What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-15 compared with 2021-02-22 · 433 added, 503 removed, 1223 unchanged (43% of the section changed)

1 unchanged sentence

CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Consolidated Balance Sheets as of December 31, 2021 and 2020

10 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Advanced Disposal Services, Inc., which is included in the 2020 consolidated financial statements of the Company and constituted approximately 10.6% of total consolidated assets, excluding goodwill, as of December 31, 2020, approximately 1.3% of total consolidated revenues and less than 1% of consolidated operating income, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Advanced Disposal Services, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company, and our report dated February 15, 2022 expressed an unqualified opinion thereon.

26 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 15, 2022 expressed an unqualified opinion thereon.

Adoption of ASU No.

2016-02 (Topic 842)

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the 2019 financial statements to reflect the accounting method change due to the adoption of ASU No.

2016-02, Leases (Topic 842) , and the related amendments.

Basis for Opinion

47 unchanged sentences

In addition, we considered the professional qualifications and objectivity of management’s internal engineers responsible for developing the assumptions.

We involved EY and external engineering specialists to assist us with these procedures.

We involved EY engineering specialists to assist us with these procedures.

Specifically, we utilized the EY engineering specialists to evaluate the reasons for significant changes in assumptions from the historical trend, and to determine whether the change from the historical trend was appropriate and identified timely.

We utilized the external engineers to evaluate the estimates of remaining landfill airspace.

We also tested the completeness and accuracy of the historical data utilized in preparing the estimate.

Acquisition of Advanced Disposal Services, Inc.

– Valuation of Customer Relationship and Landfill rights/permits

Description of the Matter

As described in Note 18 to the consolidated financial statements, during the year ended December 31, 2020, the Company completed the acquisition of Advanced Disposal Services, Inc.

(“Advance Disposal”) for net consideration of $4.1 billion.

The transaction was accounted for as a business combination.

Auditing the Company’s accounting for its acquisition of Advance Disposal was complex due to the significant estimation required by management in determining the fair value of the acquired customer relationships and landfill assets included within Other intangible assets and Property and equipment, respectively, in Note 18, both of which utilize prospective financial information.

The Company valued the customer relationship asset using an income approach;

specifically, the multi-period excess earnings model.

The significant assumptions used to value customer relationships included, among others, the attrition rate, revenue growth rate, and discount rate.

The Company valued the landfill assets using an income approach;

specifically, a discounted cash flow model.

The significant assumptions used to value landfill assets included, among others, the forecasted revenue and revenue growth (including forecasted waste volumes and rate per ton), discount rate, and forecasted capital expenditures.

These assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over its accounting for the Advance Disposal acquisition.

For example, we tested controls over the valuation of customer relationships and landfill assets, including management’s review of the valuation models, and underlying data and assumptions used to develop the estimated fair value of these assets.

To test the estimated fair value of the customer relationship and landfill assets, we performed audit procedures that included, among others, evaluating the Company’s selection of the valuation methodology, evaluating the significant assumptions used to determine the valuation calculations, and testing the completeness and accuracy of the underlying data supporting the significant assumptions.

We involved our valuation specialists to assist with evaluating the methodology and significant assumptions used by the management to determine the fair value estimates.

Additionally, we performed sensitivity analyses of the identified significant assumptions and compared them, as applicable, to current industry and market trends, the assumptions used by the Company to value similar assets in other acquisitions, as well as historical results, among other procedures.

/s/ ERNST & YOUNG LLP

27 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 10)

Waste Management, Inc.

57 unchanged sentences

Deferred income tax expense (benefit)

Interest accretion on landfill liabilities

Interest accretion on landfill and environmental remediation liabilities

Provision for bad debts

17 unchanged sentences

Debt repayments

Premiums paid on early extinguishment of debt

Net commercial paper borrowings (repayments)

Premiums and other paid on early extinguishment of debt

Common stock repurchase program

23 unchanged sentences

Balance, December 31, 2018

Adoption of new accounting standards

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Divestiture of noncontrolling interest

Balance, December 31, 2019

Adoption of new accounting standards

Consolidated net income

4 unchanged sentences

Balance, December 31, 2020

Adoption of new accounting standards

Consolidated net income

8 unchanged sentences

Years Ended December 31, 2021, 2020 and 2019

Basis of Presentation

The financial statements presented in this report represent the consolidation of Waste Management, Inc., a Delaware corporation;

5 unchanged sentences

When the terms “the Company,” “we,” “us” or “our” are used in this document, those terms refer to Waste Management, Inc., its consolidated subsidiaries and consolidated variable interest entities.

When we use the term “WM,” we are referring only to Waste Management, Inc., the parent holding company.

When we use the term “WMI,” we are referring only to Waste Management, Inc., the parent holding company.

We are North America’s leading provider of comprehensive waste management environmental services, providing services throughout the United States (“U.S.”) and Canada.

2 unchanged sentences

Through our subsidiaries, we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S.

We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our 17 Areas.

In 2021, our senior management began evaluating, overseeing and managing the financial performance of our Solid Waste operations through two operating segments.

Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada.

Our West Tier primarily includes geographic areas located in the Western U.S., including the upper Midwest region, and British Columbia, Canada.

Each of our Solid Waste operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal.

The Company finalized the assessment of our segments during the fourth quarter of 2021.

The East and West Tiers are presented in this report and constitute our existing Solid Waste business.

On October 30, 2020, we acquired Advanced Disposal Services, Inc.

(“Advanced Disposal”), the operations of which are presented in this report within our existing Solid Waste tiers.

We also provide additional services that are not managed through our Solid Waste business, which are presented in this report as “Other.” Additional information related to our acquisition of Advanced Disposal and segments is included in Notes 18 and 20, respectively.

New Accounting Standards and Reclassifications

Adoption of New Accounting Standards

Leases — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 associated with lease accounting.

There were further amendments, including practical expedients, with the issuance of ASU 2018-01 in January 2018, ASU 2018-11 in July 2018 and ASU 2018-20 in December 2018.

On January 1, 2019, we adopted this ASU using the optional transition method which allows entities to continue to apply historical accounting guidance in the comparative periods presented in the year of adoption.

Accordingly, our financial statements for the reported periods after January 1, 2019 are presented under this amended guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting guidance.

We elected to apply the following package of practical expedients on a consistent basis permitting entities not to reassess:

(i) whether any expired or existing contracts are or contain a lease;

(ii) lease classification for any expired or existing leases and (iii) whether initial direct costs for any expired or existing leases qualify for capitalization under the amended guidance.

In addition, we applied (i) the practical expedient for land easements , which allows the Company to not apply the lease standard to certain existing land easements at transition and (ii) the practical expedient to include both the lease and non-lease components as a single component and account for it as a lease.

See Note 8 for additional information.

Financial Instruments-Credit Losses — In June 2016, the FASB issued ASU 2016-13 associated with the measurement of credit losses on financial instruments.

On January 1, 2020, we adopted this ASU using the modified retrospective transition method.

The amended guidance replaced the previous incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consideration of a broader range of reasonable and supportable information to assess credit loss estimates.

This expected loss model generally results in earlier recognition of an allowance for losses.

We recognized a net $ 2 million after tax decrease to retained earnings as of January 1, 2020 for the cumulative impact of adopting the amended guidance.

See Note 3 for additional information and disclosures related to this amended guidance.

Implementation Costs Incurred in a Cloud Computing Arrangement — In August 2018, the FASB issued ASU 2018-15 associated with a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract.

The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

Costs for implementation activities in the application development stage are capitalized as prepayments depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed.

The Company adopted this amended guidance on January 1, 2020 prospectively, and it did not have a material impact on our consolidated financial statements.

Guarantor Financial Information — In March 2020, the Securities and Exchange Commission (“SEC”) adopted final rules that simplify the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rules 3-10 and 3-16, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities (which we previously included within the notes to our financial statements included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q) if certain conditions are met.

The disclosure requirements, as amended, are now located in newly-created Rules 13-01 and 13-02 of Regulation S-X and are generally effective for filings on or after January 4, 2021, with early adoption permitted.

We early adopted the new disclosure requirements effective as of April 1, 2020 and are providing the summarized financial information and related disclosures in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Item 7”) in this Form 10-K.

Amendments to and Modernization of Regulation S-K — In August and November 2020, the SEC adopted final amendments to Regulation S-K intended to (i) modernize the disclosure requirements related to the description of business, legal proceedings and risk factors (Items 101, 103 and 105) and (ii) simplify and enhance certain financial disclosure requirements (Items 301, 302(a) and 303).

Among other things, the amendments:

(i) require registrants to include a description of human capital resources to the extent such disclosures would be material to an understanding of the registrant’s business (Item 101);

(ii) increase the threshold for disclosure of governmental environmental proceedings from those reasonably likely to result in penalties in excess of $100,000 to $300,000 (Item 103);

(iii) refine the risk factors disclosure to require disclosure of material risks and require that such risk factors be organized using sub-headings (Item 105);

(iv) allow registrants to omit the table of selected quarterly financial data currently provided for each quarter of the two most recent fiscal years (Item 302(a));

(v) eliminates the table of selected financial data for each of its last five years required within annual reports (Item 301) and (vi) eliminate the requirement to present a contractual obligations table within Item 7 and instead describe known contractual and other obligations within liquidity and capital resources of Item 7 (Item 303).

We adopted the amended disclosure requirements for Item 101, Item 103 and Item 105 effective as of December 31, 2020, and the changes are reflected within Item 1, Business and Item 1A.

Risk Fact ors.

The amended guidance for Item 301, Item 302(a) and Item 303 is required for all registrants beginning with their first fiscal year ending on or after August 9, 2021.

Registrants who have not currently filed their annual reports may early adopt the entire amended rule or Item 301 and Item 302(a) effective on February 10, 2021.

We have elected to early adopt the amendments to Item 301 and Item 302(a).

We are assessing the remaining provisions of this amended guidance and evaluating the impact on our consolidated financial statements.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Reclassifications

When necessary, reclassifications have been made to our prior period financial information to conform to the current year presentation and are not material to our consolidated financial statements.

In our Annual Report on Form 10-K for the year ended December 31, 2020, our accumulated depreciation and gross property and equipment balances as of December 31, 2020 were overstated.

We subsequently corrected the balances in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and have provided the corrected balances in all filings thereafter.

Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of WM, its wholly-owned and majority-owned subsidiaries and certain variable interest entities for which we have determined that we are the primary beneficiary.

The accompanying Consolidated Financial Statements include the accounts of WMI, its wholly-owned and majority-owned subsidiaries and certain variable interest entities for which we have determined that we are the primary beneficiary.

All material intercompany balances and transactions have been eliminated.

Investments in unconsolidated entities are accounted for under the appropriate method of accounting.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Estimates and Assumptions

2 unchanged sentences

In some cases, these estimates are difficult to determine, and we must exercise significant judgment.

In preparing our financial statements, the most difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, long-lived asset impairments, the fair value of assets and liabilities acquired in business combinations or as asset acquisitions and reserves associated with our insured and self-insured claims.

In preparing our financial statements, the most difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, long-lived assets and intangible asset impairments and the fair value of assets and liabilities acquired in business combinations.

Each of these items is discussed in additional detail below.

11 unchanged sentences

Our receivables, which are recorded when billed, when services are performed or when cash is advanced, are claims against third parties that will generally be settled in cash.

The carrying value of our receivables, net of the allowance for

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

doubtful accounts, represents the estimated net realizable value.

The carrying value of our receivables, net of the allowance for doubtful accounts, represents the estimated net realizable value.

We estimate our allowance for doubtful accounts based on historical collection trends;

5 unchanged sentences

We no longer accrue interest once the notes are deemed uncollectible.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table reflects the activity in our allowance for doubtful accounts of trade receivables for the year ended December 31 (in millions):

6 unchanged sentences

For trade receivables the Company relies upon, among other factors, historical loss trends, the age of outstanding receivables, and existing as well as expected economic conditions.

Due to the adoption of ASU 2016-13, we recognized a $ 1 million pre-tax decrease to our allowance for doubtful accounts on trade receivables.

We determined that all of our trade receivables share similar risk characteristics.

We monitor our credit exposure on an ongoing basis and assess whether assets in the pool continue to display similar risk characteristics.

In January 2020, a novel strain of coronavirus (“COVID-19”) was declared a Public Health Emergency of International Concern and subsequently declared a global pandemic in March 2020.

Throughout the COVID-19 pandemic, the Company has proactively taken steps to put our employees’ and customers’ needs first and we continue to work with the appropriate regulatory agencies to ensure we can provide our essential waste services safely and efficiently.

With this in mind, during the first half of 2020 we extended payment terms and postponed collections and service discontinuation for customers who were negatively impacted by the COVID-19 pandemic.

These actions contributed to an increase in the aging of outstanding balances.

Improved economic conditions during the second half of 2020 have allowed us to return to more regular business practices, in accordance with our contractual terms.

As of December 31, 2021, we had $ 2,278 million of trade receivables, net of allowance for doubtful accounts of $ 25 million.

The allowance for doubtful accounts has increased by $ 5 million during 2020, largely due to the COVID-19 pandemic.

Based on aging analyses as of December 31, 2020 and 2019, approximately 90 % of our trade receivables were outstanding less than 60 days .

As of December 31, 2020, we had $ 2,097 million of trade receivables, net of allowance for doubtful accounts of $ 33 million.

In January 2020, COVID-19 was declared a Public Health Emergency of International Concern and subsequently declared a global pandemic in March 2020.

With this in mind, during 2020, we extended payment terms and postponed collections and service discontinuation for customers who were negatively impacted by the COVID-19 pandemic.

These actions contributed to an increase in the aging of outstanding balances during the year and resulted in a related increase in our allowance for doubtful accounts.

Improved economic conditions during 2021 have allowed us to return to more regular business practices, in accordance with our contractual terms.

Based on aging analyses as of both December 31, 2021 and 2020, approximately 90 %of our trade receivables were outstanding less than 60 days .

For other receivables, as well as loans and other instruments, the Company relies primarily on credit ratings and associated default rates based on the maturity of the instrument.

All receivables, as well as other instruments, are adjusted for our expectation of future market conditions and trends.

Due to the adoption of ASU 2016-13, we recognized a $ 4 million pre-tax increase to our allowance for doubtful accounts on notes and other receivables.

As of December 31, 2021, we had $ 451 million of notes and other receivables, net of allowance of $ 10 million.

1 unchanged sentence

Based on an aging analysis as of December 31, 2021 and 2020, approximately 60 % and 75 %, respectively, of our other receivables were due within 12 months or less.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other receivables, as of December 31, 2021 and 2020, include receivables related to income tax payments in excess of our current income tax obligations of $ 166 million and $ 414 million, respectively.

Other receivables as of December 31, 2020 and 2019 also included a receivable of $ 20 million and $ 70 million, respectively, related to federal natural gas fuel credits.

Other receivables as of December 31, 2021 and 2020 also include a receivable of $ 14 million and $ 20 million, respectively, related to federal natural gas fuel credits.

Parts and Supplies

8 unchanged sentences

environmental monitoring equipment for groundwater and landfill gas;

and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs.

and directly related engineering, capitalized

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

interest, on-site road construction and other capital infrastructure costs.

The cost basis of our landfill assets also includes asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-closure activities.

17 unchanged sentences

We use historical experience, professional engineering judgment and quoted or actual prices paid for similar work to determine the fair value of these obligations.

We are required to recognize these

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

In those instances where we perform the work with internal resources, the incremental profit margin realized is recognized as a component of operating income when the work is completed.

Once we have determined final capping, closure and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value.

As of December 31, 2020, we inflated these costs in current dollars to the expected time of payment using an inflation rate of 2.25 %.

During the years ended December 31, 2019 and 2018, we used an inflation rate of 2.5 %.

As of December 31, 2021, 2020 and 2019, we inflated these costs in current dollars to the expected time of payment using an inflation rate of 2.25 %, 2.25 % and 2.5 %, respectively.

We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach.

2 unchanged sentences

The weighted average rate applicable to our long-term asset retirement obligations as of December 31, 2021 was approximately 4.6 %.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the airspace consumed through the current period.

3 unchanged sentences

We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change.

Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining permitted and expansion airspace (as defined below) of the related discrete final capping event or the remaining permitted and expansion airspace of the landfill, as appropriate.

Sustained changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in liability and asset amounts to be recorded prospectively over either the remaining permitted and expansion airspace (as defined below) of the related discrete final capping event or the remaining permitted and expansion airspace of the landfill, as appropriate.

Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining permitted and expansion airspace of the final capping event or the remaining permitted and expansion airspace of the landfill, as appropriate.

6 unchanged sentences

The rate per ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the corresponding asset’s airspace.

For landfills that we do not own, but operate through lease or other contractual agreements,

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the rate per ton is calculated based on expected airspace to be utilized over the lesser of the contractual term of the underlying agreement or the life of the landfill.

For landfills that we do not own, but operate through lease or other contractual agreements, the rate per ton is calculated based on expected airspace to be utilized over the lesser of the contractual term of the underlying agreement or the life of the landfill.

We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:

5 unchanged sentences

● Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

● We have a legal right to use or obtain land to be included in the expansion plan;

12 unchanged sentences

Our historical experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches its highest point under the permit requirements.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

After determining the costs and remaining permitted and expansion capacity at each of our landfills, we determine the per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the corresponding number of tons.

6 unchanged sentences

If at any time management makes the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Environmental Remediation Liabilities

20 unchanged sentences

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 135 million higher than the $ 213 million recorded in the Consolidated Balance Sheet as of December 31, 2021.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

responsibility may differ materially from current estimates.

Our ultimate responsibility may differ materially from current estimates.

It is possible that technological, regulatory or enforcement developments, the results of environmental studies, the inability to identify other PRPs, the inability of other PRPs to contribute to the settlements of such liabilities, or other factors could require us to record additional liabilities.

1 unchanged sentence

These adjustments could be material in any given period.

Where we believe that both the amount of a particular environmental remediation liability and the timing of the payments are fixed or reliably determinable, we inflated the cost in current dollars by 2.25 % and 2.50 % as of December 31, 2020 and 2019, respectively, until the expected time of payment and discount the cost to present value using a risk-free discount rate, which is based on the rate for U.S.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Where we believe that both the amount of a particular environmental remediation liability and the timing of the payments are fixed or reliably determinable, we inflate the cost in current dollars until the expected time of payment and discount the cost to present value using a risk-free discount rate, which is based on the rate for U.S.

Treasury bonds with a term approximating the weighted average period until settlement of the underlying obligation.

As of December 31, 2021 and 2020, we inflated the costs by 2.25 %.

We determine the risk-free discount rate and the inflation rate on an annual basis unless interim changes would materially impact our results of operations.

9 unchanged sentences

We depreciate property and equipment over the estimated useful life of the asset using the straight-line method.

We assume no salvage value for our depreciable property and equipment.

We generally assume no salvage value for our depreciable property and equipment.

When property and equipment are retired, sold or otherwise disposed of, the cost and accumulated depreciation are removed from our accounts and any resulting gain or loss is included in results of operations as an offset or increase to operating expense for the period.

5 unchanged sentences

Furniture, fixtures and office equipment

We include capitalized costs associated with developing or obtaining internal-use software within long-term other assets and these costs are amortized over a useful life of the relevant subscription period including any renewal options that are reasonably certain of being exercised.

These costs include direct external costs of materials and services used in

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

developing or obtaining the software and internal costs for employees directly associated with the software development project.

As of December 31, 2020, significantly all of the costs incurred to date are related to internal-use software that is currently under development.

We lease property and equipment in the ordinary course of our business.

4 unchanged sentences

The leases are classified as either operating leases or financing leases, as appropriate.

See Note 8 for additional information.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating Leases (excluding landfill leases discussed below) — The majority of our leases are operating leases.

1 unchanged sentence

Management expects that in the normal course of business our operating leases will be renewed, replaced by other leases or replaced with fixed asset expenditures.

Our rent expense during each of the last three years and our future minimum operating lease payments for each of the next five years for which we are contractually obligated as of December 31, 2020 are disclosed in Note 8.

Financing Leases (excluding landfill leases discussed below) — Assets under financing leases are capitalized using interest rates determined at the commencement of each lease and are amortized over either the useful life of the asset or the lease term, as appropriate, on a straight-line basis.

The present value of the related lease payments is recorded as a debt obligation.

Our future minimum annual financing lease payments are disclosed in Note 8.

Landfill Leases — From an operating perspective, landfills that we lease are similar to landfills we own because generally we will operate the landfill for the life of the operating permit.

2 unchanged sentences

For landfill financing leases that provide for minimum contractual rental obligations, we record the present value of the minimum obligation as part of the landfill asset, which is amortized on a units-of-consumption basis over the shorter of the lease term or the life of the landfill.

Our future minimum annual lease payments for our landfill leases are disclosed in Note 8.

For operating and financing leases, including landfill leases, our rent expense for each of the last three years and future minimum lease payments are disclosed in Note 7.

We generally recognize assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, based on fair value estimates as of the date of acquisition.

Contingent Consideration — In certain acquisitions, we agree to pay additional amounts to sellers contingent upon achievement by the acquired businesses of certain negotiated goals, such as targeted revenue levels, targeted disposal volumes or the issuance of permits for expanded landfill airspace.

We have recognized liabilities for these contingent obligations based on their estimated fair value as of the date of acquisition with any differences between the acquisition-date fair value and the ultimate settlement of the obligations being recognized as an adjustment to income from operations.

We have recognized liabilities for these contingent obligations based on their estimated fair value as of the date of acquisition with any differences between the acquisition-date fair value, subsequent remeasurements and the ultimate settlement of the obligations being recognized as an adjustment to income from operations.

Acquired Assets and Assumed Liabilities — Assets and liabilities arising from contingencies such as pre-acquisition environmental matters and litigation are recognized at their acquisition-date fair value when their respective fair values can be determined.

If the fair values of such contingencies cannot be determined, they are recognized as of the acquisition date if the contingencies are probable and an amount can be reasonably estimated.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Acquisition-date fair value estimates are revised as necessary if, and when, additional information regarding these contingencies becomes available to further define and quantify assets acquired and liabilities assumed.

1 unchanged sentence

All acquisition-related transaction costs are expensed as incurred.

During the year ended December 31, 2020, we acquired four businesses related to our Solid Waste business, including the acquisition of Advanced Disposal.

See Note 18 for additional information related to the acquisitions.

See Note 17 for additional information related to our acquisitions, including our 2020 acquisition of Advanced Disposal.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goodwill and Other Intangible Assets

21 unchanged sentences

In addition, management may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace, or a landfill may be required to cease accepting waste, prior to receipt of the expansion permit.

However, such events occur in the

However, such events occur in the ordinary course of business in the waste industry and do not necessarily result in impairment of our landfill assets because, after consideration of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit.

As a result, our tests of recoverability, which generally make use of a probability-weighted cash flow estimation approach, may indicate that no impairment loss should be recorded.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ordinary course of business in the waste industry and do not necessarily result in impairment of our landfill assets because, after consideration of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit.

As a result, our tests of recoverability, which generally make use of a probability-weighted cash flow estimation approach, may indicate that no impairment loss should be recorded.

Indefinite-Lived Intangible Assets, Including Goodwill — At least annually using a measurement date of October 1, and more frequently if warranted, we assess the indefinite-lived intangible assets including the goodwill of our reporting units for impairment.

We first performed a qualitative assessment to determine if it was more likely than not that the fair value of a reporting unit was less than its carrying value.

If the assessment indicated a possible impairment, we completed a quantitative review, comparing the estimated fair value of a reporting unit to its carrying amount, including goodwill.

An impairment charge was recognized if the asset’s estimated fair value was less than its carrying amount.

Indefinite-Lived Intangible Assets, Including Goodwill — At least annually using a measurement date of October 1, and more frequently if warranted, we assess our indefinite-lived intangible assets, including the goodwill of our reporting units, for impairment.

We first perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If the assessment indicates a possible impairment, we complete a quantitative review, comparing the estimated fair value of a reporting unit to its carrying amount, including goodwill.

An impairment charge is recognized if the asset’s estimated fair value is less than its carrying amount.

Fair value is typically estimated using an income approach using Level 3 inputs.

12 unchanged sentences

We have retained a significant portion of the risks related to our health and welfare, general liability, automobile liability and workers’ compensation claims programs.

The exposure for unpaid claims and associated expenses, including incurred but not reported losses, generally is estimated with the assistance of external actuaries and by factoring in pending claims and historical trends and data.

For our self-insured portions, the exposure for unpaid claims and associated expenses, including incurred but not reported losses, is based on an actuarial valuation or internal estimates.

The gross estimated liability associated with settling unpaid claims is included in accrued liabilities in our Consolidated Balance Sheets if expected to be settled within one year;

3 unchanged sentences

We continue to maintain conventional insurance policies with third-party insurers.

In addition to certain business and operating benefits of having a wholly-owned insurance captive, we expect to receive certain cash flow benefits related to the timing of tax deductions related to these claims.

WM pays an annual premium to the insurance captive, typically in the first quarter of the year, for estimated losses based on an external actuarial analysis.

These premiums are held in a restricted escrow account to be used solely for paying insurance claims,

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

resulting in a transfer of risk from WM to the insurance captive, and are allocated between current and long-term assets depending on timing on the use of funds.

WMI pays an annual premium to the insurance captive on behalf of WMI and its insured subsidiaries, typically in the first quarter of the year, for estimated losses based on an external actuarial analysis.

These premiums are held in a restricted funds account to be used solely for paying insurance claims, resulting in a transfer of risk from our Company to the insurance captive, and are allocated between current and long-term assets depending on estimated timing of the use of funds.

Restricted Trust and Escrow Accounts

Our restricted trust and escrow accounts consist principally of funds deposited for purposes of funding insurance claims and settling landfill final capping, closure, post-closure and environmental remediation obligations.

These funds are generally allocated between cash, money market funds and available-for-sale securities depending on the estimated timing and purpose of the use of funds.

We use a wholly-owned insurance captive to insure the deductibles for certain claims programs, as discussed above in Insured and Self-Insured Claims , and the premiums paid were directly deposited into a restricted escrow account to be used solely for paying insurance claims.

These funds are generally allocated between cash, money market funds, equity securities and available-for-sale debt securities

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

depending on the estimated timing and purpose of the use of funds.

We use a wholly-owned insurance captive to insure the deductibles for certain claims programs and the premiums paid are directly deposited into a restricted escrow account to be used solely for paying insurance claims.

At several of our landfills, we provide financial assurance by depositing cash into restricted trust or escrow accounts for purposes of settling final capping, closure, post-closure and environmental remediation obligations.

3 unchanged sentences

(iv) acquisitions or divestitures and (v) changes in the fair value of the financial instruments held in the restricted trust or escrow accounts.

The current portion of restricted trust and escrow accounts as of December 31, 2020 and 2019 of $ 75 million and $ 70 million, respectively, is included in other current assets in our Consolidated Balance Sheets.

See Note 19 for additional discussion related to restricted trust and escrow accounts for final capping, closure, post-closure or environmental remediation obligations.

See Notes 16 and 18 for additional discussion related to restricted trust and escrow accounts for final capping, closure, post-closure or environmental remediation obligations.

Investments in Unconsolidated Entities

12 unchanged sentences

(iii) a market or income approach, as deemed appropriate and/or (iv) a quantitative approach, or measurement alternative, as noted above.

Impairments of our investments are recorded in equity in net losses of unconsolidated entities or other, net in the Consolidated Statements of Operations in accordance with appropriate accounting guidance.

Impairments of our investments are recorded in equity in net losses of unconsolidated entities or other, net in our Consolidated Statements of Operations in accordance with appropriate accounting guidance.

Refer to Note 11 for information related to impairments and other adjustments recognized during the reported periods.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Foreign Currency

6 unchanged sentences

The resulting translation difference is reflected as a component of other comprehensive income (loss).

Foreign currency translation adjustments were impacted by decreases in the U.S.

dollar/Canadian dollar exchange rate from 1.3639 at December 31, 2018, to 1.2990 at December 31, 2019 and to 1.2734 at December 31, 2020.

Foreign currency translation adjustments have been impacted by decreases in the U.S.

dollar/Canadian dollar exchange rate from 1.2990 at December 31, 2019, to 1.2734 at

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2020 and to 1.2639 at December 31, 2021.

Refer to Note 12 for information regarding the impacts of foreign currency on our comprehensive income and results of operations.

6 unchanged sentences

The fees we charge for our services generally include our environmental, fuel surcharge and regulatory recovery fees, which are intended to pass through to customers direct and indirect costs incurred.

We also provide additional services that are not managed through our Solid Waste business, including operations managed by both our Strategic Business Solutions (“WMSBS”) and Energy and Environmental Services (“EES”) businesses, recycling brokerage services, landfill gas-to-energy services and certain other expanded service offerings and solutions.

Our revenue from sources other than customer contracts primarily relates to lease revenue associated with compactors and balers.

Revenue from our leasing arrangements was not material and represented approximately 1 %of total revenue for each of the reported periods.

We also provide additional services that are not managed through our Solid Waste business, including our Strategic Business Solutions (“WMSBS”) and Energy and Environmental Services (“EES”) businesses, recycling brokerage services, landfill gas-to-energy services and certain other expanded service offerings and solutions.

We generally recognize revenue as services are performed or products are delivered.

7 unchanged sentences

Substantially all our deferred revenues during the reported periods are realized as revenues within one to three months , when the related services are performed.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contract Acquisition Costs

Our incremental direct costs of obtaining a contract, which consist primarily of sales incentives, are generally deferred and amortized to selling, general and administrative expense over the estimated life of the relevant customer relationship, ranging from 5 to 13 years .

Contract acquisition costs that are paid to the customer are deferred and amortized as a reduction in revenue over the contract life.

Our contract acquisition costs are classified as current or noncurrent based on the timing of when we expect to recognize amortization and are included in other assets in our Consolidated Balance Sheet.

As of December 31, 2020 and 2019, we had $ 159 million and $ 153 million of deferred contract costs, respectively, of which $ 118 million and $ 117 million was related to deferred sales incentives, respectively.

During the years ended December 31, 2020, 2019 and 2018, we amortized $ 23 million, $ 23 million and $ 22 million of sales incentives to selling, general and administrative expense, respectively.

As of December 31, 2021 and 2020, we had $ 175 million and $ 159 million of deferred contract costs, respectively, of which $ 126 million and $ 118 million, respectively, were related to deferred sales incentives.

During each of the years ended December 31, 2021, 2020 and 2019, we amortized $ 23 million of sales incentives to selling, general and administrative expense.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Long-Term Contracts

16 unchanged sentences

See Note 8 for discussion of our income taxes.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contingent Liabilities

4 unchanged sentences

See Note 10 for discussion of our commitments and contingencies.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Supplemental Cash Flow Information

1 unchanged sentence

Interest, net of capitalized interest

During 2020, we had $ 50 million of non-cash financing activities primarily related to new financing leases, a portion of which are attributed to our acquisition of Advanced Disposal.

During 2019 and 2018, we had $ 299 million and $ 250 million, respectively, of non-cash financing activities from federal low-income housing investments and new financing leases.

During 2021, we had $ 30 million of non-cash financing activities from new financing leases.

During 2020, we had $ 50 million of non-cash financing activities primarily related to new financing leases, a portion of which were attributed to our acquisition of Advanced Disposal.

During 2019, we had $ 299 million of non-cash financing activities from federal low-income housing investments and new financing leases.

Non-cash investing and financing activities are generally excluded from the Consolidated Statements of Cash Flows.

4 unchanged sentences

Current (in accrued liabilities)

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The changes to landfill and environmental remediation liabilities for the year ended December 31, 2021 are reflected in the table below (in millions):

4 unchanged sentences

Interest accretion

Revisions in estimates and interest rate assumptions (a) (b)

Acquisitions, divestitures and other adjustments (c)

Revisions in estimates and interest rate assumptions (a)

Acquisitions, divestitures and other adjustments (b)

December 31, 2021

(a) The amount reported for our landfill liabilities includes a reduction of $ 104 million related to the change in inflation rate from 2.5 % to 2.25 % as of December 31, 2020, of which $ 26 million was an immediate reduction to amortization expense.

This reduction to landfill liabilities was partially offset by (i) an increase of $ 69 million primarily from changes in the timing and amount of costs as well as changes in estimates of remaining airspace and (ii) an increase of $ 8 million due to a business decision to close one of our landfills, which resulted in the acceleration of the expected timing of capping, closure and post-closure activities.

This business decision also resulted in an impairment that is discussed in Note 12.

(b) The amount reported for our environmental remediation liabilities includes an increase of $ 9 million due to a decrease in the risk-free discount rate used to measure our liabilities from 1.75 % at December 31, 2019 to 1.00 % at December 31, 2020.

(c) The amount reported for our landfill liabilities includes (i) $ 261 million related to our acquisition of Advanced Disposal offset by (ii) a reduction of $ 17 million for the sale of certain landfills to GFL Environmental Inc.

(“GFL Environmental”) in connection with the Advanced Disposal acquisition.

These items are discussed further in Note 18.

(a) The amount reported for our landfill liabilities includes an increase of $ 15 million due to a business decision to accelerate the closure timing of a landfill in our West Tier segment, which resulted in the acceleration of the expected timing of capping, closure and post-closure activities.

The remaining increase relates to revisions in estimated costs and timing of capping, closure and post-closure liabilities.

(b) The amount reported for our landfill liabilities includes an increase of $ 13 million related to changes in the fair values assigned to certain acquired Advanced Disposal sites.

Our recorded liabilities as of December 31, 2021 include the impacts of inflating certain of these costs based on our expectations of the timing of cash settlement and of discounting certain of these costs to present value.

Anticipated payments of currently identified environmental remediation liabilities, as measured in current dollars, are $ 26 million in 2021, $ 48 million in 2022, $ 40 million in 2023, $ 33 million in 2024, $ 12 million in 2025 and $ 61 million thereafter.

At several of our landfills, we provide financial assurance by depositing cash into restricted trust funds or escrow accounts for purposes of settling final capping, closure, post-closure and environmental remediation obligations.

Generally, these trust funds are established to comply with statutory requirements and operating agreements.

See Notes 17 and 19 for additional information related to these trusts.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payments of currently identified environmental remediation liabilities, as measured in current dollars, are $ 29 million in 2022, $ 47 million in 2023, $ 35 million in 2024, $ 31 million in 2025, $ 11 million in 2026 and $ 54 million thereafter.

Property and Equipment

Property and equipment as of December 31 consisted of the following (in millions):

Machinery and equipment

Buildings and improvements

Furniture, fixtures and office equipment

Accumulated depreciation of tangible property and equipment

Machinery and equipment (a)

Containers (a)

Buildings and improvements (a)

Furniture, fixtures and office equipment (a)

Accumulated depreciation of tangible property and equipment (a)

Accumulated amortization of landfill airspace

Property and equipment, net

(a) In our Annual Report on Form 10-K for the year ended December 31, 2020, our accumulated depreciation and gross property and equipment balances as of December 31, 2020 were overstated.

We subsequently corrected the balances in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and have provided the corrected balances in all filings thereafter, as discussed in Note 1.

Depreciation and amortization expense, including amortization expense for assets recorded as financing leases, consisted of the following for the year ended December 31 (in millions):

2 unchanged sentences

Depreciation and amortization expense

We include capitalized costs associated with developing or obtaining internal-use software within long-term other assets, and these costs are amortized over the useful life of the relevant subscription period including any renewal options that are reasonably certain of being exercised.

These costs include direct external costs of materials and services used in developing or obtaining the software and internal costs for employees directly associated with the software development project.

As of December 31, 2020, total costs capitalized for our internal-use software were $ 21 million.

Additionally, amortization expense for the period was immaterial as substantially all costs incurred to date are related to internal-use software that is currently under development.

See Note 5 for information regarding amortization of our intangible assets.

Goodwill and Other Intangible Assets

Goodwill was $ 9,028 million and $ 8,994 million as of December 31, 2021 and 2020, respectively.

The $ 2,462 million increase in goodwill during 2020 is primarily related to our acquisition of Advanced Disposal as discussed further in Note 18.

The $ 34 million increase in goodwill during 2021 is primarily related to acquisitions, partially offset by divestitures.

As discussed in Note 2, we perform our annual impairment test of goodwill balances for our reporting units using a measurement date of October 1.

We will also perform interim tests if an impairment indicator exists.

See Note 20 for allocation of our goodwill by segment.

See Notes 11, 17 and 19 for additional information related to goodwill.

WASTE MANAGEMENT, INC.

7 unchanged sentences

Amortization expense for other intangible assets was $ 143 million, $ 107 million and $ 106 million for 2021, 2020 and 2019, respectively.

As of December 31, 2020, we had $ 19 million of licenses, permits and other intangible assets that are not subject to amortization because they do not have stated expirations or have routine, administrative renewal processes.

Amortization expense for other intangible assets for 2021 increased, as compared with 2020 and 2019, due to the amortization of acquired intangible assets related to our acquisition of Advanced Disposal.

Additional information related to other intangible assets acquired through business combinations is included in Note 17.

As of December 31, 2021, we had $ 19 million of licenses, permits and other intangible assets that are not subject to amortization because they do not have stated expirations or have routine, administrative renewal processes.

As of December 31, 2021, we expect annual amortization expense related to other intangible assets to be $ 130 million in 2022, $ 115 million in 2023, $ 105 million in 2024, $ 97 million in 2025 and $ 77 million in 2026.

The following table summarizes the major components of debt as of each balance sheet date (in millions) and provides the maturities and interest rate ranges of each major category as of December 31:

Commercial paper program (weighted average interest rate of 0.4 % as of December 31, 2020)

Commercial paper program (weighted average interest rate of 0.4 % as of December 31, 2021 and December 31, 2020)

Senior notes, maturing through 2050, interest rates ranging from 0.75 % to 7.75 % (weighted average interest rate of 3.1 % as of December 31, 2021 and 3.3 % as of December 31, 2020)

1 unchanged sentence

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.1 % to 4.3 % (weighted average interest rate of 1.4 % as of December 31, 2021 and 1.7 % as of December 31, 2020)

Financing leases and other, maturing through 2085, weighted average interest rate of 4.6 % (a)

Financing leases and other, maturing through 2085, weighted average interest rate of 4.5 % as of December 31, 2021 and 4.6 % as of December 31, 2020) (a)

Debt issuance costs, discounts and other

4 unchanged sentences

Debt Classification

As of December 31, 2020, we had $ 3.3 billion of debt maturing within the next 12 months, including (i) $ 1.8 billion of short-term borrowings under our commercial paper program;

(ii) $ 1.2 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities, and (iii) $ 242 million of other debt with scheduled maturities within the next 12 months, including $ 127 million of tax-exempt bonds.

As of December 31, 2021, we had $ 3.1 billion of debt maturing within the next 12 months, including (i) $ 1.8 billion of short-term borrowings under our commercial paper program (net of related discount on issuance);

(ii) $ 645 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities;

(iii) $ 500 million of 2.90 % senior notes that mature in September 2022 and (iv) $ 170 million of other debt with scheduled maturities within the next 12 months, including $ 71 million of tax-exempt bonds.

As of December 31, 2021, we have classified $ 2.4 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $ 3.5 billion long-term U.S.

2 unchanged sentences

As of December 31, 2021, we also had $ 54 million of variable-rate tax-exempt bonds with long-term scheduled maturities supported by letters of credit under our $3.5 billion revolving credit facility.

The interest rates on our variable-rate tax-exempt bonds are generally reset on either a daily or weekly basis through a remarketing process.

The interest rates on our variable-rate tax-exempt bonds reset on a weekly basis through a remarketing process.

All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at market-driven rates and we currently expect future remarketings to be successful.

3 unchanged sentences

Access to and Utilization of Credit Facilities and Commercial Paper Program

$3.0 Billion, 364-Day Revolving Credit Facility — On July 28, 2020, we entered into a supplemental $ 3.0 billion, 364-day , U.S.

revolving credit facility (“364-day revolving credit facility”), which was drawn upon and used to partially fund our acquisition of Advanced Disposal, discussed further in Note 18, and refinancing of indebtedness.

During the fourth quarter of 2020, we repaid the outstanding borrowings under our 364-day revolving credit facility and contemporaneously terminated the facility, at which time we recognized a $ 2 million loss on early extinguishment of debt in our Consolidated Statement of Operations related to unamortized debt issuance costs.

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility, maturing November 2024, provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program.

The agreement provides the Company with two one-year extension options.

Waste Management of Canada Corporation and WM Quebec Inc., each an indirect wholly-owned subsidiary of WM, are borrowers under the $3.5 billion revolving credit facility, and the agreement permits borrowing in Canadian dollars up to the U.S.

Waste Management of Canada Corporation and WM Quebec Inc., each an indirect wholly-owned subsidiary of WMI, are borrowers under the $3.5 billion revolving credit facility, and the agreement permits borrowing in Canadian dollars up to the U.S.

dollar equivalent of $ 375 million, with such borrowings to be repaid in Canadian dollars.

WM Holdings, a wholly-owned subsidiary of WM, guarantees all the obligations under the $3.5 billion revolving credit facility.

WM Holdings, a wholly-owned subsidiary of WMI, guarantees all the obligations under the $3.5 billion revolving credit facility.

The rates we pay for outstanding U.S.

or Canadian loans are generally based on LIBOR or CDOR, respectively, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service and Standard and Poor’s.

or Canadian loans are generally based on LIBOR (or a LIBOR successor rate, if applicable, as provided for in the underlying credit agreement) or CDOR, respectively, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service and Standard and Poor’s.

As of December 31, 2021, we had no outstanding borrowings under this facility.

4 unchanged sentences

As of December 31, 2021, we had $ 1.8 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Letter of Credit Lines — As of December 31, 2021, we had utilized $ 764 million of other uncommitted letter of credit lines with terms maturing through April 2023.

Debt Borrowings and Repayments

364-Day Revolving Credit Facility — In October 2020, we borrowed $ 3.0 billion under this revolving credit facility to partially fund our acquisition of Advanced Disposal, discussed further in Note 18.

Upon closing our acquisition of Advanced Disposal on October 30, 2020, we repaid $ 870 million of borrowings primarily with proceeds from the sale of certain net assets to GFL Environmental, discussed further in Note 18, and to a lesser extent, available cash on hand.

In November 2020, we repaid the remainder of outstanding borrowings with proceeds from our November 2020 issuance of senior notes discussed below, and we contemporaneously terminated this facility, at which time we recognized a $ 2 million loss on early extinguishment of debt in our Consolidated Statement of Operations related to unamortized debt issuance costs.

Commercial Paper Program — During the year ended December 31, 2020, we had net cash borrowings of $ 1.8 billion (net of related discount on issuance), the proceeds of which were used for the redemption of senior notes discussed further below and to partially fund our acquisition of Advanced Disposal.

Senior Notes — In May 2019, we issued $ 4.0 billion of senior notes, $ 3.0 billion of which were due 2024, 2026, 2029 and 2039 and included a special mandatory redemption feature (the “SMR Notes”).

The SMR Notes were issued with the intention to partially fund our acquisition of Advanced Disposal.

Pursuant to the terms of the SMR Notes, we were required to redeem all of such outstanding notes, paying debt holders 101 % of the aggregate principal amounts of such notes, plus accrued but unpaid interest, as a result of the acquisition not being completed by July 14, 2020.

Accordingly, the redemption was completed on July 20, 2020 using available cash on hand and, to a lesser extent, commercial paper borrowings.

The cash paid included the $ 3.0 billion principal amount of debt redeemed, $ 30 million of related premiums and $ 8 million of accrued interest.

We recognized a $ 52 million loss on early extinguishment of debt in our Consolidated Statement of Operations related to the redemption during the third quarter of 2020, including $ 30 million of premiums paid and $ 22 million of unamortized discounts and debt issuance costs.

In November 2020, WM issued $ 2.5 billion of senior notes consisting of:

● $ 500 million of 0.750 % senior notes due November 15, 2025;

● $ 500 million of 1.150 % senior notes due March 15, 2028;

● $ 1.0 billion of 1.500 % senior notes due March 15, 2031 and

● $ 500 million of 2.500 % senior notes due November 15, 2050.

The net proceeds from these debt issuances were $ 2.48 billion.

We used the net proceeds to repay the remaining outstanding borrowings under our 364-day revolving credit facility as discussed above, to redeem our $ 400 million aggregate principal amount of 4.60 % senior notes due March 2021, including $ 5 million of accrued but unpaid interest, and for general corporate purposes.

In June 2020, we repaid $ 600 million of 4.75 % senior notes with available cash at their scheduled maturity.

Advanced Disposal Senior Notes — At the time of acquisition, Advanced Disposal had outstanding $ 425 million of 5.625 % senior notes due November 2024, the fair value of which was $ 438 million, representing our carrying value upon acquisition due to purchase accounting.

Upon closing of the acquisition of Advanced Disposal, the Company gave notice of redemption of the Advanced Disposal senior notes, pursuant to an optional redemption feature.

The redemption was completed on November 30, 2020 using borrowings under our 364-day revolving credit facility and our commercial paper program.

Pursuant to the optional redemption feature, we redeemed such outstanding notes for 102.813 % of the aggregate principal amount, or $ 437 million, and $ 13 million of accrued but unpaid interest.

Upon redemption, we recognized a

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$ 1 million gain on early extinguishment of debt in our Consolidated Statement of Operations due to the difference in carrying value and redemption price.

Debt Borrowings and Repayments

Commercial Paper Program — During the year ended December 31, 2021 we made cash repayments of $ 6.9 billion, which were partially offset by $ 6.8 billion of cash borrowings (net of related discount on issuance).

Senior Notes — In May 2021, WMI issued $ 950 million of senior notes consisting of $ 475 million of 2.00 % senior notes due June 1, 2029 and $ 475 million of 2.95 % senior notes due June 1, 2041.

The net proceeds from these debt issuances were $ 942 million, all of which were used, along with available cash on hand, to retire $ 1.3 billion of certain high-coupon senior notes.

The cash paid included the principal amount of the debt retired, $ 211 million of related premiums and other third-party costs, and $ 15 million of accrued interest.

During the second quarter of 2021, we recognized a $ 220 million loss on early extinguishment of debt in our Consolidated Statement of Operations related to the tender offer, including $ 211 million of premiums and other third-party costs and $ 9 million primarily related to unamortized discounts and debt issuance costs.

We also recognized $ 6 million of charges to interest expense for the write-off of cash flow hedges associated with the tendered notes, which was previously being amortized to interest expense through the notes’ stated maturities.

The following table summarizes the principal amount of senior notes redeemed within each series in order of acceptance priority level (in millions):

Notes Tendered

Prior to Tender

6.125 % WMI senior notes due 2039

7.75 % WMI senior notes due 2032

7.375 % WMI senior notes due 2029

4.15 % WMI senior notes due 2049

4.10 % WMI senior notes due 2045

3.90 % WMI senior notes due 2035

7.00 % WMI senior notes due 2028

7.10 % WM Holdings senior notes due 2026

3.50 % WMI senior notes due 2024

3.125 % WMI senior notes due 2025

3.15% WMI senior notes due 2027

2.90 % WMI senior notes due 2022

2.40 % WMI senior notes due 2023

Tax-Exempt Bonds — We issued $ 175 million of new tax-exempt bonds in 2021.

The proceeds from the issuance of these bonds were deposited directly into a restricted trust fund and may only be used for the specific purpose for which the money was raised, which is generally to finance expenditures for landfill and solid waste disposal facility construction and development.

In the third quarter of 2020, we elected to refund and reissue $ 130 million of tax-exempt bonds.

Additionally, during the year ended December 31, 2020, we repaid $ 82 million of our tax-exempt bonds with available cash at their scheduled maturities.

Financing Leases and Other — The decrease in 2020 is due to $ 108 million of cash repayments primarily related to our federal low-income housing investments, financing leases and other obligations, partially offset by an increase of $ 50 million mainly associated with non-cash financing leases and our acquisition of Advanced Disposal.

The proceeds from the issuance of these bonds were deposited directly into a restricted trust fund and may only be used for the specific purpose for which the money was raised, which is generally to finance expenditures for solid waste disposal facility and material recovery facility construction and development.

In 2021, we also elected to refund and reissue $ 50 million of tax-exempt bonds and we repaid $ 127 million of our tax-exempt bonds with available cash at their scheduled maturities.

Financing Leases and Other — The decrease during 2021 is due to $ 115 million of cash repayments of debt at maturity, partially offset by an increase of $ 30 million primarily associated with non-cash financing leases.

Scheduled Debt Payments

1 unchanged sentence

$ 2,449 million in 2022, $ 651 million in 2023, $ 249 million in 2024, $ 1,278 million in 2025, $ 677 million in 2026 and $ 8,275 million thereafter.

Our recorded debt and financing lease obligations include non-cash adjustments associated with debt issuance costs, discounts, premiums and fair value adjustments attributable to terminated interest rate derivatives, which have been excluded from these amounts because they will not result in cash payments.

Our recorded debt and financing lease obligations include non-cash adjustments associated with

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

debt issuance costs, discounts and fair value adjustments attributable to terminated interest rate derivatives, which have been excluded from these amounts because they will not result in cash payments.

See Note 7 below for further discussion of our financing lease arrangements.

Our debt balances are generally unsecured, except for financing leases and the notes payable associated with our investments in low-income housing properties.

See Notes 8 and 18 for additional information related to these investments.

Debt Covenants

2 unchanged sentences

This covenant requires that the Leverage Ratio for the preceding four fiscal quarters will not be more than 3.75 to 1, provided that if an acquisition permitted under the $3.5 billion revolving credit facility involving aggregate consideration in excess of $ 200 million occurs during the fiscal quarter, the Company shall have the right to increase the Leverage Ratio to 4.25 to 1 during such fiscal quarter and for the following three fiscal quarters (the “Elevated Leverage Ratio Period”).

Given the strength of the Company’s financial position and its expectation to maintain significant headroom within the Leverage Ratio, the Company has not elected to increase the Leverage Ratio for an Elevated Leverage Ratio Period since the acquisition of Advanced Disposal.

There shall be no more than two Elevated Leverage Ratio Periods during the term of the $3.5 billion revolving credit facility, and the Leverage Ratio must return to 3.75 to 1 for at least one fiscal quarter between Elevated Leverage Ratio Periods.

The Company did not elect to increase the Leverage Ratio for an Elevated Leverage Ratio Period following the acquisition of Advanced Disposal.

The calculation of all components used in the Leverage Ratio covenant are as defined in the $3.5 billion revolving credit facility.

2 unchanged sentences

We monitor our compliance with these restrictions, but do not believe that they significantly impact our ability to enter into investing or financing arrangements typical for our business.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2020 and 2019, we were in compliance with all covenants and restrictions under our financing arrangements that may have a material effect on our Consolidated Financial Statements.

As of December 31, 2021 and 2020, we were in compliance with all covenants and restrictions under our financing arrangements that may have a material effect on our Consolidated Financial Statements.

Our operating lease activities primarily consist of leases for real estate, landfills and operating equipment.

2 unchanged sentences

Most leases include one or more options to renew, with renewal terms generally ranging from one to 10 years .

The exercise of lease renewal options is at our sole discretion.

The exercise of lease renewal options is generally at our sole discretion.

We include the renewal term in the calculation of the right-of-use asset and related lease liability when such renewals are reasonably certain of being exercised.

2 unchanged sentences

Certain of our lease agreements include rental payments based on usage and other lease agreements include rental payments adjusted periodically for inflation;

these payments are treated as variable lease payments.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payments are treated as variable lease payments.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

9 unchanged sentences

Total lease liabilities

Operating lease expense was $ 140 million, $ 132 million and $ 129 million during 2020, 2019 and 2018, respectively, and is included in operating and selling, general and administrative expenses in our Consolidated Statement of Operations.

Financing lease expense for 2020 and 2019 was $ 51 million and $ 48 million, respectively, and is included in depreciation and amortization expense and interest expense, net in our Consolidated Statement of Operations.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating lease expense was $ 155 million, $ 140 million and $ 132 million during 2021, 2020 and 2019, respectively, and is included in operating and selling, general and administrative expenses in our Consolidated Statements of Operations.

Financing lease expense was $ 58 million, $ 51 million and $ 48 million during 2021, 2020 and 2019, respectively, and is included in depreciation and amortization expense and interest expense, net in our Consolidated Statements of Operations.

Minimum contractual obligations for our leases (undiscounted) as of December 31, 2021 are as follows (in millions):

1 unchanged sentence

Discounted lease liabilities

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash paid during 2021 for our operating and financing leases was $ 70 million and $ 64 million, respectively.

7 unchanged sentences

Income tax expense

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

federal statutory income tax rate is reconciled to the effective income tax rate for the year ended December 31 as follows:

2 unchanged sentences

State and local income taxes, net of federal income tax benefit

Impacts of enactment of tax reform

Federal tax credits

6 unchanged sentences

(ii) federal tax credits;

(iii) the tax implications of impairments;

(iv) excess tax benefits associated with equity-based compensation transactions;

(v) the realization of state net operating losses and credits;

(vi) tax audit settlements;

(vii) adjustments to our accruals and deferred taxes and (viii) the impacts of enactment of tax reform.

(iii) excess tax benefits associated with equity-based compensation transactions;

(iv) the realization of state net operating losses and credits;

(v) tax audit settlements;

(vi) adjustments to our accruals and deferred taxes;

(vii) the tax implications of divestitures;

(viii) non-deductible transaction costs and (ix) the tax implications of impairments.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For financial reporting purposes, income before income taxes by source for the year ended December 31 was as follows (in millions):

Income before income taxes

Foreign income before income taxes for the year ended December 31, 2019 includes a $ 52 million impairment charge related to our minority-owned investment in a waste conversion technology business.

See Note 12 for further discussion.

Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties.

1 unchanged sentence

The low-income housing investments qualify for federal tax credits that we expect to realize through 2030 under Section 42 or Section 45D of the Internal Revenue Code.

We also held a residual financial interest in an entity that owns a refined coal facility that qualified for federal tax credits under Section 45 of the Internal Revenue Code through 2019.

We also held a residual financial interest in an entity that owned a refined coal facility that qualified for federal tax credits under Section 45 of the Internal Revenue Code through 2019.

The entity sold the majority of its assets in the first quarter of 2020, which resulted in a $ 7 million non-cash impairment of our investment at that time.

We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities within our Consolidated Statements of Operations.

During the years ended December 31, 2020, 2019 and 2018, we recognized $ 73 million (including the $ 7 million impairment of the refined coal facility noted above), $ 46 million and $ 30 million of net losses, respectively, and a reduction in our income tax expense of $ 87 million, $ 96 million and $ 57 million, respectively, primarily due to tax credits realized from these investments.

In addition, during the years ended December 31, 2020, 2019 and 2018, we recognized interest expense of $ 11 million, $ 9 million and $ 3 million, respectively, associated with our investments in low-income housing properties.

During the years ended December 31, 2021, 2020 and 2019, we recognized net losses of $ 51 million, $ 73 million (including the $ 7 million impairment of the refined coal facility noted above) and $ 46 million, respectively, and a reduction in our income tax expense of $ 74 million, $ 87 million and $ 96 million, respectively, primarily due to tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

See Note 18 for additional information related to these unconsolidated variable interest entities.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Federal Tax Credits — During 2021, 2020 and 2019, we recognized federal tax credits in addition to the tax credits realized from our investments in low-income housing properties and the refined coal facility, resulting in a reduction in our income tax expense of $ 5 million, $ 7 million and $ 11 million, respectively.

Non-Deductible Transaction Costs — During 2020 and 2019, we recognized the detrimental tax impact of $ 27 million and $ 10 million, respectively, of non-deductible transaction costs related to our acquisition of Advanced Disposal.

The tax rules require the capitalization of certain facilitative costs on the acquisition of stock of a company resulting in the applicable costs not being deductible for tax purposes.

Tax Implications of Impairments — Portions of the impairment charges recognized during 2019 and 2018 were not deductible for tax purposes resulting in an increase in income tax expense of $ 15 million and $ 1 million, respectively.

The non-cash impairment charges recognized during 2020 were deductible for tax purposes.

See Note 12 for more information related to our impairment charges.

Equity-Based Compensation — During 2021, 2020 and 2019, we recognized excess tax benefits related to the vesting or exercise of equity-based compensation awards resulting in a reduction in our income tax expense of $ 18 million, $ 27 million and $ 25 million, respectively.

6 unchanged sentences

Any unresolved issues as of the tax return filing date are subject to routine examination procedures.

We are currently in the examination phase of IRS audits for the 2017 through 2020 tax years and expect these audits to be completed within the next 15 months .

We are currently in the examination phase of IRS audits for the 2017, 2020 and 2021 tax years and expect these audits to be completed within the next 15 months .

We are also currently undergoing audits by various state and local jurisdictions for tax years that date back to 2014.

Adjustments to Accruals and Deferred Taxes — Adjustments to our accruals and deferred taxes due to the filing of our income tax returns, analysis of our deferred tax balances and changes in state and foreign laws resulted in a reduction in our income tax expense of $ 3 million, $ 22 million and $ 52 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Enactment of Tax Reform – In accordance with applicable accounting guidance, the Company recognized the provisional tax impacts and subsequent measurement period adjustments related to the remeasurement of our deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings, resulting in a reduction in our income tax expense of $ 12 million for the year ended December 31, 2018.

Unremitted Earnings in Foreign Subsidiaries — In the third quarter of 2020, we modified our permanent reinvestment assertion and began providing additional income taxes for the undistributed current year earnings of our foreign subsidiaries.

No additional income taxes have been provided for any remaining undistributed foreign earnings prior to 2020 not subject to the one-time, mandatory transition tax, or any additional outside basis difference, as these amounts continue to be indefinitely reinvested in foreign operations.

Adjustments to Accruals and Related Deferred Taxes — Adjustments to our accruals and related deferred taxes primarily due to the filing of our income tax returns, analysis of our deferred tax balances and uncertain tax positions, and

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

changes in state and foreign laws resulted in an increase in our income tax expense of $ 17 million for the year ended December 31, 2021, and a reduction in our income tax expense of $ 3 million and $ 22 million for the years ended December 31, 2020 and 2019, respectively.

Tax Implications of Divestitures – During 2021, we recognized a pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations.

This gain was not taxable, which resulted in a reduction in our income tax expense of $ 8 million.

The tax rules require the capitalization of certain facilitative costs on the acquisition of stock of a company resulting in the applicable costs not being deductible for tax purposes.

Tax Implications of Impairments — Portions of the impairment charges recognized during 2019 were not deductible for tax purposes resulting in an increase in income tax expense of $ 15 million.

The non-cash impairment charges recognized during 2021 and 2020 were deductible for tax purposes.

See Note 11 for more information related to our impairment charges.

Deferred Tax Assets (Liabilities)

11 unchanged sentences

Net deferred tax liabilities

(a) We have revised the classification between components of the net deferred tax liability as of December 31, 2020 in order to present the balances on a comparative basis with the classification as of December 31, 2021.

These classification revisions were made as we finalized the integration of the Advanced Disposal tax processes.

As of December 31, 2021, we had $ 11 million of federal net operating loss carry-forwards with expiration dates through 2026 and $ 2.7 billion of state net operating loss carry-forwards with expiration dates through 2041.

We also had $ 37 million of foreign tax credit carry-forwards with expiration dates through 2030 and $ 16 million of state tax credit carry-forwards with expiration dates through 2036.

We also had $ 47 million of federal capital loss carry-forwards with expiration dates through 2025, $ 38 million of foreign tax credit

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carry-forwards with expiration dates through 2031 and $ 12 million of state tax credit carry-forwards with expiration dates through 2037.

We have established valuation allowances for uncertainties in realizing the benefit of certain tax loss and credit carry-forwards and other deferred tax assets.

11 unchanged sentences

We recognize interest expense related to unrecognized tax benefits in our income tax expense, which was not material for the reported periods.

We did not have any accrued liabilities or expense for penalties related to unrecognized tax benefits for the reported periods.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We did not have any material accrued liabilities or expense for penalties related to unrecognized tax benefits for the reported periods.

Employee Benefit Plans

7 unchanged sentences

Charges to operating and selling, general and administrative expenses for our defined contribution plans totaled $ 104 million, $ 92 million and $ 88 million for the years ended December 31, 2021, 2020 and 2019, respectively.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Defined Benefit Plans (other than multiemployer defined benefit pension plans discussed below) — WM Holdings sponsors a defined benefit plan for certain employees who are subject to collective bargaining agreements that provide for participation in this plan.

Further, certain of our Canadian subsidiaries sponsor defined benefit plans that are frozen to new participants.

As of December 31, 2020, the combined benefit obligation of these pension plans was $ 154 million supported by $ 150 million of combined plan assets, resulting in an aggregate unfunded benefit obligation for these plans of $ 4 million.

As of December 31, 2021, the combined benefit obligation of these pension plans was $ 150 million supported by $ 150 million of combined plan assets.

1 unchanged sentence

In conjunction with our acquisition of WM Holdings in July 1998, we limited participation in these plans to participating retirees as of December 31, 1998.

The unfunded benefit obligation for these plans was $ 14 million as of December 31, 2020 and 2019.

Our accrued benefit liabilities for our defined benefit pension and other post-retirement plans were $ 18 million and $ 19 million as of December 31, 2020 and 2019, respectively, and are included as components of accrued liabilities and long-term other liabilities in our Consolidated Balance Sheets.

The unfunded benefit obligation for these plans was $ 12 million and $ 14 million as of December 31, 2021 and 2020, respectively.

Our accrued benefit liabilities for our defined benefit pension and other post-retirement plans are included as components of accrued liabilities and long-term other liabilities in our Consolidated Balance Sheets.

Multiemployer Defined Benefit Pension Plans — We are a participating employer in a number of trustee-managed multiemployer defined benefit pension plans (“Multiemployer Pension Plans”) for employees who are covered by collective bargaining agreements.

The risks of participating in these Multiemployer Pension Plans are different from single-employer plans in that (i) assets contributed to the Multiemployer Pension Plan by one employer may be used to provide benefits to employees or former employees of other participating employers;

(ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the remaining participating employers and (iii) if we choose to stop participating in any of our Multiemployer Pension Plans, we may be required to

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

pay those plans a withdrawal amount based on the underfunded status of the plan.

The following table outlines our participation in Multiemployer Pension Plans considered to be individually significant (dollars in millions):

10 unchanged sentences

Not Endangered or Critical as of 3/31/2021

Endangered as of 3/31/2019

Not Endangered or Critical as of 3/31/2020

Various dates

1 unchanged sentence

Not Endangered or Critical

Various dates

9 unchanged sentences

Under the Multiemployer Pension Reform Act of 2014, a plan is generally in critical and declining status if it (i) is certified to be in critical status pursuant to the Pension Protection Act of 2006 and (ii) is projected to be insolvent within the next 15 years or, in certain circumstances, 20 years .

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b) The “FIP/RP Status” column indicates plans for which a Funding Improvement Plan (“FIP”) or a Rehabilitation Plan (“RP”) has been implemented.

8 unchanged sentences

In connection with our ongoing renegotiations of various collective bargaining agreements, we may discuss and negotiate for the complete or partial withdrawal from one or more of these pension plans.

Further, business events, such as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or discontinuance of certain operations, which result in the decline of Company contributions to a Multiemployer Pension

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Plan could trigger a partial or complete withdrawal.

In the event of a withdrawal, we may incur expenses associated with our obligations for unfunded vested benefits at the time of the withdrawal.

In 2020, 2019 and 2018, we recognized charges of $ 4 million, $ 1 million and $ 3 million, respectively, to operating expenses for the withdrawal from certain underfunded Multiemployer Pension Plans.

Refer to Note 10 for additional information related to our obligations to Multiemployer Pension Plans for which we have withdrawn or partially withdrawn.

3 unchanged sentences

Financial Instruments — We have obtained letters of credit, surety bonds and insurance policies and have established trust funds and issued financial guarantees to support tax-exempt bonds, contracts, performance of landfill final capping, closure and post-closure requirements, environmental remediation and other obligations.

Letters of credit generally are supported by our $ 3.5 billion revolving credit facility and other credit lines established for that purpose.

Letters of credit generally are supported by our $ 3.5 billion revolving credit facility and other letter of credit lines established for that purpose.

These facilities are discussed further in Note 6.

4 unchanged sentences

In an ongoing effort to mitigate risks of future cost increases and reductions in available capacity, we continue to evaluate various options to access cost-effective sources of financial assurance.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Insurance — We carry insurance coverage for protection of our assets and operations from certain risks including general liability, automobile liability, workers’ compensation, real and personal property, directors’ and officers’ liability, pollution legal liability, cyber incident liability and other coverages we believe are customary to the industry.

8 unchanged sentences

As of December 31, 2021, our automobile liability insurance program included a per-incident deductible of up to $ 10 million.

Our receivable balance associated with

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

insurance claims was $ 139 million and $ 126 million as of December 31, 2020 and 2019, respectively.

Our receivable balance associated with insurance claims was $ 155 million and $ 139 million as of December 31, 2021 and 2020 respectively.

The changes to our insurance reserves for the year ended December 31 are summarized below (in millions):

6 unchanged sentences

(a) Based on current estimates, we anticipate that most of our insurance reserves will be settled in cash over the next six years .

(b) Insurance reserves of $ 68 million related to the acquisition of Advanced Disposal.

(b) Insurance reserves of $ 68 million as of December 31, 2020 related to the acquisition of Advanced Disposal.

We do not expect the impact of any known casualty, property, environmental or other contingency to have a material impact on our financial condition, results of operations or cash flows.

Operating and Financing Leases — Our operating and financing leases are discussed in Note 8.

Other Commitments

Unconditional Purchase Obligations — Our unconditional purchase obligations are generally established in the ordinary course of our business and are structured in a manner that provides us with access to important resources at competitive, market-driven rates and consist primarily of the following:

● Disposal — We have several agreements expiring at various dates through 2052 that require us to dispose of a minimum number of tons at third-party disposal facilities.

1 unchanged sentence

We generally fulfill our minimum contractual obligations by disposing of volumes collected in the ordinary course of business at these disposal facilities.

● Waste Paper — We are party to waste paper purchase agreements expiring at various dates through 2023 that require us to purchase a minimum number of tons of waste paper.

The cost per ton we pay is based on market prices.

● Royalties — We have various arrangements that require us to make royalty payments to third parties including prior land owners, lessors or host communities where our operations are located.

Our obligations generally are based on per ton rates for waste actually received at our transfer stations or landfills.

Royalty agreements that are non-cancelable and require fixed or minimum payments are included in our financing leases and other debt obligations in our Consolidated Balance Sheets as disclosed in Note 7.

Our unconditional purchase obligations are generally established in the ordinary course of our business and are structured in a manner that provides us with access to important resources at competitive, market-driven rates.

As of December 31, 2020, our estimated minimum obligations associated with unconditional purchase obligations, which are not recognized in our Consolidated Balance Sheets, were $ 160 million in 2021, $ 147 million in 2022, $ 133 million in 2023, $ 114 million in 2024, $ 100 million in 2025 and $ 454 million thereafter.

● Other — We are party to certain multi-year service agreements expiring at various dates through 2030 requiring minimum annual payments.

As of December 31, 2021, our estimated minimum obligations associated with unconditional purchase obligations, which are not recognized in our Consolidated Balance Sheets, were $ 197 million in 2022, $ 182 million in 2023,

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$ 130 million in 2024, $ 105 million in 2025, $ 95 million in 2026 and $ 368 million thereafter.

We may also establish unconditional purchase obligations in conjunction with acquisitions or divestitures.

1 unchanged sentence

For contracts that require us to purchase minimum quantities of goods or services, we have estimated our future minimum obligations based on the current market values of the underlying products or services or contractually stated amounts.

We currently expect the products and services provided by these agreements to continue to

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

meet the needs of our ongoing operations.

We currently expect the products and services provided by these agreements to continue to meet the needs of our ongoing operations.

Therefore, we do not expect these established arrangements to materially impact our future financial position, results of operations or cash flows.

Other Commitments

● Royalties — We have various arrangements that require us to make royalty payments to third parties including prior land owners, lessors or host communities where our operations are located.

Our obligations generally are based on per ton rates for waste actually received at our transfer stations or landfills.

Guarantees — We have entered into the following guarantee agreements associated with our operations:

● As of December 31, 2020, WM Holdings has fully and unconditionally guaranteed all of WM’s senior indebtedness, including its senior notes, $ 3.5 billion revolving credit facility and certain letter of credit lines, which mature through 2050.

WM has fully and unconditionally guaranteed the senior indebtedness of WM Holdings, which matures in 2026.

● As of December 31, 2021, WM Holdings has fully and unconditionally guaranteed all of WMI’s senior indebtedness, including its senior notes, $ 3.5 billion revolving credit facility and certain letter of credit lines, which mature through 2050.

WMI has fully and unconditionally guaranteed the senior indebtedness of WM Holdings, which matures in 2026.

Performance under these guarantee agreements would be required if either party defaulted on their respective obligations.

No additional liabilities have been recorded for these intercompany guarantees because all of the underlying obligations are reflected in our Consolidated Balance Sheets.

● WM and WM Holdings have guaranteed subsidiary debt obligations, including tax-exempt bonds, financing leases and other indebtedness.

If a subsidiary fails to meet its obligations associated with its debt agreements as they come due, WM or WM Holdings will be required to perform under the related guarantee agreement.

● WMI and WM Holdings have guaranteed subsidiary debt obligations, including tax-exempt bonds, financing leases and other indebtedness.

If a subsidiary fails to meet its obligations associated with its debt agreements as they come due, WMI or WM Holdings will be required to perform under the related guarantee agreement.

No additional liabilities have been recorded for these intercompany guarantees because all of the underlying obligations are reflected in our Consolidated Balance Sheets.

4 unchanged sentences

As of December 31, 2021, we have agreements guaranteeing certain market value losses for certain properties adjacent to or near 18 of our landfills.

We do not believe that these contingent obligations will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Any liability associated with the triggering of the home value has been reflected in our Consolidated Balance Sheets.

We do not believe that the remaining contingent obligations will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

● We have indemnified the purchasers of businesses or divested assets for the occurrence of specified events under certain of our divestiture agreements.

2 unchanged sentences

We do not currently believe that contingent obligations to provide indemnification or pay additional post-closing consideration in connection with our divestitures or acquisitions will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

● WM and WM Holdings guarantee the service, lease, financial and general operating obligations of certain of their subsidiaries.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

● WMI and WM Holdings guarantee the service, lease, financial and general operating obligations of certain of their subsidiaries.

If such a subsidiary fails to meet its contractual obligations as they come due, the guarantor has an unconditional obligation to perform on its behalf.

5 unchanged sentences

In addition to remediation activity required by state or local authorities, such liabilities include PRP investigations.

The costs associated with these liabilities

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

can include settlements, certain legal and consultant fees, as well as incremental internal and external costs directly associated with site investigation and clean-up.

The costs associated with these liabilities can include settlements, certain legal and consultant fees, as well as incremental internal and external costs directly associated with site investigation and clean-up.

As of December 31, 2021, we have been notified by the government that we are a PRP in connection with 73 locations listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”).

10 unchanged sentences

On October 11, 2017, the EPA issued its Record of Decision (“ROD”) with respect to the previously proposed remediation plan for the San Jacinto waste pits in Harris County, Texas.

McGinnes Industrial Maintenance Corporation (“MIMC”), an indirect wholly-owned subsidiary of WM, operated some of the waste pits from 1965 to 1966 and has been named as a site PRP.

In 1998, WM acquired the stock of the parent entity of MIMC.

McGinnes Industrial Maintenance Corporation (“MIMC”), an indirect wholly-owned subsidiary of WMI, operated some of the waste pits from 1965 to 1966 and has been named as a site PRP.

In 1998, WMI acquired the stock of the parent entity of MIMC.

MIMC has been working with the EPA and other named PRPs as the process of addressing the site proceeds.

3 unchanged sentences

MIMC’s ultimate liability could be materially different from current estimates.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings, or such proceedings are known to be contemplated, unless we reasonably believe that the matter will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, below a stated threshold.

In accordance with this SEC regulation, the Company uses a threshold of $ 1 million for purposes of determining whether disclosure of any such environmental proceedings is required.

As of the date of this filing, we are not aware of any matters that are required to be disclosed pursuant to this standard.

From time to time, we are also named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of having owned, operated or transported waste to a disposal facility that is alleged to have contaminated the environment or, in certain cases, on the basis of having conducted environmental remediation activities at sites.

5 unchanged sentences

and Canada, we are subject to various proceedings, lawsuits, disputes and claims arising in the ordinary course of our business.

Many of these actions raise complex factual

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and legal issues and are subject to uncertainties.

Many of these actions raise complex factual and legal issues and are subject to uncertainties.

Actions that have been filed against us, and that may be filed against us in the future, include personal injury, property damage, commercial, customer, and employment-related claims, including purported state and national class action lawsuits related to:

5 unchanged sentences

We currently do not believe that the eventual outcome of any such actions will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

WM’s charter and bylaws provide that WM shall indemnify against all liabilities and expenses, and upon request shall advance expenses to any person, who is subject to a pending or threatened proceeding because such person is or was a director or officer of the Company.

WMI’s charter and bylaws provide that WMI shall indemnify against all liabilities and expenses, and upon request shall advance expenses to any person, who is subject to a pending or threatened proceeding because such person is or was a director or officer of the Company.

Such indemnification is required to the maximum extent permitted under Delaware law.

Accordingly, the director or officer must execute an undertaking to reimburse the Company for any fees advanced if it is later determined that the director or officer was not permitted to have such fees advanced under Delaware law.

Additionally, the Company has direct contractual obligations to provide indemnification to each of the members of WM’s Board of Directors and each of WM’s executive officers.

Additionally, the Company has direct contractual obligations to provide indemnification to each of the members of WMI’s Board of Directors and each of WMI’s executive officers.

The Company may incur substantial expenses in connection with the fulfillment of its advancement of costs and indemnification obligations in connection with actions or proceedings that may be brought against its former or current officers, directors and employees.

4 unchanged sentences

A complete or partial withdrawal from a Multiemployer Pension Plan may also occur if employees covered by a collective bargaining agreement vote to decertify a union from continuing to represent them.

Any other circumstance resulting in a decline in Company contributions to a Multiemployer Pension Plan through a reduction in the labor force, whether through attrition over time or through a business event (such as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or discontinuance of certain operations) may also trigger a complete or partial withdrawal from one or more of these pension plans.

In 2020, 2019 and 2018, we recognized $ 4 million, $ 1 million and $ 3 million, respectively, of charges to operating expenses for the withdrawal from certain underfunded Multiemployer Pension Plans.

Any other circumstance resulting in a decline in Company contributions to a Multiemployer Pension Plan through a reduction in the labor force, whether through attrition

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

over time or through a business event (such as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or discontinuance of certain operations) may also trigger a complete or partial withdrawal from one or more of these pension plans.

We do not believe that any future liability relating to our past or current participation in, or withdrawals from, the Multiemployer Pension Plans to which we contribute will have a material adverse effect on our business, financial condition or liquidity.

3 unchanged sentences

See Note 8 for additional discussion regarding income taxes.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Asset Impairments and Unusual Items

3 unchanged sentences

Asset impairments

During the year ended December 31, 2020, we recognized $ 35 million of net charges primarily related to the following:

Gain from Divestitures, Net — As discussed further in Note 18, we and Advanced Disposal entered into an agreement that provided for GFL Environmental to acquire a combination of assets from us and Advanced Disposal to address divestitures required by the U.S.

Department of Justice in connection with our acquisition of Advanced Disposal (as subsequently amended, the “Divestiture Agreement”).

Immediately following the closing of the Advanced Disposal acquisition, the transactions contemplated by the Divestiture Agreement were consummated and the Company subsequently received cash proceeds of $ 856 million, subject to certain post-closing adjustments.

We recognized a net gain of $ 33 million on our net assets divested under the Divestiture Agreement, primarily within our Tier 2 segment.

Energy Services Asset Impairments — During the second quarter of 2020, the Company tested the recoverability of certain energy services assets in our Tier 1 segment.

Indicators of impairment included (i) the sharp downturn in oil demand that has led to a significant decline in oil prices and production activities, which we project will have long-term impacts on the utilization of our assets and (ii) significant shifts in our business, including increases in competition and customers choosing to bury waste on site versus in a landfill, reducing our revenue outlook.

The Company determined that the carrying amount of the asset group was not fully recoverable.

As a result, we recognized $ 41 million of non-cash impairment charges primarily related to two landfills and an oil field waste injection facility in our Tier 1 segment.

We wrote down the net book value of these assets to their estimated fair value using an income approach based on estimated future cash flow projections (Level 3).

The aggregate fair value of the impaired asset group was $ 8 million as of June 30, 2020.

The Company tested the recoverability of an additional $ 239 million in energy services assets and determined that the carrying amount was recoverable as of June 30, 2020.

No new indicators of impairment were identified during the second half of 2020.

Other Impairments — In addition to the energy services impairments noted above, we recognized a $ 20 million non-cash impairment charge in our Tier 3 segment due to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace, which was considered an impairment indicator.

As the carrying value was not recoverable, we wrote off the entire net book value of the asset using an income approach based on estimated future cash flow projections (Level 3).

The impairment charge was comprised of $ 12 million related to the carrying value of the asset and $ 8 million related to the acceleration of the expected timing of capping, closure and post-closure activities, which is discussed further in Note 4.

Additionally, during the third quarter of 2020, we recognized $ 7 million of net charges primarily related to non-cash impairments of certain assets within our WM Renewable Energy business in our Other segment.

As the carrying values of the assets were not recoverable, we wrote off their entire net carrying value using an income approach based on estimated future cash flow projections (Level 3).

During the year ended December 31, 2021, we recognized net gains of $ 16 million primarily consisting of (i) a $ 35 million pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our East Tier segment and (ii) an $ 8 million gain from divestitures of certain ancillary operations in our Other segment.

These gains were partially offset by (i) a $ 20 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment and (ii) $ 8 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other segment.

During the year ended December 31, 2020, we recognized $ 35 million of net charges primarily related to (i) a $ 33 million net gain associated with net asset divestitures executed to address requirements of the U.S.

Department of Justice in connection with our acquisition of Advanced Disposal, primarily within our West Tier segment;

(ii) $ 41 million of non-cash impairment charges primarily related to two landfills and an oil field waste injection facility in our West Tier segment;

(iii) a $ 20 million non-cash impairment charge in our East Tier segment due to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace and (iv) $ 7 million of net charges primarily related to non-cash impairments of certain assets within our WM Renewable Energy business in our Other segment.

During the year ended December 31, 2019, we recognized asset impairments of $ 42 million, related to (i) $ 27 million of goodwill impairment charges within our Other segment, of which $ 17 million related to our EES business and $ 10 million related to our LampTracker ® reporting unit, and (ii) $ 15 million of asset impairment charges primarily related to certain solid waste operations in our West Tier segment.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the year ended December 31, 2019, we recognized asset impairments of $ 42 million, related to (i) $ 27 million of goodwill impairment charges of which $ 17 million related to our EES business and $ 10 million related to our LampTracker ® reporting unit and (ii) $ 15 million of asset impairment charges primarily related to certain solid waste operations.

During the year ended December 31, 2018, we recognized net gains of $ 58 million, primarily related to (i) a $ 52 million gain associated with the sale of certain hauling operations in our Tier 1 segment and (ii) net gains of $ 44 million substantially all from divestitures of certain ancillary operations.

These gains were partially offset by (i) a $ 30 million charge to impair a landfill in our Tier 3 segment based on an internally developed discounted projected cash flow analysis, taking into account continued volume decreases and revised capping cost estimates and (ii) $ 8 million of impairment charges primarily related to our LampTracker ® reporting unit.

See Note 2 for additional information related to the accounting policy and analysis involved in identifying and calculating impairments.

1 unchanged sentence

Equity in Net Losses of Unconsolidated Entities

During the year ended December 31, 2020 we recorded a non-cash impairment charge of $ 7 million related to our investment in a refined coal facility which is discussed further in Notes 9 and 19.

During the year ended December 31, 2020, we recorded a non-cash impairment charge of $ 7 million related to an investment in a refined coal facility which is discussed further in Note 8.

The fair value of our investment was not readily determinable;

thus, we determined the fair value using management assumptions pertaining to investment value (Level 3).

During the first quarter of 2019, we recognized a $ 52 million non-cash impairment charge related to our minority-owned investment in a waste conversion technology business.

The remaining losses during the years ended December 31, 2021, 2020 and 2019 were primarily related to our noncontrolling interests in entities established to invest in and manage low-income housing properties.

Refer to Notes 8 and 18 for additional information related to these investments.

In 2019, we recognized a $ 52 million non-cash impairment charge related to our minority-owned investment in a waste conversion technology business.

We wrote down our investment to its estimated fair value as the result of recent third-party investor’s transactions in these securities.

4 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, which is included as a component of WM stockholders’ equity, are as follows (in millions, with amounts in parentheses representing decreases to accumulated other comprehensive income):

The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, which is included as a component of WMI stockholders’ equity, are as follows (in millions, with amounts in parentheses representing decreases to accumulated other comprehensive income):

Adjustments(a)

Balance, December 31, 2018

2 unchanged sentences

Net current period other comprehensive income (loss)

Adoption of new accounting standard (a)

Balance, December 31, 2019

7 unchanged sentences

Balance, December 31, 2021

(a) As of January 1, 2018, we adopted ASU 2018-02 and reclassified stranded tax effects to retained earnings.

(a) As a result of the divestiture of certain non-strategic Canadian operations in the third quarter of 2021, we reclassified $ 35 million of cumulative foreign currency translation adjustments from accumulated other comprehensive income to gain from divestitures, asset impairments and unusual items within our Consolidated Statement of Operations .

Capital Stock, Dividends and Common Stock Repurchase Program

16 unchanged sentences

The remaining shares repurchased over the course of each repurchase period are delivered to us once the repurchase period is complete.

Shares repurchased are reflected in the period the shares are delivered to us.

In the table below, shares repurchased are measured and reported based on the period shares are delivered to us, which can differ from the period cash is delivered to a repurchase agent for the value of such shares.

During 2021, we allocated an aggregate of $ 1.35 billion in cash under ASR agreements to repurchase shares.

As of December 31, 2021, we had received 8.7 million shares with a weighted average price per share of $ 146.61 .

In January 2022, we completed our ASR agreement executed in December 2021, at which time we received an additional 0.4 million shares.

The following is a summary of our share repurchases under our common stock repurchase program for the year ended December 31:

2 unchanged sentences

Total repurchases (in millions)

(a) During 2020, we executed and completed an ASR agreement to repurchase $ 313 million of our common stock and received 2.8 million shares in connection with this ASR agreement.

We also repurchased an additional 0.9 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934 (“Exchange Act”) for $ 89 million, inclusive of per-share commissions.

(a) We executed and completed three ASR agreements during 2021 to repurchase $ 1.0 billion of our common stock and received 7.0 million shares in connection with these ASR agreements.

In addition, in December 2021, we executed an ASR agreement to repurchase $ 350 million of our common stock.

At the beginning of the repurchase period, we delivered $ 350 million in cash and received 1.7 million shares based on a stock price of $ 160.67 .

The ASR agreement completed in January 2022, at which time we received 0.4 million additional shares based on a final weighted average price of $ 160.33 .

(b) During 2020, we executed and completed an ASR agreement to repurchase $ 313 million of our common stock and received 2.8 million shares in connection with this ASR agreement.

(c) During 2019, we executed and completed an ASR agreement to repurchase $ 180 million of our common stock and received 1.6 million shares in connection with this ASR agreement.

We also repurchased an additional 0.7 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act for $ 64 million, inclusive of per-share commissions.

(c) During 2018, we executed and completed four ASR agreements to repurchase $ 850 million of our common stock and we received 9.8 million shares in connection with these ASR agreements.

We also repurchased an additional 1.9 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act for $ 158 million, inclusive of per-share commissions, which includes $ 4 million paid in 2019.

We announced in December 2020 that the Board of Directors has authorized up to $ 1.35 billion in future share repurchases, which supersedes and replaces remaining authority under any prior Board of Directors’ authorization for share repurchases.

Any future share repurchases will be made at the discretion of management and will depend on factors similar to those considered by the Board of Directors in making dividend declarations, including our net earnings, financial condition and cash required for future business plans, growth and acquisitions.

We announced in December 2021 that the Board of Directors has authorized up to $ 1.5 billion in future share repurchases.

Any future share repurchases will be made at the discretion of management and will depend on factors similar

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to those considered by the Board of Directors in making dividend declarations, including our net earnings, financial condition and cash required for future business plans, growth and acquisitions.

Equity-Based Compensation

7 unchanged sentences

The total number of shares issued under the plan for the offering periods in 2021, 2020 and 2019 was approximately 513,000 , 570,000 and 537,000 , respectively.

After the January 2021 issuance of shares associated with the July to December 2020 offering period, 3.2 million shares remain available for issuance under the ESPP, which includes 3.0 million additional shares that stockholders approved in May 2020 for future issuance.

After the January 2022 issuance of shares associated with the July to December 2021 offering period, 2.7 million shares remain available for issuance under the ESPP.

As a result of our ESPP, annual compensation expense increased by $ 12 million, or $ 9 million net of tax expense, for 2021, $ 13 million, or $ 10 million net of tax expense, for 2020 and $ 10 million, or $ 7 million net of tax expense, for 2019.

2 unchanged sentences

The 2014 Plan authorized 23.8 million shares of our common stock for issuance pursuant to the 2014 Plan, plus the approximately 1.1 million shares that then remained available for issuance under the 2009 Plan, and any shares subject to outstanding awards under both incentive plans that are subsequently cancelled, forfeited, terminate, expire or lapse.

In May 2020, the Company’s Board of Directors amended the 2014 Plan to provide that future shares surrendered in payment of the exercise or purchase price of an award, or any future shares used to satisfy the withholding obligations, shall no longer be available for the grant of another award under the 2014 Plan.

In May 2020, the Company’s Board of Directors amended the 2014 Plan to provide that the number of future shares surrendered in payment of the exercise or purchase price of an award, and the number of future shares used to satisfy the withholding obligations, shall no longer be credited back to the total number of shares available for issuance under the 2014 Plan.

As of December 31, 2021, approximately 16.9 million shares were available for future grants under the 2014 Plan.

All of our equity-based compensation awards described herein have been made pursuant to either our 2009 Plan or our 2014 Plan, collectively referred to as the “Incentive Plans”.

We currently utilize treasury shares to meet the needs of our equity-based compensation programs.

All of our equity-based compensation awards described herein have been made pursuant to either our 2009 Plan or our 2014 Plan, collectively referred to as the “Incentive Plans.” We currently utilize treasury shares to meet the needs of our equity-based compensation programs.

Pursuant to the Incentive Plans, we have the ability to issue stock options, stock appreciation rights and stock awards, including restricted stock, restricted stock units (“RSUs”) and performance share units (“PSUs”).

1 unchanged sentence

The 2021 annual incentive plan awards granted to the Company’s senior leadership team, which generally includes the Company’s executive officers, included a combination of PSUs and stock options.

Additionally, one member of the Company’s senior leadership team received a grant of RSUs in 2021 in special recognition of 2020 contributions.

The Incentive Plans awards granted to other eligible employees included a combination of PSUs, RSUs and stock options in 2021.

11 unchanged sentences

Unvested units are subject to forfeiture in the event of voluntary or for-cause termination.

RSUs are subject to pro-rata vesting upon an employee’s retirement or involuntary termination other than for cause and generally payout at the end of the three-year vesting period and become immediately vested in the event of an employee’s death or disability.

Compensation expense associated with RSUs is measured based on the grant-date fair value of our common stock and is recognized on a straight-line basis over the required employment period, which is generally the vesting period.

RSUs are generally subject to pro-rata vesting upon an employee’s involuntary termination other than for cause and generally payout at the end of the three-year vesting period and become immediately vested in the event of an employee’s death or disability.

Compensation expense associated with RSUs is measured based on the grant-date fair value of our common stock and is recognized on a straight-line basis over the required employment period.

Beginning in 2021, the terms of the award agreements for new grants of RSUs were updated to provide for accelerated vesting following retirement as if the employee had remained employed until the end of the vesting period.

Accordingly, compensation expense for RSUs granted to retirement eligible employees is recognized over the longer of (i) the period between grant date and the date that the recipient becomes retirement-eligible or (ii) the defined service requirement of the award.

Compensation expense is only recognized for those awards that we expect to vest, which we estimate based upon an assessment of expected forfeitures.

Performance Share Units — Two types of PSUs are currently outstanding:

(i) PSUs for which payout is dependent on total shareholder return relative to the S&P 500 (“TSR PSUs”) and (ii) PSUs for which payout is dependent on the Company’s performance against pre-established adjusted cash flow metrics (“Cash Flow PSUs”).

(i) PSUs for which payout is dependent on total shareholder return relative to the S&P 500 Index (“TSR PSUs”) and (ii) PSUs for which payout is dependent on the Company’s performance against pre-established adjusted cash flow metrics (“Cash Flow PSUs”).

Both types of PSUs are payable in shares of common stock after the end of a three-year performance period, when the Company’s financial performance for the entire performance period is reported, typically in mid- to late-February of the succeeding year.

4 unchanged sentences

Unvested as of December 31, 2021

The determination of achievement of performance results and corresponding vesting of PSUs for the three-year performance period ended December 31, 2020 was performed by the Management Development and Compensation Committee in February 2021.

Accordingly, vesting information for such awards is not included in the table above as of December 31, 2020.

The “vested” PSUs are for the three-year performance period ended December 31, 2019, as achievement of performance results and corresponding vesting was determined in February 2020.

The performance of the

The determination of achievement of performance results and corresponding vesting of PSUs for the three-year performance period ended December 31, 2021 was performed by the Management Development and Compensation

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company’s common stock for purposes of the TSR PSUs exceeded target and neared maximum performance criteria, and the Company’s financial results, as measured for purposes of the Cash Flow PSUs, achieved the maximum performance criteria.

Committee of our Board of Directors in February 2022.

Accordingly, vesting information for such awards is not included in the table above as of December 31, 2021.

The “vested” PSUs are for the three-year performance period ended December 31, 2020, as achievement of performance results and corresponding vesting was determined in February 2021.

The performance of the Company’s common stock for purposes of the TSR PSUs exceeded target performance criteria, and the Company’s financial results, as measured for purposes of the Cash Flow PSUs, achieved the maximum performance criteria.

Accordingly, recipients of the PSU awards received a payout of 172.84 % of the vested TSR PSUs and 200 % of the vested Cash Flow PSUs.

15 unchanged sentences

As of December 31, 2021, we had approximately 201,000 vested deferred units outstanding.

Stock Options — Stock options granted vest primarily in 25 % increments on the first two anniversaries of the date of grant with the remaining 50 % vesting on the third anniversary.

The exercise price of the options is the average of the high and low market value of our common stock on the date of grant, and the options have a term of 10 years .

Stock Options — Stock options granted prior to 2021 vest in 25 % increments on the first two anniversaries of the date of grant with the remaining 50 % vesting on the third anniversary.

Stock options granted in 2021 vest ratably in three annual increments, beginning on the first anniversary of the date of grant.

The exercise price of the options is the average of the

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

high and low market value of our common stock on the date of grant, and the options have a term of 10 years .

A summary of our stock options is presented in the table below (options in thousands):

6 unchanged sentences

(a) Stock options outstanding as of December 31, 2021 have a weighted average remaining contractual term of 6.6 years and an aggregate intrinsic value of $ 238 million based on the market value of our common stock on December 31, 2021.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b) Stock options exercisable as of December 31, 2021 have an aggregate intrinsic value of $ 155 million based on the market value of our common stock on December 31, 2021.

18 unchanged sentences

The weighted average grant-date fair value of stock options granted during the years ended December 31, 2021, 2020 and 2019 was $ 17.25 , $ 15.82 and $ 12.22 , respectively.

The fair value of stock options at the date of grant is amortized to expense over the vesting period less expected forfeitures, except for stock options granted to retirement-eligible employees, for which expense is accelerated over the period that the recipient becomes retirement-eligible.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

recipient becomes retirement-eligible.

The following table presents the weighted average assumptions used to value employee stock options granted during the year ended December 31 under the Black-Scholes valuation model:

5 unchanged sentences

The expected volatility assumption is derived from the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options, combined with other relevant factors including implied volatility in market-traded options on the Company’s stock.

The dividend yield is the annual rate of dividends per share over the exercise price of the option as of the grant date.

The expected dividend yield is the annual rate of dividends per share over the exercise price of the option as of the grant date.

For the years ended December 31, 2021, 2020 and 2019, we recognized $ 94 million, $ 79 million and $ 75 million, respectively, of compensation expense associated with RSU, PSU and stock option awards as a component of selling, general and administrative expenses in our Consolidated Statements of Operations.

Our income tax expense for the years

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ended December 31, 2020, 2019 and 2018 includes related income tax benefits of $ 15 million, $ 17 million and $ 17 million, respectively.

Our income tax expense for the years ended December 31, 2021, 2020 and 2019 includes related income tax benefits of $ 18 million, $ 15 million and $ 17 million, respectively.

We have not capitalized any equity-based compensation costs during the reported periods.

11 unchanged sentences

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding

Refer to the Consolidated Statements of Operations for net income attributable to Waste Management, Inc.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value Measurements

7 unchanged sentences

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

participants would use in pricing an asset or liability, including assumptions about risk when appropriate.

In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.

Our assets and liabilities that are measured at fair value on a recurring basis include the following as of December 31 (in millions):

1 unchanged sentence

Cash equivalents and money market funds

Equity securities

Significant other observable inputs (Level 2):

3 unchanged sentences

See Note 11 for information related to our nonrecurring fair value measurements and the impact of impairments.

See Note 18 for information related to the nonrecurring fair value measurement of assets and liabilities acquired in connection with our acquisition of Advanced Disposal.

See Note 17 for information related to the nonrecurring fair value measurement of assets and liabilities acquired in connection with our acquisitions.

Cash Equivalents and Money Market Funds

2 unchanged sentences

The fair value of our cash equivalents and money market funds approximates our cost basis in these instruments.

The decrease in 2020 is primarily due to funding our acquisition of Advanced Disposal.

See Notes 7 and 18 for additional information.

The decrease in 2021 is primarily due to the use of available cash to retire certain high-coupon senior notes in May 2021, which is discussed further in Note 6.

Equity Securities

We invest portions of our restricted trust and escrow account balances in equity securities and we measure the fair value of these securities using quoted prices in active markets for identical assets.

Any changes in fair value of these

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

securities related to unrealized gains and losses have been appropriately reflected as a component of other income (expense).

Available-for-Sale Securities

3 unchanged sentences

agency securities, municipal securities and mortgage- and asset-backed securities, which generally mature over the next nine years .

Additionally, some funds are invested in equity securities.

We measure the fair value of these securities using quoted prices for identical or similar assets in inactive markets.

1 unchanged sentence

Redeemable Preferred Stock

Redeemable preferred stock is related to noncontrolling investments in unconsolidated entities and is included in investments in unconsolidated entities in our Consolidated Balance Sheets.

The fair value of our investments have been measured based on third-party investors’ recent or pending transactions in these securities, which are considered the best evidence of fair value.

Redeemable preferred stock is related to a noncontrolling investment in an unconsolidated entity and is included in investments in unconsolidated entities in our Consolidated Balance Sheets.

The fair value of our investment has been measured based on third-party investors’ recent or pending transactions in these securities, which are considered the best evidence of fair value.

When this evidence is not available, we use other valuation techniques as appropriate and available.

3 unchanged sentences

The estimated fair value of our debt was approximately $ 14.1 billion and $ 15.2 billion as of December 31, 2021 and 2020, respectively.

The increase in the fair value of debt was primarily attributable to decreases in current market rates for similar types of instruments.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The decrease in the fair value of debt is primarily related to (i) net repayments of $ 456 million during 2021;

(ii) the replacement of debt balances with a relatively high fair value to carrying value ratio with new debt with a fair value that approximates carrying value (refer to Note 6 for additional information) and (iii) increases in current market rates of our senior notes.

Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop the estimates of fair value.

5 unchanged sentences

We continue to pursue the acquisition of businesses that are accretive to our Solid Waste business and enhance and expand our existing service offerings.

Our acquisitions for the reported periods are discussed below:

2021 Acquisitions

During the year ended December 31, 2021, we acquired 11 businesses primarily related to our Solid Waste business.

Total consideration, net of cash acquired, for all acquisitions was $ 94 million, which included $ 73 million in net cash paid

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and $ 21 million of other consideration, primarily purchase price holdbacks and the settlement of a preexisting promissory note with one of the acquired businesses.

In addition, we paid $ 3 million of holdbacks, primarily related to current year acquisitions.

Our 2021 acquisitions discussed above include our acquisition of the remaining ownership interest in a waste diversion technology company.

Concurrent with our acquisition, the acquired entity issued shares to an unrelated third-party, diluting our ownership interest.

We determined the entity constituted a variable interest entity and concluded that we did not have the power to direct its significant activities.

As a result, we subsequently deconsolidated the entity and account for our remaining ownership interest as an equity method investment.

2020 Acquisitions

During the year ended December 31, 2020, we acquired four businesses related to our Solid Waste business, including the acquisition of Advanced Disposal discussed further below.

2 unchanged sentences

Contingent consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which generally include targeted financial metrics.

Advanced Disposal — On October 30, 2020, we completed the acquisition of all outstanding shares of Advanced Disposal for $ 30.30 per share in cash, pursuant to an Agreement and Plan of Merger dated April 14, 2019, as amended on June 24, 2020.

Advanced Disposal — On October 30, 2020, we completed our acquisition of all outstanding shares of Advanced Disposal for $ 30.30 per share in cash, pursuant to an Agreement and Plan of Merger dated April 14, 2019, as amended on June 24, 2020.

Total enterprise value of the acquisition was $ 4.6 billion when including approximately $ 1.8 billion of Advanced Disposal’s net debt.

This acquisition grows our footprint and allows us to provide differentiated, sustainable waste management and recycling services to approximately three million new commercial, industrial and residential customers, primarily located in the Eastern half of the U.S.

The acquisition was funded using our 364-day revolving credit facility and our commercial paper program, as discussed further in Note 7.

For the year ended December 31, 2020, we incurred $ 156 million of acquisition and integration related costs, which are primarily classified as “Selling, general and administrative, expenses”.

The post-closing operating results of Advanced Disposal have been included in our consolidated financial statements, within our existing reportable segments.

Since the acquisition date, Advanced Disposal has recognized $ 205 million, $ 142 million and $ 60 million of revenue, operating expenses and selling, general and administrative expenses, respectively, which are included in our Consolidated Statement of Operations.

This acquisition grew our footprint and allows us to provide differentiated, sustainable waste management and recycling services to approximately three million new commercial, industrial and residential customers, primarily located in the Eastern half of the U.S.

The acquisition was funded using a $ 3.0 billion, 364-day, U.S.

revolving credit facility and our commercial paper program.

In November 2020, we issued $ 2.5 billion of senior notes and used a portion of the proceeds to repay all outstanding borrowings under the $ 3.0 billion, 364-day, U.S.

revolver and terminated the facility.

For the year ended December 31, 2021, we incurred $ 51 million of integration related costs, and for the year ended December 31, 2020, we incurred $ 156 million of acquisition and integration related costs, which were primarily classified as “Selling, general and administrative expenses.” The post-closing operating results of Advanced Disposal have been included in our consolidated financial statements, within our existing reportable segments.

Post-closing through December 31, 2020, Advanced Disposal recognized $ 205 million, $ 142 million and $ 60 million of revenue, operating expenses and selling, general and administrative expenses, respectively, which are included in our Consolidated Statement of Operations.

Our consolidated financial statements have not been retroactively restated to include Advanced Disposal’s historical financial position or results of operations.

The acquisition is accounted for as a business combination.

The acquisition was accounted for as a business combination.

In accordance with the purchase method of accounting, the purchase price paid has been allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired recorded as goodwill.

5 unchanged sentences

We are in the process of valuing all of the assets and liabilities acquired in the acquisition, and, until we have completed our valuation process, there may be adjustments to our estimates of fair value and resulting preliminary purchase price allocation.

Goodwill of $ 2.5 billion was calculated as the excess of the consideration paid over the net assets recognized and represents the future economic benefits expected to arise from other assets acquired that could not be individually identified and separately recognized.

Goodwill has been assigned to our Areas that have integrated these operations as they are

The allocation of the purchase price was finalized in October 2021.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

benefitting from the synergies of the combination.

Goodwill has been assigned to our reporting units that have integrated these operations as they are benefitting from the synergies of the combination.

Goodwill related to this acquisition is not deductible for income tax purposes.

The allocation of the purchase price for the Advanced Disposal acquisition is preliminary and subject to change based on the finalization of our detailed valuations.

The following table shows the preliminary purchase price allocation (in millions):

The following table shows the purchase price allocation as of the date acquired, and adjustments to October 30, 2021 (in millions):

October 30, 2020

October 30, 2021

Accounts and other receivables

15 unchanged sentences

Total purchase price

(a) In connection with our acquisition of Advanced Disposal, we were required by the U.S.

Department of Justice to divest assets, including a portion of the assets acquired from Advanced Disposal.

Upon acquisition these assets met the criteria for reporting discontinued operations and were classified as held for sale and included within the “Assets held for sale” and “Liabilities held for sale” line items in the above preliminary allocation of purchase price.

In accordance with the Divesture Agreement, we sold the net assets to GFL Environmental for total consideration of $ 856 million as discussed further in the Divestitures section below.

(a) In connection with our acquisition of Advanced Disposal, we and Advanced Disposal entered into an agreement that provided for GFL Environmental to acquire a combination of assets from us and Advanced Disposal to address divestitures required by the U.S.

Department of Justice.

Immediately following the acquisition, the divestiture transactions were consummated and the Company subsequently received cash proceeds from the sale of $ 856 million.

(b) At the time of acquisition, Advanced Disposal had outstanding $ 425 million of 5.625 % senior notes due November 2024, the fair value of which was $ 438 million.

In November 2020, we redeemed the notes pursuant to an optional redemption feature.

See Note 7 for additional information.

The preliminary allocation of $ 604 million for other intangibles includes $ 575 million for customer relationships with an amortization period of 15 years and $ 29 million of other intangibles with a weighted average amortization period of 7 years .

The final allocation of $ 601 million for other intangibles includes $ 572 million for customer relationships with an amortization period of 15 years and $ 29 million of other intangibles with a weighted average amortization period of seven years .

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The unaudited pro forma financial information in the table below summarizes the combined results of operations for Waste Management and Advanced Disposal as though the companies had been combined as of January 1, 2019.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Advanced Disposal as though the companies had been combined as of January 1, 2019.

Examples of adjustments made to arrive at the pro forma amounts include, but are not limited to, the following:

11 unchanged sentences

Weighted average common shares outstanding:

2019 Acquisitions

During the year ended December 31, 2019, we acquired 18 businesses, including Petro Waste Environmental LP (“Petro Waste”) discussed below, primarily related to our Solid Waste business.

1 unchanged sentence

In 2019, we paid $ 6 million of contingent consideration, of which $ 4 million was related to acquisitions completed prior to 2019.

In addition, we paid $ 20 million of holdbacks, of which $ 9 million related to current year acquisitions.

In addition, we paid $ 20 million of holdbacks, of which $ 9 million related to 2019 acquisitions.

Contingent consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which generally include targeted financial metrics.

Total consideration for our 2019 acquisitions was primarily allocated to $ 350 million of property and equipment, $ 53 million of other intangible assets and $ 111 million of goodwill.

Other intangible assets included $ 38 million of customer and supplier relationships and $ 15 million of covenants not-to-compete.

Other intangible assets included $ 38 million of customer relationships and $ 15 million of covenants not-to-compete.

The goodwill was primarily a result of expected synergies from combining the acquired businesses with our existing operations and was tax deductible.

Petro Waste — On March 8, 2019, Waste Management Energy Services Holdings, LLC, an indirect wholly-owned subsidiary of WM, acquired Petro Waste.

Petro Waste — On March 8, 2019, Waste Management Energy Services Holdings, LLC, an indirect wholly-owned subsidiary of WMI, acquired Petro Waste.

The acquired business provides comprehensive oilfield environmental services and solid waste disposal facilities in the Permian Basin and the Eagle Ford Shale.

The acquisition has expanded our offerings and enhanced the quality of solid waste disposal services for oil and gas exploration and production operations in Texas.

The acquisition expanded our offerings and enhanced the quality of solid waste disposal services for oil and gas exploration and production operations in Texas.

Our purchase price was primarily allocated to seven landfills, which are included in our property and equipment.

1 unchanged sentence

The operating results of the acquired business did not have a material impact to our consolidated financial statements for the periods presented herein.

Given the significant change in energy market dynamics since the time of the acquisition, we have seen a decline in the fair value of certain of these assets.

The impairment recognized during 2020 is discussed further in Note 12.

During the year ended December 31, 2018, we acquired 32 businesses primarily related to our Solid Waste business.

Total consideration, net of cash acquired, for all acquisitions was $ 471 million, which included $ 440 million in cash paid and $ 31 million of other consideration, primarily purchase price holdbacks.

In 2018, we paid $ 6 million of contingent

Given the significant change in energy market dynamics subsequent to the acquisition, we saw a decline in the fair value of certain of these assets and recognized an impairment during 2020, as discussed further in Note 11.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consideration associated with acquisitions completed prior to 2018.

In addition, we paid $ 20 million of holdbacks, of which $ 15 million related to current year acquisitions.

Total consideration for our 2018 acquisitions was primarily allocated to $ 115 million of property and equipment, $ 141 million of other intangible assets and $ 248 million of goodwill.

Other intangible assets included $ 124 million of customer and supplier relationships, $ 16 million of covenants not-to-compete and $ 1 million of other intangible assets.

The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing operations and substantially all is tax deductible.

In 2020, 2019 and 2018, the aggregate sales price for divestitures of certain landfill assets, as well as hauling and ancillary operations, was $ 856 million, $ 8 million and $ 153 million, and we recognized net gains of $ 33 million, net losses of less than $ 1 million and net gains of $ 96 million, respectively.

Divestitures made in 2020 primarily consisted of assets required to be sold by the U.S.

In 2021, 2020 and 2019, the aggregate sales price for divestitures of certain landfill assets, as well as hauling and ancillary operations, was $ 48 million, $ 856 million and $ 8 million, and we recognized net gains of $ 44 million, net gains of $ 33 million and net losses of less than $ 1 million, respectively.

In 2021, divestitures primarily related to the sale of certain non-strategic Canadian operations, as discussed in Note 11.

In 2020, divestitures primarily consisted of assets required to be sold by the U.S.

Department of Justice in connection with our acquisition of Advanced Disposal, as discussed above.

In 2019 and 2018, the divestitures were made as part of our continuous focus on improving or divesting certain non-strategic or underperforming operations.

In 2019, divestitures were 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.

1 unchanged sentence

Following is a description of our financial interests in unconsolidated and consolidated variable interest entities that we consider significant:

Low-Income Housing Properties and Refined Coal Facility Investments

We do not consolidate our investments in entities established to manage low-income housing properties and a refined coal facility because we are not the primary beneficiary of these entities as we do not have the power to individually direct the activities of these entities.

Low-Income Housing Properties

We do not consolidate our investments in entities established to manage low-income housing properties because we are not the primary beneficiary of these entities as we do not have the power to individually direct the activities of these entities.

Accordingly, we account for these investments under the equity method of accounting.

1 unchanged sentence

The debt balance related to our investments in low-income housing properties was $ 156 million and $ 210 million as of December 31, 2021 and 2020, respectively.

During the first quarter of 2020, the entity that owned the investment in the refined coal facility sold the majority of its assets, which resulted in a $ 7 million non-cash impairment of our investment.

Additional information related to these investments is discussed in Note 9.

Trust Funds for Final Capping, Closure, Post-Closure or Environmental Remediation Obligations

5 unchanged sentences

Consolidated Variable Interest Entities — Trust funds for which we are the sole beneficiary are consolidated because we are the primary beneficiary.

These trust funds are recorded in restricted trust and escrow accounts in our Consolidated

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Balance Sheets.

These trust funds are recorded in restricted trust and escrow accounts in our Consolidated Balance Sheets.

Unrealized gains and losses on available-for-sale securities held by these trusts are recorded as a component of accumulated other comprehensive income (loss).

1 unchanged sentence

Segment and Related Information

We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our 17 Areas.

The 17 Areas constitute operating segments and we have evaluated the aggregation criteria and concluded that, based on the similarities between our Areas, including the fact that our Solid Waste business is homogenous across geographies with the same services offered across the Areas, aggregation of our Areas is appropriate for purposes of presenting our reportable segments.

Accordingly, we have aggregated our 17 Areas into three tiers that we believe have similar economic characteristics and future prospects based in large part on a review of the Areas’ income from operations margins.

The economic variations experienced by our Areas are attributable to a variety of factors, including regulatory environment of the Area;

economic environment of the Area, including level of commercial and industrial activity;

population density;

service offering mix and disposal logistics, with no one factor being singularly determinative of an Area’s current or future economic performance.

In 2019, as part of our annual review process, we analyzed the Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect recent changes in their relative economic characteristics and prospects.

These changes are the results of various factors including acquisitions, divestments, business mix and the economic climate of various geographies.

As a result, we reclassified Western Canada from Tier 1 to Tier 2 and Northern California from Tier 3 to Tier 2.

Reclassifications have been made to our prior period consolidated financial information to conform to the current year presentation.

No realignment was necessary as part of our 2020 annual review process.

The results from Advanced Disposal are included within our Tiers.

Tier 1 is comprised of our operations across the Southern U.S., with the exception of the Southern California Area and the Florida Area, and also includes the New England Area and the tri-state Area of Michigan, Indiana and Ohio.

Tier 2 includes California, Canada, and the Wisconsin and Minnesota Area.

Tier 3 encompasses all the remaining operations including the Pacific Northwest, the Mid-Atlantic region of the U.S., the Florida Area, and the Illinois and Missouri Valley Area.

The operating segments not evaluated and overseen through the 17 Areas are presented herein as “Other” as these operating segments do not meet the criteria to be aggregated with other operating segments and do not meet the quantitative criteria to be separately reported.

In 2021, our senior management began evaluating, overseeing and managing the financial performance of our Solid Waste operations through two operating segments.

Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada.

Our West Tier primarily includes geographic areas located in the Western U.S., including the upper Midwest region, and British Columbia, Canada.

Each of our Solid Waste

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal.

The Company finalized the assessment of our segments during the fourth quarter of 2021.

The East and West Tiers are presented in this report and constitute our existing Solid Waste business.

This did not result in a change in our reporting units for purposes of evaluating our goodwill.

Reclassifications have been made to our prior period consolidated financial information to conform to the current year presentation.

The operating segments not evaluated and overseen through our East and West Tiers are presented herein as “Other” as these operating segments do not meet the criteria to be aggregated with other operating segments and do not meet the quantitative criteria to be separately reported.

Summarized financial information concerning our reportable segments as of December 31 and for the year then ended is shown in the following table (in millions):

Operations(e)

Years Ended December 31:

Corporate and Other (b)

(a) “Other” includes (i) our Strategic Business Solutions (‘WMSBS”) business;

(ii) those elements of our landfill gas-to-energy operations and third-party subcontract and administration revenues managed by our Energy and Environmental (“EES”) and WM Renewable Energy businesses that are not included in the operations of our reportable segments;

(iii) our recycling brokerage services and (iv) certain other expanded service offerings and solutions.

In addition, our “Other” segment reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

Income from operations for the Other segment for the twelve months ended December 31, 2020 was impacted primarily by an increase in revenue for (i) our WMSBS business as a result of new contract activities in the current

Solid Waste (a)

Corporate and Other (c)

Solid Waste (a)

Corporate and Other (c)

Solid Waste (a)

Corporate and Other (c)

(a) Income from operations provided by our Solid Waste business is generally indicative of the margins provided by our collection, landfill, transfer and recycling lines of business.

From time to time, the operating results of our reportable

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

year periods and (ii) our WM Renewable Energy business, as a result of a new renewable energy facility coming online, which drove an increase in commodity sales.

Additionally, the twelve month period is impacted by a $ 16 million non-cash charge to write off certain equipment costs recorded in the prior year period offset, in part, by (i) a decrease in revenue within our EES business and (ii) the non-cash impairment of certain assets within our WM Renewable Energy business in the current year period.

(b) Corporate operating results reflect certain costs incurred for various support services that are not allocated to our reportable segments.

segments are significantly affected by certain transactions or events that management believes are not indicative or representative of our results.

Income from operations in our Solid Waste business increased for 2021, as compared with 2020, primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume, as well as the acquisition of Advanced Disposal;

(ii) improved profitability in our recycling business from higher market prices for recycling commodities and improved costs at facilities where we have made investments in enhanced technology and equipment and (iii) changes from divestitures, asset impairments and unusual items as discussed further in Note 11.

These increases were partially offset by (i) labor cost pressure from frontline employee wage adjustments, increased turnover driving up training costs and higher overtime due to driver shortages and volume growth;

(ii) increased landfill amortization from higher volumes and revisions in landfill estimates, including the anticipated timing of capping, closure and post-closure activities at certain landfills and adjustments in 2020 to the inflation rate used to estimate capping, closure, and post-closure asset retirement obligations that benefitted costs in 2020 and (iii) inflationary cost pressures.

During 2021, the positive earnings contributions from Advanced Disposal were offset by elevated depreciation and amortization of acquired assets.

Income from operations for 2020 decreased, as compared with 2019, for the Solid Waste business due to the overall negative impact of the COVID-19 pandemic resulting in revenue declines from lower volumes and higher depreciation expense which was primarily related to investments in capital assets, including our fleet and facilities.

The declines were partially offset by (i) higher yield in our collection and disposal businesses;

(ii) the benefit of resumed fees and price increases;

(iii) lower operating costs directly related to our proactive steps taken to manage our variable costs in the lower volume environment and (iv) a net divestiture gain of $ 33 million associated with the sale of net assets to GFL Environmental, primarily within our West Tier segment.

Additionally, income from operations for our West Tier segment was impacted by $ 41 million of non-cash asset impairment charges primarily related to two landfills and an oil field waste injection facility.

Income from operations for our East Tier segment was impacted by a $ 20 million non-cash impairment charge related to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace.

Furthermore, in 2019, our West Tier segment benefited from the clean-up efforts of natural disasters primarily in California and similar efforts did not recur in 2020.

(b) “Other” includes (i) elements of our WMSBS business;

(ii) elements of our landfill gas-to-energy operations managed by our WM Renewable Energy business and not included in the operations of our reportable segments;

(iii) elements of our third-party subcontract and administration revenues managed by our EES business and not included in the operations of our reportable segments;

(iv) our recycling brokerage services and (v) certain other expanded service offerings and solutions.

The increase in income from operations for 2021, as compared with 2020, was primarily driven by increased market values for renewable energy credits generated by our WM Renewable Energy business.

Income from operations for the Other segment for 2020, as compared with 2019, was favorably impacted primarily by (i) volume increases in our WM Renewable Energy business as a result of a new renewable energy facility coming online;

(ii) our WMSBS business as a result of newly executed national account contracts and (iii) our recycling brokerage business.

(c) “Corporate and other” operating results reflect certain costs incurred for various support services that are not allocated to our reportable segments.

These support services include, among other things, treasury, legal, digital, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills.

Income from operations for “Corporate and Other” also includes costs associated with our long-term incentive program and any administrative expenses or revisions to our estimated obligations associated with divested operations.

(c) Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments.

Income from operations for “Corporate and Other” also includes costs associated with our long-term incentive program.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

These costs increased in 2021, as compared with 2020, due to (i) higher incentive compensation costs;

(ii) increased labor, support and integration costs following our acquisition of Advanced Disposal;

(iii) strategic investments in our digital platform;

(iv) increased health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (v) charges pertaining to reserves for certain loss contingencies during 2021.

These increases were partially offset by lower consulting, advisory and legal fees following the completion of our acquisition of Advanced Disposal in 2020 and changes in the measurement of our environmental remediation obligations and recovery assets in both 2020 and 2021.

The costs increased in 2020, as compared with 2019, due to (i) higher consulting, advisory and legal fees associated with our acquisition and integration of Advanced Disposal;

(ii) strategic investments in our digital platform;

(iii) incremental costs associated with the COVID-19 pandemic and (iv) higher long-term incentive compensation costs.

These increased expenses were offset, in part, by (i) lower annual incentive compensation costs and (ii) lower litigation reserves.

(d) Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments.

Transactions within and between segments are generally made on a basis intended to reflect the market value of the service.

(d) For those items included in the determination of income from operations, the accounting policies of the segments are the same as those described in Note 3.

(e) The income from operations provided by our Solid Waste business is generally indicative of the margins provided by our collection, landfill, transfer and recycling lines of business.

From time to time, the operating results of our reportable segments are significantly affected by certain transactions or events that management believes are not indicative or representative of our results.

In 2020, we revised allocations between our segments including (i) the discontinuation of certain allocations from Corporate and Other to Solid Waste and (ii) allocating certain insurance costs from Other to Solid Waste.

(e) For those items included in the determination of income from operations, the accounting policies of the segments are the same as those described in Note 2.

In the fourth quarter of 2021, we discontinued certain allocations from our Corporate and Other segment to our Solid Waste operating segments and Other segment.

Reclassifications have been made to our prior period information for comparability purposes.

In the second quarter of 2020, we recognized $ 61 million of non-cash impairment charges, including $ 41 million related to our energy services assets in our Tier 1 segment.

Refer to Note 12 for additional information.

Our 2020 operating results were also negatively impacted by revenue declines, as a result of the COVID-19 pandemic, in our landfill and industrial and commercial collection businesses beginning in March 2020 and continuing through the date of this report, although we began to experience improvement in volumes during the second half of 2020 when compared to the more acute impacts we experienced earlier in the year.

(f) Includes non-cash items.

4 unchanged sentences

Total assets, per Consolidated Balance Sheet

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(h) Goodwill is included within each segment’s total assets.

For segment reporting purposes, our material recovery facilities are included as a component of their respective Areas and our recycling brokerage services are included as part of our “Other” operations.

For segment reporting purposes, our material recovery facilities are included as a component of their respective Tiers and our recycling brokerage services are included as part of our “Other” operations.

The following table presents changes in goodwill during the reported periods by segment (in millions):

Balance, December 31, 2019

Acquired goodwill (a)

Acquired goodwill

Divested goodwill

1 unchanged sentence

Balance, December 31, 2020

Acquired goodwill

Acquired goodwill (a)

Divested goodwill

1 unchanged sentence

Balance, December 31, 2021

Includes $ 3 million of post-closing acquisition adjustments related to prior year acquisitions.

The mix of operating revenues from our major lines of business for the years ended December 31 are as follows (in millions):

Includes $ 26 million of post-closing acquisition adjustments related to our acquisition of Advanced Disposal.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The mix of operating revenues from our major lines of business for the year ended December 31 are as follows (in millions):

Other collection

1 unchanged sentence

Intercompany (b)

(a) The “Other” line of business includes (i) our WMSBS business;

(ii) our landfill gas-to-energy operations;

(a) The “Other” line of business includes (i) certain services provided by our WMSBS business;

(ii) our landfill gas-to-energy operations managed by our WM Renewable Energy business;

(iii) certain services within our EES business, including our construction and remediation services and our services associated with the disposal of fly ash and (iv) certain other expanded service offerings and solutions.

In addition, our “Other” line of business reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

Activity related to collection, landfill, transfer and recycling within “Other” has been reclassified to the appropriate line of business for purposes of presentation in this table.

Revenue attributable to collection, landfill, transfer and recycling services provided by our “Other” businesses has been reflected as a component of the relevant line of business for purposes of presentation in this table.

(b) Intercompany revenues between lines of business are eliminated in the Consolidated Financial Statements included within this report.

Fluctuations in our operating results may be caused by many factors, including period-to-period changes in the relative contribution of revenue by each line of business, changes in commodity prices and general economic conditions.

Typically, our revenues and income from operations reflect seasonal patterns.

Our operating revenues tend to be somewhat higher in

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

summer months, primarily due to the higher construction and demolition waste volumes.

Our revenues and income from operations typically reflect seasonal patterns.

Our operating revenues tend to be somewhat higher in summer months, primarily due to the higher construction and demolition waste volumes.

The volumes of industrial and residential waste in certain regions where we operate also tend to increase during the summer months.

Our financial results for 2020 reflect declines in our collection and disposal lines of business as a result of the negative impacts of COVID-19.

These impacts began in March 2020 and continued through the date of this report, although we began to experience improvement in volumes during the second half of 2020 when compared to the more acute impacts we experienced earlier in the year.

Improved economic conditions in the second half of 2020 positioned us to resume most business practices in accordance with our contractual terms.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the Areas affected.

Our second and third quarter revenues and results of operations typically reflect these seasonal trends.

Our 2020 operating results were negatively impacted by COVID-19, as volume declines began in March 2020 in our landfill, industrial and commercial collection businesses due to steps taken by national and local governments to slow the spread of the virus, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

Throughout 2021, our volumes recovered from the sharp decline experienced in 2020, with minimal impact from the resurgence in transmission of COVID-19 associated with recent virus variants, as communities and businesses remained open.

However, the potential for future resurgence in transmission of COVID-19 and related business closures, due to virus variants or other pandemic conditions, could adversely impact our volumes and costs in the future.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the geographic areas affected.

On the other hand, certain destructive weather and climate conditions, such as wildfires in the Western U.S.

and hurricanes that most often impact our operations in the Southern and Eastern U.S.

during the second half of the year, can increase our revenues in the Areas affected as a result of the waste volumes generated by these events.

While weather-related and other event driven special projects can boost revenues through additional work for a limited time, as a result of significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

during the second half of the year, can increase our revenues in the geographic areas affected as a result of the waste volumes generated by these events.

While weather-related and other event driven special projects can boost

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

Net operating revenues relating to operations in the U.S.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data