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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 March 31, 2023

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 as of April 24, 2023 was 406,816,705 (excluding treasury shares of 223,465,756).

PART I.

Item 1.    Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share and Par Value Amounts)

March 31, 

December 31, 

    

2023

    

2022

(Unaudited)

ASSETS

Current assets:

 

 

  

Cash and cash equivalents

$

257

$

351

Accounts receivable, net of allowance for doubtful accounts of $26 and $26, respectively

 

2,418

 

2,461

Other receivables, net of allowance for doubtful accounts of $5 and $7, respectively

 

190

 

291

Parts and supplies

 

170

 

164

Other assets

 

336

 

284

Total current assets

 

3,371

 

3,551

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

 

15,705

 

15,719

Goodwill

 

9,344

 

9,323

Other intangible assets, net

 

823

 

827

Restricted funds

 

476

 

348

Investments in unconsolidated entities

 

569

 

578

Other assets

 

1,002

 

1,021

Total assets

$

31,290

$

31,367

LIABILITIES AND EQUITY

Current liabilities:

 

  

 

  

Accounts payable

$

1,510

$

1,766

Accrued liabilities

 

1,426

 

1,625

Deferred revenues

 

584

 

589

Current portion of long-term debt

 

336

 

414

Total current liabilities

 

3,856

 

4,394

Long-term debt, less current portion

 

15,034

 

14,570

Deferred income taxes

 

1,784

 

1,733

Landfill and environmental remediation liabilities

 

2,729

 

2,700

Other liabilities

 

1,079

 

1,106

Total liabilities

 

24,482

 

24,503

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

 

5,244

 

5,314

Retained earnings

 

13,414

 

13,167

Accumulated other comprehensive (loss) income

 

(57)

 

(69)

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

 

(11,813)

 

(11,569)

Total Waste Management, Inc. stockholders’ equity

 

6,794

 

6,849

Noncontrolling interests

 

14

 

15

Total equity

 

6,808

 

6,864

Total liabilities and equity

$

31,290

$

31,367

See Notes to Condensed Consolidated Financial Statements.

2

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions, Except per Share Amounts)

(Unaudited)

Three Months Ended

March 31, 

    

2023

    

2022

Operating revenues

$

4,892

$

4,661

Costs and expenses:

 

  

  

Operating

 

3,086

 

2,903

Selling, general and administrative

 

476

 

491

Depreciation, depletion and amortization

 

505

 

482

Restructuring

3

(Gain) loss from divestitures, asset impairments and unusual items, net

 

(3)

 

17

 

4,067

 

3,893

Income from operations

 

825

 

768

Other income (expense):

 

  

Interest expense, net

 

(120)

 

(85)

Equity in net losses of unconsolidated entities

 

(11)

 

(15)

Other, net

 

2

 

3

 

(129)

 

(97)

Income before income taxes

 

696

 

671

Income tax expense

 

164

 

157

Consolidated net income

 

532

 

514

Less: Net income (loss) attributable to noncontrolling interests

 

(1)

 

1

Net income attributable to Waste Management, Inc.

$

533

$

513

Basic earnings per common share

$

1.31

$

1.24

Diluted earnings per common share

$

1.30

$

1.23

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)

Three Months Ended

March 31, 

2023

    

2022

Consolidated net income

$

532

$

514

Other comprehensive income (loss), net of tax:

 

  

 

  

Derivative instruments, net

 

5

 

1

Available-for-sale securities, net

 

5

 

(13)

Foreign currency translation adjustments

 

2

 

10

Post-retirement benefit obligations, net

 

 

Other comprehensive income (loss), net of tax

 

12

 

(2)

Comprehensive income

 

544

 

512

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

(1)

 

1

Comprehensive income attributable to Waste Management, Inc.

$

545

$

511

See Notes to Condensed Consolidated Financial Statements.

3

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)

Three Months Ended

March 31, 

    

2023

    

2022

Cash flows from operating activities:

 

 

  

  

Consolidated net income

 

$

532

$

514

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

 

 

  

Depreciation, depletion and amortization

 

505

 

482

Deferred income tax expense (benefit)

 

42

 

(11)

Interest accretion on landfill and environmental remediation liabilities

 

32

 

28

Provision for bad debts

 

9

 

10

Equity-based compensation expense

 

26

 

25

Net gain on disposal of assets

 

(10)

 

(4)

(Gain) loss from divestitures, asset impairments and other, net

 

(3)

 

17

Equity in net losses of unconsolidated entities, net of dividends

 

11

 

15

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

 

 

Receivables

 

138

 

93

Other current assets

 

(51)

 

(20)

Other assets

 

22

 

19

Accounts payable and accrued liabilities

 

(145)

 

101

Deferred revenues and other liabilities

 

(64)

 

(11)

Net cash provided by operating activities

 

1,044

 

1,258

Cash flows from investing activities:

 

  

 

  

Acquisitions of businesses, net of cash acquired

 

(34)

 

(9)

Capital expenditures

 

(660)

 

(418)

Proceeds from divestitures of businesses and other assets, net of cash divested

 

11

 

5

Other, net

 

(95)

 

(150)

Net cash used in investing activities

 

(778)

 

(572)

Cash flows from financing activities:

 

  

 

  

New borrowings

 

6,885

 

2,362

Debt repayments

 

(6,548)

 

(2,471)

Common stock repurchase program

 

(350)

 

(250)

Cash dividends

 

(289)

 

(275)

Exercise of common stock options

 

12

 

9

Tax payments associated with equity-based compensation transactions

 

(28)

 

(34)

Other, net

 

(1)

 

24

Net cash used in financing activities

 

(319)

 

(635)

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

 

 

1

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

 

(53)

 

52

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

 

445

 

194

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

 

$

392

$

246

Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end of period:

Cash and cash equivalents

$

257

$

155

Restricted cash and cash equivalents included in other current assets

62

20

Restricted cash and cash equivalents included in restricted funds

73

71

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

 

$

392

$

246

See Notes to Condensed Consolidated Financial Statements.

4

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

  

(Loss) Income

  

Shares

  

Amounts

  

Interests

2023

Balance, December 31, 2022

$

6,864

630,282

$

6

$

5,314

$

13,167

$

(69)

 

(222,396)

$

(11,569)

$

15

Consolidated net income

 

532

 

 

 

533

 

 

 

 

(1)

Other comprehensive income (loss), net of tax

 

12

 

 

 

 

12

 

 

 

Cash dividends declared of $0.70 per common share

 

(289)

 

 

 

(289)

 

 

 

 

Equity-based compensation transactions, net

 

42

 

 

 

3

 

 

766

 

39

 

Common stock repurchase program

 

(353)

 

 

(70)

 

 

 

(1,862)

 

(283)

 

Other, net

 

 

 

 

 

 

1

 

 

Balance, March 31, 2023

$

6,808

630,282

$

6

$

5,244

$

13,414

$

(57)

 

(223,491)

$

(11,813)

$

14

2022

Balance, December 31, 2021

$

7,126

630,282

$

6

$

5,169

$

12,004

$

17

 

(214,159)

$

(10,072)

$

2

Consolidated net income

 

514

 

 

 

513

 

 

 

 

1

Other comprehensive income (loss), net of tax

 

(2)

 

 

 

 

(2)

 

 

 

Cash dividends declared of $0.65 per common share

 

(275)

 

 

 

(275)

 

 

 

 

Equity-based compensation transactions, net

 

34

 

 

(11)

 

5

 

 

862

 

40

 

Common stock repurchase program

 

(250)

 

 

20

 

 

 

(1,806)

 

(270)

 

Other, net

 

(1)

 

 

 

 

 

1

 

 

(1)

Balance, March 31, 2022

$

7,146

630,282

$

6

$

5,178

$

12,247

$

15

 

(215,102)

$

(10,302)

$

2

See Notes to Condensed Consolidated Financial Statements.

5

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 12. 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., together with its consolidated subsidiaries and consolidated variable interest entities. When we use the term “WMI,” we are referring only to Waste Management, Inc., the parent holding company.

We are North America’s leading provider of comprehensive environmental solutions, providing services throughout the United States (“U.S.”) and Canada. We partner with our 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 Waste Management Renewable Energy (“WM Renewable Energy”) business, we are also a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and renewable natural gas, which is a significant source of fuel for our natural gas fleet.

Our senior management evaluates, oversees and manages the financial performance of our Solid Waste operations through two operating segments. Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada. Our 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. 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 March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited. In the opinion of management, these financial statements include all adjustments, which, unless otherwise disclosed, are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows, and changes in equity for the periods presented. 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, 2022.

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.

6

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

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

Concentrations of Credit Risk

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

7

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):

March 31, 2023

December 31, 2022

Environmental

Environmental

    

Landfill

    

Remediation

    

Total

    

Landfill

    

Remediation

    

Total

Current (in accrued liabilities)

 

$

136

$

32

$

168

$

137

$

31

$

168

Long-term

 

2,561

 

168

 

2,729

  

 

2,527

 

173

 

2,700

 

$

2,697

$

200

$

2,897

$

2,664

$

204

$

2,868

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

Environmental

    

Landfill

    

Remediation

December 31, 2022

$

2,664

$

204

Obligations incurred and capitalized

 

20

  

 

Obligations settled

 

(22)

  

 

(6)

Interest accretion

 

30

  

 

2

Revisions in estimates and interest rate assumptions

 

5

  

 

Acquisitions, divestitures and other adjustments

 

  

 

March 31, 2023

$

2,697

$

200

At several of our landfills, we provide financial assurance by depositing cash into restricted trust funds for purposes of settling final capping, closure, post-closure and environmental remediation obligations. Generally, these trust funds are established to comply with statutory requirements and operating agreements. See Note 12 for additional information related to these trusts.

8

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.    Debt

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

March 31, 

December 31, 

    

2023

    

2022

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

$

863

$

1,730

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

9,876

8,626

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

1,000

1,000

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

 

370

 

369

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

 

2,648

 

2,648

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

 

704

 

699

Debt issuance costs, discounts and other

 

(91)

 

(88)

 

15,370

 

14,984

Current portion of long-term debt

 

336

 

414

Long-term debt, less current portion

$

15,034

$

14,570

(a)Excluding our landfill financing leases, the maturities of our financing leases and other debt obligations extend through 2059.

Debt Classification

As of March 31, 2023, we had approximately $2.3 billion of debt maturing within the next 12 months, including (i) $861 million of short-term borrowings under our commercial paper program (net of related discount on issuance); (ii) $725 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities; (iii) $500 million of 2.4% senior notes that mature in May 2023 and (iv) $186 million of other debt with scheduled maturities within the next 12 months, including $65 million of tax-exempt bonds. As of March 31, 2023, we have classified $1.9 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $3.5 billion long-term U.S. and Canadian revolving credit facility (“$3.5 billion revolving credit facility”), as discussed below. The remaining $336 million of debt maturing in the next 12 months is classified as current obligations.

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

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility, maturing May 2027, provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program. The interest rates we pay on outstanding U.S. or Canadian loans are based on the Secured Overnight Financing Rate (“SOFR”) administered by the Federal Reserve Bank of New York or the Canadian Dollar Offered Rate (“CDOR”), respectively, plus a spread depending on WMI’s senior public debt rating assigned by Moody’s Investors Service, Inc. and Standard and Poor’s Global Ratings. As of March 31, 2023, we had no outstanding borrowings under this facility. We had $165 million of letters of credit issued and $861 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of

9

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$2.5 billion as of March 31, 2023. WM Holdings, a wholly-owned subsidiary of WMI, guarantees all of the obligations under the $3.5 billion revolving credit facility.

Commercial Paper Program — We have a commercial paper program that enables us to borrow funds for up to 397 days at competitive interest rates. The rates we pay for outstanding borrowings are based on the term of the notes. The commercial paper program is fully supported by our $3.5 billion revolving credit facility. As of March 31, 2023, we had $861 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

$1.0 Billion, Two-Year, Term Credit Agreement — In May 2022, we entered into a $1.0 billion, two-year, U.S. term credit agreement (“Term Loan”) maturing May 2024 to be used for general corporate purposes. The interest rate we pay on our outstanding balance is generally based on SOFR, plus a spread depending on WMI’s senior public debt rating assigned by Moody’s Investors Service, Inc. and Standard and Poor’s Global Ratings. As of March 31, 2023, we had $1.0 billion of outstanding borrowings under our Term Loan. WM Holdings also guarantees all of the obligations under the Term Loan.

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

Debt Borrowings and Repayments

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

Senior Notes — In February 2023, WMI issued $750 million and $500 million of 4.625% senior notes due February 2030 and February 2033, respectively, the net proceeds of which were $1.24 billion. We used the net proceeds to repay $867 million of outstanding borrowings under our commercial paper program and utilized the remaining $373 million, combined with our net cash provided by operating activities of $1.04 billion, for general corporate purposes including for example, payment of dividends, common stock repurchases and investments in the business through capital expenditures and acquisitions.

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

4.    Income Taxes

Our effective income tax rate was 23.6% and 23.5% for the three months ended March 31, 2023 and 2022, respectively. We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant.

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

Adjustments to Accruals and Related Deferred Taxes — There were no adjustments to accruals and related deferred taxes during the three months ended March 31, 2023. During the three months ended March 31, 2022, we recognized an increase in our income tax expense of $3 million for adjustments to accruals and related deferred taxes.

Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties. We support the operations of these entities in exchange for a pro-rata

10

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities, within our Condensed Consolidated Statements of Operations. During the three months ended March 31, 2023 and 2022, we recognized $13 million and $14 million of net losses, respectively, and a reduction in our income tax expense of $22 million and $23 million, respectively, primarily due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized. In addition, during the three months ended March 31, 2023 and 2022, we recognized interest expense of $4 million and $3 million, respectively, associated with our investments in low-income housing properties. See Note 12 for additional information related to these unconsolidated variable interest entities.

5.    Earnings Per Share

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

    

2023

    

2022

Number of common shares outstanding at end of period

 

406.8

 

415.2

Effect of using weighted average common shares outstanding

 

0.6

 

0.5

Weighted average basic common shares outstanding

 

407.4

 

415.7

Dilutive effect of equity-based compensation awards and other contingently issuable shares

 

1.6

 

2.1

Weighted average diluted common shares outstanding

 

409.0

 

417.8

Potentially issuable shares

 

5.6

 

5.9

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding

 

1.8

 

1.8

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

6.    Commitments and Contingencies

Financial Instruments — We have obtained letters of credit, surety bonds and insurance policies and have established trust funds and issued financial guarantees to support tax-exempt bonds, contracts, performance of landfill final capping, closure and post-closure requirements, environmental remediation and other obligations. Letters of credit generally are supported by our $3.5 billion revolving credit facility and other credit lines established for that purpose. These facilities are discussed further in Note 3. Surety bonds and insurance policies are supported by (i) a diverse group of third-party surety and insurance companies; (ii) an entity in which we have a noncontrolling financial interest or (iii) a wholly-owned insurance captive, the sole business of which is to issue surety bonds and/or insurance policies on our behalf.

Management does not expect that any claims against or draws on these instruments would have a material adverse effect on our financial condition, results of operations or cash flows. We have not experienced any unmanageable difficulty in obtaining the required financial assurance instruments for our current operations. In an ongoing effort to mitigate risks of future cost increases and reductions in available capacity, we continue to evaluate various options to access cost-effective sources of financial assurance.

Insurance — We carry insurance coverage for protection of our assets and operations from certain risks including general liability, automobile liability, workers’ compensation, real and personal property, directors’ and officers’ liability, pollution legal liability, cyber incident liability and other coverages we believe are customary to the industry. Our exposure to loss for insurance claims is generally limited to the per incident deductible under the related insurance policy and any

11

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amounts that exceed our insured limits. Our exposure could increase if our insurers are unable to meet their commitments on a timely basis.

We have retained a significant portion of the risks related to our health and welfare, general liability, automobile liability and workers’ compensation claims programs. “General liability” refers to the self-insured portion of specific third-party claims made against us that may be covered under our commercial general liability insurance policy. 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. We use a wholly-owned insurance captive to insure the deductibles for our general liability, automobile liability and workers’ compensation claims programs.

We do not expect the impact of any known casualty, property, environmental or other contingency to have a material impact on our financial condition, results of operations or cash flows.

Guarantees — In the ordinary course of our business, WMI and WM Holdings enter into guarantee agreements associated with their subsidiaries’ operations. Additionally, WMI and WM Holdings have each guaranteed all of the senior debt of the other entity. No additional liabilities have been recorded for these intercompany guarantees because all of the underlying obligations are reflected in our Condensed Consolidated Balance Sheets.

As of March 31, 2023, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover the difference, if any, between the sale value and the guaranteed market or contractually-determined value of certain homeowner’s properties that are adjacent to or near 17 of our landfills. We have also agreed to indemnify certain third-party purchasers against liabilities associated with divested operations prior to such sale. We do not believe that the remaining contingent obligations will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

Environmental Matters — A significant portion of our operating costs and capital expenditures could be characterized as costs of environmental protection. The nature of our operations, particularly with respect to the construction, operation and maintenance of our landfills, subjects us to an array of laws and regulations relating to the protection of the 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. In addition to remediation activity required by state or local authorities, such liabilities include potentially responsible party (“PRP”) investigations. The costs associated with these liabilities can include settlements, certain legal and consultant fees, as well as incremental internal and external costs directly associated with site investigation and clean-up.

Estimating our degree of responsibility for remediation is inherently difficult. We recognize and accrue for an estimated remediation liability when we determine that such liability is both probable and reasonably estimable. Determining the method and ultimate cost of remediation requires that a number of assumptions be made. There can sometimes be a range of reasonable estimates of the costs associated with the likely site remediation alternatives identified in the environmental impact investigation. In these cases, we use the amount within the range that is our best estimate. If no amount within a range appears to be a better estimate than any other, we use the amount that is the low end of such range. If we used the high ends of such ranges, our aggregate potential liability would be approximately $130 million higher than the $200 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2023. Our ultimate responsibility may differ materially from current estimates. It is possible that technological, regulatory or enforcement developments, the results of environmental studies, the inability to identify other PRPs, the inability of other PRPs to contribute to the settlements of such liabilities, or other factors could require us to record additional liabilities. Our ongoing review of our remediation liabilities, in light of relevant internal and external facts and circumstances, could result in revisions to our accruals that could cause upward or downward adjustments to our balance sheet and income from operations. These adjustments could be material in any given period.

12

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2023, we have been notified by the government that we are a PRP in connection with 73 locations listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”). Of the 73 sites at which claims have been made against us, 14 are sites we own. Each of the NPL sites we own was initially developed by others as a landfill disposal facility. At each of these facilities, we are working in conjunction with the government to characterize or remediate identified site problems, and we have either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or are working toward a cost-sharing agreement. 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.

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. CERCLA generally provides for liability for those parties owning, operating, transporting to or disposing at the sites. Proceedings arising under Superfund typically involve numerous waste generators and other waste transportation and disposal companies and seek to allocate or recover costs associated with site investigation and remediation, which costs could be substantial and could have a material adverse effect on our consolidated financial statements. At some of the sites at which we have been identified as a PRP, our liability is well defined as a consequence of a governmental decision and an agreement among liable parties as to the share each will pay for implementing that remedy. At other sites, where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, our future costs are uncertain.

On October 11, 2017, the EPA issued its Record of Decision (“ROD”) with respect to the previously proposed remediation plan for the San Jacinto River Waste Pits Site in Harris County, Texas. McGinnes Industrial Maintenance Corporation (“MIMC”), a subsidiary of Waste Management of Texas, Inc., operated some of the waste pits from 1965 to 1966 and has been named as a site PRP. In 1998, WMI acquired the stock of the parent entity of MIMC. MIMC has been working with the EPA and other named PRPs as the process of addressing the site proceeds. On April 9, 2018, MIMC and International Paper Company entered into an Administrative Order on Consent agreement with the EPA to develop a remedial design for the EPA’s proposed remedy for the site, and we recorded a liability for MIMC’s estimated potential share of the EPA’s proposed remedy and related costs, although allocation of responsibility among the PRPs for the proposed remedy has not been established. MIMC and International Paper Company have continued to work on a remedial design to support the EPA’s proposed remedy; however, design investigations indicate that fundamental changes are required to the proposed remedy and MIMC maintains its prior position that the remedy set forth in the ROD is not the best solution to protect the environment and public health. Due to further increases in the estimated cost of the remedy set forth in the ROD, we recorded an additional liability of $17 million as of March 31, 2022 for MIMC’s estimated potential share of such costs. As of March 31, 2023 and December 31, 2022, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was $69 million and $68 million, respectively. MIMC’s ultimate liability could be materially different from current estimates and MIMC will continue to engage the EPA regarding its proposed remedy.

Item 103 of the SEC’s Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings, or such proceedings are known to be contemplated, unless we reasonably believe that the matter will result in no monetary sanctions, or in monetary sanctions, exclusive of interest and costs, below a stated threshold. In accordance with this SEC regulation, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such environmental proceedings is required. As of the date of this filing, we are not aware of any matters that are required to be disclosed pursuant to this standard.

From time to time, we are also named as defendants in personal injury and property damage lawsuits, including purported class actions, on the basis of having owned, operated or transported waste to a disposal facility that is alleged to have contaminated the environment or, in certain cases, on the basis of having conducted environmental remediation activities at sites. Some of the lawsuits may seek to have us pay the costs of monitoring of allegedly affected sites and health care examinations of allegedly affected persons for a substantial period of time even where no actual damage is

13

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

proven. While we believe we have meritorious defenses to these lawsuits, the ultimate resolution is often substantially uncertain due to the difficulty of determining the cause, extent and impact of alleged contamination (which may have occurred over a long period of time), the potential for successive groups of complainants to emerge, the diversity of the individual plaintiffs’ circumstances, and the potential contribution or indemnification obligations of co-defendants or other third parties, among other factors. Additionally, we often enter into agreements with landowners imposing obligations on us to meet certain regulatory or contractual conditions upon site closure or upon termination of the agreements. Compliance with these agreements inherently involves subjective determinations and may result in disputes, including litigation.

Litigation — We are subject to various proceedings, lawsuits, disputes and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions that have been filed against us, and that may be filed against us in the future, include personal injury, property damage, commercial, customer, and employment-related claims, including purported state and national class action lawsuits related to: alleged environmental contamination, including releases of hazardous material and odors; sales and marketing practices, customer service agreements and prices and fees; and federal and state wage and hour and other laws. The plaintiffs in some actions seek unspecified damages or injunctive relief, or both. These actions are in various procedural stages, and some are covered, in part, by insurance. We currently do not believe that the eventual outcome of any such actions will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

In June 2022, we and certain of our officers were named as defendants in a complaint alleging violation of the federal securities laws and seeking certification as a class action in the U.S. District Court for the Southern District of New York. A lead plaintiff has been appointed and an amended complaint was filed in January 2023. The amended complaint seeks damages on behalf of a putative class of secondary market purchasers of our senior notes with a special mandatory redemption feature issued in May 2019, asserting claims under the Securities Exchange Act based on alleged misrepresentations and omissions concerning the time for completion of our acquisition of Advanced Disposal. We will vigorously defend against this pending suit. We believe any potential recovery by the plaintiffs, in excess of applicable deductibles, will be covered by insurance, and we do not believe that the eventual outcome of this suit will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

WMI’s charter and bylaws provide that WMI shall indemnify against all liabilities and expenses, and upon request shall advance expenses to any person, who is subject to a pending or threatened proceeding because such person is or was a director or officer of the Company. Such indemnification is required to the maximum extent permitted under Delaware law. Accordingly, the director or officer must execute an undertaking to reimburse the Company for any fees advanced if it is later determined that the director or officer was not permitted to have such fees advanced under Delaware law. Additionally, the Company has direct contractual obligations to provide indemnification to each of the members of WMI’s Board of Directors and each of WMI’s executive officers. The Company may incur substantial expenses in connection with the fulfillment of its advancement of costs and indemnification obligations in connection with actions or proceedings that may be brought against its former or current officers, directors and employees.

Multiemployer Defined Benefit Pension Plans — About 20% of our workforce is covered by collective bargaining agreements with various local unions across the U.S. and Canada. As a result of some of these agreements, certain of our subsidiaries are participating employers in a number of trustee-managed multiemployer defined benefit pension plans (“Multiemployer Pension Plans”) for the covered employees. In connection with our ongoing renegotiation of various collective bargaining agreements, we may discuss and negotiate for the complete or partial withdrawal from one or more of these Multiemployer Pension Plans. A complete or partial withdrawal from a Multiemployer Pension Plan may also occur if employees covered by a collective bargaining agreement vote to decertify a union from continuing to represent them. Any other circumstance resulting in a decline in Company contributions to a Multiemployer Pension Plan through a reduction in the labor force, whether through attrition over time or through a business event (such as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or discontinuance of certain operations) may also trigger a complete or partial withdrawal from one or more of these pension plans.

14

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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. Any unresolved issues as of the tax return filing date are subject to routine examination procedures. In the fourth quarter of 2022, the Company received a notice of tax due for the 2017 tax year related to a remaining disagreement with the IRS. In response to the notice, the Company made a deposit of approximately $103 million with the IRS. The Company expects to seek a refund of the entire amount deposited with the IRS and litigate any denial of the claim for refund. As of March 31, 2023 and December 31, 2022, the IRS deposit, net of reserve for uncertain tax positions, is classified as a component of other long-term assets in the Company’s Condensed Consolidated Balance Sheets.

In addition, we are in the examination phase of IRS audits for the 2022 and 2023 tax years and expect the audits to be completed within the next 24 months. We are also currently undergoing audits by various state and local jurisdictions for tax years that date back to 2014. We maintain a liability for uncertain tax positions, the balance of which management believes is adequate. Results of audit assessments by taxing authorities are not currently expected to have a material adverse effect on our financial condition, results of operations or cash flows.

7.    Segment and Related Information

Our senior management evaluates, oversees and manages the financial performance of our Solid Waste operations through two operating segments. Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada. Our 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. 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.

15

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Gross

Intercompany

Net

Income

Operating

Operating

Operating

from

    

Revenues

    

Revenues(d)

    

Revenues

    

Operations

2023

 

  

 

  

 

  

 

  

Solid Waste:

 

  

 

  

 

  

 

  

East Tier

$

2,642

$

(534)

$

2,108

$

550

West Tier

 

2,537

 

(554)

 

1,983

 

572

Solid Waste (a)

 

5,179

 

(1,088)

 

4,091

 

1,122

Other (b)

 

855

 

(54)

 

801

 

(4)

6,034

(1,142)

4,892

1,118

Corporate and Other (c)

 

 

 

 

(293)

Total

$

6,034

$

(1,142)

$

4,892

$

825

2022

 

  

 

  

 

  

 

  

Solid Waste:

 

  

 

  

 

  

 

  

East Tier

$

2,383

$

(445)

$

1,938

$

531

West Tier

 

2,406

 

(490)

 

1,916

 

549

Solid Waste (a)

 

4,789

 

(935)

 

3,854

 

1,080

Other (b)

 

857

 

(50)

 

807

 

1

 

5,646

(985)

4,661

1,081

Corporate and Other (c)

 

 

 

 

(313)

Total

$

5,646

$

(985)

$

4,661

$

768

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

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

(b)“Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) business that are not included in the operations of our reportable segments; (ii) elements of our sustainability business that includes landfill gas-to-energy operations managed by our WM Renewable Energy business, our Sustainability and Environmental Solutions business and recycling brokerage services and not included in the operations of our reportable segments; (iii) certain other expanded service offerings and solutions and (iv) the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

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

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WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

The increase in income from operations was primarily driven by (i) lower annual incentive compensation and (ii) a charge during the first quarter of 2022 to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site. These were partially offset by an increase in health and welfare costs driven by higher inflation and utilization of employee medical benefits.

(d)Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments. Transactions within and between segments are generally made on a basis intended to reflect the market value of the service.

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

    

2023

    

2022

Commercial

$

1,412

$

1,287

Industrial

 

933

 

836

Residential

 

854

 

805

Other collection

 

172

 

153

Total collection

 

3,371

 

3,081

Landfill

 

1,152

 

1,051

Transfer

 

540

 

486

Recycling

 

358

 

453

Other (a)

 

613

 

575

Intercompany (b)

 

(1,142)

 

(985)

Total

$

4,892

$

4,661

(a)The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) certain services within our sustainability business including our landfill gas to energy operations managed by our WM Renewable Energy business and (iii) certain other expanded service offerings and solutions and reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity. Revenue attributable to collection, landfill, transfer and recycling services provided by our “Other” businesses has been reflected as a component of the relevant line of business for purposes of presentation in this table.
(b)Intercompany revenues between lines of business are eliminated in the Condensed Consolidated Financial Statements included within this report.

Fluctuations in our operating results may be caused by many factors, including period-to-period changes in the relative contribution of revenue by each line of business, changes in commodity prices and general economic conditions. Our revenues and income from operations typically reflect seasonal patterns. Our operating revenues tend to be somewhat higher in summer months, primarily due to the higher construction and demolition waste volumes. The volumes of industrial and residential waste in certain regions where we operate also tend to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect these seasonal trends.

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

17

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

supply chain disruption and delayed project development, or disruption of our customers’ businesses, reducing the amount of waste generated by their operations.

On the other hand, certain destructive weather and climate conditions, such as wildfires in the Western U.S. and hurricanes that most often impact our operations in the Southern and Eastern U.S. during the second half of the year, can increase our revenues in the geographic areas affected as a result of the waste volumes generated by these events. While weather-related and other event-driven special projects can boost revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

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

(Gain) loss from divestitures, asset impairments and unusual items, net for the first quarter of 2023 were nominal. During the first quarter of 2022, we recognized a $17 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site, as discussed in Note 6.

9.  Accumulated Other Comprehensive (Loss) Income

The changes in the balances of each component of accumulated other comprehensive (loss) income, net of tax, which is included as a component of Waste Management, Inc. stockholders’ equity, are as follows (in millions, with amounts in parentheses representing decreases to accumulated other comprehensive income):

Foreign

Post-

Available-

Currency

Retirement

Derivative

for-Sale

Translation

Benefit

    

Instruments

    

Securities

    

Adjustments

    

Obligations

    

Total

Balance, December 31, 2022

$

3

$

19

$

(94)

$

3

$

(69)

Other comprehensive income (loss) before reclassifications, net of tax expense (benefit) of $2, $1, $0 and $0, respectively

 

5

 

5

 

2

 

 

12

Amounts reclassified from accumulated other comprehensive (income) loss, net of tax (expense) benefit of $0, $0, $0 and $0, respectively

 

 

 

 

 

Net current period other comprehensive income (loss)

 

5

 

5

 

2

 

 

12

Balance, March 31, 2023

$

8

$

24

$

(92)

$

3

$

(57)

10.  Common Stock Repurchase Program

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

In February 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $350 million of our common stock. At the beginning of the repurchase period, we delivered $350 million cash and received 1.9 million shares based on a stock price of $150.34, exclusive of the 1% excise tax discussed below. The final number of shares to be repurchased and the final average price per share under the ASR agreement, exclusive of the 1% excise tax, will depend on the volume-weighted average price of our stock, less a discount, during the term of the agreement. Purchases under the ASR agreement are expected to be completed in April 2023.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three months ended March 31, 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased

18

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

11.  Fair Value Measurements

Assets and Liabilities Accounted for at Fair Value

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

March 31, 

December 31, 

    

2023

    

2022

Quoted prices in active markets (Level 1):

Cash equivalents and money market funds

 

$

186

 

$

240

Equity securities

39

37

Significant other observable inputs (Level 2):

Available-for-sale securities (a)

 

451

 

360

Significant unobservable inputs (Level 3):

Redeemable preferred stock (b)

 

56

 

56

Total Assets

 

$

732

$

693

(a)Our available-for-sale securities primarily relate to debt securities with maturities over the next ten years.
(b)Our investment, which is classified as an available-for-sale debt security, has been measured based on third-party investors’ recent or pending transactions in these securities, which are considered the best evidence of fair value. 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 March 31, 2023 and December 31, 2022, the carrying value of our debt was $15.4 billion and $15.0 billion. The estimated fair value of our debt was approximately $14.4 billion and $13.8 billion as of March 31, 2023 and December 31, 2022, respectively. The increase in the fair value of debt is primarily due to net borrowings of $337 million in 2023 and, to a lesser extent, changes in the current market rates of our senior notes.

Although we have determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The use of different assumptions or estimation methodologies could have a material effect on the estimated fair values. The fair value estimates are based on Level 2 inputs of the fair value hierarchy available as of March 31, 2023 and December 31, 2022. These amounts have not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts presented.

19

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.  Variable Interest Entities

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

Low-Income Housing Properties

We do not consolidate our investments in entities established to manage low-income housing properties because we are not the primary beneficiary of these entities as we do not have the power to individually direct the activities of these entities. Accordingly, we account for these investments under the equity method of accounting. Our aggregate investment balance in these entities was $309 million and $321 million as of March 31, 2023 and December 31, 2022, respectively. The debt balance related to our investments in low-income housing properties was $278 million and $295 million as of March 31, 2023 and December 31, 2022, respectively. Additional information related to these investments is discussed in Note 4.

Trust Funds for Final Capping, Closure, Post-Closure or Environmental Remediation Obligations

Unconsolidated Variable Interest Entities — Trust funds that are established for both the benefit of the Company and the host community in which we operate are not consolidated because we are not the primary beneficiary of these entities as (i) we do not have the power to direct the significant activities of the trusts or (ii) power over the trusts’ significant activities is shared. Our interests in these trusts are accounted for as investments in unconsolidated entities and receivables. These amounts are recorded in other receivables, investments in unconsolidated entities and long-term other assets in our Condensed Consolidated Balance Sheets, as appropriate. We also reflect our share of the unrealized gains and losses on available-for-sale securities held by these trusts as a component of our accumulated other comprehensive income (loss). Our investments and receivables related to these trusts had an aggregate carrying value of $95 million and $93 million as of March 31, 2023 and December 31, 2022, respectively.

Consolidated Variable Interest Entities — Trust funds for which we are the sole beneficiary are consolidated because we are the primary beneficiary. These trust funds are recorded in restricted funds in our Condensed Consolidated Balance Sheets. Unrealized gains and losses on available-for-sale securities held by these trusts are recorded as a component of accumulated other comprehensive income (loss). These trusts had a fair value of $118 million and $113 million as of March 31, 2023 and December 31, 2022, respectively.

20

Item 2.    Management’s Discussion and Analysis of Financial Condition and