What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-26 compared with 2022-07-27 · 144 added, 120 removed, 487 unchanged (35% of the section changed)

3 unchanged sentences

(In Millions, Except Share and Par Value Amounts)

September 30,

Current assets:

39 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating revenues

19 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consolidated net income

12 unchanged sentences

(In Millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

48 unchanged sentences

Income (Loss)

Three Months Ended June 30:

Balance, March 31, 2022

Three Months Ended September 30:

Balance, June 30, 2022

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, September 30, 2022

Balance, June 30, 2021

Balance, March 31, 2021

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, June 30, 2021

Balance, September 30, 2021

See Notes to Condensed Consolidated Financial Statements.

8 unchanged sentences

Income (Loss)

Six Months Ended June 30:

Nine Months Ended September 30:

Balance, December 31, 2021

4 unchanged sentences

Common stock repurchase program

Balance, June 30, 2022

Balance, September 30, 2022

Balance, December 31, 2020

4 unchanged sentences

Common stock repurchase program

Balance, June 30, 2021

Balance, September 30, 2021

See Notes to Condensed Consolidated Financial Statements.

22 unchanged sentences

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 June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 are unaudited.

The Condensed Consolidated Financial Statements as of September 30, 2022 and for the three and nine months ended September 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.

13 unchanged sentences

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

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.

These advanced 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 of when the related services are performed.

Contract Acquisition Costs

2 unchanged sentences

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 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.

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.

As of September 30, 2022 and December 31, 2021, we had $ 187 million and $ 175 million, respectively, of deferred contract costs, of which $ 134 million and $ 126 million, respectively, was related to deferred sales incentives.

During the three and nine months ended September 30, 2022, we amortized $ 6 million and $ 18 million of sales incentives to selling, general and administrative expense, respectively.

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

Amounts for our operating lease right-of-use assets are recorded in long-term other assets and 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, 2022 and 2021 were $ 44 million and $ 57 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.

11 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Current (in accrued liabilities)

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

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

Environmental

5 unchanged sentences

Acquisitions, divestitures and other adjustments

June 30, 2022

September 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 $ 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.

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

See Note 12 for additional information related to these trusts.

Partially offsetting this charge was a decrease of $ 16 million due to an increase from 1.50 % at December 31, 2021 to 3.75 % at September 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 fund accounts for purposes of settling final capping, closure, post-closure and environmental remediation obligations.

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

See Note 13 for additional information related to these trust fund accounts.

WASTE MANAGEMENT, INC.

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 June 30, 2022:

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)

September 30,

Commercial paper program (weighted average interest rate of 2.1 % as of September 30, 2022 and 0.4 % as of December 31, 2021)

Term Loan maturing May 2024, interest rate of 3.8 % as of September 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 September 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 1.8 % 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)

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3 % to 4.3 % (weighted average interest rate of 2.2 % as of September 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 September 30, 2022 and 4.5 % as of December 31, 2021 (a)

Debt issuance costs, discounts and other

2 unchanged sentences

Debt Classification

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);

As of September 30, 2022, we had approximately $ 2.2 billion of debt maturing within the next 12 months, including (i) $ 839 million 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 2.4 % senior notes that mature in May 2023 and (iv) $ 258 million of other debt with scheduled maturities within the next 12 months, including $ 136 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.

As of September 30, 2022, we have classified $ 2.0 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 $ 258 million of debt maturing in the next 12 months is classified as current obligations.

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.

Additionally, as of September 30, 2022, we also had $ 54 million of variable-rate tax-exempt bonds with long-term scheduled maturities that 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.

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

All recent variable-rate tax-exempt bond remarketings have been successful at market-driven rates.

However, if the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us.

16 unchanged sentences

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.

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

We had $ 164 million of letters of credit issued and $ 839 million 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 $ 2.5 billion as of September 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.

6 unchanged sentences

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.

As of September 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.

2 unchanged sentences

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

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.

As of September 30, 2022, we had $ 839 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of September 30, 2022, we had utilized $ 761 million of other uncommitted letter of credit lines with terms maturing through April 2024.

WASTE MANAGEMENT, INC.

1 unchanged sentence

Debt Borrowings and Repayments

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).

Commercial Paper Program — During the nine months ended September 30, 2022, we made cash repayments of $ 4.9 billion, which were partially offset by $ 3.9 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.

1 unchanged sentence

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.

Financing Leases and Other — The increase in our financing leases and other debt obligations during the nine months ended September 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 $ 65 million of cash repayments of debt at maturity.

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.

Our effective income tax rate was 22.8 % and 23.5 % for the three and nine months ended September 30, 2022, respectively, compared with 23.7 % and 23.2 % for the three and nine months ended September 30, 2021, respectively.

The decrease in our effective income tax rate when comparing the three months ended September 30, 2022 and 2021 was primarily driven by an unfavorable adjustment to accruals and related deferred taxes in 2021 due to a change from our initial expectations of the tax effects of our acquisition of Advanced Disposal Services, Inc.

(“Advanced Disposal”) and related divestitures.

The decrease was offset in part by the divestiture of certain non-strategic Canadian operations in 2021, which was not taxable and did not reoccur in the current period, and an increase in pre-tax income in 2022 resulting in a reduced rate benefit from federal tax credits.

The increase in our effective income tax rate when comparing the nine months ended September 30, 2022 and 2021 was primarily driven by an increase in pre-tax income in 2022 resulting in a reduced 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.

6 unchanged sentences

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,

During the three and nine months ended September 30, 2022, we recognized $ 16 million and $ 47 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, 2022 of $ 26 million

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

and $ 74 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, 2022, we recognized interest expense of $ 5 million and $ 10 million, respectively, associated with our investments in low-income housing properties.

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.

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

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.

Adjustments to Accruals and Related Deferred Taxes — During the three and nine months ended September 30, 2022, there were immaterial adjustments to accruals and related deferred taxes.

During the three and nine months ended September 30, 2021, adjustments to accruals and related deferred taxes increased our income tax expense by $ 10 million primarily due to a change from our initial expectations of the tax effects of our acquisition of Advanced Disposal and related divestitures.

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 benefited our effective income tax rate for the three and nine months ended September 30, 2021.

See Note 9 for further discussion.

Equity-Based Compensation – During the three and nine months ended September 30, 2022, we recognized a reduction in income tax expense of $ 5 million and $ 17 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $ 5 million and $ 16 million, respectively, for the comparable prior year periods.

Tax Legislation – The Inflation Reduction Act of 2022 (“IRA”) was signed into law by President Biden on August 16, 2022 and contains a number of tax-related provisions.

We are in the process of evaluating the IRA and identifying all potential impacts that may be applicable.

Earnings Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Number of common shares outstanding at end of period

6 unchanged sentences

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

10 unchanged sentences

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)

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

7 unchanged sentences

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 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.

As of September 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.

1 unchanged sentence

Environmental Matters — A significant portion of our operating costs and capital expenditures could be characterized as costs of environmental protection.

The nature of our operations, particularly with respect to the construction, operation and maintenance of our landfills, subjects us to an array of laws and regulations relating to the protection of the environment.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Under current laws and regulations, we may have liabilities for environmental damage caused by our operations, or for damage caused by conditions that existed before we acquired a site.

7 unchanged sentences

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 $ 211 million recorded in the Condensed Consolidated Balance Sheet as of June 30, 2022.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 140 million higher than the $ 202 million recorded in the Condensed Consolidated Balance Sheet as of September 30, 2022.

Our ultimate responsibility may differ materially from current estimates.

2 unchanged sentences

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”).

As of September 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)

others as a landfill disposal facility.

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 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.

10 unchanged sentences

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

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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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;

1 unchanged sentence

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.

As of September 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.

4 unchanged sentences

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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

individual plaintiffs’ circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors.

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

14 unchanged sentences

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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Multiemployer Defined Benefit Pension Plans — About 20 % of our workforce is covered by collective bargaining agreements with various local unions across the U.S.

9 unchanged sentences

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 18 months .

We are also currently undergoing audits by various

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

state and local jurisdictions for tax years that date back to 2014.

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.

10 unchanged sentences

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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Operations(e)

Three Months Ended June 30:

Three Months Ended September 30:

Solid Waste (a)

5 unchanged sentences

Operations(e)

Six Months Ended June 30:

Nine Months Ended September 30:

Solid Waste (a)

4 unchanged sentences

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 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.

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) a $ 26 million catch-up benefit from the extension of alternative fuel tax credits that was retroactive to January 1, 2022.

Our income from operations for the nine months ended September 30, 2022 was favorably impacted by an increase in our recycling line of business as a result of an overall increase in average market prices for recycling commodities during the first half of 2022.

These increases were partially offset by (i) inflationary cost pressures;

(ii) labor cost increases from frontline employee wage adjustments and (iii) commodity-driven business impacts from higher fuel prices.

Additionally, the prior year included a pre-tax net gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our East Tier segment and a charge due to management’s decision to close a landfill in our West Tier segment earlier than expected, resulting in acceleration of the timing of capping, closure and post-closure activities in the third quarter of 2021.

(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 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.

(ii) elements of our sustainability business that includes landfill gas-to-energy operations managed by our WM Renewable Energy business, our environmental solutions services and recycling brokerage services and not included in the operations of our reportable segments;

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

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

These support services include, among other things, treasury, legal, digital, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills.

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

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)

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.

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

The increase in income from operations from our Corporate and Other segment for the three months ended September 30, 2022, as compared with the prior year period, was primarily driven by (i) lower long-term incentive compensation costs and (ii) lower integration costs from our acquisition of Advanced Disposal.

Increased costs to support strategic investments in our digital platform, including those that support our ongoing sustainability initiatives, and increased labor costs from higher annual incentive costs and merit increases, partially offset the three months ended September 30, 2022, and more than offset the nine months ended September 30, 2022, as compared with the prior year periods.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other collection

2 unchanged sentences

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

(ii) our landfill gas to energy operations managed by our WM Renewable Energy business;

(iii) certain services within our 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.

(ii) certain services within our sustainability business, including our landfill gas to energy operations managed by our WM Renewable Energy business, our construction and remediation services and our services associated with the disposal of fly ash and (iii) 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.

6 unchanged sentences

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

2 unchanged sentences

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

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.

During the nine months ended September 30, 2022, we acquired seven businesses primarily related to our Solid Waste business.

Total consideration for all acquisitions was $ 216 million, which included $ 202 million in cash paid and $ 14 million of other consideration, primarily purchase price holdbacks.

In addition, we paid $ 5 million of holdbacks, primarily related to prior year acquisitions.

Total consideration for our 2022 acquisitions was primarily allocated to $ 60 million of property and equipment, $ 51 million of other intangible assets and $ 102 million of goodwill.

Other intangible assets included $ 34 million of customer relationships and $ 17 million of covenants not-to-compete.

We remain in the measurement period for most of our acquisitions, therefore further adjustment to our preliminary purchase price allocation may occur.

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

Divestitures, Asset Impairments and Unusual Items

For the nine months ended September 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 nine months ended September 30, 2021, we recognized net gains of $ 17 million consisting of (i) an $ 8 million gain in the first quarter from divestitures of certain ancillary operations in our Other segment and (ii) a $ 35 million pre-tax gain in the third quarter from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our East Tier 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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

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)

5 unchanged sentences

Net current period other comprehensive income (loss)

Balance, June 30, 2022

Balance, September 30, 2022

Common Stock Repurchase Program

3 unchanged sentences

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 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 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 .

During the nine months ended September 30, 2022, we entered into and completed three ASR agreements to repurchase $ 1.0 billion of our common stock, and we received 6.3 million shares based on a final weighted average price of $ 160.56 .

In addition, we also repurchased an additional 0.4 million shares in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act for $ 63 million, inclusive of per-share commissions, at a weighted average price of $ 151.30 , of which $ 2 million was paid in October 2022.

As of September 30, 2022, the Company has authorization for $ 437 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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Fair Value Measurements

1 unchanged sentence

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

September 30,

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 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.

Redeemable preferred stock (b)

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

(b) 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.

2 unchanged sentences

Fair Value of Debt

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.

As of September 30, 2022 and December 31, 2021, the carrying value of our debt was $ 14.1 billion and $ 13.4 billion, respectively.

The estimated fair value of our debt was approximately $ 12.6 billion and $ 14.1 billion as of September 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,

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

could realize in a current market exchange.

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 June 30, 2022 and December 31, 2021.

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of September 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.

2 unchanged sentences

Low-Income Housing Properties

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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.

Our aggregate investment balance in these entities was $ 339 million and $ 178 million as of September 30, 2022 and December 31, 2021, respectively.

The debt balance related to our investments in low-income housing properties was $ 310 million and $ 156 million as of September 30, 2022 and December 31, 2021, respectively.

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

4 unchanged sentences

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 $ 94 million and $ 110 million as of June 30, 2022 and December 31, 2021, respectively.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 90 million and $ 110 million as of September 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.

1 unchanged sentence

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 $ 114 million and $ 117 million as of June 30, 2022 and December 31, 2021, respectively.

These trusts had a fair value of $ 112 million and $ 117 million as of September 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