What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-04-26 · 172 added, 95 removed, 435 unchanged (38% of the section changed)

44 unchanged sentences

Three Months Ended

Six Months Ended

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

Six Months Ended

Consolidated net income

12 unchanged sentences

(In Millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Deferred income tax expense (benefit)

Deferred income tax (benefit) expense

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

22 unchanged sentences

Income (Loss)

Balance, December 31, 2021

Three Months Ended June 30:

Balance, March 31, 2022

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, June 30, 2022

Balance, March 31, 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, June 30, 2021

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)

Six Months Ended June 30:

Balance, December 31, 2021

4 unchanged sentences

Common stock repurchase program

Balance, March 31, 2021

Balance, June 30, 2022

Balance, December 31, 2020

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 1.15 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, June 30, 2021

See Notes to Condensed Consolidated Financial Statements.

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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.

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

We partner with our residential, commercial, industrial and municipal customers and the communities we serve to manage and reduce waste at each stage from collection to disposal, while recovering valuable resources and creating clean, renewable energy.

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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.

and Canada that produce renewable electricity and 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.

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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.

We 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.

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 is included in Note 7.

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

The Condensed Consolidated Financial Statements as of June 30, 2022 and for the three and six months ended June 30, 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 and intangible asset impairments and the fair value of assets and liabilities acquired in business combinations.

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, 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.

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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 Sheets.

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.

As of June 30, 2022 and December 31, 2021, we had $ 177 million and $ 175 million, respectively, of deferred contract costs, of which $ 132 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.

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

March 31, 2022

June 30, 2022

December 31, 2021

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Current (in accrued liabilities)

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

The changes to landfill and environmental remediation liabilities for the six months ended June 30, 2022 are reflected in the table below (in millions):

Environmental

5 unchanged sentences

Acquisitions, divestitures and other adjustments

March 31, 2022

June 30, 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.

Partially offsetting this charge was a decrease of $ 11 million due to an increase from 1.50 % at December 31, 2021 to 3.00 % at June 30, 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.

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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 March 31, 2022:

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)

Commercial paper program (weighted average interest rate of 0.4 % as of June 30, 2022 and December 31, 2021)

Term Loan maturing May 2024, interest rate of 2.3 % as of June 30, 2022

Senior notes, maturing through 2050, interest rates ranging from 0.75 % to 7.75 % (weighted average interest rate of 3.2 % as of June 30, 2022 and 3.1 % as of 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 0.3 % 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)

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3 % to 4.3 % (weighted average interest rate of 1.8 % as of June 30, 2022 and 1.4 % as of December 31, 2021)

Financing leases and other, maturing through 2085, weighted average interest rate of 4.7 % as of June 30, 2022 and 4.5 % as of December 31, 2021 (a)

Debt issuance costs, discounts and other

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Debt Classification

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);

As of June 30, 2022, we had approximately $ 2.4 billion of debt maturing within the next 12 months, including (i) $ 1.0 billion of short-term borrowings under our commercial paper program (net of related discount on issuance);

(ii) $ 625 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 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.

(iii) $ 500 million of 2.4 % senior notes that mature in May 2023 and (iv) $ 226 million of other debt with scheduled maturities within the next 12 months, including $ 111 million of tax-exempt bonds.

As of June 30, 2022, we have classified $ 2.1 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 $ 231 million of debt maturing in the next 12 months is classified as current obligations.

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.

Additionally, as of June 30, 2022, we also had $ 54 million of variable-rate tax-exempt bonds with long-term scheduled maturities which are 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 March 31, 2022.

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.

WASTE MANAGEMENT, INC.

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Access to and Utilization of Credit Facilities and Commercial Paper Program

$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 rates we pay for outstanding U.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, Inc.

$3.5 Billion Revolving Credit Facility — In May 2022, we amended and restated our $ 3.5 billion U.S.

and Canadian revolving credit facility extending the term through May 2027.

The agreement includes a $ 1.0 billion accordion feature that may be used to increase total capacity in future periods, and we have the option to request up to two one-year extensions.

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 WMI, guarantees all the obligations under the $3.5 billion revolving credit facility.

The $3.5 billion revolving credit facility provides us with credit capacity to be used for cash borrowings, to support letters of credit or to support our commercial paper program.

The interest rates we pay on outstanding U.S.

or Canadian loans are generally based on a secured overnight financing rate administered by the Federal Reserve Bank of New York (“SOFR”) or the Canadian Dollar Offered Rate (“CDOR”), respectively, plus a spread depending on WMI’s senior public 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.

The spread above SOFR or CDOR can range from 0.585 % to 1.025 % per annum, plus a credit adjustment spread of 0.10% per annum on SOFR-based rates (the “SOFR Credit Adjustment Spread”) to account for the transition from the use of LIBOR to SOFR in such rate calculations.

We also pay certain other fees set forth in the $3.5 billion revolving credit facility agreement, including a facility fee based on the aggregate commitment, regardless of usage.

As of June 30, 2022, we had no outstanding borrowings under this facility.

We had $ 166 million of letters of credit issued and $ 1.0 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 $ 2.3 billion as of June 30, 2022.

Pursuant to the terms of the $3.5 billion revolving credit facility, and as a mechanism to align our environmental, social and governance (“ESG”) focus and strategy across external and internal stakeholders, the Company, in consultation with one or more banks selected by the Company to be the sustainability coordinator under the applicable credit agreement (the “Sustainability Coordinator”), has the ability to establish specified key performance indicators (“KPIs”) with respect to certain ESG targets of the Company and its subsidiaries.

The Sustainability Coordinator, the Company and the administrative agent may amend the credit agreement, unless such amendment is objected to by banks holding more than 50% of the commitments under such credit agreement, solely for the purpose of incorporating the KPIs so that certain adjustments to the otherwise applicable fees or interest rates may be made based on our performance against the KPIs.

$1.0 Billion, Two-Year, Term Credit Agreement — In May 2022, we entered into a $ 1.0 billion, two-year , U.S.

term credit agreement (“Term Loan”) to be used for general corporate purposes.

The interest rate we pay on our outstanding balance is generally based on SOFR, plus a spread depending on WMI’s senior public debt rating assigned by Moody’s Investors Service, Inc.

and Standard and Poor’s Global Ratings.

The spread above SOFR can range from 0.50 % to 0.90 % per annum, plus the SOFR Credit Adjustment Spread.

As discussed above with respect to our $3.5 billion revolving credit facility, the Term Loan also permits the Company to pursue an amendment of the credit agreement to incorporate certain ESG KPIs and related adjustments to applicable fees or interest rates based on performance against the KPIs.

As of June 30, 2022, we had $ 1.0 billion of outstanding borrowings under our Term Loan.

WM Holdings also guarantees all of the obligations under the Term Loan.

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 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.

As of June 30, 2022, we had $ 1.0 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of June 30, 2022, we had utilized $ 767 million of other uncommitted letter of credit lines with terms maturing through June 2023.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt Borrowings and Repayments

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.

Commercial Paper Program — During the six months ended June 30, 2022, we made cash repayments of $ 4.1 billion, which were partially offset by $ 3.4 billion of cash borrowings (net of related discount on issuance).

Term Loan — In May 2022, we borrowed $ 1.0 billion under our Term Loan to be used for general corporate purposes.

Senior Notes — In May 2022, WMI issued $ 1.0 billion of 4.15 % senior notes due April 15, 2032, the net proceeds of which were $ 992 million.

We used the net proceeds to redeem our $ 500 million of 2.9 % senior notes due September 2022 in advance of their scheduled maturity, to repay a portion of outstanding borrowings under our commercial paper program and for general corporate purposes.

Financing Leases and Other — The increase in our financing leases and other debt obligations during the six months ended June 30, 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 $ 42 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.

Our effective income tax rate was 24.3 % and 23.9 % for the three and six months ended June 30, 2022, respectively, compared with 22.9 % and 22.8 % for the three and six months ended June 30, 2021, respectively.

The increase in our effective income tax rate when comparing the three and six months ended June 30, 2022 and 2021 was primarily driven by an increase in pre-tax income in 2022 resulting in a decreased rate benefit from federal tax credits.

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.

In February 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.

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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 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 six months ended June 30, 2022, we recognized $ 17 million and $ 31 million, respectively, of net losses for these investments.

We also recognized a reduction in our income tax expense for the three and six months ended June 30, 2022 of $ 25 million and $ 48 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 six months ended June 30, 2022, we recognized interest expense of $ 4 million and $ 6 million, respectively, associated with our investments in low-income housing properties.

During the three and six months ended June 30, 2021, we recognized $ 12 million and $ 21 million, respectively, of net losses for these investments.

We also recognized a reduction in our income tax expense for the three and six months ended June 30, 2021 of $ 16 million and $ 32 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 six months ended June 30, 2021,

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

we recognized interest expense of $ 3 million and $ 5 million, respectively, associated with our investments in low-income housing properties.

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.

Equity-Based Compensation — We recognized excess tax benefits related to the vesting or exercise of equity-based compensation awards resulting in reductions in income tax expense of $ 2 million and $ 12 million for the three and six months ended June 30, 2022, compared to $ 2 million and $ 11 million, for the comparable prior year periods.

Earnings Per Share

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

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

Three Months Ended

Six Months Ended

Number of common shares outstanding at end of period

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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 letter of credit lines established for that purpose.

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

These facilities are discussed further in Note 3.

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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.

Our exposure to loss for insurance claims is generally limited to the per incident deductible under the related insurance policy and any amounts that exceed our insured limits.

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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

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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 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.

As of June 30, 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 $ 140 million higher than the $ 216 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2022.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 140 million higher than the $ 211 million recorded in the Condensed Consolidated Balance Sheet as of June 30, 2022.

Our ultimate responsibility may differ materially from current estimates.

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These adjustments could be material in any given period.

As of June 30, 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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

others as a landfill disposal facility.

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.

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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.

Due to further increases in the estimated cost of the remedy set forth in the ROD, we recorded an additional liability of $ 17 million as of March 31, 2022 for MIMC’s estimated potential share of such costs.

As of June 30, 2022 and December 31, 2021, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $ 68 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.

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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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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 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.

Litigation — As a large company with operations across the U.S.

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

Litigation — 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 and legal issues and are subject to uncertainties.

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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

We are currently in the post-examination and post-appeals phase of the IRS audit for the 2017 tax year and considering the options available to resolve remaining disagreements with the IRS.

In addition, we are in the examination phase of IRS audits for the 2021 and 2022 tax years and expect these audits to be completed within the next 21 months .

We are also currently undergoing audits by various

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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.

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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 is shown in the following table (in millions):

Operations(e)

Three Months Ended June 30:

Solid Waste (a)

Corporate and Other (c)

Solid Waste (a)

Corporate and Other (c)

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Operations(e)

Six Months Ended June 30:

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.

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.

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

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.

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(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;

(iii) elements of our third-party subcontract and administration revenues managed by our Sustainability and Environmental Solutions (“SES”) business and not included in the operations of our reportable segments;

(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.

The decrease in income from operations from our Corporate and Other segment was primarily driven by increased costs for (i) labor, particularly due to higher incentive compensation costs and merit increases;

(ii) strategic investments in our digital platform and (iii) investments in our sustainability initiatives.

The impact of these higher

WASTE MANAGEMENT, INC.

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.

costs was partially offset by lower integration costs related to our acquisition of Advanced Disposal and the impact of adjustments from closure and post- closure activity at our closed landfills in the prior year periods.

(d) Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments.

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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):

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

Three Months Ended

Six Months Ended

Other collection

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(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.

(iii) certain services within our SES 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.

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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 geographic areas affected as a result of

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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.

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.

Divestitures, Asset Impairments and Unusual Items

For the six months ended June 30, 2022, we recognized a $ 17 million charge in the first quarter 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.

For the six months ended June 30, 2021, we recognized net charges of $ 17 million in the first quarter 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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Net current period other comprehensive income (loss)

Balance, March 31, 2022

Balance, June 30, 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 December 2021, we executed an accelerated share repurchase (“ASR”) to repurchase $ 350 million of our common stock.

In the fourth quarter of 2021, we executed an accelerated share repurchase (“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 .

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

In the first quarter of 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 April 2022.

The ASR agreement completed in April 2022, at which time we received 0.3 million additional shares based on a final weighted average price of $ 153.14 .

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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.

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

We delivered $ 250 million cash and received a total of 1.6 million shares based on a final weighted average price of $ 154.73 .

In June 2022, after the completion of the ASR agreement, we repurchased 0.2 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 $ 24 million, inclusive of per-share commissions, at a weighted average price of $ 146.74 , of which $ 4 million was paid in July 2022.

As of June 30, 2022, the Company has authorization for $ 976 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.

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Quoted prices in active markets (Level 1):

Cash equivalents and money market funds

Cash equivalents and money market funds (a)

Equity securities

Significant other observable inputs (Level 2):

Available-for-sale securities (a)

Available-for-sale securities (b)

Significant unobservable inputs (Level 3):

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.

Redeemable preferred stock (c)

(a) The increase in 2022 is primarily due to proceeds from the $ 1.0 billion Term Loan executed in May 2022.

See Note 3 for additional information.

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

(c) Our investment, which is classified as an available-for-sale debt security, 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.

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Fair Value of Debt

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.

As of June 30, 2022 and December 31, 2021, the carrying value of our debt was $ 14.3 billion and $ 13.4 billion, respectively.

The estimated fair value of our debt was approximately $ 13.3 billion and $ 14.1 billion as of June 30, 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.

Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange.

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 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.

Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

could realize in a current market exchange.

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 June 30, 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.

Variable Interest Entities

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

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.

Our aggregate investment balance in these entities was $ 356 million and $ 178 million as of June 30, 2022 and December 31, 2021, respectively.

The debt balance related to our investments in low-income housing properties was $ 321 million and $ 156 million as of June 30, 2022 and December 31, 2021, respectively.

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

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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 $ 103 million and $ 110 million as of March 31, 2022 and December 31, 2021, respectively.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 94 million and $ 110 million as of June 30, 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.

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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 $ 118 million and $ 117 million as of March 31, 2022 and December 31, 2021, respectively.

These trusts had a fair value of $ 114 million and $ 117 million as of June 30, 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