REPUBLIC SERVICES, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. You should read the following discussion in conjunction with the unaudited consolidated financial statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, you should refer to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Disclosure Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “guidance,” “expect,” “will,” “may,” “anticipate,” “plan,” “estimate,” “project,” “intend,” “should,” “can,” “likely,” “could,” “outlook” and similar expressions are intended to identify forward-looking statements. In particular, information appearing in this “Management's Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. These statements include information about our plans, strategies, expectations of future financial performance and prospects. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of our management and are subject to significant risk and uncertainties that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that the expectations will prove to be correct. Among the factors that could cause actual results to differ materially from the expectations expressed in the forward-looking statements are the effects of the COVID-19 pandemic and actions taken in response thereto, as well as acts of war, riots or terrorism, and the impact of these acts on economic, financial and social conditions in the United States as well as our dependence on large, long-term collection, transfer and disposal contracts. More information on factors that could cause actual results or events to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2020, particularly under Part I, Item 1A - Risk Factors. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, or to assess the impact such risk factors might have on our business. We undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Impact of the COVID-19 Pandemic In March 2020, the World Health Organization declared the outbreak of a new strain of coronavirus (COVID-19) pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The full extent of the impact of the COVID-19 pandemic on our operations and financial performance will depend on future developments, including the duration and spread of the pandemic, all of which are uncertain and cannot be predicted at this time. In mid-March 2020, certain customers in our small- and large-container businesses began adjusting their service levels, which included a decrease in the frequency of pickups or a temporary pause in service. In addition, we experienced a decline in volumes disposed at certain of our landfills and transfer stations. As service levels decreased, we also experienced a decrease in certain costs of our operations which are variable in nature. This decline in service activity peaked in the first half of April 2020 and improved sequentially through March 31, 2021. In April 2020, we launched our Committed to Serve initiative and committed $20 million to support frontline employees and their families, as well as small business customers in the local communities where we serve. In addition to this initiative, we have experienced an increase in certain costs of doing business as a direct result of the COVID-19 pandemic, including costs for additional safety equipment and hygiene products and increased facility and equipment cleaning. These costs are intended to assist in protecting the safety of our frontline employees as we continue to provide an essential service to our customers. In December 2020, we recognized our frontline employees for their commitment and contributions to their communities during the pandemic with a $500 award that was paid in January 2021. In addition, we incurred incremental costs associated with expanding certain aspects of our existing healthcare programs. We expect to incur similar costs throughout 2021, and potentially into future years, although we expect the amount of such costs annually to be less than those incurred in 2020. The effects of the COVID-19 pandemic on our business are described in more detail in the Results of Operations discussion in this Management's Discussion and Analysis of Financial Condition and Results of Operations . 27 Table of Contents Recent Developments Updated Full-Year 2021 Adjusted Earnings Per Share Guidance The following is a summary of anticipated adjusted diluted earnings per share for the year ending December 31, 2021. Adjusted diluted earnings per share is not a measure determined in accordance with U.S. GAAP: (Anticipated) Year Ending December 31, 2021 Diluted earnings per share $ 3.65 to 3.69 Restructuring charges 0.03 to 0.04 Accelerated vesting of compensation expense for CEO transition 0.06 Adjusted diluted earnings per share $ 3.74 to 3.79 We believe that presenting adjusted diluted earnings per share provides an understanding of operational activities before the financial impact of certain items. We use this measure, and believe investors will find it helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges, costs and recoveries in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. Overview Republic is one of the largest providers of environmental services in the United States, as measured by revenue. As of March 31, 2021, we operated facilities in 41 states through 347 collection operations, 222 transfer stations, 186 active landfills, 73 recycling processing centers, 6 treatment, recovery and disposal facilities, 6 salt water disposal wells and 7 deep injection wells. We are engaged in 75 landfill gas to energy and renewable energy projects and had post-closure responsibility for 128 closed landfills as of March 31, 2021. Revenue for the three months ended March 31, 2021 increased by 1.7% to $2,596.4 million compared to $2,553.9 million for the same period in 2020. This change in revenue is due to increases in average yield of 2.3%, acquisitions, net of divestitures of 1.0%, and recycling processing and commodity sales of 0.8%, partially offset by decreased volumes of 0.8%, environmental solutions revenue of 0.7%, and fuel recovery fees of 0.4%. Additionally, revenue decreased 0.5% due to the impact of one less workday during the three months ended March 31, 2021 as compared to the same period in 2020. The following table summarizes our revenue, expenses and operating income for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue): Three Months Ended March 31, 2021 2020 Revenue $ 2,596.4 100.0 % $ 2,553.9 100.0 % Expenses: Cost of operations 1,534.3 59.1 1,550.0 60.7 Depreciation, amortization and depletion of property and equipment 264.8 10.2 253.8 9.9 Amortization of other intangible assets 7.3 0.3 5.3 0.2 Amortization of other assets 10.0 0.4 9.5 0.4 Accretion 20.5 0.8 20.9 0.8 Selling, general and administrative 265.4 10.2 277.1 10.9 Withdrawal costs - multiemployer pension funds — — 4.3 0.2 Gain on business divestitures and impairments, net (1.1) — (3.9) (0.2) Restructuring charges 2.8 0.1 3.8 0.1 Operating income $ 492.4 18.9 % $ 433.1 17.0 % Our pre-tax income was $400.1 million for the three months ended March 31, 2021 compared to $322.6 million for the same respective period in 2020. Our net income attributable to Republic Services, Inc. was $295.9 million for the three months ended March 31, 2021, or $0.93 per diluted share, compared to $246.3 million, or $0.77 per diluted share, for the same period in 2020. 28 Table of Contents During each of the three months ended March 31, 2021 and 2020, we recorded a number of charges, other expenses and benefits that impacted our pre-tax income, net income attributable to Republic Services, Inc. (net income – Republic) and diluted earnings per share as noted in the following table (in millions, except per share data). Additionally, see our Results of Operations discussion in this Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of other items that impacted our earnings during the three months ended March 31, 2021 and 2020. Three Months Ended March 31, 2021 Three Months Ended March 31, 2020 Net Diluted Net Diluted Pre-tax Income - Earnings Pre-tax Income - Earnings Income Republic per Share Income Republic per Share As reported $ 400.1 $ 295.9 $ 0.93 $ 322.6 $ 246.3 $ 0.77 Restructuring charges (1) 2.8 2.1 — 3.8 2.8 0.01 Gain on business divestitures and impairments, net (1) (1.1) (0.8) — (3.9) (2.9) (0.01) Withdrawal costs - multiemployer pension funds — — — 4.3 3.1 0.01 Bridgeton insurance recovery — — — (10.8) (8.2) (0.03) Total adjustments 1.7 1.3 — (6.6) (5.2) (0.02) As adjusted $ 401.8 $ 297.2 $ 0.93 $ 316.0 $ 241.1 $ 0.75 (1) The aggregate impact to adjusted diluted earnings per share totals to less than $0.01 for the three months ended March 31, 2021. We believe that presenting adjusted pre-tax income, adjusted net income – Republic, and adjusted diluted earnings per share, which are not measures determined in accordance with U.S. GAAP, provides an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges, costs and recoveries in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definitions of adjusted pre-tax income, adjusted net income – Republic, and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. Further information on each of these adjustments is included below. Restructuring charges. In 2020, we incurred costs related to the redesign of certain back-office software systems, which continued into 2021. In addition, in July 2020, we eliminated certain back-office support positions in response to a decline in the underlying demand for services resulting from the COVID-19 pandemic. During the three months ended March 31, 2021 and 2020, we incurred restructuring charges of $2.8 million and $3.8 million, respectively. During the same periods, we paid $4.0 million and $3.8 million, respectively, related to these restructuring efforts. During the remainder of 2021, we expect to incur additional restructuring charges of approximately $10 million to $15 million primarily related to the redesign of certain of our back-office software systems. Substantially all of these restructuring charges will be recorded in our corporate entities and other segment. Gain on business divestitures and impairments, net. During the three months ended March 31, 2021 and 2020, we recorded a net gain on business divestitures and impairments of $1.1 million and $3.9 million, respectively. Withdrawal costs - multiemployer pension funds. During the three months ended March 31, 2020, we recorded charges to earnings of $4.3 million for withdrawal events at multiemployer pension funds to which we contribute. As we obtain updated information regarding multiemployer pension funds, the factors used in deriving our estimated withdrawal liabilities will be subject to change, which may adversely impact our reserves for withdrawal costs. Bridgeton insurance recovery. During the three months ended March 31, 2020, we recognized an insurance recovery of $10.8 million related to our closed Bridgeton Landfill in Missouri as a reduction of remediation expenses in our cost of operations. Results of Operations Revenue We generate revenue by providing environmental services to our customers, including the collection and processing of recyclable materials, collection, transfer and disposal of non-hazardous solid waste, and other environmental solutions. Our residential, small-container and large-container collection operations in some markets are based on long-term contracts with municipalities. Certain of our municipal contracts have annual price escalation clauses that are tied to changes in an underlying base index such as a consumer price index. We generally provide small-container and large-container collection services to 29 Table of Contents customers under contracts with terms up to three years. Our transfer stations and landfills generate revenue from disposal or tipping fees charged to third parties. Our recycling processing centers generate revenue from tipping fees charged to third parties and the sale of recycled commodities. Our revenue from environmental solutions consists mainly of fees we charge for disposal of non-hazardous solid and liquid material and in-plant services, such as transportation and logistics. Environmental solutions waste is generated from the by-product of oil and natural gas exploration and production activity. Additionally, it is generated by the daily operations of industrial, petrochemical and refining facilities, including maintenance, plant turnarounds and capital projects. Other non-core revenue consists primarily of revenue from National Accounts, which represents the portion of revenue generated from nationwide or regional contracts in markets outside our operating areas where the associated material handling is subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations. The following table reflects our revenue by service line for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue): Three Months Ended March 31, 2021 2020 Collection: Residential $ 593.1 22.8 % $ 568.5 22.3 % Small-container 810.5 31.2 805.7 31.5 Large-container 540.1 20.8 552.4 21.6 Other 14.2 0.5 12.3 0.5 Total collection 1,957.9 75.3 1,938.9 75.9 Transfer 331.3 321.9 Less: intercompany (185.1) (185.6) Transfer, net 146.2 5.6 136.3 5.3 Landfill 562.6 558.3 Less: intercompany (249.3) (252.3) Landfill, net 313.3 12.1 306.0 12.0 Environmental solutions 30.0 1.2 46.8 1.8 Other: Recycling processing and commodity sales 87.6 3.4 67.8 2.7 Other non-core 61.4 2.4 58.1 2.3 Total other 149.0 5.8 125.9 5.0 Total revenue $ 2,596.4 100.0 % $ 2,553.9 100.0 % 30 Table of Contents The following table reflects changes in components of our revenue, as a percentage of total revenue, for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Average yield 2.3 % 2.9 % Fuel recovery fees (0.4) (0.2) Total price 1.9 2.7 Volume (0.8) (0.1) Change in workdays (0.5) 0.5 Recycling processing and commodity sales 0.8 (0.2) Environmental solutions (0.7) (0.5) Total internal growth 0.7 2.4 Acquisitions / divestitures, net 1.0 1.0 Total 1.7 % 3.4 % Core price 4.3 % 5.2 % Average yield is defined as revenue growth from the change in average price per unit of service, expressed as a percentage. Core price is defined as price increases to our customers and fees, excluding fuel recovery fees, net of price decreases to retain customers. We also measure changes in average yield and core price as a percentage of related-business revenue, defined as total revenue excluding recycled commodities and fuel recovery fees, to determine the effectiveness of our pricing strategies. Average yield as a percentage of related-business revenue was 2.5% and 3.0% for the three months ended March 31, 2021 and 2020, respectively. Core price as a percentage of related-business revenue was 4.6% and 5.5% for the three months ended March 31, 2021 and 2020, respectively. During the three months ended March 31, 2021, we experienced the following changes in our revenue as compared to the same respective periods in 2020: • Average yield increased revenue by 2.3% during the three months ended March 31, 2021 due to price increases in all lines of business. • The fuel recovery fee program, which mitigates our exposure to increases in fuel prices, decreased revenue by 0.4% primarily due to lower fuel recovery rates, resulting from the timing of implementing changes to the rates, during the three months ended March 31, 2021 as compared to the same period in 2020. • Volume decreased revenue by 0.8% during the three months ended March 31, 2021, primarily due to volume declines in our small- and large-container collection lines of business. In mid-March 2020, certain customers in these lines of business began adjusting their service levels as a result of the COVID-19 pandemic. This decline in service activity peaked in the first half of April 2020 and sequentially improved thereafter, but volumes remained below pre-COVID levels during the three months ended March 31, 2021. This volume decline was partially offset by volume growth in our transfer and landfill lines of business. The volume increase in our landfill line of business was primarily attributable to increased solid and special waste volumes, partially offset by a decrease in construction and demolition volumes. • Revenue decreased by 0.5% due to one less workday during the three months ended March 31, 2021 as compared to the same period in 2020, which drove a decline in volumes in our large-container collection, landfill and transfer lines of business. • Recycling processing and commodity sales increased revenue by 0.8% during the three months ended March 31, 2021, primarily due to an increase in overall commodity prices as compared to the same period in 2020. The average price for recycled commodities, excluding glass and organics, for the three months ended March 31, 2021 was $133 per ton compared to $76 per ton for the same period in 2020. Changing market demand for recycled commodities causes volatility in commodity prices. At current volumes and mix of materials, we believe a $10 per ton change in the price of recycled commodities would change both annual revenue and operating income by approximately $12 million. • Environmental solutions revenue decreased by 0.7% during the three months ended March 31, 2021 primarily due to a decrease in rig counts, drilling activity, and the delay of in-plant project work as a result of lower demand for crude oil. 31 Table of Contents • Acquisitions, net of divestitures, increased revenue by 1.0% during the three months ended March 31, 2021 due to our continued growth strategy of acquiring privately held solid waste, recycling, and environmental services companies that complement our existing business platform. Cost of Operations Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers that transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our National Accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel tax credits; disposal fees and taxes, consisting of landfill taxes, host community fees and royalties; landfill operating costs, which includes financial assurance, leachate disposal, remediation charges and other landfill maintenance costs; risk management costs, which include insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations. The following table summarizes the major components of our cost of operations for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue): Three Months Ended March 31, 2021 2020 Labor and related benefits $ 555.7 21.4 % $ 556.9 21.8 % Transfer and disposal costs 192.4 7.4 198.5 7.8 Maintenance and repairs 237.4 9.2 247.3 9.7 Transportation and subcontract costs 168.8 6.5 167.3 6.6 Fuel 78.9 3.0 79.6 3.1 Disposal fees and taxes 77.7 3.0 77.3 3.0 Landfill operating costs 57.4 2.2 64.7 2.5 Risk management 59.3 2.3 61.9 2.4 Other 106.7 4.1 107.3 4.2 Subtotal 1,534.3 59.1 1,560.8 61.1 Bridgeton insurance recovery — — (10.8) (0.4) Total cost of operations $ 1,534.3 59.1 % $ 1,550.0 60.7 % These cost categories may change from time to time and may not be comparable to similarly titled categories presented by other companies. As such, you should take care when comparing our cost of operations by component to that of other companies and of ours for prior periods. Our cost of operations decreased for the three months ended March 31, 2021 compared to the same period in 2020 as a result of the following: • Labor and related benefits decreased due to a decline in service levels attributable to the COVID-19 pandemic and one less workday during the three months ended March 31, 2021 as compared to the same period in 2020. This decrease was partially offset by higher hourly and salaried wages as a result of annual merit increases during the three months ended March 31, 2021 as compared to the same period in 2020. • Transfer and disposal costs decreased as a result of lower collection volumes, partially offset by an increase in third party disposal rates. During the three months ended March 31, 2021 and 2020, approximately 68% and 69%, respectively, of the total solid waste volume we collected was disposed at landfill sites that we own or operate (internalization). • Maintenance and repairs expense decreased due to a decrease in service levels attributable to the COVID-19 pandemic along with the effective execution of our fleet strategy. • Transportation and subcontract costs increased in aggregate dollars during the three months ended March 31, 2021 primarily due to acquisition-related activity and increased subcontract work attributable to an increase in non-core revenues, partially offset by a decline in demand for our environmental solutions business and one less workday during the three months ended March 31, 2021 as compared to the same period in 2020. 32 Table of Contents • Fuel costs remained relatively unchanged due to the fuel cost per gallon remaining relatively consistent. The national average diesel fuel cost per gallon for the three months ended March 31, 2021 was $2.91 as compared to $2.88 for the same period in 2020. At current consumption levels, we believe a twenty-cent per gallon change in the price of diesel fuel would change our fuel costs by approximately $25 million per year. Offsetting these changes in fuel expense would be changes in our fuel recovery fee charged to our customers. At current participation rates, a twenty-cent per gallon change in the price of diesel fuel would change our fuel recovery fee by approximately $25 million per year. • Landfill operating costs decreased due to a decline in leachate treatment, transportation and disposal costs due in part to decreased rainfall in select geographic regions. • Risk management expenses decreased during the three months ended March 31, 2021 primarily due to favorable actuarial development in our workers' compensation programs, partially offset by unfavorable actuarial development in our auto liability prior year programs. • During the three months ended March 31, 2020, we recognized a favorable insurance recovery of $10.8 million related to our closed Bridgeton Landfill as a reduction of remediation expenses in our consolidated statement of income for the applicable period. Depreciation, Amortization and Depletion of Property and Equipment The following table summarizes depreciation, amortization and depletion of property and equipment for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue): Three Months Ended March 31, 2021 2020 Depreciation and amortization of property and equipment $ 177.7 6.8 % $ 170.8 6.7 % Landfill depletion and amortization 87.1 3.4 83.0 3.2 Depreciation, amortization and depletion expense $ 264.8 10.2 % $ 253.8 9.9 % Depreciation and amortization of property and equipment increased for the three months ended March 31, 2021 primarily due to additional assets acquired with our acquisitions. Landfill depletion and amortization expense increased primarily due to an unfavorable amortization adjustment related to the asset retirement obligation at one of our closed landfills which was recognized during the three months ended March 31, 2021. Amortization of Other Intangible Assets Our other intangible assets primarily relate to customer relationships and, to a lesser extent, non-compete agreements. Expenses for amortization of other intangible assets were $7.3 million, or 0.3% of revenue, for the three months ended March 31, 2021 compared to $5.3 million, or 0.2% of revenue, for the same respective period in 2020. Amortization expense increased due to additional assets acquired with our acquisitions. Amortization of Other Assets Our other assets primarily relate to the prepayment of fees and capitalized implementation costs associated with cloud-based hosting arrangements. Expenses for amortization of other assets were $10.0 million, or 0.4% of revenue, for the three months ended March 31, 2021, compared to $9.5 million, or 0.4% of revenue, for the same respective period in 2020. Accretion Expense Accretion expense was $20.5 million, or 0.8% of revenue, for the three months ended March 31, 2021, compared to $20.9 million, or 0.8% of revenue, for the same respective period in 2020. Accretion expense has remained relatively unchanged as our asset retirement obligations have remained relatively consistent period over period. Selling, General and Administrative Expenses Selling, general and administrative expenses include salaries, health and welfare benefits, and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems, and clerical and administrative departments. Other expenses include rent and office costs, fees for professional services provided by third parties, legal settlements, marketing, investor and community relations services, directors’ and officers’ insurance, general employee relocation, travel, entertainment and bank charges. Restructuring charges are excluded from selling, general and administrative expenses and are discussed separately. 33 Table of Contents The following table summarizes our selling, general and administrative expenses for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue): Three Months Ended March 31, 2021 2020 Salaries and related benefits $ 194.3 7.4 % $ 191.3 7.5 % Provision for doubtful accounts 4.3 0.2 4.9 0.2 Other 66.8 2.6 80.9 3.2 Total selling, general and administrative expenses $ 265.4 10.2 % $ 277.1 10.9 % These cost categories may change from time to time and may not be comparable to similarly titled categories presented by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to those of other companies and of ours for prior periods. The most significant items affecting our selling, general and administrative expenses during the three months ended March 31, 2021 and 2020 are summarized below: • Salaries and related benefits increased in aggregate dollars primarily due to higher incentive pay and wages, benefits, and other payroll related items resulting from annual merit increases. • Other selling, general and administrative expenses decreased for the three months ended March 31, 2021, primarily due to a decrease in consulting fees as well as travel and advertising costs as a result of the COVID-19 pandemic. These decreases were partially offset by a one-time favorable legal settlement recognized during the three months ended March 31, 2020, which did not recur in 2021. In March 2021, Donald W. Slager, Chief Executive Officer, announced his retirement from Republic Services, Inc. effective June 25, 2021. As a result of his retirement, we expect to incur a charge of approximately $20 million during the second quarter of 2021 related to the accelerated vesting of his compensation awards. Withdrawal Costs - Multiemployer Pension Funds During the three months ended March 31, 2020, we recorded charges to earnings of $4.3 million for withdrawal events at multiemployer pension funds to which we contribute. As we obtain updated information regarding multiemployer pension funds, the factors used in deriving our estimated withdrawal liabilities will be subject to change, which may adversely impact our reserves for withdrawal costs. Gain on Business Divestitures and Impairments, Net We strive to have a number one or number two market position in each of the markets we serve, or have a clear path on how we will achieve a leading market position over time. Where we cannot establish a leading market position, or where operations are not generating acceptable returns, we may decide to divest certain assets and reallocate resources to other markets. Business divestitures could result in gains, losses or impairment charges that may be material to our results of operations in a given period. During the three months ended March 31, 2021 and 2020, we recorded a net gain on business divestitures and impairments of $1.1 million and $3.9 million, respectively. Restructuring Charges In 2020, we incurred costs related to the redesign of certain back-office software systems, which continued into 2021. In addition, in July 2020, we eliminated certain back-office support positions in response to a decline in the underlying demand for services resulting from the COVID-19 pandemic. During the three months ended March 31, 2021 and 2020, we incurred restructuring charges of $2.8 million and $3.8 million, respectively. During the same periods, we paid $4.0 million and $3.8 million, respectively, related to these restructuring efforts. 34 Table of Contents Interest Expense The following table provides the components of interest expense, including accretion of debt discounts and accretion of discounts primarily associated with environmental and risk insurance liabilities assumed in acquisitions, for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Interest expense on debt $ 62.9 $ 82.5 Non-cash interest 16.0 15.0 Less: capitalized interest (0.5) (0.8) Total interest expense $ 78.4 $ 96.7 Total interest expense for the three months ended March 31, 2021 decreased primarily due to lower interest rates on our floating and fixed rate debt. The decrease attributable to our fixed rate debt is primarily due to the issuance of $350.0 million of 0.875% senior notes and $750.0 million of 1.750% senior notes in November 2020, $650.0 million of 1.450% senior notes in August 2020, as well as the issuance of $600.0 million of 2.300% senior notes and $400.0 million of 3.050% senior notes in February 2020, the proceeds of which were used to repay outstanding senior notes with coupons ranging from 3.550% to 5.250%. Cash paid for interest, excluding net swap settlements for our fixed-to-floating interest rate swaps, was $66.2 million and $78.1 million for the three months ended March 31, 2021 and 2020, respectively. Income Taxes Our effective tax rate, exclusive of non-controlling interests, for the three months ended March 31, 2021 and 2020 was 25.9% and 23.5%, respectively. Cash paid for income taxes was a net refund of $0.4 million and a net payment of $1.4 million, respectively, for the three months ended March 31, 2021 and 2020. For additional discussion and detail regarding our income taxes, see Note 8, Income Taxes , to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Reportable Segments In December 2020, our senior management began evaluating, overseeing and managing the financial performance of our operations through three operating segments. Group 1 primarily consists of geographic areas located in the western United States, and Group 2 primarily consists of geographic areas located in the southeastern and mid-western United States, and the eastern seaboard of the United States. Our environmental solutions operating segment, which provides environmental solutions for daily operations of industrial, petrochemical and refining facilities, is aggregated with Corporate entities and other as it only represents approximately 1% of our consolidated revenue. Each of our operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal. 35 Table of Contents Summarized financial information concerning our reportable segments for the three months ended March 31, 2021 and 2020 (in millions of dollars and as a percentage of revenue in the case of operating margin) follows: Net Revenue Depreciation, Amortization, Depletion and Accretion Before Adjustments for Asset Retirement Obligations Adjustments to Amortization Expense for Asset Retirement Obligations Depreciation, Amortization, Depletion and Accretion Gain on Business Divestitures and Impairments, Net Operating Income (Loss) Operating Margin Three Months Ended March 31, 2021 Group 1 $ 1,299.1 $ 133.1 $ (1.0) $ 132.1 $ — $ 351.5 27.1 % Group 2 1,222.0 128.1 0.6 128.7 — 261.8 21.4 % Corporate entities and other 75.3 37.6 4.2 41.8 (1.1) (120.9) — Total $ 2,596.4 $ 298.8 $ 3.8 $ 302.6 $ (1.1) $ 492.4 19.0 % Three Months Ended March 31, 2020 Group 1 $ 1,254.6 $ 128.7 $ (0.2) $ 128.5 $ — $ 313.6 25.0 % Group 2 1,208.1 125.3 (0.2) 125.1 — 229.3 19.0 % Corporate entities and other 91.2 35.9 — 35.9 (3.9) (109.8) — Total $ 2,553.9 $ 289.9 $ (0.4) $ 289.5 $ (3.9) $ 433.1 17.0 % Financial information for the three months ended March 31, 2020 reflects the transfer of our environmental solutions operating segment from Group 2 to Corporate entities and other. Corporate entities and other include legal, tax, treasury, information technology, risk management, human resources, closed landfills, environmental solutions, and other administrative functions. National Accounts revenue included in Corporate entities and other represents the portion of revenue generated from nationwide and regional contracts in markets outside our operating areas where the associated material handling is subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations. Significant changes in the revenue and operating margins of our reportable segments comparing the three months ended March 31, 2021 and 2020 are discussed below. Group 1 Revenue for the three months ended March 31, 2021 increased 3.5% due to an increase in average yield in all lines of business and an increase in volume in our transfer station line of business as well as an increase in solid and special waste volumes in our landfill line of business. These increases were partially offset by volume declines in our small- and large-container collection lines of business, a decline in construction and demolition volumes in our landfill line of business, and one less workday for the three months ended March 31, 2021 as compared to the same period in 2020. Operating income in Group 1 increased from $313.6 million for the three months ended March 31, 2020, or a 25.0% operating income margin, to $351.5 million for the three months ended March 31, 2021, or a 27.1% operating income margin. The following cost categories impacted operating income margin: • Cost of operations favorably impacted operating income margin for the three months ended March 31, 2021, primarily due to a decrease in labor and related benefits and maintenance and repairs expenses as a result of decreased service levels attributable to the COVID-19 pandemic, decreased landfill operating costs, and one less workday as compared to the same period in 2020. • Depreciation unfavorably impacted operating income margin for the three months ended March 31, 2021, primarily due to additional assets acquired with our acquisitions. Group 2 Revenue for the three months ended March 31, 2021 increased 1.2%, due to an increase in average yield in all lines of business and volume increases in our transfer station line of business as well as an increase in municipal solid waste volumes in our landfill line of business. This increase was partially offset by volume declines in our collection lines of business and one less workday for the three months ended March 31, 2021 as compared to the same period in 2020. 36 Table of Contents Operating income in Group 2 increased from $229.3 million for the three months ended March 31, 2020, or a 19.0% operating income margin, to $261.8 million for the three months ended March 31, 2021, or a 21.4% operating income margin. The following cost categories impacted operating income margin: • Cost of operations favorably impacted operating income margin for the three months ended March 31, 2021, primarily due to a decrease in labor and related benefits, transfer and disposal costs, and maintenance and repairs expenses as a result of decreased service levels attributable to the COVID-19 pandemic, decreased landfill operating costs, and one less workday as compared to the same period in 2020. • Depreciation unfavorably impacted operating income margin during the three months ended March 31, 2021, primarily due to additional assets acquired with our acquisitions. Corporate Entities and Other Operating loss in our Corporate entities and other segment increased from $109.8 million for the three months ended March 31, 2020 to $120.9 million for the three months ended March 31, 2021. The operating loss for the three months ended March 31, 2021 was unfavorably impacted by revenue declines related to our environmental solutions business, an unfavorable amortization adjustment related to the asset retirement obligation at one of our closed landfills, and favorable remediation adjustments recognized during the three months ended March 31, 2020, which did not recur in 2021, partially offset by net favorable actuarial developments recognized during the period. Landfill and Environmental Matters Available Airspace As of March 31, 2021, we owned or operated 186 active solid waste landfills with total available disposal capacity estimated to be 5.0 billion in-place cubic yards. For these landfills, the following table reflects changes in capacity and remaining capacity, as measured in cubic yards of airspace: Balance as of December 31, 2020 New Expansions Undertaken Landfills Acquired, Net of Divestitures Permits Granted / New Sites, Net of Closures Airspace Consumed Changes in Engineering Estimates Balance as of March 31, 2021 Cubic yards (in millions): Permitted airspace 4,792.5 — — 32.6 (17.9) 1.2 4,808.4 Probable expansion airspace 196.4 15.0 — (27.3) — — 184.1 Total cubic yards (in millions) 4,988.9 15.0 — 5.3 (17.9) 1.2 4,992.5 Number of sites: Permitted airspace 186 — — — 186 Probable expansion airspace 11 1 — (1) 11 Total available disposal capacity represents the sum of estimated permitted airspace plus an estimate of probable expansion airspace. Engineers develop these estimates at least annually using information provided by annual aerial surveys. Before airspace included in an expansion area is determined to be probable expansion airspace and, therefore, included in our calculation of total available disposal capacity, it must meet all of our expansion criteria. As of March 31, 2021, 11 of our landfills met all of our criteria for including their probable expansion airspace in their total available disposal capacity. At projected annual volumes, these landfills have an estimated remaining average site life of 36 years, including probable expansion airspace. The average estimated remaining life of all of our landfills is 63 years. We have other expansion opportunities that are not included in our total available airspace because they do not meet all of our criteria for treatment as probable expansion airspace. Remediation and Other Charges for Landfill Matters It is reasonably possible that we will need to adjust our accrued landfill and environmental liabilities to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in our estimates of the costs, timing or duration of the required actions could have a material adverse effect on our consolidated financial position, results of operations and cash flows. For a description of our significant remediation matters, see Note 6, Landfill and Environmental Costs, of the notes to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 37 Table of Contents Property and Equipment The following tables reflect the activity in our property and equipment accounts for the three months ended March 31, 2021: Gross Property and Equipment Balance as of December 31, 2020 Capital Additions Retirements Acquisitions, Net of Divestitures Non-cash Additions for Asset Retirement Obligations Adjustments for Asset Retirement Obligations Impairments, Transfers and Other Adjustments Balance as of March 31, 2021 Land $ 467.1 $ — $ — $ 0.3 $ — $ — $ 0.1 $ 467.5 Non-depletable landfill land 166.3 0.1 — — — — — 166.4 Landfill development costs 7,991.7 0.6 — — 10.4 3.4 125.3 8,131.4 Vehicles and equipment 8,119.0 129.6 (60.1) 2.4 — — 23.7 8,214.6 Buildings and improvements 1,402.5 2.1 (0.1) 1.2 0.4 — 11.9 1,418.0 Construction-in-progress - landfill 303.8 42.4 — — — — (126.0) 220.2 Construction-in-progress - other 107.4 27.8 — — — — (36.2) 99.0 Total $ 18,557.8 $ 202.6 $ (60.2) $ 3.9 $ 10.8 $ 3.4 $ (1.2) $ 18,717.1 Accumulated Depreciation, Amortization and Depletion Balance as of December 31, 2020 Additions Charged to Expense Retirements Acquisitions, Net of Divestitures Adjustments for Asset Retirement Obligations Impairments, Transfers and Other Adjustments Balance as of March 31, 2021 Landfill development costs $ (4,249.5) $ (83.2) $ — $ — $ (3.8) $ — $ (4,336.5) Vehicles and equipment (4,953.4) (161.5) 58.8 — — — (5,056.1) Buildings and improvements (628.7) (16.7) 0.1 — — — (645.3) Total $ (9,831.6) $ (261.4) $ 58.9 $ — $ (3.8) $ — $ (10,037.9) Liquidity and Capital Resources Cash and Cash Equivalents The following is a summary of our cash and cash equivalents and restricted cash and marketable securities balances as of: March 31, 2021 December 31, 2020 Cash and cash equivalents $ 23.2 $ 38.2 Restricted cash and marketable securities 134.6 149.1 Less: restricted marketable securities (69.5) (73.1) Cash, cash equivalents, restricted cash and restricted cash equivalents $ 88.3 $ 114.2 Our restricted cash and marketable securities include, among other things, restricted cash and marketable securities pledged to regulatory agencies and governmental entities as financial guarantees of our performance under certain collection, landfill and transfer station contracts and permits, and relating to our final capping, closure and post-closure obligations at our landfills as well as restricted cash and marketable securities related to our insurance obligations. 38 Table of Contents The following table summarizes our restricted cash and marketable securities: March 31, 2021 December 31, 2020 Capping, closure and post-closure obligations $ 31.6 $ 31.5 Insurance 103.0 117.6 Total restricted cash and marketable securities $ 134.6 $ 149.1 Intended Uses of Cash We intend to use excess cash on hand and cash from operating activities to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise. We believe that our excess cash, cash from operating activities and our availability to draw on our credit facilities provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due. We may choose to voluntarily retire certain portions of our outstanding debt before their maturity dates using cash from operations or additional borrowings. We may also explore opportunities in the capital markets to fund redemptions should market conditions be favorable. Early extinguishment of debt will result in an impairment charge in the period in which the debt is repaid. The loss on early extinguishment of debt relates to premiums paid to effectuate the repurchase and the relative portion of unamortized note discounts and debt issue costs. Summary of Cash Flow Activity The major components of changes in cash flows are discussed in the following paragraphs. The following table summarizes our cash flow from operating activities, investing activities and financing activities for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Cash provided by operating activities $ 661.0 $ 595.8 Cash used in investing activities $ (344.6) $ (461.7) Cash (used in) provided by financing activities $ (342.3) $ 31.9 Cash Flows Provided by Operating Activities The most significant items affecting the comparison of our operating cash flows for the three months ended March 31, 2021 and 2020 are summarized below. Changes in assets and liabilities, net of effects from business acquisitions and divestitures, decreased our cash flow from operations by $0.1 million during the three months ended March 31, 2021, compared to a decrease of $1.3 million during the same period in 2020, primarily as a result of the following: • Our accounts receivable, exclusive of the change in allowance for doubtful accounts and customer credits, increased $8.9 million during the three months ended March 31, 2021 due to the timing of billings net of collections, compared to a $28.0 million decrease in the same period in 2020. As of March 31, 2021, our days sales outstanding were 38.4, or 25.8 days net of deferred revenue, compared to 38.6, or 26.4 days net of deferred revenue, as of December 31, 2020. • Our prepaid expenses and other assets decreased $62.5 million during the three months ended March 31, 2021, compared to an $88.2 million decrease in the same period in 2020, primarily due to timing of our estimated tax payments. Cash paid for income taxes was a net refund of $0.4 million and a net payment of $1.4 million for the three months ended March 31, 2021 and 2020, respectively. • Our accounts payable increased $27.6 million during the three months ended March 31, 2021, compared to a $37.2 million decrease in the same period in 2020, due to the timing of payments. • Cash paid for capping, closure and post-closure obligations was $11.0 million during the three months ended March 31, 2021, compared to $8.7 million in the same period in 2020. The increase in cash paid for capping, closure, and post-closure obligations is primarily due to the timing of capping and post-closure payments at certain of our landfill sites. • Cash paid for remediation obligations was $8.3 million lower during the three months ended March 31, 2021, compared to the same period in 2020, primarily due to $3.2 million of payments related to management and monitoring of the remediation area of our closed Bridgeton Landfill in Missouri during the three months ended March 31, 2021 as compared to $12.1 million of payments for the same period in 2020. 39 Table of Contents In addition, cash paid for interest, excluding net swap settlements for our fixed-to-floating interest rate swaps, was $66.2 million and $78.1 million for the three months ended March 31, 2021 and 2020, respectively. We use cash flows from operations to fund capital expenditures, acquisitions, dividend payments, share repurchases and debt repayments. Cash Flows Used in Investing Activities The most significant items affecting the comparison of our cash flows used in investing activities for the three months ended March 31, 2021 and 2020 are summarized below: • Capital expenditures during the three months ended March 31, 2021 were $331.0 million, compared with $373.1 million for the same period in 2020. • During the three months ended March 31, 2021 and 2020, we paid $18.0 million and $61.0 million, respectively, for acquisitions and investments. We intend to finance capital expenditures and acquisitions through cash on hand, restricted cash held for capital expenditures, cash flows from operations, our revolving credit facilities, and tax-exempt bonds and other financings. We expect to primarily use cash and borrowings under our revolving credit facilities to pay for future business acquisitions. Cash Flows (Used in) Provided by Financing Activities The most significant items affecting the comparison of our cash flows (used in) provided by financing activities for the three months ended March 31, 2021 and 2020 are summarized below: • Net payments from notes payable and long-term debt and senior notes were $180.1 million during the three months ended March 31, 2021, compared to net proceeds of $271.8 million in the same period in 2020. • During the three months ended March 31, 2021, we repurchased 0.1 million shares of our stock for $12.7 million compared to repurchases of 1.2 million shares for $98.8 million during the same period in 2020. • Dividends paid were $135.5 million and $129.2 million during the three months ended March 31, 2021 and 2020, respectively. Financial Condition Debt Obligations As of March 31, 2021, we had $168.7 million of principal debt maturing within the next 12 months, which includes certain variable rate tax-exempt financings, finance lease obligations and debentures. All of our tax-exempt financings are remarketed either quarterly or semiannually by remarketing agents to effectively maintain a variable yield. The holders of the bonds can put them back to the remarketing agents at the end of each interest period. If the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we currently have availability under our $2.25 billion unsecured revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have classified these borrowings as long-term in our consolidated balance sheet as of March 31, 2021. An extended period of economic disruption associated with the COVID-19 pandemic could further disrupt the global supply chain, negatively impact demand for our services, and disrupt financial markets. These effects could materially and adversely affect our business and financial condition, including our access to sources of liquidity. We will continue to monitor the evolving COVID-19 pandemic along with the effect on our business and access to capital markets. Refer to Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for a discussion of certain risk factors related to this pandemic. For further discussion of the components of our overall debt, see Note 7, Debt, of the notes to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Credit Facilities The 364-Day Credit Facility In August 2020, we entered into a $1.0 billion 364-day unsecured revolving credit facility (the 364-Day Credit Facility), which matures in August 2021. At our option, borrowings under the 364-Day Credit Facility bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the 364-Day Credit Facility agreement). The 364-Day Credit Facility is subject to facility fees based on applicable rates defined in the 364-Day Credit Facility agreement and the aggregate commitment, regardless of usage. Availability under our 364-Day Credit Facility totaled $1.0 billion as of March 31, 2021 and December 31, 2020. The 364-Day Credit Facility can be used for working capital, capital expenditures, acquisitions, and other general corporate purposes. The 364-Day Credit Facility agreement requires us to comply 40 Table of Contents with financial and other covenants, which are consistent with the financial and other covenants included in our Credit Facility. We may pay dividends and repurchase common stock if we are in compliance with these covenants. As of March 31, 2021 and December 31, 2020, we had no borrowings outstanding under our 364-Day Credit Facility. The Credit Facility In 2018, we entered into a $2.25 billion unsecured revolving credit facility (as amended, the Credit Facility), which matures in June 2023. As permitted by the Credit Facility, we have the right to request two one-year extensions of the maturity date, but none of the lenders are committed to participate in such extension. The Credit Facility also includes a feature that allows us to increase availability, at our option, by an aggregate amount of up to $1.0 billion through increased commitments from existing lenders or the addition of new lenders. At our option, borrowings under the Credit Facility bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the Credit Facility agreement). The Credit Facility is subject to facility fees based on applicable rates defined in the Credit Facility agreement and the aggregate commitment, regardless of usage. Availability under our Credit Facility totaled $1,873.0 million and $1,671.8 million as of March 31, 2021 and December 31, 2020, respectively. The Credit Facility can be used for working capital, capital expenditures, acquisitions, letters of credit and other general corporate purposes. The Credit Facility agreement requires us to comply with financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants. As of March 31, 2021 , we had no borrowings under our Credit Facility, and as of December 31, 2020 , we had $186.0 million of borrowings under our Credit Facility . We had $361.3 million and $376.5 million of letters of credit outstanding under our Credit Facility as of March 31, 2021 and December 31, 2020, respectively. Uncommitted Credit Facility We also have an Uncommitted Credit Facility, which bears interest at LIBOR or a Cost of Funds rate (both as defined in the Uncommitted Credit Facility agreement), plus an applicable margin. We can use borrowings under the Uncommitted Credit Facility for working capital and other general corporate purposes. The agreement governing our Uncommitted Credit Facility requires us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. As of March 31, 2021, we had $12.6 million outstanding under our Uncommitted Credit Facility. As of December 31, 2020 , we had no borrowings outstanding under our Uncommitted Credit Facility. Financial and Other Covenants The Credit Facility and 364-Day Credit Facility (collectively, the Credit Facilities) require us to comply with financial and other covenants. To the extent we are not in compliance with these covenants, we cannot pay dividends or repurchase common stock. Compliance with covenants also is a condition for any incremental borrowings under the Credit Facilities, and failure to meet these covenants would enable the lenders to require repayment of any outstanding loans (which would adversely affect our liquidity). The 364-Day Credit Facility and the Credit Facility, as amended, provide that our total debt to EBITDA ratio may not exceed 3.75 to 1.00 as of the last day of any fiscal quarter. In the case of an "elevated ratio period", which may be elected by us if one or more acquisitions during a fiscal quarter involve aggregate consideration in excess of $200.0 million (the Trigger Quarter), the total debt to EBITDA ratio may not exceed 4.25 to 1.00 during the Trigger Quarter and for the three fiscal quarters thereafter. The 364-Day Credit Facility and the Credit Facility, as amended, also provide that there may not be more than two elevated ratio periods during the respective terms of the Credit Facility and 364-Day Credit Facility agreements. As of March 31, 2021, our total debt to EBITDA ratio was 2.94 compared to the 3.75 maximum allowed by the covenants. As of March 31, 2021, we were in compliance with the covenants unde r our Credit Facilities, and we exp ect to be in compliance throughout the remainder of 2021. EBITDA, which is a non-U.S. GAAP measure, is calculated as defined in our Credit Facility and 364-Day Credit Facility agreements. In this context, EBITDA is used solely to provide information regarding the extent to which we are in compliance with debt covenants and is not comparable to EBITDA used by other companies or used by us for other purposes. Failure to comply with the financial and other covenants under the Credit Facilities, as well as the occurrence of certain material adverse events, would constitute defaults and would allow the lenders under the Credit Facilities to accelerate the maturity of all indebtedness under the Credit Facilities agreements. This could have an adverse effect on the availability of financial assurances. In addition, maturity acceleration on the Credit Facilities constitutes an event of default under our other debt instruments, including our senior notes, and, therefore, our senior notes would also be subject to acceleration of maturity. If such acceleration were to occur, we would not have sufficient liquidity available to repay the indebtedness. We would likely have to seek an amendment under the Credit Facilities for relief from the financial covenant or repay the debt with proceeds from the issuance of new debt or equity, or asset sales, if necessary. We may be unable to amend the Credit Facilities or raise sufficient capital to repay such obligations in the event the maturity is accelerated. 41 Table of Contents Senior Notes and Debentures In November 2020, we issued $350.0 million of 0.875% senior notes due November 2025 (the 0.875% Notes) and $750.0 million of 1.750% senior notes due February 2032 (the 1.750% Notes). We used the net proceeds from the 0.875% Notes and 1.750% Notes to redeem all $850.0 million of the outstanding 3.550% senior notes due June 2022 and $250.0 million of the $550.0 million outstanding 4.750% senior notes due May 2023 (the 4.750% Notes). In August 2020, we issued $650.0 million of 1.450% senior notes due February 2031 (the 1.450% Notes). We used the net proceeds to redeem all $600.0 million of the outstanding 5.250% senior notes due November 2021 plus a make-whole premium of $34.0 million. The remaining proceeds were used for general corporate purposes. In February 2020, we issued $600.0 million of 2.300% senior notes due March 2030 (the 2.300% Notes) and $400.0 million of 3.050% senior notes due March 2050 (the 3.050% Notes). We used the net proceeds from the 2.300% Notes and 3.050% Notes to repay $850.0 million of 5.000% senior notes that matured in March 2020. The remaining proceeds were used to repay amounts outstanding under our unsecured credit facilities as well as for general corporate purposes. Our senior notes and debentures are general unsecured obligations. Interest is payable semi-annually. Derivative Instruments and Hedging Relationships Our ability to obtain financing through the capital markets is a key component of our financial strategy. Historically, we have managed risk associated with executing this strategy, particularly as it relates to fluctuations in interest rates, by using a combination of fixed and floating rate debt. From time to time, we also have entered into interest rate swap and lock agreements to manage risk associated with interest rates, either to effectively convert specific fixed rate debt to a floating rate (fair value hedges), or to lock interest rates in anticipation of future debt issuances (cash flow hedges). Additionally, we amended certain interest rate lock agreements, extending the mandatory maturity date and dedesignated them as cash flow hedges (the Extended Interest Rate Locks). In addition, we entered into offsetting interest rate swaps to offset future exposures to fair value fluctuations of the Extended Interest Rate Locks. For a description of our derivative contracts and hedge accounting, see Note 7, Debt , to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Tax-Exempt Financings As of March 31, 2021 and December 31, 2020, we had $1,104.9 million and $1,104.7 million of certain variable rate tax-exempt financings outstanding, respectively, with maturities ranging from 2021 to 2050. During the second quarter of 2020, we issued $60.0 million of tax-exempt financings. Finance Leases We had finance lease liabilities of $207.4 million and $206.5 million as of March 31, 2021 and December 31, 2020, respectively, with maturities ranging from 2021 to 2063 . Credit Ratings Our continued access to the debt capital markets and to new financing facilities, as well as our borrowing costs, depend on multiple factors, including market conditions, our operating performance and maintaining strong credit ratings. As of March 31, 2021, our credit ratings were BBB+, Baa2 and BBB by Standard & Poor’s Ratings Services, Moody’s Investors Service and Fitch Ratings, Inc., respectively. If our credit ratings were downgraded, especially any downgrade to below investment grade, our ability to access the debt markets with the same flexibility that we have experienced historically, our cost of funds and other terms for new debt issuances, could be adversely impacted. Off-Balance Sheet Arrangements We have no off-balance sheet debt or similar obligations, other than short-term operating leases and financial assurances, which are not classified as debt. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported financial position or results of operations. We have not guaranteed any third-party debt. Seasonality and Severe Weather Our operations can be adversely affected by periods of inclement or severe weather, which could increase the volume of waste collected under our existing contracts (without corresponding compensation), delay the collection and disposal of waste, reduce the volume of waste delivered to our disposal sites, or delay the construction or expansion of our landfills and other facilities. Our operations also can be favorably affected by severe weather, which could increase the volume of waste in situations where we are able to charge for our additional services. 42 Table of Contents Contingencies For a description of our commitments and contingencies, see Note 6, Landfill and Environmental Costs , Note 8, Income Taxes, and Note 14, Commitments and Contingencies , to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Critical Accounting Judgments and Estimates We identified and discussed our critical accounting judgments and estimates in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Although we believe our estimates and judgments are reasonable, they are based upon information available at the time the judgment or estimate is made. Actual results may differ significantly from estimates under different assumptions or conditions. New Accounting Pronouncements For a description of new accounting standards that may affect us, see Note 1, Basis of Presentation , to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.