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 ~~June 30, 2021~~March 31, 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~~Each Class	Trading Symbol	Name of ~~each exchange~~Each Exchange on ~~which registered~~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 July 22, 2021~~as of April 21, 2022 was ~~421,098,975~~415,207,025 (excluding treasury shares of ~~209,183,486)~~215,075,436).

PART I.

Item 1. Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share and Par Value Amounts)


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	148	$	553	$	155	$	118
Accounts receivable, net of allowance for doubtful accounts of $26 and $33, respectively		2,195		2,097
Other receivables, net of allowance for doubtful accounts of $9 and $7, respectively		450		527
Accounts receivable, net of allowance for doubtful accounts of $24 and $25, respectively						2,334		2,278
Other receivables, net of allowance for doubtful accounts of $8 and $8, respectively						145		268
Parts and supplies		126		124		149		135
Other assets		307		239		276		270
Total current assets		3,226		3,540		3,059		3,069
Property and equipment, net of accumulated depreciation and amortization of $19,995 and $19,337, respectively		14,110		14,148
Property and equipment, net of accumulated depreciation and amortization of $20,918 and $20,537, respectively						14,298		14,419
Goodwill		8,992		8,994		9,034		9,028
Other intangible assets, net		956		1,024		868		898
Restricted trust and escrow accounts		446		347
Restricted funds						442		348
Investments in unconsolidated entities		417		426		625		432
Other assets		890		866		893		903
Total assets	$	29,037	$	29,345	$	29,219	$	29,097
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,393	$	1,121	$	1,384	$	1,375
Accrued liabilities		1,372		1,342		1,387		1,428
Deferred revenues		557		539		600		571
Current portion of long-term debt		361		551		435		708
Total current liabilities		3,683		3,553		3,806		4,082
Long-term debt, less current portion		12,883		13,259		13,052		12,697
Deferred income taxes		1,744		1,806		1,680		1,694
Landfill and environmental remediation liabilities		2,299		2,222		2,409		2,373
Other liabilities		1,074		1,051		1,126		1,125
Total liabilities		21,683		21,891		22,073		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		6		6
Additional paid-in capital		5,104		5,129		5,178		5,169
Retained earnings		11,444		11,159		12,247		12,004
Accumulated other comprehensive income (loss)		70		39		15		17
Treasury stock at cost, 209,467,208 and 207,480,827 shares, respectively		(9,272)		(8,881)
Treasury stock at cost 215,102,120 and 214,158,636 shares, respectively						(10,302)		(10,072)
Total Waste Management, Inc. stockholders’ equity		7,352		7,452		7,144		7,124
Noncontrolling interests		2		2		2		2
Total equity		7,354		7,454		7,146		7,126
Total liabilities and equity	$	29,037	$	29,345	$	29,219	$	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				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021
Operating revenues	$	4,476	$	3,561	$	8,588	$	7,290	$	4,661	$	4,112
Costs and expenses:
Operating		2,736		2,180		5,250		4,509		2,903		2,514
Selling, general and administrative		445		377		903		802		491		458
Depreciation and amortization		500		414		972		816		482		472
Restructuring		4		2		5		2		—		1
(Gain) loss from divestitures, asset impairments and unusual items, net		—		61		17		61		17		17
		3,685		3,034		7,147		6,190		3,893		3,462
Income from operations		791		527		1,441		1,100		768		650
Other income (expense):
Interest expense, net		(98)		(119)		(195)		(231)		(85)		(97)
Loss on early extinguishment of debt		(220)		—		(220)		—
Equity in net losses of unconsolidated entities		(11)		(14)		(20)		(40)		(15)		(9)
Other, net		(6)		1		(5)		1		3		1
		(335)		(132)		(440)		(270)		(97)		(105)
Income before income taxes		456		395		1,001		830		671		545
Income tax expense		105		88		229		162		157		124
Consolidated net income		351		307		772		668		514		421
Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—		1		—
Net income attributable to Waste Management, Inc.	$	351	$	307	$	772	$	668	$	513	$	421
Basic earnings per common share	$	0.83	$	0.73	$	1.83	$	1.58	$	1.24	$	1.00
Diluted earnings per common share	$	0.83	$	0.72	$	1.82	$	1.57	$	1.23	$	0.99

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)


	Three Months Ended				Six Months Ended					Three Months Ended
	June 30,				June 30,					March 31,
	2021		2020		2021			2020		2022		2021
Consolidated net income	$	351	$	307	$	772		$	668	$	514	$	421
Other comprehensive income (loss), net of tax:
Derivative instruments, net		6		3		7			5		1		1
Available-for-sale securities, net		3		14		(2)			5		(13)		(5)
Foreign currency translation adjustments		13		34		26			(42)		10		13
Post-retirement benefit obligations, net		—		(1)		—			(1)		—		—
Other comprehensive income (loss), net of tax		22		50		31			(33)		(2)		9
Comprehensive income		373		357		803			635		512		430
Less: Comprehensive loss attributable to noncontrolling interests		—		—		—	��		—
Less: Comprehensive income (loss) attributable to noncontrolling interests											1		—
Comprehensive income attributable to Waste Management, Inc.	$	373	$	357	$	803		$	635	$	511	$	430

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)


	Six Months Ended				Three Months Ended
	June 30,				March 31,
	2021		2020		2022		2021
Cash flows from operating activities:
Consolidated net income	$	772	$	668	$	514	$	421
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		972		816		482		472
Deferred income tax benefit		(67)		(35)
Interest accretion on landfill liabilities		53		49
Deferred income tax expense (benefit)						(11)		(14)
Interest accretion on landfill and environmental remediation liabilities						28		26
Provision for bad debts		17		36		10		11
Equity-based compensation expense		45		23		25		23
Net gain on disposal of assets		(12)		(7)		(4)		(9)
Loss from divestitures, asset impairments and other, net		17		68
(Gain) loss from divestitures, asset impairments and other, net						17		17
Equity in net losses of unconsolidated entities, net of dividends		22		33		15		9
Loss on early extinguishment of debt		220		—
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		(24)		185		93		199
Other current assets		(22)		(1)		(20)		(1)
Other assets		9		14		19		7
Accounts payable and accrued liabilities		213		(171)		101		(2)
Deferred revenues and other liabilities		(52)		(57)		(11)		(39)
Net cash provided by operating activities		2,163		1,621		1,258		1,120
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(10)		(1)		(9)		(7)
Capital expenditures		(666)		(895)		(418)		(270)
Proceeds from divestitures of businesses and other assets, net of cash divested		17		15		5		15
Other, net		(49)		(37)		(150)		(72)
Net cash used in investing activities		(708)		(918)		(572)		(334)
Cash flows from financing activities:
New borrowings		1,707		—		2,362		—
Debt repayments		(2,326)		(705)		(2,471)		(329)
Premiums and other paid on early extinguishment of debt		(211)		—
Common stock repurchase program		(500)		(402)		(250)		(250)
Cash dividends		(489)		(466)		(275)		(247)
Exercise of common stock options		41		42		9		17
Tax payments associated with equity-based compensation transactions		(28)		(34)		(34)		(28)
Other, net		(4)		(10)		24		7
Net cash used in financing activities		(1,810)		(1,575)		(635)		(830)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		4		(3)		1		2
Decrease in cash, cash equivalents and restricted cash and cash equivalents		(351)		(875)
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents						52		(42)
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		648		3,647		194		648
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	297	$	2,772	$	246	$	606

Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end of period:
Cash and cash equivalents	$	148	$	2,663	$	155	$	476
Restricted cash and cash equivalents included in other current assets		56		41		20		60
Restricted cash and cash equivalents included in restricted trust and escrow accounts		93		68
Restricted cash and cash equivalents included in restricted funds						71		70
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	297	$	2,772	$	246	$	606

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																Waste Management, Inc. Stockholders’ Equity
										Accumulated																Accumulated
						Additional				Other												Additional				Other
			Common Stock			Paid-In		Retained		Comprehensive		Treasury Stock			Noncontrolling				Common Stock			Paid-In		Retained		Comprehensive		Treasury Stock			Noncontrolling
	Total		Shares	Amounts		Capital		Earnings		Income (Loss)		Shares	Amounts		Interests		Total		Shares	Amounts		Capital		Earnings		Income (Loss)		Shares	Amounts		Interests
Three Months Ended June 30:
2022
Balance, December 31, 2021																	$	7,126	630,282	$	6	$	5,169	$	12,004	$	17	(214,159)	$	(10,072)	$	2
Consolidated net income																		514	0		0		0		513		0	0		0		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

2021
Balance, March 31, 2021	$	7,429	630,282	$	6	$	5,071	$	11,337	$	48	(208,201)	$	(9,035)	$	2
Balance, December 31, 2020																	$	7,454	630,282	$	6	$	5,129	$	11,159	$	39	(207,481)	$	(8,881)	$	2
Consolidated net income		351	—		—		—		351		—	—		—		—		421	—		—		—		421		—	—		—		—
Other comprehensive income (loss), net of tax		22	—		—		—		—		22	—		—		—		9	—		—		—		—		9	—		—		—
Cash dividends declared of $0.575 per common share		(242)	—		—		—		(242)		—	—		—		—		(247)	—		—		—		(247)		—	—		—		—
Equity-based compensation transactions, net		44	—		—		33		(2)		—	310		13		—		42	—		—		(8)		4		—	1,089		46		—
Common stock repurchase program		(250)	—		—		—		—		—	(1,576)		(250)		—		(250)	—		—		(50)		—		—	(1,809)		(200)		—
Other, net		—	—		—		—		—		—	—		—		—		—	—		—		—		—		—	—		—		—
Balance, June 30, 2021	$	7,354	630,282	$	6	$	5,104	$	11,444	$	70	(209,467)	$	(9,272)	$	2

2020
Balance, March 31, 2020	$	6,745	630,282	$	6	$	5,026	$	10,718	$	(91)	(208,287)	$	(8,916)	$	2
Consolidated net income		307	—		—		—		307		—	—		—		—
Other comprehensive income (loss), net of tax		50	—		—		—		—		50	—		—		—
Cash dividends declared of $0.545 per common share		(230)	—		—		—		(230)		—	—		—		—
Equity-based compensation transactions, net		21	—		—		14		—		—	169		7		—
Common stock repurchase program		—	—		—		—		—		—	—		—		—
Other, net		—	—		—		—		—		—	—		—		—
Balance, June 30, 2020	$	6,893	630,282	$	6	$	5,040	$	10,795	$	(41)	(208,118)	$	(8,909)	$	2
Balance, March 31, 2021																	$	7,429	630,282	$	6	$	5,071	$	11,337	$	48	(208,201)	$	(9,035)	$	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
Six Months Ended June 30:

2021

Balance, December 31, 2020

$
7,454

630,282

$
6

$
5,129

$
11,159

$
39

(207,481)

$
(8,881)

$
2
Consolidated net income

772

—

—

—

772

—

—

—

—
Other comprehensive income (loss), net of tax

31

—

—

—

—

31

—

—

—
Cash dividends declared of $1.15 per common share

(489)

—

—

—

(489)

—

—

—

—
Equity-based compensation transactions, net

86

—

—

25

2

—

1,399

59

—
Common stock repurchase program

(500)

—

—

(50)

—

—

(3,385)

(450)

—
Other, net

—

—

—

—

—

—

—

—

—
Balance, June 30, 2021

$
7,354

630,282

$
6

$
5,104

$
11,444

$
70

(209,467)

$
(9,272)

$
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

668

—

—

—

668

—

—

—

—
Other comprehensive income (loss), net of tax

(33)

—

—

—

—

(33)

—

—

—
Cash dividends declared of $1.09 per common share

(466)

—

—

—

(466)

—

—

—

—
Equity-based compensation transactions, net

58

—

—

(9)

3

—

1,523

64

—
Common stock repurchase program

(402)

—

—

—

—

—

(3,687)

(402)

—
Other, net

—

—

—

—

—

—

2

—

—
Balance, June 30, 2020

$
6,893

630,282

$
6

$
5,040

$
10,795

$
(41)

(208,118)

$
(8,909)

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

~~We evaluate, oversee~~In 2021, our senior management began evaluating, overseeing and ~~manage~~managing the financial performance of our Solid Waste ~~business subsidiaries~~operations through 2 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 ~~Areas. In~~Solid Waste operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal. The Company finalized the ~~second~~assessment of our segments during the fourth quarter of ~~2021, we combined our Eastern~~2021. The East 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~~West Tiers are presented in this report ~~within~~and constitute our existing Solid Waste ~~tiers.~~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 ~~and our acquisition of Advanced Disposal~~ is included in ~~Notes 7 and 8, respectively.~~Note 7.

The Condensed Consolidated Financial Statements as of ~~June 30, 2021~~March 31, 2022 and for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 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.~~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 and intangible asset impairments and the fair value of assets and liabilities acquired in business ~~combinations or asset acquisitions and reserves associated with our insured and self-insured claims.~~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 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.~~

Sheets. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~$170~~$176 million and ~~$159~~$175 million, respectively, of deferred contract costs, of which ~~$121~~$129 million and ~~$118~~$126 million, respectively, ~~were~~was related to deferred sales incentives. ~~During each of the three- and six-month periods ended June 30, 2021 and 2020, we amortized $6 million and $11 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. 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,~~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. 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):


	June 30, 2021						December 31, 2020						March 31, 2022						December 31, 2021
			Environmental						Environmental						Environmental						Environmental
	Landfill		Remediation		Total		Landfill		Remediation		Total		Landfill		Remediation		Total		Landfill		Remediation		Total
Current (in accrued liabilities)	$	129	$	26	$	155	$	138	$	26	$	164	$	128	$	29	$	157	$	137	$	29	$	166
Long-term		2,105		194		2,299		2,018		204		2,222		2,222		187		2,409		2,189		184		2,373
	$	2,234	$	220	$	2,454	$	2,156	$	230	$	2,386	$	2,350	$	216	$	2,566	$	2,326	$	213	$	2,539

The changes to landfill and environmental remediation liabilities for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 are reflected in the table below (in millions):

Environmental


Landfill

Remediation
December 31, 2020

$
2,156

$
230
Obligations incurred and capitalized

57


—
Obligations settled

(44)


(9)
Interest accretion

53


1
Revisions in estimates and interest rate assumptions

11


(2)
Acquisitions, divestitures and other adjustments

1


—
June 30, 2021

$
2,234

$
220


			Environmental
	Landfill		Remediation
December 31, 2021	$	2,326	$	213
Obligations incurred and capitalized		26		—
Obligations settled		(17)		(7)
Interest accretion		27		1
Revisions in estimates and interest rate assumptions (a) (b)		(13)		9
Acquisitions, divestitures and other adjustments		1		—
March 31, 2022	$	2,350	$	216

(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 $8 million due to an increase from 1.50% at December 31, 2021 to 2.50% at March 31, 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 funds ~~or escrow~~ accounts 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 1312 for additional information related to these trusts.

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 ~~June 30, 2021:~~March 31, 2022:


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Commercial paper program (weighted average interest rate of 0.4% as of June 30, 2021 and December 31, 2020)	$	1,500	$	1,814
Senior notes, maturing through 2050, interest rates ranging from 0.75% to 7.75% (weighted average interest rate of 3.1% as of June 30, 2021 and 3.3% as of December 31, 2020)		8,126		8,465
Commercial paper program (weighted average interest rate of 0.5% as of March 31, 2022 and 0.4% as of December 31, 2021)					$	1,689	$	1,778
Senior notes, maturing through 2050, interest rates ranging from 0.75% to 7.75% (weighted average interest rate of 3.1% as of March 31, 2022 and December 31, 2021)						8,126		8,126
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%		403		393		400		395
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.05% to 4.3% (weighted average interest rate of 1.6% as of June 30, 2021 and 1.7% as of December 31, 2020)		2,672		2,571
Financing leases and other, maturing through 2085, weighted average interest rate of 4.7% as of June 30, 2021 and 4.6% as of December 31, 2020 (a)		625		652
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.3% to 4.3% (weighted average interest rate of 1.5% as of March 31, 2022 and 1.4% as of December 31, 2021)						2,619		2,619
Financing leases and other, maturing through 2085, weighted average interest rate of 4.8% as of March 31, 2022 and 4.5% as of December 31, 2021 (a)						731		567
Debt issuance costs, discounts and other		(82)		(85)		(78)		(80)
		13,244		13,810		13,487		13,405
Current portion of long-term debt		361		551		435		708
	$	12,883	$	13,259	$	13,052	$	12,697

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

Debt Classification

As of ~~June 30, 2021~~March 31, 2022, we had ~~$2.9~~approximately $3.0 billion of debt maturing within the next 12 months, including (i) ~~$1.5~~$1.7 billion of short-term borrowings under our commercial paper program (net of related discount on issuance); (ii) ~~$1.2 billion~~$645 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled ~~maturities~~maturities; (iii) $500 million of 2.9% senior notes that mature in September 2022 and ~~(iii) $212~~(iv) $180 million of other debt with scheduled maturities within the next 12 months, including ~~$103~~$71 million of tax-exempt bonds. As of ~~June 30, 2021,~~March 31, 2022, we have classified $2.6 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 ~~$361~~$435 million of debt maturing in the next 12 months is classified as current obligations.

As of ~~June 30, 2021,~~March 31, 2022, we also had $54 million of variable-rate tax-exempt bonds with long-term scheduled maturities supported by letters of credit under our $3.5 billion revolving credit facility. The interest rates on our variable-rate tax-exempt bonds ~~are generally~~ reset on ~~either~~ a ~~daily or~~ weekly basis through a remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have the availability under our $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have classified the $54 million of variable-rate tax-exempt bonds with maturities of more than one year as long-term in our Condensed Consolidated Balance Sheet as of ~~June 30, 2021.~~March 31, 2022.

109

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Access to and Utilization of Credit Facilities and Commercial Paper Program

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility, maturing November 2024, provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program. The rates we pay for outstanding U.S. or Canadian loans are generally based on LIBOR (or a LIBOR successor rate, if applicable, as provided for in the underlying credit agreement) or CDOR, respectively, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service, Inc. and Standard and ~~Poor’s.~~Poor’s Global Ratings. As of ~~June 30, 2021,~~March 31, 2022, we had 0 outstanding borrowings under this facility. We had ~~$266~~$166 million of letters of credit issued and ~~$1.5~~$1.7 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of ~~$1.7~~$1.6 billion as of ~~June 30, 2021.~~March 31, 2022. WM Holdings, a wholly-owned subsidiary of ~~WM,~~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 ~~June 30, 2021,~~March 31, 2022, we had ~~$1.5~~$1.7 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of ~~June 30, 2021,~~March 31, 2022, we had utilized ~~$615~~$769 million of other uncommitted letter of credit lines, with terms maturing through ~~June 2022.~~April 2023.

Debt Borrowings and Repayments

Commercial Paper Program — During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we made cash repayments of ~~$954 million,~~$2.5 billion, which were partially offset by ~~$640 million~~$2.4 billion of cash borrowings (net of related discount on issuance).

~~Senior Notes~~ — In May 2021, WM issued $950 million of senior notes consisting of $475 million of 2.00% senior notes due June 1, 2029 and $475 million of 2.95% senior notes due June 1, 2041. The net proceeds from these debt issuances were $942 million, all of which were used, along with available cash on hand, to retire $1.3 billion of certain high-coupon senior notes. The cash paid included the principal amount of the debt retired, $211 million of related premiums and other third-party costs, and $15 million of accrued interest.

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

We recognized a $220 million loss on early extinguishment of debt in our Condensed Consolidated Statement of Operations related to the tender offer, including $211 million of premiums and other third-party costs and $9 million primarily related to unamortized discounts and debt issuance costs. We also recognized $6 million of charges to interest expense for the write-off of cash flow hedges associated with the tendered notes, which was previously being amortized to interest expense through the notes’ stated maturities. The following table summarizes the principal amount of senior notes redeemed within each series in order of acceptance priority level (in millions):

Principal

Outstanding

Notes Tendered
Description

Prior to Tender

and Redeemed
6.125% WM senior notes due 2039

$
252

$
6
7.75% WM senior notes due 2032

153

9
7.375% WM senior notes due 2029

81

—
4.15% WM senior notes due 2049

1,000

316
4.10% WM senior notes due 2045

750

334
3.90% WM senior notes due 2035

450

153
7.00% WM senior notes due 2028

330

73
7.10% WM Holdings senior notes due 2026

249

26
3.50% WM senior notes due 2024

350

194
3.125% WM senior notes due 2025

600

178
3.15% WM senior notes due 2027

750

—
2.90% WM senior notes due 2022

500

—
2.40% WM senior notes due 2023

500

—
Total

$
5,965

$
1,289

In conjunction with the tender offer, we entered into a reverse Treasury rate lock with a total notional value of $450 million to hedge our interest rate exposure. We did not designate the reverse Treasury rate lock as a cash flow hedge. Upon completion of the tender offer, we terminated the reverse Treasury rate lock and paid $8 million in cash. The related loss is included in other, net in the Condensed Consolidated Statement of Operations.

~~Tax-Exempt Bonds~~ — We issued $125 million of new tax-exempt bonds in 2021. The proceeds from the issuance of these bonds were deposited directly into a restricted trust fund and may only be used for the specific purpose for which the money was raised, which is generally to finance expenditures for landfill and solid waste disposal facility construction and development. Additionally, during the six months ended June 30, 2021, we repaid $24 million of our tax-exempt bonds with available cash at their scheduled maturities.

Financing Leases and Other — The ~~decrease~~increase in our financing leases and other debt obligations during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is ~~due~~primarily related to ~~$59~~our new federal low-income housing investment discussed in Note 4, which increased our debt obligations by $183 million. The increase in our debt obligations was partially offset by $19 million of cash repayments of debt at ~~maturity, partially offset by an increase of $32 million primarily associated with non-cash financing leases.~~maturity.

4. Income Taxes

Our effective income tax rate was ~~22.9%~~23.5% and ~~22.8%~~22.7% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively, compared with 22.2% and 19.5% for the three and six months ended June 30, 2020,~~ respectively. The increase in our effective income tax rate when comparing the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~with~~was primarily driven by (i) an increase in pre-tax income in 2022, which decreased the ~~prior year period was due to (i) a decrease in the benefits realized on~~effective tax ~~audit settlements~~rate impact of our federal tax credits; and (ii) lower federal tax credits. The increase in our effective income tax rate for the six-month period ended June 30, 2021 as compared with the prior year period was also impacted by (i) a decrease in excess tax benefits associated with equity-based compensation and (ii) favorableunfavorable adjustments to accruals and related deferred taxes, ~~recorded~~both of which were partially offset by a benefit from higher federal tax credits as a result of our incremental investment in ~~2020.~~

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~These items are~~low-income housing properties, which is discussed further below. 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 and six months ended June 30, 2021, we recognized a reduction in income tax expense of $2 million and $11 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $2 million and $23 million, respectively, for the comparable prior year periods.

Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties. On February 8, 2022, we acquired an additional noncontrolling interest in a limited liability company established to invest in and manage low-income housing properties. Total consideration for this investment is expected to be $253 million, comprised of a $183 million note payable discussed in Note 3, an initial cash payment of $28 million and $42 million of interest payments expected to be paid over the life of the investment. At the time of the investment, we increased our investments in unconsolidated entities in our Condensed Consolidated Balance Sheet by $211 million, representing the principal balance of the note and the initial cash investment. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments qualify for federal tax credits that we expect to realize through ~~2030~~2033 under Section 42 or Section 45D of the Internal Revenue Code. We also held a residual financial interest in an entity that owned a refined coal facility that qualified for federal tax credits under Section 45 of the Internal Revenue Code through 2019. The entity sold the majority of its assets in the first quarter of 2020, which resulted in a $7 million non-cash impairment of our investment at that time.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, we recognized ~~$12~~$14 million and ~~$21~~$9 million ~~respectively,~~ of net losses, ~~for these investments. We also recognized~~respectively, and a reduction in our income tax expense ~~for the three~~of $23 million and ~~six months ended June 30, 2021 of~~ $16 million, ~~and $32 million,~~ respectively, primarily due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized. In addition, during the three and six months ended June 30, 2021, we recognized interest expense of $3 million and $5 million, respectively, associated with our investments in low-income housing properties.

During the three and six months ended June 30, 2020, we recognized $17 million and $43 million, respectively, (including the $7 million impairment of the refined coal facility noted above for the six-month period) of net losses for these investments. We also recognized a reduction in our income tax expense for the three and six months ended June 30, 2020 of $17 million and $41 million, respectively, due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized. In addition, during the three and six months ended June 30, 2020, we recognized interest expense of $3 million and $6 million, respectively, associated with our investments in low-income housing properties.

See Note 1312 for additional information related to these unconsolidated variable interest entities.

~~Tax Audit Settlements~~Adjustments to Accruals and Related Deferred Taxes — During the three months ended ~~June 30, 2021 and 2020,~~March 31, 2022, we ~~settled various tax audits, which resulted in a reduction~~recognized an increase in our income tax expense of ~~$1 million and $5 million, respectively.~~

~~Adjustments to Accruals and Related Deferred Taxes~~ ~~— During the first quarter of 2020, we recognized a reduction in our income tax expense of $6~~$3 million for adjustments to accruals and related deferred taxes.

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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):


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2021	2020	2021	2020	2022	2021
Number of common shares outstanding at end of period	420.8	422.2	420.8	422.2	415.2	422.1
Effect of using weighted average common shares outstanding	0.8	0.1	1.5	1.0	0.5	0.8
Weighted average basic common shares outstanding	421.6	422.3	422.3	423.2	415.7	422.9
Dilutive effect of equity-based compensation awards and other contingently issuable shares	2.0	1.6	1.7	1.9	2.1	1.4
Weighted average diluted common shares outstanding	423.6	423.9	424.0	425.1	417.8	424.3
Potentially issuable shares	6.1	6.5	6.1	6.5	5.9	6.4
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding	0.6	2.1	1.0	2.1	1.8	2.6

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 letter of 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

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to loss for insurance claims is generally limited to the per incident deductible under the related insurance policy. 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.~~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.

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Guarantees — In the ordinary course of our business, WMWMI and WM Holdings enter into guarantee agreements associated with their subsidiaries’ operations. Additionally, WMWMI 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 ~~June 30, 2021~~March 31, 2022, 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 ~~market value losses for certain~~homeowner’s properties that are adjacent to or near 1817 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 these contingent obligations will have a material adverse effect on the Company’s 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 ~~$135~~$140 million higher than the ~~$220~~$216 million recorded in the Condensed Consolidated Balance Sheet as of ~~June 30, 2021.~~March 31, 2022. 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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of ~~June 30, 2021,~~March 31, 2022, 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 ~~evaluate~~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

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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 ~~waste pits~~River Waste Pits Site in Harris County, Texas. McGinnes Industrial Maintenance Corporation (“MIMC”), ~~an indirect wholly-owned~~a subsidiary of ~~WM,~~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, WMWMI 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. Allocation of responsibility among the PRPs for the proposed remedy has not been established. As of June 30, 2021~~site, and ~~December 31, 2020, the~~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, the recorded liability for MIMC’s estimated potential share of such costs increased by $17 million in 2022. As of March 31, 2022 and December 31, 2021, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy was ~~$53~~$70 million and ~~$55~~$53 million, respectively. MIMC’s ultimate liability could be materially different from current ~~estimates.~~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

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 — As a large company with operations across the U.S. and Canada, 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.

~~WM’s~~WMI’s charter and bylaws provide that WMWMI 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

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

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 ~~WM’s~~WMI’s Board of Directors and each of ~~WM’s~~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. ~~During the first quarter of 2020, we recognized a $3 million charge to operating expenses for the withdrawal from an underfunded Multiemployer Pension Plan.~~

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. We are currently in the examination phase of

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

IRS audits for the 2017, ~~through~~ 2021 and 2022 tax years and expect these audits to be completed within the next 2124 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

~~We evaluate, oversee~~In 2021, our senior management began evaluating, overseeing and ~~manage~~managing the financial performance of our Solid Waste ~~business subsidiaries~~operations through 2 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 Company 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. This did not result in a change in our reporting units for purposes of evaluating our goodwill. Reclassifications have been made to our prior period consolidated financial information to conform to the current year presentation.

The operating segments not evaluated and overseen through our ~~Areas. In~~East and West Tiers are presented herein as “Other” as these operating segments do not meet the ~~second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17~~criteria to ~~16. The 16 Areas constitute~~be aggregated with other operating segments and ~~we have evaluated~~do not meet the ~~aggregation~~quantitative criteria and concluded that, based on the similarities between our Areas, including the fact that our Solid Waste business is homogenous across geographies with the same services offered across the Areas, aggregation of our Areas is appropriate for purposes of presenting our reportable segments. Accordingly, we have aggregated our 16 Areas into 3 tiers that we believe have similar economic characteristics and future prospects based in large part on a review of the Areas’ income from operations margins. The economic variations experienced by our Areas are attributable to a variety of factors, including regulatory environment of the Area; economic environment of the Area, including level of commercial and industrial activity; population density; service offering mix and disposal logistics, with no one factor being singularly determinative of an Area’s current or future economic performance.be separately reported.

1715

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of the combination of our Eastern and Western Canada Areas, we analyzed all 16 Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect changes in their relative economic characteristics and prospects. Reclassifications have been made to our prior period condensed consolidated financial information to conform to the current year presentation.

The operating segments not evaluated and overseen through the 16 Areas are presented herein as “Other” as these operating segments do not meet the criteria to be aggregated with other operating segments and do not meet the quantitative criteria to be separately reported.

Summarized financial information concerning our reportable segments 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
Three Months Ended June 30:








2021








Solid Waste:








Tier 1

$
1,214

$
(228)

$
986

$
350
Tier 2

1,495

(323)

1,172

331
Tier 3

1,997

(376)

1,621

375
Solid Waste (a)

4,706

(927)

3,779

1,056
Other (b)

729

(32)

697

4

5,435

(959)

4,476

1,060
Corporate and Other (c)

—

—

—

(269)
Total

$
5,435

$
(959)

$
4,476

$
791

2020








Solid Waste:








Tier 1

$
975

$
(178)

$
797

$
270
Tier 2

1,194

(252)

942

208
Tier 3

1,599

(306)

1,293

244
Solid Waste (a)

3,768

(736)

3,032

722
Other (b)

554

(25)

529

(10)

4,322

(761)

3,561

712
Corporate and Other (c)

—

—

—

(185)
Total

$
4,322

$
(761)

$
3,561

$
527

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~


	Gross		Intercompany		Net		Income		Gross		Intercompany		Net		Income
	Operating		Operating		Operating		from		Operating		Operating		Operating		from
	Revenues		Revenues(d)		Revenues		Operations		Revenues		Revenues(d)		Revenues		Operations(e)
Six Months Ended June 30:
2021
2022
Solid Waste:
Tier 1	$	2,302	$	(429)	$	1,873	$	657
Tier 2		2,890		(625)		2,265		622
Tier 3		3,820		(709)		3,111		695
East Tier									$	2,383	$	(445)	$	1,938	$	531
West Tier										2,406		(490)		1,916		549
Solid Waste (a)		9,012		(1,763)		7,249		1,974		4,789		(935)		3,854		1,080
Other (b)		1,394		(55)		1,339		22		857		(50)		807		1
		10,406		(1,818)		8,588		1,996		5,646		(985)		4,661		1,081
Corporate and Other (c)		—		—		—		(555)		—		—		—		(313)
Total	$	10,406	$	(1,818)	$	8,588	$	1,441	$	5,646	$	(985)	$	4,661	$	768

2020
2021
Solid Waste:
Tier 1	$	1,999	$	(360)	$	1,639	$	558
Tier 2		2,450		(517)		1,933		477
Tier 3		3,295		(631)		2,664		532
East Tier									$	2,128	$	(394)	$	1,734	$	453
West Tier										2,178		(442)		1,736		475
Solid Waste (a)		7,744		(1,508)		6,236		1,567		4,306		(836)		3,470		928
Other (b)		1,108		(54)		1,054		(35)		665		(23)		642		20
		8,852		(1,562)		7,290		1,532		4,971		(859)		4,112		948
Corporate and Other (c)		—		—		—		(432)		—		—		—		(298)
Total	$	8,852	$	(1,562)	$	7,290	$	1,100	$	4,971	$	(859)	$	4,112	$	650

(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.

~~The increase in income~~Income from operations ~~across the Tiers was~~in our Solid Waste business increased primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume and ~~yield;~~ (ii) improved profitability in our recycling business from higher market prices for recycling commodities ~~volume recovery from facilities where we temporarily suspended operations during the pandemic~~ and improved costs at facilities where we have made investments in enhanced technology and ~~equipment; (iii) a decrease in the provision for bad debts and (iv) the continuation of our proactive cost management efforts as volumes increased.~~equipment. These increases were partially offset by ~~(i) higher incentive compensation costs; (ii)~~ inflationary cost pressures and ~~(iii)~~labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime ~~driven by increased volumes~~due to driver shortages and driver shortages. Additionally, the prior year periods were impacted by non-cash impairment charges, as further discussed below. The positive earnings contributions of Advanced Disposal were offset by elevated depreciation and amortization of the related acquired assets.

During the second quarter of 2020, income from operations was impacted by $61 million of non-cash impairments consisting of (i) $41 million of non-cash asset impairment charges in our Tier 2 segment primarily related to two landfills and an oil field waste injection facility and (ii) a $20 million non-cash impairment charge in our Tier 3 segment related to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace.volume growth.

(b)

“Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) ~~business;~~business that are not included in the operations of our reportable segments; (ii) elements of our landfill gas-to-energy operations managed by our WM Renewable Energy business and not included in the operations of our reportable segments; (iii) elements of our third-party subcontract and administration revenues managed by our Energy and Environmental Services (“EES”) business and not included in the operations of our reportable segments; (iv) our

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

recycling brokerage ~~services and~~services; (v) certain other expanded service offerings and ~~solutions. In addition, our “Other” segment reflects~~solutions and (vi) the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

The ~~increase~~decrease in income from operations was primarily driven by ~~(i) increased market values for renewable energy credits generated by~~ our WM Renewable Energy business; (ii) increased revenues for our WMSBS business as a result of new contracts, improved pricing and increased customer activity and (iii) higher market prices for commodities benefiting our recycling brokerage services. The increase in income from operations for the six months ended June 30, 2021, as compared with the prior year period, was also due to a gain from the divestiture of certain ancillary operations during the first quarter of 2021.self-insurance program.

(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.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The ~~increase~~decrease in ~~these costs~~income from operations was primarily driven by (i) ~~higher incentive compensation costs; (ii)~~increased costs as a result of strategic investments we are making in our digital platform, including investments in customer service digitalization, as well as investments in our ~~digital platform; (iii) increases in health~~sustainability initiatives and ~~welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (iv)~~(ii) increased labor ~~and support~~ costs primarily due to merit increases. This decrease in income from operations was partially offset by lower integration costs related to our acquisition of Advanced Disposal. The six months ended June 30, 2021, as compared with the prior year period, was further impacted by a charge pertaining to reserves for certain loss contingencies recognized during the first quarter of 2021, as well as changes in the measurement of our environmental remediation obligations and recovery assets in both the first quarter of 2020 and 2021.

(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.

(e)	In the fourth quarter of 2021, we discontinued certain allocations from our Corporate and Other segment to our Solid Waste operating segments and Other segment. Reclassifications have been made to our prior period information for comparability purposes.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020		2022		2021
Commercial	$	1,178	$	928	$	2,309	$	1,991	$	1,287	$	1,131
Industrial										836		743
Residential		794		657		1,576		1,307		805		782
Industrial		811		625		1,554		1,318
Other collection		135		115		251		227		153		116
Total collection		2,918		2,325		5,690		4,843		3,081		2,772
Landfill		1,075		874		1,990		1,761		1,051		915
Transfer		532		439		997		880		486		465
Recycling		397		275		739		529		453		342
Other (a)		513		409		990		839		575		477
Intercompany (b)		(959)		(761)		(1,818)		(1,562)		(985)		(859)
Total	$	4,476	$	3,561	$	8,588	$	7,290	$	4,661	$	4,112

(a)

The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) our landfill ~~gas-to-energy operations;~~gas to energy operations managed by our WM Renewable Energy business; (iii) certain services within our EES business, including our construction and remediation services and our services associated with the disposal of fly ash and (iv) certain other expanded service offerings and solutions. In addition, our “Other” line of business 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.

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

(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.

Prior year period operating results were negatively impacted by COVID-19, as volumes declined beginning in March 2020 in our landfill, industrial and commercial collection businesses due to steps taken by national and local governments to slow the spread of the virus, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly ~~impact~~affect the operating results of the ~~Areas~~geographic areas affected. 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 ~~Areas~~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, as a result of significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

~~8. Acquisition of Advanced Disposal~~

On October 30, 2020, we completed the acquisition of all outstanding shares of Advanced Disposal for $30.30 per share in cash, pursuant to an Agreement and Plan of Merger dated April 14, 2019, as amended on June 24, 2020. Total enterprise value of the acquisition was $4.6 billion when including approximately $1.8 billion of Advanced Disposal’s net debt. This acquisition grows our footprint and allows us to provide differentiated, sustainable waste management and recycling services to approximately 3 million new commercial, industrial, and residential customers, primarily located in the Eastern half of the U.S. The acquisition was funded using a $3.0 billion, 364-day, U.S. revolving credit facility and our commercial paper program. In November 2020, we issued $2.5 billion of senior notes and used a portion of the proceeds to repay all outstanding borrowings under the $3.0 billion, 364-day, U.S. revolver and terminated the facility.

Our consolidated financial statements have not been retroactively restated to include Advanced Disposal’s historical financial position or results of operations. The acquisition was accounted for as a business combination. In accordance with the purchase method of accounting, the purchase price paid has been allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired recorded as goodwill. We have substantially completed our valuation processes of all of the assets and liabilities acquired in the acquisition, however, until we have completed our valuation process, there may be adjustments to our estimates of fair value and resulting preliminary purchase price allocation, specifically those that require significant accounting estimates and assumptions, such as our landfills and intangibles.

Goodwill of $2.5 billion was calculated as the excess of the consideration paid over the net assets recognized and represents the future economic benefits expected to arise from other assets acquired that could not be individually identified and separately recognized. Goodwill has been assigned to our Areas that have integrated these operations as they are benefiting from the synergies of the combination. Goodwill related to this acquisition is not deductible for income tax purposes.

2117

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

During the first quarter of 2022, we recognized 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.

During the first quarter of 2021, we recognized net charges of $17 million consisting of (i) a $19 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment and (ii) $6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other segment; which were partially offset by an $8 million gain from divestitures of certain ancillary operations in our Other segment.

~~The following table shows the preliminary purchase price allocation as of the date acquired, and adjustments to June 30, 2021 (in millions):~~

October 30, 2020

Adjustments

June 30, 2021
Accounts and other receivables

$
159

$
—

$
159
Parts and supplies

8

(1)

7
Other current assets

17


(1)


16
Assets held for sale (a)

1,022

—

1,022
Property and equipment

1,278

7

1,285
Goodwill

2,470

5

2,475
Other intangible assets

604

(3)

601
Investments in unconsolidated entities

9

—

9
Other assets

27

(2)

25
Accounts payable

(107)

1

(106)
Accrued liabilities

(155)

(4)

(159)
Deferred revenues

(19)

—

(19)
Current portion of long-term debt

(12)

—

(12)
Liabilities held for sale (a)

(234)

—

(234)
Long-term debt, less current portion (b)

(441)

—

(441)
Landfill and environmental remediation liabilities

(242)

(1)

(243)
Deferred income taxes

(223)

1

(222)
Other liabilities

(79)

(2)

(81)
Total purchase price

$
4,082

$
—

$
4,082

~~(a)~~

In connection with our acquisition of Advanced Disposal, we were required by the U.S. Department of Justice to divest assets, including a portion of the assets acquired from Advanced Disposal. Upon acquisition these assets met the criteria for reporting discontinued operations and were classified as held for sale and included within the “Assets held for sale” and “Liabilities held for sale” line items in the above preliminary allocation of purchase price. Immediately following the closing of our acquisition of Advanced Disposal, the transactions contemplated by the U.S. Department of Justice were consummated and we sold the net assets to GFL Environmental for total consideration of $856 million.

~~(b)~~

At the time of acquisition, Advanced Disposal had outstanding $425 million of 5.625% senior notes due November 2024, the fair value of which was $438 million. In November 2020, we redeemed the notes pursuant to an optional redemption feature.

The preliminary allocation of $601 million as of June 30, 2021 for other intangibles includes $572 million for customer relationships with an amortization period of 15 years and $29 million of other intangibles with a weighted average amortization period of seven years.

9. ~~Divestitures, Asset Impairments and Unusual Items~~

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

During the six months ended June 30, 2021, we recognized net charges of $17 million in the first quarter of 2021 consisting of (i) a $19 million charge pertaining to reserves for loss contingencies in our Corporate and Other segment and (ii) $6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Segment. These charges were partially offset by an $8 million gain from divestitures of certain ancillary operations in our Other segment.~~

~~During the six months ended June 30, 2020, we recognized non-cash impairment charges of $61 million in the second quarter of 2020 primarily related to the following:~~

~~Energy Services Asset Impairments~~— During the second quarter of 2020, the Company tested the recoverability of certain energy services assets in our Tier 2 segment. Indicators of impairment included (i) the sharp downturn in oil demand that has led to a significant decline in oil prices and production activities, which we project will have long-term impacts on the utilization of our assets and (ii) significant shifts in our business, including increases in competition and customers choosing to bury waste on site versus in a landfill, reducing our revenue outlook. The Company determined that the carrying amount of the asset group was not fully recoverable. As a result, we recognized $41 million of non-cash impairment charges primarily related to two landfills and an oil field waste injection facility in our Tier 2 segment. We wrote down the net book value of these assets to their estimated fair value using an income approach based on estimated future cash flow projections (Level 3). The aggregate fair value of the impaired asset group was $8 million as of June 30, 2020.

~~Other Impairments~~ — In addition to the energy services impairments noted above, during the second quarter of 2020, we recognized a $20 million non-cash impairment charge in our Tier 3 segment due to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace, which was considered an impairment indicator. As the carrying value was not recoverable, we wrote off the entire net book value of the asset using an income approach based on estimated future cash flow projections (Level 3). The impairment charge was comprised of $12 million related to the carrying value of the asset and $8 million related to the acceleration of the expected timing of capping, closure and post-closure activities.

~~Equity in Net Losses of Unconsolidated Entities~~

During the first quarter of 2020, we recorded a non-cash impairment charge of $7 million related to our investment in a refined coal facility which is discussed further in Note 4. The fair value of our investment was not readily determinable; thus, we determined the fair value using management assumptions pertaining to investment value (Level 3).

~~10.~~ Accumulated Other Comprehensive Income (Loss)

The changes in the balances of each component of accumulated other comprehensive income (loss), 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-								Foreign		Post-
			Available-		Currency		Retirement						Available-		Currency		Retirement
	Derivative		for-Sale		Translation		Benefit				Derivative		for-Sale		Translation		Benefit
	Instruments		Securities		Adjustments		Obligations		Total		Instruments		Securities		Adjustments		Obligations		Total
Balance, December 31, 2020	$	(9)	$	49	$	(1)	$	—	$	39
Other comprehensive income (loss) before reclassifications, net of tax expense (benefit) of $0, $(1), $0 and $0, respectively		—		(2)		26		—		24
Amounts reclassified from accumulated other comprehensive (income) loss, net of tax (expense) benefit of $3, $0, $0 and $0, respectively		7		—		—		—		7
Balance, December 31, 2021											$	—	$	43	$	(29)	$	3	$	17
Other comprehensive income (loss) before reclassifications, net of tax expense (benefit) of $0, $(5), $0 and $0, respectively												—		(13)		10		—		(3)
Amounts reclassified from accumulated other comprehensive (income) loss, net of tax (expense) benefit of $0, $0, $0 and $0, respectively												1		—		—		—		1
Net current period other comprehensive income (loss)		7		(2)		26		—		31		1		(13)		10		—		(2)
Balance, June 30, 2021	$	(2)	$	47	$	25	$	—	$	70
Balance, March 31, 2022											$	1	$	30	$	(19)	$	3	$	15

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~11.~~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~~December 2021, we ~~entered into~~executed an accelerated share repurchase (“ASR”) ~~agreement~~ to repurchase ~~$250~~$350 million of our common stock. At the beginning of the repurchase period, we delivered ~~$250~~$350 million in cash and received ~~1.8~~1.7 million shares based on a stock price of ~~$110.56.~~$160.67. The ASR agreement completed in ~~the second quarter of 2021,~~January 2022, at which time we received ~~0.2~~0.4 million additional shares based on a final weighted average price of ~~$126.83.~~$160.33.

In ~~May 2021,~~February 2022, we entered into an ASR agreement to repurchase $250 million of our common stock. At the beginning of the repurchase period, we delivered $250 million cash and received 1.4 million shares based on a stock price of ~~$141.42.~~$146.43. The final number of shares to be repurchased and the final average price per share under the ASR agreement 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 ~~July 2021.~~April 2022.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of ~~June 30, 2021,~~March 31, 2022, the Company has authorization for ~~$850 million~~$1.25 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.

~~12.~~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):

June 30,

December 31,

2021

2020
Fair Value Measurements Using:

Quoted prices in active markets (Level 1):

Cash equivalents and money market funds (a)

$
87

$
530
Significant other observable inputs (Level 2):

Available-for-sale securities (b)

447

390
Significant unobservable inputs (Level 3):

Redeemable preferred stock (c)

49

49
Total Assets

$
583

$
969


	March 31,		December 31,
	2022		2021
Quoted prices in active markets (Level 1):
Cash equivalents and money market funds	$	166	$	38
Equity securities		33		25
Significant other observable inputs (Level 2):
Available-for-sale securities (a)		464		395
Significant unobservable inputs (Level 3):
Redeemable preferred stock (b)		49		49
Total Assets	$	712	$	507

(a)	~~The decrease is primarily due to the use of available cash to retire certain high-coupon senior notes in May 2021, which is discussed further in Note 3.~~

~~(b)~~

Our available-for-sale securities primarily relate to debt securities with maturities over the next ~~nine~~eight years.

~~(c)~~(b)

~~When available, Level 3 investments have~~Our investment 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.

See Note 8 for information related to ~~the nonrecurring fair value measurement of assets and liabilities acquired in connection with our acquisition of Advanced Disposal. See Note 9 for information related to~~ our nonrecurring fair value measurements and the impact of impairments.

~~WASTE MANAGEMENT, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Fair Value of Debt

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying value of our debt was ~~$13.2~~$13.5 billion and ~~$13.8 billion, respectively.~~$13.4 billion. The estimated fair value of our debt was approximately ~~$14.0~~$13.3 billion and ~~$15.2~~$14.1 billion as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The decrease in the fair value of debt is primarily related to net repayments of $619 million during 2021 and the replacement of debt balances with a relatively high fair value to carrying value ratio with new debt with a fair value that approximates carrying value (refer to Note 3 for additional information) and increases in 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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. These amounts have not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts presented.

~~13.~~19

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Variable Interest Entities

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 ~~$207~~$372 million and ~~$228~~$178 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The debt balance related to our investments in low-income housing properties was ~~$183~~$331 million and ~~$210~~$156 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~$109~~$103 million and ~~$106~~$110 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~trust and escrow~~funds accounts 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 ~~$117~~$118 million and ~~$114~~$117 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

2520

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

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included under Item 1 and our Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

This Quarterly Report on Form 10-Q contains certain forward-looking statements that are made subject to the safe harbor protections provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the words, “will,” “may,” “should,” “continue,” “anticipate,” “believe,” “expect,” “plan,” “forecast,” “project,” “estimate,” “intend,” and words of a similar nature and include estimates or projections of financial and other data; comments on expectations relating to future periods; plans or objectives for the future; and statements of opinion, view or belief about current and future events, circumstances or performance. You should view these statements with caution. They are based on the facts and circumstances known to us as of the date the statements are made. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those set forth in such forward-looking statements, including but not limited to failure to implement our optimization, growth, and cost savings initiatives and overall business strategy; failure to identify acquisition targets, ~~and negotiate attractive terms; failure to~~ consummate orand integrate acquisitions; failure to obtain the results anticipated from ~~acquisitions; failure~~acquisitions, including continuing to ~~successfully integrate~~realize the strategic benefits and cost synergies from our acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”)~~, realize anticipated synergies or obtain other results anticipated from such acquisition;~~; environmental and other regulations, including developments related to emerging contaminants, gas emissions and renewable fuel; significant environmental, safety or other incidents resulting in liabilities or brand damage; failure to obtain and maintain necessary permits; failure to attract, hire and retain key team members and a high quality workforce; changes in wage and labor ~~disruptions and wage-related~~related regulations; significant storms and destructive climate events; public health risk and other impacts of COVID-19 or similar pandemic conditions, including related regulations, resulting in increased costs and social, labor and commercial disruption; macroeconomic pressures and market disruption resulting in labor, supply chain and ~~service reductions;~~transportation constraints and inflationary cost pressure; increased competition; pricing actions; commodity price fluctuations; impacts from Russia’s recent invasion of Ukraine and the resulting geopolitical conflict and international response, including increased risk of cyber incidents and exacerbation of market disruption, inflationary cost pressure and changes in commodity prices, fuel and other energy costs; international trade restrictions; disposal alternatives and waste diversion; declining waste volumes; weakness in general economic conditions and capital markets; adoption of new tax legislation; fuel shortages; failure to develop and protect new technology; failure of technology to perform as expected, including implementation of a new enterprise resource planning and human capital management system; failure to prevent, detect and address cybersecurity incidents or comply with privacy regulations; negative outcomes of litigation or governmental proceedings; decisions or developments that result in impairment charges and other risks discussed in our filings with the SEC, including Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. The Company is optimistic about volume recovery and overall economic recovery as states and local jurisdictions continue lifting previous restrictions related to the COVID-19 pandemic. However, uncertainty remains with respect to the pace of economic recovery, as well as the potential for resurgence in transmission of COVID-19 and related business closures due to virus variants or otherwise. Such conditions could have an unanticipated adverse impact on our business.2021. We assume no obligation to update any forward-looking statement, including financial estimates and forecasts, whether as a result of future events, circumstances or developments or otherwise.

Overview

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. We own or operate the largest network of landfills inthroughout the U.S. and Canada. In order to make disposal more practical for larger urban markets, where the distance to landfills is typically farther, we manage transfer stations that consolidate, compact and transport waste efficiently and economically. We are also ~~use waste to create energy, recovering~~a leading developer, operator and owner of landfill gas-to-energy facilities in the U.S. that produce renewable natural gas, ~~produced naturally as waste decomposes in landfills and using the~~which is a significant source of fuel for our natural gas ~~in generators to make electricity or natural gas.~~fleet. Additionally, we are a leading recycler in the U.S. and Canada, handling materials that include paper, cardboard, glass, plastic, and metal. Our “Solid Waste” business is operated and managed locally by our subsidiaries that focus on distinct geographic areas and ~~provides~~provide collection, transfer, disposal, and recycling and resource recovery services. Consistent with our Company’s long-standing commitment to ~~corporate~~ sustainability and environmental stewardship, we published our ~~2020~~2021 Sustainability Report, which details our people-first commitment

to help make the communities in which we live and work

safe, resilient, and sustainable. The information in this report can be found at https://sustainability.wm.com but it does not constitute a part of, and is not incorporated by reference into, this Quarterly Report on Form ~~10-Q.~~10 Q.

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.

Our Solid Waste operating revenues are primarily generated from fees charged for our collection, transfer, disposal, and recycling and resource recovery services, and from sales of commodities by our recycling and landfill gas-to-energy operations. Revenues from our collection operations are influenced by factors such as collection frequency, type of collection equipment furnished, type and volume or weight of the waste collected, distance to the disposal facility or material recovery facility and our disposal costs. Revenues from our landfill operations consist of tipping fees, which are generally based on the type and weight or volume of waste being disposed of at our disposal facilities. Fees charged at transfer stations are generally based on the weight or volume of waste deposited, ~~taking into account~~considering our cost of loading, transporting, and disposing of the solid waste at a disposal site. Recycling revenues generally consist of tipping fees and the sale of recycling commodities to third parties. The fees we charge for our services generally include our environmental, ~~fee,~~ fuel surcharge and regulatory recovery ~~fee~~fees which are intended to pass through to customers direct and indirect costs incurred. We also provide additional services that are not managed through our Solid Waste business, described under Results of Operations below.

~~Acquisition of Advanced Disposal~~

On October 30, 2020, we completed our acquisition of all outstanding shares of Advanced Disposal for $30.30 per share in cash, pursuant to an Agreement and Plan of Merger dated April 14, 2019, as amended on June 24, 2020. Total enterprise value of the acquisition was $4.6 billion when including approximately $1.8 billion of Advanced Disposal’s net debt. This acquisition grows our footprint and allows us to provide differentiated, sustainable waste management and recycling services to approximately three million new commercial, industrial and residential customers primarily located in the Eastern half of the U.S. The acquisition was funded using a $3.0 billion, 364-day, U.S. revolving credit facility and our commercial paper program. In November 2020, we issued $2.5 billion of senior notes and used a portion of the proceeds to repay all outstanding borrowings under the $3.0 billion, 364-day, U.S. revolver and terminated the facility. As a result of the acquisition we recorded $4.1 billion of net assets including $2.5 billion of goodwill as of December 31, 2020. During the first half of 2021, we made significant progress on our integration of Advanced Disposal. The focus of these efforts has been to ensure that we continue to provide uninterrupted service to our customers through the integration of certain customer facing and back office digital platforms.

~~COVID-19 Update~~

Throughout the COVID-19 pandemic, the Company has proactively taken steps to put our employees’ and customers’ needs first and we continue to work with the appropriate regulatory agencies to ensure we can provide our essential services safely and efficiently. We continue to operate with a focus on protecting the health and safety of our employees and maintaining business continuity for our customers. These efforts, combined with our disciplined execution in our daily operations, have positioned the Company to prudently manage the challenges presented by COVID-19.

The impacts of COVID-19 on the global economy increased rapidly during the second quarter of 2020, affecting our business in most geographies and across a variety of our customer types. Over the last year, our volumes have been recovering from the sharp decline experienced in April 2020 as a result of COVID-19. The pace of recovery in our volumes accelerated in the second quarter of 2021 as more communities and businesses re-opened. The portions of our business that had the most pronounced decreases in volume due to the pandemic were our industrial and commercial collection businesses and construction and demolition and special waste volumes at our landfills. As we exited the second quarter of 2021, volumes in each of these lines of business were either on par with pre-pandemic levels or have now surpassed 2019 volumes. Volumes in our recycling business are also up primarily due to the re-opening of facilities where we temporarily suspended operations during the pandemic. We continue to be optimistic about our volume recovery in 2021 as the economy continues to rebound and states and local jurisdictions continue re-opening. However, uncertainty remains with respect to the pace of economic recovery, as well as the potential for resurgence in transmission of COVID-19 and related business closures due to virus variants or otherwise. Such conditions could adversely impact our volumes and costs over the remainder of the year.

Strategy

Our fundamental strategy has not changed; we remain dedicated to providing long-term value to our stockholders by successfully executing our core strategy of focused differentiation and continuous improvement. As North America’s leading provider of comprehensive waste management environmental services, sustainability and environmental stewardship is embedded in all that we do. We have enabled a people-first, technology-led focus to drive our mission to maximize resource value, while minimizing environmental impact, so that both our economy and our environment can thrive. Our strategy leverages and sustains the strongest asset network in the industry to drive ~~best-in-class~~best in class customer experience and growth. Our strategic planning processes appropriately consider that the future of our business and the industry can be influenced by changes in economic conditions, the competitive landscape, the regulatory environment, asset and resource availability and technology. We believe that focused differentiation, which is driven by capitalizing on our unique and extensive network of assets, will deliver profitable growth and position us to leverage competitive advantages. Simultaneously, we believe the combination of cost control, enhancements to our digital platform, process improvement and operational efficiency will deliver on the Company’s strategy of continuous improvement and yield an attractive total cost structure and enhanced service quality. While we ~~will~~ continue to ~~monitor~~improve existing diversion technologies, such as through investments in our recycling operations, we are also evaluating and pursuing emerging diversion technologies that may generate additional ~~value and related market dynamics, our current attention will be on improving existing diversion technologies, such as our recycling operations.~~value.

Business Environment

The waste industry is a comparatively mature and stable industry. However, customers increasingly expect more of their waste materials to be recovered and those waste streams are becoming more complex. In addition, many state and local governments mandate diversion, recycling and waste reduction at the source and prohibit the disposal of certain types of waste at landfills. We monitor these developments to adapt our service offerings. As companies, individuals and communities look for ways to be more sustainable, we promote our comprehensive services that go beyond our core business of collecting and disposing of waste in order to meet their needs. This includes expanding traditional recycling services, increasing organics collection, and processing, and expanding our renewable energy projects to meet the evolving needs of our diverse customer base. As the leading waste management environmental services provider in North America, we are taking big, bold steps to catalyze positive change – change that will impact our Company as well as the communities we serve. Our sustainability agenda includes expanding recycling and focuses on meeting or exceeding specific 2025 and

2038 sustainability goals around people, customers, the environment, and community, which align with eight of the United Nations Sustainable Development Goals.

~~Despite some industry consolidation in recent years, we~~We encounter intense competition from governmental, quasi-governmental and private service providers based on pricing, ~~service quality, customer experience~~ and ~~breadth~~to a much lesser extent, the nature of service ~~offerings.~~offerings, particularly in the residential line of business. Our industry is directly affected by changes in general economic factors, including increases and decreases in consumer spending, business expansions and construction activity. These factors generally correlate to volumes of waste generated and impact our revenue. Negative economic conditions, including the impact of COVID-19 and other macroeconomic trends, can and have caused customers to reduce their service needs. Such negative economic conditions, in addition to competitor actions, can ~~and have made it more challenging~~impact our strategy to ~~implement our pricing strategy and~~ negotiate, renew, or expand service contracts ~~with acceptable margins.~~and grow our business. We also encounter competition for acquisitions and growth opportunities. General economic factors and the market for consumer goods, in addition to regulatory developments, can also significantly impact commodity prices for the recyclable materials we sell. Significant components of our operating expenses vary directly as we experience changes in revenue due to ~~volume.~~volume and a heightened pace of inflation. Volume changes can fluctuate dramatically by line of business and volume changes in higher margin businesses, such as what we saw with COVID-19, can impact key financial metrics. ~~In this type of environment, we~~We must dynamically manage our cost ~~structure.~~structure in response to volume changes and cost inflation.

We believe the Company’s industry-leading asset network and strategic focus on investing in our people and our digital platform will give the Company the necessary tools to address the evolving challenges impacting the Company and our industry. In line with our commitment to continuous improvement and a differentiated customer experience, we remain focused on our customer service digitalization initiative to change the way we interact with our customers. Enhancements made through this initiative are ~~designed~~intended to seamlessly and digitally connect all the Company’s functions required to service our customers in order to provide the best experience and service. ~~Additionally,~~In late 2021, we ~~continue~~began to ~~make meaningful progress~~execute on the ~~implementation~~next phase of this technology enablement strategy to automate and optimize certain elements of our service delivery model. This next phase will prioritize reduced labor dependency on certain high-turnover jobs, particularly in customer experience, recycling and residential collection. Additionally, in early 2022, we implemented our new enterprise resource planning ~~system.~~system which will contribute to operational and service excellence by empowering our people through a modern, simplified and connected finance and accounting platform.

~~During~~Certain macroeconomic pressures and market disruption, driven in part by the COVID-19 pandemic and other external events and conditions, intensified during the second half of 2021 and have continued through the first quarter of ~~2021,~~2022. The constrained labor market has resulted in increased costs for wage adjustments, overtime hours and training new hires to address frontline employee turnover, increased volume, and operational challenges. The COVID-19 pandemic and other external events and conditions have also contributed to significant global supply chain disruption and inflationary pressure for the goods and services we ~~began~~purchase, with a particular impact on our repair and maintenance costs. Supply chain constraints have also caused delayed delivery of fleet, steel containers and other purchases. Aspects of our business rely on third-party transportation providers, and such services have become more limited and expensive. Additionally, we are currently experiencing margin pressures from commodity-driven business impacts, particularly from recycling brokerage rebates and higher fuel prices. The extent and duration of the impact of these labor market, supply chain and transportation challenges are subject to ~~see inflationary cost pressures, particularly~~numerous external factors beyond our control, including broader macroeconomic conditions; size, location, and qualifications of the labor pool; behavioral changes; wage and price structures; adoption of new or revised regulations; future resurgence in ~~our operating costs~~pandemic conditions and ~~capital expenditures.~~restrictions and geopolitical conflicts and responses. As costs increase, we focus on our strategic pricing efforts, as well as operating efficiencies and cost controls, to maintain and grow our earnings and cash flow. With increased pressure from the strong economic recovery, particularly on labor, we remain focused on putting our people first to ensure that they are well positioned to ~~diligently and safely~~ execute our daily ~~operations.~~operations diligently and safely. We are encouraged by our results ~~for the first half of 2021~~in 2022 and remain focused on

delivering outstanding customer service, managing our variable costs with changing volumes and investing in technology that will enhance our customers’ experience and reduce our cost to serve.

Current Quarter Financial Results

During the ~~second~~first quarter of ~~2021,~~2022, we delivered strong ~~operating~~revenue and income ~~and cash flows~~from operations as we continued to experience higher yield and volume recovery at our landfills and in our ~~landfill,~~ commercial collection business. However, our first quarter of 2022 income from operations was impacted by constraints on labor availability and ~~industrial collection businesses~~inflationary cost pressures. We continue to invest in our people through market wage adjustments, investments in our digital platform and ~~benefited from~~training for new team members. In addition, we are focused on executing on our disciplined pricing programs in the ~~acquisition~~face of ~~Advanced Disposal. Additionally, we maintained~~these additional labor cost and inflationary pressures. We also made significant investments in recycling automation technology and customer service digitalization to further support our continued focus on ~~reducing our operating costs and discretionary selling, general and administrative expenses. We~~optimizing operational efficiency as well as achieving improved labor productivity for all lines of business. During the first quarter of 2022, we allocated ~~$396~~$418 million of available cash to capital expenditures and ~~$492~~$525 million to our shareholders through dividends and ~~share~~common stock repurchases.

Key elements of our financial results for the ~~second~~first quarter include:

●

Revenues of ~~$4,476~~$4,661 million, compared with ~~$3,561~~$4,112 million in the prior year period, an increase of ~~$915~~$549 million, or ~~25.7%~~13.4%. The increase is primarily attributable to (i) ~~strong volume growth; (ii) the acquisition of Advanced Disposal; (iii)~~ higher yield in our collection and disposal lines of ~~business~~business; (ii) strong volume growth and ~~(iv)~~(iii) increases in the market prices for recycling commodities we sell;

●

Operating expenses of ~~$2,736~~$2,903 million, or ~~61.1%~~62.3% of revenues, compared with ~~$2,180~~$2,514 million, or ~~61.2%~~61.1% of revenues, in the prior year period. The ~~$556~~$389 million increase is primarily attributable to (i) ~~volume increases;~~commodity-driven business impacts, particularly from recycling brokerage rebates and higher fuel prices, which also impacted our operating expense as a percentage of revenue; (ii) ~~increased labor and support costs from our acquisition of Advanced Disposal; (iii) higher market prices for recycling commodities and (iv)~~ inflationary cost ~~increases;~~pressures; (iii) labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime due to driver shortages and volume growth; (iv) volume growth, particularly for our commercial collection business; and (v) higher risk management costs;

●

Selling, general and administrative expenses ~~of $445~~were $491 million, or ~~9.9%~~10.5% of revenues, compared with ~~$377~~$458 million, or ~~10.6%~~11.1% of revenues, in the prior year period. The ~~$68~~$33 million increase is primarily attributable to ~~(i) higher incentive compensation costs; (ii) increased labor and support costs from our acquisition of Advanced Disposal and (iii)~~ strategic investments in our digital ~~platform. These cost increases were partially offset by a decrease in the provision for bad debts~~platform and sustainability initiatives and increased labor costs primarily due to ~~an overall improvement in customer account collections;~~merit increases;

●

Income from operations was ~~$791~~$768 million, or ~~17.7%~~16.5% of revenues, compared with ~~$527~~$650 million, or ~~14.8%~~15.8% of revenues, in the prior year period. The improved earnings in the current ~~year~~quarter are driven by ~~(i)~~ strong operating results in our collection and disposal ~~business; (ii)~~business and improved profitability in our recycling ~~business and (iii) our proactive cost management efforts.~~business. The increase in income from operations was partially offset by (i) inflationary cost pressures; (ii) labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher ~~depreciation and amortization expense, primarily~~overtime due to ~~the acquisition of Advanced Disposal;~~driver shortages and volume growth and (iii) strategic investments in our digital platform and sustainability initiatives;

●

Net income attributable to Waste Management, Inc. was ~~$351~~$513 million, or ~~$0.83~~$1.23 per diluted share, compared with ~~$307~~$421 million, or ~~$0.72~~$0.99 per diluted share, in the prior year period. The ~~strong operating results~~increase in income from operations discussed above, in addition to lower interest expense, drove an increase in ~~earnings which~~net income. The year-over-year increase in net income was ~~substantially offset~~impacted by an increase in ~~the current period by a $220 million loss on early extinguishment of debt related to the retirement of $1.3 billion of certain high-coupon senior notes through a cash tender offer;~~income tax expense;

●

Net cash provided by operating activities was ~~$1,043~~$1,258 million compared with ~~$856~~$1,120 million in the prior year period, ~~driven by an~~with the increase related to (i) the increase in earnings ~~partially offset by net unfavorable changes in~~attributable to our ~~operating assets~~collection and ~~liabilities, net~~disposal and recycling lines of ~~effects of acquisitions~~business and ~~divestitures, primarily~~(ii) lower interest payments due to ~~(i) higher income tax payments in the current quarter; (ii) a temporary deferral in the payment of payroll taxes in 2020 and (iii)~~ the timing of ~~cash tax benefits received~~certain interest payments and refinancing activities in ~~2020 associated with federal alternative fuel tax credits;~~2021 that reduced our overall interest rate; and

●

Free cash flow was ~~$649~~$845 million compared with ~~$423~~$865 million in the prior year ~~period~~period. The decrease in free cash flow is primarily attributable to an increase in capital spending, primarily driven by ~~the~~timing differences in our fixed asset purchases, as well as our intentional investment in sustainability and growth in recycling and renewable energy projects, partially offset by an increase in net cash provided by operating activities, as discussed above. ~~The increase is also due to a reduction in capital expenditures due to timing differences as well as supply chain constraints in advancing current year projects.~~ Free cash flow is a non-GAAP measure of liquidity. Refer to Free Cash Flow below for our definition of free cash flow, additional information about our use of this measure, and a reconciliation to net cash provided by operating activities, which is the most comparable GAAP measure.

2924

Results of Operations

Operating Revenues

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~~East and ~~Western Canada Areas reducing the number of Areas we manage from 17 to 16.~~ West Tiers.We also provide additional services that are not managed through our Solid Waste business, including ~~operations managed by~~ both our Strategic Business Solutions (“WMSBS”) and Energy and Environmental Services (“EES”) businesses, recycling brokerage services, landfill gas-to-energy services and certain other expanded service offerings and solutions. The mix of operating revenues from our major lines of business ~~is reflected in~~for the ~~table below~~three months ended March 31 are as follows (in millions):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020		2022		2021
Commercial	$	1,178	$	928	$	2,309	$	1,991	$	1,287	$	1,131
Industrial										836		743
Residential		794		657		1,576		1,307		805		782
Industrial		811		625		1,554		1,318
Other collection		135		115		251		227		153		116
Total collection		2,918		2,325		5,690		4,843		3,081		2,772
Landfill		1,075		874		1,990		1,761		1,051		915
Transfer		532		439		997		880		486		465
Recycling		397		275		739		529		453		342
Other (a)		513		409		990		839		575		477
Intercompany (b)		(959)		(761)		(1,818)		(1,562)		(985)		(859)
Total	$	4,476	$	3,561	$	8,588	$	7,290	$	4,661	$	4,112

(a)

The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) our landfill gas-to-energy ~~operations;~~operations managed by our WM Renewable Energy business; (iii) certain services within our EES business, including our construction and remediation services and our services associated with the disposal of fly ash and (iv) certain other expanded service offerings and solutions. In addition, our “Other” line of business 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.

3025

The following table provides details associated with the period-to-period ~~changes~~change in revenues and average yield (dollars in millions):


	Period-to-Period Change for the Three Months Ended June 30, 2021 vs. 2020									Period-to-Period Change for the Six Months Ended June 30, 2021 vs. 2020								Period-to-Period Change for the Three Months Ended March 31, 2022 vs. 2021
			As a % of				As a % of				As a % of				As a % of				As a % of				As a % of
			Related				Total				Related				Total				Related				Total
	Amount		Business(a)		Amount		Company(b)		Amount		Business(a)		Amount		Company(b)		Amount		Business(a)		Amount		Company(b)
Collection and disposal	$	118	3.7	%					$	211	3.2	%					$	197	5.5	%
Recycling (c)		84	32.9							181	37.4							116	35.7
Fuel surcharges and mandated fees		46	44.3							37	15.4
Fuel surcharges and other (d)																		90	46.5
Total average yield ~~(d)~~(e)					$	248	7.0	%					$	429	5.9	%					$	403	9.8	%
Volume(d)						341	9.6							240	3.3							148	3.6
Internal revenue growth						589	16.6							669	9.2							551	13.4
Acquisitions						316	8.9							618	8.5							3	0.1
Divestitures						(11)	(0.3)							(21)	(0.3)							(5)	(0.1)
Foreign currency translation						21	0.5							32	0.4							—	—
Total					$	915	25.7	%					$	1,298	17.8	%					$	549	13.4	%

(a)	Calculated by dividing the increase or decrease for the current year period by the prior year period’s related business revenue adjusted to exclude the impacts of divestitures for the current year period.

(b)	Calculated by dividing the increase or decrease for the current year period by the prior year period’s total Company revenue adjusted to exclude the impacts of divestitures for the current year period.

(c)	Includes ~~the~~combined impact of commodity price variability and changes in fees.

(d)	Beginning in the fourth quarter of 2021, includes changes in our revenue attributable to our WM Renewable Energy business from yield, which is included in Fuel Surcharges and Other, and Volume. We have revised our prior year results to conform with the current year presentation.

(e)	The amounts reported herein represent the changes in our revenue attributable to average yield for the total Company.

The following provides further details ~~associated with~~about our period-to-period change in revenues:

Average Yield

Collection and Disposal Average Yield — This measure reflects the effect on our revenue from the pricing activities of our collection, transfer and landfill operations, exclusive of volume changes. Revenue growth from collection and disposal average yield includes not only base rate changes and environmental and service fee fluctuations, but also (i) certain average price changes related to the overall mix of services, which are due to the types of services provided; (ii) changes in average price from new and lost business and (iii) price decreases to retain customers.

3126

The details of our revenue growth from collection and disposal average yield are as follows (dollars in millions):


	Period-to-Period Change for the				Period-to-Period Change for the				Period-to-Period Change for the
	Three Months Ended				Six Months Ended				Three Months Ended
	June 30, 2021 vs. 2020				June 30, 2021 vs. 2020				March 31, 2022 vs. 2021
			As a % of				As a % of				As a % of
			Related				Related				Related
	Amount		Business		Amount		Business		Amount		Business
Commercial	$	37	4.2	%	$	68	3.6	%	$	84	7.9	%
Industrial		35	5.8			57	4.5			54	7.7
Residential		29	4.7			56	4.5			38	5.0
Total collection		101	4.6			181	4.0			176	6.7
Landfill		10	1.7			17	1.5			13	2.4
Transfer		7	2.9			13	2.8			8	3.3
Total collection and disposal	$	118	3.7	%	$	211	3.2	%	$	197	5.5	%

Our overall strategic pricing efforts are focused on ~~improving~~recovering inflationary cost increases we experience in our business by increasing our average unit ~~rate as well as recovering any inflationary cost increases. This strategy has been most successful~~rate. We experienced strong average yield growth in our collection line of business ~~where we experienced average yield growth~~ of ~~4.6% and 4.0%~~6.7% for the ~~three and six months ended June 30, 2021, respectively. We are driving improvements~~first quarter of 2022 showing our focus on our pricing efforts in our residential line of business, aligning the price charged for services we provide to our customers with the costs to provide the services, which has increased our average yield 4.7% and 4.5% for the three and six months ended June 30, 2021, respectively, as compared with the prior year periods.this inflationary environment. We are also continuing to see ~~solid~~ growth in our landfill and transfer businesses with our municipal solid waste business experiencing ~~2.8% and 2.7%~~5.1% average yield growth for the ~~three and six months ended June 30, 2021, respectively,~~first quarter of 2022.

Recycling — Increases in the market prices for recycling commodities resulted in revenue growth of $116 million for the first quarter of 2022, as compared with the prior year ~~periods.~~

~~Recycling~~ — Improved profitability in our recycling business primarily from higher market prices for recycling commodities and volume recovery from facilities where we temporarily suspended operations during the pandemic resulted in revenue growth of $84 million and $181 million for the three months and six months ended June 30, 2021, respectively, as compared with the prior year periods.period. During the ~~three and six months ended June 30, 2021,~~first quarter of 2022, average market prices for recycling commodities at the Company’s facilities were ~~approximately 75% and 90%~~60% higher ~~respectively, as~~ compared to the prior year ~~periods. We currently expect the year-over-year increase to continue for the remainder of 2021 as we see strong~~period. Strong demand for recycled materials ~~outpacing supply,~~strengthened through 2021, continuing into 2022, driven by the ~~growth~~strength in e-commerce ~~businesses re-opening,~~ and manufacturers committing to use more recycled content in their packaging. We have also maintained our focus on converting to a fee-based pricing model that ensures fees paid by customers address the cost of processing materials and the impact on our cost structure of managing contamination in the recycling stream.

Fuel Surcharges and ~~Mandated Fees~~Other — These fees, which ~~are predominantly generated by~~include (i) our fuel surcharge ~~program,~~program; (ii) yield from our WM Renewable Energy business and (iii) other mandated fees, increased ~~$46 million and $37~~$90 million for the ~~three and six months ended June 30, 2021, respectively,~~first quarter of 2022, as compared with the prior year ~~periods. These~~period. Fuel surcharge revenues are based on and fluctuate in response to changes in the national average prices for diesel fuel, and also vary with changes in our volume-based revenue activity. Market prices for diesel fuel ~~increased approximately 30% and 15%~~were almost 50% higher for the ~~three and six months ended June 30, 2021, respectively,~~first quarter of 2022, as compared with the prior year ~~periods.~~period, as diesel fuel prices have continued to meaningfully increase. Revenue from our WM Renewable Energy business increased for the first quarter of 2022, as compared with the prior year period, primarily driven by the 55% increase in value for renewable fuel standard credits. The ~~mandated~~other fees are primarily related to fees and taxes assessed by various state, county and municipal government agencies at our landfills and transfer stations. These amounts have not significantly impacted the change in revenue for the ~~three and six months ended June 30, 2021,~~first quarter of 2022, as compared with the prior year ~~periods.~~period.

Volume

Our revenues from ~~volumes~~volume (excluding volumes from acquisitions and divestitures) increased ~~$341~~$148 million, or ~~9.6%, and $240 million, or 3.3%~~3.6%, for the ~~three and six months ended June 30, 2021, respectively,~~first quarter of 2022, as compared with the prior year ~~periods.~~period. Our collection and disposal business volumes grew 4.2% in the first quarter of 2022, as compared with the prior year period, but were partially offset by lower volumes in our WM Renewable Energy and recycling businesses.

~~Over the last year, our volumes have been recovering from the sharp decline experienced in April 2020 as a result of COVID-19.~~ The pace of recovery in our volumes ~~accelerated in~~continued during the ~~second~~first quarter of ~~2021 as more communities~~2022 following the growth we saw in 2021. Volume at our landfills and ~~businesses re-opened. The portions of~~ our commercial collection business ~~that had~~were the most ~~pronounced decreases in~~significant drivers of volume growth primarily due to the ~~pandemic~~negative impact of COVID-19 in the prior year as well as the economic recovery in the current business environment. In addition, our WMSBS business volume grew as a result of our continued focus on a differentiated service model for national accounts customers.

3227

were our industrial and commercial collection businesses and construction and demolition and special waste volumes at our landfills. As we exited the second quarter of 2021, volumes in each of these lines of business were either on par with pre-pandemic levels or have now surpassed 2019 volumes. Volumes in our recycling business are also up primarily due to the re-opening of facilities where we temporarily suspended operations during the pandemic. We continue to be optimistic about our volume recovery in 2021 as the economy continues to rebound and states and local jurisdictions continue re-opening. However, uncertainty remains with respect to the pace of economic recovery, as well as the potential for resurgence in transmission of COVID-19 and related business closures due to virus variants or otherwise. Such conditions could adversely impact our volume results over the remainder of the year.

~~Acquisitions~~

Revenues increased $316 million, or 8.9%, and $618 million, or 8.5%, for the three and six months ended June 30, 2021, respectively, as compared with the prior year periods, primarily due to our acquisition of Advanced Disposal. The revenue increase due to the Advanced Disposal acquisition was principally in our collection and disposal lines of business.Operating Expenses

~~Operating Expenses~~

The following table summarizes the major components of our operating expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues):

Three Months Ended

Six Months Ended

June 30,

June 30,


2021


2020


2021


2020

Labor and related benefits

$
791

17.7
%

$
636

17.9
%

$
1,537

17.9
%

$
1,325

18.2
%
Transfer and disposal costs

298

6.7

267

7.5

572

6.7

545

7.5

Maintenance and repairs

395

8.8

303

8.5

769

8.9

638

8.8

Subcontractor costs

446

10.0

357

10.0

837

9.7

728

10.0

Cost of goods sold

211

4.7

140

3.9

392

4.6

258

3.5

Fuel

95

2.1

57

1.6

181

2.1

133

1.8

Disposal and franchise fees and taxes

177

3.9

144

4.0

333

3.9

289

4.0

Landfill operating costs

107

2.4

92

2.6

203

2.3

201

2.8

Risk management

81

1.8

62

1.7

154

1.8

131

1.8

Other

135

3.0

122

3.5

272

3.2

261

3.5

$
2,736

61.1
%

$
2,180

61.2
%

$
5,250

61.1
%

$
4,509

61.9
%


	2022				2021
Labor and related benefits	$	814	17.5	%	$	746	18.1	%
Transfer and disposal costs		282	6.0			274	6.7
Maintenance and repairs		422	9.1			374	9.1
Subcontractor costs		457	9.8			391	9.5
Cost of goods sold		263	5.6			181	4.4
Fuel		134	2.9			86	2.1
Disposal and franchise fees and taxes		167	3.6			156	3.8
Landfill operating costs		96	2.1			96	2.3
Risk management		95	2.0			73	1.8
Other		173	3.7			137	3.3
	$	2,903	62.3	%	$	2,514	61.1	%

Our operating expenses for the ~~three and six months ended June 30, 2021~~first quarter of 2022 increased primarily due to ~~volume increases~~(i) commodity-driven business impacts, particularly from recycling brokerage rebates and ~~the acquisition of Advanced Disposal. During the second quarter of 2021, we began to see~~higher fuel prices; (ii) inflationary cost pressures, ~~as well as~~primarily in maintenance and repairs and subcontractor costs; (iii) labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime ~~from~~due to driver shortages ~~that increased~~and volume growth; (iv) volume growth, particularly for our ~~operating~~commercial collection business; and (v) higher risk management costs. ~~Although~~These impacts were partially offset by our costs increased, efforts to recover higher costs through price and the significant revenue increases in our high-margin businesses, which include our landfill and commercial and industrial collection businesses, resulted in a reduction of our overall operating expenses as a percentage of revenues when compared with the prior year periods. Additionally, our operating expenses as a percentage of revenues benefited from ourcontinued focus on operating efficiency ~~continued~~and efforts to control costs as volumes ~~grow and our disciplined integration of Advanced Disposal which historically has generated lower margins.~~grow.

Significant items affecting the ~~comparability~~comparison of operating expenses for the reported periods include:

Labor and Related Benefits — The increase in labor and related benefits costs was largely driven by (i) ~~increased labor and support costs related to of our acquisition of Advanced Disposal; (ii)~~ merit and proactive market wage adjustments to hire and retain talent; ~~(iii)~~(ii) planned headcount growth as volume increases, particularly in our commercial and industrial collection businesses, which when combined with continued driver shortages and turnover in certain markets, increased ~~overtime; (iv)~~overtime and training hours and (iii) increases in health and welfare costsattributable to higher benefit costs and increases in medical care ~~activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (v) higher incentive compensations costs.~~activity.

Transfer and Disposal Costs— The increase in transfer and disposal costs was largely driven by ~~additional disposal costs as a result of our acquisition of Advanced Disposal, increased volume and~~ inflationary cost increases from our third-party ~~haulers.~~haulers and increased commercial and industrial collection volumes.

Maintenance and Repairs — The increase in maintenance and repairs costs was largely driven by (i) ~~our acquisition of Advanced Disposal, including intentional investments in the fleet acquired to bring the trucks to WM standards;~~inflationary cost increases for parts, supplies and third-party services; (ii) additional fleet maintenance driven by supply chain constraints with delays in receiving new trucks; (iii) commercial and industrial collection volume increases; ~~(iii)~~(iv) labor cost pressure from our technicians, including higher overtime from labor shortages and (v) an increase in container repairs driven by volume increases and delays in ~~normal-course~~normal course capital expenditures for steel containers due to both steel costs and supply chain ~~constraints and (iv) inflationary cost increases for parts, supplies and third-party services.~~constraints.

Subcontractor Costs — The increase in subcontractor costs was largely driven by (i) ~~the acquisition of Advanced Disposal;~~inflationary cost increases, particularly related to labor costs, demand implications and fuel costs, from third-party haulers; (ii) higher disposal volumes at our transfer stations and (iii) an increase in volumes in our WMSBS business, which relies more extensively on subcontracted hauling than our collection and disposal ~~business and (iii) inflationary cost increases from third-party haulers.~~business.

Cost of Goods Sold — The increase in cost of goods sold was primarily driven by ~~increases~~an almost 60% increase in ~~market~~recycling commodity prices ~~for recycling commodities of approximately 75% and 90% during~~compared to the ~~three and six months ended June 30, 2021, respectively. Tons processed also increased from~~ prior year ~~primarily due to the re-opening of facilities where operations were temporarily suspended during the pandemic.~~period.

Fuel — The increase in fuel ~~costs~~ was primarily due to ~~(i)~~ increases of ~~approximately 30% and 15%~~almost 50% in market prices for diesel fuel ~~prices during~~and the ~~three and six months ended June 30,~~cessation of federal natural gas fuel tax credits received in 2021 ~~respectively,~~that have yet to be extended into 2022. These increases were offset, in part, by a decrease attributable to lower diesel consumption as ~~compared with the prior year periods; (ii) volume increases in~~we expand our ~~commercial and industrial collection businesses and (iii) the acquisition of Advanced Disposal.~~compressed natural gas fleet.

Disposal and Franchise Fees and Taxes — The increase in disposal and franchise fees and taxes ~~as compared with the prior year periods~~ was primarily driven by (i) landfill volume increases and ~~additional costs attributable to our acquisition of Advanced Disposal.~~

~~Landfill Operating Costs~~ ~~— The increase in landfill operating costs for the three and six months ended June 30, 2021 was primarily due to volume~~(ii) disposal rate increases ~~and the Advanced Disposal acquisition. These increases were partially offset by lower leachate management costs primarily due to the cessation of certain transportation costs in our Tier 3 segment.~~

Additionally, the increase in landfill operating costs for the six months ended June 30, 2021 was partially offset by the impacts of changes in the measurement of our environmental remediation obligations and recovery assets in both the first quarter of 2020 and 2021. Our measurement of these balances includes application of a risk-free discount rate, which is based on the rate for U.S. Treasury bonds. In the first quarter of 2021, there was an increase in the discount rate, which resulted in a reduction in the net liability balance and a credit to expense. Conversely, in the first quarter of 2020, there was a decrease in the discount rate, which resulted in an increase in the net liability balance and a charge to expense.at third-party disposal sites.

Risk Management — ~~The increase in risk~~Risk management costs ~~was~~increased primarily due to ~~our acquisition~~an increase in claims costs due to unfavorable cost development on a limited population of ~~Advanced Disposal,~~severe cases and ~~to a lesser extent, unusually low claims during the second quarter of 2020 that we attribute to the COVID-19 driven decline~~inflation in ~~business activity.~~premiums.

Other— Other operating cost increases were primarily due to ~~our acquisition~~(i) inflationary cost pressures; (ii) higher equipment rental costs attributable, in part, to increased volumes and supply chain constraints slowing normal course fleet and equipment orders and (iii) an increase in business travel in 2022. Additionally, net gains on sales of ~~Advanced Disposal, partially offset by a favorable litigation settlement~~certain assets in the ~~second quarter~~prior year unfavorably impacted the comparability of ~~2021 and asset sales.~~

the reported periods.

Selling, General and Administrative Expenses

The following table summarizes the major components of our selling, general and administrative expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues):


	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020				2022				2021
Labor and related benefits	$	297	6.6	%	$	228	6.4	%	$	594	6.9	%	$	474	6.5	%	$	305	6.5	%	$	297	7.2	%
Professional fees		56	1.2			54	1.5			105	1.2			114	1.6			66	1.4			49	1.2
Provision for bad debts		7	0.2			22	0.6			17	0.2			36	0.5			10	0.2			10	0.2
Other		85	1.9			73	2.1			187	2.2			178	2.4			110	2.4			102	2.5
	$	445	9.9	%	$	377	10.6	%	$	903	10.5	%	$	802	11.0	%	$	491	10.5	%	$	458	11.1	%

Selling, general and administrative expenses have increased primarily due to ~~(i) higher incentive compensation costs; (ii) increased labor and support costs related to our acquisition of Advanced Disposal and (iii)~~ strategic investments in our digital ~~platform.~~platform including investments in customer service digitalization, as well as investments in our sustainability initiatives and increased labor costs primarily due to merit increases. Although our costs increased, the significant revenue ~~increases in our high-margin businesses, which include our landfill and commercial and industrial collection businesses,~~increase positioned us to reduce our overall selling, general and administrative expenses as a percentage of revenues when compared with the prior year ~~periods.~~

period.

Significant items affecting the comparison of our selling, general and administrative expenses ~~between~~for the reported periods include:

Labor and Related Benefits — The increase in labor and related benefits ~~costs~~ was primarily ~~related~~due to ~~(i) higher incentive compensation costs; (ii) additional headcount in connection with~~annual merit increases for our ~~acquisition of Advanced Disposal; (iii) increases in~~employees and health and welfare costs attributable to higher benefit costs and increased medical ~~care activity generally returning to pre-pandemic levels from~~activity.

Professional Fees — The increase in professional fees was primarily driven by increased support for the ~~lower levels experienced during 2020; (iv) costs associated with our~~ strategic investments in our digital platform and ~~(v) annual merit increases for~~ our ~~employees.~~

~~Professional Fees~~ ~~— Professional fees increased primarily due to our strategic investments in our digital platform. For the six months ended June 30, 2021,~~sustainability initiatives. Partially offsetting these increases were ~~partially offset by~~ lower ~~consulting, advisory and legal fees following the completion of the~~integration costs related to our acquisition of Advanced ~~Disposal in the fourth quarter of 2020.~~

~~Provision for Bad Debts~~ ~~— The decrease in provision for bad debts was primarily due to an overall improvement in customer account collections and decreased collection risk with certain customers.~~Disposal.

Other — — The increase in other expenses was primarily driven by costs associated with ~~the acquisition of Advanced Disposal~~increased technology infrastructure costs to support our strategic investments in our digital platform and ~~increased digital costs. For the six months ended June 30, 2021, these increases were partially offset by reductions~~an increase in ~~telecommunications and~~business travel ~~and entertainment costs.~~ in 2022.

Depreciation and Amortization Expenses

The following table summarizes the components of our depreciation and amortization expenses for the three months ended March 31 (in millions of dollars and as a percentage of revenues):


	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2021				2020				2021				2020				2022				2021
Depreciation of tangible property and equipment	$	279	6.3	%	$	242	6.8	%	$	558	6.5	%	$	482	6.6	%	$	283	6.1	%	$	279	6.8	%
Amortization of landfill airspace		184	4.1			148	4.1			341	4.0			286	3.9			167	3.5			157	3.8
Amortization of intangible assets		37	0.8			24	0.7			73	0.8			48	0.7			32	0.7			36	0.9
	$	500	11.2	%	$	414	11.6	%	$	972	11.3	%	$	816	11.2	%	$	482	10.3	%	$	472	11.5	%

The increase in depreciation of tangible property and equipment during the first quarter of 2022, as compared with the prior year period, was primarily ~~related~~driven by additional depreciation due to ~~our acquisition of Advanced Disposal and~~ investments in capital assets ~~including~~to service our ~~fleet~~customers, such as containers and ~~facilities.~~heavy equipment for our landfills. The increase in amortization of landfill airspace during the first quarter of 2022 was driven by ~~(i)~~ landfill volume increases from the ~~continued~~ economic ~~recovery; (ii) our acquisition of Advanced Disposal~~recovery and ~~(iii)~~ changes in amortization rates driven by revisions in landfill ~~estimates.~~estimates, which includes changes in the anticipated timing of capping, closure and post-closure activities. The ~~increase~~decrease in amortization of intangible assets isduring the during the first quarter of 2022 was primarily driven by the reduction in amortization of acquired intangible assets ~~related to~~from the acquisition of Advanced Disposal.

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

During the ~~six months ended June 30,~~first quarter of 2022, we recognized 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 to the Condensed Consolidating Financial Statements.

During the first quarter of 2021, we recognized net charges of $17 million ~~in the first quarter of 2021~~ consisting of (i) a $19 million charge pertaining to reserves for ~~certain~~ loss contingencies in our Corporate and Other segment and (ii) $6 million of asset impairment charges primarily related to our WM Renewable Energy business within our Other ~~segment. These charges~~segment; which were partially offset by an $8 million gain from divestitures of certain ancillary operations in our Other segment.

~~During the six months ended June 30, 2020, we recognized non-cash impairment charges of $61 million in the second quarter of 2020 primarily related to the following:~~

~~Energy Services Asset Impairments~~ — During the second quarter of 2020, the Company tested the recoverability of certain energy services assets in our Tier 2 segment. Indicators of impairment included (i) the sharp downturn in oil demand that has led to a significant decline in oil prices and production activities, which we project will have long-term impacts on the utilization of our assets and (ii) significant shifts in our business, including increases in competition and customers choosing to bury waste on site versus in a landfill, reducing our revenue outlook. The Company determined that the carrying amount of the asset group was not fully recoverable. As a result, we recognized $41 million of non-cash impairment charges primarily related to two landfills and an oil field waste injection facility in our Tier 2 segment. We wrote down the net book value of these assets to their estimated fair value using an income approach based on estimated future cash flow projections (Level 3). The aggregate fair value of the impaired asset group was $8 million as of June 30, 2020.

Income from Operations

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, and realigned our Solid Waste tiers. Reclassifications have been made to our prior period condensed consolidated financial information to conform to the current year presentation.

The following table summarizes income from operations for our reportable segments for the three months ended March 31 (dollars in millions):


	Three Months Ended										Six Months Ended
	June 30,						Period-to-Period				June 30,						Period-to-Period										Period-to-Period
	2021			2020			Change				2021			2020			Change				2022			2021(c)			Change
Solid Waste:
Tier 1	$	350		$	270		$	80	29.6	%	$	657		$	558		$	99	17.7	%
Tier 2		331			208			123	59.1			622			477			145	30.4
Tier 3		375			244			131	53.7			695			532			163	30.6
East Tier																					$	531		$	453		$	78	17.2	%
West Tier																						549			475			74	15.6
Solid Waste		1,056			722			334	46.3			1,974			1,567			407	26.0			1,080			928			152	16.4
Other (a)		4			(10)			14	*			22			(35)			57	*			1			20			(19)	*
Corporate and Other (b)		(269)			(185)			(84)	45.4			(555)			(432)			(123)	28.5			(313)			(298)			(15)	5.0
Total	$	791		$	527		$	264	50.1	%	$	1,441		$	1,100		$	341	31.0	%	$	768		$	650		$	118	18.2	%
Percentage of revenues		17.7	%		14.8	%						16.8	%		15.1	%						16.5	%		15.8	%

*Percentage change does not provide a meaningful comparison.

(a)

“Other” includes (i) elements of our WMSBS ~~business;~~business that are not included in the operations of our reportable segments; (ii) elements of our landfill gas-to-energy operations managed by our WM Renewable Energy business and not included in the operations of our reportable segments; (iii) elements of our third-party subcontract and administration revenues managed by our EES business and not included in the operations of our reportable segments; (iv) our recycling brokerage ~~services and~~services; (v) certain other expanded service offerings and ~~solutions. In addition, our “Other” segment reflects~~solutions and (vi) the results of

non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

(b)

(c)	In the fourth quarter of 2021, we discontinued certain allocations from our Corporate and Other segment to our Solid Waste operating segments and Other segment. Reclassifications have been made to our prior period information for comparability purposes.

The significant items affecting income from operations for our segments during the ~~three and six months ended June 30, 2021,~~first quarter of 2022, as compared with the prior year ~~periods,~~period, are summarized below:

●

Solid Waste — Income from operations in our Solid Waste business increased ~~significantly~~ primarily due to (i) revenue growth in our collection and disposal businesses driven by both yield and volume and ~~yield;~~ (ii) improved profitability in our recycling business from higher market prices for recycling commodities ~~volume recovery from facilities where we temporarily suspended operations during the pandemic~~ and improved costs at facilities where we have made investments in enhanced technology and ~~equipment; (iii) a decrease in the provision for bad debts and (iv) the continuation of our proactive cost management efforts as volumes increased.~~equipment. These increases were partially offset by ~~(i) higher incentive compensation costs; (ii)~~ inflationary cost pressures and ~~(iii)~~labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime ~~driven by increased volumes~~due to driver shortages and driver shortages. Additionally, the prior year periods were impacted by non-cash impairment charges, as further discussed below. The positive earnings contributions of Advanced Disposal were offset by elevated depreciation and amortization of acquired assets.volume growth.

●

Other— The ~~increase~~decrease in income from operations was primarily driven by ~~(i) increased market values for renewable energy credits generated by~~ our WM Renewable Energy business; (ii) increased revenues for our WMSBS business as a result of new contracts, improved pricing and increased customer activity and (iii) higher market prices for commodities benefiting our recycling brokerage services. The increase in income from operations for the six months ended June 30, 2021, as compared with the prior year period, was also due to a gain from the divestitures of certain ancillary operations during the first quarter of 2021.self-insurance program.

●

Corporate and Other — The ~~increase~~decrease in ~~these costs~~income from operations was primarily driven by (i) ~~higher incentive compensation costs; (ii)~~increased costs as a result of strategic investments we are making in our digital platform including investments in customer service digitalization, as well as investments in our ~~digital platform; (iii) increased health~~sustainability initiatives and ~~welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (iv)~~(ii) increased labor ~~and support~~ costs primarily due to merit increases. This decrease in income from operations was partially offset by lower integration costs related to our acquisition of Advanced Disposal. The six months ended June 30, 2021, as compared with the prior year period, was further impacted by a charge pertaining to reserves for certain loss contingencies during the first quarter of 2021, as well as changes in the measurement of our environmental remediation obligations and recovery assets in both the first quarter of 2020 and 2021.

Interest Expense, Net

Our interest expense, net was ~~$98~~$85 million and ~~$195~~$97 million ~~for~~during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively, compared to $119 million and $231 million for the three and six months ended June 30, 2020,~~ respectively. The ~~decreases are~~decrease is primarily due to ~~certain refinancing activities, including (i) the redemption of $3.0 billion of senior notes in July 2020 and the issuance of $2.5 billion of senior notes in November 2020 at lower rates and (ii)~~ the retirement of $1.3 billion of certain high-coupon senior notes and concurrent issuance of $950 million of lower coupon senior notes in May 2021 ~~as discussed further below. The decreases were partially offset by decreases in~~and, to a lesser extent, the impacts that lower interest ~~income as a result of lower cash and cash equivalents balances in 2021.~~

~~Loss~~rates have had on ~~Early Extinguishment of Debt~~

~~In May 2021, WM issued $950 million of senior notes, which are discussed further below in~~ ~~Summary of Cash and Cash Equivalents, Restricted Trust and Escrow Accounts and Debt Obligations~~~~. Concurrently, we used~~ the ~~net proceeds from the newly issued senior notes of $942 million and available cash on hand, to retire $1.3 billion~~cost of certain ~~high-coupon senior notes. The loss on early extinguishment~~ of debt for the three and six months ended June 30, 2021 includes $220 million of charges related to these tender offer, including cash paid of $211 million related to premiums and other third-party costs, and $9 million primarily related to unamortized discounts and debt issuance costs. Refer to Note 3 to the Condensed Consolidated Financial Statements for additional information related to these transactions.our tax-exempt debt.

Equity in Net Losses of Unconsolidated Entities

We recognized equity in net losses of unconsolidated entities of ~~$11~~$15 million and ~~$20~~$9 million ~~for the three and six months ended June 30, 2021, respectively, compared to $14 million and $40 million for~~during the three months ended March 31, 2022 and ~~six months ended June 30, 2020,~~2021, respectively. The losses for each period were primarily related to our noncontrolling interests in entities established to invest in and manage low-income housing properties. We generate tax benefits, including tax credits, from the losses incurred from these ~~investments. During the three months ended March 31, 2020, the entity that held and managed our ownership interest~~investments which are discussed further in ~~a refined coal facility sold a majority of its assets resulting in a $7 million non-cash impairment charge at that time. Refer to~~ Note 4 to the Condensed Consolidated Financial Statements.

~~Other, Net~~

~~During the second quarter of 2021, we recognized an $8 million loss upon settlement of a reverse Treasury rate lock associated with the refinancing of certain senior notes as discussed above in~~ ~~Loss on Early Extinguishment of Debt.~~

Income Tax Expense

Our income tax expense ~~was $105~~and effective income tax rates were $157 million, or 23.5%, and ~~$229~~$124 million, or 22.7%, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively, compared to $88 million and $162 million for the three and six months ended June 30, 2020,~~ respectively. Our effective income tax rate was 22.9% and 22.8% for the three and six months ended June 30, 2021, respectively, compared to 22.2% and 19.5% for the three and six months ended June 30, 2020, respectively.

The increase in our income tax expense and effective income tax rate when comparing the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 with the prior year period ~~was due to~~are primarily driven by (i) an increase in pre-tax income in ~~2021; (ii) a decrease in~~2022, which decreased the ~~benefits realized on tax audit settlements and (iii) lower federal tax credits. The increase in our income tax expense and~~ effective tax rate ~~for the six months ended June 30, 2021 as compared with the prior year period was also impacted by (i) a decrease in excess~~impact of our federal tax ~~benefits associated with equity-based compensation~~credits; and (ii) ~~favorable~~unfavorable adjustments to accruals and related deferred taxes, ~~recorded~~both of which were partially offset by a benefit

from higher federal tax credits as a result of our incremental investment in ~~2020.~~

low-income housing properties. See Note 4 to the Condensed Consolidated Financial Statements for more information related to income taxes.

Liquidity and Capital Resources

The Company consistently generates cash flow from operations that meets and exceeds our working capital needs, payment of our dividends, ~~and~~ investment in the business through capital expenditures and tuck-in ~~acquisitions.~~acquisitions, and funding of strategic growth and sustainability investments. We continually monitor our actual and forecasted cash flows, our liquidity and our capital resources, enabling us to plan for our present needs and fund unbudgeted business requirements that may arise during the year. The Company believes that its investment grade credit ratings, large value of unencumbered assets and modest leverage enable it to obtain adequate financing to meet its ongoing capital, operating, strategic and other liquidity requirements.

Summary of Cash and Cash Equivalents, Restricted ~~Trust and Escrow Accounts~~Funds and Debt Obligations

The following is a summary of our cash and cash equivalents, restricted ~~trust and escrow accounts~~funds and debt balances (in millions):


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
Cash and cash equivalents	$	148	$	553	$	155	$	118
Restricted trust and escrow accounts:
Restricted funds:
Insurance reserves	$	384	$	306	$	402	$	305
Final capping, closure, post-closure and environmental remediation funds		117		114		118		118
Tax-exempt bond funds		20		—
Other		—		2		2		5
Total restricted trust and escrow accounts (a)	$	521	$	422
Total restricted funds (a)					$	522	$	428
Debt:
Current portion	$	361	$	551	$	435	$	708
Long-term portion		12,883		13,259		13,052		12,697
Total debt	$	13,244	$	13,810	$	13,487	$	13,405

(a)	As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, $75~~2021, $80 million of these account balances was included in other current assets in our Condensed Consolidated Balance Sheets.

As of ~~June 30, 2021~~March 31, 2022, we had ~~$2.9~~approximately $3.0 billion of debt maturing within the next 12 months, including (i) ~~$1.5~~$1.7 billion of short-term borrowings under our commercial paper ~~program;~~program (net of related discount on issuance); (ii) ~~$1.2 billion~~$645 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled ~~maturities~~maturities; (iii) $500 million of 2.9% senior notes that mature in September 2022 and ~~(iii) $212~~(iv) $180 million of other debt with scheduled maturities within the next 12 months, including ~~$103~~$71 million of tax-exempt bonds. As of ~~June 30, 2021,~~March 31, 2022, we have classified $2.6 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”). The remaining ~~$361~~$435 million of debt maturing in the next 12 months is classified as current obligations.

~~In May 2021, WM issued $950~~As of March 31, 2022, we also had $54 million of ~~senior notes consisting~~variable-rate tax-exempt bonds with long-term scheduled maturities supported by letters of ~~$475~~credit under our $3.5 billion revolving credit facility. The interest rates on our variable-rate tax-exempt bonds reset on a weekly basis through a remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have the availability under our $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have classified the $54 million of ~~2.00% senior notes due June 1, 2029 and $475 million~~variable-rate tax-exempt bonds with maturities of 2.95% senior notes due June 15, 2041. The net proceeds from these debt issuances were $942 million, all of which were used along with available cash on hand, to retire $1.3 billion of certain high-coupon senior notes. The cash paid includes the principal amount of the debt retired, $211 million of related premiums and other third-party costs, which are classifiedmore than one year as ~~loss on early extinguishment of debt~~long-term in our Condensed Consolidated ~~Statement~~Balance Sheet as of ~~Operations, and $15 million of accrued interest.~~March 31, 2022.

Guarantor Financial Information

WM Holdings has fully and unconditionally guaranteed all of ~~WM’s~~WMI’s senior indebtedness. WMWMI has fully and unconditionally guaranteed all of WM Holdings’ senior indebtedness. None of ~~WM’s~~WMI’s other subsidiaries have guaranteed any of ~~WM’s~~WMI’s or WM Holdings’ debt. In lieu of providing separate financial statements for the subsidiary issuer and guarantor ~~(WM~~(WMI and WM Holdings), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for WMWMI and WM Holdings on a combined basis after elimination of intercompany transactions between WMWMI and WM Holdings and amounts related to investments in any subsidiary that is a non-guarantor (in millions):


	June 30,		December 31,
	2021		2020		March 31, 2022		December 31, 2021
Balance Sheet Information:
Current assets	$	5	$	481	$	120	$	6
Noncurrent assets		14		14		13		13
Current liabilities		249		446		324		590
Noncurrent liabilities:
Advances due to affiliates		17,782		16,505
Advances due to affiliates (a)						19,174		18,599
Other noncurrent liabilities		10,837		11,202		10,973		10,778

(a)	The previously reported balance of Advances due to affiliates as of December 31, 2021 was understated and has been corrected in our current year presentation above.


	~~Six~~Three Months Ended
	~~June 30, 2021~~March 31, 2022
Income Statement Information:
Revenue	$	—
Operating income		—
Net ~~loss~~income		~~295~~20

Summary of Cash Flow Activity

The following is a summary of our cash flows for the ~~six~~three months ended ~~June 30~~March 31 (in millions):


	Six Months Ended
	June 30,
	2021		2020		2022		2021
Net cash provided by operating activities	$	2,163	$	1,621	$	1,258	$	1,120
Net cash used in investing activities	$	(708)	$	(918)	$	(572)	$	(334)
Net cash used in financing activities	$	(1,810)	$	(1,575)	$	(635)	$	(830)

Net Cash Provided by Operating Activities — Our operating cash flows increased by ~~$542~~$138 million for the three months ended March 31, 2022, as compared with the prior year period, as a result of ~~(i)~~ an increase in earnings ~~primarily~~ attributable to our collection and disposal and recycling lines of ~~business; (ii) favorable changes~~business, as well as lower interest payments due to the timing of certain interest payments and refinancing activities in 2021 that reduced our ~~working capital, net of effects of acquisitions and divestitures; (iii) the acquisition of Advanced Disposal and (iv) lower~~overall interest rate, partially offset by higher annual incentive compensation payments in the current year. Our working capital was favorably impacted by the timing of cash payments for our capital expenditures and an improvement in our days sales outstanding. These favorable impacts were partially offset by (i) higher income tax payments in the current year

period; (ii) the timing of cash tax benefits received in 2020 associated with federal alternative fuel tax credits and (iii) timing differences in the payment of payroll taxes due to a temporary deferral taken in 2020 as provided for by the Coronavirus Aid, Relief and Economic Security Act.

Net Cash Used in Investing Activities — The most significant items included in our investing cash flows for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ are summarized below:

●

Capital Expenditures — We used ~~$666~~$418 million and ~~$895~~$270 million for capital expenditures during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The ~~decrease~~increase in capital spending ~~was~~is primarily driven by timing differences in our ~~fleet~~fixed asset purchases, as well as ~~supply chain constraints~~our intentional investment in ~~advancing current year~~sustainability and growth in recycling and renewable energy projects. The Company continues to maintain a disciplined focus on capital management to prioritize investments in the long-term growth of our business and for the replacement of aging assets.

●

Other, Net — The year-over-year changes in other investing activities were primarily driven by changes in our investment portfolio associated with a wholly-owned insurance captive. During the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we used ~~$56~~$97 million and ~~$33~~$73 million, respectively, of cash from restricted cash and cash equivalents to invest in available-for-sale securities. Additionally, we used $28 million in 2022 to make an initial cash payment associated with a new low-income housing investment.

Net Cash Used in Financing Activities — The most significant items affecting the comparison of our financing cash flows for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ are summarized below:

●

Debt ~~(Repayments)~~Repayments and Borrowings — The following summarizes our cash borrowings and repayments of debt for the ~~six~~three months ended ~~June 30~~March 31 (in millions):


	2021		2020		2022		2021
Borrowings:
Commercial paper (a)	$	640	$	—	$	2,362	$	—
Senior notes		942		—
Tax-exempt bonds		125		—
Other debt		—		—
	$	1,707	$	—	$	2,362	$	—
Repayments:
Commercial paper (a)	$	(954)	$	—	$	(2,452)	$	(280)
Senior notes		(1,289)		(600)
Tax-exempt bonds		(24)		(52)		—		(24)
Other debt		(59)		(53)		(19)		(25)
	$	(2,326)	$	(705)	$	(2,471)	$	(329)
Net cash repayments	$	(619)	$	(705)	$	(109)	$	(329)

~~(a)~~

~~Beginning in the second quarter of 2021 we reported these cash flows on a gross basis.~~

(a)Beginning in the second quarter of 2021, we elected to report these cash flows on a gross basis. Reclassifications have been made to our prior period information for comparability purposes.

Refer to Note 3 to the Condensed Consolidated Financial Statements for additional information related to our debt borrowings and repayments.

●

~~Premiums and Other Paid on Early Extinguishment of Debt —~~ During the six months ended June 30, 2021, we paid premiums and other third-party costs of $211 million to retire certain high-coupon senior notes. See Note 3 to the Condensed Consolidated Financial Statements for further discussion of this debt transaction.

●

Common Stock Repurchase Program —During each of the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, we ~~repurchased $500~~used $250 million to repurchase shares of our common stock ~~pursuant to two~~under accelerated share repurchase ~~(“ASR”) agreements, as discussed further in~~agreements. See Note 1110 to the Condensed Consolidated Financial Statements. We expect to repurchase the full amount of our remaining authorization of $850 million of common stock during the second half of 2021. During the six months ended June 30, 2020, we repurchased $402 million of our common stock, which included $313 million related to a February 2020 ASR agreement and $89 million in open market transactions.Statements for additional information.

●

Cash Dividends — For the periods presented, all dividends have been declared by our Board of Directors. We paid cash dividends of $275 million and $247 million during the three months ended March 31, 2022 and 2021, respectively. The increase in dividend payments is primarily due to our quarterly per share dividend increasing from $0.575 in 2021 to $0.65 in 2022.

We paid cash dividends of $489 million and $466 million during the six months ended June 30, 2021 and 2020, respectively. The increase in dividend payments is primarily due to our quarterly per share dividend increasing from $0.545 in 2020 to $0.575 in 2021 which was offset, in part, by a reduction in our common stock outstanding as a result of our common stock repurchase program.

Free Cash Flow

We are presenting free cash flow, which is a non-GAAP measure of liquidity, in our disclosures because we use this measure in the evaluation and management of our business. We define free cash flow as net cash provided by operating activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets, net of cash divested. We believe it is indicative of our ability to pay our quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay our debt obligations. Free cash flow is not intended to replace net cash provided by operating activities, which is the most comparable GAAP measure. We believe free cash flow gives investors useful insight into how we view our liquidity, but the use of free cash flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that we have committed to, such as declared dividend payments and debt service requirements.

Our calculation of free cash flow and reconciliation to net cash provided by operating activities for the three months ended March 31 is shown in the table below (in millions), and may not be calculated the same as similarly-titled measures presented by other companies:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020		2022		2021
Net cash provided by operating activities	$	1,043	$	856	$	2,163	$	1,621	$	1,258	$	1,120
Capital expenditures		(396)		(436)		(666)		(895)
Capital expenditures to support the business										(371)		(259)
Capital expenditures - sustainability growth investments (a)										(47)		(11)
Total capital expenditures										(418)		(270)
Proceeds from divestitures of businesses and other assets, net of cash divested		2		3		17		15		5		15
Free cash flow	$	649	$	423	$	1,514	$	741	$	845	$	865

(a)	These growth investments are intended to further our sustainability leadership position by increasing recycling volumes and growing renewable natural gas generation and we expect they will deliver circular solutions for our customers and drive environmental value to the communities we serve.

Critical Accounting Estimates and Assumptions

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 assets and intangible asset impairments and the fair value of assets and liabilities acquired in business combinations, ~~or as asset acquisitions and reserves associated with our insured and self-insured claims,~~ as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

~~Off-Balance Sheet Arrangements~~

We have financial interests in unconsolidated variable interest entities as discussed in Note 13 to the Condensed Consolidated Financial Statements. Additionally, we are party to guarantee arrangements with unconsolidated entities as discussed in the Guarantees section of Note 6 to the Condensed Consolidated Financial Statements. These arrangements have not materially affected our financial position, results of operations or liquidity during the six months ended June 30, 2021, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.

Seasonal Trends

Our operating revenues tend to be somewhat higher in summer months, primarily due to 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 disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly ~~impact~~affect the operating results of the ~~Areas~~geographic areas affected. 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 ~~Areas~~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, ~~as a result of~~due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

Inflation

~~While~~Accelerated and pronounced economic pressures, particularly related to inflationary ~~increases in costs can affect~~cost pressures on labor and the goods and services we rely upon to deliver service to our ~~income from operations margins, we believe that inflation generally has not had,~~customers, have continued to have a significant impact on our cost structure and capital expenditures in the ~~near future is not expected~~first quarter of 2022. We are taking proactive steps to ~~have, any material adverse effect on~~recover and/or mitigate inflationary cost pressures through our ~~results~~overall strategic pricing efforts and by managing our costs through efficiency, labor productivity and investments in technology to automate certain aspects of ~~operations. However, a~~our business. A significant portion of our ~~collection revenues are generated~~revenue is tied to a price escalation index with a lookback provision, which has resulted in a timing lag in our ability to recover increased costs under ~~long-term agreements with~~these contracts during this period of rapid inflation. Separately, for many of our customers

we provide services under multi-year contracts that can restrict our ability to increase prices and the timing of such increases. As we entered 2022, many of these contract lookback provisions began to capture the inflationary cost increases experienced in the second half of 2021 in the price ~~adjustments based on various indices intended~~escalation calculation; however, due to ~~measure inflation. Additionally, management’s estimates associated with~~the continued rapid pace of inflation ~~have had, and will continue to have, an impact on our accounting for landfill and environmental remediation liabilities.~~as well as the relatively low inflationary cost environment of the first half of 2021, such timing lag persists.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Information about market risks as of ~~June 30, 2021~~March 31, 2022 does not materially differ ~~materially~~ from ~~that~~the following information discussed under Item 7A in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021:

In the normal course of business, we are exposed to market risks, including changes in interest rates, certain commodity prices and Canadian currency rates. From time to time, we use derivatives to manage some portion of these risks. The Company had no derivatives outstanding as of December 31, 2021.

Interest Rate Exposure — Our exposure to market risk for changes in interest rates relates primarily to our financing activities. As of December 31, 2021, we had $13.5 billion of long-term debt, excluding the impacts of accounting for debt issuance costs, discounts and fair value adjustments attributable to terminated interest rate derivatives. We had $2.5 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised of (i) $1.8 billion of short-term borrowings under our commercial paper program; (ii) $645 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months and (iii) $54 million of variable-rate tax-exempt bonds that are subject to repricing on a weekly basis. We currently estimate that a 100-basis point increase in the interest rates of our outstanding variable-rate debt obligations would increase our 2022 interest expense by $7 million.

Our remaining outstanding debt obligations have fixed interest rates through either the scheduled maturity of the debt or, for certain of our fixed-rate tax-exempt bonds, through the end of a term interest rate period that exceeds 12 months. The fair value of our fixed-rate debt obligations can increase or decrease significantly if market interest rates change.

We performed a sensitivity analysis to determine how market rate changes might affect the fair value of our market risk-sensitive debt instruments. This analysis is inherently limited because it reflects a singular, hypothetical set of assumptions. Actual market movements may vary significantly from our assumptions. An instantaneous, 100-basis point increase in interest rates across all maturities attributable to these instruments would have decreased the fair value of our debt by approximately $900 million as of December 31, 2021.

We are also exposed to interest rate market risk from our cash and cash equivalent balances, as well as assets held in restricted trust funds and escrow accounts. These assets are generally invested in high-quality, liquid instruments including money market funds that invest in U.S. government obligations with original maturities of three months or less. We believe that our exposure to changes in fair value of these assets due to interest rate fluctuations is insignificant as the fair value generally approximates our cost basis. We also invest a portion of our restricted trust and escrow account balances in available-for-sale securities, including U.S. Treasury securities, U.S. agency securities, municipal securities, mortgage- and asset-backed securities, which generally mature over the next nine years, as well as equity securities.

Commodity Price Exposure — In the normal course of our business, we are subject to operating agreements that expose us to market risks arising from changes in the prices for commodities such as diesel fuel, electricity and recycled materials, including old corrugated cardboard and plastics. We work to manage these risks through operational strategies that focus on capturing our costs in the prices we charge our customers for the services provided. Accordingly, as the market prices for these commodities increase or decrease, our revenues, operating costs and margins may also increase or decrease. We saw significant increases in commodity prices and demand for recycled materials in 2021, resulting in increased annual revenue for our recycling business of $537 million. Variability in commodity prices can also impact the margins of our business as certain components of our revenue are structured as a pass through of costs, including recycling brokerage and fuel surcharges.

Currency Rate Exposure — We have operations in Canada as well as certain support functions in India. Where significant, we have quantified and described the impact of foreign currency translation on components of income,

including operating revenue and operating expenses. However, the impact of foreign currency has not materially affected our results of operations.

Item 4. Controls and Procedures.

Effectiveness of Controls and Procedures

Our management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) in ensuring that the information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to management (including the principal executive and financial officers) as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of ~~June 30, 2021~~March 31, 2022 (the end of the period covered by this Quarterly Report on Form 10-Q). at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

~~Management,~~In the first quarter of 2022, we implemented a new general ledger accounting system and complementary finance enterprise resource planning system. These new system implementations were achieved after a multi-year review of existing accounting and reporting processes and the design and configuration of system-enabled enhancements to such processes. With the implementation, we have realized certain process efficiencies and we expect this new system to enhance our financial reporting and analysis capabilities in the future. The change in our general ledger and finance enterprise resource planning systems was subject to thorough testing and review by internal and external parties both before and after the implementation. While these systems implementations are intended to enhance our framework for internal control over financial reporting, management, together with our CEO and CFO, ~~evaluated~~has determined that the changes in our internal ~~control~~controls over financial reporting during the quarter ended ~~June 30, 2021. We determined that there were no changes in our internal control over financial reporting during the quarter ended June 30, 2021 that~~March 31, 2022 have ~~materially affected, or~~not been material and are not reasonably likely to materially affect our internal ~~control~~controls over financial reporting.

PART II.

Item 1. Legal Proceedings.

Information regarding our legal proceedings can be found under the Environmental Matters and Litigation sections of Note 6 to the Condensed Consolidated Financial Statements.

Item 1A. Risk ~~Factors.~~Factors.

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table summarizes common stock repurchases made during the ~~second~~first quarter of ~~2021~~2022 (shares in millions):

Issuer Purchases of Equity Securities


				Total Number of						Total Number of
	Total			Shares Purchased as	Approximate Maximum		Total			Shares Purchased as	Approximate Maximum
	Number of	Average		Part of Publicly	Dollar Value of Shares that		Number of	Average		Part of Publicly	Dollar Value of Shares that
	Shares	Price Paid		Announced Plans or	May Yet be Purchased Under		Shares	Price Paid		Announced Plans or	May Yet be Purchased Under
Period	Purchased	per Share(a)		Programs	the Plans or Programs		Purchased	per Share		Programs	the Plans or Programs
April 1 — 30	—	$	—	—	$	1.1 billion
May 1 — 31	1.6	$	139.60	1.6	$	850 million
June 1 — 30	—	$	—	—	$	850 million
January 1 — 31 (a)							0.4	$	158.98	0.4	$	1.50 billion
February 1 — 28 (b)							1.4	$	146.43	1.4	$	1.25 billion
March 1 — 31							—	$	—	—	$	1.25 billion	(c)
Total	1.6	$	139.60	1.6			1.8	$	149.49	1.8

(a)

~~The “Average Price Paid per Share” in the table represents the final weighted average price per share paid for the~~In December 2021, we executed an accelerated share repurchase (“ASR”) to repurchase $350 million of our common stock. At the beginning of the repurchase period, we delivered $350 million in cash and received 1.7 million shares based on a stock price of $160.67. The ASR agreement completed in January 2022, at which time we received 0.4 million additional shares based on a final weighted average price of $160.33.

(b)

In February 2022, we executed ~~in February 2021~~an ASR agreement to repurchase $250 million of our common stock. At the beginning of the repurchase period, we delivered $250 million cash and received 1.4 million shares based on a stock price of $146.43. The final number of shares to be repurchased and the ~~initial weighted~~final average price per share ~~paid for~~under the ASR agreement ~~executed~~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 ~~May 2021 which remained open as of June 30, 2021.~~April 2022.

In February 2021, we entered into an ASR agreement to repurchase $250 million of our common stock. At the beginning of the repurchase period, we delivered $250 million cash and received 1.8 million shares based on a stock price of $110.56. The ASR agreement completed in the second quarter of 2021, at which time we received 0.2 million additional shares based on a final weighted average price of $126.83.

In May 2021, we entered into an ASR agreement to repurchase $250 million of our common stock. At the beginning of the repurchase period, we delivered $250 million cash and received 1.4 million shares based on a stock price of $141.42. The final number of shares to be repurchased and the final average price per share under the ASR agreement 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 July 2021.

As of June 30, 2021, the Company has authorization for $850 million of future share repurchases. We expect to repurchase the full amount of our remaining authorization during the second half of 2021. 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.

(c)

As of March 31, 2022, the Company has authorization for $1.25 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.

Item 4. Mine Safety Disclosures.

Information concerning mine safety and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this quarterly report.

Item 6. Exhibits.


Exhibit No.		Description
4.1*
10.1		~~Officers’ Certificate delivered pursuant~~Form of 2022 Long Term Incentive Compensation Award Agreement for Senior Leadership Team [Incorporated by reference to ~~Section 301 of the Indenture dated September 10, 1997 establishing the terms and form of the 2.00% Senior Notes due 2029.~~Exhibit 10.1 to Form 8-K filed March 7, 2022].

4.2*10.2		~~Officers’ Certificate delivered pursuant~~Form of 2022 Long Term Incentive Compensation Award Agreement for RSU Award [Incorporated by reference to ~~Section 301 of the Indenture dated September 10, 1997 establishing the terms and form of the 2.95% Senior Notes due 2041.~~

4.3*		~~Guarantee Agreement by WM Holdings in favor of The Bank of New York Mellon Trust Company, N.A., as Trustee for the holders of the 2.00% Senior Notes due 2029.~~

4.4*		~~Guarantee Agreement by WM Holdings in favor of The Bank of New York Mellon Trust Company, N.A., as Trustee for the holders of the 2.95% Senior Notes due 2041.~~Exhibit 10.2 to Form 8-K filed March 7, 2022].

22.1*		Guarantor Subsidiary.

31.1*		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 ~~as amended,~~ of James C. Fish, Jr., President and Chief Executive Officer.

31.2*		Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934 ~~as amended,~~ of Devina A. Rankin, Executive Vice President and Chief Financial Officer.

32.1**		Certification Pursuant to 18 U.S.C. §1350 of James C. Fish, Jr., President and Chief Executive Officer.

32.2**		Certification Pursuant to 18 U.S.C. §1350 of Devina A. Rankin, Executive Vice President and Chief Financial Officer.

95*		Mine Safety Disclosures.

101.INS*		Inline XBRL Instance.

101.SCH*		Inline XBRL Taxonomy Extension Schema.

101.CAL*		Inline XBRL Taxonomy Extension Calculation.

101.LAB*		Inline XBRL Taxonomy Extension Labels.

101.PRE*		Inline XBRL Taxonomy Extension Presentation.

101.DEF*		Inline XBRL Taxonomy Extension Definition.

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

4539

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	WASTE MANAGEMENT, INC.

	By:	/s/ DEVINA A. RANKIN
		Devina A. Rankin
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

	WASTE MANAGEMENT, INC.

	By:	/s/ LESLIE K. NAGY
		Leslie K. Nagy
		Vice President and
		Chief Accounting Officer
		(Principal Accounting Officer)



Date: ~~July 27, 2021~~April 26, 2022

4640


	Principal
	Outstanding		Notes Tendered
Description	Prior to Tender		and Redeemed
6.125% WM senior notes due 2039	$	252	$	6
7.75% WM senior notes due 2032		153		9
7.375% WM senior notes due 2029		81		—
4.15% WM senior notes due 2049		1,000		316
4.10% WM senior notes due 2045		750		334
3.90% WM senior notes due 2035		450		153
7.00% WM senior notes due 2028		330		73
7.10% WM Holdings senior notes due 2026		249		26
3.50% WM senior notes due 2024		350		194
3.125% WM senior notes due 2025		600		178
3.15% WM senior notes due 2027		750		—
2.90% WM senior notes due 2022		500		—
2.40% WM senior notes due 2023		500		—
Total	$	5,965	$	1,289


	October 30, 2020			Adjustments	June 30, 2021
Accounts and other receivables	$	159	$	—	$	159
Parts and supplies		8		(1)		7
Other current assets		17		(1)		16
Assets held for sale (a)		1,022		—		1,022
Property and equipment		1,278		7		1,285
Goodwill		2,470		5		2,475
Other intangible assets		604		(3)		601
Investments in unconsolidated entities		9		—		9
Other assets		27		(2)		25
Accounts payable		(107)		1		(106)
Accrued liabilities		(155)		(4)		(159)
Deferred revenues		(19)		—		(19)
Current portion of long-term debt		(12)		—		(12)
Liabilities held for sale (a)		(234)		—		(234)
Long-term debt, less current portion (b)		(441)		—		(441)
Landfill and environmental remediation liabilities		(242)		(1)		(243)
Deferred income taxes		(223)		1		(222)
Other liabilities		(79)		(2)		(81)
Total purchase price	$	4,082	$	—	$	4,082