NOTE 9. SUPPLEMENTARY INFORMATION

Operating Revenues

The components of waste and service revenues are as follows (in millions):



	Three Months Ended March 31,
	2014		2013
Waste and service revenue unrelated to project debt	$	235	$	220
Revenue earned explicitly to service project debt - principal	5		8
Revenue earned explicitly to service project debt - interest	1		2
Total waste and service revenue	$	241	$	230

Under some of our service agreements, we bill fees to municipalities to service project debt (principal and interest). The amounts billed are based on the actual principal amortization schedule for the project bonds. Regardless of the amounts billed to client communities relating to project debt principal, we recognize revenue earned explicitly to service project debt principal on a levelized basis over the term of the applicable agreement. In the beginning of the agreement, principal billed is less than the amount of levelized revenue recognized related to principal and we record an unbilled service receivable asset. At some point during the agreement, the amount we bill will exceed the levelized revenue and the unbilled service receivable begins to reduce, and ultimately becomes nil at the end of the contract.

In the final year(s) of a contract, cash may be utilized from available debt service reserve accounts to pay remaining principal amounts due to project bondholders and such amounts are no longer billed to or paid by municipalities. Generally, therefore, in the last year of the applicable agreement, little or no cash is received from municipalities relating to project debt, while our levelized service revenue continues to be recognized until the expiration date of the term of the agreement.

Operating Costs

Renewable Energy Credits

Renewable Energy Credits (“REC”) represent environmental commodities that can be sold and traded. One REC represents the renewable energy attributes created when one MWh of electricity is produced from an eligible renewable energy source. The REC is recognized at fair value as a reduction to plant operating expense in the condensed consolidated statements of operations and as an intangible asset within other current assets in the consolidated balance sheets on the date the renewable energy is generated. The fair value amount recognized is reduced by a valuation allowance for those RECs which management believes will ultimately be sold at below market or depressed market prices. As the RECs are delivered, the intangible asset is relieved. Fair values for the RECs are based on prices established by executed contracts, pending contracts or management estimates of current market prices. The total REC amount recognized as a reduction to plant operating expense in the condensed consolidated statements of operations for the three months ended March 31, 2014 and 2013 was $6 million and $2 million, respectively.

Pass through costs

Pass through costs are costs for which we receive a direct contractually committed reimbursement from the municipal client which sponsors an energy-from-waste project. These costs generally include utility charges, insurance premiums, ash residue transportation and disposal and certain chemical costs. These costs are recorded net of municipal client reimbursements in our condensed consolidated financial statements. Total pass through costs were $15 million and $17 million for the three months ended March 31, 2014 and 2013, respectively.

Other operating expenses

The components of other operating expenses are as follows (in millions):



	Three Months Ended March 31,
	2014		2013
Construction costs	$	17	$	22
Defined benefit pension plan settlement gain ⁽¹⁾	—		(6		)
Other	1		1
Total other operating expenses	$	18	$	17


(1)	During the first quarter of 2013, we recorded a gain related to the final settlement of our defined benefit pension plan. For additional information, refer to Note 16. Employee Benefit Plans of the Notes to Consolidated Financial Statements in our Form 10-K.

Amortization of waste, service and energy contracts

Our waste, service, energy and other contract intangibles are intangible assets and liabilities relating to long-term operating contracts at acquired facilities and are recorded upon acquisition at their estimated fair market values based upon discounted cash flows. Intangible assets and liabilities are amortized using the straight line method over their remaining useful lives.

The following table details the amount of the actual/estimated amortization expense and contra-expense associated with these intangible assets and liabilities as of March 31, 2014 included or expected to be included in our condensed consolidated statements of operations for each of the years indicated (in millions):



	Waste, Service and Energy Contract Intangibles (Amortization Expense)		Waste, Service and Other Contract Intangibles (Contra-Expense)
Three Months Ended March 31, 2014	$	7	$	(3	)
Remainder of 2014	$	22	$	(8	)
2015	25		(6		)
2016	22		(6		)
2017	15		(4		)
2018	13		(2		)
Thereafter	249		(1		)
Total	$	346	$	(27	)

For additional information related to service contract intangibles, see Note 14. Subsequent Events.

Non-Cash Convertible Debt Related Expense

The components of non-cash convertible debt related expense are as follows (in millions):



	Three Months Ended March 31,
	2014			2013
Debt discount accretion related to the 3.25% Notes	$	8		$	7
Fair value changes related to the cash convertible note hedge	(1		)	(36		)
Fair value changes related to the cash conversion option derivative	1			36
Total non-cash convertible debt related expense	$	8		$	7

Accumulated Other Comprehensive Income (Loss) ("AOCI")

The changes in accumulated other comprehensive income (loss) are as follows (in millions):



	Foreign Currency Translation			Pension and Other Postretirement Plan Unrecognized Net Gain (Loss)			Net Unrealized Loss on Derivatives			Net Unrealized Gain on Securities		Total
Balance December 31, 2012	$	4		$	2		$	—		$	1	$	7
Other comprehensive (loss) income before reclassifications	(5		)	3			(2		)	1		(3		)
Amounts reclassified from accumulated other comprehensive income	—			(4		)	—			—		(4		)
Net current period comprehensive (loss) income	(5		)	(1		)	(2		)	1		(7		)
Balance March 31, 2013	$	(1	)	$	1		$	(2	)	$	2	$	—

Balance December 31, 2013	$	—		$	2		$	(5	)	$	1	$	(2	)
Other comprehensive loss before reclassifications	(3		)	—			(4		)	—		(7		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			—			—			—		—
Net current period comprehensive loss	(3		)	—			(4		)	—		(7		)
Balance March 31, 2014	$	(3	)	$	2		$	(9	)	$	1	$	(9	)

Reclassifications out of accumulated other comprehensive income (loss) are as follows (in millions):



Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
	For the Three Months Ended
Accumulated Other Comprehensive Income (Loss) Component	March 31, 2013			Affected Line Item in the Condensed Consolidated Statement of Operations
Defined benefit pension plan
Prior service costs	$	(9	)	Other operating expenses
Net actuarial loss	3			Other operating expenses
	(6		)	Total before tax
	2			Tax benefit
	$	(4	)	Net of tax