SEC Filing | Waste Management

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended September 30, 2022

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission file number 1-12154

Waste Management, Inc.

(Exact name of registrant as specified in its charter)


Delaware	73-1309529
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

800 Capitol Street

Suite 3000

Houston, Texas 77002

(Address of principal executive offices)

(713) 512-6200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	WM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☑		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at October 21, 2022 was 410,477,096 (excluding treasury shares of 219,805,365).

PART I.

Item 1. Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share and Par Value Amounts)


	September 30,		December 31,
	2022		2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	137	$	118
Accounts receivable, net of allowance for doubtful accounts of $26 and $25, respectively		2,452		2,278
Other receivables, net of allowance for doubtful accounts of $7 and $8, respectively		224		268
Parts and supplies		159		135
Other assets		292		270
Total current assets		3,264		3,069
Property and equipment, net of accumulated depreciation and amortization of $21,438 and $20,537, respectively		14,742		14,419
Goodwill		9,092		9,028
Other intangible assets, net		847		898
Restricted funds		374		348
Investments in unconsolidated entities		593		432
Other assets		929		903
Total assets	$	29,841	$	29,097
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,489	$	1,375
Accrued liabilities		1,496		1,428
Deferred revenues		591		571
Current portion of long-term debt		258		708
Total current liabilities		3,834		4,082
Long-term debt, less current portion		13,805		12,697
Deferred income taxes		1,629		1,694
Landfill and environmental remediation liabilities		2,436		2,373
Other liabilities		1,125		1,125
Total liabilities		22,829		21,971
Commitments and contingencies (Note 6)
Equity:
Waste Management, Inc. stockholders’ equity:
Common stock, $0.01 par value; 1,500,000,000 shares authorized; 630,282,461 shares issued		6		6
Additional paid-in capital		5,299		5,169
Retained earnings		12,933		12,004
Accumulated other comprehensive income (loss)		(92)		17
Treasury stock at cost, 219,742,939 and 214,158,636 shares, respectively		(11,136)		(10,072)
Total Waste Management, Inc. stockholders’ equity		7,010		7,124
Noncontrolling interests		2		2
Total equity		7,012		7,126
Total liabilities and equity	$	29,841	$	29,097

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions, Except per Share Amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Operating revenues	$	5,075	$	4,665	$	14,763	$	13,253
Costs and expenses:
Operating		3,156		2,906		9,201		8,156
Selling, general and administrative		473		469		1,451		1,372
Depreciation and amortization		503		517		1,493		1,489
Restructuring		1		1		1		6
(Gain) loss from divestitures, asset impairments and unusual items, net		—		(34)		17		(17)
		4,133		3,859		12,163		11,006
Income from operations		942		806		2,600		2,247
Other income (expense):
Interest expense, net		(91)		(87)		(269)		(282)
Loss on early extinguishment of debt		—		—		—		(220)
Equity in net losses of unconsolidated entities		(17)		(14)		(49)		(34)
Other, net		(6)		1		(7)		(4)
		(114)		(100)		(325)		(540)
Income before income taxes		828		706		2,275		1,707
Income tax expense		189		167		535		396
Consolidated net income		639		539		1,740		1,311
Less: Net income (loss) attributable to noncontrolling interests		—		1		1		1
Net income attributable to Waste Management, Inc.	$	639	$	538	$	1,739	$	1,310
Basic earnings per common share	$	1.55	$	1.28	$	4.20	$	3.11
Diluted earnings per common share	$	1.54	$	1.28	$	4.18	$	3.09

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Consolidated net income	$	639	$	539	$	1,740	$	1,311
Other comprehensive income (loss), net of tax:
Derivative instruments, net		—		1		3		8
Available-for-sale securities, net		(9)		(1)		(29)		(3)
Foreign currency translation adjustments		(66)		(57)		(83)		(31)
Post-retirement benefit obligations, net		—		(1)		—		(1)
Other comprehensive income (loss), net of tax		(75)		(58)		(109)		(27)
Comprehensive income		564		481		1,631		1,284
Less: Comprehensive income (loss) attributable to noncontrolling interests		—		1		1		1
Comprehensive income attributable to Waste Management, Inc.	$	564	$	480	$	1,630	$	1,283

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)


	Nine Months Ended
	September 30,
	2022		2021
Cash flows from operating activities:
Consolidated net income	$	1,740	$	1,311
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		1,493		1,489
Deferred income tax (benefit) expense		(53)		(91)
Interest accretion on landfill and environmental remediation liabilities		84		82
Provision for bad debts		36		28
Equity-based compensation expense		71		81
Net gain on disposal of assets		(5)		(16)
(Gain) loss from divestitures, asset impairments and other, net		17		(17)
Equity in net losses of unconsolidated entities, net of dividends		49		36
Loss on early extinguishment of debt		—		220
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		(101)		(56)
Other current assets		(47)		(35)
Other assets		19		32
Accounts payable and accrued liabilities		325		389
Deferred revenues and other liabilities		(141)		(106)
Net cash provided by operating activities		3,487		3,347
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(207)		(11)
Capital expenditures		(1,725)		(1,130)
Proceeds from divestitures of businesses and other assets, net of cash divested		18		70
Other, net		(122)		(35)
Net cash used in investing activities		(2,036)		(1,106)
Cash flows from financing activities:
New borrowings		5,916		6,428
Debt repayments		(5,429)		(7,237)
Premiums and other paid on early extinguishment of debt		—		(211)
Common stock repurchase program		(1,061)		(1,000)
Cash dividends		(811)		(730)
Exercise of common stock options		39		60
Tax payments associated with equity-based compensation transactions		(39)		(28)
Other, net		(6)		32
Net cash used in financing activities		(1,391)		(2,686)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		(6)		2
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents		54		(443)
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		194		648
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	248	$	205

Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end of period:
Cash and cash equivalents	$	137	$	116
Restricted cash and cash equivalents included in other current assets		44		16
Restricted cash and cash equivalents included in restricted funds		67		73
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	248	$	205

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Millions, Except Shares in Thousands)

(Unaudited)


			Waste Management, Inc. Stockholders’ Equity
										Accumulated
						Additional				Other
			Common Stock			Paid-In		Retained		Comprehensive		Treasury Stock			Noncontrolling
	Total		Shares	Amounts		Capital		Earnings		Income (Loss)		Shares	Amounts		Interests
Three Months Ended September 30:
2022
Balance, June 30, 2022	$	7,192	630,282	$	6	$	5,257	$	12,563	$	(17)	(217,006)	$	(10,619)	$	2
Consolidated net income		639	—		—		—		639		—	—		—		—
Other comprehensive income (loss), net of tax		(75)	—		—		—		—		(75)	—		—		—
Cash dividends declared of $0.65 per common share		(267)	—		—		—		(267)		—	—		—		—
Equity-based compensation transactions, net		62	—		—		42		(2)		—	494		22		—
Common stock repurchase program		(539)	—		—		—		—		—	(3,232)		(539)		—
Other, net		—	—		—		—		—		—	1		—		—
Balance, September 30, 2022	$	7,012	630,282	$	6	$	5,299	$	12,933	$	(92)	(219,743)	$	(11,136)	$	2

2021
Balance, June 30, 2021	$	7,354	630,282	$	6	$	5,104	$	11,444	$	70	(209,467)	$	(9,272)	$	2
Consolidated net income		539	—		—		—		538		—	—		—		1
Other comprehensive income (loss), net of tax		(58)	—		—		—		—		(58)	—		—		—
Cash dividends declared of $0.575 per common share		(241)	—		—		—		(241)		—	—		—		—
Equity-based compensation transactions, net		81	—		—		57		(1)		—	558		25		—
Common stock repurchase program		(500)	—		—		(50)		—		—	(3,087)		(450)		—
Other, net		(1)	—		—		—		—		—	—		—		(1)
Balance, September 30, 2021	$	7,174	630,282	$	6	$	5,111	$	11,740	$	12	(211,996)	$	(9,697)	$	2

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ─ (Continued)

(In Millions, Except Shares in Thousands)

(Unaudited)


			Waste Management, Inc. Stockholders’ Equity
										Accumulated
						Additional				Other
			Common Stock			Paid-In		Retained		Comprehensive		Treasury Stock			Noncontrolling
	Total		Shares	Amounts		Capital		Earnings		Income (Loss)		Shares	Amounts		Interests
Nine Months Ended September 30:
2022
Balance, December 31, 2021	$	7,126	630,282	$	6	$	5,169	$	12,004	$	17	(214,159)	$	(10,072)	$	2
Consolidated net income		1,740	—		—		—		1,739		—	—		—		1
Other comprehensive income (loss), net of tax		(109)	—		—		—		—		(109)	—		—		—
Cash dividends declared of $1.95 per common share		(811)	—		—		—		(811)		—	—		—		—
Equity-based compensation transactions, net		130	—		—		60		1		—	1,497		69		—
Common stock repurchase program		(1,063)	—		—		70		—		—	(7,084)		(1,133)		—
Other, net		(1)	—		—		—		—		—	3		—		(1)
Balance, September 30, 2022	$	7,012	630,282	$	6	$	5,299	$	12,933	$	(92)	(219,743)	$	(11,136)	$	2

2021
Balance, December 31, 2020	$	7,454	630,282	$	6	$	5,129	$	11,159	$	39	(207,481)	$	(8,881)	$	2
Consolidated net income		1,311	—		—		—		1,310		—	—		—		1
Other comprehensive income (loss), net of tax		(27)	—		—		—		—		(27)	—		—		—
Cash dividends declared of $1.725 per common share		(730)	—		—		—		(730)		—	—		—		—
Equity-based compensation transactions, net		167	—		—		82		1		—	1,957		84		—
Common stock repurchase program		(1,000)	—		—		(100)		—		—	(6,472)		(900)		—
Other, net		(1)	—		—		—		—		—	—		—		(1)
Balance, September 30, 2021	$	7,174	630,282	$	6	$	5,111	$	11,740	$	12	(211,996)	$	(9,697)	$	2

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The financial statements presented in this report represent the consolidation of Waste Management, Inc., a Delaware corporation; its wholly-owned and majority-owned subsidiaries; and certain variable interest entities for which Waste Management, Inc. or its subsidiaries are the primary beneficiaries as described in Note 13. Waste Management, Inc. is a holding company and all operations are conducted by its subsidiaries. When the terms “the Company,” “we,” “us” or “our” are used in this document, those terms refer to Waste Management, Inc., its consolidated subsidiaries and consolidated variable interest entities. When we use the term “WMI,” we are referring only to Waste Management, Inc., the parent holding company.

We are North America’s leading provider of comprehensive environmental solutions, providing services throughout the United States (“U.S.”) and Canada. We partner with our residential, commercial, industrial and municipal customers and the communities we serve to manage and reduce waste at each stage from collection to disposal, while recovering valuable resources and creating clean, renewable energy. Our “Solid Waste” business is operated and managed locally by our subsidiaries that focus on distinct geographic areas and provide collection, transfer, disposal, and recycling and resource recovery services. Through our subsidiaries and our WM Renewable Energy business, we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and renewable natural gas, which is a significant source of fuel for our natural gas fleet.

In 2021, our senior management began evaluating, overseeing and managing the financial performance of our Solid Waste operations through two operating segments. Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada. Our West Tier primarily includes geographic areas located in the Western U.S., including the upper Midwest region, and British Columbia, Canada. Each of our Solid Waste operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal. We finalized the assessment of our segments during the fourth quarter of 2021. The East and West Tiers are presented in this report and constitute our existing Solid Waste business. We also provide additional services that are not managed through our Solid Waste business, which are presented in this report as “Other.” Additional information related to our segments is included in Note 7.

The Condensed Consolidated Financial Statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 are unaudited. 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. The results for interim periods are not necessarily indicative of results for the entire year. The financial statements presented herein should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

In preparing our financial statements, we make numerous estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with precision from available data or simply cannot be calculated. In some cases, these estimates are difficult to determine, and we must exercise significant judgment. In preparing our financial statements, the most difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, long-lived asset impairments, intangible asset impairments and the fair value of assets and liabilities acquired in business combinations. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Revenue Recognition

We generally recognize revenue as services are performed or products are delivered. For example, revenue typically is recognized as waste is collected, tons are received at our landfills or transfer stations, or recycling commodities are collected or delivered as product. We bill for certain services prior to performance. Such services include, among others, certain commercial and residential contracts, and equipment rentals. These advanced billings are included in deferred revenues and recognized as revenue in the period service is provided. Substantially all our deferred revenues during the reported periods are realized as revenues within one to three months of when the related services are performed.

Contract Acquisition Costs

Our incremental direct costs of obtaining a contract, which consist primarily of sales incentives, are generally deferred and amortized to selling, general and administrative expense over the estimated life of the relevant customer relationship, ranging from five to 13 years. Contract acquisition costs that are paid to the customer are deferred and amortized as a reduction in revenue over the contract life. Our contract acquisition costs are classified as current or noncurrent based on the timing of when we expect to recognize amortization and are included in other assets in our Condensed Consolidated Balance Sheets.

As of September 30, 2022 and December 31, 2021, we had $187 million and $175 million, respectively, of deferred contract costs, of which $134 million and $126 million, respectively, was related to deferred sales incentives. During the three and nine months ended September 30, 2022, we amortized $6 million and $18 million of sales incentives to selling, general and administrative expense, respectively. During the three and nine months ended September 30, 2021, we amortized $6 million and $17 million of sales incentives to selling, general and administrative expense, respectively.

Leases

Amounts for our operating lease right-of-use assets are recorded in long-term other assets and the current and long-term portion of our operating lease liabilities are reflected in accrued liabilities and other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheets. Right-of-use assets obtained in exchange for lease obligations for our operating leases for the nine months ended September 30, 2022 and 2021 were $44 million and $57 million, respectively. Amounts for our financing leases are recorded in property and equipment, net of accumulated depreciation, and current or long-term debt in our Condensed Consolidated Balance Sheets, as appropriate.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments held within our restricted funds, and accounts receivable. We make efforts to control our exposure to credit risk associated with these instruments by (i) placing our assets and other financial interests with a diverse group of credit-worthy financial institutions; (ii) holding high-quality financial instruments while limiting investments in any one instrument and (iii) maintaining strict policies over credit extension that include credit evaluations, credit limits and monitoring procedures, although generally we do not have collateral requirements for credit extensions. We also control our exposure associated with trade receivables by discontinuing service, to the extent allowable, to non-paying customers. However, our overall credit risk associated with trade receivables is limited due to the large number and diversity of customers we serve.

Reclassifications

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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Landfill and Environmental Remediation Liabilities

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


	September 30, 2022						December 31, 2021
			Environmental						Environmental
	Landfill		Remediation		Total		Landfill		Remediation		Total
Current (in accrued liabilities)	$	124	$	29	$	153	$	137	$	29	$	166
Long-term		2,263		173		2,436		2,189		184		2,373
	$	2,387	$	202	$	2,589	$	2,326	$	213	$	2,539

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


			Environmental
	Landfill		Remediation
December 31, 2021	$	2,326	$	213
Obligations incurred and capitalized		86		—
Obligations settled		(83)		(18)
Interest accretion		81		3
Revisions in estimates and interest rate assumptions (a) (b)		(15)		4
Acquisitions, divestitures and other adjustments		(8)		—
September 30, 2022	$	2,387	$	202

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

(b)

The amount reported for our environmental remediation liabilities includes a $17 million charge in our Corporate and Other segment to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site, as discussed in Note 6. Partially offsetting this charge was a decrease of $16 million due to an increase from 1.50% at December 31, 2021 to 3.75% at September 30, 2022 in the risk-free discount rate used to measure these liabilities.

At several of our landfills, we provide financial assurance by depositing cash into restricted trust fund accounts for purposes of settling final capping, closure, post-closure and environmental remediation obligations. Generally, these trust fund accounts are established to comply with statutory requirements and operating agreements. See Note 13 for additional information related to these trust fund accounts.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Debt

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


	September 30,		December 31,
	2022		2021
Commercial paper program (weighted average interest rate of 2.1% as of September 30, 2022 and 0.4% as of December 31, 2021)	$	840	$	1,778
Term Loan maturing May 2024, interest rate of 3.8% as of September 30, 2022		1,000		—
Senior notes, maturing through 2050, interest rates ranging from 0.75% to 7.75% (weighted average interest rate of 3.2% as of September 30, 2022 and 3.1% as of December 31, 2021)		8,626		8,126
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%		362		395
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3% to 4.3% (weighted average interest rate of 2.2% as of September 30, 2022 and