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Item 8. Financial Statements and Supplementary Data

2023-02-07 compared with 2022-02-15 · 398 added, 420 removed, 1236 unchanged (40% of the section changed)

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Landfill Amortization

Landfill Depletion

Description of the Matter

At December 31, 2021, the Company’s landfill assets, net of accumulated amortization, totaled $7.3 billion and the associated amortization expense for 2021 was $731 million.

As discussed in Note 2 of the financial statements, the Company updates the estimates used to calculate individual landfill amortization rates at least annually, or more often if significant facts change.

Landfill amortization rates are used in the computation of landfill amortization expense.

Auditing landfill amortization rates and related amortization expense is complex due to the highly judgmental nature of assumptions used in estimating the rates.

At December 31, 2022, the Company’s landfill assets, net of accumulated depletion, totaled $7.6 billion and the associated depletion expense for 2022 was $754 million.

As discussed in Note 2 of the financial statements, the Company updates the estimates used to calculate individual landfill depletion rates at least annually, or more often if significant facts change.

Landfill depletion rates are used in the computation of landfill depletion expense.

Auditing landfill depletion rates and related depletion expense is complex due to the highly judgmental nature of assumptions used in estimating the rates.

Significant assumptions used in the calculation of the rates include:

estimated future development costs associated with the construction and retirement of the landfill, estimated remaining permitted airspace and unpermitted expansion airspace, airspace utilization factors, projected annual tonnage intakes, and projected timing of retirement activities.

estimated future development costs associated with the construction and retirement of the landfill, estimated remaining permitted and expansion airspace, airspace utilization factors, and projected timing of retirement activities.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over determining landfill amortization rates and calculating amortization expense.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over determining landfill depletion rates and calculating depletion expense.

Our audit procedures included, among others, testing controls over:

the Company’s process for evaluating and updating the significant assumptions used in the development of the landfill amortization rates, management’s review of those significant assumptions, and the mathematical accuracy of the calculation and recording of amortization expense.

To test the landfill asset amortization rates, our audit procedures included, among others, assessing methodologies used by the Company and testing the significant assumptions discussed above, inclusive of the underlying data used by the Company in its development of these assumptions.

the Company’s process for evaluating and updating the significant assumptions used in the development of the landfill depletion rates, management’s review of those significant assumptions, and the mathematical accuracy of the calculation and recording of depletion expense.

To test the landfill asset depletion rates, our audit procedures included, among others, assessing methodologies used by the Company and testing the significant assumptions discussed above, inclusive of the underlying data used by the Company in its development of these assumptions.

We compared the significant assumptions used by management to historical trends and, when available, to comparable size landfills accepting a similar type of waste.

Regarding unpermitted expansion airspace, we evaluated the Company’s criteria for inclusion in remaining airspace.

Regarding expansion airspace, we evaluated the Company’s criteria for inclusion in remaining airspace.

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

We involved EY’s engineering specialists to assist with the evaluation of the Company’s landfill future development cost and airspace assumptions.

We also tested the completeness and accuracy of the historical data utilized in the development of the landfill amortization rates.

We also tested the completeness and accuracy of the historical data utilized in the development of the landfill depletion rates.

Landfill – Final Capping, Closure and Post-Closure Costs

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estimated future costs associated with the capping, closure and post closure activities at each specific landfill;

airspace consumed to date in relation to total estimated permitted airspace;

the projected annual tonnage intake;

airspace consumed to date in relation to total estimated permitted and expansion airspace;

and the projected timing of retirement activities.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the calculation of asset retirement obligations.

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the calculation of landfill asset retirement obligations.

Our audit procedures included, among others, testing the Company’s controls over the landfill asset retirement obligation estimation process and management’s review of the significant assumptions used in the estimation of the liability, including the amount and timing of retirement costs.

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Total current assets

Property and equipment, net of accumulated depreciation and amortization of $ 20,537 and $ 19,337 , respectively

Property and equipment, net of accumulated depreciation and depletion of $ 21,627 and $ 20,537 , respectively

Other intangible assets, net

Restricted trust and escrow accounts

Restricted funds

Investments in unconsolidated entities

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Selling, general and administrative

Depreciation and amortization

Depreciation, depletion and amortization

Restructuring

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Foreign currency translation adjustments

Post-retirement benefit obligation, net

Post-retirement benefit obligations, net

Other comprehensive income (loss), net of tax

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Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Depreciation and amortization

Depreciation, depletion and amortization

Deferred income tax expense (benefit)

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Tax payments associated with equity-based compensation transactions

Net cash (used in) provided by financing activities

Net cash used in financing activities

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

(Decrease) increase in cash, cash equivalents and restricted cash and cash equivalents

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

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

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Restricted cash and cash equivalents included in other current assets

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

Restricted cash and cash equivalents included in restricted funds

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

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Balance, December 31, 2019

Adoption of new accounting standards

Consolidated net income

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Cash dividends declared of $ 2.18 per common share

Equity-based compensation transactions, net of tax

Equity-based compensation transactions, net

Common stock repurchase program

Balance, December 31, 2020

Adoption of new accounting standards

Consolidated net income

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Common stock repurchase program

Acquisitions and other, net

Balance, December 31, 2022

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is a holding company and all operations are conducted by its subsidiaries.

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

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

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.

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

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

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

Through our subsidiaries, including our Waste Management Renewable Energy (“WM Renewable Energy”) business, we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S and Canada that produce renewable electricity and renewable natural gas, which is a significant source of fuel for our natural gas fleet.

Our senior management evaluates, oversees and manages the financial performance of our Solid Waste operations through two operating segments.

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

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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.

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

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

We also provide additional services that are not managed through our Solid Waste business, which are presented in this report as “Other.” Additional information related to our acquisition of Advanced Disposal and segments is included in Notes 17 and 19.

Reclassifications

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

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

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

Summary of Significant Accounting Policies

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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 assets 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.

Each of these items is discussed in additional detail below.

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Concentrations of Credit Risk

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

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

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

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Balance as of January 1

Adoption of new accounting standard

Additions charged to expense

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Balance as of December 31

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

To determine the allowance for doubtful accounts for trade receivables, we rely upon, among other factors, historical loss trends, the age of outstanding receivables, and existing as well as expected economic conditions.

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2020, we had $ 703 million of notes and other receivables, net of allowance of $ 8 million.

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

Based on aging analysis as of both December 31, 2022 and 2021, approximately 90 % of our trade receivables were outstanding less than 60 days .

To determine the allowance for doubtful accounts for other receivables, as well as loans and other instruments, we rely primarily on credit ratings and associated default rates based on the maturity of the instrument.

Other receivables, as of December 31, 2022 and 2021, include receivables related to income tax payments in excess of our current income tax obligations of $ 150 million and $ 166 million, respectively.

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

Other receivables as of December 31, 2022 and 2021 also include a receivable of $ 19 million and $ 14 million, respectively, related to alternative fuel tax credits.

Based on an aging analysis as of December 31, 2022 and 2021, approximately 55 % and 60 %, respectively, of our other receivables were due within 12 months or less.

Parts and Supplies

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environmental monitoring equipment for groundwater and landfill gas;

and directly related engineering, capitalized

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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Final Capping, Closure and Post-Closure Costs — Following is a description of our asset retirement activities and our related accounting:

● Final Capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace has been consumed.

● Final Capping — Generally involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and compacted soil layers and topsoil over areas of a landfill where total airspace has been consumed.

Final capping asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the specific final capping event with a corresponding increase in the landfill asset.

Each final capping event is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows and airspace associated with each final capping event.

Each final capping event is accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted cash flows associated with each final capping event.

● Closure — Includes the construction of the final portion of methane gas collection systems (when required), demobilization and routine maintenance costs.

These are costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency.

These are costs incurred after the site ceases to accept waste, but

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

before the landfill is certified as closed by the applicable state regulatory agency.

These costs are recorded as an asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in the landfill asset.

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The weighted average rate applicable to our long-term asset retirement obligations as of December 31, 2022 was approximately 4.8 %.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

Changes in such estimates associated with airspace that has been fully utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.

Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as final capping, closure and post-closure expense, which is included in operating expenses within our Consolidated Statements of Operations.

Amortization of Landfill Assets — The amortizable basis of a landfill includes (i) amounts previously expended and capitalized;

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

such estimates associated with a fully consumed landfill result in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace depletion expense.

Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method and is recorded as landfill operating costs, which is included in operating expenses within our Consolidated Statements of Operations.

Depletion of Landfill Assets — The depletable basis of a landfill includes (i) amounts previously expended and capitalized;

(ii) capitalized landfill final capping, closure and post-closure costs;

(iii) projections of future purchase and development costs required to develop the landfill site to its remaining permitted and expansion airspace and (iv) projected asset retirement costs related to landfill final capping, closure and post-closure activities.

Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton.

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

(iii) projections of future purchase and development costs required to develop the landfill site to its remaining permitted and expansion airspace (as defined below) and (iv) projected asset retirement costs related to landfill final capping, closure and post-closure activities.

Depletion is recorded on a units-of-consumption basis, applying expense as a rate per ton.

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

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

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● Expansion Airspace — We also include currently unpermitted expansion airspace in our estimate of remaining permitted and expansion airspace in certain circumstances.

First, to include airspace associated with an expansion effort, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years.

Second, we must believe that obtaining the expansion permit is likely, considering the following criteria:

First, for unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, we must believe that obtaining the expansion permit is likely.

Second, we must generally expect the initial expansion permit application to be submitted within one year and the final expansion permit to be received within five years, in addition to meeting the following criteria:

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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● Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion meets Company criteria for investment.

For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the expansion effort must meet all the criteria listed above.

These criteria are evaluated by our field-based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits.

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Of the 16 landfill sites with expansions included as of December 31, 2022, two landfills required the Chief Financial Officer to approve the inclusion of the unpermitted airspace because the permit application process did not meet the one - or five-year requirements.

When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement costs related to final capping, closure and post-closure of the expansion in the amortization basis of the landfill.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted and expansion capacity in tons.

The AUF is established using the measured density obtained from previous annual surveys and is then adjusted to account for future settlement.

The amount of settlement that is forecasted will take into account several site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate and operating practices.

The amount of settlement that is forecasted will consider several site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate and operating practices.

In addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group and the AUF used is reviewed on a periodic basis and revised as necessary.

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

We calculate per ton amortization rates for each landfill for assets associated with each final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future.

We calculate per ton depletion rates for each landfill for assets associated with each final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future.

These rates per ton are updated annually, or more often, as significant facts change.

It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be significantly different from our estimates and assumptions.

To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or higher expenses;

or higher profitability may result if the opposite occurs.

Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense.

To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower earnings may be experienced due to higher depletion rates or higher expenses;

or higher earnings may result if the opposite occurs.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Environmental Remediation Liabilities

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Where it is probable that a liability has been incurred, we estimate costs required to remediate sites based on site-specific facts and circumstances.

We routinely review and evaluate sites that require remediation, considering whether we were an owner, operator, transporter, or generator at the site, the amount and type of waste hauled to the site and the number of years we were associated with the site.

We routinely review and evaluate sites that require remediation and determine our estimated cost for the likely remedy based on a number of estimates and assumptions.

Next, we review the same type of information with respect to other named and unnamed PRPs.

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● Information available from regulatory agencies as to costs of remediation;

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● The number, financial resources and relative degree of responsibility of other PRPs who may be liable for remediation of a specific site;

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These adjustments could be material in any given period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

For remedial liabilities that have been discounted, we include interest accretion, based on the effective interest method, in operating expenses in our Consolidated Statements of Operations.

As of December 31, 2022, 2021 and 2020, we inflated the costs by 2.50 %, 2.25 % and 2.25 %, respectively, and discounted the costs by 3.75 %, 1.50 % and 1.00 %, respectively.

Our discount rate has increased since 2020 as a result of the overall increase in the 10-year Treasury rates.

The following table summarizes the impacts of revisions in the risk-free discount rate applied to our environmental remediation liabilities and recovery assets for the year ended December 31 (in millions) and the risk-free discount rate applied as of December 31:

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Risk-free discount rate applied to environmental remediation liabilities and recovery assets

The portion of our recorded environmental remediation liabilities that were not subject to inflation or discounting, as the amounts and timing of payments are not fixed or reliably determinable, was $ 31 million and $ 34 million as of December 31, 2021 and 2020, respectively.

Had we not inflated and discounted any portion of our environmental remediation liability, the amount recorded would have decreased by $ 6 million and $ 12 million as of December 31, 2021 and 2020, respectively.

Had we not inflated and discounted any portion of our environmental remediation liability, the amount recorded would have increased by $ 10 million and decreased by $ 6 million as of December 31, 2022 and 2021, respectively.

Property and Equipment (exclusive of landfills, discussed above)

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated useful lives for significant property and equipment categories are as follows (in years):

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

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Contingent rental obligations are expensed as incurred.

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goodwill and Other Intangible Assets

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We do not amortize goodwill, but as discussed in the Long-Lived Asset Impairments section below, we assess our goodwill for impairment at least annually.

Other intangible assets consist primarily of customer and supplier relationships, covenants not-to-compete, licenses, permits (other than landfill permits, as all landfill-related intangible assets are combined with landfill tangible assets and amortized using our landfill amortization policy), and other contracts.

Other intangible assets consist primarily of customer and supplier relationships, covenants not-to-compete, licenses, permits (other than landfill permits, which are combined with landfill tangible assets and depleted per our landfill depletion policy), and other contracts.

Other intangible assets are recorded at fair value on the acquisition date and are generally amortized using either a 150% declining balance approach or a straight-line basis as we determine appropriate.

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The assessment of impairment indicators and the recoverability of our capitalized costs associated with landfills and related expansion projects require significant judgment due to the unique nature of the waste industry, the highly regulated permitting process and the sensitive estimates involved.

During the review of a landfill expansion application, a regulator may initially deny the expansion application although the expansion permit is ultimately granted.

During the review of a landfill expansion application, a regulator

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

may initially deny the expansion application although the expansion permit is ultimately granted.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

Restricted Trust and Escrow Accounts

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

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

These premiums are held in a restricted funds account to be used solely for paying insurance claims, resulting in a transfer of risk from our Company to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

Balances maintained in these restricted trust and escrow accounts will fluctuate based on (i) changes in statutory requirements;

the insurance captive, and are allocated between current and long-term assets depending on estimated timing of the use of funds.

Restricted Funds

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

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

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

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

Balances maintained in these restricted funds accounts will fluctuate based on (i) changes in statutory requirements;

(ii) future deposits made to comply with contractual arrangements;

(iii) the ongoing use of funds;

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

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

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

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

Investments in Unconsolidated Entities

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We monitor and assess the carrying value of our investments throughout the year for potential impairment and write them down to their fair value when other-than-temporary declines exist.

Fair value is generally based on (i) other third-party investors’ recent transactions in the securities;

Fair value is generally based on (i) other third-party investors’ recent or pending transactions in the securities;

(ii) other information available regarding the current market for similar assets;

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Foreign Currency

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

dollar/Canadian dollar exchange rate from 1.2734 at December 31, 2020, to 1.2639 at December 31, 2021 and to 1.3554 at December 31, 2022.

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

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

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

We also provide additional services that are not managed through our Solid Waste business, including our Strategic Business Solutions (“WMSBS”) and sustainability businesses, which include landfill gas-to-energy services, Sustainability and Environmental Solutions (“SES”) business and recycling brokerage services.

We also offer certain other expanded service offerings and solutions.

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

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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.

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

See Note 19 for additional information related to revenue by reportable segment and major lines of business.

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

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

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

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

Our contract acquisition costs are classified as current or noncurrent based on

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the timing of when we expect to recognize amortization and are included in other assets in our Consolidated Balance Sheets.

As of December 31, 2022 and 2021, we had $ 192 million and $ 175 million of deferred contract costs, respectively, of which $ 137 million and $ 126 million, respectively, were related to deferred sales incentives.

During each of the years ended December 31, 2022, 2021 and 2020, we amortized $ 24 million, $ 23 million and $ 23 million, respectively, of sales incentives to selling, general and administrative expense.

Long-Term Contracts

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It is difficult to predict the outcome of litigation, as it is subject to many uncertainties.

Additionally, it is not always possible for management to make a meaningful estimate of the potential loss or range of loss associated with such contingencies.

See Note 10 for discussion of our commitments and contingencies.

Additionally, it is not always possible for management to make a meaningful estimate

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the potential loss or range of loss associated with such contingencies.

See Note 10 for discussion of our commitments and contingencies.

Internal-Use Software

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

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

As of December 31, 2022 and 2021, total costs capitalized for our internal-use software were $ 45 million and $ 48 million, respectively, net of accumulated amortization of $ 27 million and $ 11 million, respectively.

During each of the years ended December 31, 2022, 2021 and 2020, we amortized $ 16 million, $ 10 million and $ 1 million, respectively, to selling, general and administrative expense.

Supplemental Cash Flow Information

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Interest, net of capitalized interest

Income taxes (a)

(a) The increase in income taxes paid in 2022 is primarily due to the increase in pre-tax book income during 2022 and a deposit of approximately $ 103 million made to the Internal Revenue Service (“IRS”) in the fourth quarter of 2022 related to a disputed tax matter for which we expect to seek a refund.

See Note 8 for further discussion.

During 2022, we had $ 225 million of non-cash financing activities primarily from our federal low-income housing investment and new financing leases.

Additionally, we had approximately $ 135 million of non-cash investing activities related to non-cash consideration transferred as part of our acquisitions in 2022.

See Note 17 for further discussion of our 2022 acquisitions.

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

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

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

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

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Current (in accrued liabilities)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Revisions in estimates and interest rate assumptions (a)

Acquisitions, divestitures and other adjustments (b)

Acquisitions, divestitures and other adjustments

December 31, 2022

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

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

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

(a) In 2021, the increase in our landfill liabilities for revisions in estimates and interest rate assumptions was $ 33 million.

The increase in our landfill liabilities in 2022 is primarily due to inflationary cost pressures that are expected to impact costs over the remaining landfill lives.

Our recorded liabilities as of December 31, 2022 include the impacts of inflating certain of these costs based on our expectations of the timing of cash settlement and of discounting certain of these costs to present value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Anticipated payments of currently identified environmental remediation liabilities, as measured in current dollars, are $ 31 million in 2023, $ 43 million in 2024, $ 29 million in 2025, $ 19 million in 2026, $ 16 million in 2027 and $ 76 million thereafter.

Property and Equipment

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

Machinery and equipment (a)

Containers (a)

Buildings and improvements (a)

Furniture, fixtures and office equipment (a)

Accumulated depreciation of tangible property and equipment (a)

Accumulated amortization of landfill airspace

Machinery and equipment

Buildings and improvements

Furniture, fixtures and office equipment

Accumulated depreciation of tangible property and equipment

Accumulated depletion of landfill airspace

Property and equipment, net

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

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

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

See Note 11 for information regarding asset impairments.

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

Depreciation of tangible property and equipment

Amortization of landfill airspace

Depreciation and amortization expense

Depletion of landfill airspace

Depreciation and depletion expense

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Goodwill and Other Intangible Assets

Goodwill was $ 9,323 million and $ 9,028 million as of December 31, 2022 and 2021, respectively.

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

The $ 295 million increase in goodwill during 2022 is primarily related to acquisitions.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our other intangible assets consisted of the following as of December 31 (in millions):

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Amortization expense for other intangible assets was $ 129 million, $ 143 million and $ 107 million for 2022, 2021 and 2020, respectively.

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

The decrease in amortization expense in 2022 was primarily due to decreasing amortization under the 150% declining balance approach for intangible assets from the acquisition of Advanced Disposal.

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

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

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

As of December 31, 2022 and 2021, we had $ 19 million of licenses, permits and other intangible assets that are not subject to amortization because they do not have stated expirations or have routine, administrative renewal processes.

As of December 31, 2022, we expect annual amortization expense related to other intangible assets to be $ 120 million in 2023, $ 110 million in 2024, $ 101 million in 2025, $ 80 million in 2026 and $ 75 million in 2027.

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NOTES TO 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 December 31:

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

Commercial paper program (weighted average interest rate of 4.9 % as of December 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 3.2 % as of December 31, 2022 and 3.1 % as of December 31, 2021)

Term Loan maturing May 2024, interest rate of 5.1 % as of December 31, 2022

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

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Current portion of long-term debt

Long-term debt, less current portion

(a) Excluding our landfill financing leases, the maturities of our financing leases and other debt obligations extend through 2059.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt Classification

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

As of December 31, 2022, we had approximately $ 3.1 billion of debt maturing within the next 12 months, including (i) $ 1.7 billion of short-term borrowings under our commercial paper program (net of related discount on issuance);

(ii) $ 725 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities;

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

(iii) $ 500 million of 2.4 % senior notes that mature in May 2023 and (iv) $ 192 million of other debt with scheduled maturities within the next 12 months, including $ 65 million of tax-exempt bonds.

As of December 31, 2022, we have classified $ 2.7 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.

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The remaining $ 414 million of debt maturing in the next 12 months is classified as current obligations.

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

The interest rates on our variable-rate tax-exempt bonds 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.

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

In the event of a failed remarketing, we 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 Consolidated Balance Sheet as of December 31, 2021.

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

Access to and Utilization of Credit Facilities, Commercial Paper Program and Term Loan

$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.

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

The rates we pay for outstanding U.S.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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.

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 December 31, 2022, we had no outstanding borrowings under this facility.

We had $ 167 million of letters of credit issued and $ 1.8 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by this facility, leaving unused and available credit capacity of $ 1.5 billion as of December 31, 2021.

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 December 31, 2022.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$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”) maturing May 2024 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 of December 31, 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.

Other Letter of Credit Lines — As of December 31, 2022, we had utilized $ 800 million of other uncommitted letter of credit lines with terms extending through April 2024.

Debt Borrowings and Repayments

Commercial Paper Program — During the year ended December 31, 2022 we made cash repayments of $ 6.7 billion, which were partially offset by $ 6.6 billion of cash borrowings (net of related discount on issuance).

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

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

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

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

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

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

Notes Tendered

Prior to Tender

6.125 % WMI senior notes due 2039

7.75 % WMI senior notes due 2032

7.375 % WMI senior notes due 2029

4.15 % WMI senior notes due 2049

4.10 % WMI senior notes due 2045

3.90 % WMI senior notes due 2035

7.00 % WMI senior notes due 2028

7.10 % WM Holdings senior notes due 2026

3.50 % WMI senior notes due 2024

3.125 % WMI senior notes due 2025

3.15% WMI senior notes due 2027

2.90 % WMI senior notes due 2022

2.40 % WMI senior notes due 2023

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

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

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

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

Term Loan — In May 2022, we borrowed $ 1.0 billion under our Term Loan 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.

Tax-Exempt Bonds — We issued $ 100 million of tax-exempt bonds in 2022.

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

In 2022, we also repaid $ 71 million of our tax-exempt bonds with available cash at their scheduled maturities.

Financing Leases and Other — The increase in our financing leases and other debt obligations in 2022 is primarily related to a note payable associated with our federal low-income housing investment discussed in Note 8, which increased our debt obligations by $ 183 million.

The increase in our debt obligations was partially offset by $ 93 million of cash repayments of debt at maturity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Scheduled Debt Payments

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$ 2,423 million in 2023, $ 1,290 million in 2024, $ 1,324 million in 2025, $ 673 million in 2026, $ 1,163 million in 2027 and $ 8,275 million thereafter.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

As discussed above, we have the intent and ability to refinance certain 2023 scheduled maturities on a long-term basis, including our $500 million of 2.4% senior notes that mature in May 2023.

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

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

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

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

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The terms of certain of our financing arrangements require that we comply with financial and other covenants.

Our most restrictive financial covenant is the one contained in our $3.5 billion revolving credit facility, which sets forth a maximum total debt to consolidated earnings before interest, taxes, depreciation and amortization ratio (the “Leverage Ratio”).

Our most restrictive financial covenant is the one contained in both our $3.5 billion revolving credit facility and Term Loan, which sets forth a maximum total debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization ratio (the “Leverage Ratio”).

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

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

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

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

Our $3.5 billion revolving credit facility, senior notes and other financing arrangements also contain certain restrictions on the ability of the Company’s subsidiaries to incur additional indebtedness as well as restrictions on the ability of the Company and its subsidiaries to, among other things, incur liens;

engage in sale-leaseback transactions and engage in mergers and consolidations.

As of December 31, 2022 and 2021, we were in compliance with our Leverage Ratio covenant.

Our $3.5 billion revolving credit facility, Term Loan, senior notes and other financing arrangements also contain certain restrictions on the ability of the Company’s subsidiaries to incur additional indebtedness as well as restrictions on the ability of the Company and its subsidiaries to, among other things, incur liens, engage in sale-leaseback transactions and engage in mergers and consolidations.

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

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

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

As of December 31, 2022 and 2021, we were in compliance with all covenants and restrictions under our financing arrangements, in addition to our Leverage Ratio covenant, that may have a material effect on our Consolidated Financial Statements.

Our operating lease activities primarily consist of leases for real estate, landfills (refer to Note 2 for further detail) and operating equipment.

Our financing lease activities primarily consist of leases for operating equipment, railcars and landfill assets.

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Certain leases also include options to purchase the leased property.

The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

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

The depreciable life of assets and leasehold improvements is limited by the expected lease

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

payments are treated as variable lease payments.

term, unless there is a transfer of title or purchase option reasonably certain of exercise.

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

these payments are treated as variable lease payments.

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

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Classification

Property and equipment, net of accumulated depreciation and amortization

Property and equipment, net of accumulated depreciation and depletion

Total lease assets

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Operating lease expense was $ 183 million, $ 155 million and $ 140 million during 2022, 2021 and 2020, respectively, and is included in operating and selling, general and administrative expenses in our Consolidated Statements of Operations.

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

Financing lease expense was $ 55 million, $ 58 million and $ 51 million during 2022, 2021 and 2020, respectively, and is included in depreciation, depletion and amortization expense and interest expense, net in our Consolidated Statements of Operations.

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Minimum contractual obligations for our leases (undiscounted) as of December 31, 2022 are as follows (in millions):

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Discounted lease liabilities

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As of December 31, 2022, we entered into operating and financing leases, primarily for real estate and equipment, that have not yet commenced and therefore are not reflected in the table above, with future lease payments of $ 52 million and $ 50 million, respectively.

These leases commence through 2024 and have non-cancelable lease terms up to 17 years .

Cash paid during 2022 for our operating and financing leases was $ 76 million and $ 56 million, respectively.

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Income tax expense

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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(vi) adjustments to our accruals and deferred taxes;

(vii) the tax implications of divestitures;

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(vii) the tax implications of divestitures and (viii) non-deductible transaction costs.

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

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Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities 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, an initial cash payment of $ 28 million and $ 42 million of interest payments expected to be paid over the life of the investment.

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

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

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

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

During the years ended December 31, 2022, 2021 and 2020, we recognized net losses of $ 65 million, $ 51 million and $ 73 million (including the $ 7 million impairment of the refined coal facility noted above), respectively, and a reduction in our income tax expense of $ 99 million, $ 74 million and $ 87 million, respectively, due to tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

In addition, during the years ended December 31, 2022, 2021 and 2020, we recognized interest expense of $ 14 million, $ 9 million and $ 11 million, respectively, associated with our investments in low-income housing properties.

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

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

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

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Equity-Based Compensation — During 2022, 2021 and 2020, we recognized a reduction in our income tax expense of $ 17 million, $ 18 million and $ 27 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards.

State Net Operating Losses and Credits — During 2022, 2021 and 2020, we recognized state net operating losses and credits resulting in a reduction in our income tax expense of $ 8 million, $ 15 million and $ 12 million, respectively.

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

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

In the fourth quarter of 2022, the Company received a notice of tax due for the 2017 tax year related to a remaining disagreement with the IRS.

In response to the notice, the Company made a deposit of approximately $ 103 million with the IRS.

The Company expects to seek a refund of the entire amount deposited with the IRS and litigate any denial of the claim for refund.

As of December 31, 2022, the IRS deposit, net of reserve for uncertain tax positions, is classified as a component of other long-term assets in the Company’s Consolidated Balance Sheet.

In addition, we are in the examination phase of an IRS audit for the 2022 tax year and expect the audit to be completed within the next 18 months.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Adjustments to Accruals and Related Deferred Taxes — Adjustments to our accruals and related deferred taxes primarily due to the filing of our income tax returns, analysis of our deferred tax balances and uncertain tax positions, and changes in state and foreign laws resulted in an increase in our income tax expense of $ 1 million and $ 17 million for the years ended December 31, 2022 and 2021, respectively, and a reduction in our income tax expense of $ 3 million for the year ended December 31, 2020.

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

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

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

This gain was not taxable, which benefited our effective income tax rate for the year ended December 31, 2021.

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

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

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

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

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

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.

The provisions of the IRA related to alternative fuel tax credits secure approximately $ 55 million of annual pre-tax benefit (to be recorded as a reduction in our operating expense) from tax credits through 2024.

Additionally, we will incur an excise tax of 1% for future common stock repurchases, which will be reflected in the cost of purchasing the underlying shares as a component of treasury stock.

The IRA contains a number of additional provisions related to tax incentives for investments in renewable energy production, carbon capture, and other climate actions, as well as the overall measurement of corporate income taxes.

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

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

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Net deferred tax liabilities

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

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

As of December 31, 2022, we had $ 6 million of federal net operating loss carry-forwards with expiration dates through 2026 and $ 2.5 billion of state net operating loss carry-forwards with expiration dates through 2042.

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

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

We also had $ 27 million of federal capital loss carry-forwards with expiration dates through 2026, $ 39 million of foreign tax credit carry-forwards with expiration dates through 2032 and $ 8 million of state tax credit carry-forwards with expiration dates through 2038.

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

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Balance as of December 31

These liabilities are included as a component of other long-term liabilities in our Consolidated Balance Sheets because the Company does not anticipate that settlement of the liabilities will require payment of cash within the next 12 months.

These liabilities are included as a component of other long-term liabilities or as an offset to other long-term assets in our Consolidated Balance Sheets because the Company does not anticipate that settlement of the liabilities will require

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payment of cash within the next 12 months.

As of December 31, 2022, we had $ 53 million of net unrecognized tax benefits that, if recognized in future periods, would impact our effective income tax rate.

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Charges to operating and selling, general and administrative expenses for our defined contribution plans totaled $ 112 million, $ 104 million and $ 92 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

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

As of December 31, 2022, the combined benefit obligation of these pension plans was $ 117 million supported by $ 113 million of combined plan assets, resulting in an aggregate unfunded benefit obligation for these plans of $ 4 million.

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

In addition, WM Holdings and certain of its subsidiaries provided post-retirement health care and other benefits to eligible retirees.

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

(ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the remaining participating employers and (iii) if we choose to stop participating in any of our Multiemployer Pension Plans, we may be required to pay those plans a withdrawal amount based on the underfunded status of the plan.

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

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

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Reported Status(a)

Contributions(d)

Contributions

Automotive Industries Pension Plan

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Various dates

Suburban Teamsters of Northern Illinois Pension Plan

Suburban Teamsters of Northern Illinois Pension Plan (d)

Not Endangered or Critical

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

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

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(d) Of the Multiemployer Pension Plans considered to be individually significant, the Company was listed in the Form 5500 of the Suburban Teamsters of Northern Illinois Pension Plan as providing more than 5 % of the total contributions for plan years ending December 31, 2021 and 2020.

Total contributions to Multiemployer Pension Plans excludes contributions related to withdrawal liabilities discussed below.

Total contributions to Multiemployer Pension Plans exclude contributions related to withdrawal liabilities.

Our portion of the projected benefit obligation, plan assets and unfunded liability for the Multiemployer Pension Plans is not material to our financial position.

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

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

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

In the event of a withdrawal, we may incur expenses associated with

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

our obligations for unfunded vested benefits at the time of the withdrawal.

Refer to Note 10 for additional information related to our obligations to Multiemployer Pension Plans.

Multiemployer Plan Benefits Other Than Pensions — During the years ended December 31, 2022, 2021 and 2020, the Company made contributions of $ 49 million, $ 51 million and $ 48 million, respectively, to multiemployer health and welfare plans that also provide other post-retirement employee benefits.

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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 6.

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

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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.

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.

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

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

“General liability” refers to the self-insured portion of specific third-party claims made against us that may be covered under our commercial general liability insurance policy.

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We use a wholly-owned insurance captive to insure the deductibles for our general liability, automobile liability and workers’ compensation claims programs.

As of December 31, 2021, both our commercial general liability insurance policy and our workers’ compensation insurance program carried self-insurance exposures of up to $ 5 million per incident.

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

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

Our receivable balance

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

associated with insurance claims was $ 142 million and $ 155 million as of December 31, 2022 and 2021 respectively.

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

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

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

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

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

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

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

As of December 31, 2022, our estimated minimum obligations associated with unconditional purchase obligations, which are not recognized in our Consolidated Balance Sheets, were $ 192 million in 2023, $ 158 million in 2024, $ 114 million in 2025, $ 101 million in 2026, $ 34 million in 2027 and $ 369 million thereafter.

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

Our actual future minimum obligations under these outstanding purchase agreements are generally quantity driven and, as a result, our associated financial obligations are not fixed as of December 31, 2021.

Our future minimum obligations under these outstanding purchase agreements are generally quantity driven and, as a result, our associated financial obligations are not fixed as of December 31, 2022.

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

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

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

● As of December 31, 2022, WM Holdings has fully and unconditionally guaranteed all of WMI’s senior indebtedness, including its senior notes which mature through 2050, $ 3.5 billion revolving credit facility, Term

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Loan and certain letter of credit lines.

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

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As of December 31, 2022, we have agreements guaranteeing certain market value losses for certain properties adjacent to or near 17 of our landfills.

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

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

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

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

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

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

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

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

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

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

Each of the NPL sites we own was initially developed by

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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.

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

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

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

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

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

McGinnes Industrial Maintenance Corporation (“MIMC”), a subsidiary of Waste Management of Texas, Inc., operated some of the waste pits from 1965 to 1966 and has been named as a site PRP.

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

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

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

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

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

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

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

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

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

As of December 31, 2022 and 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.

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

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

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

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

In June 2022, we and certain of our officers were named as defendants in a complaint alleging violation of the federal securities laws and seeking certification as a class action in the U.S.

District Court for the Southern District of New York.

A lead plaintiff has been appointed and an amended complaint was filed in January 2023.

The amended complaint seeks damages on behalf of a putative class of persons who purchased our SMR Notes (as defined and discussed in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Loss on Early Extinguishment of Debt, Net ), asserting claims under the Securities Exchange Act based on alleged misrepresentations and omissions concerning the time for completion of our acquisition of Advanced Disposal.

We will vigorously defend against this pending suit.

We believe any potential recovery by the plaintiffs, in excess of applicable deductibles, will be covered by insurance, and we do not believe that the eventual outcome of this suit will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

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

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

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

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

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

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

condition or liquidity.

However, liability for future withdrawals could have a material adverse effect on our results of operations or cash flows for a particular reporting period, depending on the number of employees withdrawn and the financial condition of the Multiemployer Pension Plan(s) at the time of such withdrawal(s).

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

See Note 8 for additional discussion regarding income taxes.

We participate in the IRS’s Compliance Assurance Process, which means we work with the IRS throughout the year towards resolving any material issues prior to the filing of our annual tax return.

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

In the fourth quarter of 2022, the Company received a notice of tax due for the 2017 tax year related to a remaining disagreement with the IRS.

In response to the notice, the Company made a deposit of approximately $ 103 million with the IRS.

The Company expects to seek a refund of the entire amount deposited with the IRS and litigate any denial of the claim for refund.

As of December 31, 2022, the IRS deposit, net of reserve for uncertain tax positions, is classified as a component of other long-term assets in the Company’s Consolidated Balance Sheet.

Asset Impairments and Unusual Items

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Asset impairments

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

For the year ended December 31, 2022, we recognized $ 62 million of net charges consisting of (i) $ 50 million of asset impairment charges primarily related to management’s decision to close two landfills within our East Tier segment and (ii) a $ 17 million charge pertaining to reserves for loss contingencies 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 10.

These losses were partially offset by a $ 5 million gain from the divestiture of a solid waste business in our West Tier segment.

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

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

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

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

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

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

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

WASTE MANAGEMENT, INC.

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Equity in Net Losses of Unconsolidated Entities

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

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

The fair value of our investment was not readily determinable;

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

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

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

The remaining losses for the years ended December 31, 2022, 2021 and 2020 were primarily related to our noncontrolling interests in entities established to invest in and manage low-income housing properties.

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

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

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

The fair value of our investment was not readily determinable;

thus, we determined the fair value utilizing a combination of quoted price inputs for the equity in our investment (Level 2) and certain management assumptions pertaining to investment value (Level 3).

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Accumulated Other Comprehensive Income (Loss)

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Balance, December 31, 2022

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

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to (gain) loss from divestitures, asset impairments and unusual items, net within our Consolidated Statement of Operations .

Capital Stock, Dividends and Common Stock Repurchase Program

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We have 10 million shares of authorized preferred stock, $ 0.01 par value, none of which is currently outstanding.

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Our quarterly dividends have been declared by our Board of Directors.

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In December 2022, we announced that our Board of Directors expects to increase the quarterly dividend from $ 0.65 to $ 0.70 per share for dividends declared in 2023.

However, all future dividend declarations are at the discretion of the Board of Directors and depend on various factors, including our net earnings, financial condition, cash required for future business plans, growth and acquisitions and other factors the Board of Directors may deem relevant.

However, all future dividend declarations are at the discretion of our Board of Directors and depend on various factors, including our net earnings, financial condition, cash required for future business plans, growth and acquisitions and other factors the Board of Directors may deem relevant.

Common Stock Repurchase Program

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

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

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

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

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

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Total repurchases (in millions)

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

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

(a) We executed and completed four ASR agreements during 2022 to repurchase $ 1.417 billion of our common stock and received 8.8 million shares in connection with these ASR agreements.

We also repurchased an additional 0.6 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934 (“Exchange Act”) for $ 83 million, inclusive of per-share commissions.

Shares repurchased in 2022 include 0.4 million shares of our common stock for $ 70 million pursuant to our December 2021 ASR agreement that completed in January 2022.

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

Additionally, in December 2021, we executed

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an ASR agreement to repurchase $ 350 million of our common stock.

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

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

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

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

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

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We announced in December 2022 that the Board of Directors has authorized up to $ 1.5 billion in future share repurchases.

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

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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.

This new authorization replaces our prior $ 1.5 billion authorization that was fully utilized in 2022.

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

Equity-Based Compensation

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

The terms and conditions of equity awards granted under the Incentive Plans are determined by the Management Development and Compensation Committee of our Board of Directors.

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

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

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

The Company also periodically grants RSUs to employees working on key initiatives, in connection with new hires and promotions and to field-based managers.

The terms and conditions

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of equity awards granted under the Incentive Plans are determined by the Management Development and Compensation Committee of our Board of Directors.

The 2022 annual incentive plan awards granted to the Company’s senior leadership team, which generally includes the Company’s executive officers, included a combination of PSUs and stock options.

Additionally, several members of the Company’s senior leadership team received a grant of RSUs in 2022 in special recognition of leadership and contributions critical to the acquisition of Advanced Disposal and the subsequent integration and synergy generation.

Awards granted to other eligible employees under the 2014 Plan included a combination of PSUs, RSUs and stock options in 2022.

The Company also periodically grants RSUs to employees working on key initiatives, in connection with new hires and promotions and to field-based managers.

Restricted Stock Units — A summary of our RSUs is presented in the table below (units in thousands):

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

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

At the end of the performance period, the number of shares awarded can range from 0 % to 200 % of the targeted amount, depending on the performance against the pre-established targets.

At the end of the performance period, the number of shares awarded can range from 0 % to 200 % of the

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targeted amount, depending on the performance against the pre-established targets.

A summary of our PSUs, at 100 % of the targeted amount, is presented in the table below (units in thousands):

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Unvested as of December 31, 2022

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

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Committee of our Board of Directors in February 2022.

The determination of achievement of performance results and corresponding vesting of PSUs for the three-year performance period ended December 31, 2022 was performed by the Management Development and Compensation Committee of our Board of Directors in January 2023.

Accordingly, vesting information for such awards is not included in the table above as of December 31, 2022.

The “vested” PSUs are for the three-year performance period ended December 31, 2021, as achievement of performance results and corresponding vesting was determined in February 2022.

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

Accordingly, recipients of the PSU awards received a payout of 167.78 % of the vested TSR PSUs and 200 % of the vested Cash Flow PSUs.

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As of December 31, 2022, we had approximately 179,000 vested deferred units outstanding.

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

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

The exercise price of the options is the average of the

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

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

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

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

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

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Outstanding as of January 1, 2022

Exercised (a)

Forfeited or expired

Outstanding as of December 31, 2021 (a)

Exercisable as of December 31, 2021 (b)

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

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

We received cash proceeds of $ 66 million, $ 63 million and $ 67 million during the years ended December 31, 2021, 2020 and 2019, respectively, from employee stock option exercises.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 66 million, $ 58 million and $ 71 million, respectively.

Outstanding as of December 31, 2022 (b)

Exercisable as of December 31, 2022 (c)

(a) Includes approximately 141,000 stock options exercised pursuant to Rule 10b5-1 trading plans that provided for net share settlement, resulting in the Company withholding approximately 112,000 shares of our common stock to cover the associated stock option exercise price and taxes.

(b) Stock options outstanding as of December 31, 2022 have a weighted average remaining contractual term of 6.2 years and an aggregate intrinsic value of $ 163 million based on the market value of our common stock on December 31, 2022.

(c) Stock options exercisable as of December 31, 2022 have an aggregate intrinsic value of $ 130 million based on the market value of our common stock on December 31, 2022.

During 2022, 2021 and 2020, we received cash proceeds of $ 44 million, $ 66 million and $ 63 million, respectively, from the exercise of 675,000 , 962,000 and 1,039,000 of employee stock options.

The aggregate intrinsic value of stock options exercised during 2022, 2021 and 2020 was $ 51 million, $ 66 million and $ 58 million, respectively.

Stock options exercisable as of December 31, 2022 were as follows (options in thousands):

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The weighted average grant-date fair value of stock options granted during the years ended December 31, 2022, 2021 and 2020 was $ 26.44 , $ 17.25 and $ 15.82 , respectively.

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

The fair value of stock options at the date of grant is amortized to expense over the vesting period less expected forfeitures, except

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recipient becomes retirement-eligible.

for stock options granted to retirement-eligible employees, for which expense is accelerated over the period that the recipient becomes retirement-eligible.

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

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Cash equivalents primarily include short-term interest-bearing instruments with maturities of three months or less.

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

We invest portions of our restricted trust funds in money market funds and we measure the fair value of these investments using quoted prices in active markets for identical assets.

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

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

Equity Securities

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

Any changes in fair value of these

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

Any changes in fair value of these securities related to unrealized gains and losses have been appropriately reflected as a component of other income (expense).

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

Available-for-Sale Securities

Our available-for-sale securities include restricted trust and escrow account balances and an investment in an unconsolidated entity, as discussed in Note 18.

Our available-for-sale securities include restricted trust funds and an investment in an unconsolidated entity, as discussed in Note 18.

We invest primarily in debt securities, including U.S.

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The estimated fair value of our debt was approximately $ 13.8 billion and $ 14.1 billion as of December 31, 2022 and 2021, respectively.

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

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

The decrease in the fair value of debt is primarily related to increases in current market rates of our senior notes, the impacts of which were substantially offset by net borrowings of $ 1.4 billion during 2022.

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

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Acquisitions and Divestitures

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

Our acquisitions for the reported periods are discussed below:

2022 Acquisitions

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

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

During the year ended December 31, 2022, we acquired 13 businesses, including the acquisition of a controlling interest in a business intended to allow us to deliver new recycling capabilities for our customers and provide circular solutions for film and clear plastic wrap used commercially, such as plastic stretch wrap for pallets, furniture film, grocery bags and potentially shrink wrap around food and beverage containers.

Our other acquisitions in 2022 primarily related to our Solid Waste business.

Total consideration, net of cash acquired, for all acquisitions was $ 507 million, which included $ 372 million in net cash paid and $ 135 million in non-cash consideration, primarily related to purchase price holdbacks and the conversion of $ 67 million in secured convertible promissory notes receivable into equity of the acquired business.

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

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

Total consideration for our 2022 acquisitions was primarily allocated to $ 138 million of property and equipment, $ 64 million of other intangible assets, $ 325 million of goodwill and $ 14 million of noncontrolling interests.

Other intangible assets included $ 45 million of customer relationships and $ 19 million of covenants not-to-compete.

We remain in the measurement period for most of our 2022 acquisitions, and further adjustments to our preliminary purchase price allocations may occur, specifically for the valuation of certain acquired intangibles.

The goodwill related to our 2022 acquisitions was primarily a result of expected synergies from combining the acquired businesses with our existing operations, of which less than half was tax deductible.

2021 Acquisitions

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

Total consideration, net of cash acquired, for all acquisitions was $ 94 million, which included $ 73 million in net cash paid and $ 21 million of other consideration, primarily purchase price holdbacks and the settlement of a preexisting promissory note with one of the acquired businesses.

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

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revolver and terminated the facility.

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

For the year ended December 31, 2022 and 2021, we incurred integration related costs of $ 10 million and $ 51 million, respectively, and for the year ended December 31, 2020, we incurred acquisition and integration related costs of $ 156 million, which were primarily classified as “Selling, general and administrative expenses.” The post-closing operating results of Advanced Disposal have been included in our consolidated financial statements, within our existing reportable segments.

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

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

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

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

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

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

Immediately following the

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

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

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

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The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Advanced Disposal as though the companies had been combined as of January 1, 2020.

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Weighted average common shares outstanding:

2019 Acquisitions

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

Total consideration, net of cash acquired, for all acquisitions was $ 515 million, which included $ 501 million in cash paid and other consideration of $ 14 million, primarily purchase price holdbacks.

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

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

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

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

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

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

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

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

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

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

The acquisition was funded using commercial paper borrowings, and the acquisition accounting for this transaction was finalized in 2019.

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

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

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

In 2022, 2021 and 2020, the aggregate sales price for divestitures of certain landfill assets, as well as collection, hauling, disposal and ancillary operations, was $ 6 million, $ 48 million and $ 856 million, and we recognized net gains of $ 5 million, $ 44 million and $ 33 million, respectively.

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

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

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

The remaining amounts reported in the Consolidated Statements of Cash Flows generally relate to the sale of fixed assets.

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Variable Interest Entities

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

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

Low-Income Housing Properties

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The debt balance related to our investments in low-income housing properties was $ 295 million and $ 156 million as of December 31, 2022 and 2021, respectively.

Additional information related to these investments is discussed in Note 8.

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

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

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

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

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

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Segment and Related Information

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

Our senior management evaluates, oversees and manages the financial performance of our Solid Waste operations through two operating segments.

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

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

Each of our Solid Waste

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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.

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

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

This did not result in a change in our reporting units for purposes of evaluating our goodwill.

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

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

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Summarized financial information concerning our reportable segments as of December 31 and for the year then ended is shown in the following table (in millions):

Depreciation,

Depletion and

Operations(e)

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(a) Income from operations provided by our Solid Waste business is generally indicative of the margins provided by our collection, landfill, transfer and recycling lines of business.

From time to time, the operating results of our reportable

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 in 2022, as compared with 2021, primarily due to revenue growth in our collection and disposal businesses driven by both yield and volume.

This increase was partially offset by (i) inflationary cost pressures;

(ii) labor cost increases from frontline employee wage adjustments;

(iii) divestitures, asset impairments and unusual items, discussed in Note 11 above, that impacted our East Tier results and (iv) reduced profitability in our recycling business from the decline in recycling commodity prices and lower volumes.

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segments are significantly affected by certain transactions or events that management believes are not indicative or representative of our results.

Income from operations in our Solid Waste business increased for 2021, as compared with 2020, primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume, as well as the acquisition of Advanced Disposal;

(ii) improved profitability in our recycling business from higher market prices for recycling commodities and improved costs at facilities where we have made investments in enhanced technology and equipment and (iii) changes from divestitures, asset impairments and unusual items as discussed further in Note 11.

Income from operations in our Solid Waste business increased in 2021, as compared with 2020, primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume, as well as the acquisition of Advanced Disposal;

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

(ii) increased landfill amortization from higher volumes and revisions in landfill estimates, including the anticipated timing of capping, closure and post-closure activities at certain landfills and adjustments in 2020 to the inflation rate used to estimate capping, closure, and post-closure asset retirement obligations that benefitted costs in 2020 and (iii) inflationary cost pressures.

During 2021, the positive earnings contributions from Advanced Disposal were offset by elevated depreciation and amortization of acquired assets.

Income from operations for 2020 decreased, as compared with 2019, for the Solid Waste business due to the overall negative impact of the COVID-19 pandemic resulting in revenue declines from lower volumes and higher depreciation expense which was primarily related to investments in capital assets, including our fleet and facilities.

The declines were partially offset by (i) higher yield in our collection and disposal businesses;

(ii) the benefit of resumed fees and price increases;

(iii) lower operating costs directly related to our proactive steps taken to manage our variable costs in the lower volume environment and (iv) a net divestiture gain of $ 33 million associated with the sale of net assets to GFL Environmental, primarily within our West Tier segment.

Additionally, income from operations for our West Tier segment was impacted by $ 41 million of non-cash asset impairment charges primarily related to two landfills and an oil field waste injection facility.

Income from operations for our East Tier segment was impacted by a $ 20 million non-cash impairment charge related to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace.

Furthermore, in 2019, our West Tier segment benefited from the clean-up efforts of natural disasters primarily in California and similar efforts did not recur in 2020.

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

(ii) elements of our landfill gas-to-energy operations managed by our WM Renewable Energy business and not included in the operations of our reportable segments;

(iii) elements of our third-party subcontract and administration revenues managed by our EES business and not included in the operations of our reportable segments;

(iv) our recycling brokerage services and (v) certain other expanded service offerings and solutions.

In addition, our “Other” segment reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

The increase in income from operations for 2021, as compared with 2020, was primarily driven by increased market values for renewable energy credits generated by our WM Renewable Energy business.

Income from operations for the Other segment for 2020, as compared with 2019, was favorably impacted primarily by (i) volume increases in our WM Renewable Energy business as a result of a new renewable energy facility coming online;

(ii) our WMSBS business as a result of newly executed national account contracts and (iii) our recycling brokerage business.

(ii) increased landfill depletion from higher volumes and revisions in landfill estimates, including the anticipated timing of capping, closure and post-closure activities at certain landfills and adjustments in 2020 to the inflation rate used to estimate capping, closure, and post-closure asset retirement obligations that benefitted costs in 2020 and (iii) inflationary cost pressures.

During 2021, the positive earnings contributions from Advanced Disposal were offset by elevated depreciation, depletion and amortization of acquired assets.

(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 sustainability business that includes landfill gas-to-energy operations managed by our WM Renewable Energy business, our SES business 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.

The decrease in income from operations in 2022, as compared with 2021, was due to the recognition of acquisition and integration-related costs, as well as, a prior year gain from divestitures of certain ancillary operations in our Other segment, discussed in Note 11, partially offset by improved profitability in our SES and WMSBS businesses.

The increase in income from operations for 2021, as compared to 2020, was primarily driven by increased market values for renewable energy credits generated by our WM Renewable Energy business.

(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.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

These costs increased in 2022, as compared with 2021, primarily due to strategic investments in our digital platform and sustainability initiatives, partially offset by lower acquisition and integration related costs.

These costs increased in 2021, as compared with 2020, due to (i) higher incentive compensation costs;

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(iv) increased health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (v) charges pertaining to reserves for certain loss contingencies during 2021.

These increases were partially offset by lower consulting, advisory and legal fees following the completion of our acquisition of Advanced Disposal in 2020 and changes in the measurement of our environmental remediation obligations and recovery assets in both 2020 and 2021.

The costs increased in 2020, as compared with 2019, due to (i) higher consulting, advisory and legal fees associated with our acquisition and integration of Advanced Disposal;

(ii) strategic investments in our digital platform;

(iii) incremental costs associated with the COVID-19 pandemic and (iv) higher long-term incentive compensation costs.

These increased expenses were offset, in part, by (i) lower annual incentive compensation costs and (ii) lower litigation reserves.

These increases were partially offset by lower consulting, advisory and legal fees following the completion of our acquisition of Advanced Disposal in the fourth quarter of 2020 and changes in the measurement of our environmental remediation obligations and recovery assets in both 2020 and 2021.

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

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(e) For those items included in the determination of income from operations, the accounting policies of the segments are the same as those described in Note 2.

In the fourth quarter of 2021, we discontinued certain allocations from our Corporate and Other segment to our Solid Waste operating segments and Other segment.

Reclassifications have been made to our prior period information for comparability purposes.

(f) Includes non-cash items.

Capital expenditures are reported in our reportable segments at the time they are recorded within the segments’ property and equipment balances and, therefore, may include amounts that have been accrued but not yet paid.

Capital expenditures are reported in our reportable segments at the time they are recorded within the segments’ property and equipment balances and, therefore, include timing differences for amounts accrued but not yet paid.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(g) The reconciliation of total assets reported above to total assets in the Consolidated Balance Sheets as of December 31 is as follows (in millions):

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Balance, December 31, 2020

Acquired goodwill

Acquired goodwill (a)

Divested goodwill

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Balance, December 31, 2021

Acquired goodwill (a)

Acquired goodwill

Divested goodwill

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Includes $ 26 million of post-closing acquisition adjustments related to our acquisition of Advanced Disposal.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

(iii) certain services within our EES business, including our construction and remediation services and our services associated with the disposal of fly ash and (iv) certain other expanded service offerings and solutions.

In addition, our “Other” line of business reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

(ii) certain services within our sustainability business including our landfill gas-to-energy operations managed by our WM Renewable Energy business and (iii) certain other expanded service offerings and solutions and reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

Revenue attributable to collection, landfill, transfer and recycling services provided by our “Other” businesses has been reflected as a component of the relevant line of business for purposes of presentation in this table.

(b) Intercompany revenues between lines of business are eliminated in the Consolidated Financial Statements included within this report.

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fluctuations in our operating results may be caused by many factors, including period-to-period changes in the relative contribution of revenue by each line of business, changes in commodity prices and general economic conditions.

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Our 2020 operating results were negatively impacted by COVID-19, as volume declines began in March 2020 in our landfill, industrial and commercial collection businesses due to steps taken by national and local governments to slow the spread of the virus, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

Throughout 2021, our volumes recovered from the sharp decline experienced in 2020, with minimal impact from the resurgence in transmission of COVID-19 associated with recent virus variants, as communities and businesses remained open.

Throughout 2021 and 2022, our volumes recovered from the sharp decline experienced in 2020, with minimal impact from the resurgence in transmission of COVID-19 associated with recent virus variants, as communities and businesses remained open.

However, the potential for future resurgence in transmission of COVID-19 and related business closures, due to virus variants or other pandemic conditions, could adversely impact our volumes and costs in the future.

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

Service or operational disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the geographic areas affected.

Extreme weather events may also lead to supply chain disruption and delayed project development, or disruption of our customers’ businesses, reducing the amount of waste generated by their operations.

On the other hand, certain destructive weather and climate conditions, such as wildfires in the Western U.S.

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during the second half of the year, can increase our revenues in the geographic areas affected as a result of the waste volumes generated by these events.

While weather-related and other event driven special projects can boost

WASTE MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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.

Net operating revenues relating to operations in the U.S.

and Canada for the year ended December 31 are as follows (in millions):

Property and equipment, net of accumulated depreciation and amortization, relating to operations in the U.S.

Property and equipment, net of accumulated depreciation and depletion, relating to operations in the U.S.

and Canada for the year ended December 31 are as follows (in millions):

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data