What changed in this filing

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Item 1. Financial Statements

2023-07-26 compared with 2023-04-27 · 162 added, 101 removed, 426 unchanged (38% of the section changed)

44 unchanged sentences

Three Months Ended

Six Months Ended

Operating revenues

18 unchanged sentences

Three Months Ended

Six Months Ended

Consolidated net income

12 unchanged sentences

(In Millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

46 unchanged sentences

(Loss) Income

Balance, December 31, 2022

Three Months Ended June 30:

Balance, March 31, 2023

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, June 30, 2023

Balance, March 31, 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, June 30, 2022

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

(Loss) Income

Six Months Ended June 30:

Balance, December 31, 2022

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Common stock repurchase program

Balance, March 31, 2022

Balance, June 30, 2023

Balance, December 31, 2021

Consolidated net income

Other comprehensive income (loss), net of tax

Cash dividends declared of $ 1.30 per common share

Equity-based compensation transactions, net

Common stock repurchase program

Balance, June 30, 2022

See Notes to Condensed Consolidated Financial Statements.

13 unchanged sentences

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 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.

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 that we allocate to our natural gas fleet.

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

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

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

The Condensed Consolidated Financial Statements as of June 30, 2023 and for the three and six months ended June 30, 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.

19 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 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.

As of June 30, 2023 and December 31, 2022, we had $ 202 million and $ 192 million, respectively, of deferred contract costs, of which $ 142 million and $ 137 million, respectively, was 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.

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

March 31, 2023

June 30, 2023

December 31, 2022

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Current (in accrued liabilities)

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

The changes to landfill and environmental remediation liabilities for the six months ended June 30, 2023 are reflected in the table below (in millions):

Environmental

5 unchanged sentences

Acquisitions, divestitures and other adjustments

March 31, 2023

June 30, 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.

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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)

Debt and Derivatives

Commercial paper program (weighted average interest rate of 5.4 % as of June 30, 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 3.5 % as of June 30, 2023 and 3.2 % as of December 31, 2022)

Term Loan maturing May 2024, interest rate of 5.9 % as of June 30, 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 0.4 % 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)

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.4 % to 4.4 % (weighted average interest rate of 2.9 % as of June 30, 2023 and 2.7 % as of December 31, 2022)

Financing leases and other, maturing through 2071 (weighted average interest rate of 4.8 % as of June 30, 2023 and 4.7 % as of December 31, 2022) (a)

Debt issuance costs, discounts and other

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Debt Classification

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 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.

As of June 30, 2023, we had approximately $ 3.6 billion of debt maturing within the next 12 months, including (i) $ 1.3 billion of short-term borrowings under our commercial paper program (net of related discount on issuance);

(ii) our $ 1.0 billion, two-year, U.S.

term credit agreement maturing May 2024 (“Term Loan”);

(iii) $ 983 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities;

(iv) $ 156 million of 3.5 % senior notes that mature in May 2024 and (v) $ 172 million of other debt with scheduled maturities within the next 12 months, including $ 55 million of tax-exempt bonds.

As of June 30, 2023, we have classified $ 3.1 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $ 3.5 billion long-term U.S.

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

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and Standard and Poor’s Global Ratings.

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

As of June 30, 2023, we had no outstanding borrowings under this facility.

We had $ 179 million of letters of credit issued and $ 1.3 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

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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.

$ 2.0 billion as of June 30, 2023.WM Holdings, a wholly-owned subsidiary of WMI, guarantees all the obligations under the $3.5 billion revolving credit facility.

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

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

As of 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”) maturing May 2024 to be used for general corporate purposes.

As of June 30, 2023, we had $ 1.3 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Term Loan — In May 2022, we entered into our $ 1.0 billion, Term Loan maturing May 2024 to support 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.

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.

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.

As of June 30, 2023, we had $ 1.0 billion of outstanding borrowings under our Term Loan.

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

Other Letter of Credit Lines — As of June 30, 2023, we had utilized $ 802 million of other uncommitted letter of credit lines with terms maturing through December 2026.

Debt Borrowings and Repayments

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).

Commercial Paper Program — During the six months ended June 30, 2023, we made cash repayments of $ 10.5 billion, which were partially offset by $ 10.1 billion of cash borrowings (net of related discount on issuance).

A portion of these borrowings were used to repay senior notes at maturity as discussed below.

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.

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

We used the net proceeds to reduce outstanding borrowings under our commercial paper program, repay $ 500 million of WMI’s 2.4 % senior notes upon maturity in May 2023, and for general corporate purposes, including our sustainability capital investment program.

Tax-Exempt Bonds — We issued $ 50 million of tax-exempt bonds during the six months ended June 30, 2023.

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 2023, we also repaid $ 40 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 during the six months ended June 30, 2023 is due to an increase of $ 61 million primarily related to non-cash financing leases, partially offset by $ 58 million of cash repayments of debt at maturity.

Interest Rate Derivatives

During the second quarter of 2023, we entered into treasury rate locks with a notional value of $ 200 million to secure an underlying interest rate of a debt issuance that is currently being evaluated for the second half of 2023, subject to market conditions and other considerations.

We designated our treasury rate locks as cash flow hedges.

As of June 30, 2023, the fair value of these active interest rate derivatives was an asset of $ 8 million, classified as other current assets in our Condensed Consolidated Balance Sheet.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

share of the tax credits they generate.

Our effective income tax rate was 24.2 % and 23.9 % for the three and six months ended June 30, 2023, respectively, compared with 24.3 % and 23.9 % for the three and six months ended June 30, 2022, respectively.

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

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

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 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.

During the three and six months ended June 30, 2023, we recognized $ 12 million and $ 25 million of net losses, respectively, and a reduction in our income tax expense of $ 26 million and $ 48 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 and six months ended June 30, 2023, we recognized interest expense of $ 3 million and $ 7 million, respectively, associated with our investments in low-income housing properties.

During the three and six months ended June 30, 2022, we recognized $ 17 million and $ 31 million of net losses, respectively, and a reduction in our income tax expense of $ 25 million and $ 48 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 and six months ended June 30, 2022, we recognized interest expense of $ 4 million and $ 6 million, respectively, associated with our investments in low-income housing properties.

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

Equity-Based Compensation – During the three and six months ended June 30, 2023, we recognized a reduction in our income tax expense of $ 3 million and $ 10 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $ 2 million and $ 12 million, respectively, for the comparable prior year periods.

Earnings Per Share

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

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

Three Months Ended

Six Months Ended

Number of common shares outstanding at end of period

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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 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.

As of June 30, 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 19 of our landfills.

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

1 unchanged sentence

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

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

The nature of our operations, particularly with respect to the construction, operation

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and maintenance of our landfills, subjects us to an array of laws and regulations relating to the protection of the environment.

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 $ 130 million higher than the $ 200 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 125 million higher than the $ 196 million recorded in the Condensed Consolidated Balance Sheet as of June 30, 2023.

Our ultimate responsibility may differ materially from current estimates.

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These adjustments could be material in any given period.

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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”).

As of June 30, 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 proposed remedy has not been established.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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;

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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 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.

As of June 30, 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

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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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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.

Our motion to dismiss is pending.

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.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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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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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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.

As of June 30, 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 21 months .

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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 East Tier primarily consists of geographic areas located in the Eastern U.S., the Great

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

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

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

Three Months Ended June 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)

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

Six Months Ended June 30:

Solid Waste (a)

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

Income from operations in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal 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.

Income from operations in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal business driven by yield 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 Inflation Reduction Act of 2022 (“IRA”).

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

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(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 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)

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 electricity and natural gas prices and (ii) the decline in recycling brokerage commodity prices affecting profitability in our recycling business.

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

1 unchanged sentence

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

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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The improvement in income from operations was primarily driven by (i) lower annual incentive compensation costs;

(ii) lower professional fees in connection with investments in our digital program, as certain strategic projects have now been implemented and (iii) 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 lower costs were partially offset by annual merit increases and market adjustments for deferred compensation plans related to investment performance.

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

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

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

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

Three Months Ended

Six Months Ended

Other collection

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(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 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.

(ii) certain services within our sustainability business including our landfill gas-to-energy operations managed by our WM Renewable Energy business;

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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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)

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.

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.

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

and hurricanes that most often impact our operations in the Southern and Eastern U.S.

during the second half of the year, can increase our revenues in the 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 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 six months ended June 30, 2023, we completed solid waste and recycling acquisitions with total consideration of $ 118 million, which included $ 111 million in cash paid and $ 7 million of other consideration, specifically purchase price holdbacks.

In addition, we paid $ 7 million of holdbacks, primarily related to prior year acquisitions.

Total consideration for our 2023 acquisitions was allocated to $ 17 million of property and equipment, $ 43 million of other intangible assets, primarily customer relationships, and $ 67 million of goodwill with the remaining allocated to liabilities assumed from the ordinary course of business.

We remain in the measurement period for most of our acquisitions, and adjustments 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 substantially all was tax deductible.

(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.

(Gain) loss from divestitures, asset impairments and unusual items, net for the first half 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.

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Net current period other comprehensive income (loss)

Balance, March 31, 2023

Balance, June 30, 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 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

In the first quarter of 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 .

The ASR agreement completed in May 2023 and we received 0.4 million additional shares based on a final weighted average price of $ 153.90 .

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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.

In the second quarter of 2023, we entered into an ASR agreement to repurchase $ 250 million of our common stock and received 1.5 million shares based on a final weighted average stock price of $ 163.62 .

Subsequent to the completion of the ASR, we repurchased 0.1 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act for $ 22 million, inclusive of per-share commissions, at a weighted average price of $ 164.79 , of which $ 2 million was paid in July 2023.

The IRA, 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.

We reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased.

The discussion of the results of our common stock repurchase program in the prior two paragraphs is exclusive of the 1% excise tax.

As of June 30, 2023, the Company has authorization for $ 878 million of future share repurchases, exclusive of the 1% excise tax discussed above.

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

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Available-for-sale securities (a)

Interest rate derivatives

Significant unobservable inputs (Level 3):

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Fair Value of Debt

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.

As of June 30, 2023 and December 31, 2022, the carrying value of our debt was $ 15.4 billion and $ 15.0 billion, respectively.

The estimated fair value of our debt was approximately $ 14.2 billion and $ 13.8 billion as of June 30, 2023 and December 31, 2022, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of fair value.

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

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

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

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of June 30, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Variable Interest Entities

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

Our aggregate investment balance in these entities was $ 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.

Our aggregate investment balance in these entities was $ 296 million and $ 321 million as of June 30, 2023 and December 31, 2022, respectively.

The debt balance related to our investments in low-income housing properties was $ 260 million and $ 295 million as of June 30, 2023 and December 31, 2022, respectively.

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

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These amounts are recorded in other receivables, investments in unconsolidated entities and long-term other assets in our Condensed Consolidated Balance Sheets, as appropriate.

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 $ 95 million and $ 93 million as of March 31, 2023 and December 31, 2022, respectively.

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 (loss) income.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 97 million and $ 93 million as of June 30, 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.

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

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

These trusts had a fair value of $ 116 million and $ 113 million as of June 30, 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