SEC Filing | Waste Management

Environmental

Landfill

Remediation

December 31, 2020

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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, 2021

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, 2021 was 418,316,357 (excluding treasury shares of 211,966,104).

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,
	2021		2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	116	$	553
Accounts receivable, net of allowance for doubtful accounts of $27 and $33, respectively		2,323		2,097
Other receivables, net of allowance for doubtful accounts of $8 and $7, respectively		346		527
Parts and supplies		132		124
Other assets		267		239
Total current assets		3,184		3,540
Property and equipment, net of accumulated depreciation and amortization of $20,351 and $19,337, respectively		14,083		14,148
Goodwill		9,006		8,994
Other intangible assets, net		919		1,024
Restricted trust and escrow accounts		370		347
Investments in unconsolidated entities		402		426
Other assets		877		866
Total assets	$	28,841	$	29,345
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,466	$	1,121
Accrued liabilities		1,473		1,342
Deferred revenues		562		539
Current portion of long-term debt		601		551
Total current liabilities		4,102		3,553
Long-term debt, less current portion		12,446		13,259
Deferred income taxes		1,708		1,806
Landfill and environmental remediation liabilities		2,345		2,222
Other liabilities		1,066		1,051
Total liabilities		21,667		21,891
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		5,111		5,129
Retained earnings		11,740		11,159
Accumulated other comprehensive income (loss)		12		39
Treasury stock at cost, 211,996,311 and 207,480,827 shares, respectively		(9,697)		(8,881)
Total Waste Management, Inc. stockholders’ equity		7,172		7,452
Noncontrolling interests		2		2
Total equity		7,174		7,454
Total liabilities and equity	$	28,841	$	29,345

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,
	2021		2020		2021		2020
Operating revenues	$	4,665	$	3,861	$	13,253	$	11,151
Costs and expenses:
Operating		2,906		2,332		8,156		6,841
Selling, general and administrative		469		416		1,372		1,218
Depreciation and amortization		517		419		1,489		1,235
Restructuring		1		7		6		9
(Gain) loss from divestitures, asset impairments and unusual items, net		(34)		7		(17)		68
		3,859		3,181		11,006		9,371
Income from operations		806		680		2,247		1,780
Other income (expense):
Interest expense, net		(87)		(97)		(282)		(328)
Loss on early extinguishment of debt		—		(52)		(220)		(52)
Equity in net losses of unconsolidated entities		(14)		(16)		(34)		(56)
Other, net		1		1		(4)		2
		(100)		(164)		(540)		(434)
Income before income taxes		706		516		1,707		1,346
Income tax expense		167		126		396		288
Consolidated net income		539		390		1,311		1,058
Less: Net income (loss) attributable to noncontrolling interests		1		—		1		—
Net income attributable to Waste Management, Inc.	$	538	$	390	$	1,310	$	1,058
Basic earnings per common share	$	1.28	$	0.92	$	3.11	$	2.50
Diluted earnings per common share	$	1.28	$	0.92	$	3.09	$	2.49

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Consolidated net income	$	539	$	390	$	1,311	$	1,058
Other comprehensive income (loss), net of tax:
Derivative instruments, net		1		4		8		9
Available-for-sale securities, net		(1)		2		(3)		7
Foreign currency translation adjustments		(57)		19		(31)		(23)
Post-retirement benefit obligations, net		(1)		—		(1)		(1)
Other comprehensive income (loss), net of tax		(58)		25		(27)		(8)
Comprehensive income		481		415		1,284		1,050
Less: Comprehensive income (loss) attributable to noncontrolling interests		1		—		1		—
Comprehensive income attributable to Waste Management, Inc.	$	480	$	415	$	1,283	$	1,050

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)


	Nine Months Ended
	September 30,
	2021		2020
Cash flows from operating activities:
Consolidated net income	$	1,311	$	1,058
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		1,489		1,235
Deferred income tax (benefit) expense		(91)		61
Interest accretion on landfill and environmental remediation liabilities		82		75
Provision for bad debts		28		40
Equity-based compensation expense		81		74
Net gain on disposal of assets		(16)		(10)
(Gain) loss from divestitures, asset impairments and other, net		(17)		76
Equity in net losses of unconsolidated entities, net of dividends		36		48
Loss on early extinguishment of debt		220		52
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		(56)		76
Other current assets		(35)		(47)
Other assets		32		41
Accounts payable and accrued liabilities		389		(62)
Deferred revenues and other liabilities		(106)		(67)
Net cash provided by operating activities		3,347		2,650
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(11)		(3)
Capital expenditures		(1,130)		(1,238)
Proceeds from divestitures of businesses and other assets, net of cash divested		70		20
Other, net		(35)		(20)
Net cash used in investing activities		(1,106)		(1,241)
Cash flows from financing activities:
New borrowings		6,428		2,650
Debt repayments		(7,237)		(5,764)
Premiums and other paid on early extinguishment of debt		(211)		(30)
Common stock repurchase program		(1,000)		(402)
Cash dividends		(730)		(696)
Exercise of common stock options		60		49
Tax payments associated with equity-based compensation transactions		(28)		(34)
Other, net		32		(17)
Net cash used in financing activities		(2,686)		(4,244)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		2		1
Decrease in cash, cash equivalents and restricted cash and cash equivalents		(443)		(2,834)
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		648		3,647
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	205	$	813

Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end of period:
Cash and cash equivalents	$	116	$	703
Restricted cash and cash equivalents included in other current assets		16		42
Restricted cash and cash equivalents included in restricted trust and escrow accounts		73		68
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	205	$	813

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:
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

2020
Balance, June 30, 2020	$	6,893	630,282	$	6	$	5,040	$	10,795	$	(41)	(208,118)	$	(8,909)	$	2
Consolidated net income		390	—		—		—		390		—	—		—		—
Other comprehensive income (loss), net of tax		25	—		—		—		—		25	—		—		—
Cash dividends declared of $0.545 per common share		(230)	—		—		—		(230)		—	—		—		—
Equity-based compensation transactions, net		80	—		—		64		(2)		—	422		18		—
Common stock repurchase program		—	—		—		—		—		—	—		—		—
Other, net		(1)	—		—		—		(1)		—	1		—		—
Balance, September 30, 2020	$	7,157	630,282	$	6	$	5,104	$	10,952	$	(16)	(207,695)	$	(8,891)	$	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:
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

2020
Balance, December 31, 2019	$	7,070	630,282	$	6	$	5,049	$	10,592	$	(8)	(205,956)	$	(8,571)	$	2
Adoption of new accounting standard		(2)	—		—		—		(2)		—	—		—		—
Consolidated net income		1,058	—		—		—		1,058		—	—		—		—
Other comprehensive income (loss), net of tax		(8)	—		—		—		—		(8)	—		—		—
Cash dividends declared of $1.635 per common share		(696)	—		—		—		(696)		—	—		—		—
Equity-based compensation transactions, net		138	—		—		55		1		—	1,945		82		—
Common stock repurchase program		(402)	—		—		—		—		—	(3,687)		(402)		—
Other, net		(1)	—		—		—		(1)		—	3		—		—
Balance, September 30, 2020	$	7,157	630,282	$	6	$	5,104	$	10,952	$	(16)	(207,695)	$	(8,891)	$	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 “WM,” we are referring only to Waste Management, Inc., the parent holding company.

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

We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our Areas. In the second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17 to 16. On October 30, 2020, we acquired Advanced Disposal Services, Inc. (“Advanced Disposal”), the operations of which are presented in this report within our existing Solid Waste tiers. We also provide additional services that are not managed through our Solid Waste business, which are presented in this report as “Other.” Additional information related to our segments and our acquisition of Advanced Disposal is included in Notes 7 and 8, respectively.

The Condensed Consolidated Financial Statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 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, 2020.

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, the fair value of assets and liabilities acquired in business combinations or asset acquisitions and reserves associated with our insured and self-insured claims. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

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 advance billings are included in deferred

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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 Sheet.

As of September 30, 2021 and December 31, 2020, we had $172 million and $159 million, respectively, of deferred contract costs, of which $122 million and $118 million, respectively, were related to deferred sales incentives. During each of the three- and nine-month periods ended September 30, 2021 and 2020, we amortized $6 million and $17 million, respectively, of sales incentives to selling, general and administrative expense.

Leases

Amounts for our operating lease right-of-use assets are recorded in long-term other assets in our Condensed Consolidated Balance Sheets. 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, 2021 and 2020 were $57 million and $80 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 trust and escrow accounts, 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. Our prior year accumulated depreciation and gross property and equipment balances as of December 31, 2020 were overstated and subsequently corrected in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

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, 2021						December 31, 2020
			Environmental						Environmental
	Landfill		Remediation		Total		Landfill		Remediation		Total
Current (in accrued liabilities)	$	135	$	26	$	161	$	138	$	26	$	164
Long-term		2,155		190		2,345		2,018		204		2,222
	$	2,290	$	216	$	2,506	$	2,156	$	230	$	2,386

The changes to landfill and environmental remediation liabilities for the nine months ended September 30, 2021 are reflected in the table below (in millions):