15.

Condensed Consolidating Financial Statements

WM Holdings has fully and unconditionally guaranteed all of WM’s senior indebtedness. WM has fully and unconditionally guaranteed all of WM Holdings’ senior indebtedness. None of WM’s other subsidiaries have guaranteed any of WM’s or WM Holdings’ debt. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information (in millions):

CONDENSED CONSOLIDATING BALANCE SHEETS

September 30, 2016

(Unaudited)


	WM			WM Holdings		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—	$	30		$	—		$	30
Other current assets		5			5		2,253			—			2,263

		5			5		2,283			—			2,293
Property and equipment, net		—			—		10,842			—			10,842
Investments in affiliates		19,543			19,978		—			(39,521	)		—
Advances to affiliates(a)		—			—		12,727			(12,727	)		—
Other assets		14			30		7,577			—			7,621

Total assets	$	19,562		$	20,013	$	33,429		$	(52,248	)	$	20,756


LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	295		$	—	$	137		$	—		$	432
Accounts payable and other current liabilities		66			4		2,162			—			2,232

		361			4		2,299			—			2,664
Long-term debt, less current portion(a)		6,072			304		2,453			—			8,829
Due to affiliates(a)		13,053			148		5,299			(18,500	)		—
Other liabilities		16			—		3,864			—			3,880

Total liabilities		19,502			456		13,915			(18,500	)		15,373
Equity:
Stockholders’ equity		5,359			19,557		19,964			(39,521	)		5,359
Advances to affiliates		(5,299	)		—		(474	)		5,773			—
Noncontrolling interests		—			—		24			—			24

		60			19,557		19,514			(33,748	)		5,383

Total liabilities and equity	$	19,562		$	20,013	$	33,429		$	(52,248	)	$	20,756

(a)

In conjunction with the preparation of our June 30, 2016 Condensed Consolidating Balance Sheet, we identified and corrected the presentation of $126 million of tax-exempt bonds previously reported in Non-Guarantor Subsidiaries’ rather than WM’s “Long-term debt, less current portion,” which had corresponding impacts on “Advances to affiliates” and “Due to affiliates.” This immaterial correction has been reflected in our current year Condensed Consolidating Financial Statements.

CONDENSED CONSOLIDATING BALANCE SHEETS (Continued)

December 31, 2015


	WM			WM Holdings		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—	$	39		$	—		$	39
Other current assets		3			6		2,297			—			2,306

		3			6		2,336			—			2,345
Property and equipment, net		—			—		10,665			—			10,665
Investments in affiliates(b)		18,557			18,925		—			(37,482	)		—
Advances to affiliates		—			—		12,113			(12,113	)		—
Other assets		23			29		7,305			—			7,357

Total assets	$	18,583		$	18,960	$	32,419		$	(49,595	)	$	20,367


LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	41		$	—	$	212		$	—		$	253
Accounts payable and other current liabilities		83			9		2,165			—			2,257

		124			9		2,377			—			2,510
Long-term debt, less current portion		5,801			304		2,571			—			8,676
Due to affiliates(b)		12,588			76		5,299			(17,963	)		—
Other liabilities		24			—		3,790			—			3,814

Total liabilities		18,537			389		14,037			(17,963	)		15,000
Equity:
Stockholders’ equity		5,345			18,571		18,911			(37,482	)		5,345
Advances to affiliates(b)		(5,299	)		—		(551	)		5,850			—
Noncontrolling interests		—			—		22			—			22

		46			18,571		18,382			(31,632	)		5,367

Total liabilities and equity	$	18,583		$	18,960	$	32,419		$	(49,595	)	$	20,367

(b)

In conjunction with the preparation of our September 30, 2016 Condensed Consolidating Balance Sheet, we identified $5.9 billion of intercompany loans between WM and Non-Guarantor Subsidiaries previously included in “Due to affiliates” and “Advances to affiliates” that based on intent are not expected to be collected, and as such are being presented as part of “Equity” in WM’s and Non-Guarantor Subsidiaries’ balance sheet. Accordingly, the 2015 Condensed Consolidating Balance Sheet included herein has been revised to reflect this presentation.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended September 30, 2016

(Unaudited)


	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,548		$	—		$	3,548
Costs and expenses		—			—			2,988			—			2,988

Income from operations		—			—			560			—			560

Other income (expense):
Interest expense, net		(77	)		(5	)		(12	)		—			(94	)
Equity in earnings of subsidiaries, net of taxes		349			352			—			(701	)		—
Other, net		—			—			(9	)		—			(9	)

		272			347			(21	)		(701	)		(103	)

Income (loss) before income taxes		272			347			539			(701	)		457
Provision for (benefit from) income taxes		(30	)		(2	)		185			—			153

Consolidated net income		302			349			354			(701	)		304
Less: Net income (loss) attributable to noncontrolling interests		—			—			2			—			2

Net income attributable to Waste Management, Inc.	$	302		$	349		$	352		$	(701	)	$	302

Three Months Ended September 30, 2015

(Unaudited)


	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,360		$	—		$	3,360
Costs and expenses		—			—			2,759			—			2,759

Income from operations		—			—			601			—			601

Other income (expense):
Interest expense, net		(72	)		(5	)		(18	)		—			(95	)
Equity in earnings of subsidiaries, net of taxes		378			381			—			(759	)		—
Other, net		—			—			(10	)		—			(10	)

		306			376			(28	)		(759	)		(105	)

Income (loss) before income taxes		306			376			573			(759	)		496
Provision for (benefit from) income taxes		(29	)		(2	)		190			—			159

Consolidated net income		335			378			383			(759	)		337
Less: Net income (loss) attributable to noncontrolling interests		—			—			2			—			2

Net income attributable to Waste Management, Inc.	$	335		$	378		$	381		$	(759	)	$	335

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (Continued)

Nine Months Ended September 30, 2016

(Unaudited)


	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	10,149		$	—		$	10,149
Costs and expenses		—			—			8,470			—			8,470

Income from operations		—			—			1,679			—			1,679

Other income (expense):
Interest expense, net		(227	)		(15	)		(40	)		—			(282	)
Loss on early extinguishment of debt		(1	)		—			(3	)		—			(4	)
Equity in earnings of subsidiaries, net of taxes		986			995			—			(1,981	)		—
Other, net		—			—			(81	)		—			(81	)

		758			980			(124	)		(1,981	)		(367	)

Income (loss) before income taxes		758			980			1,555			(1,981	)		1,312
Provision for (benefit from) income taxes		(89	)		(6	)		561			—			466

Consolidated net income		847			986			994			(1,981	)		846
Less: Net income (loss) attributable to noncontrolling interests		—			—			(1	)		—			(1	)

Net income attributable to Waste Management, Inc.	$	847		$	986		$	995		$	(1,981	)	$	847

Nine Months Ended September 30, 2015 (Unaudited)
	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	9,715		$	—		$	9,715
Costs and expenses		—			—			8,172			—			8,172

Income from operations		—			—			1,543			—			1,543

Other income (expense):
Interest expense, net		(226	)		(17	)		(51	)		—			(294	)
Loss on early extinguishment of debt		(500	)		(52	)		—			—			(552	)
Equity in earnings of subsidiaries, net of taxes		929			971			—			(1,900	)		—
Other, net		—			—			(34	)		—			(34	)

		203			902			(85	)		(1,900	)		(880	)

Income (loss) before income taxes		203			902			1,458			(1,900	)		663
Provision for (benefit from) income taxes		(277	)		(27	)		488			—			184

Consolidated net income		480			929			970			(1,900	)		479
Less: Net income (loss) attributable to noncontrolling interests		—			—			(1	)		—			(1	)

Net income attributable to Waste Management, Inc.	$	480		$	929		$	971		$	(1,900	)	$	480

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	WM		WM Holdings		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Three Months Ended September 30, 2016
Comprehensive income	$	303	$	349	$	339		$	(701	)	$	290
Less: Comprehensive income (loss) attributable to noncontrolling interests		—		—		2			—			2

Comprehensive income attributable to Waste Management, Inc.	$	303	$	349	$	337		$	(701	)	$	288

Three Months Ended September 30, 2015
Comprehensive income	$	336	$	378	$	325		$	(759	)	$	280
Less: Comprehensive income (loss) attributable to noncontrolling interests		—		—		2			—			2

Comprehensive income attributable to Waste Management, Inc.	$	336	$	378	$	323		$	(759	)	$	278


	WM		WM Holdings		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Nine Months Ended September 30, 2016
Comprehensive income	$	852	$	986	$	1,053		$	(1,981	)	$	910
Less: Comprehensive income (loss) attributable to noncontrolling interests		—		—		(1	)		—			(1	)

Comprehensive income attributable to Waste Management Inc.	$	852	$	986	$	1,054		$	(1,981	)	$	911

Nine Months Ended September 30, 2015
Comprehensive income	$	487	$	929	$	849		$	(1,900	)	$	365
Less: Comprehensive income (loss) attributable to noncontrolling interests		—		—		(1	)		—			(1	)

Comprehensive income attributable to Waste Management, Inc.	$	487	$	929	$	850		$	(1,900	)	$	366

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2016

(Unaudited)


	WM(c)			WM Holdings(c)			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income	$	847		$	986		$	994		$	(1,981	)	$	846
Equity in earnings of subsidiaries, net of taxes		(986	)		(995	)		—			1,981			—
Other adjustments		139			9			1,213			—			1,361

Net cash provided by operating activities		—			—			2,207			—			2,207

Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		—			—			(600	)		—			(600	)
Capital expenditures		—			—			(962	)		—			(962	)
Proceeds from divestitures of businesses and other assets (net of cash divested)		—			—			32			—			32
Net receipts from restricted trust and escrow accounts and other, net		—			—			(20	)		—			(20	)

Net cash used in investing activities		—			—			(1,550	)		—			(1,550	)

Cash flows from financing activities:
New borrowings		—			—			2,536			—			2,536
Debt repayments		—			—			(2,210	)		—			(2,210	)
Premiums paid on early extinguishment of debt		—			—			(2	)		—			(2	)
Common stock repurchase program		—			—			(500	)		—			(500	)
Cash dividends		—			—			(546	)		—			(546	)
Exercise of common stock options		—			—			57			—			57
Other, net		—			—			(1	)		—			(1	)
(Increase) decrease in intercompany and investments, net		—			—			—			—			—

Net cash used in financing activities		—			—			(666	)		—			(666	)

Effect of exchange rate changes on cash and cash equivalents		—			—			—			—			—

Increase (decrease) in cash and cash equivalents		—			—			(9	)		—			(9	)
Cash and cash equivalents at beginning of period		—			—			39			—			39

Cash and cash equivalents at end of period	$	—		$	—		$	30		$	—		$	30

(c)	Cash receipts and payments of WM and WM Holdings are transacted by Non-Guarantor Subsidiaries.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued)

Nine Months Ended September 30, 2015

(Unaudited)


	WM(d)			WM Holdings(d)			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income	$	480		$	929		$	970		$	(1,900	)	$	479
Equity in earnings of subsidiaries, net of taxes		(929	)		(971	)		—			1,900			—
Other adjustments		449			42			1,002			—			1,493

Net cash provided by operating activities		—			—			1,972			—			1,972

Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		—			—			(473	)		—			(473	)
Capital expenditures		—			—			(864	)		—			(864	)
Proceeds from divestitures of businesses and other assets (net of cash divested)		—			—			114			—			114
Net receipts from restricted trust and escrow accounts and other, net		—			—			42			—			42

Net cash used in investing activities		—			—			(1,181	)		—			(1,181	)

Cash flows from financing activities:
New borrowings		—			—			2,060			—			2,060
Debt repayments		—			—			(2,421	)		—			(2,421	)
Premiums paid on early extinguishment of debt		—			—			(555	)		—			(555	)
Common stock repurchase program		—			—			(600	)		—			(600	)
Cash dividends		—			—			(523	)		—			(523	)
Exercise of common stock options		—			—			53			—			53
Other, net		—			—			3			—			3
(Increase) decrease in intercompany and investments, net		(1,235	)		—			1,235			—			—

Net cash used in financing activities		(1,235	)		—			(748	)		—			(1,983	)

Effect of exchange rate changes on cash and cash equivalents		—			—			(2	)		—			(2	)

Increase (decrease) in cash and cash equivalents		(1,235	)		—			41			—			(1,194	)
Cash and cash equivalents at beginning of period		1,235			—			72			—			1,307

Cash and cash equivalents at end of period	$	—		$	—		$	113		$	—		$	113

(d)	Cash receipts and payments of WM and WM Holdings are transacted by Non-Guarantor Subsidiaries. We have revised the prior year presentation to reflect all relevant cash flow activities in the Non-Guarantor Subsidiaries column.