What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2022-10-26 · 138 added, 242 removed, 389 unchanged (49% of the section changed)

3 unchanged sentences

(In Millions, Except Share and Par Value Amounts)

September 30,

Current assets:

4 unchanged sentences

Total current assets

Property and equipment, net of accumulated depreciation and amortization of $ 21,438 and $ 20,537 , respectively

Property and equipment, net of accumulated depreciation and depletion of $ 22,027 and $ 21,627 , respectively

Other intangible assets, net

21 unchanged sentences

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

Treasury stock at cost 223,491,127 and 222,396,166 shares, respectively

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating revenues

1 unchanged sentence

Selling, general and administrative

Depreciation and amortization

Depreciation, depletion and amortization

Restructuring

3 unchanged sentences

Interest expense, net

Loss on early extinguishment of debt

Equity in net losses of unconsolidated entities

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Consolidated net income

12 unchanged sentences

(In Millions)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

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

Depreciation and amortization

Deferred income tax (benefit) expense

Depreciation, depletion and amortization

Deferred income tax expense (benefit)

Interest accretion on landfill and environmental remediation liabilities

4 unchanged sentences

Equity in net losses of unconsolidated entities, net of dividends

Loss on early extinguishment of debt

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

11 unchanged sentences

Debt repayments

Premiums and other paid on early extinguishment of debt

Common stock repurchase program

4 unchanged sentences

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

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

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

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

14 unchanged sentences

Noncontrolling

Income (Loss)

Three Months Ended September 30:

Balance, June 30, 2022

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 0.65 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, September 30, 2022

Balance, June 30, 2021

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 0.575 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, September 30, 2021

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ─ (Continued)

(In Millions, Except Shares in Thousands)

Waste Management, Inc.

Stockholders’ Equity

Comprehensive

Treasury Stock

Noncontrolling

Income (Loss)

Nine Months Ended September 30:

(Loss) Income

Balance, December 31, 2022

4 unchanged sentences

Common stock repurchase program

Balance, September 30, 2022

Balance, March 31, 2023

Balance, December 31, 2021

4 unchanged sentences

Common stock repurchase program

Balance, September 30, 2021

Balance, March 31, 2022

See Notes to Condensed Consolidated Financial Statements.

8 unchanged sentences

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 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.

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

Through our subsidiaries and 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.

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.

1 unchanged sentence

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

We finalized the assessment of our segments during the fourth quarter of 2021.

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

We also provide additional services that are not managed through our Solid Waste business, which are presented in this report as “Other.” Additional information related to our segments is included in Note 7.

The Condensed Consolidated Financial Statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited.

The Condensed Consolidated Financial Statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited.

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

14 unchanged sentences

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

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

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

Contract Acquisition Costs

2 unchanged sentences

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

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

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

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

As of both March 31, 2023 and December 31, 2022, we had $ 192 million of deferred contract costs, of which $ 139 million and $ 137 million, respectively, were related to deferred sales incentives.

Amounts for our operating lease right-of-use assets are recorded in long-term other assets and the current and long-term portion of our operating lease liabilities are reflected in accrued liabilities and other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheets.

Right-of-use assets obtained in exchange for lease obligations for our operating leases for the nine months ended September 30, 2022 and 2021 were $ 44 million and $ 57 million, respectively.

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

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

Concentrations of Credit Risk

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

8 unchanged sentences

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

September 30, 2022

March 31, 2023

December 31, 2022

2 unchanged sentences

Current (in accrued liabilities)

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

The changes to landfill and environmental remediation liabilities for the three months ended March 31, 2023 are reflected in the table below (in millions):

Environmental

3 unchanged sentences

Interest accretion

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

Revisions in estimates and interest rate assumptions

Acquisitions, divestitures and other adjustments

September 30, 2022

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

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

Partially offsetting this charge was a decrease of $ 16 million due to an increase from 1.50 % at December 31, 2021 to 3.75 % at September 30, 2022 in the risk-free discount rate used to measure these liabilities.

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

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

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

March 31, 2023

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.

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

See Note 12 for additional information related to these trusts.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the major components of debt as of each balance sheet date (in millions) and provides the maturities and interest rate ranges of each major category as of September 30, 2022:

September 30,

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

Term Loan maturing May 2024, interest rate of 3.8 % as of September 30, 2022

Senior notes, maturing through 2050, interest rates ranging from 0.75 % to 7.75 % (weighted average interest rate of 3.2 % as of September 30, 2022 and 3.1 % as of December 31, 2021)

The following table summarizes the major components of debt at principal amounts as of each balance sheet date (in millions) and provides the maturities and interest rate ranges of each major category as of March 31, 2023:

Commercial paper program (weighted average interest rate of 5.2 % as of March 31, 2023 and 4.9 % as of December 31, 2022)

Senior notes, maturing through 2050, interest rates ranging from 0.75 % to 7.75 % (weighted average interest rate of 3.4 % as of March 31, 2023 and 3.2 % as of December 31, 2022)

Term Loan maturing May 2024, (interest rate of 5.6 % as of March 31, 2023 and 5.1 % as of December 31, 2022)

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

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3 % to 4.3 % (weighted average interest rate of 2.2 % as of September 30, 2022 and 1.4 % as of December 31, 2021)

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

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.4 % to 4.4 % (weighted average interest rate of 2.8 % as of March 31, 2023 and 2.7 % as of December 31, 2022)

Financing leases and other, maturing through 2071 (weighted average interest rate of 4.7 % as of March 31, 2023 and December 31, 2022) (a)

Debt issuance costs, discounts and other

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.

Debt Classification

As of September 30, 2022, we had approximately $ 2.2 billion of debt maturing within the next 12 months, including (i) $ 839 million of short-term borrowings under our commercial paper program (net of related discount on issuance);

As of March 31, 2023, we had approximately $ 2.3 billion of debt maturing within the next 12 months, including (i) $ 861 million 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 2.4 % senior notes that mature in May 2023 and (iv) $ 186 million of other debt with scheduled maturities within the next 12 months, including $ 65 million of tax-exempt bonds.

As of September 30, 2022, we have classified $ 2.0 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $ 3.5 billion long-term U.S.

As of March 31, 2023, we have classified $ 1.9 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $ 3.5 billion long-term U.S.

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

The remaining $ 336 million of debt maturing in the next 12 months is classified as current obligations.

Additionally, as of September 30, 2022, we also had $ 54 million of variable-rate tax-exempt bonds with long-term scheduled maturities that are supported by letters of credit under our $3.5 billion revolving credit facility.

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

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

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

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

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Access to and Utilization of Credit Facilities and Commercial Paper Program

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

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

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

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

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

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

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

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

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility, maturing May 2027, provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program.

The interest rates we pay on outstanding U.S.

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

or Canadian loans are based on the Secured Overnight Financing Rate (“SOFR”) administered by the Federal Reserve Bank of New York 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 September 30, 2022, we had no outstanding borrowings under this facility.

We had $ 164 million of letters of credit issued and $ 839 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of $ 2.5 billion as of September 30, 2022.

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

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

As of March 31, 2023, we had no outstanding borrowings under this facility.

We had $ 165 million of letters of credit issued and $ 861 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$ 2.5 billion as of March 31, 2023.

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

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

The rates we pay for outstanding borrowings are based on the term of the notes.

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

As of March 31, 2023, we had $ 861 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

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

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

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

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

As of March 31, 2023, we had $ 1.0 billion of outstanding borrowings under our Term Loan.

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

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

The rates we pay for outstanding borrowings are based on the term of the notes.

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

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

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Letter of Credit Lines — As of March 31, 2023, we had utilized $ 796 million of other uncommitted letter of credit lines, with terms maturing through December 2026.

Debt Borrowings and Repayments

Commercial Paper Program — During the nine months ended September 30, 2022, we made cash repayments of $ 4.9 billion, which were partially offset by $ 3.9 billion of cash borrowings (net of related discount on issuance).

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

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

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

Financing Leases and Other — The increase in our financing leases and other debt obligations during the nine months ended September 30, 2022 is primarily related to our new federal low-income housing investment discussed in Note 4, which increased our debt obligations by $ 183 million.

The increase in our debt obligations was partially offset by $ 65 million of cash repayments of debt at maturity.

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

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

(“Advanced Disposal”) and related divestitures.

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

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

Commercial Paper Program — During the three months ended March 31, 2023, we made cash repayments of $ 6.5 billion, which were partially offset by $ 5.6 billion of cash borrowings (net of related discount on issuance).

Senior Notes — In February 2023, WMI issued $ 750 million and $ 500 million of 4.625 % senior notes due February 2030 and February 2033, respectively, the net proceeds of which were $ 1.24 billion.

We used the net proceeds to repay $ 867 million of outstanding borrowings under our commercial paper program and utilized the remaining $ 373 million, combined with our net cash provided by operating activities of $ 1.04 billion, for general corporate purposes including for example, payment of dividends, common stock repurchases and investments in the business through capital expenditures and acquisitions.

Financing Leases and Other — The increase in our financing leases and other debt obligations during the three months ended March 31, 2023 is due to an increase of $ 33 million primarily related to non-cash financing leases, partially offset by $ 28 million of cash repayments of debt at maturity.

Our effective income tax rate was 23.6 % and 23.5 % for the three months ended March 31, 2023 and 2022, respectively.

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

Equity-Based Compensation — During the three months ended March 31, 2023, and 2022, we recognized a reduction in our income tax expense of $ 7 million and $ 10 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards.

Adjustments to Accruals and Related Deferred Taxes — There were no adjustments to accruals and related deferred taxes during the three months ended March 31, 2023.

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

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 discussed in Note 3, an initial cash payment of $ 28 million and $ 42 million of interest payments expected to be paid over the life of the investment.

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

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

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

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

During the three and nine months ended September 30, 2022, we recognized $ 16 million and $ 47 million, respectively, of net losses for these investments.

We also recognized a reduction in our income tax expense for the three and nine months ended September 30, 2022 of $ 26 million

We support the operations of these entities in exchange for a pro-rata

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and $ 74 million, respectively, due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

In addition, during the three and nine months ended September 30, 2022, we recognized interest expense of $ 5 million and $ 10 million, respectively, associated with our investments in low-income housing properties.

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

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

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

share of the tax credits they generate.

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

During the three months ended March 31, 2023 and 2022, we recognized $ 13 million and $ 14 million of net losses, respectively, and a reduction in our income tax expense of $ 22 million and $ 23 million, respectively, primarily due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized.

In addition, during the three months ended March 31, 2023 and 2022, we recognized interest expense of $ 4 million and $ 3 million, respectively, associated with our investments in low-income housing properties.

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

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

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

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

This gain was not taxable, which benefited our effective income tax rate for the three and nine months ended September 30, 2021.

See Note 9 for further discussion.

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

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

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

Earnings Per Share

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

Three Months Ended

Nine Months Ended

September 30,

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

Number of common shares outstanding at end of period

6 unchanged sentences

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

8 unchanged sentences

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

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

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amounts that exceed our insured limits.

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

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

As of September 30, 2022, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover the difference, if any, between the sale value and the guaranteed market or contractually-determined value of certain homeowner’s properties that are adjacent to or near 17 of our landfills.

As of March 31, 2023, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover the difference, if any, between the sale value and the guaranteed market or contractually-determined value of certain homeowner’s properties that are adjacent to or near 17 of our landfills.

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

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

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 130 million higher than the $ 200 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023.

Our ultimate responsibility may differ materially from current estimates.

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These adjustments could be material in any given period.

As of September 30, 2022, we have been notified by the government that we are a PRP in connection with 73 locations listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2023, we have been notified by the government that we are a PRP in connection with 73 locations listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”).

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

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

On April 9, 2018, MIMC and International Paper Company entered into an Administrative Order on Consent agreement with the EPA to develop a remedial design for the EPA’s proposed remedy for the site, and we recorded a liability for MIMC’s estimated potential share of the EPA’s proposed remedy and related costs, although allocation of responsibility among the PRPs for the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

proposed remedy has not been established.

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

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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 September 30, 2022 and December 31, 2021, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $ 68 million and $ 53 million, respectively.

As of March 31, 2023 and December 31, 2022, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $ 69 million and $ 68 million, respectively.

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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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 secondary market purchasers of our senior notes with a special mandatory redemption feature issued in May 2019, 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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The Company may incur substantial expenses in connection with the fulfillment of its advancement of costs and indemnification obligations in connection with actions or proceedings that may be brought against its former or current officers, directors and employees.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

In addition, we are in the examination phase of IRS audits for the 2021 and 2022 tax years and expect these audits to be completed within the next 18 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 March 31, 2023 and 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 Condensed Consolidated Balance Sheets.

In addition, we are in the examination phase of IRS audits for the 2022 and 2023 tax years and expect the audits to be completed within the next 24 months .

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

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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.

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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.

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Operations(e)

Three Months Ended September 30:

Solid Waste (a)

Corporate and Other (c)

Solid Waste (a)

Corporate and Other (c)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operations(e)

Nine Months Ended September 30:

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

Solid Waste (a)

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From time to time, the operating results of our reportable segments are significantly affected by certain transactions or events that management believes are not indicative or representative of our results.

Income from operations in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume and (ii) a $ 26 million catch-up benefit from the extension of alternative fuel tax credits that was retroactive to January 1, 2022.

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

Income from operations in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal business driven by both yield and volume and (ii) fuel tax credits recognized in the current year which were nominal in the prior year period as the majority of our fuel tax credits were not recognized until August 2022 due to the timing of the Inflationary Reduction Act of 2022.

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

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

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

(ii) labor cost increases from frontline employee wage adjustments and annual merit increases and (iii) reduced profitability in our recycling business from the decline in recycling commodity prices and lower volumes.

(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 environmental solutions services and recycling brokerage services and 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 Sustainability and Environmental Solutions 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.

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

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

The decrease in income from operations was due to (i) reduced profitability in our WM Renewable Energy business due to lower market values for renewable fuel standard credits and lower energy prices and (ii) the decline in recycling brokerage commodity prices affecting profitability in our recycling business.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

The increase in income from operations was primarily driven by (i) lower annual incentive compensation and (ii) a charge during the first quarter of 2022 to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site.

These were partially offset by an increase in health and welfare costs driven by higher inflation and utilization of employee medical benefits.

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

Transactions within and between segments are generally made on a basis intended to reflect the market value of the service.

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

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

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

Three Months Ended

Nine Months Ended

September 30,

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

Other collection

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

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

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

(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.

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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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While weather-related and other event-driven special projects can boost revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

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

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

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

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

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

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

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

Divestitures, Asset Impairments and Unusual Items

For the nine months ended September 30, 2022, we recognized a $ 17 million charge in the first quarter in our Corporate and Other segment to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site, as discussed in Note 6.

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

These gains were partially offset by (i) a $ 20 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment and (ii) $ 6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other segment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accumulated Other Comprehensive Income (Loss)

The changes in the balances of each component of accumulated other comprehensive income (loss), net of tax, which is included as a component of Waste Management, Inc.

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

(Gain) loss from divestitures, asset impairments and unusual items, net for the first quarter of 2023 were nominal.

During the first quarter of 2022, we recognized 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 6.

Accumulated Other Comprehensive (Loss) Income

The changes in the balances of each component of accumulated other comprehensive (loss) income, net of tax, which is included as a component of Waste Management, Inc.

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

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Net current period other comprehensive income (loss)

Balance, September 30, 2022

Balance, March 31, 2023

Common Stock Repurchase Program

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

In the fourth quarter of 2021, we executed an accelerated share repurchase (“ASR”) agreement to repurchase $ 350 million of our common stock.

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

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

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

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

As of September 30, 2022, the Company has authorization for $ 437 million of future share repurchases.

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

In February 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $ 350 million of our common stock.

At the beginning of the repurchase period, we delivered $ 350 million cash and received 1.9 million shares based on a stock price of $ 150.34 , exclusive of the 1% excise tax discussed below.

The final number of shares to be repurchased and the final average price per share under the ASR agreement, exclusive of the 1% excise tax, will depend on the volume-weighted average price of our stock, less a discount, during the term of the agreement.

Purchases under the ASR agreement are expected to be completed in April 2023.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

During the three months ended March 31, 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and recorded a corresponding liability for the excise taxes payable in accrued liabilities in our Condensed Consolidated Balance Sheet.

As of March 31, 2023, the Company has authorization for $ 1.15 billion of future share repurchases.

Fair Value Measurements

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

September 30,

Quoted prices in active markets (Level 1):

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

See Note 9 for information related to our nonrecurring fair value measurements and the impact of impairments.

Fair Value of Debt

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

The estimated fair value of our debt was approximately $ 12.6 billion and $ 14.1 billion as of September 30, 2022 and December 31, 2021, respectively.

The decrease in the fair value of debt is primarily related to increases in current market rates of our senior notes.

As of March 31, 2023 and December 31, 2022, the carrying value of our debt was $ 15.4 billion and $ 15.0 billion.

The estimated fair value of our debt was approximately $ 14.4 billion and $ 13.8 billion as of March 31, 2023 and December 31, 2022, respectively.

The increase in the fair value of debt is primarily due to net borrowings of $ 337 million in 2023 and, to a lesser extent, changes in the current market rates of our senior notes.

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

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

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of September 30, 2022 and December 31, 2021.

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of March 31, 2023 and December 31, 2022.

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

Variable Interest Entities

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

Low-Income Housing Properties

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Variable Interest Entities

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

Low-Income Housing Properties

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

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

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

Our aggregate investment balance in these entities was $ 309 million and $ 321 million as of March 31, 2023 and December 31, 2022, respectively.

The debt balance related to our investments in low-income housing properties was $ 278 million and $ 295 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

Our investments and receivables related to these trusts had an aggregate carrying value of $ 90 million and $ 110 million as of September 30, 2022 and December 31, 2021, respectively.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 95 million and $ 93 million as of March 31, 2023 and December 31, 2022, respectively.

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

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

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

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

These trusts had a fair value of $ 112 million and $ 117 million as of September 30, 2022 and December 31, 2021, respectively.

These trusts had a fair value of $ 118 million and $ 113 million as of March 31, 2023 and December 31, 2022, respectively.

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

What changed 10-Q

Item 1. Financial Statements