What changed in this filing

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Item 1. Financial Statements

2022-04-26 compared with 2021-10-26 · 148 added, 337 removed, 382 unchanged (56% of the section changed)

3 unchanged sentences

(In Millions, Except Share and Par Value Amounts)

September 30,

Current assets:

6 unchanged sentences

Other intangible assets, net

Restricted trust and escrow accounts

Restricted funds

Investments in unconsolidated entities

30 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating revenues

7 unchanged sentences

Interest expense, net

Loss on early extinguishment of debt

Equity in net losses of unconsolidated entities

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Consolidated net income

12 unchanged sentences

(In Millions)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Deferred income tax (benefit) expense

Deferred income tax expense (benefit)

Interest accretion on landfill and environmental remediation liabilities

4 unchanged sentences

Equity in net losses of unconsolidated entities, net of dividends

Loss on early extinguishment of debt

Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

11 unchanged sentences

Debt repayments

Premiums and other paid on early extinguishment of debt

Common stock repurchase program

4 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents

Decrease in cash, cash equivalents and restricted cash and cash equivalents

Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period

3 unchanged sentences

Restricted cash and cash equivalents included in other current assets

Restricted cash and cash equivalents included in restricted trust and escrow accounts

Restricted cash and cash equivalents included in restricted funds

Cash, cash equivalents and restricted cash and cash equivalents at end of period

9 unchanged sentences

Income (Loss)

Three Months Ended September 30:

Balance, June 30, 2021

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 0.575 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, September 30, 2021

Balance, June 30, 2020

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 0.545 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, September 30, 2020

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ─ (Continued)

(In Millions, Except Shares in Thousands)

Waste Management, Inc.

Stockholders’ Equity

Comprehensive

Treasury Stock

Noncontrolling

Income (Loss)

Nine Months Ended September 30:

Balance, December 31, 2021

4 unchanged sentences

Common stock repurchase program

Balance, September 30, 2021

Balance, March 31, 2022

Balance, December 31, 2020

Adoption of new accounting standard

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, September 30, 2020

Balance, March 31, 2021

See Notes to Condensed Consolidated Financial Statements.

9 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.

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Our “Solid Waste” business is operated and managed locally by our subsidiaries that focus on distinct geographic areas and provide collection, transfer, disposal, and recycling and resource recovery services.

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 Areas.

In the second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17 to 16 .

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 segments and our acquisition of Advanced Disposal is included in Notes 7 and 8, respectively.

The Condensed Consolidated Financial Statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 are unaudited.

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

that produce renewable natural gas, which is a significant source of fuel for our natural gas fleet.

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.

The Condensed Consolidated Financial Statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are unaudited.

In the opinion of management, these financial statements include all adjustments, which, unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows, and changes in equity for the periods presented.

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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 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 asset impairments and intangible asset impairments and the fair value of assets and liabilities acquired in business combinations.

Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

3 unchanged sentences

Such services include, among others, certain commercial and residential contracts, and equipment rentals.

These advance billings are included in deferred

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenues and recognized as revenue in the period service is provided.

These advance billings are included in deferred revenues and recognized as revenue in the period service is provided.

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

2 unchanged sentences

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 Condensed Consolidated Balance Sheet.

As of September 30, 2021 and December 31, 2020, we had $ 172 million and $ 159 million, respectively, of deferred contract costs, of which $ 122 million and $ 118 million, respectively, were related to deferred sales incentives.

During each of the three- and nine-month periods ended September 30, 2021 and 2020, we amortized $ 6 million and $ 17 million, respectively, of sales incentives to selling, general and administrative expense.

As of March 31, 2022 and December 31, 2021, we had $ 176 million and $ 175 million, respectively, of deferred contract costs, of which $ 129 million and $ 126 million, respectively, was related to deferred sales incentives.

Amounts for our operating lease right-of-use assets are recorded in long-term other assets in our Condensed Consolidated Balance Sheets.

The current and long-term portion of our operating lease liabilities are reflected in accrued liabilities and other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheets.

Right-of-use assets obtained in exchange for lease obligations for our operating leases for the nine months ended September 30, 2021 and 2020 were $ 57 million and $ 80 million, respectively.

Amounts for our financing leases are recorded in property and equipment, net of accumulated depreciation, and current or long-term debt in our Condensed Consolidated Balance Sheets, as appropriate.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments held within our restricted trust and escrow accounts, and accounts receivable.

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments held within our restricted funds, and accounts receivable.

We make efforts to control our exposure to credit risk associated with these instruments by (i) placing our assets and other financial interests with a diverse group of credit-worthy financial institutions;

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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.

Our prior year accumulated depreciation and gross property and equipment balances as of December 31, 2020 were overstated and subsequently corrected in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

WASTE MANAGEMENT, INC.

2 unchanged sentences

Liabilities for landfill and environmental remediation costs are presented in the table below (in millions):

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Current (in accrued liabilities)

The changes to landfill and environmental remediation liabilities for the nine months ended September 30, 2021 are reflected in the table below (in millions):

The changes to landfill and environmental remediation liabilities for the three months ended March 31, 2022 are reflected in the table below (in millions):

Environmental

3 unchanged sentences

Interest accretion

Revisions in estimates and interest rate assumptions (a)

Acquisitions, divestitures and other adjustments (b)

September 30, 2021

(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 Tier 3 segment, which resulted in the acceleration of the expected timing of capping, closure and post-closure activities.

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

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.

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

Acquisitions, divestitures and other adjustments

March 31, 2022

(a) The amount reported for our landfill liabilities includes decreases related to revisions in estimated costs and timing of capping, closure and post-closure liabilities.

(b) The amount reported for our environmental remediation liabilities includes a $ 17 million charge in our Corporate and Other segment to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site, as discussed in Note 6.

Partially offsetting this charge was a decrease of $ 8 million due to an increase from 1.50 % at December 31, 2021 to 2.50 % at March 31, 2022 in the risk-free discount rate used to measure these liabilities.

At several of our landfills, we provide financial assurance by depositing cash into restricted trust funds 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.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 September 30, 2021:

September 30,

Commercial paper program (weighted average interest rate of 0.3 % as of September 30, 2021 and 0.4 % as of 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 September 30, 2021 and 3.3 % as of December 31, 2020)

Commercial paper program (weighted average interest rate of 0.5 % as of March 31, 2022 and 0.4 % as of December 31, 2021)

Senior notes, maturing through 2050, interest rates ranging from 0.75 % to 7.75 % (weighted average interest rate of 3.1 % as of March 31, 2022 and December 31, 2021)

Canadian senior notes, C$ 500 million maturing September 2026, interest rate of 2.6 %

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.1 % to 4.3 % (weighted average interest rate of 1.5 % as of September 30, 2021 and 1.7 % as of December 31, 2020)

Financing leases and other, maturing through 2085, weighted average interest rate of 4.7 % as of September 30, 2021 and 4.6 % as of December 31, 2020 (a)

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3 % to 4.3 % (weighted average interest rate of 1.5 % as of March 31, 2022 and 1.4 % as of December 31, 2021)

Financing leases and other, maturing through 2085, weighted average interest rate of 4.8 % as of March 31, 2022 and 4.5 % as of December 31, 2021 (a)

Debt issuance costs, discounts and other

2 unchanged sentences

Debt Classification

As of September 30, 2021, we had $ 2.8 billion of debt maturing within the next 12 months, including (i) $ 1.4 billion of short-term borrowings under our commercial paper program (net of related discount on issuance);

As of March 31, 2022, we had approximately $ 3.0 billion of debt maturing within the next 12 months, including (i) $ 1.7 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 2.9 % senior notes that mature in September 2022 and (iv) $ 180 million of other debt with scheduled maturities within the next 12 months, including $ 71 million of tax-exempt bonds.

As of September 30, 2021, we have classified $ 2.2 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.

As of March 31, 2022, we have classified $ 2.6 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.

and Canadian revolving credit facility (“$3.5 billion revolving credit facility”), as discussed below.

The remaining $ 435 million of debt maturing in the next 12 months is classified as current obligations.

As of September 30, 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.

As of March 31, 2022, 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 reset on a weekly basis through a remarketing process.

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In the event of a failed remarketing, we have the availability under our $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully.

Accordingly, we have classified the $ 54 million of variable-rate tax-exempt bonds with maturities of more than one year as long-term in our Condensed Consolidated Balance Sheet as of September 30, 2021.

Accordingly, we have classified the $ 54 million of variable-rate tax-exempt bonds with maturities of more than one year as long-term in our Condensed Consolidated Balance Sheet as of March 31, 2022.

WASTE MANAGEMENT, INC.

3 unchanged sentences

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.

As of September 30, 2021, we had no outstanding borrowings under this facility.

We had $ 167 million of letters of credit issued and $ 1.4 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of $ 1.9 billion as of September 30, 2021.

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

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, Inc.

and Standard and Poor’s Global Ratings.

As of March 31, 2022, we had no outstanding borrowings under this facility.

We had $ 166 million of letters of credit issued and $ 1.7 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of $ 1.6 billion as of March 31, 2022.

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

Commercial Paper Program — We have a commercial paper program that enables us to borrow funds for up to 397 days at competitive interest rates.

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The commercial paper program is fully supported by our $3.5 billion revolving credit facility.

As of September 30, 2021, we had $ 1.4 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of September 30, 2021, we had utilized $ 720 million of other uncommitted letter of credit lines with terms maturing through April 2023.

As of March 31, 2022, we had $ 1.7 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of March 31, 2022, we had utilized $ 769 million of other uncommitted letter of credit lines, with terms maturing through April 2023.

Debt Borrowings and Repayments

Commercial Paper Program — During the nine months ended September 30, 2021, we made cash repayments of $ 5.8 billion, which were partially offset by $ 5.4 billion of cash borrowings (net of related discount on issuance).

Senior Notes — In May 2021, WM 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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the second quarter of 2021, we recognized a $ 220 million loss on early extinguishment of debt in our Condensed 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 % WM senior notes due 2039

7.75 % WM senior notes due 2032

7.375 % WM senior notes due 2029

4.15 % WM senior notes due 2049

4.10 % WM senior notes due 2045

3.90 % WM senior notes due 2035

7.00 % WM senior notes due 2028

7.10 % WM Holdings senior notes due 2026

3.50 % WM senior notes due 2024

3.125 % WM senior notes due 2025

3.15 % WM senior notes due 2027

2.90 % WM senior notes due 2022

2.40 % WM senior notes due 2023

In conjunction with the tender offer, we entered into a reverse Treasury rate lock with a total notional value of $ 450 million to hedge our interest rate exposure.

We did not designate the reverse Treasury rate lock as a cash flow hedge.

Upon completion of the tender offer, we terminated the reverse Treasury rate lock and paid $ 8 million in cash.

The related loss is included in other, net in the Condensed Consolidated Statement of Operations.

Tax-Exempt Bonds — We issued $ 125 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 solid waste disposal facility and material recovery facility construction and development.

Additionally, during the nine months ended September 30, 2021, we repaid $ 63 million of our tax-exempt bonds with available cash at their scheduled maturities.

Financing Leases and Other — The decrease during the nine months ended September 30, 2021 is due to $ 87 million of cash repayments of debt at maturity, partially offset by an increase of $ 30 million primarily associated with non-cash financing leases.

Our effective income tax rate was 23.7 % and 23.2 % for the three and nine months ended September 30, 2021, respectively, compared with 24.5 % and 21.4 % for the three and nine months ended September 30, 2020, respectively.

The decrease in our effective income tax rate when comparing the three months ended September 30, 2021 with the prior year period was due to the detrimental impact of non-deductible transaction costs incurred during the prior year period related to our acquisition of Advanced Disposal which did not reoccur in the current period.

The decrease was partially offset by a net nominal increase in our effective income tax rate during the current year period resulting from a pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

operations in 2021 which was not taxable and unfavorable adjustments to accruals and related deferred taxes primarily due to a change from our initial expectations of the tax effects of the Advanced Disposal acquisition and related divestitures.

The increase in our effective income tax rate for the nine-month period ended September 30, 2021 as compared with the prior year period was due to (i) lower federal tax credits in 2021;

(ii) unfavorable adjustments to accruals and related deferred taxes discussed above and (iii) a decrease in excess tax benefits associated with equity-based compensation in the current year period, partially offset by a pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in 2021 which was not taxable.

In addition, our effective income tax rate in 2020 included the detrimental impact of non-deductible transaction costs related to closing the acquisition of Advanced Disposal in 2020.

These items are discussed further below.

Commercial Paper Program — During the three months ended March 31, 2022, we made cash repayments of $ 2.5 billion, which were partially offset by $ 2.4 billion of cash borrowings (net of related discount on issuance).

Financing Leases and Other — The increase in our financing leases and other debt obligations during the three months ended March 31, 2022 is primarily related to our new federal low-income housing investment discussed in Note 4, which increased our debt obligations by $ 183 million.

The increase in our debt obligations was partially offset by $ 19 million of cash repayments of debt at maturity.

Our effective income tax rate was 23.5 % and 22.7 % for the three months ended March 31, 2022 and 2021, respectively.

The increase in our effective income tax rate when comparing the three months ended March 31, 2022 and 2021 was primarily driven by (i) an increase in pre-tax income in 2022, which decreased the effective tax rate impact of our federal tax credits;

and (ii) unfavorable adjustments to accruals and related deferred taxes, both of which were partially offset by a benefit from higher federal tax credits as a result of our incremental investment in low-income housing properties, which is discussed further below.

We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant.

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

On February 8, 2022, we acquired an additional noncontrolling interest in a limited liability company established to invest in and manage low-income housing properties.

Total consideration for this investment is expected to be $ 253 million, comprised of a $ 183 million note payable discussed in Note 3, an initial cash payment of $ 28 million and $ 42 million of interest payments expected to be paid over the life of the investment.

At the time of the investment, we increased our investments in unconsolidated entities in our Condensed Consolidated Balance Sheet by $ 211 million, representing the principal balance of the note and the initial cash investment.

We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate.

The low-income housing investments qualify for federal tax credits that we expect to realize through 2033 under Section 42 or Section 45D of the Internal Revenue Code.

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 Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2021, we recognized $ 15 million and $ 36 million, respectively, of net losses for these investments.

We also recognized a reduction in our income tax expense for the three and nine months ended September 30, 2021 of $ 21 million and $ 53 million, respectively, due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

In addition, during the three and nine months ended September 30, 2021, we recognized interest expense of $ 2 million and $ 7 million, respectively, associated with our investments in low-income housing properties.

During the three and nine months ended September 30, 2020, we recognized $ 16 million and $ 59 million, respectively, (including the $ 7 million impairment of the refined coal facility noted above for the nine-month period) of net losses for these investments.

We also recognized a reduction in our income tax expense for the three and nine months ended September 30, 2020 of $ 24 million and $ 65 million, respectively, due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

In addition, during the three and nine months ended September 30, 2020, we recognized interest expense of $ 3 million and $ 9 million, respectively, associated with our investments in low-income housing properties.

See Note 13 for additional information related to these unconsolidated variable interest entities.

Adjustments to Accruals and Related Deferred Taxes — Adjustments to accruals and related deferred taxes increased our income tax expense by $ 10 million for the three and nine months ended September 30, 2021.

The unfavorable adjustments to accruals and related deferred taxes are primarily due to a change from our initial expectations of the tax effects of the Advanced Disposal acquisition and related divestitures.

During the three and nine months ended September 30, 2020, adjustments to accruals and related deferred taxes impacted our income tax expense with a nominal increase and a $ 6 million decrease, respectively.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity-Based Compensation — During the three and nine months ended September 30, 2021, we recognized a reduction in income tax expense of $ 5 million and $ 16 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $ 2 million and $ 25 million, respectively, for the comparable prior year periods.

Tax Implications of Divestitures – During the third quarter of 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 caused a beneficial impact to our effective income tax rate for the three and nine months ended September 30, 2021.

Non-Deductible Transaction Costs — During the three months ended September 30, 2020, we recognized the detrimental tax impact of $ 19 million 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.

During the three months ended March 31, 2022 and 2021, we recognized $ 14 million and $ 9 million of net losses, respectively, and a reduction in our income tax expense of $ 23 million and $ 16 million, respectively, primarily due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

See Note 12 for additional information related to these unconsolidated variable interest entities.

Adjustments to Accruals and Related Deferred Taxes — During the three months ended March 31, 2022, we recognized an increase in our income tax expense of $ 3 million for adjustments to accruals and related deferred taxes.

Earnings Per Share

Basic and diluted earnings per share were computed using the following common share data (shares in millions):

Three Months Ended

Nine Months Ended

September 30,

Basic and diluted earnings per share for the three months ended March 31 were computed using the following common share data (shares in millions):

Number of common shares outstanding at end of period

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

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

Commitments and Contingencies

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 3.

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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.

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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

pollution legal liability, cyber incident liability and other coverages we believe are customary to the industry.

Our exposure to loss for insurance claims is generally limited to the per incident deductible under the related insurance policy.

to loss for insurance claims is generally limited to the per incident deductible under the related insurance policy.

Our exposure could increase if our insurers are unable to meet their commitments on a timely basis.

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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.

Guarantees — In the ordinary course of our business, WM and WM Holdings enter into guarantee agreements associated with their subsidiaries’ operations.

Additionally, WM and WM Holdings have each guaranteed all of the senior debt of the other entity.

Guarantees — In the ordinary course of our business, WMI and WM Holdings enter into guarantee agreements associated with their subsidiaries’ operations.

Additionally, WMI and WM Holdings have each guaranteed all of the senior debt of the other entity.

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

As of September 30, 2021, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover certain market value losses for certain properties adjacent to or near 18 of our landfills.

As of March 31, 2022, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover the difference, if any, between the sale value and the guaranteed market or contractually-determined value of certain homeowner’s properties that are adjacent to or near 17 of our landfills.

We have also agreed to indemnify certain third-party purchasers against liabilities associated with divested operations prior to such sale.

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If no amount within a range appears to be a better estimate than any other, we use the amount that is the low end of such range.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 135 million higher than the $ 216 million recorded in the Condensed Consolidated Balance Sheet as of September 30, 2021.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 140 million higher than the $ 216 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2022.

Our ultimate responsibility may differ materially from current estimates.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of September 30, 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”).

As of March 31, 2022, 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”).

Of the 73 sites at which claims have been made against us, 14 are sites we own.

Each of the NPL sites we own was initially developed by others as a landfill disposal facility.

At each of these facilities, we are working in conjunction with the government to evaluate or remediate identified site problems, and we have either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or are working toward a cost-sharing agreement.

At each of these facilities, we are working in conjunction with the government to characterize or remediate identified site problems, and we have either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or are working toward a cost-sharing agreement.

We generally expect to receive any amounts due from other participating parties at or near the time that we make the remedial expenditures.

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At other sites, where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, our future costs are uncertain.

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.

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

McGinnes Industrial Maintenance Corporation (“MIMC”), a subsidiary of Waste Management of Texas, Inc., 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.

Allocation of responsibility among the PRPs for the proposed remedy has not been established.

As of September 30, 2021 and December 31, 2020, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy and related costs was $ 53 million and $ 55 million, respectively.

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

On April 9, 2018, MIMC and International Paper Company entered into an Administrative Order on Consent agreement with the EPA to develop a remedial design for the EPA’s proposed remedy for the site, and we recorded a liability for MIMC’s estimated potential share of the EPA’s proposed remedy and related costs, although allocation of responsibility among the PRPs for the proposed remedy has not been established.

MIMC and International Paper Company have continued to work on a remedial design to support the EPA’s proposed remedy;

however, design investigations indicate that fundamental changes are required to the proposed remedy and MIMC maintains its prior position that the remedy set forth in the ROD is not the best solution to protect the environment and public health.

Due to further increases in the estimated cost of the remedy set forth in the ROD, the recorded liability for MIMC’s estimated potential share of such costs increased by $ 17 million in 2022.

As of March 31, 2022 and December 31, 2021, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $ 70 million and $ 53 million, respectively.

MIMC’s ultimate liability could be materially different from current estimates and MIMC will continue to engage the EPA regarding its proposed remedy.

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.

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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.

Some of the lawsuits may seek to have us pay the costs of monitoring of allegedly affected sites and health care examinations of allegedly affected persons for a substantial period of time even where no actual damage is proven.

While we believe we have meritorious defenses to these lawsuits, the ultimate resolution is often substantially uncertain due to the difficulty of determining the cause, extent and impact of alleged contamination (which may have occurred over a long period of time), the potential for successive groups of complainants to emerge, the diversity of the individual plaintiffs’ circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors.

Additionally, we often enter into agreements with landowners imposing obligations on

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

us to meet certain regulatory or contractual conditions upon site closure or upon termination of the agreements.

Additionally, we often enter into agreements with landowners imposing obligations on us to meet certain regulatory or contractual conditions upon site closure or upon termination of the agreements.

Compliance with these agreements inherently involves subjective determinations and may result in disputes, including litigation.

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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.

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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.

During the first quarter of 2020, we recognized a $ 3 million charge to operating expenses for the withdrawal from an underfunded Multiemployer Pension Plan.

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.

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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, 2020 and 2021 tax years and expect these audits to be completed within the next 18 months .

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

We maintain a liability for uncertain tax positions, the balance of which management believes is adequate.

Results of audit

We are currently in the examination phase of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assessments by taxing authorities are not currently expected to have a material adverse effect on our financial condition, results of operations or cash flows.

IRS audits for the 2017, 2021 and 2022 tax years and expect these audits to be completed within the next 24 months .

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

We maintain a liability for uncertain tax positions, the balance of which management believes is adequate.

Results of audit assessments by taxing authorities are not currently expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Segment and Related Information

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

In the second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17 to 16.

The 16 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 16 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.

As a result of the combination of our Eastern and Western Canada Areas, we analyzed all 16 Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect changes in their relative economic characteristics and prospects.

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

The operating segments not evaluated and overseen through the 16 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized financial information concerning our reportable segments is shown in the following table (in millions):

Three Months Ended September 30:

Solid Waste (a)

Corporate and Other (c)

Solid Waste (a)

Corporate and Other (c)

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.

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Nine Months Ended September 30:

Summarized financial information concerning our reportable segments for the three months ended March 31 is shown in the following table (in millions):

Operations(e)

Solid Waste (a)

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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.

The increase in income from operations across the Tiers for the three and nine months ended September 30, 2021, as compared to the prior year periods, was primarily due to (i) revenue growth in our collection and disposal businesses driven by both volume and yield;

(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) a pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our Tier 3 segment during the third quarter of 2021.

The nine months ended September 30, 2021 also benefited from a reduction in the provision for bad debts because these expenses were higher during the nine months ended September 30, 2020 due to the impacts of the pandemic on our outlook for customer receipts.

These increases were partially offset by (i) labor cost pressure from frontline employee wage adjustments, increased turnover driving up training costs and accelerated overtime due to driver shortages and volume growth;

(ii) inflationary cost pressures;

(iii) higher incentive compensation costs and (iv) a landfill amortization charge in our Tier 3 segment due to management’s decision to close a landfill earlier than expected.

Additionally, the prior year periods were impacted by non-cash impairment charges, as further discussed below.

The positive earnings contributions of Advanced Disposal were offset by elevated depreciation and amortization of acquired assets.

During the nine months ended September 30, 2020, income from operations was impacted by $ 61 million of non-cash impairments consisting of (i) $ 41 million of non-cash asset impairment charges in our Tier 2 segment primarily related to two landfills and an oil field waste injection facility and (ii) a $ 20 million non-cash impairment charge in our Tier 3

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

segment related to management’s decision during the second quarter of 2020 to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace.

(b) “Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) business;

Income from operations in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume and (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.

These increases were partially offset by inflationary cost pressures and labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime due to driver shortages and volume growth.

(b) “Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) business that are not included in the operations of our reportable segments;

(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 Energy and Environmental Services (“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.

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.

The increase in income from operations was primarily driven by increased market values for renewable energy credits generated by our WM Renewable Energy business.

The increase in income from operations for the nine months ended September 30, 2021, as compared with the prior year period, was also due to a gain from the divestitures of certain ancillary operations during the first quarter of 2021.

(iv) our recycling brokerage services;

(v) certain other expanded service offerings and solutions and (vi) the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

The decrease in income from operations was primarily driven by our self-insurance program.

(c) “Corporate and Other” operating results reflect certain costs incurred for various support services that are not allocated to our reportable segments.

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Income from operations for “Corporate and Other” also includes costs associated with our long-term incentive program.

These costs have increased during the three and nine months ended September 30, 2021 due to (i) increased labor, support and integration costs from our acquisition of Advanced Disposal;

(ii) strategic investments in our digital platform;

(iii) higher incentive compensation costs and (iv) increased health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020.

The nine months ended September 30, 2021, as compared with the prior year period, was further impacted by a charge pertaining to reserves for certain loss contingencies during 2021, as well as changes in the measurement of our environmental remediation obligations and recovery assets in both the first quarter of 2020 and 2021.

These increases were partially offset by lower consulting, advisory and legal fees following the completion of our acquisition of Advanced Disposal in the fourth quarter of 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The decrease in income from operations was primarily driven by (i) increased costs as a result of strategic investments we are making in our digital platform, including investments in customer service digitalization, as well as investments in our sustainability initiatives and (ii) increased labor costs primarily due to merit increases.

This decrease in income from operations was partially offset by lower integration costs related to our acquisition of Advanced Disposal.

(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.

The mix of operating revenues from our major lines of business are as follows (in millions):

Three Months Ended

Nine Months Ended

September 30,

(e) 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.

The mix of operating revenues from our major lines of business for the three months ended March 31 are as follows (in millions):

Other collection

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(a) The “Other” line of business includes (i) certain services provided by our WMSBS business;

(ii) our landfill

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

gas-to-energy operations;

(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.

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Our second and third quarter revenues and results of operations typically reflect these seasonal trends.

Prior year period 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.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly impact the operating results of the Areas affected.

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.

Acquisition of 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.

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 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.

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

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.

We have substantially completed our valuation processes of all of the assets and liabilities acquired in the acquisition, however, until we have completed our valuation process, there may be adjustments to our estimates of fair value and resulting preliminary purchase price allocation, specifically those that require significant accounting estimates and assumptions, such as our landfills and intangibles.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 benefiting from the synergies of the combination.

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

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

October 30, 2020

September 30, 2021

Accounts and other receivables

Parts and supplies

Other current assets

Assets held for sale (a)

Property and equipment

Other intangible assets

Investments in unconsolidated entities

Accounts payable

Accrued liabilities

Deferred revenues

Current portion of long-term debt

Liabilities held for sale (a)

Long-term debt, less current portion (b)

Landfill and environmental remediation liabilities

Deferred income taxes

Other liabilities

Total purchase price

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.

Immediately following the closing of our acquisition of Advanced Disposal, the transactions contemplated by the U.S.

Department of Justice were consummated and we sold the net assets to GFL Environmental for total consideration of $ 856 million.

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.

The preliminary allocation of $ 601 million as of September 30, 2021 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 .

during the second half of the year, can increase our revenues in the geographic areas affected as a result of

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Divestitures, Asset Impairments and Unusual Items

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, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

(Gain) Loss from Divestitures, Asset Impairments and Unusual Items, Net

During the nine months ended September 30, 2021, we recognized net gains of $ 17 million consisting of (i) a $ 35 million pre-tax gain in the third quarter of 2021 from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our Tier 3 segment and (ii) an $ 8 million gain in the first quarter of 2021 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) $ 6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other segment.

During the nine months ended September 30, 2020, we recognized non-cash impairment charges of $ 68 million primarily related to the following:

Energy Services Asset Impairments — During the second quarter of 2020, the Company tested the recoverability of certain energy services assets in our Tier 2 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 2 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.

Other Impairments — In addition to the energy services impairments noted above, during the second quarter of 2020, 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.

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).

Equity in Net Losses of Unconsolidated Entities

During the first quarter of 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 Note 4.

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).

The remaining losses for each period were primarily related to our noncontrolling interests in entities established to invest in and manage low-income housing properties.

We generate tax benefits, including tax credits, from the losses incurred from these investments.

Refer to Note 4 for additional information related to these investments.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the first quarter of 2022, we recognized a $ 17 million charge in our Corporate and Other segment to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site, as discussed in Note 6.

During the first quarter of 2021, we recognized net charges of $ 17 million consisting of (i) a $ 19 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment and (ii) $ 6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other segment;

which were partially offset by an $ 8 million gain from divestitures of certain ancillary operations in our Other segment.

Accumulated Other Comprehensive Income (Loss)

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stockholders’ equity, are as follows (in millions, with amounts in parentheses representing decreases to accumulated other comprehensive income):

Adjustments(a)

Balance, December 31, 2021

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Net current period other comprehensive income (loss)

Balance, September 30, 2021

(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 translation adjustments from accumulated other comprehensive income to gain from divestitures, asset impairments and unusual items within our Condensed Consolidated Statement of Operations.

Balance, March 31, 2022

Common Stock Repurchase Program

The Company repurchases shares of its common stock as part of capital allocation programs authorized by our Board of Directors.

In February 2021, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $ 250 million of our common stock.

At the beginning of the repurchase period, we delivered $ 250 million cash and received 1.8 million shares based on a stock price of $ 110.56 .

The ASR agreement completed in the second quarter of 2021, at which time we received 0.2 million additional shares based on a final weighted average price of $ 126.83 .

In May 2021, we entered into an ASR agreement to repurchase $ 250 million of our common stock.

At the beginning of the repurchase period, we delivered $ 250 million cash and received 1.4 million shares based on a stock price of $ 141.42 .

The ASR agreement completed in the third quarter of 2021, at which time we received 0.4 million additional shares based on a final weighted average price of $ 140.04 .

In August 2021, we entered into an ASR agreement to repurchase $ 500 million of our common stock.

In December 2021, we executed an accelerated share repurchase (“ASR”) 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 .

In February 2022, we entered into an ASR agreement to repurchase $ 250 million of our common stock.

At the beginning of the repurchase period, we delivered $ 250 million cash and received 1.4 million shares based on a stock price of $ 146.43 .

The final number of shares to be repurchased and the final average price per share under the ASR agreement will depend on the volume-weighted average price of our stock, less a discount, during the term of the agreement.

Purchases under the ASR agreement are expected to be completed in November 2021.

As of September 30, 2021, the Company has authorization for $ 350 million of future share repurchases.

Any future share repurchases pursuant to this authorization of our Board of Directors 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.

Purchases under the ASR agreement are expected to be completed in April 2022.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2022, the Company has authorization for $ 1.25 billion of future share repurchases.

Fair Value Measurements

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

September 30,

Fair Value Measurements Using:

Quoted prices in active markets (Level 1):

Cash equivalents and money market funds (a)

Cash equivalents and money market funds

Equity securities

Significant other observable inputs (Level 2):

Available-for-sale securities (b)

Available-for-sale securities (a)

Significant unobservable inputs (Level 3):

Redeemable preferred stock (c)

(a) The decrease 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 3.

(b) Our available-for-sale securities primarily relate to debt securities with maturities over the next nine years .

(c) When available, Level 3 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 (b)

(a) Our available-for-sale securities primarily relate to debt securities with maturities over the next eight years .

(b) 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.

These valuation methodologies may include transactions in similar instruments, discounted cash flow techniques, third-party appraisals or industry multiples and public company comparable transactions.

See Note 8 for information related to the nonrecurring fair value measurement of assets and liabilities acquired in connection with our acquisition of Advanced Disposal.

See Note 8 for information related to our nonrecurring fair value measurements and the impact of impairments.

Fair Value of Debt

As of September 30, 2021 and December 31, 2020, the carrying value of our debt was $ 13.0 billion and $ 13.8 billion, respectively.

The estimated fair value of our debt was approximately $ 13.8 billion and $ 15.2 billion as of September 30, 2021 and December 31, 2020, respectively.

The decrease in the fair value of debt is primarily related to net repayments of $ 809 million during 2021 and 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 3 for additional information) and increases in current market rates of our senior notes.

As of March 31, 2022 and December 31, 2021, the carrying value of our debt was $ 13.5 billion and $ 13.4 billion.

The estimated fair value of our debt was approximately $ 13.3 billion and $ 14.1 billion as of March 31, 2022 and December 31, 2021, respectively.

The decrease in the fair value of debt is primarily related to 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.

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The use of different assumptions or estimation methodologies could have a material effect on the estimated fair values.

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of September 30, 2021 and December 31, 2020.

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of March 31, 2022 and December 31, 2021.

These amounts have not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts presented.

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

Our aggregate investment balance in these entities was $ 193 million and $ 228 million as of September 30, 2021 and December 31, 2020, respectively.

The debt balance related to our investments in low-income housing properties was $ 169 million and $ 210 million as of September 30, 2021 and December 31, 2020, respectively.

Our aggregate investment balance in these entities was $ 372 million and $ 178 million as of March 31, 2022 and December 31, 2021, respectively.

The debt balance related to our investments in low-income housing properties was $ 331 million and $ 156 million as of March 31, 2022 and December 31, 2021, respectively.

Additional information related to these investments is discussed in Note 4.

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

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We also reflect our share of the unrealized gains and losses on available-for-sale securities held by these trusts as a component of our accumulated other comprehensive income (loss).

Our investments and receivables related to these trusts had an aggregate carrying value of $ 107 million and $ 106 million as of September 30, 2021 and December 31, 2020, respectively.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 103 million and $ 110 million as of March 31, 2022 and December 31, 2021, respectively.

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 Condensed Consolidated Balance Sheets.

These trust funds are recorded in restricted funds accounts in our Condensed 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).

These trusts had a fair value of $ 117 million and $ 114 million as of September 30, 2021 and December 31, 2020, respectively.

These trusts had a fair value of $ 118 million and $ 117 million as of March 31, 2022 and December 31, 2021, respectively.

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-Q

Item 1. Financial Statements