in the consolidated statements of income in which the effects of hedging relationships and derivative instruments are recorded	$	(96.6)	$	(100.4)

The effects of fair value and cash flow hedging relationships in Subtopic 815-20:
Gain on fair value hedging relationships:
Interest rate swaps:
Net swap settlements	$	0.7	$	0.1
Net periodic earnings	$	0.6	$	—
(Loss) gain on cash flow hedging relationships:
Interest rate swap locks:
Amount of (loss) gain reclassified from AOCI into income, net of tax	$	(0.8)	$	0.1

The effects of derivative instruments not in Subtopic 815-20:
Loss on free-standing derivative instruments:
Interest rate contract:
Net loss on change in fair value of free-standing derivative instruments	$	(2.6)	$	—

Fair Value Measurements

In measuring fair values of assets and liabilities, we use valuation techniques that maximize the use of observable inputs (Level 1) and minimize the use of unobservable inputs (Level 3). We also use market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.

The carrying value for certain of our financial instruments, including cash, accounts receivable, current investments, accounts payable and certain other accrued liabilities, approximates fair value because of their short-term nature. As of March 31, 2020 and December 31, 2019, our assets and liabilities that are measured at fair value on a recurring basis include the following:


	March 31, 2020
			Fair Value
	Carrying Amount		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market mutual funds	$	43.3	$	43.3	$	43.3	$	—	$	—
Bonds - restricted cash and marketable securities and other assets	58.5		58.5		—		58.5		—


Interest rate swaps - other assets	21.0		21.0		—		21.0		—
Other derivative assets - other assets	61.6		61.6		—		61.6		—

Total assets	$	184.4	$	184.4	$	43.3	$	141.1	$	—
Liabilities:




Other derivative liabilities - other long-term liabilities	$	112.6	$	112.6	$	—	$	112.6	$	—
Interest rate locks - other long-term liabilities	11.0		11.0		—		11.0		—
Contingent consideration - other accrued liabilities and other long-term liabilities	71.7		71.7		—		—		71.7
Total liabilities	$	195.3	$	195.3	$	—	$	123.6	$	71.7


	December 31, 2019
			Fair Value
	Carrying Amount		Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market mutual funds	$	43.0	$	43.0	$	43.0	$	—	$	—
Bonds - restricted cash and marketable securities and other assets	51.6		51.6		—		51.6		—

Interest rate swaps - other assets	10.7		10.7		—		10.7		—
Other derivative assets - other assets	2.9		2.9		—		2.9		—
Interest rate locks - prepaid expenses and other current assets	3.6		3.6		—		3.6		—
Total assets	$	111.8	$	111.8	$	43.0	$	68.8	$	—
Liabilities:
Other derivative liabilities - other long-term liabilities	$	22.2	$	22.2	$	—	$	22.2	$	—
Interest rate locks - other accrued liabilities and other long-term liabilities	15.7		15.7		—		15.7		—
Contingent consideration - other accrued liabilities and other long-term liabilities	72.0		72.0		—		—		72.0


Total liabilities	$	109.9	$	109.9	$	—	$	37.9	$	72.0

Total Debt

As of March 31, 2020 and December 31, 2019, the carrying value of our total debt was $9.0 billion and $8.7 billion, respectively, and the fair value of our total debt was $9.5 billion and $9.4 billion, respectively. The estimated fair value of our fixed rate senior notes and debentures is based on quoted market prices. The fair value of our remaining notes payable, tax-exempt financings and borrowings under our credit facilities approximates the carrying value because the interest rates are variable. The fair value estimates are based on Level 2 inputs of the fair value hierarchy as of March 31, 2020 and December 31, 2019. See Note 7, Debt, for further information related to our debt.

Contingent Consideration

In April 2015, we entered into a waste management contract with the County of Sonoma, California to operate the county's waste management facilities. As of March 31, 2020, the Sonoma contingent consideration represents the fair value of $65.2 million payable to the County of Sonoma based on the achievement of future annual tonnage targets through the expected remaining capacity of the landfill. The potential undiscounted amount of all future contingent payments that we could be required to make under the waste management contract is estimated to be between approximately $75 million and $165 million. During the three months ended March 31, 2020, the activity in the contingent consideration liability included accretion, which was offset by concession payments made in the ordinary course of business. There were no changes to the estimate of fair value.

In 2017, we recognized additional contingent consideration associated with the acquisition of a landfill. As of March 31, 2020, the contingent consideration of $3.9 million represents the fair value of amounts payable to the seller based on annual volume of tons disposed at the landfill. During the three months ended March 31, 2020, the activity in the contingent consideration liability included accretion, which was offset by concession payments made in the ordinary course of business. There were no changes to the estimate of fair value.

In June 2019, we recognized additional contingent consideration associated with the acquisition of a collection business. As of March 31, 2020, the contingent consideration of $2.6 million represents the fair value of amounts payable to the seller based on annual volume of tons collected from certain customers of the business. During the three months ended March 31, 2020, the activity in the contingent consideration liability included accretion. There were no changes to the estimate of fair value.