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, ~~2020~~2021

or

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

	For the transition period from to

Commission file number 1-12154

Waste Management, Inc.

(Exact name of registrant as specified in its charter)


Delaware	73-1309529
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

~~1001 Fannin~~800 Capitol Street

Suite 3000

Houston, Texas 77002

(Address of principal executive offices)

(713) 512-6200

(Registrant’s telephone number, including area code)

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



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	WM	New York Stock Exchange

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

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

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


Large accelerated filer☑	☑	Accelerated filer ☐
Non-accelerated filer☐	☐	Smaller reporting company ☐
		Emerging growth company ☐

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

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

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at July ~~27, 2020~~22, 2021 was ~~422,461,187~~421,098,975 (excluding treasury shares of ~~207,821,274)~~209,183,486).

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,		June 30,		December 31,
	2020		2019		2021		2020
	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,663	$	3,561	$	148	$	553
Accounts receivable, net of allowance for doubtful accounts of $46 and $28, respectively		1,888		1,949
Other receivables, net of allowance for doubtful accounts of $2 and $1, respectively		219		370
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
Parts and supplies		118		106		126		124
Other assets		218		223		307		239
Total current assets		5,106		6,209		3,226		3,540
Property and equipment, net of accumulated depreciation and amortization of $19,031 and $18,657, respectively		12,917		12,893
Property and equipment, net of accumulated depreciation and amortization of $19,995 and $19,337, respectively						14,110		14,148
Goodwill		6,512		6,532		8,992		8,994
Other intangible assets, net		472		521		956		1,024
Restricted trust and escrow accounts		382		313		446		347
Investments in unconsolidated entities		439		483		417		426
Other assets		791		792		890		866
Total assets	$	26,619	$	27,743	$	29,037	$	29,345
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	904	$	1,065	$	1,393	$	1,121
Accrued liabilities		1,184		1,327		1,372		1,342
Deferred revenues		494		534		557		539
Current portion of long-term debt		3,190		218		361		551
Total current liabilities		5,772		3,144		3,683		3,553
Long-term debt, less current portion		9,598		13,280		12,883		13,259
Deferred income taxes		1,367		1,407		1,744		1,806
Landfill and environmental remediation liabilities		2,030		1,930		2,299		2,222
Other liabilities		959		912		1,074		1,051
Total liabilities		19,726		20,673		21,683		21,891
Commitments and contingencies
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		5,040		5,049		5,104		5,129
Retained earnings		10,795		10,592		11,444		11,159
Accumulated other comprehensive income (loss)		(41)		(8)		70		39
Treasury stock at cost, 208,118,292 and 205,956,366 shares, respectively		(8,909)		(8,571)
Treasury stock at cost, 209,467,208 and 207,480,827 shares, respectively						(9,272)		(8,881)
Total Waste Management, Inc. stockholders’ equity		6,891		7,068		7,352		7,452
Noncontrolling interests		2		2		2		2
Total equity		6,893		7,070		7,354		7,454
Total liabilities and equity	$	26,619	$	27,743	$	29,037	$	29,345

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions, Except per Share Amounts)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,


2020

2019

2020

2019
Operating revenues

$
3,561

$
3,946

$
7,290

$
7,642
Costs and expenses:





Operating

2,180

2,443

4,509

4,741
Selling, general and administrative

377

391

802

800
Depreciation and amortization

414

409

816

775
Restructuring

2

—

2

2
(Gain) loss from divestitures, asset impairments and unusual items, net

61

7

61

7

3,034

3,250

6,190

6,325
Income from operations

527

696

1,100

1,317
Other income (expense):



Interest expense, net

(119)

(100)

(231)

(196)
Loss on early extinguishment of debt

—

(84)

—

(84)
Equity in net losses of unconsolidated entities

(14)

(16)

(40)

(25)
Other, net

1

1

1

(53)

(132)

(199)

(270)

(358)
Income before income taxes

395

497

830

959
Income tax expense

88

115

162

230
Consolidated net income

307

382

668

729
Less: Net income (loss) attributable to noncontrolling interests

—

1

—

1
Net income attributable to Waste Management, Inc.

$
307

$
381

$
668

$
728
Basic earnings per common share

$
0.73

$
0.90

$
1.58

$
1.71
Diluted earnings per common share

$
0.72

$
0.89

$
1.57

$
1.70


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Operating revenues	$	4,476	$	3,561	$	8,588	$	7,290
Costs and expenses:
Operating		2,736		2,180		5,250		4,509
Selling, general and administrative		445		377		903		802
Depreciation and amortization		500		414		972		816
Restructuring		4		2		5		2
(Gain) loss from divestitures, asset impairments and unusual items, net		—		61		17		61
		3,685		3,034		7,147		6,190
Income from operations		791		527		1,441		1,100
Other income (expense):
Interest expense, net		(98)		(119)		(195)		(231)
Loss on early extinguishment of debt		(220)		—		(220)		—
Equity in net losses of unconsolidated entities		(11)		(14)		(20)		(40)
Other, net		(6)		1		(5)		1
		(335)		(132)		(440)		(270)
Income before income taxes		456		395		1,001		830
Income tax expense		105		88		229		162
Consolidated net income		351		307		772		668
Less: Net income (loss) attributable to noncontrolling interests		—		—		—		—
Net income attributable to Waste Management, Inc.	$	351	$	307	$	772	$	668
Basic earnings per common share	$	0.83	$	0.73	$	1.83	$	1.58
Diluted earnings per common share	$	0.83	$	0.72	$	1.82	$	1.57

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Millions)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,


2020

2019

2020

2019
Consolidated net income

$
307

$
382

$
668

$
729
Other comprehensive income (loss), net of tax:








Derivative instruments, net

3

2

5

4
Available-for-sale securities, net

14

4

5

9
Foreign currency translation adjustments

34

25

(42)

53
Post-retirement benefit obligation, net

(1)

—

(1)

(1)
Other comprehensive income (loss), net of tax

50

31

(33)

65
Comprehensive income

357

413

635

794
Less: Comprehensive loss attributable to noncontrolling interests

—

1

—

1
Comprehensive income attributable to Waste Management, Inc.

$
357

$
412

$
635

$
793


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

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)


	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2021		2020
Cash flows from operating activities:
Consolidated net income	$	668	$	729	$	772	$	668
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		816		775		972		816
Deferred income tax benefit		(35)		(12)		(67)		(35)
Interest accretion on landfill liabilities		49		47		53		49
Provision for bad debts		36		19		17		36
Equity-based compensation expense		23		43		45		23
Net gain on disposal of assets		(7)		(5)		(12)		(7)
(Gain) loss from divestitures, asset impairments and other, net		68		78
Loss from divestitures, asset impairments and other, net						17		68
Equity in net losses of unconsolidated entities, net of dividends		33		25		22		33
Loss on early extinguishment of debt		—		84		220		—
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		185		19		(24)		185
Other current assets		(1)		(5)		(22)		(1)
Other assets		14		4		9		14
Accounts payable and accrued liabilities		(171)		127		213		(171)
Deferred revenues and other liabilities		(57)		(28)		(52)		(57)
Net cash provided by operating activities		1,621		1,900		2,163		1,621
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		(1)		(440)		(10)		(1)
Capital expenditures		(895)		(1,049)		(666)		(895)
Proceeds from divestitures of businesses and other assets (net of cash divested)		15		20
Proceeds from divestitures of businesses and other assets, net of cash divested						17		15
Other, net		(37)		(96)		(49)		(37)
Net cash used in investing activities		(918)		(1,565)		(708)		(918)
Cash flows from financing activities:
New borrowings		—		3,971		1,707		—
Debt repayments		(705)		(385)		(2,326)		(705)
Premiums paid on early extinguishment of debt		—		(84)
Net commercial paper borrowings (repayments)		—		(1,001)
Premiums and other paid on early extinguishment of debt						(211)		—
Common stock repurchase program		(402)		(248)		(500)		(402)
Cash dividends		(466)		(440)		(489)		(466)
Exercise of common stock options		42		45		41		42
Tax payments associated with equity-based compensation transactions		(34)		(30)		(28)		(34)
Other, net		(10)		(6)		(4)		(10)
Net cash (used in) provided by financing activities		(1,575)		1,822
Net cash used in financing activities						(1,810)		(1,575)
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash equivalents		(3)		2		4		(3)
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents		(875)		2,159
Decrease in cash, cash equivalents and restricted cash and cash equivalents						(351)		(875)
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		3,647		183		648		3,647
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	2,772	$	2,342	$	297	$	2,772

Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end of period:
Cash and cash equivalents	$	2,663	$	2,250	$	148	$	2,663
Restricted cash and cash equivalents included in other current assets		41		18		56		41
Restricted cash and cash equivalents included in restricted trust and escrow accounts		68		74		93		68
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	2,772	$	2,342	$	297	$	2,772

See Notes to Condensed Consolidated Financial Statements.

WASTE MANAGEMENT, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN EQUITY

(In Millions, Except Shares in Thousands)

(Unaudited)

Waste Management, Inc. Stockholders’ Equity

Accumulated

Additional

Other

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Noncontrolling


Total

Shares

Amounts

Capital

Earnings

Income (Loss)

Shares

Amounts

Interests
Three Months Ended June 30:

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

2019

Balance, March 31, 2019

$
6,417

630,282

$
6

$
4,978

$
9,924

$
(53)

(205,556)

$
(8,440)

$
2
Consolidated net income

382

—

—

—

381

—

—

—

1
Other comprehensive income (loss), net of tax

31

—

—

—

—

31

—

—

—
Cash dividends declared of $0.5125 per common share

(217)

—

—

—

(217)

—

—

—

—
Equity-based compensation transactions, net

36

—

—

20

—

—

387

16

—
Common stock repurchase program

(180)

—

—

(36)

—

—

(1,314)

(144)

—
Other, net

(2)

—

—

—

—

—

1

—

(2)
Balance, June 30, 2019

$
6,467

630,282

$
6

$
4,962

$
10,088

$
(22)

(206,482)

$
(8,568)

$
1


			Waste Management, Inc. Stockholders’ Equity
										Accumulated
						Additional				Other
			Common Stock			Paid-In		Retained		Comprehensive		Treasury Stock			Noncontrolling
	Total		Shares	Amounts		Capital		Earnings		Income (Loss)		Shares	Amounts		Interests
Three Months Ended June 30:
2021
Balance, March 31, 2021	$	7,429	630,282	$	6	$	5,071	$	11,337	$	48	(208,201)	$	(9,035)	$	2
Consolidated net income		351	—		—		—		351		—	—		—		—
Other comprehensive income (loss), net of tax		22	—		—		—		—		22	—		—		—
Cash dividends declared of $0.575 per common share		(242)	—		—		—		(242)		—	—		—		—
Equity-based compensation transactions, net		44	—		—		33		(2)		—	310		13		—
Common stock repurchase program		(250)	—		—		—		—		—	(1,576)		(250)		—
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

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:

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

2019

Balance, December 31, 2018

$
6,276

630,282

$
6

$
4,993

$
9,797

$
(87)

(206,299)

$
(8,434)

$
1
Consolidated net income

729

—

—

—

728

—

—

—

1
Other comprehensive income (loss), net of tax

65

—

—

—

—

65

—

—

—
Cash dividends declared of $1.025 per common share

(440)

—

—

—

(440)

—

—

—

—
Equity-based compensation transactions, net

82

—

—

5

3

—

1,808

74

—
Common stock repurchase program

(244)

—

—

(36)

—

—

(1,993)

(208)

—
Other, net

(1)

—

—

—

—

—

2

—

(1)
Balance, June 30, 2019

$
6,467

630,282

$
6

$
4,962

$
10,088

$
(22)

(206,482)

$
(8,568)

$
1


			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. Waste Management, Inc. is a holding company and all operations are conducted by its subsidiaries. When the terms “the Company,” “we,” “us” or “our” are used in this document, those terms refer to Waste Management, Inc., its consolidated subsidiaries and consolidated variable interest entities. When we use the term “WM,” we are referring only to Waste Management, Inc., the parent holding company.

The Condensed Consolidated Financial Statements as of June 30, ~~2020~~2021 and for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~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, ~~2019.~~2020.

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

Revenue Recognition

We generally recognize revenue as services are performed or products are delivered. For example, revenue typically is recognized as waste is collected, tons are received at our landfills or transfer stations, or recycling commodities are collected or delivered as product. We bill for certain services prior to performance. Such services include, among others, certain commercial and residential contracts, and equipment rentals. These advance billings are included in deferred

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

revenues and recognized as revenue in the period service is provided. Substantially all our deferred revenues during the reported periods are realized as revenues within one to three months when the related services are performed.

~~WASTE MANAGEMENT, INC.~~

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

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 5five to 13 years. Contract acquisition costs that are paid to the customer are deferred and amortized as a reduction in revenue over the contract life. Our contract acquisition costs are classified as current or noncurrent based on the timing of when we expect to recognize amortization and are included in other assets in our Condensed Consolidated Balance Sheet.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$159~~$170 million and ~~$153~~$159 million, respectively, of deferred contract costs, of which ~~$117~~$121 million ~~at each date was~~and $118 million, respectively, were related to deferred sales incentives. During each of the ~~three~~three- and ~~six months~~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, and $3 million and $5 million of other contract acquisition costs as a reduction in revenue, respectively. During the three and six months ended June 30, 2019, we amortized $6 million and $11 million of sales incentives to selling, general and administrative expense, and $5 million and $11 million of other contract acquisition costs as a reduction in revenue, respectively.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, 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.

~~Adoption of New Accounting Standards~~

Fi~~nancial Instruments-Credit Losses~~ — In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 associated with the measurement of credit losses on financial instruments. On January 1, 2020, we adopted this ASU using the modified retrospective transition method. The amended guidance replaced the previous incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to assess credit loss estimates. This expected loss model generally results in earlier recognition of an allowance for losses. We recognized a net $2 million after tax decrease to retained earnings as of January 1, 2020 for the cumulative impact of adopting the amended guidance.

Our receivables, which are recorded when billed, when services are performed or when cash is advanced, are claims against third parties that will generally be settled in cash. The carrying value of our receivables, net of the allowance for

~~WASTE MANAGEMENT, INC.~~

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

doubtful accounts, represents the estimated net realizable value. Past-due receivable balances are written off when our internal collection efforts have been unsuccessful. Also, we recognize interest income on long-term interest-bearing notes receivable as the interest accrues under the terms of the notes. We no longer accrue interest once the notes are deemed uncollectible.

For trade receivables the Company relies upon, among other factors, historical loss trends, the age of outstanding receivables, and existing as well as expected economic conditions. Due to the adoption of ASU 2016-13, we recognized a $1 million pre-tax decrease to our allowance for doubtful accounts on trade receivables. We determined that all of our trade receivables share similar risk characteristics. We monitor our credit exposure on an ongoing basis and assess whether assets in the pool continue to display similar risk characteristics.

In January 2020, a novel strain of coronavirus (“COVID-19”) was declared a Public Health Emergency of International Concern and subsequently declared a global pandemic in March 2020. 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 waste services safely and efficiently. With this in mind, we have extended payment terms and postponed discontinuing service for customers who have been negatively impacted by the COVID-19 pandemic which has contributed to an increase in the aging of outstanding balances.

As of June 30, 2020, we had $1,888 million of trade receivables, net of allowance of $46 million. The allowance for doubtful accounts has increased by $18 million during 2020, largely due to the COVID-19 pandemic. Based on an aging analysis as of June 30, 2020, approximately 85% of our trade receivables were outstanding less than 60 days.

~~The following table reflects the activity in our allowance for doubtful accounts of trade receivables for the six months ended June 30 (in millions):~~

2020

2019
Balance as of January 1,

$
28

$
29
Adoption of new accounting standard

(1)

—
Additions charged to expense

36

19
Accounts written-off, net of recoveries

(16)

(23)
Acquisitions, divestitures and other, net

(1)

3
Balance as of June 30,

$
46

$
28

For other receivables as well as loans and other instruments, the Company relies primarily on credit ratings and associated default rates based on the maturity of the instrument. All receivables, as well as other instruments, are adjusted for our expectation of future market conditions and trends. Due to the adoption of ASU 2016-13, we recognized a $4 million pre-tax increase to our allowance for doubtful accounts on notes and other receivables. As of June 30, 2020, we had $386 million of notes and other receivables, net of allowance of $4 million. Based on an aging analysis as of June 30, 2020, approximately 55% of our other receivables were due within 12 months or less.

~~Implementation Costs Incurred in a Cloud Computing Arrangement~~ — In August 2018, the FASB issued ASU 2018-15 associated with a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs for implementation activities in the application development stage are capitalized as prepayments depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The Company adopted this amended guidance on January 1, 2020 prospectively, and it did not have a material impact on our consolidated financial statements.

~~WASTE MANAGEMENT, INC.~~

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

~~Guarantor Financial Information~~— In March 2020, the SEC adopted final rules that simplify the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rules 3-10 and 3-16, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities (which we previously included within the notes to our financial statements included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q) if certain conditions are met. The disclosure requirements, as amended, are now located in newly-created Rules 13-01 and 13-02 of Regulation S-X and are generally effective for filings on or after January 4, 2021, with early adoption permitted. We early adopted the new disclosure requirements effective as of April 1, 2020 and are providing the summarized financial information and related disclosures in Item 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~in this Form 10-Q.~~

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, 2020						December 31, 2019						June 30, 2021						December 31, 2020
			Environmental						Environmental						Environmental						Environmental
	Landfill		Remediation		Total		Landfill		Remediation		Total		Landfill		Remediation		Total		Landfill		Remediation		Total
Current (in accrued liabilities)	$	108	$	26	$	134	$	138	$	27	$	165	$	129	$	26	$	155	$	138	$	26	$	164
Long-term		1,814		216		2,030		1,717		213		1,930		2,105		194		2,299		2,018		204		2,222
	$	1,922	$	242	$	2,164	$	1,855	$	240	$	2,095	$	2,234	$	220	$	2,454	$	2,156	$	230	$	2,386

The changes to landfill and environmental remediation liabilities for the six months ended June 30, ~~2020~~2021 are reflected in the table below (in millions):

Environmental


Landfill

Remediation
December 31, 2019

$
1,855

$
240
Obligations incurred and capitalized

40


—
Obligations settled

(47)


(11)
Interest accretion

49


1
Revisions in estimates and interest rate assumptions (a) (b)

27


12
Acquisitions, divestitures and other adjustments

(2)


—
June 30, 2020

$
1,922

$
242

~~(a)~~

The amount reported for our landfill liabilities includes (i) a $10 million increase in estimated construction costs for capping at certain landfills and (ii) an increase of $8 million due to a business decision to close one of our landfills, which resulted in the acceleration of the expected timing of capping, closure and post-closure activities. This business decision also resulted in an impairment that is discussed in Note 9.

~~(b)~~

The amount reported for our environmental remediation liabilities includes an increase of $12 million due to a decrease in the risk-free discount rate used to measure our liabilities from 1.75% at December 31, 2019 to 0.75% at June 30, 2020.


			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

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.

~~WASTE MANAGEMENT, INC.~~

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

Generally, these trust funds are established to comply with statutory requirements and operating agreements. See Note 13 for additional information related to these trusts.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Debt ~~and Interest Rate Derivatives~~

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, ~~2020:~~2021:

June 30,

December 31,

2020

2019
Senior notes, maturing through 2049, interest rates ranging from 2.4% to 7.75% (weighted average interest rate of 3.9% as of June 30, 2020 and December 31, 2019)

$
9,365

$
9,965
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%

368

385
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from 0.1% to 4.3% (weighted average interest rate of 2.1% as of June 30, 2020 and 2.3% as of December 31, 2019)

2,471

2,523
Financing leases and other, maturing through 2071, weighted average interest rate of 4.75%

664

710
Debt issuance costs, discounts and other

(80)

(85)

12,788

13,498
Current portion of long-term debt

3,190

218

$
9,598

$
13,280


	June 30,		December 31,
	2021		2020
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
Canadian senior notes, C$500 million maturing September 2026, interest rate of 2.6%		403		393
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
Debt issuance costs, discounts and other		(82)		(85)
		13,244		13,810
Current portion of long-term debt		361		551
	$	12,883	$	13,259

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

Debt Classification

~~May 2019 Senior Notes~~ —As of June 30, ~~2020,~~2021 we had $3.0 billion of senior notes due 2024, 2026, 2029 and 2039 with a special mandatory redemption feature (the “SMR Notes”). The SMR Notes were issued in May 2019 with the intention of paying a portion of the consideration related to our pending acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”), which is discussed further in Note 8. Pursuant to the terms of the SMR Notes, we were required to redeem all of such outstanding notes equal to 101% of the aggregate principal amounts of such notes, plus accrued but unpaid interest, as a result of the acquisition not being completed by July 14, 2020. Accordingly, on July 15, 2020, the Company provided notice of the special mandatory redemption, and the redemption was completed on July 20, 2020. As of June 30, 2020, we classified the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, as current obligations.

~~Other Debt~~ — ~~As of June 30, 2020, in addition to the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, discussed above, we had $1.3~~$2.9 billion of debt maturing within the next 12 months, including (i) ~~$400 million~~$1.5 billion of ~~4.60% senior notes that mature in March 2021;~~short-term borrowings under our commercial paper program (net of related discount on issuance); (ii) ~~$734 million~~$1.2 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities and (iii) $212 million of other debt with scheduled maturities within the next 12 months, including ~~$106~~$103 million of tax-exempt bonds. As of June 30, ~~2020,~~2021, we have classified ~~$1.1~~$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 ~~$212~~$361 million of debt maturing in the next 12 months is classified as current obligations.

As of June 30, ~~2020,~~2021, we also had ~~$108~~$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

~~WASTE MANAGEMENT, INC.~~

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

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 ~~$108~~$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, ~~2020.~~2021.

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 CDOR, respectively, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service and Standard and Poor’s. As of June 30, ~~2020,~~2021, we had 0 outstanding borrowings under this facility. We had ~~$362~~$266 million of letters of credit issued ~~which were~~and $1.5 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program, both supported by ~~this~~the facility, leaving unused and available credit capacity of ~~$3.1~~$1.7 billion as of June 30, ~~2020.~~2021. WM Holdings, a wholly-owned subsidiary of WM, 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, ~~2020,~~2021, we had 0$1.5 billion of outstanding borrowings (net of related discount on issuance) under our commercial paper program.

Other Letter of Credit ~~Facilities~~Lines — As of June 30, ~~2020,~~2021, we had utilized ~~$528~~$615 million of other uncommitted letter of credit ~~facilities, which are both committed and uncommitted,~~lines with terms maturing through June ~~2021.~~2022.

Debt Borrowings and Repayments

~~Senior Notes~~ ~~— During the six months ended June 30, 2020, we repaid $600 million of 4.75% senior notes that matured in June 2020 with available cash.~~

~~Canadian Senior Notes~~ ~~— The $17 million decrease during the six months ended June 30, 2020 is due to decreases in the Canadian currency translation rate.~~

~~Tax-Exempt Bonds~~Commercial Paper Program — During the six months ended June 30, ~~2020,~~2021, we made cash repayments of $954 million, which were partially offset by $640 million 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 ~~$52~~$24 million of our tax-exempt bonds with available ~~cash.~~cash at their scheduled maturities.

Financing Leases and Other — The decrease during the six months ended June 30, ~~2020~~2021 is due to ~~$53~~$59 million of cash repayments ~~primarily related to our federal low-income housing investments, financing leases and other obligations,~~of debt at maturity, partially offset by an increase of $7$32 million primarily associated with non-cash financing ~~arrangements.~~leases.

~~Interest Rate Derivatives~~4. Income Taxes

~~During the first half of 2020, we entered into treasury~~Our effective income tax rate locks with a total notional value of $400 million to secure an underlying interest rate in anticipation of a debt issuance previously anticipated in the second quarter of 2020. We designated our treasury locks as cash flow hedges. In June 2020, we terminated these treasury rate lockswas 22.9% and upon termination received $1 million in cash. We are now evaluating a potential debt issuance to occur during the second half of the year, subject to market conditions and other considerations. As we currently believe that a debt issuance in 2020 is still probable to occur, the gain associated with these treasury rate locks has been deferred as a component of “Accumulated other comprehensive income” and will be amortized to interest expense over the debt term once the issuance occurs.

~~All financial statement impacts associated with these financial hedges were immaterial as of and~~22.8% for the three and six months ended June 30, ~~2020. There~~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, 2021 with the prior year period was ~~no significant ineffectiveness~~due to (i) a decrease in the benefits realized on tax audit settlements 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 ~~our cash flow hedges during the~~equity-based compensation and (ii) favorable adjustments to accruals and related deferred taxes recorded in 2020.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~three or six months ended June 30, 2020. Refer to Note 10 for information regarding the impacts of our cash flow derivatives on our comprehensive income and results of operations.~~

~~4. Income Taxes~~

Our effective income tax rate was 22.2% and 19.5% for the three and six months ended June 30, 2020, respectively, compared with 23.3% and 24.0% for the three and six months ended June 30, 2019, respectively. The decrease in our effective income tax rate when comparing the current and prior year periods was primarily driven by (i) a decrease in pre-tax income in 2020, which increased the effective tax rate impact of our federal tax credits, and to a lesser extent; (ii) $52 million non-cash impairment charge recognized in 2019 that was not deductible for tax purposes and (iii) excess tax benefits associated with equity-based compensation, which were slightly higher in 2020 than in the prior year. These items are 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. 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 under Section 42 or Section 45D of the Internal Revenue Code. We also held a residual financial interest in an entity that ~~owns~~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. 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, 2021, we recognized $12 million and $21 million, respectively, 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, 2021 of $16 million and $32 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, 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 ~~and~~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, ~~primarily~~ due to federal tax credits realized from these ~~investments.~~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.

During the three and six months ended June 30, 2019, we recognized $12 million and $21 million of net losses and a reduction in our income tax expense of $18 million and $33 million, respectively, primarily due to tax credits realized from these investments. In addition, during the three and six months ended June 30, 2019, we recognized interest expense of $2 million and $4 million, respectively, associated with our investments in low-income housing properties.

See Note 13 for additional information related to these unconsolidated variable interest entities.

~~Equity-Based Compensation~~Tax Audit Settlements — During the three months ended June 30, 2021 and 2020, we settled various tax audits, which resulted in a reduction in our income tax expense of $1 million and $5 million, respectively.

Adjustments to Accruals and Related Deferred Taxes — During the ~~three and six months ended June 30,~~first quarter of 2020, we recognized a reduction in our income tax expense of $2$6 million for adjustments to accruals and ~~$23 million, respectively, for excess tax benefits~~ related ~~to the vesting or exercise of equity-based compensation awards compared with $5 million and $17 million, respectively, for the comparable prior year periods.~~

~~Tax Implications of Impairments~~ — We recognized a $52 million non-cash impairment charge in the first quarter of 2019 which was not deductible for tax purposes. The non-cash impairment charges recognized during the three and six months ended June 30, 2020 are deductible for tax purposes. See Note 9 for additional information related to the impairments.

~~Recent Legislation~~ — On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions,deferred taxes.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

none of which directly affected our income tax expense for the three and six months ended June 30, 2020 or are expected to have a material impact on our income tax expense in future reporting periods. The Company is evaluating the impact of the CARES Act and expects to benefit from the deferral of certain payroll taxes through the end of calendar year 2020.

5. Earnings Per Share

Basic and diluted earnings per share were computed using the following common share data (shares in millions):


	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2020	2019	2020	2019	2021	2020	2021	2020
Number of common shares outstanding at end of period	422.2	423.8	422.2	423.8	420.8	422.2	420.8	422.2
Effect of using weighted average common shares outstanding	0.1	1.0	1.0	0.8	0.8	0.1	1.5	1.0
Weighted average basic common shares outstanding	422.3	424.8	423.2	424.6	421.6	422.3	422.3	423.2
Dilutive effect of equity-based compensation awards and other contingently issuable shares	1.6	2.7	1.9	2.6	2.0	1.6	1.7	1.9
Weighted average diluted common shares outstanding	423.9	427.5	425.1	427.2	423.6	423.9	424.0	425.1
Potentially issuable shares	6.5	7.2	6.5	7.2	6.1	6.5	6.1	6.5
Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding	2.1	1.1	2.1	1.9	0.6	2.1	1.0	2.1

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 ~~facilities~~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 as a result of COVID-19 or other economic factors.~~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. Our exposure could increase if our insurers are unable to meet their commitments on a timely basis.

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

~~WASTE MANAGEMENT, INC.~~

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

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, WM and WM Holdings enter into guarantee agreements associated with their subsidiaries’ operations. Additionally, WM 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, ~~2020,~~2021 we have guaranteed the obligations and certain performance requirements of third parties in connection with both consolidated and unconsolidated entities, including guarantees to cover certain market value losses for certain properties adjacent to or near 18 of our landfills. Additionally, in connection with the divestiture of our Wheelabrator business in 2014, we agreed to continue providing guarantees of certain of its operational and financial performance obligations. During the second quarter of 2020, we were released from the last outstanding guarantee and all outstanding guarantees have now been returned, replaced or expired by their terms. We have also agreed to indemnify certain third-party purchasers against liabilities associated with divested operations prior to such sale. Additionally, under certain of our acquisition agreements, we have provided for additional consideration to be paid to the sellers if established financial targets or other market conditions are achieved post-closing, and we have recognized liabilities for these contingent obligations based on an estimate of the fair value of these contingencies at the time of acquisition. 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, and we do not expect the financial impact of operational and financial performance guarantees to materially exceed the recorded fair value.~~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 ~~$145~~$135 million higher than the ~~$242~~$220 million recorded in the Condensed Consolidated Balance Sheet as of June 30, ~~2020.~~2021. 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 June 30, ~~2020,~~2021, we have been notified by the government that we are a PRP in connection with 7573 locations listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”). Of the 7573 sites at which claims have been made against us, 1514 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

~~WASTE MANAGEMENT, INC.~~

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

evaluate 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 6059 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 in Harris County, Texas. McGinnes Industrial Maintenance Corporation (“MIMC”), an indirect wholly-owned subsidiary of WM, operated some of the waste pits from 1965 to 1966 and has been named as a site PRP. In 1998, WM 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, ~~2020~~2021 and December 31, ~~2019,~~2020, the recorded liability for MIMC’s estimated potential share of the EPA’s proposed remedy and related costs was ~~$56 million.~~$53 million and $55 million, respectively. MIMC’s ultimate liability could be materially different from current estimates.

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, ~~of less than $100,000. The following matters are disclosed in~~below a stated threshold. In accordance with ~~that requirement:~~

~~On July 10, 2013,~~this SEC regulation, the ~~EPA issued~~Company uses a ~~Notice~~threshold of ~~Violation ("NOV") to Waste Management~~$1 million for purposes of ~~Wisconsin, Inc., an indirect wholly-owned subsidiary~~determining whether disclosure of ~~WM, alleging violations~~any such environmental proceedings is required. As of the ~~Resource Conservation and Recovery Act concerning acceptance~~date of ~~certain waste~~this filing, we are not aware of any matters that ~~was not permitted~~are required to be ~~disposed of at the Metro Recycling & Disposal Facility in Franklin, Wisconsin. The parties have agreed~~disclosed pursuant to ~~resolve~~ this matter through payment of a penalty, implementation of additional monitoring activities and revisions to waste acceptance protocols at the facility. The related Consent Decree is expected to become final in the third quarter of 2020. The outcome of this matter will not be material to the Company’s business, financial condition, results of operations or cash flows.standard.

On November 25, 2019, the Georgia Department of Natural Resources, Environmental Protection Division, issued an NOV to Waste Management of Metro Atlanta, Inc., an indirect wholly-owned subsidiary of WM. The NOV alleges violations of Georgia environmental statutes and the related permits for Pine Bluff Landfill resulting from slope stability concerns at the landfill that are being remediated. On June 11, 2020, the parties resolved the matter through a Consent Order requiring payment of a penalty and the implementation of additional corrective actions, monitoring and reporting at the landfill. The outcome of this matter is not material to the Company’s business, financial condition, results of operations or cash flows.

~~WASTE MANAGEMENT, INC.~~

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

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 — 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 charter and bylaws provide that WM 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 Board of Directors and each of WM’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

~~WASTE MANAGEMENT, INC.~~

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

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 IRS audits for the 2017 through ~~2020~~2021 tax years and expect these audits to be completed within the next 21 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 and manage the financial performance of our Solid Waste business subsidiaries through our Areas. In the second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17 ~~Areas.~~to 16. The 1716 Areas constitute operating segments and we have evaluated the aggregation 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 1716 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.

In17

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of the ~~fourth quarter of 2019, as part~~combination of our ~~annual review process,~~Eastern and Western Canada Areas, we analyzed ~~the~~all 16 Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect ~~recent~~ changes in their relative economic characteristics and prospects. These changes are the results of various factors including acquisitions, divestitures, business mix and the economic climate of various geographies. As a result, we reclassified Western Canada from Tier 1 to Tier 2 and Northern California from Tier 3 to Tier 2. Reclassifications have been made to our prior period condensed consolidated financial information to conform to the current year presentation.

Tier 1 is comprised of our operations across the Southern U.S., with the exception of the Southern California Area and the Florida Area, and also includes the New England Area and the tri-state Area of Michigan, Indiana and Ohio. Tier 2 includes California, Canada, and the Wisconsin and Minnesota Area. Tier 3 encompasses all the remaining operations including the Pacific Northwest, the Mid-Atlantic region of the U.S., the Florida Area, and the Illinois and Missouri Valley Area.

The operating segments not evaluated and overseen through the 1716 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 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)

~~Summarized financial information concerning our reportable segments is shown in the following table (in millions):~~

Gross

Intercompany

Net

Income

Operating

Operating

Operating

from


Revenues

Revenues(c)

Revenues

Operations(d)
Three Months Ended June 30:








2020








Solid Waste:








Tier 1

$
1,418

$
(271)

$
1,147

$
316
Tier 2

897

(190)

707

182
Tier 3

1,453

(275)

1,178

222
Solid Waste

3,768

(736)

3,032

720
Other (a)

554

(25)

529

(10)

4,322

(761)

3,561

710
Corporate and Other (b)

—

—

—

(183)
Total

$
4,322

$
(761)

$
3,561

$
527

2019








Solid Waste:








Tier 1

$
1,573

$
(293)

$
1,280

$
434
Tier 2

995

(199)

796

230
Tier 3

1,631

(311)

1,320

282
Solid Waste

4,199

(803)

3,396

946
Other (a)

580

(30)

550

(49)

4,779

(833)

3,946

897
Corporate and Other (b)

—

—

—

(201)
Total

$
4,779

$
(833)

$
3,946

$
696

~~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(c)		Revenues		Operations(d)		Revenues		Revenues(d)		Revenues		Operations
Six Months Ended June 30:
2021
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
Solid Waste(a)										9,012		(1,763)		7,249		1,974
Other ~~(a)~~(b)										1,394		(55)		1,339		22
										10,406		(1,818)		8,588		1,996
Corporate and Other ~~(b)~~(c)										—		—		—		(555)
Total									$	10,406	$	(1,818)	$	8,588	$	1,441

2020
Solid Waste:
Tier 1	$	2,921	$	(551)	$	2,370	$	709	$	1,999	$	(360)	$	1,639	$	558
Tier 2		1,829		(388)		1,441		370		2,450		(517)		1,933		477
Tier 3		2,994		(569)		2,425		486		3,295		(631)		2,664		532
Solid Waste(a)		7,744		(1,508)		6,236		1,565		7,744		(1,508)		6,236		1,567
Other ~~(a)~~(b)		1,108		(54)		1,054		(35)		1,108		(54)		1,054		(35)
		8,852		(1,562)		7,290		1,530		8,852		(1,562)		7,290		1,532
Corporate and Other ~~(b)~~(c)		—		—		—		(430)		—		—		—		(432)
Total	$	8,852	$	(1,562)	$	7,290	$	1,100	$	8,852	$	(1,562)	$	7,290	$	1,100

2019
Solid Waste:
Tier 1	$	3,026	$	(558)	$	2,468	$	832
Tier 2		1,899		(381)		1,518		430
Tier 3		3,139		(590)		2,549		552
Solid Waste(a)		8,064		(1,529)		6,535		1,814
Other ~~(a)~~(b)		1,168		(61)		1,107		(67)
		9,232		(1,590)		7,642		1,747
Corporate and Other ~~(b)~~(c)		—		—		—		(430)
Total	$	9,232	$	(1,590)	$	7,642	$	1,317

(a)

“Other” includes (i) our Strategic Business Solutions (“WMSBS”) organization; (ii) those elements of our landfill gas-to-energy operations and third-party subcontract and administration revenues managed by our Energy and Environmental Services (“EES”) and WM Renewable Energy organizations that are not included in the operations of our reportable segments; (iii) our recycling brokerage services and (iv) certain other expanded service offerings and solutions. In addition, our “Other” segment reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

~~(b)~~

Corporate 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, information technology, 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 and any administrative expenses or revisions to our estimated obligations associated with divested operations.

~~(c)~~

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.

~~(d)~~

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. In 2020, we revised allocations between our segments including (i) the discontinuation of certain allocations from Corporate and Other to Solid Waste and (ii) allocating certain insurance costs from Other to Solid Waste. Reclassifications have been made to our prior period information for comparability purposes.

The increase in income from operations across the Tiers was primarily due to (i) revenue growth in our collection and disposal businesses driven by both 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. These increases were partially offset by (i) higher incentive compensation costs; (ii) inflationary cost pressures and (iii) increased overtime driven by increased volumes 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.

(b)

“Other” includes (i) our Strategic Business Solutions (“WMSBS”) business; (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

2019

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

~~In the second quarter of 2020, we recognized $61 million of non-cash impairment charges, including $41 million related to~~The increase in income from operations was primarily driven by (i) increased market values for renewable energy credits generated by our ~~energy services assets in~~WM Renewable Energy business; (ii) increased revenues for our Tier 1 segment. Refer to Note 9 for additional information. Our 2020 operating results were also negatively impacted by revenue declines in our landfill, industrial and commercial collection businesses beginning in March 2020WMSBS 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 ~~COVID-19 pandemic.~~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.

(c)

“Corporate and Other” operating results reflect certain costs incurred for various support services that are not allocated to our reportable segments. These support services include, among other things, treasury, legal, digital, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills. Income from operations for “Corporate and Other” also includes costs associated with our long-term incentive program.

The increase in these costs was driven by (i) higher incentive compensation costs; (ii) strategic investments in our digital platform; (iii) increases in health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (iv) increased labor and support costs from 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.

The mix of operating revenues from our major lines of business are as follows (in millions):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Commercial	$	928	$	1,052	$	1,991	$	2,078	$	1,178	$	928	$	2,309	$	1,991
Residential		657		655		1,307		1,295		794		657		1,576		1,307
Industrial		625		744		1,318		1,424		811		625		1,554		1,318
Other collection		115		122		227		231		135		115		251		227
Total collection		2,325		2,573		4,843		5,028		2,918		2,325		5,690		4,843
Landfill		874		1,023		1,761		1,887		1,075		874		1,990		1,761
Transfer		439		474		880		886		532		439		997		880
Recycling		275		264		529		555		397		275		739		529
Other (a)		409		445		839		876		513		409		990		839
Intercompany (b)		(761)		(833)		(1,562)		(1,590)		(959)		(761)		(1,818)		(1,562)
Total	$	3,561	$	3,946	$	7,290	$	7,642	$	4,476	$	3,561	$	8,588	$	7,290

(a)

The “Other” line of business includes (i) certain services provided by our WMSBS ~~organization;~~business; (ii) our landfill gas-to-energy operations; (iii) certain services within our EES ~~organization,~~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. ~~Activity related~~Revenue attributable to collection, landfill, transfer and recycling ~~within~~services provided by our “Other” businesses has been ~~reclassified to~~reflected as a component of the ~~appropriate~~relevant line of business for purposes of ~~the~~ 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. ~~Typically, our~~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.

~~Our 2020~~Prior year period operating results were negatively impacted by COVID-19, as volumes declined beginning in March 2020 ~~and continued through the second quarter~~ 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. For customers negatively impacted by the COVID-19 pandemic, we have proactively waived and suspended certain ancillary service charges, deferred certain annual price increases, extended payment terms and adjusted customer service levels. Additionally, for qualifying small and medium businesses, we have provided customers with one-month of free service upon re-opening. While the customer-centric steps have also contributed to this revenue decline, these impacts have been relatively immaterial.

~~WASTE MANAGEMENT, INC.~~

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

our operations in the Southern and Eastern U.S. during the second half of the year, can increase our revenues in the Areas affected as a result of the waste volumes generated by these events. While weather-related and other ~~event driven~~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. ~~Acquisitions~~

~~Pending~~ Acquisition

~~Advanced Disposal~~—~~On April 14, 2019, we entered into an Agreement and Plan of Merger to acquire all outstanding shares~~ of Advanced Disposal ~~for $33.15 per share in cash, representing a total enterprise value at the time of $4.9 billion when including approximately $1.9 billion of Advanced Disposal’s net debt.~~

On ~~June 24,~~October 30, 2020, we ~~entered into an amendment to~~completed the ~~Agreement and Plan~~acquisition of ~~Merger (as amended, the “Merger Agreement”), pursuant to which a subsidiary of WM will acquire~~ all outstanding shares of Advanced Disposal for $30.30 per share in cash, ~~representing a total~~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. ~~Advanced Disposal’s solid~~This acquisition grows our footprint and allows us to provide differentiated, sustainable waste ~~network includes 95 collection operations, 73 transfer stations, 41 owned or operated landfills~~management and ~~22 owned or operated~~ recycling ~~facilities. We currently expect~~services to approximately 3 million new commercial, industrial, and residential customers, primarily located in the ~~acquisition to close by the end~~Eastern half of the third quarter of 2020. The Merger Agreement provides that the Company and Advanced Disposal will have a mutual right to terminate the Merger Agreement after September 30, 2020 if the closing has not occurred, and that date will automatically extend to November 30, 2020 under certain circumstances.

On June 24, 2020, we also announced that we and Advanced Disposal have entered into an agreement, whereby GFL Environmental will acquire a combination of assets from us and Advanced Disposal for $835 million to address substantially all of the divestitures expected to be required by the U.S. Department of Justice in connection with the Advanced Disposal acquisition. As with the Advanced Disposal acquisition, the sale of assets to GFL Environmental remains subject to clearance from the U.S. Department of Justice and is also conditioned on the closing of our acquisition of Advanced Disposal.

~~2019 Acquisition~~

~~Petro Waste Environmental LP (“Petro Waste”)~~ —On March 8, 2019, Waste Management Energy Services Holdings, LLC, an indirect wholly-owned subsidiary of WM, acquired Petro Waste. The acquired business provides comprehensive oilfield environmental services and solid waste disposal facilities in the Permian Basin and the Eagle Ford Shale. The acquisition has expanded our offerings and enhanced the quality of solid waste disposal services for oil and gas exploration and production operations in Texas. Our purchase price was primarily allocated to 7 landfills, which are included in our property and equipment.

The acquisition was funded ~~with borrowings under~~using a $3.0 billion, 364-day, U.S. revolving credit facility and our commercial paper ~~program~~program. In November 2020, we issued $2.5 billion of senior notes and ~~the acquisition accounting for this transaction was finalized in 2019. The operating results~~used a portion of the ~~acquired business did not have a material impact~~proceeds to ~~our~~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 ~~periods presented herein. Given~~purchase method of accounting, the ~~significant change in energy market dynamics from~~purchase price paid has been allocated to the ~~time~~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 ~~seen a decline in the~~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 ~~certain~~$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 ~~assets~~operations as they are benefiting from the ~~time~~synergies of ~~acquisition.~~ the combination. Goodwill related to this acquisition is not deductible for income tax purposes.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The ~~impairment recognized during~~following table shows the ~~three~~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, ~~2020 is discussed further~~2021, we recognized net charges of $17 million in ~~Note 9.~~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)

~~9. Asset Impairments and Unusual Items~~Segment. These charges were partially offset by an $8 million gain from divestitures of certain ancillary operations in our Other segment.

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

During the ~~second quarter of~~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 12 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 12 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. ~~The Company tested the recoverability of an additional $239 million in energy services assets and determined that the carrying amount was recoverable 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, which is discussed further in Note 2.~~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 ~~Notes 4 and 13.~~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).

~~Other, Net~~

During the first quarter of 2019, we recognized a $52 million non-cash impairment charge related to our minority-owned investment in a waste conversion technology business. We wrote down our investment to its estimated fair value as the result of a third-party investor’s transactions in these securities. The fair value of our investment was not readily determinable; thus, we determined the fair value utilizing a combination of quoted price inputs for the equity in our investment (Level 2) and certain management assumptions pertaining to investment value (Level 3).

~~WASTE MANAGEMENT, INC.~~

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

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-

Available-

Currency

Retirement

Derivative

for-Sale

Translation

Benefit


Instruments

Securities

Adjustments(a)

Obligations

Total
December 31, 2019

$
(24)

$
38

$
(21)

$
(1)

$
(8)
Other comprehensive income (loss) before reclassifications, net of tax expense (benefit) of $0, $2, $0 and $0, respectively

1

5

(42)

—

(36)
Amounts reclassified from accumulated other comprehensive (income) loss, net of tax (expense) benefit of $1, $0, $0 and $0, respectively

4

—

—

(1)

3
Net current period other comprehensive income (loss)

5

5

(42)

(1)

(33)
June 30, 2020

$
(19)

$
43

$
(63)

$
(2)

$
(41)

~~(a)~~

~~Foreign currency translation adjustments were impacted by a decrease in the Canadian/U.S. dollar exchange rate from 0.7698 at December 31, 2019 to 0.7366 at June 30, 2020.~~


					Foreign		Post-
			Available-		Currency		Retirement
	Derivative		for-Sale		Translation		Benefit
	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
Net current period other comprehensive income (loss)		7		(2)		26		—		31
Balance, June 30, 2021	$	(2)	$	47	$	25	$	—	$	70

We had interest rate derivatives outstanding during the first half of 2020, which were classified as a cash flow hedges and are discussed further in Note 3. In June 2020, we terminated these treasury rate locks and received $1 million in cash. We are now evaluating a potential debt issuance to occur during the second half of the year, subject to market conditions and other considerations. As we currently believe that a debt issuance in 2020 is still probable to occur, the gain associated with these treasury rate locks has been deferred as a component of “Accumulated other comprehensive income” and will be amortized to interest expense over the debt term once the issuance occurs. We had 0 active derivatives outstanding during 2019. Amounts reclassified out of accumulated other comprehensive income (loss) associated with our previously terminated cash flow hedges were not material for the periods presented.

WASTE MANAGEMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. 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 ~~2020,~~2021, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase ~~$313~~$250 million of our common stock. At the beginning of the repurchase period, we delivered ~~$313~~$250 million cash and received ~~2.0~~1.8 million shares based on a stock price of ~~$125.75.~~$110.56. The ASR agreement completed in ~~March 2020,~~the second quarter of 2021, at which time we received ~~0.8~~0.2 million additional shares based on a final weighted average price of ~~$111.78.~~$126.83.

~~During the first quarter of 2020,~~In May 2021, we ~~also began repurchasing shares~~entered into an ASR agreement to repurchase $250 million of our common ~~stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18~~stock. At the beginning of the ~~Exchange Act. This~~ repurchase ~~program ended~~period, we delivered $250 million cash and received 1.4 million shares based on ~~March 27, 2020~~a stock price of $141.42. The final number of shares to be repurchased and ~~we repurchased 0.9 million shares. Cash paid for these share repurchases was $89 million, inclusive of per-share commissions, which represents a weighted~~the final average price per share under the ASR agreement will depend on the volume-weighted average price of ~~$99.96.~~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, ~~2020,~~2021, the Company has authorization for ~~$918~~$850 million of future share repurchases. ~~To enhance our liquidity position in response to COVID-19, we elected to temporarily suspend additional share repurchases for the foreseeable future.~~ 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.

~~WASTE MANAGEMENT, INC.~~

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

12. 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,		June 30,		December 31,
	2020		2019		2021		2020
Fair Value Measurements Using:
Quoted prices in active markets (Level 1):
Cash equivalents and money market funds(a)	$	2,616	$	3,527	$	87	$	530
Significant other observable inputs (Level 2):
Available-for-sale securities ~~(a)~~(b)		397		350		447		390
Significant unobservable inputs (Level 3):
Redeemable preferred stock ~~(b)~~(c)		49		49		49		49
Total Assets	$	3,062	$	3,926	$	583	$	969

(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 ~~generally mature~~primarily relate to debt securities with maturities over the next nine years.

~~(b)~~(c)

When available, Level 3 investments have 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, ~~2020~~2021 and December 31, ~~2019,~~2020, the carrying value of our debt was ~~$12.8~~$13.2 billion and ~~$13.5~~$13.8 billion, respectively. The estimated fair value of our debt was approximately ~~$13.9~~$14.0 billion and ~~$14.5~~$15.2 billion as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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. Furthermore, the fair value of debt instruments measured as of June 30, 2020 is particularly susceptible to variability from future measurements of fair value given elevated volatility in key market factors due to the impact the COVID-19 pandemic is having on financial markets. 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, ~~2020~~2021 and December 31, ~~2019.~~2020. These amounts have not been revalued since those dates, and current estimates of fair value could differ significantly from the amounts presented.

13. Variable Interest Entities

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

~~WASTE MANAGEMENT, INC.~~

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

Low-Income Housing Properties ~~and Refined Coal Facility Investments~~

We do not consolidate our investments in entities established to manage low-income housing properties ~~and a refined coal facility~~ 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 ~~$260~~$207 million and ~~$309~~$228 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The debt balance related to our investments in low-income housing properties was ~~$240~~$183 million and ~~$269~~$210 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. During the first quarter of 2020, the entity which holds the investment in the refined coal facility sold the majority of its assets, which resulted in a $7 million non-cash impairment of our investment. 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 ~~$99~~$109 million and ~~$101~~$106 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 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 ~~$110~~$117 million and ~~$109~~$114 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~14. Subsequent Events~~

On July 20, 2020, we fulfilled our redemption obligations with respect to the SMR Notes using available cash on hand and, to a lesser extent, commercial paper borrowings. The cash paid includes the $3.0 billion principal amount of debt redeemed, $30 million of related premiums and $8 million of accrued interest. As of June 30, 2020, we had approximately $22 million of unamortized discounts and deferred issuance costs related to the SMR Notes. The $30 million of premiums paid and $22 million of unamortized discounts and deferred issuance costs will be included in the calculation of our expected loss on early extinguishment of debt in our Consolidated Statement of Operations in the third quarter of 2020.

On July 28, 2020, we entered into a supplemental 364-day, $3.0 billion U.S. revolving credit facility maturing July 27, 2021, which will be used for general corporate purposes, including funding a portion of the Advanced Disposal acquisition and refinancing of indebtedness, and to provide working capital. The facility provides the Company the option to convert outstanding balances into a term loan maturing no later than the first anniversary of the maturity date, subject to the payment of a fee and notifying the administrative agent at least 15 days prior to the original maturity date. WM Holdings, a wholly-owned subsidiary of WM, guarantees all the obligations under the $3.0 billion revolving credit facility. The rates we pay for outstanding loans are generally based on LIBOR, plus a spread depending on the Company’s debt rating assigned by Moody’s Investors Service and Standard and Poor’s. The spread above LIBOR ranges from 1.0% to 1.3%. Based on our current ratings, the rate which we expect to pay will be LIBOR plus 1.225%.

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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, ~~2019.~~2020.

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 ~~increased competition; pricing actions;~~ 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 or integrate acquisitions; failure to obtain the results anticipated from acquisitions; failure to successfully integrate the acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”), realize anticipated synergies or ~~other acquisitions; failure to~~ obtain ~~the~~other results anticipated from ~~the acquisition of Advanced Disposal or other acquisitions;~~such acquisition; environmental and other regulations, including developments related to emerging contaminants, gas emissions and renewable fuel; ~~commodity price fluctuations; international trade restrictions; weakness~~significant environmental, safety or other incidents resulting in ~~general economic conditions~~liabilities or brand damage; failure to obtain and ~~capital markets;~~maintain necessary permits; failure to attract, hire and retain key team members and a high quality workforce; labor disruptions and wage-related regulations; significant storms and destructive climate events; public health risk and other impacts of COVID-19 or similar pandemic conditions, including increased costs, social and commercial disruption and service ~~reductions and other adverse effects on our business, financial condition, results of operations and cash flows; failure to obtain and maintain necessary permits;~~reductions; increased competition; pricing actions; commodity price fluctuations; 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 system; failure to prevent, detect and address cybersecurity incidents or comply with privacy regulations; ~~significant environmental or other incidents resulting in liabilities and brand damage; significant storms and destructive events influenced by climate change; labor disruptions; impairment charges;~~ negative outcomes of litigation or governmental ~~proceedings~~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, ~~2019,~~2020. The Company is optimistic about volume recovery and overall economic recovery as ~~updated by Part II, Item 1A.~~ ~~Risk Factors~~~~, included~~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 ~~Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and this quarterly report on Form 10-Q for the quarter ended June 30, 2020.~~business. 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.~~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 in ~~North America.~~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 also use waste to create energy, recovering the gas produced naturally as waste decomposes in landfills and using the gas in generators to make ~~electricity.~~electricity or natural gas. Additionally, we are a leading recycler in ~~North America,~~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 collection, transfer, disposal, and recycling and resource recovery services. ~~Through~~Consistent with our ~~subsidiaries,~~Company’s long-standing commitment to corporate sustainability and environmental stewardship, we ~~are also~~published our 2020 Sustainability Report, which details our 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 does not constitute a ~~leading developer, operator~~part of, and ~~owner of landfill gas-to-energy facilities in the United States (“U.S.”).~~is not incorporated by reference into this Quarterly Report on Form 10-Q.

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 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 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

In January 2020, a novel strain of coronavirus (“COVID-19”) was declared a Public Health Emergency of International Concern and was subsequently declared a global pandemic in March 2020. We have contingency plans in place to ensure continuity of operations at our collection sites, transfer stations, landfills and recycling facilities. These plans ensure that we are in compliance with federal, state, provincial and local rules. Key elements of our business continuity plan have been executed consistently across the organization. Our safety team has medical experts and industrial hygienists that are continuously monitoring and incorporating guidance from the Centers for Disease Control and Prevention and other relevant authorities. To date our existing personal protective equipment, hygiene and operating procedures comply with guidelines established to protect our employees from additional risks associated with COVID-19.

The COVID-19 pandemic and related measures have had a significant adverse impact on many sectors of the economy. Waste Management provides essential services to a diverse customer base and, as a result, many elements of our business are less exposed to variability. Despite these favorable attributes of our business model, we expect the impacts of COVID-19 on our business to continue to be significant for the remainder of the year.

~~COVID-19 began to impact our business in mid-March 2020, the results of which are described in detail under~~ ~~Results of Operations~~ ~~below. The challenges posed by~~Throughout the COVID-19 pandemic, on the global economy increased rapidly at the end of the first quarter of 2020 and have continued through the date of this report, impacting our business in most geographies and across a variety of our customer types. 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 resulted in revenue declines at our landfills, as well as decreased demand from our industrial and commercial collection customers. Additionally, the cost to service our residential customers increased as stay-at-home orders and continuing work-from-home trends have increased the waste we collect in this line of business. With many government bodies taking steps to re-open communities and the economy, we started to see business activity and waste volumes increase from the lowest levels observed in April 2020. The landfill and commercial and industrial collection volume increases that followed the re-openings have been robust, but gradual, and our volumes continue to be meaningfully below prior year. Further, with some cities and states pausing or reversing re-openings, these improving volume trends may reverse in the near term.

~~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. ~~These efforts are, in some instances, reducing short-term revenues or increasing our costs, though they are sound decisions that reflect our~~We continue to operate with a focus on protecting the ~~long-term strength~~health and safety of our ~~business. Examples of these~~employees and maintaining business continuity for our customers. These efforts, ~~include:~~

~~Employees~~ — We have prioritized the health, safety and financial security of our workforce. Key steps include: transitioning back-office employees to work-from-home, providing financial certainty to employees by guaranteeing all full-time hourly employees compensation for a 40-hour work week regardless of service decreases, securing additional personal protective equipment to bolster the safety and security of our workplaces and guaranteeing elements of incentive compensation to certain employees to reflect our appreciation for their dedication and focus on executing well in the face of the pandemic.

~~Customers~~ — Our top priority with respect to our customers has been ensuring that our customers’ essential waste service needs continue to be safely met in spite of the unprecedented changes encountered in their communities. For

customers impacted by the COVID-19 pandemic, we have proactively waived and suspended certain ancillary service charges, deferred certain annual price increases, extended payment terms and adjusted customer service levels. Additionally, for qualifying small and medium businesses, we have provided customers with one-month of free service upon re-opening.

~~The above steps~~ 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 ~~COVID-19 pandemic. The fundamentals~~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 ~~Company remain strong and we believe we~~last year, our volumes have ~~sufficient liquidity on hand to continue business operations during this volatile period. We estimate that COVID-19 has had~~been recovering from the ~~following notable impacts on our results of operations for the three- and six-month periods ended June 30, 2020:~~

~~Revenues~~ ~~— During the three and six months ended June 30,~~sharp decline experienced in April 2020 ~~we experienced a negative impact to revenue of approximately $400 million and $440 million, respectively, that we attribute to reductions in customers’ waste service needs~~ as a result of COVID-19. ~~While~~The pace of recovery in our volumes accelerated in the ~~customer-centric steps discussed above~~second quarter of 2021 as more communities and businesses re-opened. The portions of our business ~~closures have also contributed~~that had the most pronounced decreases in volume due to ~~this revenue decline, these impacts have been relatively immaterial.~~

~~Operating Expenses~~ — Volume-driven revenue declines led to a significant reduction in certain variable operating expenses, including labor costs where we focused on reducing overtime hours and operating efficiently by adapting our routes for the ~~lower volumes in~~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. The reductions~~business were either on par with pre-pandemic levels or have now surpassed 2019 volumes. Volumes in ~~most operating expense categories during the reported periods~~our recycling business are ~~directly related to proactive steps taken to manage our variable costs in the declining volume environment. The revenue declines~~also up primarily due to the ~~COVID-19 pandemic have had a greater impact on our higher margin business lines, which negatively impacted operating costs as a percentage~~re-opening of ~~revenues for certain cost categories. In spite of this, our proactive cost management efforts have positioned us to reduce our overall operating expenses as a percentage of revenues when compared with~~facilities where we temporarily suspended operations during the prior year. These cost decreases have been partially offset by the impacts of (i) the 40-hour work week guarantee and (ii) increases in container weights in our residential collection line of business, which increased our overall cost to serve these customers.

~~Selling, General and Administrative Expenses~~ — Our increase in the provision for bad debts of $12 million and $17 million for the three and six months ended June 30, 2020, respectively, is due in large part to negative impacts on customer receipts we have experienced and expect topandemic. We continue to ~~experience due~~be optimistic about our volume recovery in 2021 as the economy continues to ~~the COVID-19 pandemic. Additionally, we incurred $8 million~~rebound and ~~$14 million of costs during~~states and local jurisdictions continue re-opening. However, uncertainty remains with respect to the three and six months ended June 30, 2020, respectively, primarily for (i) technology related costs as a result of our initiative to transition back-office employees to a work-from-home environment and (ii) costs incurred from guaranteeing elements of incentive compensation to certain employees.

~~The ultimate impacts of COVID-19 on our long-term outlook for the business will depend on future developments, including the duration of the pandemic and~~ pace of economic ~~recovery. These factors~~recovery, as well as the potential for resurgence in transmission of COVID-19 and ~~their impacts on~~related business closures due to virus variants or otherwise. Such conditions could adversely impact our ~~business, financial condition, results~~volumes and costs over the remainder of ~~operations and cash flows are uncertain and cannot be predicted at this time. We remain focused on~~ the ~~diligent and safe execution of our daily operations, but are also now focused on the longer term to ensure that we come out of this pandemic a stronger, more differentiated company.~~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. We have enabled a people-first, technology-led focus, that leverages and sustains the strongest asset network in the industry to drive 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 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. ~~We believe the execution of our strategy will deliver shareholder value and leadership in a dynamic industry and challenging economic environment.~~

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 ~~services~~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.

Despite some industry consolidation in recent years, we encounter intense competition from governmental, quasi-governmental and private service providers based on pricing, service quality, customer experience and breadth of service offerings. Our industry is directly affected by changes in general economic factors, including increases and decreases in consumer spending, business expansions and construction ~~starts.~~activity. These factors generally correlate to volumes of waste generated and impact our revenue. Negative economic conditions, including the impact of COVID-19, 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 to implement our pricing strategy and negotiate, renew or expand service contracts with acceptable margins. 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 changes can ~~vary~~fluctuate dramatically by line of business and ~~decreases in volumes~~volume changes in higher margin businesses, such as what we ~~have seen~~saw with COVID-19, can impact key financial ~~metrics, particularly operating expense as a percentage of revenue.~~metrics. In this type of environment, we must dynamically manage our cost structure.

Our financial results for the three and six months ended June 30, 2020 reflect declines in our collection and disposal lines of business as a result of the negative impacts of COVID-19. These impacts began in March 2020 and continued through the second quarter of 2020. Given the current pressures on the business from COVID-19, we are taking proactive steps to reduce costs and maximize cash flow. These steps include (i) optimizing our route structure to respond proactively to lower industrial and commercial collection volumes; (ii) reducing overtime hours to manage labor costs; (iii) limiting hiring and optimizing the existing workforce through greatly improved retention and reduced turnover and (iv) reducing or eliminating certain non-essential costs and expenses like consulting, travel and entertainment. Additionally, to enhance our liquidity, we are maintaining a disciplined focus on capital management by aligning additional investment with the revenue generation of the business, reducing capital spending on our landfill assets, and managing container capital in conjunction with our customers’ volumes. We have also elected to temporarily suspend additional share repurchases for the foreseeable future.

COVID-19 has also had impacts on the recycling line of business, including the creation of a short-term dislocation in the supply and demand dynamics for recycled commodities in the U.S. While the recent decline in supply of recycled content drove an increase in market prices for certain commodities, we remain steadfast in our commitment to improve the profitability and returns of the recycling line of business. We have maintained our focus on converting to a fee-based pricing model that addresses the cost of processing materials and the impact on our cost structure to manage contamination in the waste stream.

We believe ~~that~~ the Company’s industry-leading asset network and strategic ~~focuses~~focus on investing in our people and ~~technology~~our digital platform will give the Company the necessary tools to address the evolving challenges ~~presented by~~impacting the ~~COVID-19 pandemic~~Company and ~~the impacts on~~ our industry. In line with our commitment to continuous improvement and a differentiated customer experience, we ~~are accelerating~~remain focused on our customer service digitalization initiative to change the way we interact with our customers. Enhancements made through this initiative are designed to seamlessly and digitally connect all the WMCompany’s functions required to service our customers in order to provide the best experience and service. Additionally, we continue to make meaningful progress on the implementation of our new enterprise resource planning system.

During the second quarter of 2021, we began to see inflationary cost pressures, particularly in our operating costs and capital expenditures. 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. We are encouraged by our results for the first half of 2021 and remain focused on

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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 ~~Period~~Quarter Financial Results

During the second quarter of ~~2020,~~2021, we delivered strong operating income and cash flows as we continued to experience volume recovery in our ~~operating results for our~~landfill, commercial and industrial collection businesses and ~~disposal lines~~benefited from the acquisition of ~~business were negatively influenced by the impacts of the COVID-19 pandemic; however,~~Advanced Disposal. Additionally, we ~~took intentional steps to decrease~~maintained focus on reducing our operating costs and ~~eliminate~~ discretionary selling, general and administrative ~~expenses~~expenses. We allocated $396 million of available cash to ~~mitigate the impact from the declines in~~capital expenditures and $492 million to our ~~volumes. In addition to reducing costs, we took proactive steps to manage our capital spending.~~shareholders through dividends and share repurchases.

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

●

Revenues of ~~$3,561~~$4,476 million, compared with ~~$3,946~~$3,561 million in the prior year period, ~~a decrease~~an increase of ~~$385~~$915 million, or ~~9.8%~~25.7%. The ~~year-over-year comparison has been negatively impacted by~~increase is primarily attributable to (i) strong volume ~~declines resulting from a reduction~~growth; (ii) the acquisition of Advanced Disposal; (iii) higher yield in customers’ waste service needs associated with the COVID-19 pandemic. In addition, the Company’s year-over-year revenue comparison was impacted by (i) natural disaster clean-up efforts in 2019 that did not reoccur in the current period and (ii) a decline of $60 million from lower fuel surcharges due to a significant decrease in market rates for diesel fuel. These revenue declines have been partially offset by increases in revenue fromour collection and disposal ~~yield~~lines of business and (iv) increases in the market prices for recycling ~~yield, which includes both higher fees and higher commodity prices;~~commodities we sell;

●

Operating expenses of ~~$2,180~~$2,736 million, or ~~61.2%~~61.1% of revenues, compared with ~~$2,443~~$2,180 million, or ~~61.9%~~61.2% of revenues, in the prior year period. The ~~$263~~$556 million ~~decrease~~increase is primarily attributable to ~~proactive steps taken to manage~~(i) volume increases; (ii) increased labor and support costs from our ~~variable costs in the declining volume environment. The revenue declines due to the COVID-19 pandemic have had a greater impact on our~~acquisition of Advanced Disposal; (iii) higher ~~margin business lines, which negatively impacted operating costs as a percentage of revenues. In spite of this, our proactive~~market prices for recycling commodities and (iv) inflationary cost ~~management efforts have positioned us to reduce operating expenses as a percentage of revenues when compared with the prior year;~~increases;

●

Selling, general and administrative expenses of ~~$377~~$445 million, or ~~10.6%~~9.9% of revenues, compared with ~~$391~~$377 million, or ~~9.9%~~10.6% of revenues, in the prior year period. The ~~year-over-year decrease~~$68 million increase is primarily attributable to ~~lower~~(i) higher incentive compensation ~~accruals~~costs; (ii) increased labor and ~~the proactive steps that we have taken to defer hiring~~support costs from our acquisition of Advanced Disposal and ~~discretionary expenses.~~(iii) strategic investments in our digital platform. These cost ~~reductions~~increases were partially offset by ~~(i) increased acquisition-related costs; (ii) higher costs associated with investments~~a decrease in ~~our people and technology and (iii) costs incurred as a direct result of~~ the ~~COVID-19 pandemic, including increased~~ provision for bad ~~debts;~~debts due to an overall improvement in customer account collections;

●

Income from operations was ~~$527~~$791 million, or ~~14.8%~~17.7% of revenues, compared with ~~$696~~$527 million, or ~~17.6%~~14.8% of revenues, in the prior year period. The ~~year-over-year comparison has primarily been affected~~improved earnings in the current year are driven by (i) ~~the overall negative impact of the COVID-19 pandemic to~~strong operating results in our collection and disposal business; (ii) ~~non-cash impairment charges of $61 million including $41 million primarily related to two landfills and an oil field waste injection facility~~improved profitability in our ~~Tier 1 segment;~~recycling business and (iii) anour proactive cost management efforts. The increase in ~~spending for~~income from operations was partially offset by higher depreciation and amortization expense, primarily due to the ~~planned~~ acquisition of Advanced ~~Disposal and (iv) investments we are making in technology;~~Disposal;

●

Net income attributable to Waste Management, Inc. was ~~$307~~$351 million, or ~~$0.72~~$0.83 per diluted share, compared with ~~$381~~$307 million, or ~~$0.89~~$0.72 per diluted share, in the prior year period. InThe strong operating results discussed above, in addition to ~~the activity discussed above, net income~~lower interest expense, drove an increase in earnings which was substantially offset in the current period was also impacted by an increase in net interest expense due to the planned acquisition of Advanced Disposal, which was partially offset by lower income tax expense. The prior year period was also impacted by a ~~pre-tax~~$220 million loss ~~of $84 million associated with the~~on early extinguishment of ~~debt;~~debt related to the retirement of $1.3 billion of certain high-coupon senior notes through a cash tender offer;

●

Net cash provided by operating activities was ~~$856~~$1,043 million compared with ~~$1,010~~$856 million in the prior year period, ~~with the decline~~ driven by ~~lower~~an increase in earnings, ~~on our core operations and an unfavorable working capital change, both of which have been primarily caused by the impact of the COVID-19 pandemic. These negative cash flow impacts have been~~ partially offset by ~~lower~~net unfavorable changes in our operating assets and liabilities, net of effects of acquisitions and divestitures, primarily due to (i) higher income tax payments in the current ~~year period~~quarter; (ii) a temporary deferral in the payment of payroll taxes in 2020 and (iii) the timing of cash tax benefits received in 2020 associated with ~~deferring certain payroll taxes as provided for by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”);~~federal alternative fuel tax credits; and

●

Free cash flow was ~~$423~~$649 million compared with ~~$440~~$423 million in the prior year ~~period. The slight decrease in free cash flow is due to~~period primarily driven by the ~~decrease~~increase in net cash provided by operating activities ~~noted above, which was substantially offset by an intentional~~discussed above. The increase is also due to a reduction in capital ~~expenditures. We have taken proactive steps~~expenditures due to ~~reduce the amount of capital spending required to align with the lower volumes~~timing differences as well as supply chain constraints in ~~our business.~~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.

Results of Operations

Operating Revenues


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Commercial	$	928	$	1,052	$	1,991	$	2,078	$	1,178	$	928	$	2,309	$	1,991
Residential		657		655		1,307		1,295		794		657		1,576		1,307
Industrial		625		744		1,318		1,424		811		625		1,554		1,318
Other collection		115		122		227		231		135		115		251		227
Total collection		2,325		2,573		4,843		5,028		2,918		2,325		5,690		4,843
Landfill		874		1,023		1,761		1,887		1,075		874		1,990		1,761
Transfer		439		474		880		886		532		439		997		880
Recycling		275		264		529		555		397		275		739		529
Other (a)		409		445		839		876		513		409		990		839
Intercompany (b)		(761)		(833)		(1,562)		(1,590)		(959)		(761)		(1,818)		(1,562)
Total	$	3,561	$	3,946	$	7,290	$	7,642	$	4,476	$	3,561	$	8,588	$	7,290

(a)

(b)	Intercompany revenues between lines of business are eliminated in the Condensed Consolidated Financial Statements included within this report.

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


	Period-to-Period Change for the Three Months Ended June 30, 2020 vs. 2019									Period-to-Period Change for the Six Months Ended June 30, 2020 vs. 2019							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
			As a % of				As a % of				As a % of				As a % of				As a % of				As a % of				As a % of				As a % of
			Related				Total				Related				Total				Related				Total				Related				Total
	Amount		Business(a)		Amount		Company(b)		Amount		Business(a)		Amount		Company(b)		Amount		Business(a)		Amount		Company(b)		Amount		Business(a)		Amount		Company(b)
Collection and disposal	$	55	1.6	%					$	127	1.9	%					$	118	3.7	%					$	211	3.2	%
Recycling commodities (c)		24	9.6							(35)	(6.5)
Recycling (c)																		84	32.9							181	37.4
Fuel surcharges and mandated fees		(60)	(36.6)							(76)	(24.3)							46	44.3							37	15.4
Total average yield (d)					$	19	0.5	%					$	16	0.2	%					$	248	7.0	%					$	429	5.9	%
Volume						(406)	(10.3)							(396)	(5.2)							341	9.6							240	3.3
Internal revenue growth						(387)	(9.8)							(380)	(5.0)							589	16.6							669	9.2
Acquisitions						10	0.3							39	0.5							316	8.9							618	8.5
Divestitures						(1)	—							(2)	—							(11)	(0.3)							(21)	(0.3)
Foreign currency translation						(7)	(0.3)							(9)	(0.1)							21	0.5							32	0.4
Total					$	(385)	(9.8)	%					$	(352)	(4.6)	%					$	915	25.7	%					$	1,298	17.8	%

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

(d)	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 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 ~~lines of business,~~operations, exclusive of volume changes. Revenue growth from collection and disposal average yield includes not only base rate changes and environmental and service fee ~~increases,~~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.

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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				Period-to-Period Change for the
	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30, 2020 vs. 2019				June 30, 2020 vs. 2019				June 30, 2021 vs. 2020				June 30, 2021 vs. 2020
			As a % of				As a % of				As a % of				As a % of
			Related				Related				Related				Related
	Amount		Business		Amount		Business		Amount		Business		Amount		Business
Commercial	$	17	1.8	%	$	39	2.1	%	$	37	4.2	%	$	68	3.6	%
Industrial		7	1.0			30	2.3			35	5.8			57	4.5
Residential		16	2.5			28	2.2			29	4.7			56	4.5
Total collection		40	1.7			97	2.1			101	4.6			181	4.0
Landfill		8	1.2			17	1.4			10	1.7			17	1.5
Transfer		7	2.6			13	2.7			7	2.9			13	2.8
Total collection and disposal	$	55	1.6	%	$	127	1.9	%	$	118	3.7	%	$	211	3.2	%

We are monitoring COVID-19 and taking steps to mitigate the potential business impact to our customers. In order to support the continuity of our customers’ businesses, we have made certain customer-centric pricing decisions such as temporarily waiving and suspending certain ancillary service charges as well as delaying price increases in certain markets, which has negatively impacted our average yield. However, ourOur overall strategic pricing ~~effort~~efforts are focused on improving our average unit rate as well as recovering any inflationary cost increases. This strategy has ~~proven to be effective despite the COVID-19 pandemic, particularly~~been most successful in our ~~commercial business.~~

~~Recycling Commodities~~ ~~— During the three months ended June 30, 2020,~~collection line of business where we experienced ~~a 30% increase in~~ average ~~market prices, when compared to the prior year, due to demand~~yield growth of 4.6% and 4.0% for recycled material in the U.S. exceeding supply. We expect this dislocation will normalize and overall, average market prices for recycling commodities are expected to remain meaningfully below long-term averages. For the six months ended June 30, 2020, average market prices for recycling commodities were down 3.5% compared to the prior year. Our efforts to assess fees to cover the higher costs of handling contaminated recycling materials continue to provide a mechanism to offset the decline in market value of commodity prices, though with the impacts of COVID-19 on customers and market conditions, we did not experience a significant increase in these fees during the three and six months ended June 30, ~~2020.~~2021, respectively. We are driving improvements 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. 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% average yield growth for the three and six months ended June 30, 2021, respectively, 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. During the three and six months ended June 30, 2021, average market prices for recycling commodities at the Company’s facilities were approximately 75% and 90% 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 demand for recycled materials outpacing supply, driven by the growth 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 — These fees, which are predominantly generated by our fuel surcharge program, ~~declined $60~~increased $46 million and ~~$76~~$37 million for the three and six months ended June 30, ~~2020,~~2021, respectively, as compared with the prior year periods. These revenues are based on and fluctuate in response to changes in the national average prices for diesel ~~fuel. Given the downturn~~fuel, and also vary with changes in ~~oil and gas markets, market~~our volume-based revenue activity. Market prices for diesel fuel ~~decreased over 20%~~increased approximately 30% and ~~13%~~15% for the three and six months ended June 30, ~~2020,~~2021, respectively, as compared with the prior year periods. ~~Additionally, we have taken steps to transition certain customers’ pricing away from non-variable fuel structures, which has further contributed to the year-over-year decline.~~

The mandated 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, ~~2020.~~2021, as compared with the prior year periods.

Volume

Our revenues from volumes (excluding volumes from acquisitions and divestitures) ~~decreased $406~~increased $341 million, or ~~10.3%~~9.6%, and ~~$396~~$240 million, or ~~5.2%~~3.3%, for the three and six months ended June 30, ~~2020,~~2021, respectively, as compared with the prior year periods.

~~Beginning~~Over the last year, our volumes have been recovering from the sharp decline experienced in ~~March~~April 2020 ~~and continuing throughout~~as a result of COVID-19. The pace of recovery in our volumes accelerated in the second quarter of ~~2020,~~2021 as more communities and businesses re-opened. The portions of our ~~industrial and commercial collection and our landfill businesses experienced significant volume declines as a result of the COVID-19 pandemic. These volume decreases were~~business that had the most pronounced decreases in ~~April 2020. With many government bodies taking steps~~volume due to ~~re-open communities and~~ the economy, in May and June 2020, we started to see business activity and waste volumes increase from the lowest levels observed in April 2020. While volume increases following the re-openings have been robust, our volumespandemic

3432

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 ~~meaningfully below prior year. Further, with some cities~~optimistic about our volume recovery in 2021 as the economy continues to rebound and states ~~pausing~~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 ~~reversing re-openings, these improving~~otherwise. Such conditions could adversely impact our volume ~~trends may reverse in~~results over the ~~near term.~~remainder of the year.

~~In addition,~~Acquisitions

Revenues increased $316 million, or 8.9%, and $618 million, or 8.5%, for the ~~natural disaster clean-up efforts in the first~~three and six months ended June 30, 2021, respectively, as compared with the prior year periods, primarily due to our acquisition of ~~2019 did not reoccur~~Advanced Disposal. The revenue increase due to the Advanced Disposal acquisition was principally in ~~the current year period further impacting~~ our ~~year-over-year volume comparison.~~collection and disposal lines of business.

Operating Expenses

The following table summarizes the major components of our operating expenses (in millions of dollars and as a percentage of revenues):


	Three Months Ended								Six Months Ended								Three Months Ended								Six Months Ended
	June 30,								June 30,								June 30,								June 30,
	2020				2019				2020				2019				2021				2020				2021				2020
Labor and related benefits	$	636	17.9	%	$	703	17.8	%	$	1,325	18.2	%	$	1,370	17.9	%	$	791	17.7	%	$	636	17.9	%	$	1,537	17.9	%	$	1,325	18.2	%
Transfer and disposal costs		267	7.5			300	7.6			545	7.5			563	7.4			298	6.7			267	7.5			572	6.7			545	7.5
Maintenance and repairs		303	8.5			344	8.7			638	8.8			667	8.7			395	8.8			303	8.5			769	8.9			638	8.8
Subcontractor costs		357	10.0			388	9.8			728	10.0			736	9.6			446	10.0			357	10.0			837	9.7			728	10.0
Cost of goods sold		140	3.9			142	3.6			258	3.5			312	4.1			211	4.7			140	3.9			392	4.6			258	3.5
Fuel		57	1.6			104	2.7			133	1.8			205	2.7			95	2.1			57	1.6			181	2.1			133	1.8
Disposal and franchise fees and taxes		144	4.0			164	4.2			289	4.0			307	4.0			177	3.9			144	4.0			333	3.9			289	4.0
Landfill operating costs		92	2.6			100	2.5			201	2.8			191	2.5			107	2.4			92	2.6			203	2.3			201	2.8
Risk management		62	1.7			71	1.8			131	1.8			135	1.8			81	1.8			62	1.7			154	1.8			131	1.8
Other		122	3.5			127	3.2			261	3.5			255	3.3			135	3.0			122	3.5			272	3.2			261	3.5
	$	2,180	61.2	%	$	2,443	61.9	%	$	4,509	61.9	%	$	4,741	62.0	%	$	2,736	61.1	%	$	2,180	61.2	%	$	5,250	61.1	%	$	4,509	61.9	%

~~As discussed above~~Our operating expenses for the three and six months ended June 30, 2021 increased primarily due to volume increases and the acquisition of Advanced Disposal. During the second quarter of 2021, we began to see inflationary cost pressures as well as increased overtime from driver shortages that increased our operating costs. Although our costs increased, efforts to recover higher costs through price and the significant revenue increases in ~~Operating Revenues~~~~, year-over-year decreases in~~our high-margin businesses, which include our landfill and commercial and industrial ~~and commercial~~ collection ~~volumes, primarily due to the impacts~~businesses, resulted in a reduction of COVID-19, have significantly impacted the three- and six-month periods ended June 30, 2020. The reductions in most operating expense categories during the reported periods are directly related to proactive steps taken to manage our variable costs in the declining volume environment. The revenue declines due to the COVID-19 pandemic have had a greater impact on our higher margin business lines, which negatively impacted operating costs as a percentage of revenues for certain cost categories. In spite of this, our proactive cost management efforts have positioned us to reduce our overall operating expenses as a percentage of revenues when compared with the prior ~~year.~~year periods. Additionally, our operating expenses as a percentage of revenues benefited from our focus on operating efficiency, continued efforts to control costs as volumes grow and our disciplined integration of Advanced Disposal which historically has generated lower margins.

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

Labor and Related Benefits — The ~~decrease~~increase in labor and related benefits costs was largely driven by ~~decreases~~(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) volume increases, particularly in ~~volume~~our commercial and industrial collection businesses, which allowed us to take proactive measures to optimize routes and reduce overtime hours. Additionally, the decrease was due to (i) improved efficiency from lighter road traffic; (ii) lower incentive compensation costs and (iii) reducedwhen combined with driver shortages in certain markets, increased overtime; (iv) increases in health and welfare ~~costs. These decreases were partially offset by annual merit increases. We have guaranteed full-time hourly employees a minimum of 40-hours of pay~~costsattributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during ~~the COVID-19 pandemic regardless of service decreases. This employee-focused effort had a minimal impact to labor costs during the reported periods,~~2020 and ~~the Company believes that these increased costs were offset by benefits from reduced employee turnover and improved employee morale.~~(v) higher incentive compensations costs.

Transfer and Disposal Costs— The ~~decrease~~increase in transfer and disposal costs was largely driven by ~~volume declines in our industrial and commercial collection businesses~~additional disposal costs as a result of ~~COVID-19.~~our acquisition of Advanced Disposal, increased volume and inflationary cost increases from our third-party haulers.

Maintenance and Repairs — The ~~decrease~~increase in maintenance and repairs costs was largely driven by ~~proactive steps~~(i) our acquisition of Advanced Disposal, including intentional investments in the fleet acquired to ~~optimize routes~~bring the trucks to WM standards; (ii) additional fleet maintenance driven by commercial and ~~reduce overtime hours~~industrial volume increases; (iii) an increase in container repairs driven by volume increases and delays in normal-course capital expenditures for steel containers due to ~~address the volume declines. The most significant components of our non-labor savings were spending on~~both steel costs and supply chain constraints and (iv) inflationary cost increases for parts, supplies and third-party ~~container repairs. In addition, the three and six months ended June 30, 2019 were impacted by a $16 million non-cash charge to write off certain equipment costs related to our Other segment.~~services.

Subcontractor Costs — The ~~decrease~~increase in subcontractor costs ~~for the three months ended June 30, 2020~~ was largely driven by (i) the ~~COVID-19 related volume declines in our industrial and commercial collection businesses. For the six months ended June 30, 2020, subcontractor costs were generally flat, which can be attributed to~~acquisition of Advanced Disposal; (ii) an increase in ~~business activity~~volumes in our WMSBS ~~and EES businesses during the first quarter of 2020, prior to COVID-19 impacting~~ business, ~~activity in North America. These businesses rely~~which relies more extensively on subcontracted hauling than our collection and disposal ~~business.~~business and (iii) inflationary cost increases from third-party haulers.

Cost of Goods Sold — ~~Market prices for recycled commodities is the primary driver for the variability~~The increase in ~~our~~ cost ~~of goods sold. Cost~~ of goods sold was ~~relatively flat when comparing~~primarily driven by increases in market prices for recycling commodities of approximately 75% and 90% during the three and six months ended June 30, ~~2020 with the~~2021, respectively. Tons processed also increased from prior year ~~period~~primarily due to the ~~offsetting impacts~~re-opening of ~~a decline in recycling volumes and an increase in~~facilities where operations were temporarily suspended during the market prices for recycled commodities. For the six-month comparison, there is a significant decrease in costs of goods sold due to the combined impacts of a decline in recycling volumes and a decrease in the market prices for recycled commodities.pandemic.

Fuel — The ~~decrease~~increase in fuel costs was primarily due to (i) ~~a benefit from federal alternative fuel credits; (ii) a~~ ~~decline~~increases of approximately 30% and 15% in market fuel prices ~~for diesel fuel;~~during the three and six months ended June 30, 2021, respectively, as compared with the prior year periods; (ii) volume increases in our commercial and industrial collection businesses and (iii) ~~volume~~ ~~declines and (iv) lower costs resulting from~~ the ~~continued conversion~~acquisition of ~~our fleet to natural gas vehicles.~~Advanced Disposal.

Disposal and Franchise Fees and Taxes — The ~~decrease~~increase in disposal and franchise fees and taxes ~~for~~as compared with the ~~reported~~prior year periods was primarily ~~related to lower volumes in our landfill line of business, largely~~ driven by ~~the impact~~landfill volume increases and additional costs attributable to our acquisition of ~~COVID-19.~~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 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, ~~2020~~2021 was ~~primarily due to higher leachate management costs compared to~~partially offset by the ~~prior year period. Additionally,~~impacts of changes in the ~~six-month periods included charges~~measurement of ~~$10 million~~our environmental remediation obligations and recovery assets in both the first quarter of 2020 and ~~$7 million in the second quarter~~2021. Our measurement of ~~2019, due to decreases in the~~these balances includes application of a risk-free discount rate, which is based on the rate for U.S. Treasury ~~bonds, used~~bonds. In the first quarter of 2021, there was an increase in the ~~measurement~~discount rate, which resulted in a reduction in the net liability balance and a credit to expense. Conversely, in the first quarter of ~~our environmental remediation obligations~~2020, there was a decrease in the discount rate, which resulted in an increase in the net liability balance and ~~recovery assets. This increase was partially offset by declining volumes at our landfills.~~a charge to expense.

Risk Management — The ~~decrease~~increase in risk management costs was primarily due to ~~certain large loss claims in the prior-year periods,~~our acquisition of Advanced Disposal, and to a lesser extent, ~~a reduction in~~unusually low claims during the second quarter of 2020 ~~periods~~ that we attribute to the COVID-19 driven decline in business activity.

Other— Other operating cost increases were due to our acquisition of Advanced Disposal, partially offset by a favorable litigation settlement in the second quarter of 2021 and asset sales.

Selling, General and Administrative Expenses

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


	Three Months Ended								Six Months Ended								Three Months Ended								Six Months Ended
	June 30,								June 30,								June 30,								June 30,
	2020				2019				2020				2019				2021				2020				2021				2020
Labor and related benefits	$	228	6.4	%	$	250	6.3	%	$	474	6.5	%	$	515	6.7	%	$	297	6.6	%	$	228	6.4	%	$	594	6.9	%	$	474	6.5	%
Professional fees		54	1.5			43	1.1			114	1.6			78	1.0			56	1.2			54	1.5			105	1.2			114	1.6
Provision for bad debts		22	0.6			10	0.3			36	0.5			19	0.3			7	0.2			22	0.6			17	0.2			36	0.5
Other		73	2.1			88	2.2			178	2.4			188	2.5			85	1.9			73	2.1			187	2.2			178	2.4
	$	377	10.6	%	$	391	9.9	%	$	802	11.0	%	$	800	10.5	%	$	445	9.9	%	$	377	10.6	%	$	903	10.5	%	$	802	11.0	%

As a result of the negative impacts of COVID-19 on our business, we have reduced incentive compensation accruals, and we have taken proactive steps to reduce discretionary expenses, both of which have decreased selling,Selling, general and administrative ~~expenses. These cost reductions~~expenses have ~~been largely offset by incremental~~increased primarily due to (i) higher incentive compensation costs; (ii) increased labor and support costs ~~incurred in connection with the planned~~related to our acquisition ~~and integration~~ of Advanced Disposal and (iii) strategic investments in ~~technology~~our digital platform. Although our costs increased, the significant revenue increases in our high-margin businesses, which include our landfill and ~~increased provision for bad debts. Selling,~~commercial and industrial collection businesses, positioned us to reduce our overall selling, general and administrative expenses as a percentage of ~~revenue measures have increased in 2020 due to~~revenues when compared with the ~~decrease in volume-related revenues.~~ prior year periods.

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

Labor and Related Benefits — The ~~decrease~~increase in labor and related benefits costs iswas primarily related to ~~lower~~(i) higher incentive compensation ~~accruals, lower~~costs; (ii) additional headcount in connection with our acquisition of Advanced Disposal; (iii) increases in health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020; (iv) costs associated with our strategic investments in our digital platform and ~~proactive steps to defer hiring, all of which we attribute to the COVID-19 pandemic impacts on our business. These cost decreases were partially offset by~~(v) annual merit ~~increases.~~increases for our employees.

Professional Fees — ~~The increase in professional~~Professional fees ~~was~~increased primarily ~~driven by consulting fees incurred as we plan for the acquisition and integration of Advanced Disposal. In addition, we continue~~due to ~~make~~our strategic investments in ~~operating, customer-facing~~our digital platform. For the six months ended June 30, 2021, these increases were partially offset by lower consulting, advisory and ~~back-office technologies, including~~legal fees following the ~~implementation~~completion of ~~a new enterprise resource planning system. We are also investing~~the acquisition of Advanced Disposal in ~~and accelerating our customer service digitalization platform, which will connect all~~ the ~~WM functions required to service our customers.~~fourth quarter of 2020.

Provision for Bad Debts — The ~~increase~~decrease in ~~the~~ provision for bad debts ~~can~~was primarily ~~be attributed~~due to ~~the estimated impact from the COVID-19 pandemic resulting~~an overall improvement in ~~increased~~customer account collections and decreased collection ~~risks associated~~risk with certain customers.

Other —The ~~decrease~~increase in other expenses was primarily ~~due to proactive measures taken to reduce discretionary~~driven by costs ~~company wide. Litigation reserves have also declined in 2020. These cost decreases have been~~associated with the acquisition of Advanced Disposal and increased digital costs. For the six months ended June 30, 2021, these increases were partially offset by ~~increased infrastructure costs~~reductions in ~~2020 associated with our ongoing investments in technology as well as incremental technology costs incurred to transition employees to work-from-home in response to the COVID-19 pandemic.~~telecommunications and travel and entertainment costs.

Depreciation and Amortization Expenses

The following table summarizes the components of our depreciation and amortization expenses (in millions of dollars and as a percentage of revenues):


	Three Months Ended								Six Months Ended								Three Months Ended								Six Months Ended
	June 30,								June 30,								June 30,								June 30,
	2020				2019				2020				2019				2021				2020				2021				2020
Depreciation of tangible property and equipment	$	242	6.8	%	$	221	5.6	%	$	482	6.6	%	$	434	5.7	%	$	279	6.3	%	$	242	6.8	%	$	558	6.5	%	$	482	6.6	%
Amortization of landfill airspace		148	4.1			161	4.1			286	3.9			288	3.7			184	4.1			148	4.1			341	4.0			286	3.9
Amortization of intangible assets		24	0.7			27	0.7			48	0.7			53	0.7			37	0.8			24	0.7			73	0.8			48	0.7
	$	414	11.6	%	$	409	10.4	%	$	816	11.2	%	$	775	10.1	%	$	500	11.2	%	$	414	11.6	%	$	972	11.3	%	$	816	11.2	%

The increase in depreciation of tangible property and equipment ~~during the three and six months ended June 30, 2020, compared to the prior year periods,~~ was primarily related to our acquisition of Advanced Disposal and investments in capital assets, including ~~trucks~~our fleet and facilities. The ~~decrease~~increase in amortization of landfill airspace ~~during the three and six months ended June 30, 2020, compared to the prior year periods,~~ was driven by ~~lower volumes at~~(i) landfill volume increases from the continued economic recovery; (ii) our ~~landfills as a result~~acquisition of ~~the COVID-19 pandemic, partially offset by~~Advanced Disposal and (iii) changes in landfill ~~estimates largely~~estimates. The increase in amortization of intangible assets is primarily driven by ~~increases in landfill construction costs.~~the amortization of acquired intangible assets related to the acquisition of Advanced Disposal.

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

During the ~~second~~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 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 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 12 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 12 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. ~~The Company tested the recoverability of an additional $239 million in energy services assets and determined that the carrying amount was recoverable as of June 30, 2020.~~

Income from Operations

In the ~~fourth~~second quarter of ~~2019, as part~~2021, we combined our Eastern and Western Canada Areas reducing the number of ~~our annual review process,~~Areas we ~~analyzed the Areas’ income~~manage from ~~operations margins for purposes of segment reporting~~17 to 16, and realigned our Solid Waste tiers to reflect recent changes in their relative economic characteristics and prospects. These changes are the results of various factors including acquisitions, divestitures, business mix and the economic climate of various geographies. As a result, we reclassified Western Canada from Tier 1 to Tier 2 and Northern California from Tier 3 to Tier 2.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 (dollars in millions):


	Three Months Ended										Six Months Ended										Three Months Ended										Six Months Ended
	June 30,						Period-to-Period				June 30,						Period-to-Period				June 30,						Period-to-Period				June 30,						Period-to-Period
	2020			2019(c)			Change				2020			2019(c)			Change				2021			2020			Change				2021			2020			Change
Solid Waste:
Tier 1	$	316		$	434		$	(118)	(27.2)	%	$	709		$	832		$	(123)	(14.8)	%	$	350		$	270		$	80	29.6	%	$	657		$	558		$	99	17.7	%
Tier 2		182			230			(48)	(20.9)			370			430			(60)	(14.0)			331			208			123	59.1			622			477			145	30.4
Tier 3		222			282			(60)	(21.3)			486			552			(66)	(12.0)			375			244			131	53.7			695			532			163	30.6
Solid Waste		720			946			(226)	(23.9)			1,565			1,814			(249)	(13.7)			1,056			722			334	46.3			1,974			1,567			407	26.0
Other (a)		(10)			(49)			39	(79.6)			(35)			(67)			32	(47.8)			4			(10)			14	*			22			(35)			57	*
Corporate and Other (b)		(183)			(201)			18	(9.0)			(430)			(430)			—	0.0			(269)			(185)			(84)	45.4			(555)			(432)			(123)	28.5
Total	$	527		$	696		$	(169)	(24.3)	%	$	1,100		$	1,317		$	(217)	(16.5)	%	$	791		$	527		$	264	50.1	%	$	1,441		$	1,100		$	341	31.0	%
Percentage of revenues		14.8	%		17.6	%						15.1	%		17.2	%						17.7	%		14.8	%						16.8	%		15.1	%

*Percentage change does not provide a meaningful comparison.

(a)

“Other” includes (i) our WMSBS ~~organization;~~business; (ii) ~~those~~ elements of our landfill gas-to-energy operations ~~and third-party subcontract and administration revenues~~ managed by our ~~EES and~~ WM Renewable Energy ~~organizations that are~~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 ~~(iv)~~(v) certain other expanded service offerings and solutions. In addition, our “Other” segment reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

(b)

“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, ~~information technology,~~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 and any administrative expenses or revisions to our estimated obligations associated with divested operations.~~

~~(c)~~

In 2020, we revised allocations between our segments including (i) the discontinuation of certain allocations from Corporate and Other to Solid Waste and (ii) allocating certain insurance costs from Other to Solid Waste. Reclassifications have been made to our prior period information for comparability purposes.program.

The significant items affecting income from operations for our segments during the three and six months ended June 30, ~~2020,~~2021, as compared with the prior year periods, are summarized below:

●

Solid Waste — Income from operations in our Solid Waste business ~~decreased~~increased significantly ~~on a year-over-year basis~~primarily due to (i) revenue growth in our collection and disposal businesses driven by both 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 ~~overall negative impact of the COVID-19~~ pandemic and ~~non-cash impairment charges taken~~

~~during the second quarter of 2020. Income from operations for all Tiers was impacted by revenue declines from lower volumes as well as an increase~~improved costs at facilities where we have made investments in enhanced technology and equipment; (iii) a decrease in the provision for bad ~~debts.~~debts and (iv) the continuation of our proactive cost management efforts as volumes increased. These increases were partially offset by (i) higher incentive compensation costs; (ii) inflationary cost pressures and (iii) increased overtime driven by increased volumes 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.

~~Income~~During the second quarter of 2020, income from operations ~~for our Tier 1 segment~~ 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. Our Tier 2 segment income from operations was impacted by natural disaster clean-up efforts in 2019 that did not reoccur in the current year period. Income from operations for our Tier 3 segment was impacted byfacility 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.

●

Other — ~~Income~~The increase 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 ~~Other segment for the three and~~ six months ended June 30, ~~2020 was impacted by (i) a $16 million non-cash charge to write off certain equipment costs in~~2021, as compared with the prior year ~~periods and (ii) decreases in risk management costs.~~period, was also due to a gain from the divestitures of certain ancillary operations during the first quarter of 2021.

●

Corporate and Other — The ~~favorable change~~increase in these costs was driven by (i) higher incentive compensation costs; (ii) strategic investments in our digital platform; (iii) increased health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the ~~income~~lower levels experienced during 2020 and (iv) increased labor and support costs from ~~operations measurement for the three~~our acquisition of Advanced Disposal. The six months ended June 30, ~~2020~~2021, as compared with the prior year period, was ~~primarily driven~~further impacted by ~~(i) lower health and welfare costs; (ii) lower incentive compensation accruals and (iii)~~ a ~~$7 million~~ charge ~~related~~pertaining to reserves for certain loss contingencies during the ~~remeasurement~~first quarter of 2021, as well as changes in the measurement of our environmental remediation obligations and recovery assets in the prior year, which more than offset increased expenses as a result of (i) preparation for our acquisition of Advanced Disposal; (ii) investments we are making in technology and (iii) incremental costs associated with COVID-19 pandemic. The income from operations measurement is flat for the six-month periods because (i) the above-mentioned cost reductions for health and welfare and incentive compensation were more significant in the second quarter of 2020 given the timing of the impacts of COVID-19 on our business and (ii) we recorded a $10 million charge related to the remeasurement of our environmental remediation obligations inboth the first quarter of ~~2020.~~2020 and 2021.

Interest Expense, Net

Our interest expense, net was $98 million and $195 million for the three and six months ended June 30, 2021, respectively, compared to $119 million and $231 million for the three and six months ended June 30, 2020, ~~respectively, compared to $100 million and $196 million for the three and six months ended June 30, 2019,~~ respectively. The ~~increase for~~decreases are primarily due to certain refinancing activities, including (i) the ~~three- and six-month periods is primarily attributable to our May 2019 issuance~~redemption of ~~$4.0~~$3.0 billion of senior notes ~~which was intended to be used to fund our planned acquisition~~in July 2020 and the issuance of ~~Advanced Disposal. For an update on these debt~~$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 issuance of $950 million of lower coupon senior notes in May 2021, as discussed further below. The decreases were partially offset by decreases in interest income as a result of lower cash and cash equivalents balances ~~see Note 14 to the Condensed Consolidated Financial Statements.~~in 2021.

Loss on Early Extinguishment of Debt

In May ~~2019,~~2021, WM issued ~~$4.0 billion~~$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 ~~$344~~the net proceeds from the newly issued senior notes of $942 million and available cash on hand, to retire ~~$257 million~~$1.3 billion of certain high-coupon senior notes. The ~~cash paid to retire the high-coupon senior notes includes the principal amount of the debt retired, $84 million of related premiums, which are classified as~~ loss on early extinguishment of debt ~~in our~~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 ~~Statement of Operations, and $3 million of accrued interest.~~Financial Statements for additional information related to these transactions.

Equity in Net Losses of Unconsolidated Entities

We recognized equity in net losses of unconsolidated entities of ~~$14~~$11 million and ~~$40~~$20 million for the three and six months ended June 30, ~~2020,~~2021, respectively, compared to ~~$16~~$14 million and ~~$25~~$40 million for the three months and six months ended June 30, ~~2019,~~2020, respectively. The losses for each period ~~are~~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. ~~Additionally, the 2019 periods include losses associated with our investment in a refined coal facility.~~ During the ~~first quarter of~~three months ended March 31, 2020, the entity that ~~holds~~held and ~~manages~~managed our ownership interest in ~~the~~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 ~~first~~second quarter of ~~2019,~~2021, we recognized an $8 million loss upon settlement of a ~~$52 million non-cash impairment charge related to our minority-owned investment~~reverse Treasury rate lock associated with the refinancing of certain senior notes as discussed above in ~~a waste conversion technology business. We wrote down our investment to its estimated fair value~~Loss on Early Extinguishment of Debt.

3938

as the result of recent third-party investor’s transactions in these securities. The fair value of our investment was not readily determinable; thus, we determined the fair value utilizing a combination of quoted price inputs for the equity in our investment (Level 2) and certain management assumptions pertaining to investment value (Level 3).

Income Tax Expense

Our income tax expense was $105 million and $229 million for the three and six months ended June 30, 2021, respectively, compared to $88 million and $162 million for the three and six months ended June 30, 2020, ~~respectively, compared to $115 million~~respectively. Our effective income tax rate was 22.9% and ~~$230 million~~22.8% for the three and six months ended June 30, ~~2019, respectively. Our effective income tax rate was~~2021, respectively, compared to 22.2% and 19.5% for the three and six months ended June 30, 2020, ~~respectively, compared to 23.3% and 24.0% for the three and six months ended June 30, 2019,~~ respectively.

The ~~decrease~~increase in our income tax expense and effective income tax rate when comparing the three and six months ended June 30, ~~2020~~2021 with the prior year ~~periods are driven~~period was due to (i) an increase in pre-tax income in 2021; (ii) a decrease in 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 pre-tax income in 2020, which increased the effective tax rate impact of our federal tax credits, and to a lesser extent; (ii) a $52 million non-cash impairment charge recognized during the first quarter of 2019 that was not deductible for tax purposes and (iii) excess tax benefits associated with equity-based compensation ~~which were slightly higher~~and (ii) favorable adjustments to accruals and related deferred taxes recorded in ~~2020 than in the prior year.~~2020.

~~On March 27, 2020, the CARES Act was enacted in response~~See Note 4 to the ~~COVID-19 pandemic. The CARES Act contains numerous~~Condensed Consolidated Financial Statements for more information related to income tax provisions, none of which directly affected our income tax expense for the three and six months ended June 30, 2020 or are expected to have a material impact on our income tax expense in future reporting periods. The Company is evaluating the impact of the CARES Act and expects to benefit from the deferral of certain payroll taxes through the end of calendar year 2020.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. 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, including the anticipated impact from COVID-19. Additionally, the Company is taking numerous actions to manage costs and capital spending without compromising long-term strategic priorities. This includes route optimization initiatives, reducing overtime hours, limiting hiring and optimizing our workforce through improved retention and reduced turnover, reducing non-essential selling, general and administrative expenses, reducing incentive compensation costs and lowering capital expenditures to a level that is consistent with anticipated volume changes. Additionally, as a result of the CARES Act discussed above in ~~Income Tax Expense~~~~, we are currently benefiting from the deferral of certain payroll taxes, which will continue through the end of calendar year 2020, favorably impacting our net cash provided by operating activities.~~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, despite the disruptions and challenges presented by the COVID-19 pandemic. The long-term impacts from COVID-19 on our business, financial condition and operating results cannot be predicted with reasonable certainty at this time.

As discussed in Note 3 to the Condensed Consolidated Financial Statements, as of June 30, 2020, we had $3.0 billion of senior notes due 2024, 2026, 2029 and 2039 with a special mandatory redemption feature (the “SMR Notes”). The SMR Notes were issued in May 2019 with the intention of paying a portion of the consideration related to our pending acquisition of Advanced Disposal. The Advanced Disposal acquisition, and the revised acquisition terms announced on June 24, 2020, are discussed further in Note 8 to the Condensed Consolidated Financial Statements. Pursuant to the terms of the SMR Notes, we were required to redeem all of such outstanding notes equal to 101% of the aggregate principal amounts of such notes, plus accrued but unpaid interest, as a result of the acquisition not being completed by July 14, 2020. Accordingly, as of June 30, 2020, we have classified the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, as current obligations. As reported in Note 14 to the Condensed Consolidated Financial Statements, on July 20, 2020, we fulfilled our redemption obligations with respect to the SMR notes using available cash on hand and, to a lesser extent, commercial paper borrowings. The cash paid included the $3.0 billion principal amount of debt redeemed, $30 million of related premiums and $8 million of accrued interest. When we announced the revised acquisition terms on

~~June 24, 2020, we also advised that the Company anticipated~~ ~~funding the acquisition using a combination of credit facilities and commercial paper~~. Accordingly, as reported in Note 14 to the Condensed Consolidated Financial Statements, on July 28, 2020, we entered into a supplemental 364-day, $3.0 billion U.S. revolving credit facility maturing July 27, 2021, which will be used for general corporate purposes, including funding a portion of the Advanced Disposal acquisition and refinancing of indebtedness, and to provide working capital.requirements.

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

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


	June 30,		December 31,		June 30,		December 31,
	2020		2019		2021		2020
Cash and cash equivalents	$	2,663	$	3,561	$	148	$	553
Restricted trust and escrow accounts:
Insurance reserves	$	339	$	270	$	384	$	306
Final capping, closure, post-closure and environmental remediation funds		110		109		117		114
Tax-exempt bond funds						20		—
Other		3		4		—		2
Total restricted trust and escrow accounts (a)	$	452	$	383	$	521	$	422
Debt:
Current portion	$	3,190	$	218	$	361	$	551
Long-term portion		9,598		13,280		12,883		13,259
Total debt	$	12,788	$	13,498	$	13,244	$	13,810

(a)	~~Includes $70 million as~~As of June 30, ~~2020~~2021 and December 31, ~~2019~~2020, $75 million of these account balances was included in other current assets in our Condensed Consolidated Balance Sheets.

As of June 30, ~~2020, in addition to the SMR Notes, net of $22 million of related unamortized discounts and deferred issuance costs, discussed above,~~2021 we had ~~$1.3~~$2.9 billion of debt maturing within the next 12 months, including (i) ~~$400 million~~$1.5 billion of ~~4.60% senior notes that mature in March 2021;~~short-term borrowings under our commercial paper program; (ii) ~~$734 million~~$1.2 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities and (iii) $212 million of other debt with scheduled maturities within the next 12 months, including ~~$106~~$103 million of tax-exempt bonds. As of June 30, ~~2020,~~2021, we have classified ~~$1.1~~$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 ~~$212~~$361 million of debt maturing in the next 12 months is classified as current obligations.

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 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 classified as loss on early extinguishment of debt in our Condensed Consolidated Statement of Operations, and $15 million of accrued interest.

Guarantor Financial Information

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. In lieu of providing separate financial statements for the subsidiary issuer and guarantor (WM and WM Holdings), we have presented the accompanying supplemental summarized combined balance sheet and income statement information for WM and WM Holdings on a combined basis after elimination of intercompany transactions between WM and WM Holdings and amounts related to investments in any subsidiary that is a non-guarantor (in millions):


	June 30,		December 31,		June 30,		December 31,
	2020		2019		2021		2020
Balance Sheet Information:
Current assets	$	2,554	$	3,491	$	5	$	481
Noncurrent assets		15		16		14		14
Current liabilities		3,098		127		249		446
Noncurrent liabilities:
Advances due to affiliates		19,336		19,345		17,782		16,505
Other noncurrent liabilities		7,410		10,988		10,837		11,202


	Six Months Ended
	June 30, ~~2020~~2021
Income Statement Information:
Revenue	$	—
Operating income		—
Net loss		~~151~~295

Summary of Cash Flow Activity

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


	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2021		2020
Net cash provided by operating activities	$	1,621	$	1,900	$	2,163	$	1,621
Net cash used in investing activities	$	(918)	$	(1,565)	$	(708)	$	(918)
Net cash (used in) provided by financing activities	$	(1,575)	$	1,822
Net cash used in financing activities					$	(1,810)	$	(1,575)

Net Cash Provided by Operating Activities — Our operating cash flows ~~decreased~~increased by $542 million as compared with the prior year period, ~~largely~~ as a result of ~~the impacts of COVID-19, which contributed to a significant decline in earnings. Other contributors impacting our operating cash flows for the reported periods include:~~ (i) an increase in ~~interest~~earnings primarily attributable to our collection, disposal and recycling lines of business; (ii) favorable changes in our working capital, net of effects of acquisitions and divestitures; (iii) the acquisition of Advanced Disposal and (iv) lower annual incentive compensation payments in the current ~~year period primarily associated with~~year. Our working capital was favorably impacted by the timing of cash payments for our ~~May 2019 issuance of $4.0 billion of senior notes~~capital expenditures and ~~(ii) higher bonus payments~~an improvement in ~~the current year period.~~our days sales outstanding. These ~~results~~favorable impacts were partially offset by (i) ~~lower~~higher income tax payments in the current year

period; (ii) the timing of cash ~~benefit~~tax benefits received in 2020 associated with ~~deferring certain~~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 ~~CARES Act, which is discussed in the~~ ~~Income Tax Expense~~ ~~section~~Coronavirus Aid, Relief and ~~(iii) benefits from alternative fuel tax credits.~~Economic Security Act.

Net Cash Used in Investing Activities — The most significant items included in our investing cash flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are summarized below:

●

~~Acquisitions~~ — We spent $1 million and $440 million for acquisitions during the six months ended June 30, 2020 and 2019, respectively, related to our Solid Waste business. These amounts exclude cash used in financing and operating activities related to the timing of contingent consideration paid. Our acquisition spending in 2019 relates primarily to our acquisition of Petro Waste Environmental LP, which is discussed further in Note 8 to the Condensed Consolidated Financial Statements.

●

Capital Expenditures — We used ~~$895~~$666 million and ~~$1,049~~$895 million for capital expenditures during the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. The decrease in capital spending was primarily driven by timing differences in our fleet purchases as well as supply chain constraints in advancing current year 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; however, we are currently taking proactive steps to reduce the amount of capital spending required due to the decrease in volumes as a result of COVID-19.~~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 months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we used ~~$33~~$56 million and ~~$81~~$33 million, respectively, of cash from restricted cash and cash equivalents to invest in available-for-sale securities. Additionally, during the first quarter of 2019, we had $17 million of cash proceeds from the redemption of our preferred stock received in conjunction with the 2014 sale of our Puerto Rico operations.

Net Cash ~~(Used in) Provided by~~Used in Financing Activities — The most significant items affecting the comparison of our financing cash flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are summarized below:

●

Debt (Repayments) Borrowings — The following summarizes our cash borrowings and repayments of debt ~~(excluding our commercial paper program discussed below)~~ for the six months ended June 30 (in millions):


	2020		2019		2021		2020
Borrowings:
Senior notes	$	—	$	3,971
	$	—	$	3,971
Repayments:
Revolving credit facility (a)	$	—	$	(11)
Commercial paper (a)					$	640	$	—
Senior notes		(600)		(257)		942		—
Tax-exempt bonds		(52)		(94)		125		—
Other debt		(53)		(23)		—		—
	$	(705)	$	(385)	$	1,707	$	—
Net cash (repayments) borrowings	$	(705)	$	3,586
Repayments:
Commercial paper (a)					$	(954)	$	—
Senior notes						(1,289)		(600)
Tax-exempt bonds						(24)		(52)
Other debt						(59)		(53)
					$	(2,326)	$	(705)
Net cash repayments					$	(619)	$	(705)

(a)

~~Our revolving credit facility was amended and restated~~Beginning in ~~November 2019.~~the second quarter of 2021 we reported these cash flows on a gross basis.

~~In May 2019, we issued $4.0 billion of senior notes to position us to fund our pending acquisition of Advanced Disposal.~~ Refer to Note 3 to the Condensed Consolidated Financial Statements for additional information related to ~~the July 2020 Special Mandatory Redemption of $3.0 billion of these senior notes and our other~~ debt borrowings and repayments.

●

Premiums and Other Paid on Early Extinguishment of Debt — During the six months ended June 30, ~~2019,~~2021, we paid premiums and other third-party costs of ~~$84~~$211 million to retire certain high-coupon senior notes.

●

~~Commercial Paper Program —~~ ~~During~~ See Note 3 to the ~~six months ended June 30, 2019, we made net cash repayments~~Condensed Consolidated Financial Statements for further discussion of $1,001 million under our commercial paper program. Borrowings incurred in 2019 were primarily to support acquisitions and for general corporate purposes. We repaid the outstanding balance in the second quarter of 2019 with proceeds from the May 2019 issuance of senior notes discussed above. We had no commercial paper borrowings during the six months ended June 30, 2020.this debt transaction.

●

Common Stock Repurchase Program — During the six months ended June 30, 2021, we repurchased $500 million of our common stock pursuant to two accelerated share repurchase (“ASR”) agreements, as discussed further in Note 11 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 ~~includes~~included $313 million related to a February 2020 ~~accelerated share repurchase~~ASR agreement and $89 million in open market transactions. In the first quarter of 2020, to enhance our liquidity position in response to COVID-19, we elected to temporarily suspend additional share repurchases for the foreseeable future. During the six months ended June 30, 2019, we repurchased $244 million of our common stock, which includes $180 million related to the May 2019 accelerated share repurchase agreement and $64 million in open market transactions. We also paid $4 million related to share repurchases executed in December 2018.

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●

Cash Dividends — For the periods presented, all dividends have been declared by our Board of Directors.

We paid cash dividends of ~~$466~~$489 million and ~~$440~~$466 million during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The increase in dividend payments is primarily due to our quarterly per share dividend increasing from ~~$0.5125 in 2019 to~~ $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~~net of cash ~~divested).~~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 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				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Net cash provided by operating activities	$	856	$	1,010	$	1,621	$	1,900	$	1,043	$	856	$	2,163	$	1,621
Capital expenditures		(436)		(578)		(895)		(1,049)		(396)		(436)		(666)		(895)
Proceeds from divestitures of businesses and other assets (net of cash divested)		3		8		15		20
Proceeds from divestitures of businesses and other assets, net of cash divested										2		3		17		15
Free cash flow	$	423	$	440	$	741	$	871	$	649	$	423	$	1,514	$	741

~~Pending Acquisition~~

On April 14, 2019, we entered into an Agreement and Plan of Merger to acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash, representing a total enterprise value at the time of $4.9 billion when including approximately $1.9 billion of Advanced Disposal’s net debt. On June 24, 2020, we entered into an amendment to the Agreement and Plan of Merger (as amended, the “Merger Agreement”), pursuant to which a subsidiary of WM will acquire all outstanding shares of Advanced Disposal for $30.30 per share in cash, representing a total enterprise value of $4.6 billion when including approximately $1.8 billion of Advanced Disposal’s net debt. Advanced Disposal’s solid waste network includes 95 collection operations, 73 transfer stations, 41 owned or operated landfills and 22 owned or operated recycling facilities. We currently expect the acquisition to close by the end of the third quarter of 2020. The Merger Agreement provides that the Company and Advanced Disposal will have a mutual right to terminate the Merger Agreement after September 30, 2020 if the closing has not occurred, and that date will automatically extend to November 30, 2020 under certain circumstances.

~~Subsequent Events~~

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 asset impairments, 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, ~~2019.~~2020. 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, ~~2020,~~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 ~~the~~ higher construction and demolition waste volumes. The volumes of industrial and residential waste in certain regions where we operate also tend to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect these seasonal trends.

Service disruptions caused by severe storms, extended periods of inclement weather or climate ~~extremes resulting from climate change~~events can significantly ~~affect~~impact the operating results of the 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 affected as a result of the waste volumes generated by these events. While weather-related and other ~~event driven~~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.

Inflation

While inflationary increases in costs can affect our income from operations margins, we believe that inflation generally has not had, and in the near future is not expected to have, any material adverse effect on our results of operations. However, a portion of our collection revenues are generated under long-term agreements with price adjustments based on various indices intended to measure inflation. Additionally, management’s estimates associated with inflation have had, and will continue to have, an impact on our accounting for landfill and environmental remediation liabilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Except for the broad effects of the COVID-19 pandemic, including widespread business disruption and the negative impact on financial markets, theinformation~~Information about market risks as of June 30, ~~2020~~2021 does not differ materially from that discussed under Item 7A in our Annual Report on Form 10-K for the year ended December 31, ~~2019 and in Item 3 of our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020.

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 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, ~~2020~~2021 (the end of the period covered by this Quarterly Report on Form 10-Q).

Changes in Internal Control over Financial Reporting

Management, together with our CEO and CFO, evaluated the changes in our internal control over financial reporting during the quarter ended June 30, ~~2020.~~2021. We determined that there were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control 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.

~~Except as set forth below, there~~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, ~~2019, as updated by Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020.

Item 2. ~~Our planned acquisition~~Unregistered Sales of Advanced Disposal Services, Inc. (“Advanced Disposal”) and/or our planned divestitures to GFL Environmental (together, the “Pending Transactions”) may not occur at all, may not occur in the expected time frame or may involve the divestitureEquity Securities and Use of ~~more or different businesses and assets than currently anticipated, which may negatively affect the trading price of our~~Proceeds.

The following table summarizes common stock ~~and our future business and financial results.~~repurchases made during the second quarter of 2021 (shares in millions):

~~On April 14, 2019,~~Issuer Purchases of Equity Securities


				Total Number of
	Total			Shares Purchased as	Approximate Maximum
	Number of	Average		Part of Publicly	Dollar Value of Shares that
	Shares	Price Paid		Announced Plans or	May Yet be Purchased Under
Period	Purchased	per Share(a)		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
Total	1.6	$	139.60	1.6

(a)

The “Average Price Paid per Share” in the table represents the final weighted average price per share paid for the accelerated share repurchase (“ASR”) agreement executed in February 2021 and the initial weighted average price per share paid for the ASR agreement executed in May 2021 which remained open as of June 30, 2021.

In February 2021, we entered into an ~~Agreement~~ASR agreement to repurchase $250 million of our common stock. At the beginning of the repurchase period, we delivered $250 million cash and ~~Plan~~received 1.8 million shares based on a stock price of ~~Merger to acquire Advanced Disposal. On June 24, 2020,~~$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 ~~amendment~~ASR agreement to repurchase $250 million of our common stock. At the ~~Agreement and Plan of Merger to revise the acquisition terms. If the acquisition is completed, Advanced Disposal will become an indirect wholly-owned subsidiary of WM. The consummation~~beginning of the ~~acquisition is not assured~~repurchase period, we delivered $250 million cash and ~~is subject~~received 1.4 million shares based on a stock price of $141.42. The final number of shares to ~~certain conditions, including~~ be repurchased and the ~~affirmative vote~~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 ~~holders of a majority of the outstanding shares of Advanced Disposal common stock to approve the revised acquisition terms, the expiration or termination of any waiting period~~agreement. Purchases under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder and the absence of any law or order restraining, enjoining or otherwise prohibiting the acquisition, as well as other customary closing conditions.

~~On June 24, 2020, we also announced that we and Advanced Disposal have entered into an~~ASR agreement ~~whereby GFL Environmental will acquire a combination of assets from us and Advanced Disposal to address substantially all of the divestitures~~are expected to be ~~required~~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 ~~U.S. Department~~Board of ~~Justice~~Directors in ~~connection with the Advanced Disposal acquisition. The sale of assets to GFL Environmental is conditioned on the closing of~~making dividend declarations, including our ~~acquisition of Advanced Disposal~~net earnings, financial condition and ~~other customary closing conditions.~~

The Pending Transactions are subject to a number of risks and uncertainties, including general economic and capital markets conditions; the effects that the announcement of the Pending Transactions may have on the respective businesses; inability to obtaincash required ~~regulatory or government approvals~~ for ~~the Pending Transactions or to obtain such approvals on satisfactory conditions; inability~~ ~~to obtain approval from the stockholders of Advanced Disposal or~~ ~~to satisfy other closing conditions of the Pending Transactions;~~ ~~inability of a party to obtain financing necessary for the Pending Transactions or on attractive terms;~~ the occurrence of any event, change or other circumstance that could give rise to the termination of a Pending Transaction; legal proceedings that may be instituted related to the Pending Transactions and the legal expenses and diversion of management’s attention that may be associated therewith; and unexpected costs, charges or expenses. We will be required to pay Advanced Disposal a termination fee of $250 million, as further specified in the Merger Agreement, if the Merger Agreement is terminated because (i) of the issuance of a nonappealable court order or legal restraint prohibiting the transaction or (ii) the transaction has not closed by September 30, 2020 (which date will automatically extend to November 30, 2020 under certain circumstances set forth in the Merger Agreement). Additionally, if the Pending Transactions are not completed, if there are significant delays in completing the Pending Transactions or if we are required to divest substantially more or different assets than currently anticipated, it could negatively affect the trading price of our common stock and our future business plans, growth and ~~financial results.~~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
~~2.1~~4.1*		~~Amendment No. 1,~~Officers’ Certificate delivered pursuant to Section 301 of the Indenture dated ~~June 24, 2020, to Agreement~~September 10, 1997 establishing the terms and ~~Plan~~form of ~~Merger, dated April 14, 2019, by and among WM, Everglades Merger Sub Inc., and Advanced Disposal Services, Inc. [incorporated by reference to Exhibit 2.1 to Form 8-K filed June 24, 2020].~~the 2.00% Senior Notes due 2029.

~~2.2~~4.2*		~~Amended~~Officers’ Certificate delivered pursuant to Section 301 of the Indenture dated September 10, 1997 establishing the terms and ~~Restated Voting Agreement dated June 24, 2020 by and between WM and Canada Pension Plan Investment Board [incorporated by reference to Exhibit 2.2 to Form 8-K filed June 24, 2020].~~form of the 2.95% Senior Notes due 2041.

~~10.1~~4.3*		~~Waste Management, Inc. Employee Stock Purchase Plan, As Amended and Restated May 12, 2020 [incorporated~~Guarantee Agreement by ~~reference to Exhibit 10.1 to Form 8-K filed May 15, 2020].~~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.

~~10.2~~4.4*		~~First Amendment to Waste Management, Inc. Stock Incentive Plan dated May 12, 2020 [incorporated~~Guarantee Agreement by ~~reference to Exhibit 10.2 to Form 8-K filed May 15, 2020].~~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.

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.

4845

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 ~~30, 2020~~27, 2021

4946


	2020		2019
Balance as of January 1,	$	28	$	29
Adoption of new accounting standard		(1)		—
Additions charged to expense		36		19
Accounts written-off, net of recoveries		(16)		(23)
Acquisitions, divestitures and other, net		(1)		3
Balance as of June 30,	$	46	$	28