13. Asset Impairments and Unusual Items
Goodwill impairments
During the year ended December 31, 2013, we recognized $509 million of goodwill impairment charges, primarily related to (i) $483 million associated with our Wheelabrator business; (ii) $10 million associated with our Puerto Rico operations and (iii) $9 million associated with a majority-owned waste diversion technology company. During the years ended December 31, 2012 and 2011, we recognized goodwill impairment charges of $4 million and $1 million, respectively, related to certain of our non-Solid Waste operations. See Notes 3 and 6 for additional information related to these impairment charges as well as the accounting policy and analysis involved in identifying and calculating impairments.
(Income) expense from divestitures, asset impairments (other than goodwill) and unusual items
The following table summarizes the major components of “(Income) expense from divestitures, asset impairments and unusual items” for the years ended December 31 for the respective periods (in millions):
| 2013 | 2012 | 2011 | ||||||||||
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(Income) expense from divestitures |
$ | (8 | ) | $ | — | $ | 1 | |||||
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Asset impairments (other than goodwill) |
472 | 79 | 8 | |||||||||
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| $ | 464 | $ | 79 | $ | 9 | |||||||
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During the year ended December 31, 2013, we recognized net charges of $464 million, primarily related to the following:
| Ÿ |
Landfill impairments — We recognized $262 million of charges to impair certain of our landfills, primarily as a result of our consideration of management’s decision in the fourth quarter of 2013 not to actively pursue expansion and/or development of such landfills. These charges were primarily associated with two landfills in our Eastern Canada Area, which are no longer accepting waste. We had previously concluded that receipt of permits for these landfills was probable. However, in connection with our asset rationalization and capital allocation analysis, which was influenced, in some cases, by our acquisition of RCI, we determined that the future costs to construct these landfills could be avoided as we are able to allocate disposal that would have gone to these landfills to other facilities and not materially impact operations. As a result of management’s decision, we determined that the landfill assets were no longer able to be recovered by the undiscounted cash flows attributable to these assets. As such, we wrote them down to their estimated fair values using a market approach considering the highest and best use of the assets. |
| Ÿ |
Waste-to-energy impairments — We recognized $144 million of impairment charges relating to three waste-to-energy facilities, primarily as a result of closure or anticipated closure due to continued difficulty securing sufficient volumes to operate the plants at capacity and the prospect of additional capacity entering the market where the largest facility is located. We wrote down the carrying value of our facilities to their estimated fair value using a market approach. |
| Ÿ |
Other impairments — The remainder of our 2013 charges were attributable to (i) $31 million of charges to impair various recycling assets; (ii) $20 million of charges to write down assets related to a majority-owned waste diversion technology company and; (iii) a $15 million charge to write down the carrying value of an oil and gas property to its estimated fair value. |
| Ÿ |
Divestitures — Partially offsetting these charges were $8 million of net gains on divestitures. |
See Note 3 for additional information related to the accounting policy and analysis involved in identifying and calculating impairments.
During the year ended December 31, 2012, we recognized impairment charges aggregating $79 million, attributable to (i) $45 million of charges related to three facilities in our medical waste services business as a result of projected operating losses at each of these facilities; (ii) $20 million of charges related to investments in waste diversion technology companies and (iii) other charges to write down the carrying value of assets to their estimated fair values, all of which are individually immaterial.
During the year ended December 31, 2011, we recognized impairment charges relating to two facilities in our medical waste services business, in addition to the three facilities impaired in 2012 discussed above, as a result of the closure of one site and continuing operating losses at the other site.
Refer to Note 21 for information related to the impact of impairments on the results of operations of our reportable segments.
Equity in net losses of unconsolidated entities
During the year ended December 31, 2012, we recognized a charge of $10 million related to a payment we made under a guarantee on behalf of an unconsolidated entity that went into liquidation. This investment was accounted for under the equity method.
Other income (expense)
During the year ended December 31, 2013, we recognized impairment charges of $71 million relating to other-than-temporary declines in the value of investments in waste diversion technology companies accounted for under the cost method. We wrote down the carrying value of our investments to their fair value, which was primarily determined using an income approach based on estimated future cash flow projections obtained in the fourth quarter of 2013 and, to a lesser extent, third-party investors’ recent transactions in these securities. Partially offsetting these charges was a $4 million gain on the sale of a similar investment recognized in the second quarter of 2013.
During the year ended December 31, 2012, we recognized an impairment charge of $16 million relating to an other-than-temporary decline in the value of another investment in a waste diversion technology company accounted for under the cost method. We wrote down the carrying value of our investment to its fair value based on other third-party investors’ recent transactions in these securities, which are considered to be the best evidence of fair value currently available.
These net charges are recorded in “Other, net” in our Consolidated Statement of Operations.