What changed in this filing

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Item 1. Financial Statements

2023-10-25 compared with 2023-07-26 · 135 added, 113 removed, 475 unchanged (34% of the section changed)

3 unchanged sentences

(In Millions, Except Share and Par Value Amounts)

September 30,

Current assets:

39 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating revenues

18 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consolidated net income

12 unchanged sentences

(In Millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

46 unchanged sentences

(Loss) Income

Three Months Ended June 30:

Balance, March 31, 2023

Three Months Ended September 30:

Balance, June 30, 2023

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, September 30, 2023

Balance, June 30, 2022

Balance, March 31, 2022

Consolidated net income

3 unchanged sentences

Common stock repurchase program

Balance, June 30, 2022

Balance, September 30, 2022

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ─ (Continued)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ─ (Continued)

(In Millions, Except Shares in Thousands)

5 unchanged sentences

(Loss) Income

Six Months Ended June 30:

Nine Months Ended September 30:

Balance, December 31, 2022

4 unchanged sentences

Common stock repurchase program

Balance, June 30, 2023

Balance, September 30, 2023

Balance, December 31, 2021

4 unchanged sentences

Common stock repurchase program

Balance, June 30, 2022

Balance, September 30, 2022

See Notes to Condensed Consolidated Financial Statements.

21 unchanged sentences

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

The Condensed Consolidated Financial Statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 are unaudited.

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

As of September 30, 2023 and December 31, 2022, we had $ 207 million and $ 192 million, respectively, of deferred contract costs, of which $ 145 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):

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Current (in accrued liabilities)

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

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

Environmental

5 unchanged sentences

Acquisitions, divestitures and other adjustments

June 30, 2023

September 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.

4 unchanged sentences

Debt and Derivatives

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 June 30, 2023:

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

September 30,

Commercial paper program (weighted average interest rate of 5.5 % as of September 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 3.7 % as of September 30, 2023 and 3.2 % as of December 31, 2022)

Term Loan, interest rate of 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 2.9 % 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)

Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.55 % to 4.4 % (weighted average interest rate of 2.9 % as of September 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 September 30, 2023 and 4.7 % as of December 31, 2022) (a)

Debt issuance costs, discounts and other

3 unchanged sentences

Debt Classification

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.

As of September 30, 2023, we had approximately $ 2.4 billion of debt maturing within the next 12 months, including (i) $ 489 million of short-term borrowings under our commercial paper program (net of related discount on issuance);

(ii) $ 1.6 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities;

(iii) $ 156 million of 3.5 % senior notes that mature in May 2024 and (iv) $ 174 million of other debt with scheduled maturities within the next 12 months, including $ 60 million of tax-exempt bonds.

As of September 30, 2023, we have classified $ 2.1 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $ 3.5 billion long-term U.S.

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

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and Standard and Poor’s Global Ratings.

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

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

We had $ 181 million of letters of credit issued and $ 489 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$ 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.

$ 2.8 billion as of September 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 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.

As of September 30, 2023, we had $ 489 million 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, two-year, U.S.

term credit agreement maturing May 2024 (“Term Loan”) to support general corporate purposes.

WM Holdings guaranteed all obligations under the Term Loan.

The interest rate we paid on our Term Loan was 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 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.

The Term Loan had a contractual maturity of May 2024, but we elected to repay all outstanding balances under the Term Loan in August 2023 with proceeds from our July 2023 senior notes issuance, which is discussed further below.

Other Letter of Credit Lines — As of September 30, 2023, we had utilized $ 801 million of other uncommitted letter of credit lines with terms maturing through December 2026.

Debt Borrowings and Repayments

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.

Commercial Paper Program — During the nine months ended September 30, 2023, we made cash repayments of $ 15.3 billion, which were partially offset by $ 14.1 billion of cash borrowings (net of related discount on issuance).

A portion of these borrowings were repaid with proceeds from senior note issuances 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 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 July 2023, WMI issued $ 750 million and $ 1.25 billion of 4.875 % senior notes due February 2029 and February 2034, respectively, the net proceeds of which were $ 1.97 billion.

We used the net proceeds to reduce outstanding borrowings under our commercial paper program, repay $ 1.0 billion of outstanding borrowings under our Term Loan and for general corporate purposes.

Term Loan — In August 2023, we repaid $ 1.0 billion of outstanding borrowings under our Term Loan with proceeds from our July 2023 senior notes issuance discussed above and contemporaneously terminated the facility.

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

The proceeds from the issuance of these bonds were deposited directly into a restricted trust fund to 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 $ 65 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.

Financing Leases and Other — The decrease in our financing leases and other debt obligations during the nine months ended September 30, 2023 is due to $ 91 million of cash repayments of debt at maturity, partially offset by an increase of $ 78 million primarily related to non-cash financing leases.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Interest Rate Derivatives

During 2023, we entered into treasury rate locks with a total notional value of $ 800 million to secure underlying interest rates associated with our senior notes issuances discussed above.

We designated our treasury rate locks as cash flow hedges.

These treasury rate locks were terminated contemporaneously with the related issuances of senior notes and we received cash of $ 19 million to settle the related assets.

Our effective income tax rate was 24.1 % and 24.0 % for the three and nine months ended September 30, 2023, respectively, compared with 22.8 % and 23.5 % for the three and nine months ended September 30, 2022, respectively.

The increase in our effective income tax rate when comparing the three and nine months ended September 30, 2023 and 2022 was primarily driven by (i) an unfavorable increase in permanent differences between taxable income and accounting income associated with our treatment of landfill closure and post-closure costs and (ii) a decrease in the excess tax benefits associated with equity-based compensation.

The impacts of these items were partially offset by increased federal tax credits.

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

Permanent Differences — During the three and nine months ended September 30, 2023, we recognized additional income tax expense when compared to prior periods of $ 10 million and $ 16 million, respectively, related to permanent differences between taxable income and accounting income.

This increase is largely due to an increase in taxable interest income associated with the Company’s election to deduct landfill closure and post-closure costs for income tax purposes when incurred and accrued.

The increase in taxable interest income is due to the increase in the applicable federal rate published by the IRS.

Equity-Based Compensation – During the three and nine months ended September 30, 2023, we recognized a reduction in our income tax expense of $ 1 million and $ 11 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $ 5 million and $ 17 million, respectively, for the comparable prior year periods.

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

2 unchanged sentences

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

During the three and six months ended June 30, 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.

During the three and nine months ended September 30, 2023, we recognized $ 18 million and $ 43 million of net losses, respectively, and a reduction in our income tax expense of $ 28 million and $ 76 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 nine months ended September 30, 2023, we recognized interest expense of $ 3 million and $ 10 million, respectively, associated with our investments in low-income housing properties.

During the three and nine months ended September 30, 2022, we recognized $ 16 million and $ 47 million of net losses, respectively, and a reduction in our income tax expense of $ 26 million and $ 74 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 nine months ended September 30, 2022, we recognized interest expense of $ 5 million and $ 10 million,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Number of common shares outstanding at end of period

6 unchanged sentences

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commitments and Contingencies

13 unchanged sentences

For our self-insured portions, the exposure for unpaid claims and associated expenses, including incurred but not reported losses, is based on an actuarial valuation or internal estimates.

The accruals for these liabilities could be revised if future occurrences or loss development significantly differ from such valuations and estimates.

The accruals for these liabilities could be revised if future

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

occurrences or loss development significantly differ from such valuations and estimates.

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

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

As of 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.

As of September 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

WASTE MANAGEMENT, INC.

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.

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.

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 $ 125 million higher than the $ 196 million recorded in the Condensed Consolidated Balance Sheet as of June 30, 2023.

If we used the high ends of such ranges, our aggregate potential liability would be approximately $ 120 million higher than the $ 185 million recorded in the Condensed Consolidated Balance Sheet as of September 30, 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 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”).

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

The other 59 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, known as CERCLA or Superfund.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

other 59 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, known as CERCLA or Superfund.

The majority of proceedings involving NPL sites that we do not own are based on allegations that certain of our subsidiaries (or their predecessors) transported hazardous substances to the sites, often prior to our acquisition of these subsidiaries.

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

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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.

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

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

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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 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.

As of September 30, 2023 and December 31, 2022, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $ 68 million.

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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Compliance with these agreements inherently involves subjective determinations and may result in disputes, including litigation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Litigation — We are subject to various proceedings, lawsuits, disputes and claims arising in the ordinary course of our business.

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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

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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.

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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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 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.

As of September 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 18 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Lakes region and substantially all of Canada.

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

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

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

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):

Three Months Ended June 30:

Three Months Ended September 30:

Solid Waste (a)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Six Months Ended June 30:

Nine Months Ended September 30:

Solid Waste (a)

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Corporate and Other (c)

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

(a) Income from operations provided by our Solid Waste business is generally indicative of the margins provided by our collection, landfill, transfer and recycling lines of business and includes elements of profitability from our “Other” segment.

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 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”).

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

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

(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.

(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.

In addition, fuel tax credits in 2022 were not recognized until August 2022 due to the timing of the Inflation Reduction Act of 2022 (“IRA”).

This created a $ 26 million negative impact to income from operations for the three months ended September 30, 2023, but is broadly flat for the nine months ended September 30, 2023.

(b) “Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) business that are not included in the operations of our reportable segments;

1 unchanged sentence

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

The decrease in income from operations was due to (i) reduced profitability in our WM Renewable Energy business primarily driven by decreases in the value of energy prices and renewable fuel standard credits 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.

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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.

These lower costs were partially offset by annual merit increases and litigation costs.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other collection

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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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

While weather-related

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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.

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, 2023, we completed solid waste and recycling acquisitions with total consideration of $ 138 million, which included $ 129 million in cash paid and $ 9 million of other consideration, specifically purchase price holdbacks.

In addition, we paid $ 10 million of holdbacks, of which $ 6 million related to prior year acquisitions.

Total consideration for our 2023 acquisitions was allocated to $ 22 million of property and equipment, $ 46 million of other intangible assets, primarily customer relationships, and $ 76 million of goodwill with the remaining allocated to liabilities assumed from the ordinary course of business.

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

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

(Gain) loss from divestitures, asset impairments and unusual items, net for the nine months ended September 30, 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, June 30, 2023

Balance, September 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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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)

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.

In the third quarter of 2023, we entered into an ASR agreement to repurchase $ 350 million of our common stock and received 2.2 million shares based on a final weighted average stock price of $ 156.87 .

Additionally, 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 $ 19.5 million, inclusive of per-share commissions, at a weighted average price of $ 168.04 , of which $ 1.5 million was paid in October 2023.

The Inflation Reduction Act of 2022 (“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.

The discussion of our common stock repurchase program above is exclusive of the 1% excise tax.

As of September 30, 2023, the Company has authorization for $ 508.5 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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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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Available-for-sale securities (a)

Interest rate derivatives

Significant unobservable inputs (Level 3):

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When this evidence is not available, we use other valuation techniques as appropriate and available.

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

Fair Value of Debt

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.

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

These valuation

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of fair value.

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

Fair Value of Debt

As of September 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 $ 13.8 billion as of September 30, 2023 and December 31, 2022.

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

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

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of June 30, 2023 and December 31, 2022.

The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of September 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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Accordingly, we account for these investments under the equity method of accounting.

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.

Our aggregate investment balance in these entities was $ 278 million and $ 321 million as of September 30, 2023 and December 31, 2022, respectively.

The debt balance related to our investments in low-income housing properties was $ 243 million and $ 295 million as of September 30, 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 (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.

Our investments and receivables related to these trusts had an aggregate carrying value of $ 94 million and $ 93 million as of September 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 $ 116 million and $ 113 million as of June 30, 2023 and December 31, 2022, respectively.

These trusts had a fair value of $ 116 million and $ 113 million as of September 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