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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2024

or

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

For the transition period from to

Commission file number 1-12154

Waste Management, Inc.

(Exact name of registrant as specified in its charter)

Delaware

73-1309529

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

800 Capitol Street

Suite 3000

Houston, Texas 77002

(Address of principal executive offices)

(713) 512-6200

(Registrant’s telephone number, including area code)

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

Title of Each Class

    

Trading Symbol

    

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

WM

New York Stock Exchange

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding as of April 22, 2024 was 401,083,098 (excluding treasury shares of 229,199,363).

PART I.

Item 1.    Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Millions, Except Share and Par Value Amounts)

March 31, 

December 31, 

    

2024

    

2023

(Unaudited)

ASSETS

Current assets:

 

 

  

Cash and cash equivalents

$

322

$

458

Accounts receivable, net of allowance for doubtful accounts of $27 and $30, respectively

 

2,530

 

2,633

Other receivables, net of allowance for doubtful accounts of $5 and $4, respectively

 

155

 

237

Parts and supplies

 

189

 

173

Other assets

 

333

 

303

Total current assets

 

3,529

 

3,804

Property and equipment, net of accumulated depreciation and depletion of $23,144 and $22,826, respectively

 

17,044

 

16,968

Goodwill

 

9,246

 

9,254

Other intangible assets, net

 

728

 

759

Restricted funds

 

524

 

422

Investments in unconsolidated entities

 

589

 

606

Other assets

 

1,006

 

1,010

Total assets

$

32,666

$

32,823

LIABILITIES AND EQUITY

Current liabilities:

 

  

 

  

Accounts payable

$

1,617

$

1,709

Accrued liabilities

 

1,410

 

1,605

Deferred revenues

 

586

 

578

Current portion of long-term debt

 

336

 

334

Total current liabilities

 

3,949

 

4,226

Long-term debt, less current portion

 

15,762

 

15,895

Deferred income taxes

 

1,880

 

1,826

Landfill and environmental remediation liabilities

 

2,912

 

2,888

Other liabilities

 

1,085

 

1,092

Total liabilities

 

25,588

 

25,927

Commitments and contingencies (Note 6)

 

  

 

  

Equity:

 

  

 

  

Waste Management, Inc. stockholders’ equity:

 

  

 

  

Common stock, $0.01 par value; 1,500,000,000 shares authorized; 630,282,461 shares issued

 

6

 

6

Additional paid-in capital

 

5,352

 

5,351

Retained earnings

 

14,738

 

14,334

Accumulated other comprehensive (loss) income

 

(60)

 

(37)

Treasury stock at cost 228,979,512 and 228,827,218 shares, respectively

 

(12,954)

 

(12,751)

Total Waste Management, Inc. stockholders’ equity

 

7,082

 

6,903

Noncontrolling interests

 

(4)

 

(7)

Total equity

 

7,078

 

6,896

Total liabilities and equity

$

32,666

$

32,823

See Notes to Condensed Consolidated Financial Statements.

2

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions, Except per Share Amounts)

(Unaudited)

Three Months Ended

March 31, 

    

2024

    

2023

Operating revenues

$

5,159

$

4,892

Costs and expenses:

 

  

  

Operating

 

3,140

 

3,086

Selling, general and administrative

 

491

 

476

Depreciation, depletion and amortization

 

514

 

505

Restructuring

3

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

 

(2)

 

(3)

 

4,143

 

4,067

Income from operations

 

1,016

 

825

Other income (expense):

 

  

  

Interest expense, net

 

(130)

 

(120)

Equity in net losses of unconsolidated entities

 

(19)

 

(11)

Other, net

 

2

 

2

 

(147)

 

(129)

Income before income taxes

 

869

 

696

Income tax expense

 

162

 

164

Consolidated net income

 

707

 

532

Less: Net income (loss) attributable to noncontrolling interests

 

(1)

 

(1)

Net income attributable to Waste Management, Inc.

$

708

$

533

Basic earnings per common share

$

1.76

$

1.31

Diluted earnings per common share

$

1.75

$

1.30

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)

Three Months Ended

March 31, 

2024

    

2023

Consolidated net income

$

707

$

532

Other comprehensive income (loss), net of tax:

 

  

 

  

Derivative instruments, net

 

 

5

Available-for-sale securities, net

 

1

 

5

Foreign currency translation adjustments

 

(24)

 

2

Post-retirement benefit obligations, net

 

 

Other comprehensive income (loss), net of tax

 

(23)

 

12

Comprehensive income

 

684

 

544

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

(1)

 

(1)

Comprehensive income attributable to Waste Management, Inc.

$

685

$

545

See Notes to Condensed Consolidated Financial Statements.

3

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)

Three Months Ended

March 31, 

    

2024

    

2023

Cash flows from operating activities:

 

 

  

  

Consolidated net income

 

$

707

$

532

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

 

 

  

Depreciation, depletion and amortization

 

514

 

505

Deferred income tax expense (benefit)

 

57

 

42

Interest accretion on landfill and environmental remediation liabilities

 

33

 

32

Provision for bad debts

 

10

 

9

Equity-based compensation expense

 

30

 

26

Net gain on disposal of assets

 

(10)

 

(10)

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

 

(2)

 

(3)

Equity in net losses of unconsolidated entities, net of dividends

 

19

 

11

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

 

 

Receivables

 

176

 

138

Other current assets

 

(45)

 

(51)

Other assets

 

(4)

 

22

Accounts payable and accrued liabilities

 

(102)

 

(145)

Deferred revenues and other liabilities

 

(16)

 

(64)

Net cash provided by operating activities

 

1,367

 

1,044

Cash flows from investing activities:

 

  

 

  

Acquisitions of businesses, net of cash acquired

 

(11)

 

(34)

Capital expenditures

 

(668)

 

(660)

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

 

15

 

11

Other, net

 

(91)

 

(95)

Net cash used in investing activities

 

(755)

 

(778)

Cash flows from financing activities:

 

  

 

  

New borrowings

 

4,412

 

6,885

Debt repayments

 

(4,570)

 

(6,548)

Common stock repurchase program

 

(250)

 

(350)

Cash dividends

 

(307)

 

(289)

Exercise of common stock options

 

32

 

12

Tax payments associated with equity-based compensation transactions

 

(48)

 

(28)

Other, net

 

(6)

 

(1)

Net cash used in financing activities

 

(737)

 

(319)

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

 

(2)

 

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

 

(127)

 

(53)

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

 

552

 

445

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

 

$

425

$

392

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

Cash and cash equivalents

$

322

$

257

Restricted cash and cash equivalents included in other current assets

34

62

Restricted cash and cash equivalents included in restricted funds

69

73

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

 

$

425

$

392

See Notes to Condensed Consolidated Financial Statements.

4

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Millions, Except Shares in Thousands)

(Unaudited)

Waste Management, Inc. Stockholders’ Equity

Accumulated

Additional

Other

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Noncontrolling

  

Total

  

Shares

  

Amounts

  

Capital

  

Earnings

  

(Loss) Income

  

Shares

  

Amounts

  

Interests

2024

Balance, December 31, 2023

$

6,896

630,282

$

6

$

5,351

$

14,334

$

(37)

 

(228,827)

$

(12,751)

$

(7)

Consolidated net income

 

707

 

 

 

708

 

 

 

 

(1)

Other comprehensive income (loss), net of tax

 

(23)

 

 

 

 

(23)

 

 

 

Cash dividends declared of $0.75 per common share

 

(307)

 

 

 

(307)

 

 

 

 

Equity-based compensation transactions, net

 

51

 

 

(12)

 

3

 

 

1,075

 

60

 

Common stock repurchase program

 

(253)

 

 

10

 

 

 

(1,228)

 

(263)

 

Other, net

 

7

 

 

3

 

 

 

 

 

4

Balance, March 31, 2024

$

7,078

630,282

$

6

$

5,352

$

14,738

$

(60)

 

(228,980)

$

(12,954)

$

(4)

2023

Balance, December 31, 2022

$

6,864

630,282

$

6

$

5,314

$

13,167

$

(69)

 

(222,396)

$

(11,569)

$

15

Consolidated net income

 

532

 

 

 

533

 

 

 

 

(1)

Other comprehensive income (loss), net of tax

 

12

 

 

 

 

12

 

 

 

Cash dividends declared of $0.70 per common share

 

(289)

 

 

 

(289)

 

 

 

 

Equity-based compensation transactions, net

 

42

 

 

 

3

 

 

766

 

39

 

Common stock repurchase program

 

(353)

 

 

(70)

 

 

 

(1,862)

 

(283)

 

Other, net

 

 

 

 

 

 

1

 

 

Balance, March 31, 2023

$

6,808

630,282

$

6

$

5,244

$

13,414

$

(57)

 

(223,491)

$

(11,813)

$

14

See Notes to Condensed Consolidated Financial Statements.

5

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    Basis of Presentation

The financial statements presented in this report represent the consolidation of Waste Management, Inc., a Delaware corporation; its wholly-owned and majority-owned subsidiaries; and certain variable interest entities for which Waste Management, Inc. or its subsidiaries are the primary beneficiaries as described in Note 11. Waste Management, Inc. is a holding company and all operations are conducted by its subsidiaries. When the terms “the Company,” “we,” “us” or “our” are used in this document, those terms refer to Waste Management, Inc., together with its consolidated subsidiaries and consolidated variable interest entities. When we use the term “WMI,” we are referring only to Waste Management, Inc., the parent holding company.

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

Our senior management evaluates, oversees and manages the financial performance of our business through four reportable segments, referred to as (i) Collection and Disposal - East Tier (“East Tier”); (ii) Collection and Disposal - West Tier (“West Tier”); (iii) Recycling Processing and Sales and (iv) WM Renewable Energy. Our East and West Tier, along with certain ancillary services (“Other Ancillary”) not managed through our Tier segments, but that support our collection and disposal operations, form our “Collection and Disposal” businesses. We also provide additional services not managed through our four reportable segments, which are presented as Corporate and Other. Refer to Note 7 for further discussion.

The Condensed Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 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, 2023.

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

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 and other commodities,

6

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

such as RNG, electricity and capacity, Renewable Identification Numbers (“RINs”) and Renewable Energy Credits (“RECs”), are sold.

We also bill for certain services prior to performance. Such services include, among others, certain commercial and residential contracts, and equipment rentals. These advanced billings are included in deferred revenues and recognized as revenue in the period service is provided. Substantially all our deferred revenues during the reported periods are realized as revenues within one to three months, when the related services are performed.

Contract Acquisition Costs

Our incremental direct costs of obtaining a contract, which consist primarily of sales incentives, are generally deferred and amortized to selling, general and administrative expense over the estimated life of the relevant customer relationship, ranging from five to 13 years. Contract acquisition costs that are paid to the customer are deferred and amortized as a reduction in revenue over the contract life. Our contract acquisition costs are classified as current or noncurrent based on the timing of when we expect to recognize amortization and are included in other assets in our Condensed Consolidated Balance Sheets. As of March 31, 2024 and December 31, 2023, we had $209 million and $207 million, respectively, of deferred contract costs, of which $150 million and $148 million, respectively, were related to deferred sales incentives.

Leases

Amounts for our operating lease right-of-use assets are recorded in long-term other assets and the current and long-term portion of our operating lease liabilities are reflected in accrued liabilities and other long-term liabilities, respectively, in our Condensed Consolidated Balance Sheets. Amounts for our financing leases are recorded in property and equipment, net of accumulated depreciation and depletion, and current or long-term debt in our Condensed Consolidated Balance Sheets, as appropriate.

Concentrations of Credit Risk

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

Reclassifications

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

7

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.    Landfill and Environmental Remediation Liabilities

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

March 31, 2024

December 31, 2023

Environmental

Environmental

    

Landfill

    

Remediation

    

Total

    

Landfill

    

Remediation

    

Total

Current (in accrued liabilities)

 

$

142

$

32

$

174

$

143

$

31

$

174

Long-term

 

2,733

 

179

 

2,912

  

 

2,710

 

178

 

2,888

 

$

2,875

$

211

$

3,086

$

2,853

$

209

$

3,062

The changes to landfill and environmental remediation liabilities for the three months ended March 31, 2024 are reflected in the table below (in millions):

Environmental

    

Landfill

    

Remediation

December 31, 2023

$

2,853

$

209

Obligations incurred and capitalized

 

20

  

 

Obligations settled

 

(20)

  

 

(6)

Interest accretion

 

33

  

 

Revisions in estimates

 

(10)

  

 

8

Acquisitions, divestitures and other adjustments

 

(1)

  

 

March 31, 2024

$

2,875

$

211

At several of our landfills, we provide financial assurance by depositing cash into restricted trust funds for purposes of settling final capping, closure, post-closure and environmental remediation obligations. Generally, these trust funds are established to comply with statutory requirements and operating agreements. See Note 11 for additional information related to these trusts.

8

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.    Debt

The following table summarizes the major components of debt at principal amounts as of each balance sheet date (in millions) and provides the maturities and interest rate ranges of each major category as of March 31, 2024:

March 31, 

December 31, 

    

2024

    

2023

Commercial paper program (weighted average interest rate of 5.5% as of March 31, 2024 and 5.6% as of December 31, 2023)

$

750

$

860

Senior notes, maturing through 2050, interest rates ranging from 0.75% to 7.75% (weighted average interest rate of 3.7% as of March 31, 2024 and 3.7% as of December 31, 2023)

11,376

11,376

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

 

369

 

378

Tax-exempt bonds, maturing through 2053, fixed and variable interest rates ranging from 0.55% to 5.0% (weighted average interest rate of 3.2% as of March 31, 2024 and 3.3% as of December 31, 2023)

 

2,883

 

2,883

Financing leases and other, maturing through 2082 (weighted average interest rate of 4.9% as of March 31, 2024 and 5.0% as of December 31, 2023) (a)

 

838

 

855

Debt issuance costs, discounts and other

 

(118)

 

(123)

 

16,098

 

16,229

Current portion of long-term debt

 

336

 

334

Long-term debt, less current portion

$

15,762

$

15,895

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

Debt Classification

As of March 31, 2024, we had approximately $3.1 billion of debt maturing within the next 12 months, including (i) $750 million of short-term borrowings under our commercial paper program (net of related discount on issuance); (ii) $1.6 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities; (iii) $156 million of 3.5% senior notes that mature in May 2024; (iv) $422 million of 3.125% senior notes that mature in March 2025 and (v) $180 million of other debt with scheduled maturities within the next 12 months, including $60 million of tax-exempt bonds. As of March 31, 2024, we have classified $2.8 billion of debt maturing in the next 12 months as long-term because we have the intent and ability to refinance these borrowings on a long-term basis as supported by the forecasted available capacity under our $3.5 billion long-term U.S. and Canadian revolving credit facility (“$3.5 billion revolving credit facility”), as discussed below. The remaining $336 million of debt maturing in the next 12 months is classified as current obligations.

Access to and Utilization of Credit Facilities and Commercial Paper Program

$3.5 Billion Revolving Credit Facility — Our $3.5 billion revolving credit facility, maturing May 2027, provides us with credit capacity to be used for cash borrowings, to support letters of credit and to support our commercial paper program. The interest rates we pay on outstanding U.S. or Canadian loans are based on the Secured Overnight Financing Rate (“SOFR”) administered by the Federal Reserve Bank of New York or the Canadian Dollar Offered Rate (“CDOR”), respectively, plus a spread depending on WMI’s senior public debt rating assigned by Moody’s Investors Service, Inc. and Standard and Poor’s Global Ratings. As of March 31, 2024, we had no outstanding borrowings under this facility. We had $181 million of letters of credit issued and $750 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by the facility, leaving unused and available credit capacity of $2.6 billion as of March 31, 2024. WM Holdings, a wholly-owned subsidiary of WMI, guarantees all of the obligations under the $3.5 billion revolving credit facility.

9

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Commercial Paper Program — We have a commercial paper program that enables us to borrow funds for up to 397 days at competitive interest rates. The rates we pay for outstanding borrowings are based on the term of the notes. The commercial paper program is fully supported by our $3.5 billion revolving credit facility. As of March 31, 2024, we had $750 million of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit Lines — As of March 31, 2024, we had utilized $846 million of other uncommitted letter of credit lines, with terms maturing through December 2027.

Debt Borrowings and Repayments

Commercial Paper Program — During the three months ended March 31, 2024, we made cash repayments of $4.5 billion, which were partially offset by $4.4 billion of cash borrowings (net of related discount on issuance).

Financing Leases and Other — The decrease in our financing leases and other debt obligations during the three months ended March 31, 2024 is due to $42 million of cash repayments at debt maturity, partially offset by an increase of $25 million primarily related to non-cash financing leases.

4.    Income Taxes

Our effective income tax rate was 18.6% and 23.6% for the three months ended March 31, 2024 and 2023, respectively. The decrease in our effective income tax rate when comparing the three months ended March 31, 2024 and 2023 was primarily driven by (i) an increase in federal tax credits and (ii) an increase in the excess tax benefits associated with equity-based compensation; partially offset by an increase in pre-tax income in the current period. We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant.

Investments Qualifying for Federal Tax Credits 

Renewable Natural Gas — Through our subsidiaries including our WM Renewable Energy segment, we have invested in building landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and RNG. We expect our new RNG facilities to qualify for federal tax credits and to realize those credits through 2027 under Sections 48 and 45Z of the Internal Revenue Code.

During the three months ended March 31, 2024 and 2023, we recognized a reduction in our income tax expense of $37 million and $2 million, respectively due to federal tax credits expected to be realized from our RNG investments.

Low-Income Housing We have significant financial interests in entities established to invest in and manage low-income housing properties. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments qualify for federal tax credits that we expect to realize through 2033 under Section 42 or Section 45D of the Internal Revenue Code.

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

During the three months ended March 31, 2024 and 2023, we recognized $20 million and $13 million of net losses, respectively, and a reduction in our income tax expense of $28 million and $22 million, respectively, primarily due to federal tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized. In addition, during the three months ended March 31, 2024 and 2023, we recognized interest expense of $6 million and $4 million, respectively, associated with our investments in low-income housing properties. See Note 11 for additional information related to these unconsolidated variable interest entities.

10

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equity-Based Compensation — During the three months ended March 31, 2024 and 2023, we recognized a reduction in our income tax expense of $21 million and $7 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards.

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):

    

2024

    

2023

Number of common shares outstanding at end of period

 

401.3

 

406.8

Effect of using weighted average common shares outstanding

 

0.4

 

0.6

Weighted average basic common shares outstanding

 

401.7

 

407.4

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

 

1.8

 

1.6

Weighted average diluted common shares outstanding

 

403.5

 

409.0

Potentially issuable shares

 

4.9

 

5.6

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

 

1.6

 

1.8

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

6.    Commitments and Contingencies

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

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

Insurance — We carry insurance coverage for protection of our assets and operations from certain risks including general liability, automobile liability, workers’ compensation, real and personal property, directors’ and officers’ liability, pollution legal liability, cyber incident liability and other coverages we believe are customary to the industry. Our exposure to loss for insurance claims is generally limited to the per-incident deductible under the related insurance policy and any amounts that exceed our insured limits. Our exposure could increase if our insurers are unable to meet their commitments on a timely basis.

We have retained a significant portion of the risks related to our health and welfare, general liability, automobile liability and workers’ compensation claims programs. “General liability” refers to the self-insured portion of specific   third-party claims made against us that may be covered under our commercial general liability insurance policy. For our self-insured portions, the exposure for unpaid claims and associated expenses, including incurred but not reported losses, is based on an actuarial valuation or internal estimates. The accruals for these liabilities could be revised if future

11

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

occurrences or loss development significantly differ from such valuations and estimates. We use a wholly-owned insurance captive to insure the deductibles for our general liability, automobile liability and workers’ compensation claims programs.

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

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

As of March 31, 2024, we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover the difference, if any, between the sale value and the guaranteed market or contractually-determined value of certain homeowner’s properties that are adjacent to or near 19 of our landfills. We have also agreed to indemnify certain third-party purchasers against liabilities associated with divested operations prior to such sale. We do not believe that the remaining contingent obligations will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

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

Estimating our degree of responsibility for remediation is inherently difficult. We recognize and accrue for an estimated remediation liability when we determine that such liability is both probable and reasonably estimable. Determining the method and ultimate cost of remediation requires that a number of assumptions be made. There can sometimes be a range of reasonable estimates of the costs associated with the likely site remediation alternatives identified in the environmental impact investigation. In these cases, we use the amount within the range that is our best estimate. If no amount within a range appears to be a better estimate than any other, we use the amount that is the low end of such range. If we used the high ends of such ranges (where estimable), our aggregate potential liability would be approximately $18 million higher than the $211 million recorded in the Condensed Consolidated Balance Sheet as of March 31, 2024. 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.

As of March 31, 2024, we had 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, or 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 were initially developed by others as a landfill disposal facility. At each of these facilities, we are working in conjunction with the government to characterize or remediate identified site problems, and we have either agreed with other legally liable parties on an arrangement for sharing the costs of remediation or are working toward a cost-sharing agreement. We generally expect to receive any amounts due from other participating parties at or near the time that we make the remedial expenditures. The

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WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

other 59 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, known as CERCLA or Superfund.

The majority of proceedings involving NPL sites that we do not own are based on allegations that certain of our subsidiaries (or their predecessors) transported hazardous substances to the sites, often prior to our acquisition of these subsidiaries. CERCLA generally provides for liability for those parties owning, operating, transporting to or disposing at the sites. Proceedings arising under Superfund typically involve numerous waste generators and other waste transportation and disposal companies and seek to allocate or recover costs associated with site investigation and remediation, which costs could be substantial and could have a material adverse effect on our consolidated financial statements. At some of the sites at which we have been identified as a PRP, our liability is well defined as a consequence of a governmental decision and an agreement among liable parties as to the share each will pay for implementing that remedy. At other sites, where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, our future costs are uncertain.

In 2018, both of McGinnes Industrial Maintenance Corporation (“MIMC”), a subsidiary of Waste Management of Texas, Inc., and International Paper Company (“IPC”) entered into an Administrative Order on Consent with the EPA as PRPs to develop a remedial design for the San Jacinto River Waste Pits Superfund Site in Harris County, Texas. 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 IPC have continued to work on a remedial design to support the EPA’s proposed remedy; however, in the first quarter of 2024, the EPA publicly issued a letter alleging that the remedial design has serious deficiencies. MIMC and IPC have engaged with the EPA and provided responses to the EPA letter. Due to increases in the estimated cost of the remedy, we recorded an additional $17 million liability for MIMC’s estimated potential share of such costs in 2023. As of March 31, 2024 and December 31, 2023, the recorded liability was $85 million. MIMC’s ultimate liability could be materially different from current estimates, including potential increases resulting from MIMC’s continued engagement with the EPA regarding a final remedial design for the site.

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

Litigation — We are subject to various proceedings, lawsuits, disputes and claims arising in the ordinary course of our business. Many of these actions raise complex factual and legal issues and are subject to uncertainties. Actions that have been filed against us, and that may be filed against us in the future, include personal injury, property damage,

13

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

commercial, customer, and employment-related claims, including purported state and national class action lawsuits related to: alleged environmental contamination, including releases of hazardous material and odors; sales and marketing practices, customer service agreements and prices and fees; and federal and state wage and hour and other laws. The plaintiffs in some actions seek unspecified damages or injunctive relief, or both. These actions are in various procedural stages, and some are covered, in part, by insurance. We currently do not believe that the eventual outcome of any such actions will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

In June 2022, we and certain of our officers were named as defendants in a complaint alleging violation of the federal securities laws and seeking certification as a class action in the U.S. District Court for the Southern District of New York. A lead plaintiff has been appointed and an amended complaint was filed in January 2023. The amended complaint seeks damages on behalf of a putative class of secondary market purchasers of our senior notes with a special mandatory redemption feature issued in May 2019, asserting claims under the Securities Exchange Act based on alleged misrepresentations and omissions concerning the time for completion of our acquisition of Advanced Disposal. On March 27, 2024, the Court denied our motion to dismiss except as to one of our officers, and the case will proceed to discovery. We intend to vigorously defend against this pending suit. We believe any potential recovery by the plaintiffs, in excess of applicable deductibles, will be covered by insurance, and we do not believe that the eventual outcome of this suit will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.

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

Multiemployer Defined Benefit Pension Plans — About 20% of our workforce is covered by collective bargaining agreements with various local unions across the U.S. and Canada. As a result of some of these agreements, certain of our subsidiaries are participating employers in a number of trustee-managed multiemployer defined benefit pension plans (“Multiemployer Pension Plans”) for the covered employees. 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.

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 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. 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

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WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

annual tax return. Any unresolved issues as of the tax return filing date are subject to routine examination procedures. In the fourth quarter of 2022, the Company received a notice of tax due for the 2017 tax year related to a remaining disagreement with the IRS. In response to the notice, the Company made a deposit of approximately $103 million with the IRS. The Company expects to seek a refund of the entire amount deposited with the IRS and litigate any denial of the claim for refund. As of March 31, 2024 and December 31, 2023, the IRS deposit, net of reserve for uncertain tax positions, is classified as a component of other long-term assets in the Company’s Condensed Consolidated Balance Sheets.

7.    Segment and Related Information

Our senior management evaluates, oversees and manages the financial performance of our business through four reportable segments, referred to as (i) East Tier; (ii) West Tier; (iii) Recycling Processing and Sales and (iv) WM Renewable Energy. Our East Tier and West Tier, combined with certain “Other Ancillary” services that are not managed through the Tier segments, but that support our collection and disposal operations, form our Collection and Disposal businesses. We also provide additional services not managed through our four reportable segments, which are presented as Corporate and Other.

15

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Gross

Intercompany

Net

Income

Operating

Operating

Operating

from

    

Revenues

    

Revenues(a)

    

Revenues

    

Operations(b)

2024

 

  

 

  

 

  

 

  

Collection and Disposal:

 

  

 

  

 

  

 

  

East Tier

$

2,616

$

(535)

$

2,081

$

654

West Tier

2,497

(504)

1,993

627

Other Ancillary

 

686

 

(44)

 

642

 

(2)

Collection and Disposal

 

5,799

 

(1,083)

 

4,716

 

1,279

Recycling Processing and Sales

 

436

 

(68)

 

368

 

19

WM Renewable Energy

70

(1)

69

21

Corporate and Other

 

12

 

(6)

 

6

 

(303)

Total

$

6,317

$

(1,158)

$

5,159

$

1,016

2023

 

  

 

  

 

  

 

  

Collection and Disposal:

 

  

 

  

 

  

 

  

East Tier

$

2,561

$

(516)

$

2,045

$

531

West Tier

2,392

(495)

1,897

531

Other Ancillary

 

625

 

(44)

 

581

 

2

Collection and Disposal

 

5,578

 

(1,055)

 

4,523

 

1,064

Recycling Processing and Sales

 

374

 

(80)

 

294

 

13

WM Renewable Energy

 

70

(1)

69

20

Corporate and Other

 

12

 

(6)

 

6

 

(272)

Total

$

6,034

$

(1,142)

$

4,892

$

825

(a)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.
(b)For those items included in the determination of income from operations, the accounting policies of the segments are the same as those described in Note 1.

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WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Gross

Intercompany

Net

    

Operating

Operating

Operating

Revenues

    

Revenues

    

Revenues

    

2024

 

Commercial

 

$

1,501

$

(185)

$

1,316

Industrial

 

934

(187)

 

747

Residential

876

(22)

854

Other collection

 

751

 

(53)

 

698

Total collection

 

4,062

 

(447)

 

3,615

Landfill

1,177

(385)

792

Transfer

560

(251)

309

Total Collection and Disposal

 

5,799

 

(1,083)

 

4,716

Recycling Processing and Sales

 

436

 

(68)

 

368

WM Renewable Energy

 

70

 

(1)

 

69

Corporate and Other

12

(6)

6

Total

$

6,317

$

(1,158)

$

5,159

2023

Commercial

 

$

1,412

$

(161)

$

1,251

Industrial

 

933

(177)

 

756

Residential

854

(25)

829

Other collection

 

689

 

(50)

 

639

Total collection

 

3,888

 

(413)

 

3,475

Landfill

1,150

(391)

759

Transfer

540

(251)

289

Total Collection and Disposal

 

5,578

 

(1,055)

 

4,523

Recycling Processing and Sales

 

374

 

(