2019
2019
ANNUAL
ANNUAL
REPORT
REPORT
Proxy Statement
17MAR202000051863
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
Date and Time:
May 12, 2020 at 11:00 a.m., Central Time
Place:*
The Maury Myers Conference Center
Waste Management, Inc.
1021 Main Street
Houston, Texas 77002
Purpose:
•
•
•
•
To elect the eight nominees named in the attached proxy
statement for election as directors;
To vote on a proposal to ratify the appointment of Ernst &
independent registered public
Young LLP as our
accounting firm for the fiscal year ending December 31,
2020;
To vote on a non-binding, advisory proposal to approve our
executive compensation;
To vote on a proposal to amend and restate our Employee
Stock Purchase Plan (the ‘‘ESPP’’) to increase the number
of shares authorized for issuance under the ESPP; and
•
To conduct other business that is properly raised at the
meeting.
Only stockholders of record on March 16, 2020 may vote at
the meeting.
IMPORTANT NOTICE OF INTERNET AVAILABILITY
OF PROXY MATERIALS:
This Notice of Annual Meeting and Proxy Statement and the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2019 are available on the ‘‘Investors’’
webpage at www.wm.com.
17MAR202000011044
17MAR202000012145
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You may vote via the Internet by following the
instructions provided in the Notice or, if you
received printed copies of the proxy materials,
on your proxy card.
If you received printed copies of the materials in
accordance with the instructions in the Notice,
you also have the option to vote by telephone by
calling the toll-free number listed on your proxy
card. Telephone voting is available 24 hours per
day until 11:59 p.m., Eastern Time, on May 11,
2020.
If you received printed copies of the proxy
materials in accordance with the instructions in
the Notice and would like to vote by mail, please
mark, sign and date your proxy card and return
in the postage-paid envelope
it promptly
provided.
If your shares of Common Stock are held in street name, you
will receive instructions from your broker, bank or other
nominee that you must follow in order to have your shares of
Common Stock voted.
Your vote is important. We urge you to promptly submit your proxy by telephone, by the Internet or, if this Proxy Statement was
mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid
envelope.
9MAR201814090660
COURTNEY A. TIPPY
Corporate Secretary
March 27, 2020
* We intend to hold our annual meeting in person. However, we are actively monitoring the public health and travel concerns
relating to COVID-19 (coronavirus). In the event it is not possible or advisable to hold the annual meeting as planned, we will
announce alternative arrangements for the meeting, which may include holding the meeting solely by means of remote
communication. Any alternative arrangements for the meeting will be publicly announced in a press release available on the
Company’s ‘‘Investors’’ webpage at www.wm.com and filed with the SEC. As always, we encourage you to vote your shares
prior to the annual meeting.
TABLE OF CONTENTS
GENERAL INFORMATION
BOARD OF DIRECTORS
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Leadership Structure . . . . . . . . . . . . . . . . . . .
Role in Risk Oversight . . . . . . . . . . . . . . . . . . .
Independence of Board Members . . . . . . . . . . .
Meetings and Board Committees . . . . . . . . . . .
Audit Committee . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Audit Committee Report
Management Development and Compensation
Committee . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . .
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . . . . . .
Nominating and Governance Committee . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . .
Board of Directors Governing Documents . . . . . .
Non-Employee Director Compensation . . . . . . . .
ELECTION OF DIRECTORS (Item 1 on the Proxy
Card)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
DIRECTOR AND OFFICER STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
DELINQUENT SECTION 16(A) REPORTS
EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
. . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary . . . . . . . . . . . . . . . . . . .
Our Compensation Philosophy for Named
Compensation Discussion and Analysis
Executive Officers . . . . . . . . . . . . . . . . . . .
Page
1
5
5
5
6
6
7
9
11
12
12
13
14
15
15
17
22
24
24
25
26
26
26
26
28
Overview of Elements of Our 2019
Compensation Program . . . . . . . . . . . . . . .
How Named Executive Officer Compensation
Decisions are Made . . . . . . . . . . . . . . . . .
Named Executives’ 2019 Compensation
Program and Results . . . . . . . . . . . . . . . .
Post-Employment and Change in Control
Executive Compensation Tables
Compensation; Clawback Policies . . . . . . . .
Other Compensation Policies and Practices . . .
. . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . .
Grant of Plan-Based Awards in 2019 . . . . . . .
Outstanding Equity Awards as of December 31,
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested . . . . . . . . .
Nonqualified Deferred Compensation in 2019 . .
Potential Payments Upon Termination or
Change in Control
. . . . . . . . . . . . . . . . . .
Potential Consideration Upon Termination of
Employment
. . . . . . . . . . . . . . . . . . . . . .
Chief Executive Officer Pay Ratio . . . . . . . . . .
Equity Compensation Plan Table . . . . . . . . . .
RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (Item 2 on the
Proxy Card)
. . . . . . . . . . . . . . . . . . . . . . . . . .
ADVISORY VOTE ON EXECUTIVE COMPENSATION
(Item 3 on the Proxy Card)
. . . . . . . . . . . . . . .
PROPOSAL TO AMEND AND RESTATE THE
COMPANY’S EMPLOYEE STOCK PURCHASE
PLAN (Item 4 on the Proxy Card)
. . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER MATTERS
APPENDIX A
Page
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46
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49
50
50
51
52
54
56
A-1
PROXY STATEMENT
Waste Management, Inc. is a holding company, and all operations are conducted by its subsidiaries. Our subsidiaries are operated
and managed locally and focus on providing services in distinct geographic areas. Through our subsidiaries, we are North
America’s leading provider of comprehensive waste management environmental services, and we are also a leading developer,
operator and owner of landfill gas-to-energy facilities in the United States.
Our Board of Directors is soliciting your proxy for the 2020 Annual Meeting of Stockholders and at any postponement or
adjournment of the meeting. We are furnishing proxy materials to our stockholders primarily via the Internet. On March 27, 2020,
we sent an electronic notice of how to access our proxy materials and our Annual Report to stockholders that have previously
signed up to receive their proxy materials via the Internet. On March 27, 2020, we began mailing a Notice of Internet Availability of
Proxy Materials to those stockholders that previously have not signed up for electronic delivery. The Notice contains instructions
on how stockholders can access our proxy materials on the website referred to in the Notice or request that a printed set of the
proxy materials be sent to them. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower
the costs of the annual meeting, and conserve natural resources.
Record Date
March 16, 2020.
Quorum
The holders of a majority of the shares of Common
Stock outstanding on the record date must be present in
person or by proxy.
Shares Outstanding
There were 423,627,187 shares of our
Common Stock outstanding and entitled to vote as of March 16,
2020.
Voting by Proxy
Internet, phone, or mail.
Voting at the Meeting
Stockholders can vote in person
during the meeting. Stockholders of record will be on a list held
by the inspector of elections. Beneficial holders must obtain a
proxy from their brokerage firm, bank, or other stockholder of
record and present it to the inspector of elections with their
ballot. Voting in person by a stockholder will revoke any
previously submitted proxy.
Changing Your Vote
Stockholders of record may revoke their
proxy at any time before we vote it at the meeting by submitting
a later-dated proxy via the Internet, by telephone, by mail, by
delivering instructions to our Corporate Secretary before the
annual meeting revoking the proxy or by voting in person at the
annual meeting. If you hold shares through a bank or
brokerage firm, you may revoke any prior voting instructions by
contacting that firm.
Votes Required to Adopt Proposals
Each share of our
Common Stock outstanding on the record date is entitled to
one vote on each of the eight director nominees and one vote on
each other matter. To be elected, a director must receive a
majority of the votes cast with respect to that director’s
election at the meeting. This means that the number of shares
voted ‘‘for’’ a director must exceed 50% of the votes cast with
respect to that director. Each of the other proposals requires
the favorable vote of the holders of a majority of the
outstanding shares of Common Stock present, either by proxy
or in person, and entitled to vote on the matter.
Effect of Abstentions and Broker Non-Votes
Abstentions
will have no effect on the election of directors. For each of the
other proposals, abstentions will have the same effect as a vote
against these matters because they are considered present
and entitled to vote on the matters.
If your shares are held by a broker, the broker will ask you how
you want your shares to be voted. If you give the broker
instructions, your shares must be voted as you direct. If you do
not give instructions, one of two things can happen depending
on the type of proposal. For the proposal to ratify selection of
the Company’s independent registered public accounting firm,
the broker may vote your shares at its discretion. But for all
other proposals in this Proxy Statement, including the election
of directors, the advisory vote on executive compensation and
the amendment and restatement of our ESPP, the broker
cannot vote your shares at all. When that happens, it is called a
‘‘broker non-vote.’’ Broker non-votes are counted
in
determining the presence of a quorum at the meeting, but they
are not counted for purposes of calculating the shares present
and entitled to vote on particular proposals at the meeting.
Voting Instructions
You may receive more than one proxy card depending on how you hold your shares. If you hold shares
through a broker, your ability to vote by phone or over the Internet depends on your broker’s voting process. You should complete
and return each proxy or other voting instruction request provided to you. If you complete and submit your proxy voting
instructions, the persons named as proxies will follow your instructions. If you submit your proxy but do not give voting
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PROXY STATEMENT
instructions, we will vote your shares as set forth below. If you give us your proxy, any other matters that may properly come
before the meeting will be voted at the discretion of the proxy holders.
Item
1
2
3
4
Matter
Election of Directors Nominees
Ratification of Ernst & Young LLP as the Company’s Independent
Registered Public Accounting Firm for fiscal year 2020
Approve the Company’s Executive Compensation
Proposal to amend and restate our ESPP
NOMINEES FOR DIRECTOR
Board Vote
Recommendation
FOR each director
nominee
FOR
FOR
FOR
Committee
Name
Frank M. Clark, Jr.
James C. Fish, Jr.
Andr´es R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
Age
Tenure
2002 - Present
Management
Development
and
Compensation
C
17MAR20200004309017MAR20200005096117MAR202000005350
Independent
Audit
Nominating
and
Governance
2016 - Present
2015 - Present
17MAR20200004309017MAR20200005096117MAR202000050961
2013 - Present
17MAR20200004309017MAR20200005096117MAR202000050961
2015 - Present
2019 - Present
1997 - Present
17MAR202000043090
17MAR202000050961
C
17MAR20200004309017MAR20200000535017MAR202000050961
17MAR202000043090
2005 - Present
17MAR20200004309017MAR20200005096117MAR202000050961 17MAR202000050961
17MAR202000050961 17MAR202000050961
C
17MAR202000005350
74
57
62
62
60
61
70
72
Chair, as of 2020 Annual Meeting
C
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Member
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PROXY STATEMENT
to
Secretary
our Corporate
Attending the Meeting
than 150 days in advance of the first anniversary of the previous
Only stockholders, their proxy
holders and our invited guests may attend the meeting. If you
year’s annual meeting of stockholders. As a result, any such
stockholder’s notice for the 2021 Annual Meeting must be
plan to attend, please bring identification and, if you hold
received no earlier than December 13, 2020 and no later than
shares in street name, bring your bank or broker statement
January 12, 2021 and must contain the information specified in
showing your beneficial ownership of Waste Management, Inc.
the Company’s By-laws. The stockholder’s notice must be
stock as of the record date in order to be admitted to the
meeting. If you are planning to attend our annual meeting and
at Waste
delivered
require directions to the meeting, please contact our Corporate Management, Inc., 1001 Fannin Street, Houston, Texas 77002.
Secretary at 713-512-6200. The only items on the agenda for
this year’s annual meeting are the items set out in the Notice.
There will be no presentations.
Potential Alternative Meeting Arrangements
We intend to
hold our annual meeting in person. However, we are actively
monitoring the public health and travel concerns relating to
COVID-19 (coronavirus). In the event it is not possible or
advisable to hold the annual meeting as planned, we will
announce alternative arrangements for the meeting, which
may include holding the meeting solely by means of remote
communication. Any alternative arrangements for the meeting
will be publicly announced in a press release available on the
Company’s ‘‘Investors’’ webpage at www.wm.com and filed
with the SEC. As always, we encourage you to vote your shares
prior to the annual meeting.
Proxy Access Nominations: In November 2019, the Company
amended and restated its By-laws to provide for ‘‘proxy
access.’’ This provision permits a stockholder or group of up to
20 stockholders owning 3% or more of the Company’s
outstanding Common Stock continuously for at least three
years to nominate and include in the Company’s proxy
materials director nominees constituting up to the greater of
20% of the Board of Directors or two individuals, provided the
stockholder(s) and the nominee(s) satisfy the requirements
specified in the By-laws. In order for such nominees to be
form of proxy,
included
stockholders and nominees must submit a notice of proxy
access nomination together with other related information
required by our By-laws. The information necessary to
nominate a director candidate using our proxy access By-law
must be delivered to or mailed and received by the Company
Stockholder Proposals and Nominees for the 2021 Annual
not less than 120 days nor more than 150 days before the
Meeting
Stockholder Proposals: Eligible stockholders who
anniversary of the date that the Company commenced mailing
wish to submit a proposal for inclusion in the proxy statement
of its proxy statement for the previous year’s annual meeting of
for our 2021 Annual Meeting must submit their proposal to our
stockholders. As a result, any such nomination for the 2021
Corporate Secretary at Waste Management, Inc., 1001 Fannin
Annual Meeting must be received no earlier than October 28,
Street, Houston, Texas 77002. The written proposal must be
2020 and no later than November 27, 2020 and must contain
received at our offices on or before November 27, 2020, and the
the information specified in the Company’s By-laws. Such
stockholder must have been the registered or beneficial owner
information must be delivered to our Corporate Secretary at
of (a) at least 1% of our outstanding Common Stock or Waste Management, Inc., 1001 Fannin Street, Houston,
(b) shares of our Common Stock with a market value of $2,000
for at least one year before submitting the proposal. The
proposal must comply with the requirements set forth in the
federal securities laws, including Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the ‘‘Exchange
Act’’), in order to be included in the Company’s proxy statement
and proxy card for the 2021 Annual Meeting.
A copy of our By-laws may be obtained free of charge by writing
to our Corporate Secretary and is available in the ‘‘ESG —
Corporate Governance’’ section of the ‘‘Investors’’ page on our
website at www.wm.com. The Company will not consider any
proposal or nomination that is not timely or otherwise does not
meet the By-law and SEC requirements for submitting a
proposal or nomination.
in our proxy statement and
Texas 77002.
Advance Notice Proposals and Nominations: In addition, the
Company’s By-laws establish advance notice procedures that
must be complied with for stockholders to bring proposals that
are not included in the Company’s proxy materials and
nominations of persons for election as directors (other than
pursuant to our proxy access By-law discussed below) before
an annual meeting of stockholders. In accordance with our
By-laws, for a proposal or nominee not included in our proxy
materials to be properly brought before the 2021 Annual
Meeting, a stockholder’s notice must be delivered to or mailed
and received by the Company not less than 120 days nor more
Due to an anticipated address change for our principal
executive officers during the fourth quarter of 2020, we also
ask that you email a courtesy copy of any notice to
GCLegal@wm.com.
Expenses of Solicitation
We pay the cost of preparing,
assembling and mailing this proxy-soliciting material. In addition
to the use of the mail, proxies may be solicited personally, by
Internet or telephone, or by Waste Management officers and
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2020 Proxy Statement
3
proxy materials will receive only one copy of the Proxy
Statement and Annual Report unless we are notified that one
or more of these individuals wishes to receive separate copies.
This procedure helps reduce our printing costs and postage
fees.
the
If you wish to receive a separate copy of this Proxy Statement
and
contact: Waste
Management, Inc., Corporate Secretary, 1001 Fannin Street,
Houston, Texas 77002, telephone 713-512-6200.
Annual Report,
please
If you do not wish to participate in householding in the future
and prefer to receive separate copies of the proxy materials,
please contact: Broadridge Financial Solutions, Attention
Householding Department, 51 Mercedes Way, Edgewood,
NY 11717, telephone 1-866-540-7095. If you are currently
receiving multiple copies of proxy materials and wish to receive
only one copy for your household, please contact Broadridge.
PROXY STATEMENT
employees of the Company’s subsidiaries without additional
compensation. We pay all costs of solicitation, including certain
expenses of brokers and nominees who mail proxy materials to
their customers or principals. Also,
Innisfree M&A
Incorporated has been hired to help in the solicitation of
proxies for the 2020 Annual Meeting for a fee of $15,000 plus
associated costs and expenses.
Annual Report
A copy of our Annual Report on Form 10-K for
the year ended December 31, 2019, which includes our
financial statements for fiscal year 2019, is included with this
Proxy Statement. The Annual Report on Form 10-K is not
incorporated by reference into this Proxy Statement or deemed
to be a part of the materials for the solicitation of proxies.
Householding Information
We have adopted a procedure
approved by the SEC called ‘‘householding.’’ Under this
procedure, stockholders of record who have the same address
and last name and do not participate in electronic delivery of
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4
BOARD OF DIRECTORS
Our Board of Directors currently has nine members. Each
member of our Board is elected annually. Mr. Patrick W. Gross
has reached the retirement age set forth in the Company’s
Corporate Governance Guidelines; therefore, he is not standing
for re-election and his term as a Director of the Company will
expire at the 2020 Annual Meeting. The Board of Directors
intends to reduce the size of the Board to eight members
effective as of the expiration of Mr. Gross’s term at the 2020
Annual Meeting.
respond to changes in our Company’s strategy as well as
emerging risks. The primary means by which our Board
oversees our risk management processes is through its
regular communications with management and by regularly
reviewing our enterprise risk management, or ERM,
framework. We believe that our leadership team’s engagement
and communication methods are supportive of comprehensive
risk management practices and that our Board’s involvement
is appropriate to ensure effective oversight.
Mr. Thomas H. Weidemeyer is the Non-Executive Chairman of
the Board and presides over all meetings of the Board,
including executive sessions that only non-employee directors
attend. Stockholders and
interested parties wishing to
communicate with the Board or the non-employee directors
should address their communications to Mr. Thomas H.
Weidemeyer, Non-Executive Chairman of the Board, c/o Waste
Management,
Houston,
Texas 77052-3569.
53569,
Inc.,
P.O.
Box
Leadership Structure
We separated the roles of Chairman of the Board and Chief
Executive Officer at our Company in 2004. We believe that
having a Non-Executive Chairman of the Board is in the best
interests of the Company and stockholders, due in part to the
ever-increasing demands made on boards of directors under
federal securities laws, national stock exchange rules and
other federal and state regulations. The Non-Executive
Chairman’s responsibilities
full Board
meetings and executive sessions and managing the Board
function. Effective May 17, 2018, the Board elected Mr. Thomas
H. Weidemeyer to serve as Chairman of the Board due to his
many years as a valuable member of our Board, his experience
serving on boards of other large public companies, and his
extensive
experience.
and
Mr. Weidemeyer also serves on all three Board committees.
operational
leadership
leading
include
The separation of the positions allows our Chairman of the
Board to focus on management of Board matters and allows
our Chief Executive Officer to focus his attention on managing
our business. Additionally, we believe the separation of those
roles contributes to the independence of the Board in its
oversight role and in assessing the Chief Executive Officer and
management generally.
Role in Risk Oversight
Our executive officers have primary responsibility for risk
management within our Company. Our Board of Directors
oversees risk management to ensure that the processes
designed, implemented and maintained by our executives are
functioning as intended and adapted when necessary to
Our ERM process is supported by regular inquiries of our
Company’s Senior Leadership Team, and additional members
of management and operations
leadership across the
enterprise, as to the risks, including emerging risks, that may
affect the execution of our strategic priorities or achievement
of our long-term outlook. For the most significant risks, the
ERM process is designed to generate actionable insights that
are actively discussed and reviewed with the Senior Leadership
Team and our Board of Directors.
Risks and opportunities are assessed and then prioritized
using internal evaluations of financial impact, likelihood of
occurrence, outlook for changes in the nature or extent of risk
exposure and a self-assessment of the Company’s confidence
in existing risk mitigation efforts. The Senior Leadership Team
reviews the outcomes of the risk assessments, focusing
largely on the estimated scope of impacts, as well as the
adequacy of current support by internal staff, the sufficiency of
financial support for mitigation measures needed to manage
and reduce risk, and the sufficiency of any third-party expertise
that may be necessary to supplement internal resources. All
significant risks have a standardized scorecard that includes
forward-looking action plans with measurable indicators and
progress updates on action plans from previous assessments.
Our Board of Directors generally has seven regular meetings
per year, five of which are in person, including one meeting that
is dedicated specifically to strategic planning, and regular
updates are given to our Board of Directors on Company risks.
At each of these meetings, our President and Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer and
Chief Legal Officer report to our Board and, when appropriate,
specific committees. Additionally, other members of
management and employees attend meetings periodically and
present information, including those responsible for our
Internal Audit, Environmental Audit, Business Ethics and
Compliance, Human Resources, Government Affairs, Digital,
Insurance, Safety, Finance and Accounting functions. These
presentations allow our Board to have direct communication
with members of management and assess management’s
evaluation and administration of the Company’s risk profile
through our ERM process. For example, our Digital
organization briefs our Board or Audit Committee on
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BOARD OF DIRECTORS
is affiliated
improvement; physical
considering relevant facts and circumstances.
independence, which meet or exceed the requirements of the
cybersecurity risk and potentially disruptive technologies at
least twice a year, and environmental impacts, risks and New York Stock Exchange. These standards specify certain
relationships that are prohibited in order for the non-employee
opportunities are discussed with our Board or Audit Committee
director to be deemed independent. The categorical standards
at least annually. Other key areas of assessment addressed by
our Board uses in determining independence are included in
our ERM process and overseen by our Board include the
our Corporate Governance Guidelines, which can be found on
following: industry disruption; commodity markets; revenue
management; legal and regulatory; capital allocation; supply
our website. In addition to these categorical standards, our
chain management; service to customers; cost discipline; Board makes a subjective determination of independence
process
infrastructure; brand
management; health & safety; human capital; information
technology and currency & cash management. Consistent with
our Company’s long-standing commitment to corporate
sustainability and environmental stewardship, we have
published our 2019 Sustainability Report, an update to our full
length 2018 Sustainability Report, ‘‘Driving Change,’’ which
provides additional information about our management of
these risks. The information in this report can be found on our
Company website but does not constitute a part of our Proxy
Statement or Annual Report.
The Board reviewed all commercial and non-profit affiliations
of each non-employee director and the dollar amount of all
transactions between the Company and each entity with which
a non-employee director
to determine
independence. These transactions consisted of the Company,
through
its subsidiaries, providing waste management
services in the ordinary course of business and the Company’s
subsidiaries purchasing goods and services in the ordinary
course of business and included commercial dealings with
Graybar Electric Company, Inc. and The AES Corporation.
Management is also encouraged to communicate with our Ms. Mazzarella and Mr. Gluski, respectively, are the chief
executive officer of these entities. The Board concluded there
Board of Directors with respect to extraordinary risk issues or
developments that may require more immediate attention
are no transactions between the Company and any entity with
scheduled Board meetings. Our which a non-employee director is affiliated that (a) are
between
prohibited by our categorical standards of independence,
Non-Executive Chairman
facilitates
(b) are material individually or in the aggregate or (c) give rise
communications with our Board of Directors as a whole and is
to a material direct or indirect interest for that non-employee
integral in initiating the discussions among the independent
director. Accordingly, the Board has determined that each
Board members necessary to ensure management
is
non-employee director candidate meets the categorical
adequately evaluating and overseeing our Company’s risk
standards of independence and that there are no relationships
management. Additionally, in accordance with New York Stock
Exchange requirements, the Audit Committee of our Board is
that would affect independence.
responsible for discussing our major financial risk exposures,
steps management has taken to monitor and control such
exposures and the Company’s process for risk assessment
and management, and quarterly reports are made to the Audit
Committee on financial and compliance risks.
Last year the Board held seven regular meetings and two
special meetings, and each committee of the Board met
independently as set forth below. Each director attended at
least 75% of the meetings of the Board and the committees on
which he or she served. In addition, all directors attended the
2019 Annual Meeting of Stockholders. Although we do not have
The Board of Directors has determined that each of the
following seven non-employee director nominees are
a formal policy regarding director attendance at annual
independent in accordance with the New York Stock Exchange meetings, it has been longstanding practice that all directors
attend unless there are unavoidable schedule conflicts or
listing standards:
unforeseen circumstances.
Independence of Board Members
Meetings and Board Committees
the Board
regularly
of
Frank M. Clark, Jr.
Andr´es R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
Mr. James C. Fish, Jr., our President and Chief Executive
Officer, is also a director of the Company. As an employee of
the Company, Mr. Fish is not an ‘‘independent’’ director.
To assist the Board in determining independence, the Board of
Directors adopted categorical standards of director
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The Board appoints committees to help carry out its duties.
Committee members take on greater responsibility for key
issues, although all members of the Board are invited to attend
all committee meetings and the committee reviews the results
of its meetings with the full Board. The Board has three
separate standing committees: the Audit Committee; the
Management Development and Compensation Committee (the
‘‘MD&C Committee’’); and the Nominating and Governance
Committee. Additionally, the Board has the power to appoint
additional committees, as it deems necessary.
BOARD OF DIRECTORS
THE AUDIT
COMMITTEE
Members
Patrick W. Gross, Chairman
Frank M. Clark, Jr.
Andr´es R. Gluski
Victoria M. Holt
William B. Plummer
Thomas H. Weidemeyer
Number of Meetings Held in 2019
9
Mr. Gross has been the Chairman of our Audit Committee since May 2010. The other
members of our Audit Committee are Messrs. Clark, Gluski, Plummer and Weidemeyer
and Ms. Holt. Chairman Gross has reached the retirement age set forth in the Company’s
Corporate Governance Guidelines and is not standing for re-election. In February 2020, the
Nominating and Governance Committee recommended, and the Board approved,
appointment of Mr. Plummer to become Chairman of our Audit Committee, effective upon
the expiration of Chairman Gross’ term as a Director of the Company at the 2020 Annual
Meeting. Each member of our Audit Committee satisfies the additional New York Stock
Exchange independence standards for audit committees set forth in Section 10A of the
Exchange Act.
Our Board of Directors has determined that Audit Committee Chairman Mr. Gross,
Mr. Clark, Mr. Gluski, Mr. Plummer and Ms. Holt are audit committee financial experts as
defined by the SEC based on a thorough review of their education and financial and public
company experience.
Mr. Gross was a founder of American Management Systems Inc. where he was
principal executive officer for over 30 years. Since 2001, he has served as Chairman of
The Lovell Group, a private investment and advisory firm. Mr. Gross holds an MBA
from Stanford University’s Graduate School of Business, a master’s degree in
engineering science from the University of Michigan and a bachelor’s degree in
engineering science from Rensselaer Polytechnic Institute.
Mr. Clark served as Chairman and Chief Executive Officer of ComEd from 2005 to 2012
and President of ComEd from 2001 to 2005. Mr. Clark holds a LLB from DePaul
University College of Law and a BBA from DePaul University.
Mr. Gluski has served as President, Chief Executive Officer and Director of The AES
Corporation since 2011 and was Executive Vice President and Chief Operating Officer
of The AES Corporation from 2007 to 2011. Mr. Gluski is a graduate of Wake Forest
University and holds a PhD and MA in Economics from the University of Virginia.
Mr. Plummer served as Executive Vice President and Chief Financial Officer of United
Rentals, Inc. from 2008 to 2018. Mr. Plummer holds degrees in aeronautics and
astronautics from the Massachusetts Institute of Technology and an MBA from
Stanford University’s Graduate School of Business.
Ms. Holt has served as President, Chief Executive Officer and Director of Proto
Labs, Inc. since 2014 and was President and Chief Executive Officer of Spartech
Corporation from 2010 to 2013. Prior to joining Spartech, she served as Senior Vice
President of PPG Industries, Inc. for over five years. Ms. Holt holds an MBA from Pace
University and a bachelor’s degree in chemistry from Duke University.
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BOARD OF DIRECTORS
Key Functions
The Audit Committee’s duties are set forth in a written charter that was approved by the
Board of Directors. A copy of the charter can be found on our website. The Audit Committee
generally is responsible for overseeing all matters relating to our financial statements and
reporting, independent auditors and internal audit function. As part of its function, the
Audit Committee reports the results of all of its reviews to the full Board. In fulfilling its
duties, the Audit Committee, has the following responsibilities:
Administrative Responsibilities
•
•
Report to the Board, at least annually, all public company audit committee memberships
by members of the Audit Committee;
Perform an annual review of its performance relative to its charter and report the results
of its evaluation to the full Board; and
Adopt an orientation program for new Audit Committee members.
•
Financial Statements
•
•
•
•
•
Review financial statements and Forms 10-K and 10-Q with management and the
independent auditor;
Review all earnings press releases and discuss with management the type of earnings
guidance that we provide to analysts and rating agencies;
Discuss with the independent auditor any material changes to our accounting principles
and matters required to be communicated by Public Company Accounting Oversight
Board (United States) Auditing Standard No. 1301 Communications with Audit
Committees;
Review our financial reporting, accounting and auditing practices with management, the
independent auditor and our internal auditors;
Review management’s and the independent auditor’s assessment of the adequacy and
effectiveness of internal controls over financial reporting; and
Review executive officer certifications related to our reports and filings.
•
Independent Auditor
•
•
•
•
Engage an independent auditor, determine the auditor’s compensation and replace the
auditor if necessary;
Review the independence of the independent auditor and establish our policies for hiring
current or former employees of the independent auditor;
Evaluate the lead partner of our independent audit team and review a report, at least
annually, describing the independent auditor’s internal control procedures; and
Pre-approve all services,
independent auditor.
including non-audit engagements, provided by the
Internal Audit
•
•
Review the plans, staffing, reports and activities of the internal auditors; and
Review and establish procedures for receiving, retaining and handling complaints,
including anonymous complaints by our employees, regarding accounting, internal
controls and auditing matters.
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AUDIT COMMITTEE
REPORT
BOARD OF DIRECTORS
The role of the Audit Committee is, among other things, to oversee the Company’s financial
reporting process on behalf of the Board of Directors, to recommend to the Board whether
the Company’s financial statements should be included in the Company’s Annual Report
on Form 10-K and to select the independent auditor for ratification by stockholders.
Company management is responsible for the Company’s financial statements as well as
for its financial reporting process, accounting principles and internal controls. The
Company’s independent auditors are responsible for performing an audit of the Company’s
financial statements and expressing an opinion as to the conformity of such financial
statements with accounting principles generally accepted in the United States.
The Audit Committee has reviewed and discussed the Company’s audited financial
statements as of and for the year ended December 31, 2019 with management and the
independent registered public accounting firm, and has taken the following steps in
making its recommendation that the Company’s financial statements be included in its
annual report:
•
•
•
•
First, the Audit Committee discussed with Ernst & Young, the Company’s independent
registered public accounting firm for fiscal year 2019, those matters required to be
discussed by the applicable requirements of the Public Company Accounting Oversight
Board (United States) and the SEC, including information regarding the scope and
results of the audit. These communications and discussions are intended to assist the
Audit Committee in overseeing the financial reporting and disclosure process.
Second, the Audit Committee discussed with Ernst & Young its independence and
received from Ernst & Young a letter concerning independence as required under
applicable independence standards for auditors of public companies. This discussion
and disclosure helped the Audit Committee in evaluating such independence. The Audit
Committee also considered whether the provision of other non-audit services to the
Company is compatible with the auditor’s independence.
Third, the Audit Committee met periodically with members of management, the internal
auditors and Ernst & Young to review and discuss internal controls over financial
reporting. Further, the Audit Committee reviewed and discussed management’s report
on internal control over financial reporting as of December 31, 2019, as well as Ernst &
Young’s report regarding the effectiveness of internal control over financial reporting.
Finally, the Audit Committee reviewed and discussed, with the Company’s management
and Ernst & Young, the Company’s audited consolidated balance sheet as of
December 31, 2019, and consolidated statements of operations, comprehensive income,
cash flows and changes in equity for the fiscal year ended December 31, 2019, including
the quality, not just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of the disclosure.
The Committee has also discussed with the Company’s internal auditors and independent
registered public accounting firm the overall scope and plans of their respective audits.
The Committee meets periodically with both the internal auditors and independent
registered public accounting firm, with and without management present, to discuss the
results of their examinations and their evaluations of the Company’s internal controls over
financial reporting.
The members of the Audit Committee are not engaged in the accounting or auditing
profession and, consequently, are not experts in matters involving auditing or accounting.
In the performance of their oversight function, the members of the Audit Committee
necessarily relied upon the information, opinions, reports and statements presented to
them by Company management and by the independent registered public accounting firm.
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BOARD OF DIRECTORS
Based on the reviews and discussions explained above (and without other independent
verification), the Audit Committee recommended to the Board (and the Board approved)
that the Company’s financial statements be included in its annual report for its fiscal year
ended December 31, 2019. The Committee has also approved the selection of Ernst &
Young LLP as the Company’s independent registered public accounting firm for fiscal year
2020.
The Audit Committee of the Board of Directors
Patrick W. Gross, Chairman
Frank M. Clark, Jr.
Andr´es R. Gluski
Victoria M. Holt
William B. Plummer
Thomas H. Weidemeyer
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THE MANAGEMENT
DEVELOPMENT AND
COMPENSATION
COMMITTEE
Members
Frank M. Clark, Jr., Chairman
Andr´es R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
Number of Meetings Held in 2019
5
BOARD OF DIRECTORS
Mr. Clark has served as the Chairman of our MD&C Committee since May 2011. The other
members of the Committee are Mr. Gluski, Ms. Holt, Ms. Mazzarella, Mr. Plummer,
Mr. Pope and Mr. Weidemeyer. Each member of our MD&C Committee is independent in
accordance with the rules and regulations of the New York Stock Exchange.
Key Functions
Our MD&C Committee is responsible for overseeing our executive officer compensation, as
well as developing the Company’s compensation philosophy generally. The MD&C
Committee’s written charter, which was approved by the Board of Directors, can be found
on our website. In fulfilling its duties, the MD&C Committee has the following
responsibilities:
•
•
•
•
•
•
•
•
•
Review and establish policies governing the compensation and benefits of our executive
officers;
Approve the compensation of our executive officers and set the bonus plan goals for
those individuals;
Conduct an annual evaluation of our Chief Executive Officer by all independent directors
and set his compensation;
Oversee the administration of our equity-based incentive plans;
Review the results of the stockholder advisory vote on executive compensation and
consider any implications of such voting results on the Company’s compensation
programs;
Recommend to the full Board new Company compensation and benefit plans or changes
to our existing plans;
Evaluate and recommend to the Board the compensation paid to our non-employee
directors;
Review the independence of the MD&C Committee’s compensation consultant annually;
and
Perform an annual review of its performance relative to its charter and report the results
of its evaluation to the full Board.
In overseeing compensation matters, the MD&C Committee may delegate authority for
day-to-day administration and interpretation of the Company’s plans, including selection of
participants, determination of award levels within plan parameters, and approval of award
documents, to Company employees. However, the MD&C Committee may not delegate any
authority to Company employees under those plans for matters affecting the compensation
and benefits of the executive officers. For additional information on the MD&C Committee,
see the Compensation Discussion and Analysis beginning on page 26.
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BOARD OF DIRECTORS
COMPENSATION
COMMITTEE REPORT
The MD&C Committee has reviewed and discussed the Compensation Discussion and
Analysis, beginning on page 26, with management. Based on their review and discussions,
the MD&C Committee recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in the Company’s Proxy Statement.
The Management Development and Compensation
Committee of the Board of Directors
Frank M. Clark, Jr., Chairman
Andr´es R. Gluski
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer
John C. Pope
Thomas H. Weidemeyer
COMPENSATION
COMMITTEE
INTERLOCKS AND
INSIDER
PARTICIPATION
During 2019, Ms. Holt, Ms. Mazzarella and Messrs. Clark, Gluski, Plummer, Pope and
Weidemeyer served on the MD&C Committee. No member of the MD&C Committee was an
officer or employee of the Company during 2019; no member of the MD&C Committee is a
former officer of the Company; and during 2019, none of our executive officers served as a
member of a board of directors or compensation committee of any entity that has one or
more executive officers who serve on our Board of Directors or MD&C Committee.
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THE NOMINATING
AND GOVERNANCE
COMMITTEE
Members
Kathleen M. Mazzarella, Chairman
Patrick W. Gross
John C. Pope
Thomas H. Weidemeyer
Number of Meetings Held in 2019
5
BOARD OF DIRECTORS
Ms. Mazzarella was named Chairman of our Nominating and Governance Committee in May 2018. The
other members of the Committee include Messrs. Gross, Pope and Weidemeyer. Each member of our
Nominating and Governance Committee is independent in accordance with the rules and regulations
of the New York Stock Exchange.
Key Functions
The Nominating and Governance Committee has a written charter that has been approved by the
Board of Directors and can be found on our website. It is the duty of the Nominating and Governance
Committee to oversee matters regarding corporate governance. In fulfilling its duties, the Nominating
and Governance Committee has the following responsibilities:
• Review and recommend the composition of our Board, including the nature and duties of each of
our committees, in accordance with our Corporate Governance Guidelines;
• Evaluate the charters of each of the committees and recommend directors to serve as committee
chairs;
• Review individual director’s performance in consultation with the Chairman of the Board and review
the overall effectiveness of the Board;
• Recommend retirement policies for the Board, the terms for directors and the proper ratio of
employee directors to outside directors;
• Perform an annual review of its performance relative to its charter and report the results of its
evaluation to the full Board;
• Review stockholder proposals received for inclusion in the Company’s proxy statement and
recommend action to be taken with regard to the proposals to the Board; and
• Identify and recommend to the Board candidates to fill director vacancies.
Potential new director candidates are identified through various methods; the Nominating and
Governance Committee welcomes suggestions from directors, members of management, and
stockholders. From time to time, the Nominating and Governance Committee uses outside
consultants to assist with identifying potential director candidates. In 2018, the Nominating and
Governance Committee retained an outside consultant who later identified Mr. William B. Plummer as
a potential director candidate. Our Board of Directors elected Mr. Plummer as a member of the Board
effective August 19, 2019, and he was appointed to the Audit Committee and MD&C Committee. He is a
nominee for re-election at the annual meeting.
For all potential candidates, the Nominating and Governance Committee considers all factors it
deems relevant, such as a candidate’s personal and professional integrity and sound judgment,
business and professional skills and experience, independence, possible conflicts of interest,
diversity, and the potential for effectiveness, in conjunction with the other directors, to serve the
long-term interests of the stockholders. While there is no formal policy with regard to consideration of
diversity in identifying director nominees, the Committee considers diversity in business experience,
professional expertise, gender and ethnic background, along with various other factors when
evaluating director nominees. The Nominating and Governance Committee has considered the gender
and racial / ethnic composition of our Board, including the presence of two women, Mr. Clark’s and
Mr. Plummer’s self-identification as African American / Black and Mr. Gluski’s self-identification as
Hispanic, and believes these factors, among numerous others, contribute to a valuable diversity of
background, thoughts and opinions on our Board. The Committee uses a matrix of experience, skills
and expertise to develop criteria to select candidates. Before being nominated by the Nominating and
Governance Committee, director candidates are interviewed by the Chief Executive Officer and a
including the
minimum of two members of the Nominating and Governance Committee,
Non-Executive Chairman of the Board. Additional interviews typically include other members of the
Board, representatives from senior levels of management and an outside consultant.
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BOARD OF DIRECTORS
The Nominating and Governance Committee will consider all potential nominees on their merits
without regard to the source of recommendation. The Nominating and Governance Committee
believes that the nominating process will and should continue to involve significant subjective
judgments. To suggest a nominee for consideration by the Nominating and Governance Committee,
you should submit your candidate’s name, together with biographical information and his or her
written consent to nomination to the Chairman of the Nominating and Governance Committee, Waste
Management, Inc., 1001 Fannin Street, Houston, Texas 77002, between October 27, 2020 and
November 26, 2020.
In addition to the Nominating and Governance Committee’s consideration of any potential nominees
submitted, in November 2019, the Company amended and restated its By-laws to provide for ‘‘proxy
access.’’ This provision permits a stockholder or group of up to 20 stockholders owning 3% or more of
the Company’s outstanding Common Stock continuously for at least three years to nominate and
include in the Company’s proxy materials director nominees constituting up to the greater of 20% of
the Board of Directors or two individuals, provided the stockholder(s) and the nominee(s) satisfy the
requirements specified in the By-laws. In order for such nominees to be included in our proxy
statement and form of proxy, stockholders and nominees must submit a notice of proxy access
nomination together with other related information required by our By-laws. Please see ‘‘Stockholder
Proposals and Nominees for the 2021 Annual Meeting — Proxy Access Nominations’’ on page 3 for
additional information about timing, notification and informational requirements.
Related Party Transactions
The Board of Directors has adopted a written Related Party Transactions Policy for the review and approval or ratification of
related party transactions. Our policy generally defines related party transactions as current or proposed transactions in excess
of $120,000 in which (i) the Company is a participant and (ii) any director, executive officer or immediate family member of any
director or executive officer has a direct or indirect material interest. In addition, the policy sets forth certain transactions that will
not be considered related party transactions, including (i) executive officer compensation and benefit arrangements; (ii) director
compensation arrangements; (iii) business travel and expenses, advances and reimbursements in the ordinary course of
business; (iv) indemnification payments and advancement of expenses, and payments under directors’ and officers’
indemnification insurance policies; (v) any transaction between the Company and any entity in which a related party has a
relationship solely as a director, a less than 5% equity holder, or an employee (other than an executive officer); and (vi) purchases
of Company debt securities, provided that the related party has a passive ownership of no more than 2% of the principal amount of
any outstanding series. The Nominating and Governance Committee is responsible for overseeing the policy.
All executive officers and directors are required to notify the Chief Legal Officer or the Corporate Secretary as soon as practicable
of any proposed transaction that they or their family members are considering entering into that involves the Company. The Chief
Legal Officer will determine whether potential transactions or relationships constitute related party transactions that must be
referred to the Nominating and Governance Committee.
The Nominating and Governance Committee will review a detailed description of the transaction, including:
•
•
•
•
the terms of the transaction;
the business purpose of the transaction;
the benefits to the Company and to the relevant related party; and
whether the transaction would require a waiver of the Company’s Code of Conduct.
In determining whether to approve a related party transaction, the Nominating and Governance Committee will consider, among
other things, whether:
•
•
•
•
the terms of the related party transaction are fair to the Company and such terms would be reasonable in an arms-length
transaction;
there are business reasons for the Company to enter into the related party transaction;
the related party transaction would impair the independence of any non-employee director;
the related party transaction would present an improper conflict of interest for any director or executive officer of the
Company; and
•
the related party transaction is material to the Company or the individual.
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BOARD OF DIRECTORS
Any member of the Nominating and Governance Committee who has an interest in a transaction presented for consideration will
abstain from voting on the related party transaction.
The Nominating and Governance Committee’s consideration of related party transactions and its determination of whether to
approve such a transaction are reflected in the minutes of the Nominating and Governance Committee’s meetings. As discussed
above under ‘‘Independence of Board Members,’’ the Company reviewed all transactions between the Company and each entity
with which a non-employee director is affiliated, as well as all transactions between the Company and each entity with which an
executive officer is affiliated, and the Company is not aware of any transactions in 2019 that are required to be disclosed.
Board of Directors Governing Documents
Stockholders may obtain copies of our Corporate Governance Guidelines, the charters of the Audit Committee, the MD&C
Committee, and the Nominating and Governance Committee, and our Code of Conduct free of charge by contacting the Corporate
Secretary, c/o Waste Management, Inc., 1001 Fannin Street, Houston, Texas 77002 or by accessing the ‘‘ESG — Corporate
Governance’’ section of the ‘‘Investors’’ page on our website at www.wm.com.
Non-Employee Director Compensation
Our non-employee director compensation program consists of equity awards and cash consideration. Director compensation is
recommended annually by the MD&C Committee, with the assistance of an independent third-party consultant, and set by action
of the Board of Directors. The Board’s goal in designing directors’ compensation is to provide a competitive package that will
enable the Company to attract and retain highly skilled individuals with relevant experience. The compensation is also designed to
reward the time and talent required to serve on the board of a company of our size and complexity. The Board seeks to provide
sufficient flexibility in the form of compensation delivered to meet the needs of different individuals while ensuring that a
substantial portion of directors’ compensation is linked to the long-term success of the Company.
Equity Compensation
Non-employee directors receive an annual grant of shares of Common Stock under the Company’s 2014 Stock Incentive Plan. The
shares are fully vested at the time of grant; however, non-employee directors are required to hold all net shares until one year
after retirement and are subject to ownership guidelines, as discussed below. The grant of shares is generally made in two equal
installments, and the number of shares issued is based on the market value of our Common Stock on the dates of grant, which
are typically January 15 and July 15 of each year. Each non-employee director received a grant of Common Stock valued at
approximately $77,500 in each of January 2019 and July 2019. Mr. Thomas H. Weidemeyer received an additional grant of
Common Stock valued at approximately $50,000 in each of January 2019 and July 2019 for his service as Non-Executive Chairman
of the Board in 2019. Mr. Plummer received a prorated grant of Common Stock, included in the table below, following his election
to the Board in August 2019.
Cash Compensation
All non-employee directors receive an annual cash retainer for Board service and additional cash retainers for serving as a
committee chair. Directors do not receive meeting fees in addition to the retainers. The annual cash retainer is generally paid in
advance in two equal installments in January and July of each year. The table below sets forth the cash retainers for 2019:
Annual Retainer
Annual Chair Retainers
$110,000
$100,000 for Non-Executive Chairman
$25,000 for Audit Committee Chair
$20,000 for MD&C Committee Chair
$15,000 for Nominating and Governance Committee Chair
2020 Non-Employee Director Compensation
In February 2020, the MD&C Committee conducted its annual review of non-employee director compensation with the assistance
of the independent third-party consultant. The MD&C Committee recommended, and the Board of Directors approved, the
following increases in Non-Employee Director Compensation, with such increases to take effect with the next installments to be
paid or granted in July 2020: (a) annual grant of Common Stock increased from $155,000 to $165,000; (b) annual cash retainer
increased from $110,000 to $115,000 and (c) annual cash retainer for the Nominating and Governance Committee Chair increased
from $15,000 to $20,000. Prior to this change, non-employee director compensation had been held flat since February 2017.
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BOARD OF DIRECTORS
Stock Ownership Guidelines for Non-Employee Directors
Our non-employee directors are subject to ownership guidelines that establish a minimum ownership level and require that all
net shares received in connection with a stock award, after selling shares to pay all applicable taxes, be held during their tenure
as a director and for one year following termination of Board service. The MD&C Committee amended the ownership guidelines
for employees and directors in November 2018 to increase the assumed stock price from $60 per share to $80 per share, to better
reflect more recent sustained market prices for our Common Stock. As a result, non-employee directors are now required to hold
7,000 shares, valued at approximately five times the 2019 annual cash retainer for non-employee directors. There is no deadline
for non-employee directors to reach their ownership guideline; however, the MD&C Committee performs regular reviews to
confirm that all non-employee directors are in compliance or are showing sustained progress toward achievement of their
ownership guideline. All of our non-employee directors have reached the ownership guideline, except our newest director,
Mr. Plummer, is making appropriate progress toward his ownership guideline. Additionally, our Insider Trading Policy provides
that directors are not permitted to hedge their ownership of Company securities, including trading in options, warrants, puts and
calls or similar derivative instruments on any security of the Company or selling any security of the Company ‘‘short.’’
Director Compensation Table
The table below shows the aggregate cash paid, and stock awards issued, to the non-employee directors in 2019 in accordance
with the descriptions set forth above:
Name
Frank M. Clark, Jr.
Andr´es R. Gluski
Patrick W. Gross
Victoria M. Holt
Kathleen M. Mazzarella
William B. Plummer(2)
John C. Pope
Thomas H. Weidemeyer
Fees Earned
or Paid in
Cash ($)
Stock
Awards
($)(1)
Total ($)
130,000
155,058
285,058
110,000
155,058
265,058
135,000
155,058
290,058
110,000
155,058
265,058
125,000
155,058
280,058
44,500
62,779
107,279
110,000
155,058
265,058
210,000
254,956
464,956
(1) Amounts in this column represent the grant date fair value of stock awards granted in 2019, in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic 718. The grant date fair value of the
awards is equal to the number of shares issued multiplied by the average of the high and low market price of our
Common Stock on each date of grant; there are no assumptions used in the valuation of shares.
(2) Prorated compensation for the period from Mr. Plummer’s election on August 19, 2019 through December 31, 2019.
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ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The first item on the proxy card is the election of eight directors
The Board will act on the resignation, taking into account the
to serve until the 2021 Annual Meeting of Stockholders or until Nomination and Governance Committee’s recommendation,
and publicly disclose its decision and rationale behind it within
their respective successors have been duly elected and
qualified. The Board has nominated the eight director
90 days of the date of the certification of the election results.
candidates named below and recommends that you vote FOR
their election. If any nominee is unable or unwilling to serve as
a director, which we do not anticipate, the Board, by resolution,
may reduce the number of directors that constitute the Board
or may choose a substitute. To be elected, a director must
receive a majority of the votes cast with respect to that director
at the meeting. Our By-laws provide that if the number of
shares voted ‘‘for’’ any director nominee does not exceed 50%
of the votes cast with respect to that director, he or she will
tender his or her resignation to the Board of Directors
contingent on the acceptance of such resignation by the Board.
The Nominating and Governance Committee will then make a
recommendation to the Board on whether to accept or reject
the resignation, or whether other action should be taken.
The table below shows all of our director nominees; their ages,
terms of office on our Board; experience within at least the past
five years; and qualifications our Board considered when
inviting them to serve as a director as well as nominating them
for re-election. We believe that, as a general matter, our
directors’ past five years of experience gives an indication of
the wealth of knowledge and experience these individuals have
and that our Board considered; however, we have also included
specific skills and areas of expertise that makes each of these
individuals a valuable member of our Board. Each of the
director nominees currently serves on our Board of Directors.
Director Nominees
FRANK M. CLARK, JR.
POSITION AND BUSINESS EXPERIENCE
Chairman and Chief Executive Officer — ComEd (energy services company and
subsidiary of Exelon Corporation) from 2005 to 2012; President — ComEd from 2001 to
2005.
Executive Vice President and Chief of Staff — Exelon Corporation (public utility holding
company) from 2004 to 2005; Senior Vice President — Exelon Corporation from 2001 to
2004.
President of the Chicago Board of Education.
26AUG201916382370
Director of Aetna, Inc. from 2006 to November 2018.
Age:
74
Director since:
2002
Board Committees:
Audit and Management
Development &
Compensation (Chair)
Director of BMO Financial Corp., a private company, from 2005 to December 2016.
QUALIFICATIONS
Mr. Clark served in executive positions at a large public utility company for over a
decade, providing him with extensive experience and knowledge of large company
management, operations and business critical functions. His background in policy-
related matters, including regulatory and governmental affairs, human resources and
labor relations are a valuable asset to the Company. He also brings over 15 years of
experience as a member of a public company board of directors.
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2020 Proxy Statement
17
ELECTION OF DIRECTORS
JAMES C. FISH, JR.
POSITION AND BUSINESS EXPERIENCE
President and Chief Financial Officer from July 2016 to November 2016.
Executive Vice President and Chief Financial Officer from 2012 to July 2016.
Senior Vice President — Eastern Group from 2011 to 2012.
Area Vice President — Pennsylvania and West Virginia Area from 2009 to 2011.
Market Area General Manager — Western Pennsylvania/West Virginia from 2008 to 2009
and Rhode Island/Southern Massachusetts from 2006 to 2008.
26AUG201916383878
QUALIFICATIONS
Age:
57
Director since:
November 2016
ANDR´ES R. GLUSKI
Mr. Fish has been our President and Chief Executive Officer and a member of the Board
of Directors since November 2016. Mr. Fish joined the Company in 2001 and held several
key positions with the Company prior to his promotion, including Executive Vice
President and Chief Financial Officer, Senior Vice President for the Company’s Eastern
Group, Area Vice President for the Pennsylvania and West Virginia Area and Vice
President of Price Management. As a result, Mr. Fish has a broad and deep
understanding of the Company and the strategic actions necessary to deliver
stockholder value.
POSITION AND BUSINESS EXPERIENCE
President, Chief Executive Officer and Director — The AES Corporation (global energy
company) since 2011; Executive Vice President and Chief Operating Officer — The AES
Corporation from 2007 to 2011.
Director of AES Gener (Chile) from 2005 to January 2020.
Director of Cliffs Natural Resources from 2011 to July 2014.
26AUG201916380888
QUALIFICATIONS
Age:
62
Director since:
January 2015
Board Committees:
Audit and Management
Development &
Compensation
Mr. Gluski has been President and CEO of The AES Corporation, a Fortune 500 company
in the electricity sector, since 2011. During his tenure, he has led the transformation of
the company from a mainly fossil based generation provider to a leader in renewable
energy, energy storage and cloud-based energy efficiency services. Mr. Gluski has
extensive experience in finance, operations and turnarounds. He is currently on the
Board of Directors of the Edison Electric Institute, Chairman of the Council of the
Americas and has been voted one of the ‘‘Most Influential Leaders’’ by Latino Leaders
magazine.
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ELECTION OF DIRECTORS
VICTORIA M. HOLT
POSITION AND BUSINESS EXPERIENCE
President, Chief Executive Officer and Director — Proto Labs, Inc. (online and
technology-enabled quick-turn manufacturer) since February 2014.
President and Chief Executive Officer — Spartech Corporation (a leading producer of
plastic sheet, compounds and packaging products) from 2010 to 2013; Director of
Spartech Corporation from 2005 to 2013.
Director of Piper Sandler Companies (formerly Piper Jaffray Companies) since
September 2019.
Director of Watlow Electric Manufacturing Company, a private company, since 2012.
7MAR201917153538
QUALIFICATIONS
Age:
62
Director since:
2013
Board Committees:
Audit and Management
Development &
Compensation
Ms. Holt has served in executive positions at public companies for many years, providing
her with extensive knowledge about operations, management, logistical requirements
and measuring financial performance of large public companies. Her background and
education provide her with expertise in applying environmental solutions critical to our
Company’s strategy. She also has many years of experience serving on a public company
board of directors.
KATHLEEN M. MAZZARELLA
7MAR201917151972
Age:
60
Director since:
October 2015
Board Committees:
Management
Development &
Compensation and
Nominating &
Governance (Chair)
POSITION AND BUSINESS EXPERIENCE
Chairman, President and Chief Executive Officer — Graybar Electric Company, Inc.
(distributor of electrical, communications and data networking products and provider of
related supply chain management and logistics services) since 2013; President and
Chief Executive Officer — Graybar Electric Company, Inc. from 2012 to 2013; Executive
Vice President and Chief Operating Officer — Graybar Electric Company, Inc. from 2010
to 2012.
Director of Cigna Corporation since December 2018.
Director of Express Scripts Holding Company from June 2017 until acquisition by Cigna
Corporation in December 2018.
Director of Core & Main, a private company, since January 2019.
Director of Federal Reserve Bank of St. Louis from January 2015 to December 2019;
Chair of the Board from April 2016 to December 2019.
QUALIFICATIONS
Ms. Mazzarella has experience serving as the chief executive of a large corporation,
developing expertise in the areas of logistics and supply chain management. During her
40-year tenure at Graybar, Ms. Mazzarella has held executive-level positions in sales,
human resources, strategic planning and marketing. This diverse background combined
with her deep and valuable experience leading various aspects of a customer-focused
business will help the Company achieve its strategy to provide an exceptional customer
experience. She also has experience serving on large public company, private company
and non-profit boards.
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ELECTION OF DIRECTORS
WILLIAM B. PLUMMER
POSITION AND BUSINESS EXPERIENCE
Executive Vice President and Chief Financial Officer — United Rentals, Inc. (world’s
largest equipment rental company) from 2008 to October 2018; Senior Adviser — United
Rentals, Inc. from October 2018 to January 2019.
Director of Global Payments Inc. since May 2017.
Chairman of the Board — Nesco Holdings, Inc. since July 2019.
13MAR202003551661
Director of Venture Metals, LLC, a private company, since July 2019.
Age:
61
Director since:
August 2019
Board Committees:
Audit and Management
Development &
Compensation
JOHN C. POPE
Director of John Wiley & Sons, Inc. from 2003 to September 2019.
Director of UIL Holdings Corporation from 2013 to December 2015.
Director of United Rentals North America, Inc., a private company, from 2008 to January
2019.
QUALIFICATIONS
Mr. Plummer has more than two decades of financial leadership experience. During his
tenure at United Rentals, Mr. Plummer was responsible for the development of the
company’s finance activities, investor relations, and co-led its merger, acquisition and
divestiture strategies. Mr. Plummer also served as Chief Financial Officer of Dow
Jones & Company, where he set policy for global finance and corporate strategy.
Mr. Plummer has experience as member of the board of directors of a number of other
large public companies, with particular focus on audit committee service and
leadership.
POSITION AND BUSINESS EXPERIENCE
Chairman of the Board — PFI Group (private investment firm) since 1994.
Chairman of the Board — R.R. Donnelley & Sons Company since May 2014; Director of
R.R. Donnelley & Sons Company, or predecessor companies, since 1996.
Director of The Kraft Heinz Company, or predecessor companies including Kraft Foods
Group, Inc., since 2001.
Director of Talgo S.A. since May 2015.
7MAR201917151496
Former Directorships: Con-way, Inc., or predecessor companies, from 2003 to October
2015; Dollar Thrifty Automotive Group, Inc. from 1997 to 2012; and Navistar International
Corporation from 2012 to 2013.
Age:
70
Director since:
1997
Board Committees:
Management
Development &
Compensation and
Nominating &
Governance
QUALIFICATIONS
Prior to his service on the boards of multiple major corporations, Mr. Pope served in
executive operational and financial positions at large airline companies for almost
20 years, providing him with extensive experience and knowledge of management of
large public companies with large-scale logistical challenges, high fixed-cost structure
and significant capital requirements. His background, education and board service also
provide him with expertise in finance and accounting. Mr. Pope has served on the board
of directors for many public companies for over 30 years.
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ELECTION OF DIRECTORS
THOMAS H. WEIDEMEYER
POSITION AND BUSINESS EXPERIENCE
Chief Operating Officer — United Parcel Service, Inc. (package delivery and supply chain
services company) from 2001 to 2003; Senior Vice President — United Parcel
Service, Inc. from 1994 to 2003.
President, UPS Airlines (UPS owned airline) from 1994 to 2003.
Director of NRG Energy, Inc. since 2003.
Director of The Goodyear Tire & Rubber Company since 2004 (retiring April 2020)
Director of Amsted Industries Incorporated, a private company, since 2007.
7MAR201917153069
QUALIFICATIONS
Mr. Weidemeyer served in executive positions at a large public company for several
years and has served as our Non-Executive Chairman of the Board since May 2018. His
roles encompassed significant operational management responsibility, providing him
knowledge and experience in an array of functional areas critical to large public
companies, including supply chain and logistics management. Mr. Weidemeyer also has
over 15 years of experience serving on the board of directors for public companies.
Age:
72
Director since:
2005
Chairman of the
Board since:
May 2018
Board Committees:
Audit, Management
Development &
Compensation and
Nominating &
Governance
FOR THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF EACH OF THE EIGHT DIRECTOR NOMINEES.
16MAR202023050719
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DIRECTOR AND OFFICER STOCK
OWNERSHIP
Our Board of Directors has adopted stock ownership
guidelines for our non-employee directors based on the
recommendation of the MD&C Committee, as described in
Non-Employee Director Compensation on page 15 of this Proxy
Statement. Our executive officers, including Mr. Fish, are also
subject to stock ownership guidelines, as described in the
Compensation Discussion and Analysis beginning on page 26
of this Proxy Statement.
The Security Ownership of Management table below shows the
number of shares of Common Stock each director and each
executive officer named in the Summary Compensation Table
on page 40 beneficially owned as of March 16, 2020, our record
date for the annual meeting, as well as the number owned by
all directors and currently-serving executive officers as a
group. These
in the
aggregate, own less than 1% of our outstanding shares as of
the record date.
individuals, both
individually and
SECURITY OWNERSHIP OF MANAGEMENT
Name
Frank M. Clark, Jr.
Andr´es R. Gluski
Patrick W. Gross
Victoria M. Holt
Kathleen M. Mazzarella(3)
William B. Plummer
John C. Pope
Thomas H. Weidemeyer(4)
James C. Fish, Jr.
Devina A. Rankin
John J. Morris, Jr.
Tara J. Hemmer
Steven R. Batchelor
All directors and executive officers as a group (17 persons)(5)
Shares of Common
Stock Owned(1)
Shares of Common
Stock Covered by
Exercisable Options(2)
32,129
11,169
24,942
17,271
9,081
1,186
53,497
31,165
264,369
25,473
86,855
21,425
21,168
657,866
—
—
—
—
—
—
—
—
53,312
54,456
23,803
27,442
14,036
288,726
(1) The table reports beneficial ownership in accordance with Rule 13d-3 under the Exchange Act. The amounts reported above
include 3,947 stock equivalents attributed to Mr. Fish, 2,220 stock equivalents attributed to Mr. Morris and 966 stock
equivalents attributed to Mr. Batchelor, based on their holdings in the Company’s 401(k) Retirement Savings Plan stock fund.
The amounts reported above also include 94,844 shares of Common Stock deferred by Mr. Fish. Deferred shares were
earned on account of vested equity awards and pay out in shares of Common Stock after the executive’s departure from the
Company pursuant to the Company’s 409A Deferral Savings Plan (‘‘409A Deferral Plan’’).
Executive officers may choose a Waste Management stock fund as an investment option for deferred cash compensation
under the Company’s 409A Deferral Plan. Interests in the fund are considered phantom stock because they are equal in value
to shares of our Common Stock, but these amounts are not invested in stock or funds. Phantom stock is not included in the
table above, but it represents an investment risk based on the performance of our Common Stock. Mr. Morris and
Mr. Batchelor have 2,410 and 4,950 phantom stock equivalents, respectively, under the 409A Deferral Plan.
(2)
Includes the number of options currently exercisable and options that will become exercisable within 60 days of our record
date.
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2020 Proxy Statement
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DIRECTOR AND OFFICER STOCK OWNERSHIP
(3) Shares are held by the Mazzarella Living Trust, a joint revocable trust for which Ms. Mazzarella and her husband serve as
trustees.
(4) Shares are held by the Weidemeyer Living Trust, a joint revocable trust for which Mr. Weidemeyer and his wife serve as
trustees.
(5)
Included in the ‘‘All directors and currently-serving executive officers as a group’’ are 10,411 stock equivalents attributable to
the executive officers’ collective holdings in the Company’s 401(k) Retirement Savings Plan stock fund. This group also holds
an aggregate of 8,358 phantom stock equivalents under the 409A Deferral Plan that are not included in the table.
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2020 Proxy Statement
23
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The table below shows information for persons known to us to beneficially own more than 5% of our Common Stock based on
their filings with the SEC through March 16, 2020.
Name and Address
The Vanguard Group
100 Vanguard Boulevard
Malvern, PA 19355
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
William H. Gates III
One Microsoft Way
Redmond, WA 98052
Shares Beneficially
Owned
Number
Percent(1)
36,362,006(2)
8.6%
33,503,929(3)
7.9%
33,217,344(4)
7.8%
(1) Percentage is calculated using the number of shares of Common Stock outstanding and entitled to vote as of March 16, 2020.
(2) This information is based on a Schedule 13G/A filed with the SEC on February 12, 2020. The Vanguard Group reports that it
has sole or shared voting power over 774,144 shares of Common Stock and sole or shared dispositive power over 36,362,006
shares of Common Stock beneficially owned.
(3) This information is based on a Schedule 13G/A filed with the SEC on February 6, 2020. BlackRock, Inc. reports that it has sole
voting power over 29,250,490 shares of Common Stock and sole dispositive power over 33,503,929 shares of Common Stock
beneficially owned.
(4) This information is based on a Schedule 13G/A filed with the SEC on February 13, 2020. Mr. Gates reports that he has sole
voting and dispositive power over 14,583,672 shares of Common Stock held by Cascade Investment, L.L.C., as the sole
member of such entity. Additionally, the Schedule 13G/A reports that Mr. Gates and Melinda French Gates share voting and
dispositive power over 18,633,672 shares of Common Stock beneficially owned by Bill & Melinda Gates Foundation Trust.
DELINQUENT SECTION 16(A)
REPORTS
The federal securities laws require our executive officers and directors to file reports of their holdings and transactions in our
Common Stock with the SEC and the New York Stock Exchange. Based on a review of the forms and written representations from
our executive officers and directors, we are aware of one delinquent report for 2019. On May 1, 2019, Mr. Batchelor received a
distribution from the 409A Deferral Plan stock fund that was automatically made pursuant to his prior election for a date-specific
withdrawal to occur on that date. The corresponding decrease in Mr. Batchelor’s phantom stock holdings was not reported on a
Form 4 at the time, but upon discovery was reported on a Form 5 in January 2020.
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2020 Proxy Statement
24
EXECUTIVE OFFICERS
The following is a listing of our current executive officers, their ages and their business experience for at least the past five years
(other than Mr. Fish, whose age, experience and qualifications are included in the director nominees section of this Proxy
Statement). Unless otherwise specified, all prior positions listed below were with our Company.
Name
Steven R. Batchelor
Charles C. Boettcher
Age
62
46
Tara J. Hemmer
John J. Morris, Jr.
Leslie K. Nagy
Tamla D. Oates-Forney
Devina A. Rankin
Nikolaj H. Sjoqvist
Michael J. Watson
47
50
45
48
44
47
50
Positions Held and Business Experience for Past Five Years
Senior Vice President — Operations since January 2019.
Vice President, Collections and Fleet Operations from 2013 to December 2018.
Executive Vice President, Corporate Development and Chief Legal Officer since
February 2020.
Senior Vice President, Corporate Development and Chief Legal Officer from May 2019
to February 2020.
Senior Vice President and Chief Legal Officer from January 2017 to May 2019.
Also served as Chief Compliance Officer from May 2017 to February 2018.
Vice President and General Counsel from September 2016 to December 2016.
Executive Vice President, Chief Financial Officer and General Counsel of Oilfield Water
Logistics, a produced water gathering, transportation and disposal company, from
November 2015 to August 2016.
Senior Vice President, General Counsel, Chief Compliance Officer and Corporate
Secretary of Eagle Rock Energy Partners, L.P., a master limited partnership engaged
in midstream gathering and processing, upstream exploration and production and
minerals/royalties, from 2007 to October 2015.
Senior Vice President — Operations since January 2019.
Senior Vice President — Operations, Safety and Environmental Compliance from
January 2018 to December 2018.
Vice President — Disposal Operations, Closed Sites and Environmental Compliance
from September 2017 to January 2018.
Area Vice President — Greater Mid-Atlantic Area from 2012 to May 2017.
Executive Vice President and Chief Operating Officer since January 2019.
Senior Vice President — Operations from 2012 to December 2018.
Chief Strategy Officer from March 2012 to July 2012.
Area Vice President — Greater Mid-Atlantic Area from 2011 to 2012.
Vice President and Chief Accounting Officer since November 2017.
Principal Accounting Officer and Controller, Parker Drilling Company, an oilfield
services company, from 2014 to November 2017.
Senior Vice President and Chief Human Resources Officer since December 2018.
Vice President, Human Resources, GE Energy Connections, an electrification and
automation business included in the General Electric Company multinational
conglomerate, from 2014 to April 2018.
Executive Vice President and Chief Financial Officer since February 2020.
Senior Vice President and Chief Financial Officer from February 2017 to February 2020.
Also continued to serve as Treasurer from February 2017 to August 2017.
Vice President, Treasurer and Acting Chief Financial Officer from January 2017 to
February 2017.
Vice President and Treasurer from 2012 to January 2017.
Senior Vice President and Chief Digital Officer since October 2017.
Vice President — Revenue Management from 2012 to October 2017.
Senior Vice President and Chief Customer Officer since October 2018.
Area Vice President — Illinois / Missouri Valley Area from 2013 to September 2018.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
25
17MAR202000053215
2020 Proxy Statement
25
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
information about
The Company’s Compensation Discussion and Analysis
the Company’s executive
provides
compensation philosophy and
its
the components of
compensation programs. This includes information about how
compensation of the Company’s named executive officers for
the fiscal year ended December 31, 2019 aligned with the
Company’s 2019 financial goals and performance. The
Compensation Discussion and Analysis helps readers better
understand
the Summary
Compensation Table and other accompanying tables included
in this Proxy Statement.
information
found
the
in
This Compensation Discussion and Analysis focuses on our
executive pay program as it relates to the following executive
officers during 2019, whom we refer to as the ‘‘named
executive officers’’ or ‘‘named executives’’:
•
•
•
•
•
Mr. James C. Fish, Jr. — President and Chief Executive
Officer since November 2016.
Ms. Devina A. Rankin — Senior Vice President and Chief
Financial Officer since February 2017.
Mr. John J. Morris, Jr. — Executive Vice President and
Chief Operating Officer since January 2019; Senior Vice
President, Operations from July 2012 to December
2018.
Ms. Tara J. Hemmer — Senior Vice President,
Operations since January 2019.
Mr. Steven R. Batchelor — Senior Vice President,
Operations since January 2019.
For additional
information about the named executives’
background and prior experience with the Company and
Ms. Rankin’s promotion
in February 2020, please see
‘‘Executive Officers’’ on pg 25 of this Proxy Statement.
Executive Summary
The objective of our executive compensation program is to
attract, retain, reward and incentivize talented employees who
will lead the Company in the successful execution of our
strategy. The Company seeks to accomplish this goal by
designing a compensation program that is supportive of and
aligns with the strategy of the Company and the creation of
stockholder value, while discouraging excessive risk-taking.
The following key structural elements and policies further the
objective of our executive compensation program:
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17MAR202000053215
2020 Proxy Statement
26
•
•
•
•
•
•
•
a substantial portion of executive compensation is
linked to Company performance, through annual cash
incentive performance criteria and long-term equity-
based incentive awards. As a result, our executive
compensation program provides for notably higher total
compensation in periods of above-target Company
performance, as we saw with respect to some
compensation elements in 2019. Performance-based
annual cash incentive and long-term equity-based
incentive awards comprised approximately 88% of total
2019 target compensation for our President and Chief
Executive Officer, while approximately 80% of the 2019
target compensation opportunities for our other named
executives was performance-based;
at target, 70% of total compensation of our President
and Chief Executive Officer was tied to long-term equity
awards, and approximately 62% of total compensation
of our other named executives was tied to long-term
equity awards, which aligns executives’ interests with
those of stockholders;
our total direct compensation opportunities for named
executive officers are targeted to fall in a range around
the competitive median;
performance-based awards include threshold, target
and maximum payouts correlating to a range of
performance outcomes and are based on a variety of
indicators of performance, which limits risk-taking
behavior;
performance stock units with a three-year performance
period, as well as stock options that vest over a
interests with
three-year period,
long-term performance and reduce
incentives to
maximize performance in any one year;
link executives’
all of our executive officers are subject to stock
ownership guidelines, which we believe demonstrates a
commitment to, and confidence in, the Company’s
long-term prospects;
the Company has clawback provisions in its equity
award agreements and executive officer employment
agreements, and has adopted a clawback policy
applicable to annual incentive compensation, designed
to recoup compensation when cause and/or misconduct
are found;
•
•
our executive officer severance policy implemented a
limitation on the amount of benefits the Company may
provide to
its executive officers under severance
agreements entered into after the date of such policy
(the ‘‘Severance Limitation Policy’’); and
the Company has adopted a policy that prohibits it from
entering into new agreements with executive officers
that provide for certain death benefits or tax gross-up
payments.
2019 Pay-for-Performance
During 2019, we continued our focus on optimizing our solid
waste business, developing our people and investing in
technology to better serve our customers. We produced strong
operating results from our collection and disposal business,
and these results demonstrate that that we are investing in the
right areas and driving the right behaviors. This positive 2019
performance continues to position management to execute on
the strategic long-term growth goals of the Company through
investments in our employees, technology, and asset network.
Following is a summary of the 2019 compensation program
results:
Total Shareholder Return
With respect to the half of the performance share units
(‘‘PSUs’’) granted in 2017 with a three-year performance
period ended December 31, 2019 that was subject to total
shareholder return relative
the
performance of the Company’s Common Stock on this
measure translated into a percentile rank relative to the
S&P 500 of 73.66%, resulting in a 194.7% payout on these
PSUs in shares of Common Stock. This performance
directly benefited our stockholders, delivering total
shareholder return of 69.83% over the three-year
performance period.
the S&P 500,
to
EXECUTIVE COMPENSATION
Cash Flow Generation
The Company generated net cash flow from operating
activities, less capital expenditures, for purposes of the
performance goal associated with the other half of our
PSUs granted in 2017, of $5.959 billion, exceeding the
maximum performance level of $5.336 billion for the
three-year performance period ended December 31, 2019.
This performance resulted in a maximum 200% payout on
these PSUs in shares of Common Stock.
Annual Incentive Performance Measures
Company performance on annual cash
incentive
performance measures for named executive officers is set
forth below. Due to these results, each of the named
executives received an annual cash incentive payment for
fiscal year 2019 equal to 99.47% of target.
Income from Operations, excluding Depreciation and
Amortization— $4.360 billion, exceeding threshold of
$4.216 billion but below target of $4.454 billion,
yielding a payout of 84.33%
Income from Operations Margin— 18.03%, exceeding
threshold of 18.0%, but below target of 18.3%, yielding
a payout of 64.22%
Internal Revenue Growth— defined as
internal
revenue growth from yield, plus internal revenue
growth from volume, at the consolidated level for the
traditional solid waste business — 5.4%, exceeding
maximum of 5.3%. This performance would have
yielded a payout of 200% for that metric, but
management proposed, and the MD&C Committee
approved, a reduced payout of 165% on this metric to
more fairly reward actual achievement.
2019 Actual Performance and Compensation Payouts
Maximum
Target
Threshold
Annual Incentive Plan
5.4% Actual
3.9% Target
(25% weight)
165.0%
$4.360B Actual
$4.454B Target
(50% weight)
18.03% Actual
18.30% Target
(25% weight)
84.33%
64.22%
Income from
Operations,
excluding
Depreciation &
Amortization
Income from
Operations
Margin
Internal
Revenue
Growth
Combined
Results
99.47%
Annual
Incentive
Award
Payout
Long-Term Performance Share Units
73.66th Percentile Actual
50th Percentile Target
(50% weight)
$5.959B Actual
$4.951B Target
(50% weight)
194.7%
200.0%
Combined
Results
197.4%
Relative TSR
(S&P 500)
Cash Flow
Generation
PSU Award
Payout
12MAR202009342965
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2020 Proxy Statement
27
Our Compensation Philosophy for Named
Executive Officers
The Company’s compensation philosophy is designed to:
•
•
•
Attract and retain exceptional employees through
competitive compensation opportunities;
and
Encourage
through
substantial at-risk performance-based compensation,
while discouraging excessive risk-taking behavior; and
performance
reward
Align our decision makers’ long-term interests with
those of our stockholders through emphasis on equity
ownership.
Additionally, our compensation philosophy is intended to
encourage executives to embrace the Company’s strategy and
to lead the Company in setting aspirations that will continue to
drive exemplary performance.
•
•
•
Base salaries should be paid within a range of plus or
minus 10% around the competitive median, with
attention given to individual circumstances, including
strategic importance of the named executive’s role, the
executive’s experience and individual performance;
short-term
Target
incentive
and
opportunities should generally be set at the competitive
median; and
long-term
Total direct compensation opportunities should
generally be within a range of plus or minus 20% around
the competitive median.
the advisory vote on With respect to our named executive officers, the MD&C
Committee believes that total direct compensation at target
should be in a range around the competitive median according
to the following:
EXECUTIVE COMPENSATION
On the whole, the 2019 compensation program continued to
demonstrate alignment between executive pay and Company
performance. The payouts on the PSUs granted in 2017
correlate with outstanding cash flow generation and total
shareholder return over the three-year performance period.
The blended results of the annual incentive performance
measures, after a voluntary reduction in the payout under the
internal revenue growth measure to better calibrate this new
performance measure, were almost exactly at target. Overall,
these results reflect strong pay-for-performance, with both
shareholders and executives being rewarded.
Consideration of Stockholder Advisory Vote
for
When establishing 2019 compensation
the named
executives, the MD&C Committee noted the results of the
advisory stockholder votes on executive compensation, with at
least 96% of shares present and entitled to vote at the annual
meeting voting
the Company’s executive
compensation every year since
compensation was implemented. Accordingly, the results of
the stockholder advisory vote have not caused the MD&C
Committee to recommend any changes to our compensation
practices.
favor of
in
2020 Compensation Program Preview
including outstanding
The MD&C Committee continually reviews our compensation
program to ensure it is clearly aligned with the business
strategy and best supports the accomplishment of our goals,
and its choice of long-term performance measures and
respective weighting has been consistent since 2016. The
MD&C Committee is pleased with the results that have been
financial results while
delivered,
maintaining our focus on pricing, capital allocation and cost
control. Accordingly, the Committee has approved keeping the
2020 long-term incentive program design consistent with the
2019 design. The MD&C Committee has also approved
retaining the annual incentive program design consistent with
the prior year, which included the introduction of the new
internal revenue growth measure. This consistency reinforces
the MD&C Committee’s efforts to maintain a compensation
program that is straightforward, easy to communicate and
readily translates into actionable goals.
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Overview of Elements of Our 2019 Executive Compensation Program
EXECUTIVE COMPENSATION
Component
Purpose
Key Features
To attract and retain executives Adjustments to base salary primarily consider competitive
with a competitive level of
regular income
market data and the executive’s individual performance and
responsibilities.
Timing
Current
Short-Term
Performance
Incentive
Base Salary
Annual Cash
Incentive
To encourage and reward
contributions to our annual
financial objectives through
performance-based
compensation subject to
challenging, yet attainable,
objective and transparent
metrics
Cash incentives are targeted at a percentage of base salary
and range from zero to 200% of target based on the following
performance measures:
•
•
•
Income from Operations, excluding Depreciation and
Amortization—designed to encourage balanced growth and
profitability (weighted 50%);
Income from Operations Margin — defined as Income from
Operations as a percentage of Revenue — motivates
executives to control costs and operate efficiently while
focusing on yield (weighted 25%); and
Internal Revenue Growth — defined as internal revenue
growth from yield, plus internal revenue growth from
volume, at the consolidated level for the traditional solid
waste business — designed to support strategic growth goals
(weighted 25%).
The MD&C Committee has discretion to increase or decrease
an individual’s payment by up to 25% based on individual
performance, but such modifier has never been used to
increase a payment to a named executive.
Number of shares delivered range from zero to 200% of the
initial target grant based on performance over a three-year
performance period.
Payout on half of each executive’s PSUs granted in 2019 is
dependent on cash flow generation, defined as net cash flow
provided by operating activities, less capital expenditures, with
certain exclusions, which continues our focus on capital
discipline, while also aligning the Company with stockholders’
free cash flow expectations.
Payout on the remaining half of the PSUs granted in 2019 is
dependent on total shareholder return relative to other
companies in the S&P 500 over the three-year performance
period.
PSUs earn dividend equivalents that are paid at the end of the
performance period based on the number of shares earned.
Recipients can defer the receipt of shares, in which case such
shares of Common Stock will be paid out, without interest, at
the end of the deferral period.
Long-Term
Performance
Incentives
Performance Share To encourage and reward
Units
building long-term stockholder
value through successful
strategy execution;
To retain executives; and
To increase stockholder
alignment through executives’
stock ownership
Stock Options
Restricted Stock
Units
To support the growth element Stock options vest in 25% increments on the first two
of the Company’s strategy and
encourage and reward stock
price appreciation over the
long-term;
anniversaries of the date of grant and the remaining 50% vest
on the third anniversary.
Exercise price is the average of the high and low market price
of our Common Stock on the date of grant.
To retain executives; and
To increase stockholder
alignment through executives’
stock ownership
Used on a limited basis
(e.g. promotion and new hire)
to make awards that
encourage and reward
long-term performance and
increase alignment with
stockholders
Stock options have a term of ten years.
No restricted stock units (‘‘RSUs’’) were granted to named
executives in 2019.
RSUs typically vest in full three years after the date of grant.
Time-based vesting aids retention. Dividend equivalents on
RSUs accrue and are paid in cash upon vesting.
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EXECUTIVE COMPENSATION
Deferral Plan. Each of our named executive officers is
eligible to participate in our 409A Deferral Plan and may elect
to defer receipt of portions of their base salary and cash
incentives in excess of the annual compensation threshold
established under Section 401(a)(17) of the Internal Revenue
Code of 1986, as amended (the ‘‘IRC’’). We believe that
providing a program that allows and encourages planning for
retirement is a key factor in our ability to attract and retain
talent. Additional details on the 409A Deferral Plan can be
found in the Nonqualified Deferred Compensation in 2019 table
and accompanying disclosure on page 46.
Perquisites. The Company provides very limited perquisites
or personal benefits to executive officers, consisting of
reimbursement of the cost of physical exams, cost to the
Company for spousal or guest participation in corporate
events, and use of Company aircraft for personal travel. The
MD&C Committee permits our President and Chief Executive
Officer to use the Company’s aircraft for business and personal
travel; provided, however, that personal use of the Company
aircraft attributed to him that results in incremental cost to the
Company shall not exceed 90 hours during any calendar year
without approval from the Chairman of the MD&C Committee.
In 2019, our President and Chief Executive Officer had less than
one hour of personal use of Company aircraft under this
standard resulting from a brief route deviation during a
business trip. Personal use of the Company’s aircraft by other
employees resulting in incremental cost to the Company is
permitted with Chief Executive Officer approval, but this occurs
infrequently. The value of our named executives’ personal use
of the Company’s aircraft is treated as taxable income to the
respective executive in accordance with IRS regulations using
the Standard Industry Fare Level formula. This is a different
amount than we calculate pursuant to the SEC requirement to
report the incremental cost to us of their use. See note (5) to
the Summary Compensation Table below for additional
information about this calculation.
Post-Employment and Change in Control Compensation. The
Company provides severance protections that aid in retention
of senior leadership by providing the individual with comfort
that he or she will be treated fairly in the event of an involuntary
termination not for cause. The change in control provisions
included in our Executive Severance Protection Plan, our stock
option award documentation and, if applicable, employment
agreements require a double trigger in order to receive any
payment in the event of a change in control situation. Additional
details can be found under ‘‘—Post Employment and Change in
Control Compensation; Clawback Policies’’ and ‘‘Potential
Payments Upon Termination or Change in Control.’’
How Named Executive Officer Compensation
Decisions are Made
The MD&C Committee meets several times each year to
perform its responsibilities as delegated by the Board of
Directors and as set forth in the MD&C Committee’s charter.
These responsibilities include evaluating and approving the
Company’s compensation philosophy, policies, plans and
programs for our named executive officers.
In the performance of its duties, the MD&C Committee
regularly reviews the total compensation, including the base
salary, target annual cash incentive award opportunities,
long-term incentive award opportunities and other benefits,
including potential severance payments for each of our named
executive officers. At a regularly scheduled meeting each year,
the MD&C Committee reviews our named executives’ total
compensation and compares that compensation to the
competitive market, as discussed below. In the first quarter of
each year, the MD&C Committee meets to determine salary
increases, if any, for the named executive officers; verifies the
results of the Company’s performance for annual cash
incentive and performance share unit calculations; reviews the
individual annual cash incentive targets for the current year as
a percent of base salary for each of the named executive
officers; and makes decisions on granting long-term equity
awards.
in
its analysis of
Compensation Consultant. The MD&C Committee uses
the appropriate
several resources
compensation for the named executive officers. The MD&C
Committee selects and employs an independent consultant to
provide advice relating to market and general compensation
trends. The MD&C Committee also uses the services of its
independent consultant for data gathering and analyses. The
MD&C Committee has retained Frederic W. Cook & Co., Inc.
(‘‘FW Cook’’) as its independent consultant since 2002. The
Company makes regular payments to FW Cook for its services
including meeting
compensation,
around
preparation and attendance, advice, and best practice
information, as well as competitive data. Information about
such payments is submitted to the chair of the MD&C
Committee.
executive
In addition to services related to executive compensation, FW
Cook also provides the MD&C Committee information and
advice with respect to compensation of the independent
directors. FW Cook has no other business relationships with
the Company and receives no other payments from the
Company. The MD&C Committee adopted a charter provision
requiring
independence of any
compensation consultants it uses for executive compensation
it consider
that
the
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matters. The MD&C Committee has considered
the
independence of FW Cook in light of SEC rules and New York
Stock Exchange listing standards. In connection with this
process, the MD&C Committee has reviewed, among other
items, a letter from FW Cook addressing the independence of
FW Cook and the members of the consulting team serving the
MD&C Committee, including the following factors: (i) other
services provided to us by FW Cook; (ii) fees paid by us as a
percentage of FW Cook’s total revenue; (iii) policies or
procedures of FW Cook that are designed to prevent conflicts
of interest; (iv) any business or personal relationships between
the senior advisor of the consulting team with a member of the
MD&C Committee; (v) any Company stock owned by the senior
advisor or any member of his immediate family and (vi) any
business or personal relationships between our executive
officers and the senior advisor. The MD&C Committee
reviewed these considerations and concluded that the work
performed by FW Cook and its senior advisor involved in the
engagement did not raise any conflict of interest.
EXECUTIVE COMPENSATION
•
industry surveys
Size-adjusted median compensation data from two
in which management
general
annually participates; the Aon Hewitt 2018 Total
Compensation Measurement (‘‘TCM’’) survey and the
Willis Towers Watson 2018 Executive Compensation
Data base (‘‘CDB’’) survey. The Aon Hewitt TCM and
Willis Towers Watson CDB surveys include over 500
companies ranging
from approximately
in size
$5 million to $500 billion in annual revenue. Data
selected from these surveys is scoped based on
Company revenue; and
•
Median compensation data from a comparison group of
18 publicly traded U.S. companies, described below.
for
and
these
providing
The comparison group of companies is initially recommended
by the independent consultant prior to the data gathering
process, with
input from management and the MD&C
Committee. The composition of the group is evaluated, and a
final comparison group of companies is approved by the MD&C
the
Committee each year. The selection process
Role of CEO and Human Resources. Our President and Chief
comparison group begins with all companies in the Standard &
Executive Officer contributes to compensation determinations
Poor’s North American database that are publicly traded U.S.
by assessing the performance of the other named executive
companies in 15 different Global Industry Classifications.
officers
assessments with
These industry classifications are meant to provide a collection
recommendations to the MD&C Committee. Personnel within
of companies in industries that share similar characteristics
the Company’s Human Resources Department assist the with us. The companies are then limited to those with at least
MD&C Committee by working with the independent consultant
$5 billion
to ensure appropriate
to provide information requested by the MD&C Committee and
comparisons, and further narrowed by choosing those with
assisting it in designing and administering the Company’s
asset intensive domestic operations, as well as those focusing
compensation programs.
on transportation and
logistics. Companies with these
characteristics are chosen because the MD&C Committee
believes that it is appropriate to compare our executives’
similar
executives
compensation with
responsibilities and challenges at other companies. Compared
to the 2017 comparison group used to
inform 2018
compensation decisions, Baker Hughes was removed from the
comparison group and no companies were added.
Peer Company Comparisons. The MD&C Committee uses
compensation information of comparison groups of companies
to gauge the competitive market, which is relevant for
attracting and retaining key talent and for ensuring that the
Company’s compensation practices are aligned with prevalent
practices. For purposes of establishing the 2019 executive
compensation program, the MD&C Committee considered a
competitive analysis of total direct compensation levels and
compensation mix for our executive officers during the second
half of 2018, using information from:
in annual revenue
have
that
The following chart sets forth various size comparisons to
companies in the comparison group; this table is provided to
evidence that the Company was appropriately positioned within
its peer group for purposes of establishing 2019 compensation
during 2018. All financial and market data are taken from
Standard & Poor’s Capital IQ, with financial data as of each
company’s 2017 fiscal year end and market capitalization as of
December 31, 2017.
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EXECUTIVE COMPENSATION
Peer Company Comparison Group
Net Revenue
Operating Income
Total Assets
Total Equity
Total Employees
Market Capitalization
Waste Management Composite
Percentile Rank
46%
53%
36%
39%
71%
50%
49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
18 Company Comparison Group
American Electric Power FedEx
Norfolk Southern
Sysco
Avis Budget
Grainger WW
Republic Services
Union Pacific
C.H. Robison WW
Halliburton
Ryder System
UPS
CSX
Entergy
Hertz Global Holdings
Southern
NextEra Energy
Southwest Airlines
18MAR202014271379
For purposes of each of the named executives, the general
industry data and the comparison group data are blended when
composing the competitive analysis, when possible, such that
the combined general industry data and the comparison group
are each weighted 50%. For competitive comparisons, the
total direct
MD&C Committee has determined
compensation packages for our named executive officers
within a range of plus or minus 20% of the median total
compensation of the competitive analysis is appropriate. In whether the balance between short-term and
making these determinations, total direct compensation
consists of base salary, target annual cash incentive, and the
annualized grant date fair value of long-term equity incentive
awards.
The MD&C Committee uses tally sheets to review the
compensation of our named executive officers, which show the
cumulative impact of all elements of compensation. These tally
sheets include detailed information and dollar amounts for each
component of compensation, the value of all equity held by each
named executive, and the value of welfare and retirement
benefits and severance payments. Tally sheets provide the MD&C
Committee with the relevant information necessary to determine
long-term
compensation, as well as fixed and variable compensation, is
consistent with the overall compensation philosophy of the
Company. This
in the MD&C
Committee’s analysis of whether total direct compensation
provides a compensation package that is appropriate and
competitive. Tally sheets are provided annually to the full Board of
is also useful
information
that
in which total Directors.
long-term
incentive compensation and
Allocation of Compensation Elements and Tally Sheets. The
MD&C Committee considers the forms
compensation will be paid to executive officers and seeks to
achieve an appropriate balance between base salary, annual
cash
incentive
compensation. The MD&C Committee determines the size of
each element based primarily on comparison group data and
individual and Company performance. The percentage of
compensation
is contingent on achievement of
performance criteria typically increases in correlation to an
executive officer’s responsibilities within the Company, with
performance-based incentive compensation making up a
greater percentage of total compensation for our most senior
executive officers. Additionally, as an executive becomes more
senior, a greater percentage of the executive’s compensation
shifts away from short-term to long-term incentive awards.
that
The following charts display the allocation of total 2019 target
compensation among base salary, annual cash incentive and
long-term incentives for (a) our President and Chief Executive
Officer and (b) our other named executives, on average. These
charts reflect the MD&C Committee’s 2019 desired total mix of
target compensation for named executives, which includes
approximately 62% of total compensation derived from long-term
equity awards, while long-term equity awards comprised 70% of
our President and Chief Executive Officer’s total target
compensation. These charts also reflect that approximately 88%
of our President and Chief Executive Officer’s total target
compensation opportunities awarded in 2019 were performance-
based, while approximately 80% of the total target compensation
established in February 2019 for the other named executives was
performance-based. We consider stock options granted under
our long-term incentive plan to be performance-based because
their value will increase as the market value of our Common
Stock increases.
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President and Chief Executive Officer
Other Named Executives (on average)
EXECUTIVE COMPENSATION
12.5%
Base Salary
17.5%
Annual Cash
Incentive
70.0%
Long-Term Equity
Incentive Awards
61.7%
Long-Term Equity
Incentive Awards
19.9%
Base Salary
18.4%
Annual Cash
Incentive
87.5% Total Performance Based
80.1% Total Performance Based
17MAR202013065522
Internal Pay Equity. The MD&C Committee considers the
differentials between compensation of the named executive
officers. The MD&C Committee also reviews compensation
comparisons between the President and Chief Executive
Officer and the other executive officers, while recognizing the
additional responsibilities of the President and Chief Executive
Officer and that such differentials will increase in periods of
above-target performance and decrease in times of below-
target performance. Based on these considerations, the MD&C
Committee concluded that the compensation paid to the
President and Chief Executive Officer is reasonable compared
to that of the other executive officers.
subject to that performance measure, in order to avoid variable
accounting treatment for those awards.
to $1 million, unless
Tax and Accounting Matters. Our compensation programs
were designed to permit the Company to deduct compensation
expense under Section 162(m) of the IRC, which historically
limited the tax deductibility of annual compensation paid to
certain named executives
the
compensation qualified as performance-based. The Company
also reserved the right to pay compensation that did not qualify
as performance-based. Other than some limited exceptions
relating to certain previously-granted awards, the ability to rely
on this performance-based exception was eliminated in 2017,
and the limitation on deductibility of compensation was
expanded to include all named executive officers. As a result,
the Company generally may no longer take a deduction for any
compensation paid to any of its named executive officers in
excess of $1 million.
Policy on Calculation Adjustments. In 2014, the MD&C
Committee adopted a policy on calculation adjustments that
affect payouts under annual and long-term incentive awards in
order to address the potentially distorting effect of certain
items. Such adjustments are intended to align award payments
with the underlying performance of the business; avoid volatile,
artificial inflation or deflation of awards due to unusual items in
either the award year or the previous comparator year; and
eliminate counterproductive incentives to pursue short-term
gains and protect current incentive opportunities. To ensure
the integrity of the adjustments, the policy provides that the
MD&C Committee’s approach to adjustments shall generally
be consistent with the Company’s approach to reporting
adjusted non-GAAP earnings to the investment community,
except that the MD&C Committee has determined that
potential adjustments arising from a single transaction or
event generally should be disregarded unless, taken together,
they change the calculated award payout by at least five
percent. For this reason, actual results reported in this proxy
statement on financial performance metrics may differ from We account for equity-based payments,
earnings results reported to the investment community. The
MD&C Committee retains discretion
to evaluate all
adjustments, both income and expense, as circumstances
warrant; however, beginning with long-term equity incentive
awards granted in 2017, the MD&C Committee agreed that it
shall not have the ability to use negative discretion with respect
to the calculation of cash flow for purposes of the PSUs
Section 409A of the IRC (‘‘Code Section 409A’’) generally
provides that any deferred compensation arrangement which
does not meet specific requirements will result in immediate
taxation of any amounts deferred to the extent not subject to a
substantial risk of forfeiture. In general, to avoid a Code
Section 409A violation, amounts deferred may only be paid out
on separation from service, disability, death, a specified time or
fixed schedule, a change
in control or an unforeseen
emergency. Furthermore, the election to defer generally must
be made in the calendar year prior to performance of services.
We intend to structure all of our compensation arrangements,
including our 409A Deferral Plan, in a manner that complies
with or is exempt from Code Section 409A.
including stock
in accordance with Financial
options, PSUs and RSUs,
Accounting
Standards
Standards Board Accounting
Codification Topic 718, Stock Compensation (‘‘ASC Topic 718’’).
The MD&C Committee takes into consideration the accounting
treatment under ASC Topic 718 when determining the form
and amount of annual long-term equity incentive awards.
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EXECUTIVE COMPENSATION
and considers any implications of such voting results on the
However, because our long-term equity incentive awards are
Company’s compensation programs. In light of the fact that at
based on a target dollar value established prior to grant
(described in further detail under ‘‘Named Executives’ 2019
least 96% of shares present and entitled to vote at the annual
Compensation Program and Results—Long-Term Equity meeting have voted in favor of the Company’s executive
the advisory vote on
Incentives’’), this ‘‘value’’ will differ from the grant date fair
compensation every year since
the
results of
value of awards calculated pursuant to ASC Topic 718.
implemented,
compensation was
stockholder advisory votes have not caused the MD&C
Committee to recommend any changes to our compensation
practices.
the
Risk Assessment. The MD&C Committee uses the structural
elements set forth in the Executive Summary earlier to
establish compensation that will provide sufficient incentives
for named executive officers to drive results while avoiding
unnecessary or excessive risk taking that could harm the
long-term value of the Company. During 2019, the MD&C
Committee reviewed the Company’s compensation policies
and practices and the assessment and analysis of related risk
conducted by the
independent compensation consultant.
Based on this review and analysis, the MD&C Committee and
the independent compensation consultant concluded that our
compensation policies and practices do not create risks that
are reasonably likely to have a material adverse effect on the
Company.
The MD&C Committee approved increases to the 2019 base
salaries of named executive officers, consistent with our
compensation philosophy and driven by competitive market
data,
individual
performance relative to the executive’s responsibilities and
contributions. The Committee also considered the promotions
effective January 1, 2019 for each of Mr. Morris, Ms. Hemmer
Consideration of Stockholder Advisory Vote on Executive and Mr. Batchelor. The table below shows the 2019 annual
Compensation. The MD&C Committee reviews the results of
base salary established by the MD&C Committee for each of
the stockholder advisory vote on executive compensation
our named executive officers.
internal pay equity considerations and
Named Executives’ 2019 Compensation
Program and Results
Base Salary
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
Annual Cash Incentive
•
•
Annual cash incentives were dependent on the following
performance measures: Income from Operations,
excluding Depreciation and Amortization; Income from
Operations Margin and Internal Revenue Growth.
Company performance on each of the performance
measures set forth below resulted in each of the named
executives receiving an annual cash incentive payment
in March 2020 for fiscal year 2019 equal to 99.47% of
target.
for annual cash
financial performance
The MD&C Committee develops
measures
to drive
improvements in business operations, as well as support and
fund the long-term strategy of the Company. The MD&C
Committee has found that the Income from Operations,
excluding Depreciation and Amortization, performance
incentive awards
2019
Base Salary
$1,250,000
$ 638,100
$ 700,000
$ 537,600
$ 537,600
focus on growth and
measure encourages balanced
profitability, while the
Income from Operations Margin
performance measure continues to keep the Company focused
on cost control, operational improvements and yield. In 2019,
the Company replaced a prior cost control performance
measure with the new Internal Revenue Growth measure. The
MD&C Committee believes that this measure better supports
the Company’s strategic growth and creation of shareholder
value, and the MD&C Committee believes these financial
performance measures, collectively, support and align with the
strategy of the Company and are appropriate indicators of our
progress toward the Company’s goals.
When setting threshold, target and maximum performance
measure levels each year, the MD&C Committee looks to the
Company’s historical results of operations and analyses and
forecasts for the coming year. Specifically, the MD&C
Committee considers expected revenue based on analyses of
pricing and volume trends, as affected by operational and
general economic factors and expected costs.
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EXECUTIVE COMPENSATION
The table below details the performance measures set by the MD&C Committee for purposes of the named executive officers’
annual cash incentive for 2019.
Threshold
Performance
(60% Payment)
Target
Performance
(100% Payment)
Maximum
Performance
(200% Payment)
Income from Operations, excluding Depreciation and Amortization
$4.216 billion
$4.454 billion
$4.610 billion
Income from Operations Margin
Internal Revenue Growth
18.0%
2.5%
18.3%
3.9%
18.6%
5.3%
The following table sets forth the Company’s performance achieved on each of the annual cash incentive performance measures
and the payout earned on account of such performance.
Income from Operations,
excluding Depreciation
and Amortization
(weighted 50%)
Income from
Operations
Margin
(weighted
25%)
Internal Revenue
Growth
(weighted 25%)
Actual
Payout
Earned
Actual
Payout
Earned
Actual
Payout
Earned
Total
Payout Earned
(as a percentage
of Target)
$4.360 billion
84.33% 18.03% 64.22% 5.4%
165%
99.47%
As discussed above, the MD&C Committee has discretion to metric, but management proposed, and the MD&C Committee
adjust the performance calculations for unusual or otherwise
approved, a reduced payout of 165% on this metric to more
non-operational matters in line with its policy on calculation
fairly reward actual achievement and to better calibrate this
adjustments. The calculation of 2019 annual cash incentive
new performance measure.
performance measures was generally made on a basis
consistent with the Company’s reporting of its 2019 financial
results, including exclusion of $33 million in costs related to
the planned acquisition of Advanced Disposal Services, Inc.
Additionally, actual performance on the internal revenue
growth measure would have yielded a payout of 200% for that
Target annual cash incentives are a specified percentage of the
executives’ base salary. The following table shows each named
executive’s target percentage of base salary for 2019 and
annual cash incentive for 2019 paid in March 2020.
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
Target Percentage
of Base Salary
Annual Cash Incentive
For 2019(1)
140
95
95
90
90
$1,704,132
$ 578,516
$ 661,476
$ 479,828
$ 479,828
(1) Calculations of annual cash incentive payouts, as a percentage of base salary, were made using the named
executive’s actual base salary received in 2019. Such amounts are lower than if calculated using the 2019 base
salaries in the table above due to the timing of when base salary increases take effect.
Long-Term Equity Incentives
Our equity awards are designed to hold individuals accountable
for long-term decisions by rewarding the success of those
decisions. The MD&C Committee continuously evaluates the
components of its programs. In determining which forms of
equity compensation are appropriate, the MD&C Committee
considers whether the awards granted are achieving their
purpose; the competitive market; and accounting, tax or other
regulatory
the
appropriate awards for the named executives’ 2019 annual
long-term incentive award, the MD&C Committee decided to
grant both PSUs comprising 80% of each named executive’s
award and stock options comprising 20% of each named
issues, among others.
In determining
executive’s award, consistent with prior years. Payout on half
of each named executives’ PSUs granted in 2019 is dependent
on cash flow generation. Payout on the remaining half of PSUs
granted in 2019 is dependent on total shareholder return
relative to the S&P 500. Meanwhile, stock options encourage
focus on increasing the market value of our stock. Before
determining the actual number of PSUs and stock options that
were granted to each of the named executives in 2019, the
MD&C Committee established a target dollar amount for each
named executive’s annual total long-term equity incentive
award. The values chosen were based primarily on the
comparison information for the competitive market and
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EXECUTIVE COMPENSATION
consideration of the named executives’ responsibility for
meeting the Company’s strategic objectives. Target dollar
amounts for equity incentive awards will vary from grant date
fair values calculated for accounting purposes.
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
Overview of Performance Share Units.
•
•
Named executives were granted new PSUs with a three-year
performance period ending December 31, 2021. Payout on
half of each named executive’s PSUs granted in 2019 is
dependent on cash flow generation, and payout on the
remaining half of PSUs granted in 2019 is dependent on total
shareholder return relative to the S&P 500.
Named executives received a payout of 197.4% of the PSUs
granted in 2017 with a three-year performance period ended
December 31, 2019. The Company exceeded the maximum
level of performance for the cash flow generation
performance measure and exceeded the target level of
performance for the relative total shareholder return
performance measure.
PSUs Granted in 2019. Performance share units are granted
to our named executive officers annually to align compensation
with the achievement of our long-term financial goals and to
increase stockholder alignment through stock ownership.
PSUs provide an immediate retention benefit to the Company
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
Dollar Values of 2019
Long-Term Equity Incentives
Set by the Committee
(at Target)
$7,000,000
$2,000,000
$2,200,000
$1,650,000
$1,650,000
because there is unvested potential value at the date of grant.
The number of PSUs granted to our named executive officers
corresponds to an equal number of shares of Common Stock.
At the end of the three-year performance period for each grant,
the Company will deliver a number of shares ranging from 0%
to 200% of the initial number of PSUs granted, depending on
the
against
Company’s
pre-established targets.
performance
three-year
The MD&C Committee determined the number of PSUs that
were granted to each of the named executives in 2019 by taking
the targeted dollar amounts established for total long-term
equity incentives (set forth in the table above) and multiplying
by 80%. Those values were then divided by the average of the
high and low market price of our Common Stock over the 30
trading days preceding the date of the MD&C Committee
meeting at which the grants were approved to determine the
number of PSUs granted. The number of PSUs granted in 2019
are shown in the table below.
Number
of PSUs
58,948
16,842
18,526
13,894
13,894
Half of each named executive’s PSUs included in the table above are subject to a cash flow generation performance measure; the
cash flow generation performance measure requires focus on capital discipline and strengthens alignment with stockholders’
free cash flow expectations. For purposes of these PSUs, we define cash flow as net cash provided by operating activities, less
capital expenditures, with the following adjustments: (a) costs associated with labor disruptions and multiemployer plan
withdrawal liabilities are excluded due to being required as a result of past labor commitments combined with changing
economic conditions and business climate; (b) strategic acquisition, restructuring, and transformation and reorganization costs
are excluded; and (c) cash proceeds from the divestiture of businesses and other assets are included. The table below shows the
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EXECUTIVE COMPENSATION
required achievement of the cash flow generation performance measure and the corresponding potential payouts under our
PSUs granted in 2019.
Threshold
Target
Maximum
Performance
Payout
Performance
Payout
Performance
Payout
Cash Flow
$5.875 billion
50% $6.375 billion
100% $6.875 billion
200%
The remaining half of each named executive’s PSUs are subject to total shareholder return relative to the S&P 500. This measure
directly correlates executive compensation with creation of stockholder value. Total shareholder return is calculated as follows:
(Common Stock price at end of performance period—Common Stock price at beginning of performance period + dividends during
performance period) / Common Stock price at beginning of performance period. The table below shows the required achievement
of the total shareholder return performance measure and the corresponding potential payouts under our PSUs granted in 2019.
Total Shareholder Return Relative to the S&P 500
Performance
75th percentile (Maximum)
50th percentile (Target)
25th percentile (Threshold)
Payout
200%
100%
50%
If actual performance falls between performance levels for
either of the PSU performance measures, then the number of
PSUs earned will be
interpolated between
performance levels, rounded to the nearest 0.1%.
the
The different performance measure levels are determined
based on an analysis of historical performance and current
projections and trends. The MD&C Committee uses this
analysis and modeling of different scenarios related to items
that affect the Company’s performance such as yield, volumes
and capital to set the performance measures. As with the
consideration of targets for the annual cash incentives, when
the MD&C Committee established the cash flow targets, the
MD&C Committee carefully considered several material
factors affecting the Company for 2019 and beyond, including
general economic and market conditions and economic
indicators for future periods, to ensure that the cash flow
targets align with the Company’s long-range strategic plan.
Payout on PSUs for the Performance Period Ended
December 31, 2019. Half of the PSUs granted in 2017 with the
performance period ended December 31, 2019 were subject to
the cash flow generation performance measure, and the
remaining half of the PSUs granted in 2017 were subject to
total shareholder return relative to the S&P 500. For the
three-year performance period ended December 31, 2019, the
Company generated net cash flow from operating activities,
less capital expenditures, of $5.959 billion, exceeding the
maximum
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
of $5.336 billion; this performance level yielded a 200% payout
in shares of Common Stock that were issued in February 2020.
two With respect to the PSUs with a three-year performance period
ended December 31, 2019 that were subject to total
shareholder return relative to the S&P 500, the performance of
the Company’s Common Stock on this measure translated into
a percentile rank relative to the S&P 500 of 73.66%, resulting in
a 194.7% payout in shares of Common Stock that were issued
in February 2020. In line with the MD&C Committee’s policy on
calculation adjustments discussed above, no adjustments
were made to the performance calculations for these PSUs.
Stock Options. The MD&C Committee believes use of stock
options is appropriate to support the growth element of the
Company’s strategy. The grant of options made to the named
executive officers in the first quarter of 2019 in connection with
the annual grant of long-term equity awards was based on the
targeted dollar amounts established for total long-term equity
incentives (set forth in the table above) and multiplied by 20%.
The actual number of stock options granted was determined by
assigning a value to the options using an option pricing model
and dividing the dollar value of target compensation by the
value of an option. The resulting number of stock options are
shown in the table below.
Number
of Options
114,566
32,733
36,007
27,005
27,005
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EXECUTIVE COMPENSATION
nor Mr. Batchelor are party to an employment agreement with
the Company.
The stock options will vest in 25% increments on the first two
anniversaries of the date of grant and the remaining 50% will
vest on the third anniversary. The exercise price of the options
granted in 2019 is $98.898, which is the average of the high and
low market price of our Common Stock on the date of grant,
and the options have a term of ten years. We account for our
employee stock options under the fair value method of
accounting using a Black-Scholes methodology to measure
stock option expense at the date of grant. The fair value of the
stock options at the date of grant is amortized to expense over
the vesting period less expected forfeitures, except for stock
options granted to retirement-eligible employees, for which
expense is fully recognized at the time of grant.
Post-Employment Covenants and Clawback Policies. The
2017 Employment Agreements contain noncompetition and
nonsolicitation restrictions that apply during employment and
for a two-year period following termination. Additionally, the
Severance Protection Plan contains (a) a requirement that the
individual execute a general release prior to receiving
post-termination benefits and (b) a clawback feature that
allows for the suspension and refund of termination benefits
for subsequently discovered cause. The clawback feature
generally allows the Company to cancel any remaining
payments due and obligates the named executive to refund to
the Company severance payments already made if, within one
Restricted Stock Units. The MD&C Committee anticipates
year of termination of employment of the named executive by
that grants of RSUs to named executives will continue to be
made on a limited basis in cases such as a significant
the Company for any reason other than for cause, the Company
promotion and increased responsibilities and to attract new determines that the named executive could have been
hires, and that RSUs will not be a routine component of named
executive compensation. No RSUs were granted to named
executives in 2019.
terminated for cause.
The MD&C Committee approved an award of 15,625 RSUs to
Mr. Fish upon his promotion to President and Chief Executive
Officer in November 2016 that vested ratably over three years.
The final one-third of this promotional grant of RSUs vested in
November 2019. Additionally, Ms. Rankin, Ms. Hemmer and
Mr. Batchelor previously received RSUs as part of their equity
incentive compensation granted prior to being promoted to the
senior leadership team, and such RSUs vest in full on the third
anniversary of the date of grant. Ms. Rankin’s last remaining
grant of RSUs vested in February 2019. As of December 31,
2019, Ms. Hemmer and Mr. Batchelor had 1,331 and 1,107
unvested RSUs, respectively. Dividend equivalents on RSUs
accrue and are paid in cash upon vesting. RSUs may not be
voted or transferred until vested.
Post-Employment and Change in Control
Compensation; Clawback Policies
(the
‘‘2017
agreements
Severance Protection Plan. In December 2017, we adopted
an Executive Severance Protection Plan (the ‘‘Severance
Protection Plan’’) and each of Messrs. Fish and Morris and
Ms. Rankin entered into new or amended and restated
employment
Employment
Agreements’’). The Severance Protection Plan covers each of
our executive officers. The 2017 Employment Agreements do
not contain separate severance entitlements, but instead
provide for additional terms and protections relating to the
respective executive’s participation
the Severance
Protection Plan. The 2017 Employment Agreements are
intended to transition the Company’s severance protections
away from contract-based protections and onto a standardized
and flexible plan-based approach. Going forward, the Company
does not anticipate entering into new employment agreements
with our executive officers, and neither Ms. Hemmer
in
Our current equity award agreements also
include a
requirement that, in order to be eligible to vest in any portion of
the award, the employee must enter into an agreement
containing restrictive covenants applicable to the employee’s
behavior following termination. Additionally, our equity award
agreements include compensation clawback provisions that
provide, if the MD&C Committee determines that an employee
either engaged in or benefited from misconduct, then the
employee will refund any amounts received under the equity
award agreements. Misconduct generally includes any act or
failure to act that caused or was intended to cause a violation of
the Company’s policies, generally accepted accounting
principles or applicable laws and that materially increased the
value of the equity award. Further, our MD&C Committee has
adopted a clawback policy applicable to our annual cash
incentive awards that is designed to recoup annual cash
incentive payments when the recipient’s personal misconduct
affects the payout calculations for the awards. Clawback terms
applicable to our incentive awards allow recovery within the
earlier to occur of one year after discovery of misconduct and
the second anniversary of the employee’s termination of
employment.
Other Compensation Policies and Practices
Compensation Limitation Policies. The Company has adopted
a Severance Limitation Policy that generally provides that the
Company may not enter into new severance arrangements with
its executive officers, as defined in the federal securities laws,
that provide for benefits, less the value of vested equity awards
and benefits provided to employees generally, in an amount
that exceeds 2.99 times the executive officer’s then current
base salary and target annual cash incentive, unless such
future severance arrangement receives stockholder approval.
The Company has also adopted its Policy Limiting Certain
Compensation Practices, which generally provides that the
compensation
Company will not
into new
enter
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EXECUTIVE COMPENSATION
to be
retained
throughout
that exceed amounts permitted by
including benefits generally available
arrangements that would obligate the Company to pay a death must hold 100% of all net shares acquired through the
benefit or gross-up payment to an executive officer unless
Company’s long-term incentive plans for at least one year, and
such arrangement receives stockholder approval. Both of
those individuals must continue to hold 100% of all such net
these compensation limitation policies are subject to certain
shares until the individual’s ownership guideline is achieved.
exceptions,
to
Once achieved, the requisite stock ownership level must
management-level employees and any payment in reasonable
the executive’s
continue
settlement of a legal claim. Additionally, ‘‘Death Benefits’’
employment with the Company. Our MD&C Committee
under the policy does not include deferred compensation,
believes these holding periods discourage executives from
retirement benefits or accelerated vesting or continuation of
taking actions in an effort to gain from short-term increases in
equity-based awards pursuant to generally-applicable equity
the market value of our stock.
award plan provisions. None of our executive officers are party
to any employment agreement or arrangement with the
Company that provides for severance, gross-up or death
benefits
these
compensation limitation policies.
The MD&C Committee regularly reviews the ownership
guidelines to ensure that the appropriate share ownership
levels are in place. Guidelines are expressed as a fixed number
of shares and were revised in November 2018 to account for
the Company’s more recent sustained Common Stock market
Stock Ownership Guidelines and Holding Requirements. All
value. The ownership requirement of Mr. Fish, our President
of our named executive officers are subject to stock ownership
and Chief Executive Officer, was over six times base salary,
guidelines. We instituted stock ownership guidelines because
using his base salary as of December 31, 2019 and an assumed
we believe that ownership of Company stock demonstrates a
$80 per share stock price. Using the closing price of our
commitment to, and confidence in, the Company’s long-term
Common Stock on March 16, 2020, the ownership requirement
prospects and further aligns employees’ interests with those of
of our President and Chief Executive Officer is approximately
our stockholders. We believe that the requirement that these
7.6 times his base salary as of December 31, 2019. Shares
individuals maintain a portion of their individual wealth in the
owned outright, vested RSUs and PSUs that have been
form of Company stock deters actions that would not benefit
stockholders generally. Although there is no deadline set for
in the
deferred, stock equivalents based on holdings
executives to reach their ownership guidelines, the MD&C
Company’s 401(k) Retirement Savings Plan and phantom stock
Committee monitors ownership
levels to confirm that
held in the Company’s 409A Deferral Plan count toward
executives are making sustained progress toward achievement meeting the ownership guidelines. Stock options, PSUs, RSUs
of their ownership guidelines.
and restricted stock, if any, do not count toward meeting the
ownership guidelines until they are vested or earned. The
following table outlines the stock ownership guidelines and
attainment for our named executive officers.
Additionally, our stock ownership guidelines contain holding
requirements. Executives with a title of Senior Vice President
or higher, which includes all of our named executives,
Named Executive Officer
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
As discussed under ‘‘Director and Officer Stock Ownership,’’
the MD&C Committee also establishes ownership guidelines
for the independent directors and performs regular reviews to
ensure all independent directors are in compliance or are
showing sustained progress toward achievement of their
ownership guideline.
Insider Trading; Prohibition of Hedging and Pledging Company
Securities. The Company’s Insider Trading Policy prohibits
directors, executive officers and other ‘‘designated insiders’’ from
engaging in most transactions involving the Company’s Common
Stock during periods, determined by the Company, that those
individuals are most likely to be aware of material, non-public
information. Directors, executive officers and other designated
insiders subject to stock ownership guidelines must clear all their
transactions in our Common Stock with the Company’s office of
Ownership
Guideline (number
of shares)
Attainment as of
March 16, 2020
95,000
25,000
27,500
14,000
14,000
278%
102%
325%
153%
187%
instruments
the Chief Legal Officer in advance. Additionally, it is our policy that
directors, executive officers and designated insiders are not
permitted to hedge their ownership of Company securities,
including (a) trading in options, warrants, puts and calls or similar
derivative instruments on any security of the Company, (b) selling
any security of the Company ‘‘short’’ and (c) purchasing any
financial
forward
contracts, equity swaps, collars and exchange funds) or otherwise
engaging in transactions that are designed to or have the effect of
offsetting any decrease in the market value of any security of the
Company granted as compensation or held, directly or indirectly,
by the director, executive officer or designated insider. The
Company’s Insider Trading Policy also provides that directors and
executive officers may not pledge Company securities or hold
Company securities in a margin account.
(including prepaid variable
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EXECUTIVE COMPENSATION
Executive Compensation Tables
We are required to present compensation information in the tabular format prescribed by the SEC. This format, including the
tables’ column headings, may be different from the way we describe or consider elements and components of compensation
internally. The Compensation Discussion and Analysis contains a discussion that should be read in conjunction with these tables
to gain a complete understanding of our executive compensation philosophy, programs and decisions.
SUMMARY COMPENSATION TABLE
Year
James C. Fish, Jr.
President and Chief Executive Officer
2019
2018
2017
Devina A. Rankin
Senior Vice President and Chief Financial
Officer
2019
2018
2017
John J. Morris, Jr.
Executive Vice President and Chief
Operating Officer
2019
2018
2017
Tara J. Hemmer(6)
Senior Vice President — Operations
Salary Bonus
($)(1)
($)
Stock
Awards
($)(2)
Option
Awards
($)(3)
Non-Equity
Incentive Plan
All Other
Compensation Compensation
($)(5)
($)(4)
Total
($)
1,232,788(7)
1,157,692(7)
— 6,853,530 1,399,997
1,704,132
107,654
11,298,101
— 5,431,408 1,199,997
1,169,293
166,891
9,125,281
1,076,923
— 4,762,674 1,000,002
2,062,111
92,395
8,994,105
618,208
539,923
— 1,958,118
399,997
— 1,538,892
340,006
470,077 50,000
952,569
200,002
578,516
379,541
572,398
68,575
53,956
34,062
3,623,414
2,852,318
2,279,108
699,807
646,192
625,577
— 2,153,907
440,006
— 1,629,462
359,997
— 1,428,853
299,999
661,476
435,053
798,560
86,046
4,041,242
116,032
3,186,736
65,941
3,218,930
2019
535,670
— 1,615,372
330,001
479,828
38,502
2,999,373
Steven R. Batchelor(6)
Senior Vice President — Operations
2019
535,397
— 1,615,372
330,001
479,828
29,157
2,989,755
(1) Ms. Rankin received a $50,000 cash bonus in January 2017 in recognition of her additional responsibilities while serving as
Acting Chief Financial Officer. Ms. Rankin’s promotion was made permanent in February 2017.
(2) Amounts in this column represent the grant date fair value of PSUs granted to all named executives annually. The grant date
fair values were calculated in accordance with ASC Topic 718, as further described in Note 15 in the Notes to the
Consolidated Financial Statements in our 2019 Annual Report on Form 10-K. The grant date fair value of a PSU granted in
2019 subject to total shareholder return relative to the S&P 500, based on a Monte Carlo valuation, is $133.63, and because
total shareholder return is a market condition, projected achievement is embedded in the grant date fair value. The grant
date fair value of a PSU granted in 2019 subject to the cash flow generation performance measure is $98.898, which is the
average of the high and low market price of our Common Stock on the date of the grant, in accordance with our 2014 Stock
Incentive Plan. The table below shows (a) the aggregate grant date fair value of PSUs subject to the cash flow generation
performance measure assuming target level of performance is achieved (this is the amount included in the Stock Awards
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column in the Summary Compensation Table) and (b) the aggregate grant date fair value of the same PSUs assuming the
Company will reach the highest level of achievement for this performance measure and maximum payouts will be earned.
EXECUTIVE COMPENSATION
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Target
Level of Performance
Achieved ($)
Aggregate Grant Date
Fair Value of Cash
Flow Generation PSUs
Assuming Highest
Level of Performance
Achieved ($)
2,914,920
2,354,189
2,065,774
832,820
667,017
413,169
916,092
706,274
619,754
687,044
687,044
5,829,840
4,708,378
4,131,548
1,665,640
1,334,034
826,338
1,832,184
1,412,548
1,239,508
1,374,088
1,374,088
Year
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2019
(3) Amounts in this column represent the grant date fair value of stock options granted annually, in accordance with ASC
Topic 718. The grant date fair value of the options granted in 2019, estimated using the Black-Scholes option pricing model, is
$12.22 per option. The assumptions made in determining the grant date fair values of options are disclosed in Note 15 in the
Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
(4) Amounts in this column represent cash incentive awards earned and paid based on the achievement of performance criteria.
Please see ‘‘Compensation Discussion and Analysis — Named Executive’s 2019 Compensation Program and Results —
Annual Cash Incentive’’ for additional information.
(5) The amounts included in ‘‘All Other Compensation’’ for 2019 are shown below (in dollars):
Mr. Fish
Ms. Rankin
Mr. Morris
Ms. Hemmer
Mr. Batchelor
401(k)
Plan Matching
Contributions
409A
Deferral
Plan
Matching
Contributions
Life Insurance
Premiums
Perquisites
and Other
Personal
Benefits(a)
12,600
12,600
12,600
12,600
12,600
92,945
32,867
38,546
25,028
15,816
2,109
1,027
1,225
874
741
—
22,081
33,675
—
—
(a)
Includes perquisites and personal benefits received by a named executive officer in 2019, to the extent that the total
value of such perquisites and personal benefits was at least $10,000. This column includes (i) incremental cost to us
for personal use of Company aircraft in the following amounts: Ms. Rankin — $15,781 and Mr. Morris — $30,525
and (ii) income that is imputed to each of our named executive officers reflecting the cost to the Company of the
executive’s guest’s participation in corporate events in the following amounts: Ms. Rankin — $6,300; and
Mr. Morris — $3,150. Annually, we calculate an hourly direct operating cost for Company aircraft using industry
standard measurements of costs for fuel, catering, telecommunications, maintenance, landing and hangar fees,
flight plans and permits, and crew. We then allocate incremental cost to the named executive based on the amount
of aircraft time required for the personal use, multiplied by the direct operating cost. For example, the majority of
Mr. Morris’ personal aircraft use reported above resulted from deviations from business travel flight plans to pick
up or drop off the executive in another location for personal reasons; in such case, we calculate the time difference
resulting from the flight plan deviation and multiply it by the direct operating cost. We also allocate incremental cost
to the named executive for any deadhead flights required to position the aircraft to serve personal needs. We own
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EXECUTIVE COMPENSATION
and operate our aircraft primarily for business use; therefore, we do not include purchase costs or other fixed costs
associated with the ownership or operation of our aircraft in the direct operating cost.
(6) Each of Ms. Hemmer and Mr. Batchelor were promoted to their current positions on January 1, 2019.
(7)
Includes $75,000 of base salary in 2019 and $50,000 of base salary in 2018 to which Mr. Fish was entitled but voluntarily
relinquished to fund a scholarship program for children of Company employees.
GRANT OF PLAN-BASED AWARDS IN 2019
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
Estimated Future Payouts
Under Equity Incentive
Plan Awards(2)
Threshold
($)
Target Maximum Threshold Target Maximum
(#)
(#)
(#)
($)
($)
Awards:
All other
Grant
Option Exercise Closing Date Fair
Value of
or Base Market
Number of Price of Price on Stock and
Option
Securities
Awards
Underlying Awards
($)(5)
($/sh)(4)
Option Date of
Grant
($/sh)
Options(#)(3)
1,027,535 1,712,559 3,425,118
29,474
58,948 117,896
6,853,530
114,566
98.898
99.08
1,399,997
348,509
580,848 1,161,696
399,000
665,000 1,330,000
289,430
482,384
964,768
289,430
482,384
964,768
8,421
16,842
33,684
1,958,118
32,733
98.898
99.08
399,997
9,263
18,526
37,052
2,153,907
36,007
98.898
99.08
440,006
6,947
13,894
27,788
1,615,372
27,005
98.898
99.08
330,001
6,947
13,894
27,788
1,615,372
27,005
98.898
99.08
330,001
Grant Date
James C. Fish, Jr.
Annual Cash
Incentive
2/19/19
2/19/19
Devina A. Rankin
Annual Cash
Incentive
2/19/19
2/19/19
John J. Morris, Jr.
Annual Cash
Incentive
2/19/19
2/19/19
Tara J. Hemmer
Annual Cash
Incentive
2/19/19
2/19/19
Steven R. Batchelor
Annual Cash
Incentive
2/19/19
2/19/19
(1) Actual payouts of cash incentive awards for 2019 performance are shown in the Summary Compensation Table under
‘‘Non-Equity Incentive Plan Compensation.’’ The named executives’ possible annual cash incentive payouts are calculated
using a percentage of base salary approved by the MD&C Committee. The threshold levels represent the amounts that would
have been payable if the minimum performance requirements were met for each performance measure. Please see
‘‘Compensation Discussion and Analysis — Named Executive’s 2019 Compensation Program and Results — Annual Cash
Incentive’’ for additional information about these awards, including performance criteria.
(2) Represents the number of shares of Common Stock potentially issuable based on the achievement of performance criteria
under PSU awards granted under our 2014 Stock Incentive Plan. Please see ‘‘Compensation Discussion and Analysis —
Named Executive’s 2019 Compensation Program and Results — Long-Term Equity Incentives — Performance Share Units’’
for additional information about these awards, including performance criteria. The performance period for these awards
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EXECUTIVE COMPENSATION
ends December 31, 2021. PSUs earn dividend equivalents, which are paid out based on the number of shares earned at the
end of the performance period.
(3) Represents the number of shares of Common Stock potentially issuable upon the exercise of options granted under our 2014
Stock Incentive Plan. Please see ‘‘Compensation Discussion and Analysis — Named Executive’s 2019 Compensation
Program and Results — Long-Term Equity Incentives — Stock Options’’ for additional information about these awards. The
stock options will vest in 25% increments on the first two anniversaries of the date of grant and the remaining 50% will vest
on the third anniversary. Although we consider all of our equity awards to be a form of incentive compensation because their
value will increase as the market value of our Common Stock increases, only awards with performance criteria are
considered ‘‘equity incentive plan awards’’ for SEC disclosure purposes. As a result, stock option awards are not included as
‘‘Equity Incentive Plan Awards’’ in either the table above or the Outstanding Equity Awards as of December 31, 2019 table.
(4) The exercise price represents the average of the high and low market price of our Common Stock on the date of the grant, in
accordance with our 2014 Stock Incentive Plan.
(5) These amounts are grant date fair values of the awards as calculated under ASC Topic 718 and as further described in
Note 15 in the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K and notes (2) and
(3) to the Summary Compensation Table.
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EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2019
Option Awards
Stock Awards(1)
Name
James C. Fish, Jr.
Devina A. Rankin
John J. Morris, Jr.
Tara J. Hemmer
Steven R. Batchelor
Equity
Incentive
Equity
Incentive
Plan
Awards:
Plan Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Price Expiration Not Vested Not Vested Not Vested Not Vested
($)(7)
Awards:
Number of
Market Unearned
Shares,
Units or
Other
Rights
That Have
Number of
Shares or
Units of
Stock
That Have
Value of
Shares or
Units of
Stock
That Have
Option
(#)(6)
(#)(7)
($)(6)
Date
($)
Number of
Securities
Underlying
Unexercised
Options
Number of
Securities
Underlying
Unexercised
Option
Options Exercise
Exercisable Unexercisable
(#)
(#)(2)
—
—
—
—
6,990
12,953
6,386
—
7,401
—
—
4,111
2,969
6,530
—
921
2,721
6,530
7,342
9,146
10,442
8,003
114,566(3)
98.898 2/19/2029
74,013(4)
64,767(5)
85.34 2/20/2028
73.335 2/28/2027
32,733(3)
20,971(4)
12,954(5)
98.898 2/19/2029
85.34 2/20/2028
73.335 2/28/2027
—
56.235 2/26/2026
36,007(3)
22,204(4)
19,430(5)
98.898 2/19/2029
85.34 2/20/2028
73.335 2/28/2027
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
114,120
26,010,230
—
—
—
—
32,474
7,401,474
—
—
—
—
—
—
35,078
7,994,978
—
—
—
—
27,005(3)
12,336(4)
98.898 2/19/2029
1,331
151,681
23,090
5,262,673
85.34 2/20/2028
2,969(5)
73.335 2/28/2027
—
56.235 2/26/2026
—
—
—
—
—
—
—
—
—
—
—
—
27,005(3)
2,763(4)
2,722(5)
—
—
—
—
—
98.898 2/19/2029
1,107
126,154
15,438
3,518,629
85.34 2/20/2028
73.335 2/28/2027
56.235 2/26/2026
54.635 2/25/2025
41.37
3/7/2024
36.885
3/8/2023
34.935
3/9/2022
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) Values are based on the closing price of our Common Stock on December 31, 2019 of $113.96.
(2)
Includes vested stock options granted on March 9, 2012, March 8, 2013 and March 7, 2014 pursuant to our 2009 Stock
Incentive Plan and vested stock options granted on February 25, 2015, February 26, 2016, February 28, 2017 and February 20,
2018 pursuant to our 2014 Stock Incentive Plan.
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2020 Proxy Statement
44
EXECUTIVE COMPENSATION
(3)
(4)
(5)
(6)
(7)
Includes stock options granted on February 19, 2019 that vest 25% on the first and second anniversary of the date of grant and
50% on the third anniversary of the date of grant.
Includes stock options granted on February 20, 2018 that vested 25% on the first anniversary of the date of grant. An
additional 25% will vest on the second anniversary of the date of grant and 50% will vest on the third anniversary of the date of
grant.
Includes stock options granted on February 28, 2017 that vested 25% on the first and second anniversary of the date of grant.
The remaining 50% will vest on the third anniversary of the date of grant.
Includes the following number of RSUs granted under our 2014 Stock Incentive Plan to Ms. Hemmer and Mr. Batchelor as
incentive compensation prior to their promotion to the senior leadership team: Ms. Hemmer — 646 granted on February 28,
2017 and 685 granted on May 2, 2017; Mr. Batchelor — 592 granted on February 28, 2017 and 515 granted on February 20,
2018. All RSUs vest on the third anniversary of the date of grant.
Includes PSUs with three-year performance periods ending December 31, 2020 and December 31, 2021. Payouts on PSUs
are made after the Company’s financial results for the performance period are reported and the MD&C Committee
determines achievement of performance results and corresponding vesting, typically in mid to late February of the
succeeding year. The PSUs for the performance period ended December 31, 2019 are not included in the table as they are
considered earned as of December 31, 2019 for proxy statement disclosure purposes; instead, such PSUs are included in the
Option Exercises and Stock Vested table below. Pursuant to SEC disclosure instructions, because the Company’s
performance on the metrics governing our PSUs with the performance period ended December 31, 2019 exceeded target, the
payout value of unearned awards is calculated assuming maximum performance criteria is achieved. The following number
of PSUs have a performance period ending December 31, 2020: Mr. Fish — 55,172; Ms. Rankin — 15,632; Mr. Morris —
16,552; Ms. Hemmer — 9,196; and Mr. Batchelor — 1,544. The following number of PSUs have a performance period ending
December 31, 2021: Mr. Fish — 58,948; Ms. Rankin — 16,842; Mr. Morris — 18,526; Ms. Hemmer — 13,894; and
Mr. Batchelor — 13,894.
OPTION EXERCISES AND STOCK VESTED
Name
James C. Fish, Jr.
Devina A. Rankin
John J. Morris, Jr.
Tara J. Hemmer
Steven R. Batchelor
Option Awards
Stock Awards
Number of Shares
Acquired on Exercise (#)
Value Realized on
Exercise ($)
Number of Shares
Acquired on Vesting (#)(1)
Value Realized on
Vesting ($)(1)
84,314(2)
—
42,795(3)
14,539(4)
—
3,810,206
—
1,813,700
974,903
—
116,391
22,996
33,356
4,597
4,281
14,369,680
2,834,311
4,138,145
551,315
512,112
(1)
Includes shares of the Company’s Common Stock issued on account of PSUs granted in 2017 with a performance period
ended December 31, 2019. The determination of achievement of performance results and corresponding vesting of such
PSUs was performed by the MD&C Committee in February 2020. Following such determination, shares of the Company’s
Common Stock earned under this award were issued on February 13, 2020, based on the average of the high and low market
price of our Common Stock on that date. Also includes the following number of RSUs that vested in 2019: Mr. Fish — 5,208;
Ms. Rankin — 759; Ms. Hemmer — 776; and Mr. Batchelor — 776. The value of RSUs realized on vesting was calculated using
the average of the high and low market price of our Common Stock on the date of vesting.
(2) Mr. Fish received 19,834 net shares after withholdings and the sale of shares to cover option costs and taxes.
(3) Mr. Morris received 10,340 net shares after withholdings and the sale of shares to cover option costs and taxes.
(4) Ms. Hemmer received 5,161 net shares after withholdings and the sale of shares to cover option costs and taxes.
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45
EXECUTIVE COMPENSATION
Nonqualified Deferred Compensation in 2019
Each of our named executive officers is eligible to participate in
our 409A Deferral Plan and may elect to defer receipt of
portions of their base salary and cash incentives in excess of
threshold established under
the annual compensation
Section 401(a)(17) of the IRC, referred to as the ‘‘Threshold.’’ As
of 2019, the Threshold was $280,000. The plan provides that
eligible employees may defer for payment at a future date (i) up
to 25% of base salary and up to 100% of annual cash incentives
payable after the aggregate of such compensation components
reaches the Threshold; (ii) receipt of any RSUs and (iii) receipt
of any PSUs. The Company match provided under the 409A
Deferral Plan is dollar for dollar on the employee’s deferrals,
up to 3% of the employee’s aggregate base salary and cash
incentives in excess of the Threshold, and fifty cents on the
dollar on the employee’s deferrals, in excess of 3% and up to
6% of the employee’s aggregate base salary and cash
incentives in excess of the Threshold. Additional deferral
contributions will not be matched but will be tax-deferred.
Amounts deferred under this plan are allocated into accounts
that mirror selected investment funds in our 401(k) Retirement
Savings Plan, including a Company stock fund, although the
amounts deferred are not actually invested in stock or funds.
There is no Company match on deferred RSUs or PSUs, but the
Company makes a cash payment of dividend equivalents on the
shares deferred at the same time and at the same rate as
dividends on the Company’s Common Stock.
Participating employees generally can elect to receive
distributions commencing six months after the employee
leaves the Company in the form of annual installments or a
lump sum payment. Special circumstances may allow for a
modified or accelerated distribution, such as the employee’s
death, an unforeseen emergency, or upon termination of the
plan. In the event of death, distribution will be made to the
designated beneficiary in a single lump sum in the following
calendar year. In the event of an unforeseen emergency, the
plan administrator may allow an early payment in the amount
necessary to satisfy the emergency. All participants are
immediately 100% vested in all of their contributions, Company
matching contributions, and gains and/or losses related to
their investment choices.
Name
James C. Fish, Jr.
Devina A. Rankin
John J. Morris, Jr.
Tara J. Hemmer
Steven R. Batchelor
Executive
Contributions
in Last
Fiscal
Year ($)(1)
4,784,171
39,921
47,945
46,457
50,860
Registrant
Contributions
in Last
Fiscal
Year ($)(2)
92,945
32,867
38,546
25,028
15,816
Aggregate
Earnings
in Last
Fiscal
Year ($)(3)
2,751,463
19,319
348,607
39,447
351,166
Aggregate
Withdrawals/
Distributions ($)(4)
Aggregate Balance
at Last Fiscal
Year End ($)(5)
194,430
12,478,644
—
—
—
168,626
299,840
1,722,192
264,218
1,890,487
(1) Contributions are made pursuant to the Company’s 409A Deferral Plan. Executive contributions of base salary and annual
cash incentive compensation is included in the Salary column and the Non-Equity Incentive Plan Compensation column,
respectively, of the Summary Compensation Table. Additionally, Mr. Fish deferred receipt of 51,852 shares of Common Stock
in 2019 that were earned on account of PSUs with the performance period ended December 31, 2018. The grant date fair
value of such PSUs was included in the Stock Awards column of the Summary Compensation Table when granted in 2016.
(2) Company contributions to the executives’ 409A Deferral Plan accounts are included in the All Other Compensation column in
the Summary Compensation Table.
(3) Earnings on these accounts are not included in any other amounts in the tables included in this Proxy Statement, as the
amounts of the named executives’ earnings on deferred cash compensation represent the general market gains (or losses)
on investments, rather than amounts or rates set by the Company for the benefit of the named executives. In case of Mr. Fish,
who has deferred receipt of 94,844 shares of Common Stock, earnings also include the change in the closing price per share
of the Company’s Common Stock from December 31, 2018 to December 31, 2019, plus $2.05 of dividends paid per share of
Common Stock in 2019, multiplied by the number of shares deferred. The value of such deferred shares was included in the
Option Exercises and Stock Vested table for the year of vesting.
(4) The amount shown in this column for Mr. Fish consists of dividend equivalents paid on deferred shares. The amount shown in
this column for Mr. Batchelor reflects a distribution that was automatically made pursuant to his prior election for a
date-specific withdrawal to occur on May 1, 2019.
(5) Amounts shown in this column include the following amounts that were reported as compensation to the named executive in
the Summary Compensation Table for 2017-2019: Mr. Fish — $848,765; Ms. Rankin — $211,989; Mr. Morris — $330,978;
Ms. Hemmer — $71,485 and Mr. Batchelor — $66,676. Because Ms. Hemmer and Mr. Batchelor became named executives
in 2019, such amounts only include 2019 compensation for those individuals.
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17MAR202000053215
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46
Potential Payments Upon Termination or
Change in Control
meanings generally described below. You should refer to the
applicable documentation, accessible through the Company’s
Form 10-K Exhibit List, for the actual definitions.
EXECUTIVE COMPENSATION
‘‘Cause’’ generally means the named executive has:
deliberately refused to perform his or her duties;
breached his or her duty of loyalty to the Company; been
convicted of a felony; intentionally and materially harmed
the Company; materially violated the Company’s policies
and procedures or breached the covenants contained in
his or her agreement.
‘‘Good Reason’’ generally means that, without the named
executive’s consent: his or her duties or responsibilities
have been substantially changed; he or she has been
removed from his or her position; the Company has
breached his or her employment agreement; any
successor to the Company has not assumed the
obligations under his or her employment agreement; or he
or she has been reassigned to a location more than 50
miles away.
Change in Control. The post-employment compensation our
named executives receive is based on provisions included in
retirement and severance plan documents, employment
agreements and equity
incentive award documentation.
Severance protections aid in retention of senior leadership by
providing the individual with comfort that he or she will be
treated fairly in the event of an involuntary termination not for
cause. The change in control provisions included in the
Severance Protection Plan, our stock option award
agreements and,
if applicable, employment agreements
require a double trigger in order to receive any payment in the
event of a change in control situation. First, a change in control
must occur, and second, the individual must terminate
employment for good reason or the Company must terminate
employment without cause within six months prior to or two
years following the change in control event. PSUs are paid out
in cash on a prorated basis based on actual results achieved
through the end of the fiscal quarter prior to a change in
control. Thereafter, the executive would typically receive a
replacement award from the successor entity, provided that
the successor entity is publicly traded. If the successor is not
publicly traded, the executive will be entitled to a replacement
award of cash. RSUs, which are not routinely a component of
our named executive officer compensation, vest upon a change
in control, unless the successor entity converts the awards to
equivalent grants in the successor. In the case of both
converted RSU and PSU awards, they will vest in full if the
executive is terminated without cause following the change in
control. We believe providing change in control protection
encourages our named executives to pursue and facilitate
transactions that are in the best interests of stockholders while Benefits to a participant under the Severance Protection Plan
not granting executives an undeserved windfall.
are subject to reduction to the extent required by the
Company’s Severance Limitation Policy or if the excise tax
described in Sections 280G or 4999 of the IRC is applicable and
such reduction would place the participant in a better net after
tax position.
‘‘Change in Control’’ generally means that: at least 25% of
the Company’s Common Stock has been acquired by one
person or persons acting as a group; certain significant
turnover in our Board of Directors has occurred; there has
been a merger of the Company in which at least 50% of the
combined post-merger voting power of the surviving entity
does not consist of the Company’s pre-merger voting
power, or a merger to effect a recapitalization that
resulted in a person or persons acting as a group acquired
25% or more of the Company’s voting securities; or the
Company is liquidating or selling all or substantially all of
its assets.
Involuntary Termination or Resignation for Good Reason.
Under the Severance Protection Plan, in the event a participant
is terminated without cause or resigns for good reason, subject
to execution of a release of claims and continued compliance
with all restrictive covenants, he or she will be entitled to Voluntary Termination; Retirement. Our equity award
receive: (a) cash severance in an aggregate amount equal to
agreements generally provide that an executive forfeits
two times the sum of the participant’s base salary and target
terminates
unvested awards
annual bonus (with one half payable in a lump sum at
employment. RSUs and PSUs generally vest on a pro rata basis
termination, and the remaining half payable in installments
upon involuntary termination other than for cause. RSUs
over a two-year period); (b) continuation of group health
generally vest on a pro rata basis upon an employee’s
benefits over a two-year period following termination and (c) a
qualifying retirement; however, PSUs and stock options
pro rata annual cash incentive payment for the year of
generally continue to vest following a qualifying retirement as if
termination. In the event a named executive is terminated for
the employee had remained employed until the end of the
cause, he or she is entitled to any accrued but unpaid salary
performance period. If the recipient is terminated by the
only, and all unvested awards and outstanding stock options,
Company without cause or voluntarily resigns, the recipient is
whether exercisable or not, are forfeited.
entitled to exercise all stock options outstanding and
exercisable within a specified
frame after such
termination.
if he or she voluntarily
time
The terms ‘‘cause,’’ ‘‘good reason,’’ and ‘‘change in control’’
are defined in the executives’ employment agreements, the
Severance Protection Plan and equity award plans and
agreements, as applicable, but such terms have the
Explanation of Tabular Disclosure. The following table
presents potential payouts to our named executives at
47
17MAR202000053215
2020 Proxy Statement
47
•
•
•
•
For purposes of calculating the payout upon the ‘‘double
in control and subsequent
trigger’’ of change
involuntary termination not for cause, the value of the
performance share unit replacement award is equal to
the number of PSUs that would be forfeited based on
the prorated acceleration of the PSUs, multiplied by the
closing price of our Common Stock on December 31,
2019.
The payout for continuation of benefits is an estimate of
the cost the Company would incur to continue those
benefits.
The Company’s practice is to provide all benefits eligible
employees with life insurance that pays one times
annual base salary upon death. The insurance benefit is
a payment by an insurance company, not the Company,
and is payable under the terms of the insurance policy.
Refer to the Nonqualified Deferred Compensation in
2019 table above for aggregate balances payable to the
named executives under our 409A Deferral Plan
pursuant
the named executive’s distribution
elections.
to
EXECUTIVE COMPENSATION
in
termination of employment
year-end upon
the
circumstances indicated pursuant to the terms of applicable
plans and agreements. The payouts set forth below assume
the triggering event indicated occurred on December 31, 2019,
when the closing price of our Common Stock was $113.96 per
share. These payouts are calculated for SEC disclosure
purposes and are not necessarily indicative of the actual
amounts the named executive would receive. Please note the
following when reviewing the payouts set forth below:
•
•
The compensation component set forth below for
accelerated vesting of stock options is comprised of the
unvested stock options granted in 2017, 2018 and 2019,
which vest 25% on the first and second anniversary of
the date of grant and 50% on the third anniversary of the
date of grant.
For purposes of calculating the payout of performance
share unit awards outstanding as of December 31, 2019,
we have assumed that target performance was
achieved; any actual performance share unit payouts
will be based on actual performance of the Company
during the performance period.
48
17MAR202000053215
2020 Proxy Statement
48
Potential Consideration Upon Termination of Employment
Mr. Fish Ms. Rankin
Mr. Morris Ms. Hemmer Mr. Batchelor
EXECUTIVE COMPENSATION
Payout or Value of Compensation Components, in
dollars
In Event of Death or Disability
•
•
•
•
Accelerated vesting of stock options
Payment of PSUs (contingent on actual
performance at end of performance period)
Accelerated vesting of restricted stock units
Life insurance benefit paid by insurance company
(in the case of death)
Total
In Event of Termination Without Cause by the
Company or For Good Reason by the Employee
•
•
•
Two times base salary plus target annual cash
bonus (one-half payable in lump sum; one-half
payable in bi-weekly installments over a two-year
period)
Continued coverage under health and welfare
benefit plans for two years
Prorated payment of PSUs (contingent on actual
performance at end of performance period)
6,475,004
1,619,470
1,967,159
880,421
596,407
13,005,115
—
3,700,737
—
3,997,489
—
2,631,336
151,681
1,759,314
126,154
1,125,000
552,000
650,000
461,000
390,000
20,605,119
5,872,207
6,614,648
4,124,438
2,871,875
6,000,000
2,488,590
2,730,000
2,042,880
2,042,880
25,752
25,752
25,752
25,752
25,752
•
Prorated vesting of restricted stock units
—
—
—
139,413
Total
12,456,591
4,341,729
4,717,004
3,434,482
2,814,200
In Event of Termination Without Cause by the
Company or For Good Reasons by the Employee
Six Months Following a Change in Control (Double
Trigger)
6,430,839
1,827,387
1,961,252
1,226,437
645,089
100,479
•
•
•
•
•
•
•
Two times base salary plus target annual cash
bonus (one-half payable in lump sum; one-half
payable in bi-weekly installments over a two-year
period)
Continued coverage under health and welfare
benefit plans for two years
6,000,000
2,488,590
2,730,000
2,042,880
2,042,880
25,752
25,752
25,752
25,752
880,421
25,752
596,407
645,089
Accelerated vesting of stock options
6,475,004
1,619,470
1,967,159
Prorated accelerated payment of PSUs
6,430,839
1,827,387
1,961,252
1,226,437
Accelerated payment of PSUs replacement grant
6,574,276
1,873,350
2,036,237
1,404,899
1,114,225
Accelerated vesting of restricted stock units
—
—
—
Prorated annual cash bonus(1)
3,500,000
1,212,390
1,330,000
151,681
483,840
126,154
483,840
Total
29,005,871
9,046,939
10,050,400
6,215,910
5,034,347
(1) Pursuant to the Severance Protection Plan, Ms. Hemmer and Mr. Batchelor receive a prorated target annual cash bonus
under this scenario. Mr. Fish, Ms. Rankin and Mr. Morris receive a prorated maximum annual cash bonus under this scenario
pursuant to their 2017 Employment Agreements. The 2017 Employment Agreements provided for this enhanced treatment
partially on account of similar terms in pre-existing employment agreements that executives were agreeing to terminate in
order to support the Company’s transition toward a more standardized and flexible approach to severance protections.
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17MAR202000053215
2020 Proxy Statement
49
EXECUTIVE COMPENSATION
Chief Executive Officer Pay Ratio
in
In 2018, we identified the Company’s median employee, based
on total annual compensation for all employees other than our
Chief Executive Officer,
accordance with SEC
Regulation S-K, Item 402(u) (the ‘‘Median Employee’’) for
purposes of the proxy statement filed in March 2018. During
2019, a change in such employee’s circumstances make it no
longer appropriate to use that individual as the Median
Employee. A new Median Employee was selected, whose
compensation is substantially similar to the original median
employee based on the compensation measure used to select
the original median employee. The Median Employee, a Driver
in the United States, was identified from a list of Company
employees as of December 31, 2017. Out of a total worldwide
employee population of 42,075 on that date, the list included
41,585 employees and excluded the Chief Executive Officer and
our 489 employees based in India. Approximately 90% of these
total employees work in the United States and approximately
10% work in Canada. Over 99% of these individuals are
full-time employees. Any temporary or seasonal employees
are included; any subcontracted workers are not employees
and are excluded.
Equity Compensation Plan Table
To select the Median Employee, we determined the actual
taxable compensation paid to each listed employee in 2017,
converted to U.S. dollars at appropriate exchange rates for
non-U.S. employees and annualized for salaried employees
hired during the year. We did not apply any cost-of-living
adjustments nor did we use any form of statistical sampling.
employee
population,
Since December 31, 2017, there have been no changes to the
Company’s
compensation
arrangements, or the circumstances of the Median Employee
(except as noted above) that the Company believes would
significantly impact this pay ratio disclosure. Accordingly, as
permitted by SEC Regulation S-K, Item 402(u), the Company is
providing the following information based on the Median
Employee as identified.
For 2019, total annual compensation for the Median Employee
was $76,048. The annual compensation of our Chief Executive
Officer was $11,298,101, for a ratio of 1:149. These compensation
values were calculated in accordance with SEC Regulation S-K,
Item 402(c)(2)(x) requirements for reporting total compensation in
the Summary Compensation Table.
The following table provides information as of December 31, 2019 about the number of shares to be issued upon vesting or
exercise of equity awards and the number of shares remaining available for issuance under our equity compensation plans.
Plan Category
Number of
Securities to be
Exercise
of Outstanding
Options and Rights
Issued Upon Weighted-Average
Exercise Price of
Outstanding
Options and Rights
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation Plans
Equity compensation plans approved by security holders(1)
5,588,356(2)
$69.66(3)
20,762,702(4)
(1)
(2)
Includes our 2009 Stock Incentive Plan, 2014 Stock Incentive Plan and Employee Stock Purchase Plan (‘‘ESPP’’). No
additional awards may be granted under our 2009 Stock Incentive Plan.
Includes: options outstanding for 3,938,478 shares of Common Stock; 224,997 shares of Common Stock to be issued in
connection with deferred compensation obligations; 347,997 shares underlying unvested restricted stock units and 1,076,884
shares of Common Stock that would be issued on account of outstanding PSUs if the target performance level is achieved.
Assuming, instead, that the maximum performance level was achieved on such PSUs, the number of shares of Common
Stock that would be issued on account of outstanding awards would increase by 1,076,884 shares.
The total number of shares subject to outstanding awards in the table above includes 361,856 shares on account of PSUs, at
target, with the performance period ended December 31, 2019. The determination of achievement of performance results on
such PSUs was performed by the MD&C Committee in February 2020, and the Company achieved (a) maximum performance
criteria on the half of the PSUs that are subject to the cash flow generation performance measure, yielding a 200% payout
and (b) near-maximum performance criteria on the half of the PSUs that are subject to the total shareholder return
performance measure, yielding a 194.7% payout. A total of 475,627 shares of Common Stock were issued on account of such
PSUs in February 2020, net of units deferred, of which 241,022 shares of Common Stock were included in the first column of
the table above.
Excludes purchase rights that accrue under the ESPP. Purchase rights under the ESPP are considered equity compensation
for accounting purposes; however, the number of shares to be purchased is indeterminable until the time shares are actually
issued, as automatic employee contributions may be terminated before the end of an offering period and, due to the
look-back pricing feature, the purchase price and corresponding number of shares to be purchased is unknown.
(3) Excludes PSUs and restricted stock units because those awards do not have exercise prices associated with them. Also
excludes purchase rights under the ESPP for the reasons described in (2) above.
(4) The shares remaining available include 807,579 shares under our ESPP and 19,955,123 shares under our 2014 Stock
Incentive Plan, assuming payout of PSUs at maximum. Assuming payout of PSUs at target, the number of shares remaining
available for issuance under our 2014 Stock Incentive Plan would be 21,032,007.
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17MAR202000053215
2020 Proxy Statement
50
RATIFICATION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING
FIRM
(Item 2 on The Proxy Card)
Our Board of Directors, upon the recommendation of the Audit Committee, has ratified the selection of Ernst & Young LLP to serve as
our independent registered public accounting firm for fiscal year 2020, subject to ratification by our stockholders.
Representatives of Ernst & Young LLP will be at the annual meeting. They will be able to make a statement if they want, and will
be available to answer any appropriate questions stockholders may have.
Although ratification of the selection of Ernst & Young is not required by our By-laws or otherwise, we are submitting the selection to
stockholders for ratification because we value our stockholders’ views on our independent registered public accounting firm and as a
matter of good governance. If our stockholders do not ratify our selection, it will be considered a direction to our Board and Audit
Committee to consider selecting another firm. Even if the selection is ratified, the Audit Committee may, in its discretion, select a
different independent registered public accounting firm, subject to ratification by the Board, at any time during the year if it determines
that such a change is in the best interests of the Company and our stockholders.
Independent Registered Public Accounting Firm Fee Information
Fees for professional services provided by our independent registered public accounting firm in each of the last two fiscal years,
in each of the following categories, were as follows:
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
2019
2018
(In millions)
$4.5
$4.6
0.1
—
—
0.1
—
—
$4.6
$4.7
Audit fees includes fees for the annual audit, reviews of the Company’s Quarterly Reports on Form 10-Q, work performed to
support the Company’s debt issuances, accounting consultations, and separate subsidiary audits required by statute or
regulation. Audit-related fees principally include financial due diligence services relating to certain potential acquisitions.
The Audit Committee has adopted procedures for the approval of Ernst & Young’s services and related fees. At the beginning of
each year, all audit and audit-related services, tax fees and other fees for the upcoming audit are provided to the Audit Committee
for approval. The services are grouped into significant categories and provided to the Audit Committee in the format shown above.
All projects that have the potential to exceed $100,000 are separately identified and reported to the Committee for approval. The
Audit Committee Chairman has the authority to approve additional services, not previously approved, between Committee
meetings. Any additional services approved by the Audit Committee Chairman between Committee meetings are reported to the
full Audit Committee at the next regularly scheduled meeting. The Audit Committee is updated on the status of all services and
related fees at every regular meeting. In 2019 and 2018, the Audit Committee or Audit Committee Chairman pre-approved all
audit and audit-related services performed by Ernst & Young. As set forth in the Audit Committee Report on page 9, the Audit
Committee has considered whether the provision of these audit-related services is compatible with maintaining auditor
independence and has determined that it is.
Vote Required for Approval
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock
present at the meeting, in person or represented by proxy, and entitled to vote.
FOR THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2020.
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ADVISORY VOTE ON EXECUTIVE
COMPENSATION
(Item 3 on the Proxy Card)
Pursuant to Section 14A of the Exchange Act, stockholders are entitled to an advisory (non-binding) vote on compensation
programs for our named executive officers (sometimes referred to as ‘‘say on pay’’). The Board of Directors has determined that it
will include this ‘‘say on pay’’ vote in the Company’s proxy materials annually, pending consideration of future advisory
stockholder votes on the frequency of this advisory vote on executive compensation.
We encourage stockholders to review the Compensation Discussion and Analysis and the Executive Compensation Tables on
pages 26 to 50 of this Proxy Statement. The Company has designed its executive compensation program to be supportive of, and
align with, the strategy of the Company and the creation of stockholder value, while discouraging excessive risk-taking. The
following key structural elements and policies, discussed in more detail in the Compensation Discussion and Analysis, further the
objective of our executive compensation program and evidence our dedication to competitive and reasonable compensation
practices that are in the best interests of stockholders:
•
•
•
•
•
•
•
•
over 80% of our named executive’s target compensation, on average, is linked to Company performance, through annual cash
incentive performance criteria and long-term equity-based incentive awards, and over 60% of our named executive’s target
compensation is tied to long-term equity awards, which aligns executives’ interests with those of stockholders;
our total direct compensation opportunities for named executive officers are targeted to fall in a range around the
competitive median;
performance-based awards include threshold, target and maximum payouts correlating to a range of performance
outcomes and are based on a variety of indicators of performance, which limits risk-taking behavior;
performance stock units with a three-year performance period, as well as stock options that vest over a three-year period,
link executives’ interests with long-term performance and reduce incentives to maximize performance in any one year;
all of our executive officers are subject to stock ownership guidelines, which we believe demonstrates a commitment to,
and confidence in, the Company’s long-term prospects;
the Company has clawback provisions in its equity award agreements and executive officer employment agreements, and
has adopted a clawback policy applicable to annual incentive compensation, designed to recoup compensation when cause
and/or misconduct are found;
our Severance Limitation Policy limits the amount of benefits the Company may provide to its executive officers under
severance agreements entered into after the date of such policy; and
the Company has adopted a policy that prohibits it from entering into new agreements with executive officers that provide
for certain death benefits or tax gross-up payments.
The Board strongly endorses the Company’s executive compensation program and recommends that the stockholders vote in
favor of the following resolution:
RESOLVED, that the compensation of the Company’s named executive officers as described in this Proxy Statement under
‘‘Executive Compensation,’’ including the Compensation Discussion and Analysis and the tabular and narrative disclosure
contained in this Proxy Statement, is hereby APPROVED.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
Vote Required for Approval
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock
present at the meeting, in person or represented by proxy, and entitled to vote. Because the vote is advisory, it will not be binding,
and neither the Board nor the MD&C Committee will be required to take any action as a result of the outcome of the vote on this
proposal. The MD&C Committee will carefully consider the outcome of the vote in connection with future executive compensation
arrangements.
FOR THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE COMPANY’S
EXECUTIVE COMPENSATION.
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PROPOSAL TO AMEND AND
RESTATE THE COMPANY’S
EMPLOYEE STOCK PURCHASE PLAN
(Item 4 on the Proxy Card)
Description of the Proposed Amendment and Restatement
Our ESPP was approved by stockholders at our 1997 Annual Meeting. An aggregate of one million shares of Common Stock was
originally authorized for issuance under the ESPP and stockholders have approved an additional 14.75 million shares for issuance
since then. As of January 1, 2020, approximately 40,175 employees were eligible to participate in the ESPP and approximately
807,579 shares remained available for issuance. The total number of shares issued under the ESPP in each of 2019, 2018 and
2017 was approximately 537,000, 582,000 and 594,000, respectively. The Board of Directors has concluded it is in the best interest
to amend and restate the ESPP to authorize an additional three million shares of Common Stock for issuance under the plan,
subject to stockholder approval. If stockholder approval is not obtained, the amendment and restatement will be of no force or
effect.
Key considerations applicable to the ESPP and the proposed amendment and restatement include the following. Please read
‘‘Operation of the ESPP’’ below for further detail.
•
The price of shares of Common Stock purchased under the ESPP is 85% of the lower of the fair market value on the first
day and the last day of the offering period.
•
Each offering period is six months.
•
The additional three million shares proposed to be authorized for issuance pursuant to the amendment and restatement
comprise less than 1% of the Company’s outstanding shares of Common Stock.
Description of the ESPP
The following description of the ESPP is qualified in its entirety by, and should be read in conjunction with, the text of the plan, a
copy of which, as proposed to be amended and restated, is attached hereto as Appendix A and incorporated herein by reference.
Purpose
The purpose of the ESPP is to provide an incentive for present and future employees of the Company’s participating subsidiaries
to acquire or increase their proprietary interest in the Company through the purchase of shares of Common Stock at a discount.
Securities Underlying Awards
The closing price of the Company’s Common Stock as of March 16, 2020 was $99.89 per share.
Administration
The ESPP is administered by the Administrative Committee of the Waste Management Employee Benefit Plans, a committee
appointed by the Board of Directors. The Administrative Committee has the authority to interpret all provisions of the ESPP.
Eligibility
Any employee who customarily works for one of the Company’s participating subsidiaries at least 20 hours per week and more
than five months in a calendar year is eligible to participate in the ESPP after having been employed for at least 30 days prior to an
enrollment date.
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PROPOSAL TO AMEND AND RESTATE THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN
Operation of the ESPP
On the last day of each six-month period between January 1 and June 30 and July 1 and December 31 (each, an ‘‘Offering Period’’),
each employee who is enrolled in the ESPP will automatically purchase a number of shares of Common Stock determined by
dividing such employee’s payroll deductions accumulated in the ESPP during such Offering Period by the Offering Price. The
Offering Price of each of the shares purchased in a given Offering Period shall be the lower of (a) 85% of the fair market value of a
share of Common Stock on the first day of the Offering Period and (b) 85% of the fair market value of a share of Common Stock on
the last day of the Offering Period. If an employee withdraws from participation during an Offering Period, the monies contributed
to the Plan are refunded without interest.
Eligible employees may elect to participate in the ESPP by taking such enrollment steps as are determined by the Administrative
Committee to authorize payroll deductions from the employee’s pay in an amount from 1% to 10% (in whole percentages) of the
employee’s gross base pay. No employee may (a) make payroll deductions during any calendar year in excess of $21,250 (or such
other amount determined by the Administrative Committee); (b) purchase shares under the ESPP if such purchase would result in
the employee owning five percent or more of the total combined voting power or value of the Company’s outstanding capital stock;
or (c) purchase shares under the ESPP with a fair market value in excess of $25,000 per calendar year.
All payroll deductions for the ESPP are placed in our general corporate account. No interest accrues on the payroll deductions.
Employees may purchase Common Stock under the ESPP only through payroll deductions, and an employee participating in the
ESPP may not make any additional payments into the account.
Termination of Employment and Withdrawal
If an employee withdraws from participation in the ESPP or terminates employment for any reason, including retirement or death,
during an Offering Period, the payroll deductions credited to the employee’s account will be refunded promptly without interest.
Amendment and Termination of ESPP
The Board of Directors may amend the ESPP at any time; provided, however, the ESPP may not be amended in any way (a) that will
cause rights issued thereunder to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of
the Internal Revenue Code of 1986, as amended (the ‘‘Code’’) or (b) that requires stockholder approval, unless such stockholder
approval is obtained. In addition, other amendments not requiring stockholder approval pursuant to Section 423 of the Code may
also be made by the Plan Sponsor Committee of Waste Management Employee Benefit Plans, a committee appointed by the
Board of Directors.
The ESPP will terminate on the earlier of (a) the date that participating employees become entitled to purchase an aggregate
number of shares greater than the number of shares remaining available for purchase under the ESPP and (b) the date on which
the ESPP is terminated by the Board of Directors.
Federal Income Tax Consequences
The following discussion is intended to be a general summary only of the federal income tax aspects of purchase rights granted
under the ESPP and not of state or local taxes that may be applicable. Tax consequences may vary depending on the particular
circumstances, and administrative and judicial interpretations of the application of the federal income tax laws are subject to
change. Participants in the ESPP who are residents of or are employed in a country other than the United States may be subject to
taxation in accordance with the tax laws of that particular country in addition to or in lieu of U.S. federal income taxes.
The ESPP is intended to be an ‘‘employee stock purchase plan’’ as defined in Section 423 of the Code. A participant recognizes no
taxable income either as a result of commencing participation in the ESPP or purchasing Common Stock under the terms of the
ESPP. If a participant disposes of shares purchased under the ESPP within either two years from the first day of the applicable
Offering Period or within one year from the purchase date, known as disqualifying dispositions, the participant will realize
ordinary income in the year of such disposition equal to the amount by which the fair market value of the shares on the purchase
date exceeds the purchase price. The amount of the ordinary income will be added to the participant’s basis in the shares, and any
additional gain or resulting loss recognized on the disposition of the shares will be a capital gain or loss, which will be long-term if
the participant’s holding period is more than 12 months. If the participant disposes of shares purchased under the ESPP at least
two years after the first day of the applicable Offering Period and at least one year after the purchase date, the participant will
realize ordinary income in the year of disposition equal to the lesser of (a) the excess of the fair market value of the shares on the
date of disposition over the purchase price or (b) 15% of the fair market value of the shares on the first day of the applicable
Offering Period. The amount of any ordinary income will be added to the participant’s basis in the shares, and any additional gain
recognized upon the disposition after such basis adjustment will be a long-term capital gain. If the fair market value of the shares
on the date of disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a
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PROPOSAL TO AMEND AND RESTATE THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN
long-term capital loss. Any ordinary income recognized by a participant upon the disqualifying disposition of the shares generally
should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable
provisions of the Code or the regulations thereunder.
New Plan Benefits
The value of the Common Stock purchased through the ESPP will vary based on the fair market value of our Common Stock on the
first and last days of the Offering Period. Accordingly, the number of shares that may be purchased by the named executive
officers, the executive officers as a group and all employees, including all current officers who are not executive officers, as a
group in the future is not currently determinable. However, the table below shows, as to each of the indicated individuals and
groups, the number of shares of Common Stock purchased by such individuals during the 2019 Offering Periods under the ESPP.
The weighted average purchase price per share of Common Stock purchased during the 2019 Offering Periods under the ESPP
was $85.09. Non-employee directors of the Company are not eligible to participate in the ESPP.
Name/Group
James C. Fish, Jr.
Devina A. Rankin
John J. Morris, Jr.
Steven R. Batchelor
Charles C. Boettcher
Tara J. Hemmer
Leslie K. Nagy
Tamla Oates-Forney
Nikolaj H. Sjoqvist
Michael J. Watson
All executive officers, as a group
All employees, including all current officers who are not executive officers,
as a group
Vote Required for Approval
Number of Shares
—
—
—
281
261
281
70
—
281
265
1,439
535,484
Approval of this proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock
present at the meeting, in person or represented by proxy, and entitled to vote.
FOR THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE AMENDMENT AND RESTATMENT OF THE EMPLOYEE STOCK
PURCHASE PLAN.
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OTHER MATTERS
The Company does not intend to bring any other matters before the annual meeting, nor does the Company have any present
knowledge that any other matters will be presented by others for action at the meeting. If any other matters are properly
presented, your proxy card authorizes the people named as proxy holders to vote using their judgment.
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APPENDIX A
WASTE MANAGEMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated Effective May 12, 2020)
The Waste Management, Inc. Employee Stock Purchase Plan (the ‘‘Plan’’) has been established for the benefit of its eligible
employees, and is hereby amended and restated, effective as of the date upon which shareholder approval is obtained pursuant to
Section 17. The terms of the amended and restated Plan are set forth below.
1. Definitions.
As used in the Plan the following terms shall have the meanings set forth below:
(a)
‘‘Board’’ means the Board of Directors of the Company.
(b)
‘‘Code’’ means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
(c)
‘‘Committee’’ means the Administrative Committee of the Waste Management Employee Benefit Plans appointed by the
Board to administer the Plan as described in Section 4 below, or such other committee appointed by the Board.
(d)
‘‘Common Stock’’ means the common stock, $0.01 par value, of the Company.
(e)
‘‘Company’’ means Waste Management, Inc., a Delaware corporation, or any successor corporation by merger,
reorganization, consolidation or otherwise.
(f)
‘‘Continuous Employment’’ means the absence of any interruption or termination of service as an Eligible Employee with
the Company and/or its Participating Subsidiaries. For purposes of the preceding sentence, an authorized leave of absence shall
not be considered an interruption or termination of service, provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or statute.
(g)
‘‘Eligible Compensation’’ means, with respect to each Participant for each pay period, the regular base earnings,
commissions, overtime and, for employees on an Involuntary Military Leave of Absence, pay differential, paid to the Participant by
the Company and/or one or more Participating Subsidiaries during the Offering Period before reductions are made to Code
Section 125 and Section 401(k) plans maintained by the Company and/or its Participating Subsidiaries. However, any incentive
compensation or other bonus amounts shall be excluded for purposes of determining Eligible Compensation.
(h)
‘‘Eligible Employee’’ means an employee of the Company or one of its Participating Subsidiaries who is customarily
employed for at least 20 hours per week and more than five months in a calendar year, or are absent from active employment
while on an Involuntary Military Leave of Absence. For purposes of the preceding sentence, employees who are members of a
collective bargaining unit shall be excluded as eligible employees under the Plan, unless their applicable collective bargaining
agreement provides for participation in the Plan.
(i)
(j)
‘‘Enrollment Date’’ means the first business day of each Offering Period.
‘‘Exercise Date’’ means the last business day of each Offering Period.
(k)
‘‘Exercise Price’’ means the price per share of Common Stock offered in a given Offering Period, which shall be the
lower of: (i) 85% of the Fair Market Value of a share of the Common Stock on the Enrollment Date of such Offering Period, or
(ii) 85% of the Fair Market Value of a share of the Common Stock on the Exercise Date of such Offering Period.
(l)
‘‘Fair Market Value’’ means, with respect to a share of Common Stock as of any Enrollment Date or Exercise Date, the
closing price of such Common Stock on the New York Stock Exchange on such date, as reported in The Wall Street Journal. In the
event that such a closing price is not available for an Enrollment Date or an Exercise Date, the Fair Market Value of a share of
Common Stock on such date shall be the closing price of a share of the Common Stock on the New York Stock Exchange on the
last business day prior to such date or such other amount as may be determined by the Committee by any fair and reasonable
means.
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(m)
‘‘Involuntary Military Leave of Absence’’ means an employee’s leave from employment pursuant to the Company’s Paid
Leave of Absence Policy to perform military service obligations in the United States Air Force, Army, Navy, Marines, Coast Guard,
Public Health Service Corps or National Guard, and the employee is either drafted or a member of the Reserves called to active
duty.
(n)
‘‘Offering Period’’ means each six-month period that begins and ends on the business days that coincide with January 1
through June 30, or July 1 through December 31, or such other period or periods as the Committee may establish. However, if the
first and/or last day of an Offering Period begins or ends (as applicable) on a Saturday, Sunday or holiday, then (i) the first day of
the Offering Period will begin on the immediately following business day, and/or (ii) the last day of an Offering Period will end on
the immediately preceding business day.
(o)
‘‘Participant’’ means an Eligible Employee who has elected to participate in the Plan by filing an enrollment agreement
with the Company as provided below in Section 6.
(p)
‘‘Participating Subsidiary’’ means any Subsidiary not excluded from participation in the Plan by the Committee, in its
sole discretion.
(q)
‘‘Subsidiary’’ means any domestic or foreign corporation of which the Company owns, directly or indirectly, 50% or more
of the total combined voting power of all classes of stock or other equity interests and that otherwise qualifies as a ‘‘subsidiary
corporation’’ within the meaning of Section 424(f) of the Code or any successor thereto.
2. Purpose of the Plan.
The purpose of the Plan is to provide an incentive for present and future employees of the Company and its Participating
Subsidiaries to acquire a proprietary interest (or increase an existing proprietary interest) in the Company through the purchase
of Common Stock. The Company intends that the Plan qualify as an ‘‘employee stock purchase plan’’ under Section 423 of the
Code, and that the Plan shall be administered, interpreted and construed in a manner consistent with the requirements of
Section 423 of the Code.
3. Shares Reserved for the Plan.
As of the effective date of this restatement, the Company shall reserve for issuance and purchase by Participants under the
Plan an aggregate of three million shares of Common Stock in addition to shares previously reserved under the Plan, subject to
adjustment as provided below in Section 13. Shares of Common Stock subject to the Plan may be newly issued shares or treasury
shares. If and to the extent that any option to purchase shares of Common Stock shall not be exercised for any reason, or if such
right to purchase shares shall terminate as provided herein, the shares that have not been so purchased hereunder shall again
become available for the purposes of the Plan, unless the Plan shall have been terminated.
4. Administration of the Plan.
(a) The Committee has been appointed by the Board to administer the Plan. The Committee shall have the authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to correct any defect or rectify any
omission in the Plan, or to reconcile any inconsistency in this Plan and any option to purchase shares granted hereunder, and to
make all other determinations necessary or advisable for the administration of the Plan. The Committee’s actions and
determinations with respect to the foregoing shall be final, conclusive and binding on all persons. The act or determination of a
majority of the members of the Committee shall be deemed to be the act or determination of the entire Committee.
(b) The Committee may, in its discretion, request advice or assistance, or employ such other persons as it deems necessary
or appropriate for the proper administration of the Plan, including, but not limited to employing a brokerage firm, bank or other
financial institution to assist in the purchase of shares, delivery of reports or other administrative aspects of the Plan.
5. Eligibility to Participate in the Plan.
Subject to limitations imposed by Section 423(b) of the Code, each Eligible Employee who is employed by the Company or a
Participating Subsidiary for 30 days prior to an Enrollment Date shall be eligible to participate in the Plan for the Offering Period
beginning on that Enrollment Date.
6. Election to Participate in the Plan.
(a) Each Eligible Employee may elect to participate in the Plan by completing an enrollment agreement in the form provided
by the Company and filing such enrollment agreement with the Company prior to the applicable Enrollment Date, unless the
Committee establishes another deadline for filing the enrollment agreement with respect to a given Offering Period.
(b) Unless a Participant withdraws from participation in the Plan as provided in Section 10 or authorizes a different payroll
deduction by filing a new enrollment agreement prior to the Enrollment Date of a succeeding Offering Period, a Participant who is
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participating in an Offering Period as of the Exercise Date of such Offering Period shall be deemed to have (i) elected to participate
in the immediately succeeding Offering Period and (ii) authorized the same payroll deduction percentage for such immediately
succeeding Offering Period as was in effect for such Participant immediately prior to such succeeding Offering Period.
7. Payroll Deductions.
(a) All Participant contributions to the Plan shall be made only by payroll deductions. Each time a Participant files the
enrollment agreement with respect to an Offering Period, the Participant shall authorize payroll deductions to be made during the
Offering Period in an amount from 1% to 10% (in whole percentages) of the Eligible Compensation that the Participant receives on
each payroll date during such Offering Period. Payroll deductions for a Participant shall commence on the first payroll date
following the Enrollment Date and shall end on the last payroll date in the Offering Period to which such authorization is
applicable, unless sooner terminated by the Participant as provided below in Section 10.
(b) All payroll deductions made for a Participant shall be deposited in the Company’s general corporate account and shall
be credited to the Participant’s account under the Plan. No interest shall accrue on or be credited with respect to the payroll
deductions of a Participant under the Plan. A Participant may not make any additional contributions into such account. All payroll
deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
(c) Except as provided in Section 10, a Participant may not change his contribution election during an Offering Period.
(d) Notwithstanding the foregoing provisions of this Section 7, no Participant may make payroll deductions during any
calendar year in excess of $21,250, or such other limit as may be established by the Committee, in its discretion.
8. Grant of Options.
(a) On the Enrollment Date of each Offering Period, subject to the limitations set forth in Sections 3 and 8(b) hereof, each
Eligible Employee shall be granted an option to purchase on the Exercise Date for such Offering Period a number of whole and, to
the extent permitted by the Committee, fractional shares of the Company’s Common Stock determined by dividing such Eligible
Employee’s payroll deductions accumulated during the Offering Period by the Exercise Price established for such Offering Period.
(b) Notwithstanding any provision of the Plan to the contrary, no Eligible Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing
5% or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company,
or (ii) which permits such Eligible Employee’s rights to purchase stock under all employee stock purchase plans of the Company
and its Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such
option is granted) for each calendar year in which such option is outstanding at any time.
9. Automatic Purchase.
Unless a Participant withdraws from the Plan as provided below in Section 10, the Participant’s option for the purchase of
shares will be exercised automatically on each Exercise Date for which an enrollment agreement has been filed, and the
maximum number of whole and, to the extent permitted by the Committee, fractional shares subject to the option will be
purchased for the Participant at the Exercise Price established for that Offering Period, as provided above in Section 8. Any
accumulated payroll deductions in excess of the amount applied to purchase shares on the Exercise Date shall be refunded to the
Participant as soon as administratively feasible after the Exercise Date, unless the Committee establishes otherwise.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all of the payroll deductions credited to the Participant’s account for a given Offering Period
by providing written notice to the Company no later than 45 days prior to the last day of such Offering Period. A Participant shall
not be permitted to make a partial withdrawal of the payroll deductions credited to his account. All of the Participant’s payroll
deductions credited to the Participant’s account will be paid to him promptly after receipt of the Participant’s notice of withdrawal,
the Participant’s participation in the Plan will be automatically terminated, and no further payroll deductions for the purchase of
shares hereunder will be made. Payroll deductions will not resume on behalf of a Participant who has withdrawn from the Plan,
unless written notice is delivered to the Company within the enrollment period preceding the commencement of a new Offering
Period directing the Company to resume payroll deductions.
(b) Upon termination of the Participant’s Continuous Employment prior to the Exercise Date of the Offering Period for any
reason, including retirement or death, the payroll deductions credited to the Participant’s account will be returned to the
Participant or, in the case of death, to the Participant’s estate, and the Participant’s options to purchase shares under the Plan
will be automatically terminated.
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(c)
In the event a Participant ceases to be an Eligible Employee during an Offering Period, the Participant will be deemed to
have elected to withdraw all payroll deductions credited to his account from the Plan. In such circumstance, the payroll
deductions credited to the Participant’s account will be returned to the Participant, and the Participant’s options to purchase
shares under the Plan will be terminated.
11. Transferability.
Options to purchase Common Stock granted under the Plan are not transferable, in any manner, by a Participant and are
exercisable only by the Participant.
12. Reports.
Individual notional accounts will be maintained for each Participant in the Plan. Following each Exercise Date, Participants
who have purchased shares under Section 9 may access a summary of their purchases in the manner determined by the
Committee.
13. Adjustments Upon Changes in Capitalization.
(a)
If the outstanding shares of Common Stock are increased or decreased, or are changed into or are exchanged for a
different number or kind of shares, as a result of one or more reorganizations, restructurings, recapitalizations, reclassifications,
stock splits, reverse stock splits, stock dividends or the like, upon authorization of the Committee, appropriate adjustments shall
be made in the number and/or kind of shares, and the per share purchase price thereof, which may be issued in the aggregate
and to any Participant upon exercise of options granted under the Plan.
(b)
In the event of the proposed dissolution or liquidation of the Company, each Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by the Committee. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each option
under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Committee determines, in the exercise of its sole discretion and in lieu of
such assumption or substitution, that the Participant shall have the right to exercise the option as to all of the optioned stock,
including shares as to which the option would not otherwise be exercisable. If the Committee makes an option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets, the Committee shall notify the Participant that the
option shall be fully exercisable for a stated period, which shall not be less than 10 days from the date of such notice, and the
option will terminate upon the expiration of such period.
(c)
In all cases, the Committee shall have full discretion to exercise any of the powers and authority provided under this
Section 13, and the Committee’s actions hereunder shall be final and binding on all Participants. No fractional shares of stock
shall be issued under the Plan pursuant to any adjustment authorized under the provisions of this Section 13.
14. Amendment of the Plan.
The Company may at any time, or from time to time, amend the Plan in any respect through action of the Board or, for any
amendment that does not require shareholder approval, through action of the Plan Sponsor Committee of the Waste
Management Employee Benefit Plans; provided, however, that the Plan may not be amended in any way that will cause rights
issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code or
any successor thereto, including, without limitation, shareholder approval, if required.
15. Termination of the Plan.
The Plan and all rights of Eligible Employees hereunder shall terminate:
(a) on the Exercise Date that Participants become entitled to purchase a number of shares greater than the number of
reserved shares remaining available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
In the event that the Plan terminates under circumstances described in Section 15(a) above, reserved shares remaining as of
the termination date shall be sold to Participants on a pro rata basis.
16. Notices.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to
have been duly given when received in the form specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof.
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2020 Proxy Statement
A-4
APPENDIX A
17. Shareholder Approval.
This amended and restated Plan shall be subject to approval by the shareholders of the Company within twelve months after
the date the amended and restated Plan is adopted by the Board of Directors.
18. Conditions Upon Issuance of Shares.
(a) The Plan, the grant and exercise of options to purchase shares of Common Stock under the Plan, and the Company’s
obligation to sell and deliver shares upon the exercise of options to purchase shares shall be subject to all applicable federal,
state and foreign laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required. Notwithstanding anything in the Plan to the contrary, share certificates shall not
be delivered to Participants until the later of (i) the date on which the applicable holding period to avoid a disqualifying disposition
(within the meaning of Code Section 421) expires, or (ii) the date that a Participant specifically requests a certificate for shares
purchased pursuant to the Plan.
(b) The Company may make such provisions, as it deems appropriate, for withholding by the Company pursuant to all
applicable tax laws of such amounts as the Company determines it is required to withhold in connection with the purchase or sale
by a Participant of any Common Stock acquired pursuant to the Plan. The Company may require a Participant to satisfy any
relevant tax requirements before authorizing any issuance of Common Stock to such Participant.
19. General Provisions.
(a) Notwithstanding any provision of the Plan to the contrary and in accordance with Section 423 of the Code, all Eligible
Employees who are granted options under the Plan shall have the same rights and privileges.
(b) Neither the Plan nor any compensation paid hereunder will confer on any Participant the right to continue as an
employee or in any other capacity.
(c) A Participant will become a stockholder with respect to the shares of Common Stock that are purchased pursuant to
options granted under the Plan only when the shares are issued to the Participant in accordance with the terms of the Plan. A
Participant will have no rights as a stockholder with respect to shares of Common Stock for which an election to participate in an
Offering Period has been made until such Participant becomes a stockholder as provided above.
(d) The Plan shall be binding on the Company and its successors and assigns.
(e) This Plan constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with
respect to the subject matter hereof.
(f) The Plan and all rights hereunder shall be subject to and interpreted in accordance with the laws of the State of Texas,
without reference to the principles of conflicts of laws, and to applicable Federal or other securities laws.
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2020 Proxy Statement
A-5
Form 10-K
s
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND 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
(State or other jurisdiction of
incorporation or organization)
1001 Fannin Street
Houston, Texas
(Address of principal executive offices)
73-1309529
(I.R.S. Employer
Identification No.)
77002
(Zip code)
Registrant’s telephone number, including area code:
(713) 512-6200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Trading Symbol
WM
Name of Each Exchange on Which Registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes (cid:2) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:3) No (cid:2)
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 (cid:2) No (cid:3)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:2) No (cid:3)
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
Non-accelerated filer
(cid:2)
(cid:3)
Accelerated filer (cid:3)
Smaller reporting company (cid:3)
Emerging growth company (cid:3)
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. (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:3) No (cid:2)(cid:4)
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2019 was approximately $48.8 billion. The aggregate market
value was computed by using the closing price of the common stock as of that date on the New York Stock Exchange (“NYSE”). (For purposes of calculating this amount
only, all directors and executive officers of the registrant have been treated as affiliates.)
The number of shares of Common Stock, $0.01 par value, of the registrant outstanding as of February 7, 2020 was 424,708,758 (excluding treasury shares of
205,573,703).
DOCUMENTS INCORPORATED BY REFERENCE
Document
Proxy Statement for the
2020 Annual Meeting of Stockholders
Incorporated as to
Part III
TABLE OF CONTENTS
PART I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Page
3
15
29
29
30
30
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
31
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
32
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . .
59
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
61
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . 126
Item 9.
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Item 11.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . 127
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . 127
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Item 14.
Item 15.
Item 16.
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
PART IV
2
Item 1. Business.
General
PART I
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.
WM was incorporated in Oklahoma in 1987 under the name “USA Waste Services, Inc.” and was reincorporated as
a Delaware company in 1995. In a 1998 merger, the Illinois-based waste services company formerly known as Waste
Management, Inc. became a wholly-owned subsidiary of WM and changed its name to Waste Management Holdings, Inc.
(“WM Holdings”). At the same time, our parent holding company changed its name from USA Waste Services to Waste
Management, Inc. Like WM, WM Holdings is a holding company and all operations are conducted by subsidiaries. For
details on the financial position, results of operations and cash flows of WM, WM Holdings and their subsidiaries, see
Note 22 to the Consolidated Financial Statements.
Our principal executive offices are located at 1001 Fannin Street, Houston, Texas 77002. Our telephone number is
(713) 512-6200. Our website address is www.wm.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K are all available, free of charge, on our website as soon as practicable after we file the
reports with the SEC. Our stock is traded on the New York Stock Exchange under the symbol “WM.”
We are North America’s leading provider of comprehensive waste management environmental services. 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.
Our “Solid Waste” business is operated and managed locally by our subsidiaries that focus on distinct geographic areas
and provide collection, transfer, disposal, and recycling and resource recovery services. Through our subsidiaries, we are
also a leading developer, operator and owner of landfill gas-to-energy facilities in the United States (“U.S.”). During 2019,
our largest customer represented less than 2% of annual revenues. We employed approximately 44,900 people as of
December 31, 2019.
We own or operate 249 landfill sites, which is the largest network of landfills in North America. In order to make
disposal more practical for larger urban markets, where the distance to landfills is typically farther, we manage 302 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.
We are a leading recycler in North America, handling materials that include paper, cardboard, glass, plastic and metal. We
provide cost-efficient, environmentally sound recycling programs for municipalities, businesses and households across the
U.S. and Canada as well as other services that supplement our Solid Waste business.
Our Company’s goals are targeted at serving our customers, our employees, the environment, the communities in
which we work and our stockholders. Increasingly, customers want more of their waste materials recovered while waste
streams are becoming more complex, and our aim is to address the current needs, while anticipating the expanding and
evolving needs of our customers.
We believe we are uniquely equipped to meet the challenges of the changing waste industry and our customers’ waste
management needs, both today and as we work together to envision and create a more sustainable future. As the waste
industry leader, we have the expertise necessary to collect and handle our customers’ waste efficiently and responsibly by
delivering environmental performance — maximizing resource value, while minimizing environmental impact — so that
both our economy and our environment can thrive.
3
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 are enabling 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, 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 that execution of our strategy will deliver shareholder value and leadership in a dynamic industry. In
addition, we intend to continue to return value to our stockholders through dividend payments and our common stock
repurchase program. In December 2019, we announced that our Board of Directors expects to increase the quarterly
dividend from $0.5125 to $0.545 per share for dividends declared in 2020, which is a 6.3% increase from the quarterly
dividends we declared in 2019. This is an indication of our ability to generate strong and consistent cash flows and marks
the 17th consecutive year of dividend increases. All quarterly dividends will be declared at the discretion of our Board of
Directors and depend on various factors, including our net earnings, financial condition, cash required for future business
plans, growth and acquisitions and other factors the Board of Directors may deem relevant.
Operations
General
We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our
17 Areas. See Note 20 to the Consolidated Financial Statements for additional information about our reportable segments.
We also provide additional services that are not managed through our Solid Waste business, as described below. These
operations are presented in this report as “Other.” The services we currently provide include collection, landfill (solid and
hazardous waste landfills), transfer, recycling and resource recovery and other services, as described below.
Collection. Our commitment to customers begins with a vast waste collection network. Collection involves picking
up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery
facility (“MRF”) or disposal site. We generally provide collection services under one of two types of arrangements:
•(cid:2) For commercial and industrial collection services, typically we have a three-year service agreement. The fees
under the agreements are influenced by factors such as collection frequency, type of collection equipment we
furnish, type and volume or weight of the waste collected, distance to the disposal facility, labor costs, cost of
disposal and general market factors. As part of the service, we provide steel containers to most customers to store
their solid waste between pick-up dates. Containers vary in size and type according to the needs of our customers
and the restrictions of their communities. Many are designed to be lifted mechanically and either emptied into a
truck’s compaction hopper or directly into a disposal site. By using these containers, we can service most of our
commercial and industrial customers with trucks operated by only one employee.
•(cid:2) For most residential collection services, we have a contract with, or a franchise granted by, a municipality,
homeowners’ association or some other regional authority that gives us the exclusive right to service all or a
portion of the homes in an area. These contracts or franchises are typically for periods of three to 10 years. We
also provide services under individual monthly subscriptions directly to households. The fees for residential
collection are either paid by the municipality or authority from their tax revenues or service charges, or are paid
directly by the residents receiving the service.
Landfill. Landfills are the main depositories for solid waste in North America. As of December 31, 2019, we owned
or operated 244 solid waste landfills and five secure hazardous waste landfills, which represents the largest network of
4
landfills in North America. Solid waste landfills are constructed and operated on land with engineering safeguards that
limit the possibility of water and air pollution, and are operated under procedures prescribed by regulation. A landfill must
meet federal, state or provincial, and local regulations during its design, construction, operation and closure. The operation
and closure activities of a solid waste landfill include excavation, construction of liners, continuous spreading and
compacting of waste, covering of waste with earth or other acceptable material and constructing final capping of the
landfill. These operations are carefully planned to maintain environmentally safe conditions and to maximize the use of
the airspace.
All solid waste management companies must have access to a disposal facility, such as a solid waste landfill. The
significant capital requirements of developing and operating a landfill serve as a barrier to landfill ownership and, thus,
third-party haulers often dispose of waste at our landfills. It is usually preferable for our collection operations to use
disposal facilities that we own or operate, a practice we refer to as internalization, rather than using third-party disposal
facilities. Internalization generally allows us to realize higher consolidated margins and stronger operating cash flows. The
fees charged at disposal facilities, which are referred to as tipping fees, are based on several factors, including competition
and the type and weight or volume of solid waste deposited.
Under environmental laws, the federal government (or states with delegated authority) must issue permits for all
hazardous waste landfills. All of our hazardous waste landfills have obtained the required permits, although some can
accept only certain types of hazardous waste. These landfills must also comply with specialized operating standards. Only
hazardous waste in a stable, solid form, which meets regulatory requirements, can be deposited in our secure disposal cells.
In some cases, hazardous waste can be treated before disposal. Generally, these treatments involve the separation or
removal of solid materials from liquids and chemical treatments that transform waste into inert materials that are no longer
hazardous. Our hazardous waste landfills are sited, constructed and operated in a manner designed to provide long-term
containment of waste. We also operate a hazardous waste facility at which we isolate treated hazardous waste in liquid
form by injection into deep wells that have been drilled in certain acceptable geologic formations far below the base of
fresh water to a point that is safely separated by other substantial geological confining layers.
Transfer. As of December 31, 2019, we owned or operated 302 transfer stations in North America. We deposit waste
at these stations, as do other waste haulers. The solid waste is then consolidated and compacted to reduce the volume and
increase the density of the waste and transported by transfer trucks or by rail to disposal sites.
Access to transfer stations is critical to haulers who collect waste in areas not in close proximity to disposal facilities.
Fees charged to third parties at transfer stations are usually based on the type and volume or weight of the waste deposited
at the transfer station, the distance to the disposal site, market rates for disposal costs and other general market factors.
The utilization of our transfer stations by our own collection operations improves internalization by allowing us to
retain fees that we would otherwise pay to third parties for the disposal of the waste we collect. It enables us to manage
costs associated with waste disposal because (i) transfer trucks, railcars or rail containers have larger capacities than
collection trucks, allowing us to deliver more waste to the disposal facility in each trip; (ii) waste is accumulated and
compacted at transfer stations that are strategically located to increase the efficiency of our network of operations and
(iii) we can retain the volume by managing the transfer of the waste to one of our own disposal sites.
The transfer stations that we operate but do not own generally are operated through lease agreements under which we
lease property from third parties. There are some instances where transfer stations are operated under contract, generally
for municipalities. In most cases, we own the permits and will be responsible for any regulatory requirements relating to
the operation and closure of the transfer station.
Recycling. Our recycling operations provide communities and businesses with an alternative to traditional landfill
disposal and support our strategic goals to extract more value from the materials we manage. We were the first major solid
waste company to focus on residential single-stream recycling, which allows customers to mix recyclable paper, plastic
and glass in one bin. Residential single-stream programs have greatly increased the recycling volumes. Single-stream
recycling is possible through the use of various mechanized screens and optical sorting technologies. We have also been
advancing the single-stream recycling programs for commercial applications. Recycling involves the separation of
5
reusable materials from the waste stream for processing and resale or other disposition. Our recycling operations include
the following:
Materials processing — Through our collection operations, we collect recyclable materials from residential,
commercial and industrial customers and direct these materials to one of our MRFs for processing. As of
December 31, 2019, we operated 103 MRFs where paper, cardboard, metals, plastics, glass, construction and
demolition materials and other recycling commodities are recovered for resale or redirected for other purposes.
Recycling commodities — We market and resell recycling commodities globally. We manage the marketing of
recycling commodities that are processed in our facilities by maintaining comprehensive service centers that
continuously analyze market prices, logistics, market demands and product quality.
Recycling brokerage services — We also provide recycling brokerage services, which involve managing the
marketing of recyclable materials for third parties. The experience of our recycling operations in managing recycling
commodities for our own operations gives us the expertise needed to effectively manage volumes for third parties.
Utilizing the resources and knowledge of our recycling operations’ service centers, we can assist customers in
marketing and selling their recycling commodities with minimal capital requirements.
Some of the recyclable materials processed in our MRFs are purchased from various sources, including third parties
and our own operations. The price we pay for recyclable materials is often referred to as a “rebate.” In some cases, rebates
are based on fixed contractual rates or on defined minimum per-ton rates but are generally based upon the price we receive
for sales of processed goods, market conditions and transportation costs. As a result, changes in commodity prices for
recycled materials also significantly affect the rebates we pay to our suppliers and depending on the key terms of the
agreement are recorded as either operating expenses or a reduction in operating revenues within our Consolidated
Statements of Operations, subsequent to the adoption of Accounting Standards Update (“ASU”) 2014-09 on
January 1, 2018. In recent years, we have been focused on revising our rebate structures to ensure that we cover our cost
of handling and processing the materials and generate an acceptable margin on the materials we process and sell.
Other. Other services we provide include the following:
Although many waste management services such as collection and disposal are local services, our strategic accounts
organization, which is managed by our Strategic Business Solutions (“WMSBS”) organization, works with customers
whose locations span the U.S. and Canada. Our strategic accounts program provides centralized customer service, billing
and management of accounts to streamline the administration of customers multiple locations’ waste management needs.
Our Energy and Environmental Services (“EES”) organization offers our customers in all Areas a variety of services
in collaboration with our Area and strategic accounts programs, including (i) construction and remediation services;
(ii) services associated with the disposal of fly ash, residue generated from the combustion of coal and other fuel stocks;
(iii) in-plant services, where our employees work full-time inside our customers’ facilities to provide full-service waste
management solutions and consulting services; this service is managed through our EES organization but reflected
principally in our collection line of business and (iv) specialized disposal services for oil and gas exploration and
production operations; revenues for this service are also reflected principally in our collection line of business. Our
vertically integrated waste management operations enable us to provide customers with full management of their waste.
The breadth of our service offerings and the familiarity we have with waste management practices gives us the unique
ability to assist customers in minimizing the amount of waste they generate, identifying recycling opportunities,
determining the most efficient means available for waste collection and disposal and ensuring that disposal is achieved in
a manner that is both reflective of the current regulatory environment and environmentally friendly.
We develop, operate and promote projects for the beneficial use of landfill gas through our WM Renewable Energy
organization. Landfill gas is produced naturally as waste decomposes in a landfill. The methane component of the landfill
gas is a readily available, renewable energy source that can be gathered and used beneficially as an alternative to fossil
fuel. The U.S. Environmental Protection Agency (“EPA”) endorses landfill gas as a renewable energy resource, in the
same category as wind, solar and geothermal resources. As of December 31, 2019, we had 124 landfill gas beneficial use
6
projects producing commercial quantities of methane gas at owned or operated landfills. For 97 of these projects, the
processed gas is used to fuel electricity generators. The electricity is then sold to public utilities, municipal utilities or
power cooperatives. For 15 of these projects, the landfill gas is processed to pipeline-quality natural gas and then sold to
natural gas suppliers. For 12 of these projects, the gas is used at the landfill or delivered by pipeline to industrial customers
as a direct substitute for fossil fuels in industrial processes.
We continue to invest in businesses and technologies that are designed to offer services and solutions ancillary or
supplementary to our current operations. These investments include joint ventures, acquisitions and partial ownership
interests. The solutions and services include the collection of project waste, including construction debris and household
or yard waste, through our Bagster® program; the development, operation and marketing of plasma gasification facilities;
operation of a landfill gas-to-liquid natural gas plant; and organic waste-to-fuel conversion technology. We also have
expanded service offerings and solutions including fluorescent bulb and universal waste mail-back through our
LampTracker® program; portable restroom servicing under the name Port-o-Let®; and street and parking lot sweeping
services.
Competition
We encounter intense competition from governmental, quasi-governmental and private sources in all aspects of our
operations. We principally compete with large national waste management companies, counties and municipalities that
maintain their own waste collection and disposal operations and regional and local companies of varying sizes and financial
resources. The industry also includes companies that specialize in certain discrete areas of waste management, operators
of alternative disposal facilities, companies that seek to use parts of the waste stream as feedstock for renewable energy
and other by-products, and waste brokers that rely upon haulers in local markets to address customer needs. In recent years,
the industry has seen some additional consolidation, though the industry remains intensely competitive.
Operating costs, disposal costs and collection fees vary widely throughout the areas in which we operate. The prices
that we charge are determined locally, and typically vary by volume and weight, type of waste collected, treatment
requirements, risk of handling or disposal, frequency of collections, distance to final disposal sites, the availability of
airspace within the geographic region, labor costs and amount and type of equipment furnished to the customer. We face
intense competition in our Solid Waste business based on pricing and quality of service. We have also begun competing
for business based on breadth of service offerings. As companies, individuals and communities look for ways to be more
sustainable, we are promoting our comprehensive services that go beyond our core business of collecting and disposing of
waste in order to meet their needs.
Seasonal Trends
Our operating revenues tend to be somewhat higher in summer months, primarily due to higher construction and
demolition waste volumes. The volumes of industrial and residential waste in certain regions where we operate also tend
to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect
these seasonal trends.
Service disruptions caused by severe storms, extended periods of inclement weather or climate extremes resulting
from climate change can significantly affect the operating results of the Areas impacted. 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 special
projects can boost revenues through additional work for a limited time, due to significant start-up costs and other factors,
such revenue can generate earnings at comparatively lower margins.
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Employees
As of December 31, 2019, we had approximately 44,900 full-time employees, of which approximately 8,600 were
employed in administrative and sales positions and the balance in operations. Approximately 8,400 of our employees are
covered by collective bargaining agreements.
Financial Assurance and Insurance Obligations
Financial Assurance
Municipal and governmental waste service contracts generally require contracting parties to demonstrate financial
responsibility for their obligations under the contract. Financial assurance is also a requirement for (i) obtaining or
retaining disposal site or transfer station operating permits; (ii) supporting certain variable-rate tax-exempt debt and
(iii) estimated final capping, closure, post-closure and environmental remedial obligations at many of our landfills. We
establish financial assurance using surety bonds, letters of credit, insurance policies, trust and escrow agreements and
financial guarantees. The type of assurance used is based on several factors, most importantly: the jurisdiction, contractual
requirements, market factors and availability of credit capacity.
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. Letters of credit generally are
supported by our long-term U.S. and Canadian revolving credit facility (“$3.5 billion revolving credit facility”) and other
credit facilities established for that purpose.
Insurance
We carry a broad range of insurance coverages, including health and welfare, general liability, automobile liability,
workers’ compensation, real and personal property, directors’ and officers’ liability, pollution legal 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. We use a wholly-owned insurance captive to insure the
deductibles for our general liability, automobile liability and workers’ compensation claims programs. As of
December 31, 2019, both our commercial General Liability Insurance Policy and our workers’ compensation insurance
program carried self-insurance exposures of up to $5 million per incident. As of December 31, 2019, our automobile
liability insurance program included a per-incident deductible of up to $10 million. 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. Our estimated insurance liabilities as of December 31, 2019 are summarized in Note 11 to the
Consolidated Financial Statements.
Regulation
Our business is subject to extensive and evolving federal, state or provincial and local environmental, health, safety
and transportation laws and regulations. These laws and regulations are administered by the EPA, Environment Canada,
and various other federal, state, provincial and local environmental, zoning, transportation, land use, health and safety
agencies in the U.S. and Canada. Many of these agencies regularly examine our operations to monitor compliance with
these laws and regulations and have the power to enforce compliance, obtain injunctions or impose civil or criminal
penalties in case of violations.
Because the primary mission of our business is to collect and manage solid waste in an environmentally sound manner,
a significant amount of our capital expenditures is related, either directly or indirectly, to environmental protection
measures, including compliance with federal, state, provincial and local rules. There are costs associated with siting,
design, permitting, operations, monitoring, site maintenance, corrective actions, financial assurance, and facility closure
and post-closure obligations. With acquisition, development or expansion of a waste management or disposal facility or
transfer station, we must often spend considerable time, effort and money to obtain or maintain required permits and
8
approvals. There are no assurances that we will be able to obtain or maintain required governmental approvals. Once
obtained, operating permits are subject to renewal, modification, suspension or revocation by the issuing agency.
Compliance with current regulations and future requirements could require us to make significant capital and operating
expenditures. However, most of these expenditures are made in the normal course of business and do not place us at any
competitive disadvantage.
The regulatory environment in which we operate is influenced by changes in leadership at the federal, state, provincial
and local levels. The policies set forth under the current U.S. administration, for example, have included substantial
changes to foreign trade policy and generally have been in favor of reducing regulation, including environmental
regulation. We cannot predict what impact the current or future administrations will have on future regulations impacting
our industry, especially given the number of rules currently in litigation, nor can we predict the timing of any such changes.
Reduction of regulation may have a favorable impact on our operating costs, but the extensive environmental regulation
applicable to landfills is a barrier to rapid entry that benefits our Company. Moreover, the risk reduction provided by
stringent regulation is valuable to our customers and the communities we serve.
The primary U.S. federal statutes affecting our business are summarized below:
•(cid:2) The Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, regulates handling, transporting
and disposing of hazardous and non-hazardous waste and delegates authority to states to develop programs to
ensure the safe disposal of solid waste. Landfills are regulated under Subtitle D of RCRA, which sets forth
minimum federal performance and design criteria for solid waste landfills, and Subtitle C of RCRA, which
establishes a federal program to manage hazardous wastes from cradle to grave. These regulations are typically
implemented by the states, although states can impose requirements that are more stringent than the federal
standards. We incur costs in complying with these standards in the ordinary course of our operations.
•(cid:2) The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as
amended, which is also known as Superfund, provides for federal authority to respond directly to releases or
threatened releases of hazardous substances into the environment that have created actual or potential
environmental hazards. CERCLA’s primary means for addressing such releases is to impose strict liability for
cleanup of disposal sites upon current and former site owners and operators, generators of the hazardous
substances at the site and transporters who selected the disposal site and transported substances thereto. Liability
under CERCLA is not dependent on the intentional release of hazardous substances; it can be based upon the
release or threatened release of hazardous substances, even resulting from lawful, unintentional and attentive
action, as the term is defined by CERCLA and other applicable statutes and regulations. The EPA may issue
orders requiring responsible parties to perform response actions at sites, or the EPA may seek recovery of funds
expended or to be expended in the future at sites. Liability may include contribution for cleanup costs incurred
by a defendant in a CERCLA civil action or by an entity that has previously resolved its liability to federal or
state regulators in an administrative or judicially-approved settlement. Liability under CERCLA could also
include obligations to a potentially responsible party (“PRP”) that voluntarily expends site clean-up costs. Further,
liability for damage to publicly-owned natural resources may also be imposed. We are subject to potential liability
under CERCLA as an owner or operator of facilities at which hazardous substances have been disposed and as a
generator or transporter of hazardous substances disposed of at other locations.
•(cid:2) The Federal Water Pollution Control Act of 1972, as amended, known as the Clean Water Act, regulates the
discharge of pollutants into streams, rivers, groundwater, or other surface waters from a variety of sources,
including solid and hazardous waste disposal sites. If our operations discharge any pollutants into surface waters,
the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring,
and, under certain circumstances, reduce the quantity of pollutants in those discharges. In 1990, the EPA issued
additional standards for management of storm water run-off that require landfills and other waste-handling
facilities to obtain storm water discharge permits. Also, if a landfill or other facility discharges wastewater
through a sewage system to a publicly-owned treatment works, the facility must comply with discharge limits
imposed by the treatment works. Further, before the development or expansion of a landfill can alter or affect
“wetlands,” a permit may have to be obtained providing for mitigation or replacement wetlands. The Clean Water
Act provides for civil, criminal and administrative penalties for violations of its provisions.
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•(cid:2) The Clean Air Act of 1970, as amended, provides for federal, state and local regulation of the emission of air
pollutants. Certain of our operations are subject to the requirements of the Clean Air Act, including large
municipal solid waste landfills and landfill gas-to-energy facilities. In 1996, the EPA issued new source
performance standards (“NSPS”) and emission guidelines (“EG”) controlling landfill gases from new and existing
large landfills. In January 2003, the EPA issued Maximum Achievable Control Technology (“MACT”) standards
for municipal solid waste landfills subject to the NSPS and EG. In August 2016, the EPA issued two new rules
that serve to update the 1996 NSPS and EG regulatory requirements. These NSPS, EG and MACT regulations
impose performance standards to minimize air emissions from large municipal solid waste landfills, subject most
of these landfills to certain operating permit requirements under Title V of the Clean Air Act and, in many
instances, require installation of landfill gas collection and control systems to control emissions or to treat and
utilize landfill gas on- or off-site.
•(cid:2) The Occupational Safety and Health Act of 1970 (“OSHA”), as amended, establishes certain employer
responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious
injury, compliance with standards promulgated by the Occupational Safety and Health Administration, and
various reporting and record keeping obligations as well as disclosure and procedural requirements. Various
standards for notices of hazards, safety in excavation and demolition work and the handling of asbestos, may
apply to our operations. The Department of Transportation and OSHA, along with other federal agencies, have
jurisdiction over certain aspects of hazardous materials and hazardous waste, including safety, movement and
disposal. Various state and local agencies with jurisdiction over disposal of hazardous waste may seek to regulate
movement of hazardous materials in areas not otherwise preempted by federal law.
We are also actively monitoring the following recent regulatory developments affecting our business:
•(cid:2) With regard to regulatory developments under RCRA, the EPA published an advance notice of proposed
rulemaking in December 2018 to consider whether to propose revisions to the municipal solid waste landfill
criteria to support advances in liquids management. Although the notice does not reopen any existing regulations,
we have been working closely with the EPA to ensure that the agency is aware of how future regulation could
impact our industry. In July 2019, the EPA announced increases in the user fees accompanying the system that
the agency uses to track hazardous waste shipments electronically. Later in 2019, the U.S. Department of Energy
finalized a rule setting forth the fee that the agency will charge for the long-term storage and management of
elemental mercury. Neither announcement is anticipated to adversely impact the Company’s hazardous business
units, and we are working closely with both agencies to minimize risks more broadly to our industry.
•(cid:2) With regard to regulatory requirements pertaining to greenhouse gas emissions, since 2014, decisions from the
U.S Supreme Court and U.S. Court of Appeals for the D.C Circuit, as well as EPA policy memoranda, have
significantly narrowed the applicability and scope of EPA permitting requirements for GHGs from stationary
sources, including with respect to biogenic carbon dioxide (“CO2”) permitting. In 2016, the EPA proposed
revisions to the Prevention of Significant Deterioration (“PSD”) and Title V Greenhouse Gas (“GHG”) permitting
regulations establishing a significant emissions rate (“SER”) threshold, below which sources would not be
required to implement additional control technologies for their GHG emissions. This SER threshold should
prevent most of our operational changes, such as landfill expansions and beneficial gas recovery projects, from
being subject to PSD or Title V permit requirements due to our GHG emissions – assuming the EPA classifies
biogenic CO2 emissions from municipal solid waste and landfill gas as carbon neutral. The EPA has not yet
finalized this rulemaking. The EPA also has not yet finalized its policy for addressing biogenic CO2 emissions
from waste management; however, the EPA’s independent Science Advisory Board has recommended it treat
waste-derived CO2 emissions as carbon neutral. These judicial and regulatory actions have reduced, and are
expected to continue to reduce, the potential impact of the PSD and Title V GHG Tailoring Rule on our air
permits, compliance and operating requirements.
Potential climate change, GHG regulatory, and corporate sustainability initiatives have influenced our business
strategy to provide low-carbon services to our customers, and we increasingly view our ability to offer lower
carbon services as a key component of our business growth. We continue to anticipate the needs of our customers,
which include investing in and developing ever-more-advanced recycling and reuse technologies. If the U.S. were
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to impose a carbon tax or other form of GHG regulation increasing demand for low-carbon service offerings in
the future, the services we are developing will be increasingly valuable.
•(cid:2) We continue to monitor periodic regulatory actions to increase the stringency of certain National Ambient Air
Quality Standards (“NAAQS”) which could affect the cost, timeliness and availability of air permits for new and
modified large municipal solid waste landfills and landfill gas-to-energy facilities. While we cannot predict the
ultimate outcome of potential revisions to NAAQS, we do not believe that the such requirements will have a
material adverse impact on our business as a whole.
•(cid:2)
•(cid:2)
•(cid:2)
In December 2014, the EPA issued a final rule regulating the disposal and beneficial use of coal combustion
residuals (“CCR”). This codification of the CCR rule provides utilities with a stable regulatory regime and
encourages beneficial use of CCR in encapsulated uses (e.g., used in cement or wallboard), and use according to
established industry standards (e.g., application of sludge for agricultural enrichment). The EPA also deemed
disposal and beneficial use of CCR at permitted municipal solid waste landfills exempt from the new regulations
because the RCRA Subtitle D standards applicable at municipal solid waste landfills provide at least equivalent
protection. These standards are consistent with our approach to handling CCR at our sites currently, and the new
standards have provided a growth opportunity for the Company. States may impose standards more stringent than
the federal program, and under the 2016 Water Infrastructure Improvements for the Nation Act, may receive
approval to run permitting programs for CCR in their states. In 2018, the U.S. Court of Appeals for the D.C
Circuit vacated significant portions of the 2014 final rule and remanded the rule to the EPA for further revision.
Between August and December of 2019, the EPA published three proposed rules aimed at providing utilities with
some flexibility in closing or retrofitting unlined storage ponds and in regulating onsite storage of CCR for
beneficial reuse. The Company will continue to monitor these rules to evaluate opportunities to provide CCR
disposal services.
In May 2016, the EPA established lifetime health advisories for certain per- and polyfluoroalkyl substances
(“PFAS”), a group of man-made chemicals that have been manufactured and used globally since the 1940s in
products such as textiles, fire suppressants, cookware, packaging and plastics. PFAS are typically very persistent
in the environment and can be found in water, soil and air. Citing concerns about potential adverse human health
effects from exposure to PFAS, the EPA announced its “PFAS Action Plan” in February 2019 and has taken
various actions to address PFAS contamination. Meanwhile, an increasing number of states have enacted new
drinking water, surface water and/or groundwater limits for various PFAS, which has led to a patchwork of PFAS
standards across the U.S. The EPA has stated that it will increase its regulatory oversight of PFAS in 2020, with
proposals anticipated that would establish drinking water standards, expanded authority for PFAS remediation,
chemical release reporting obligations, and guidance on PFAS disposal. Compliance with new and proposed
PFAS standards is anticipated to result in additional expense to the Company, but such standards are also
anticipated to present potential business opportunities in the area of PFAS management, treatment and disposal.
In August 2016, the EPA published two rules to update the 1996 standards with new requirements for landfill gas
control and monitoring at both new municipal solid waste landfills (constructed or modified after July 17, 2014)
as well as existing landfills (operating after November 8, 1987, and not modified after July 17, 2014). Working
with our trade associations and other landfill owners and operators, we identified significant legal, technical and
implementation concerns with the rules and together filed a judicial appeal of the rules while also filing
administrative petitions asking that the EPA stay the rules and initiate a rulemaking process. We also alerted the
EPA that its August 2016 rulemakings led to an inconsistent regulatory structure in which six separate
overlapping and inconsistent sets of work practices now govern the disposal industry. In May 2017, the EPA
granted our industry’s administrative petitions for reconsideration and rulemaking, signaling its intent to
reconsider its 2016 rulemakings. However, the agency continues to move forward with two additional rulemaking
packages (a federal plan to implement the 2016 rule for existing landfills and revisions to the existing MACT
rule) that could lead to further regulatory confusion. We cannot predict the outcome of any of these ongoing
rulemaking processes; however, we do not believe any such regulatory changes will have a material adverse
impact on our business as a whole.
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State, Provincial and Local Regulations
There are also various state or provincial and local regulations that affect our operations. Each state and province in
which we operate has its own laws and regulations governing solid waste disposal, water and air pollution, and, in most
cases, releases and cleanup of hazardous substances and liabilities for such matters. States and provinces have also adopted
regulations governing the design, operation, maintenance and closure of landfills and transfer stations. Some counties,
municipalities and other local governments have adopted similar laws and regulations. Our facilities and operations are
likely to be subject to these types of requirements.
Our landfill operations are affected by the increasing preference for alternatives to landfill disposal. Many state and
local governments mandate recycling and waste reduction at the source and prohibit the disposal of certain types of waste,
such as yard waste, food waste and electronics at landfills. The number of state and local governments with recycling
requirements and disposal bans continues to grow, while the logistics and economics of recycling the items remain
challenging.
Various states have enacted, or are considering enacting, laws that restrict the disposal within the state of solid waste
generated outside the state. While laws that overtly discriminate against out-of-state waste have been found to be
unconstitutional, some laws that are less overtly discriminatory have been upheld in court. From time to time, the U.S.
Congress has considered legislation authorizing states to adopt regulations, restrictions, or taxes on the importation of out-
of-state or out-of-jurisdiction waste. Additionally, several state and local governments have enacted “flow control”
regulations, which attempt to require that all waste generated within the state or local jurisdiction be deposited at specific
sites. In 1994, the U.S. Supreme Court ruled that a flow control ordinance that gave preference to a local facility that was
privately owned was unconstitutional, but in 2007, the Court ruled that an ordinance directing waste to a facility owned
by the local government was constitutional. The U.S. Congress’ adoption of legislation allowing restrictions on interstate
transportation of out-of-state or out-of-jurisdiction waste or certain types of flow control, or courts’ interpretations of
interstate waste and flow control legislation, could adversely affect our solid and hazardous waste management services.
Additionally, regulations establishing extended producer responsibility (“EPR”) are being considered or implemented
in many places around the world, including in the U.S. and Canada. EPR regulations are designed to place either partial
or total responsibility on producers to fund the post-use life cycle of the products they create. Along with the funding
responsibility, producers may be required to undertake additional responsibilities, such as taking over management of local
recycling programs by taking back their products from end users or managing the collection operations and recycling
processing infrastructure. There is no federal law establishing EPR in the U.S. or Canada; however, state, provincial and
local governments could take, and in some cases have taken, steps to implement EPR regulations. If wide-ranging EPR
regulations were adopted, they could have a fundamental impact on the waste, recycling and other streams we manage and
how we operate our business, including contract terms and pricing.
Many states, provinces and local jurisdictions have enacted “fitness” laws that allow the agencies that have jurisdiction
over waste services contracts or permits to deny or revoke these contracts or permits based on the applicant’s or permit
holder’s compliance history. Some states, provinces and local jurisdictions go further and consider the compliance history
of the parent, subsidiaries or affiliated companies, in addition to the applicant or permit holder. These laws authorize the
agencies to make determinations of an applicant’s or permit holder’s fitness to be awarded a contract to operate, and to
deny or revoke a contract or permit because of unfitness, unless there is a showing that the applicant or permit holder has
been rehabilitated through the adoption of various operating policies and procedures put in place to assure future
compliance with applicable laws and regulations. While fitness laws can present potential increased costs and barriers to
entry into market areas, these laws have not, and are not expected to have a material adverse impact on our business as a
whole.
Recycling; Foreign Import and Export Regulations and Material Restrictions
Enforcement or implementation of foreign and domestic regulations can affect our ability to export products. A
significant portion of the fiber that we market has historically been shipped to export markets across the globe, particularly
China. In recent years, the Chinese government has announced bans on certain materials and begun to enforce extremely
12
restrictive quality and other requirements that have significantly reduced China’s import of recyclables. The Chinese
government has also limited the flow of material into China by restricting the issuance of required import licenses, and the
restriction on import licenses is expected to constrict further in 2020. In addition, changes to foreign trade policy and tariffs
imposed by the current U.S. administration have resulted in China imposing new tariffs on the import of recyclables. It is
currently anticipated that China will ban the import of recyclables completely in 2021. Many other markets, both domestic
and foreign, have tightened their quality expectations and limited or restricted the import of certain recyclables as well.
Such trade restrictions and tariffs have disrupted the global trade of recyclables, particularly fiber, creating excess
supply and decreasing recyclable commodity prices. The heightened quality requirements have been difficult for the
industry to achieve and have driven up operating costs. In particular, single-stream MRFs process a wide range of
commingled materials and tend to receive a higher percentage of non-recyclables, which results in increased processing
and residual disposal costs to achieve quality standards. As recyclable commodity prices have fallen and operating costs
have increased, recyclers are seeking to pass cost increases through to customers. The resulting price increase for recycling
services in communities and at businesses in the U.S. has resulted in some customers reducing or eliminating their
recycling service. Industry trade organizations and government agencies are engaged in discussions to mitigate long-term
impacts to recycling programs and the industry as a whole.
For the past several years, we have been working with stakeholders to educate the public on the need to recycle
properly. We are investing time and labor and working with customers to help improve quality and have seen improvement
in the quality of material that we receive at our facilities. We have continued our focus on developing a sustainable
recycling business model that meets customers’ environmental needs by passing through the increasing cost of processing
and higher contamination rates, and these efforts had a positive impact on the operating results for our recycling business
in 2019.
With a heightened awareness of the global problems caused by plastic waste in the environment, an increasing number
of cities across the country have passed ordinances banning certain types of plastics from sale or use. Over 800 pieces of
legislation, approximately 50% of which are bans on plastic bags, have been introduced in the U.S. regulating plastics:
660 passed, including 585 city ordinances. Others include bans on the sale or use of plastic straws, polystyrene plastic and
single use packaging. These bans have increased pressure by manufacturers on our recycling facilities to accept a broader
array of materials in curbside recycling programs to alleviate public pressures to ban the sale of those materials. However,
with no viable end markets for recycling these materials, we and other recyclers are working to educate and remind
customers of the need for end market demand and economic viability to support sustainable recycling programs. With
increased focus on responsible management of plastics, we have taken a proactive approach to collaborate with buyers to
ensure environmental sustainability goals are prioritized in managing the product we sell.
Regulation of Oil and Gas Exploration, Production and Disposal
Our EES organization provides specialized environmental management and disposal services for fluids used and
wastes generated by customers engaged in oil and gas exploration and production, and these disposal services include use
of underground injection wells. There is heightened federal regulatory focus on emissions of methane that occur during
drilling and transportation of natural gas, as well as state attention to protective disposal of drilling residuals. There also
remains heightened attention from the public, some states and the EPA to the alleged potential for hydraulic fracturing that
occurs during drilling to impact drinking water supplies. Increased regulation of oil and gas exploration and production,
including GHG emissions or hydraulic fracturing, could make it more difficult or cost-prohibitive for our EES customers
to continue operations, adversely affecting our business.
Additionally, any new regulations regarding the treatment and disposal of wastes associated with exploration and
production operations, including through use of injection wells, could increase our costs to provide oilfield services and
reduce our margins and revenue from such services. Conversely, any loosening of regulations regarding how such wastes
are handled or disposed of could adversely affect our business, as we believe the size, capital structure, regulatory
sophistication and established reliability of our Company provide us with an advantage in providing services that must
comply with any complex regulatory regime that may govern providing oilfield waste services.
13
Investment in Natural Gas Vehicles and Infrastructure
We operate a large fleet of natural gas vehicles, and we plan to continue to invest in these assets for our collection
fleet. As of December 31, 2019, we were operating 8,924 natural gas trucks and 145 natural gas fueling facilities; 25 of
these fueling stations also serve the public, and in some cases our facilities serve the fleet of pre-approved third parties.
Concerns have been raised about the potential for emissions from the fueling stations and infrastructure that serve natural
gas-fueled vehicles. Additional regulation of, or restrictions on, natural gas fueling infrastructure or reductions in
associated tax incentives could increase our operating costs. We are not yet able to evaluate potential operating changes
or costs associated with such regulations, but we do not anticipate that such regulations would have a material adverse
impact on our business.
There is increasing pressure to reduce the use of fossil fuel in the heavy-duty truck industry, and some cities and states
are beginning to discuss requirements for using more advanced engine technology, such as electric powered vehicles,
rather than natural gas or diesel vehicles. Although current options for heavy-duty electric vehicles lack sufficient range
and proven experience for our operations, requirements to transition to electric powered vehicles could increase our cost
of vehicles and impair our investment in our natural gas fleet and infrastructure.
Renewable Fuel Production
We have invested, and continue to invest, in facilities to capture and treat renewable natural gas (“RNG”) from the
Company’s landfills, and RNG from landfill biogas is a significant source of fuel for our natural gas collection vehicles.
The Energy Policy Act of 2005 and Energy Independence and Security Act of 2007 authorize the Renewable Fuels
Standards (“RFS”) program that promotes the production and use of renewable transportation fuels. The Company is an
EPA-registered producer of transportation fuel making compressed and liquefied RNG from landfill biogas, which
qualifies as a cellulosic biofuel under the RFS program. Oil refiners and importers are required through the RFS program
to blend specified volumes of various categories of renewable transportation fuels with gasoline or buy credits, referred to
as renewable identification numbers (“RINs”), from renewable fuel producers. The market value for RINs is tied to
renewable fuel volumes set by the EPA annually, and the final 2020 required volumes for cellulosic biofuel are 41% higher
than in 2019. The EPA also is poised to initiate a rulemaking this year that would set required volume requirements for a
three-year period from 2020 through 2022.
Federal, State and Local Climate Change Initiatives; Sustainability
In light of regulatory and business developments related to concerns about climate change, we have identified a
strategic business opportunity to provide our public and private sector customers with sustainable solutions to reduce their
GHG emissions. As part of our on-going marketing evaluations, we assess customer demand for and opportunities to
develop waste services offering verifiable carbon reductions, such as waste reduction, increased recycling, and conversion
of landfill gas and discarded materials into electricity and fuel. We use carbon life cycle tools in evaluating potential new
services and in establishing the value proposition that makes us attractive as an environmental service provider. We are
active in support of public policies that encourage development and use of lower carbon energy and waste services that
lower users’ carbon footprints. We understand the importance of broad stakeholder engagement in these endeavors, and
actively seek opportunities for public policy discussion on more sustainable materials management practices. In addition,
we work with stakeholders at the federal and state level in support of legislation that encourages production and use of
renewable, low-carbon fuels and electricity. Despite the announcement that the U.S. has begun its formal withdrawal from
the Paris Climate Accords, we have seen no reduction in customer demand for services aligned with their GHG reduction
goals and strategies.
We continue to assess the physical risks to company operations from the effects of severe weather events and use risk
mitigation planning to increase our resiliency in the face of such events. We are investing in infrastructure to withstand
more severe storm events, which may afford us a competitive advantage and reinforce our reputation as a reliable service
provider through continued service in the aftermath of such events.
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Consistent with our Company’s long-standing commitment to corporate sustainability and environmental stewardship,
we have published our 2019 Sustainability Report, which is an update to our full length 2018 Sustainability Report,
“Driving Change,” which details the GHG emissions reductions we have facilitated to date and our determination to
expand these reductions in the future, as well as 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 our Company website but does not constitute
a part of this Form 10-K. The Company actively participates in a number of sustainability reporting programs and
frameworks, including the Dow Jones Sustainability Indices, where we are “Sector Leader” for Commercial Services, the
CDP, where we are among “A List” companies, and the Sustainability Accounting Standards Board, on which we serve
as a member of the Board’s advisory group.
Item 1A. Risk Factors.
In an effort to keep our stockholders and the public informed about our business, we may make “forward-looking
statements.” 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
generally include statements regarding:
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
future results of operations, including revenues, earnings or cash flows;
plans and objectives for the future;
projections, estimates or assumptions relating to our operational or financial performance; or
our opinions, views or beliefs about the effects of current or future events, circumstances or performance.
You should view these statements with caution. These statements are not guarantees of future performance,
circumstances or events. They are based on facts and circumstances known to us as of the date the statements are made.
All aspects of our business are subject to uncertainties, risks and other influences, many of which we do not control. Any
of these factors, either alone or taken together, could have a material adverse effect on us and could change whether any
forward-looking statement ultimately turns out to be true. Additionally, we assume no obligation to update any forward-
looking statement as a result of future events, circumstances or developments. The following discussion should be read
together with the Consolidated Financial Statements and the notes thereto. Outlined below are some of the risks that we
believe could affect our business and financial statements for 2020 and beyond and could cause actual results to be
materially different from those that may be set forth in forward-looking statements made by the Company.
The waste industry is highly competitive, and if we cannot successfully compete in the marketplace, our business,
financial condition and operating results may be materially adversely affected.
We encounter intense competition from governmental, quasi-governmental and private sources in all aspects of our
operations. We principally compete with large national waste management companies, counties and municipalities that
maintain their own waste collection and disposal operations and regional and local companies of varying sizes and financial
resources. The industry also includes companies that specialize in certain discrete areas of waste management, operators
of alternative disposal facilities, companies that seek to use parts of the waste stream as feedstock for renewable energy
and other by-products, and waste brokers that rely upon haulers in local markets to address customer needs. In recent years,
the industry has seen some additional consolidation, though the industry remains intensely competitive. Counties and
municipalities may have financial competitive advantages because tax revenues are available to them and tax-exempt
financing is more readily available to them. Also, such governmental units may attempt to impose flow control or other
restrictions that would give them a competitive advantage. In addition, some of our competitors may have lower financial
expectations, allowing them to reduce their prices to expand sales volume or to win competitively-bid contracts, including
large national accounts and exclusive franchise arrangements with municipalities. When this happens, we may lose
customers and be unable to execute our pricing strategy, resulting in a negative impact to our revenue growth from yield
on base business.
15
If we fail to implement our business strategy, our financial performance and our growth could be materially and
adversely affected.
Our future financial performance and success are dependent in large part upon our ability to implement our business
strategy successfully. Implementation of our strategy will require effective management of our operational, financial and
human resources and will place significant demands on those resources. See Item 1. Business for more information on our
business strategy.
There are risks involved in pursuing our strategy, including the following:
•(cid:2) Our employees, customers or investors may not embrace and support our strategy.
•(cid:2) We may not be able to hire or retain the personnel necessary to manage our strategy effectively.
•(cid:2) A key element of our strategy is yield management through focus on price leadership, which has presented
challenges to keep existing business and win new business at reasonable returns. We have also continued our
environmental fee, fuel surcharge and regulatory recovery fee to offset costs. The loss of volumes as a result of
price increases and our unwillingness to pursue lower margin volumes may negatively affect our cash flows or
results of operations. Additionally, we have in the past and may in the future face purported class action lawsuits
related to our customer service agreements, prices and fees.
•(cid:2) We may be unsuccessful in implementing improvements to operational efficiency and such efforts may not yield
the intended result.
•(cid:2) We may not be able to maintain cost savings achieved through optimization efforts.
•(cid:2) Strategic decisions with respect to our asset portfolio may result in impairments to our assets. See Item 1A. Risk
Factors — We may record material charges against our earnings due to impairments to our assets.
•(cid:2) Our ability to make strategic acquisitions depends on our ability to identify desirable acquisition targets, negotiate
advantageous transactions despite competition for such opportunities, fund such acquisitions on favorable terms,
obtain regulatory approvals and realize the benefits we expect from those transactions.
•(cid:2) Acquisitions, investments and/or new service offerings may not increase our earnings in the timeframe
anticipated, or at all, due to difficulties operating in new markets or providing new service offerings, failure of
emerging technologies to perform as expected, failure to operate within budget, integration issues, or regulatory
issues, among others.
•(cid:2)
Integration of acquisitions and/or new services offerings could increase our exposure to the risk of inadvertent
noncompliance with applicable laws and regulations.
•(cid:2) Liabilities associated with acquisitions, including ones that may exist only because of past operations of an
acquired business, may prove to be more difficult or costly to address than anticipated.
•(cid:2) Execution of our strategy, particularly growth through acquisitions, may cause us to incur substantial additional
indebtedness, which may divert capital away from our traditional business operations and other financial plans.
•(cid:2) We continue to seek to divest underperforming and non-strategic assets if we cannot improve their profitability.
We may not be able to successfully negotiate the divestiture of underperforming and non-strategic operations,
which could result in asset impairments or the continued operation of low-margin businesses.
In addition to the risks set forth above, implementation of our business strategy could also be affected by other factors
beyond our control, such as increased competition, legal developments, government regulation, general economic
conditions, increased operating costs or expenses, subcontractor costs and availability and changes in industry trends. We
may decide to alter or discontinue certain aspects of our business strategy at any time. If we are not able to implement our
business strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to
implement some or all of the initiatives of our business strategy successfully, our operating results may not improve to the
extent we anticipate, or at all.
16
Our planned acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”) may not occur at all, may not
occur in the expected time frame or may involve the divestiture of certain businesses and assets, which may negatively
affect the trading price of our common stock and our future business and financial results.
On April 14, 2019, we entered into an Agreement and Plan of Merger pursuant to which, among other things and
subject to the satisfaction or waiver of specified conditions, we agreed to acquire Advanced Disposal. If the acquisition is
completed, Advanced Disposal will become an indirect wholly-owned subsidiary of WM. The consummation of the
acquisition is not assured and is subject to certain conditions, including the expiration or termination of any waiting period
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.
The planned acquisition of Advanced Disposal is subject to a number of risks and uncertainties, including general
economic and capital markets conditions; the effects that the pending merger may have on us, Advanced Disposal and our
respective businesses; inability to obtain required regulatory or government approvals or to obtain such approvals on
satisfactory conditions; inability of Advanced Disposal to satisfy other closing conditions; the occurrence of any event,
change or other circumstance that could give rise to the termination of the Agreement and Plan of Merger, several of which
could require us to pay a termination fee of $150 million to Advanced Disposal; legal proceedings that may be instituted
related to the proposed acquisition and the legal expenses and diversion of management’s attention that may be associated
therewith; and unexpected costs, charges or expenses. If the planned acquisition of Advanced Disposal is not completed,
if there are significant delays in completing the planned acquisition or if the planned acquisition involves an unexpected
amount of required divestitures, it could negatively affect the trading price of our common stock and our future business
and financial results.
Additionally, in May 2019, we issued senior notes with an aggregate principal amount of $3 billion that include a
special mandatory redemption feature. This feature provides that if the acquisition of Advanced Disposal is not completed
on or prior to July 14, 2020, or if, prior to such date, the Agreement and Plan of Merger is terminated for any reason, we
will be required to redeem all of such outstanding notes equal to 101% of the aggregate principal amounts of such notes,
plus accrued but unpaid interest. Our ability to pay the redemption price may be limited by our financial resources at the
time and the terms of our debt instruments and other instruments and agreements. We may also be required to incur
additional indebtedness and reduce availability under our $3.5 billion revolving credit facility to fund the redemption
price. Any failure to pay the special mandatory redemption price of such notes when due would constitute an event of
default with respect to the notes of such series and could have a material adverse effect on our business, results of
operations and financial condition and the market prices of our securities. Further, if we redeem such series of notes
pursuant to the special mandatory redemption feature, our investors may be dissatisfied that they did not obtain the return
that they expected on their investment in those notes.
We may not realize the strategic benefits and cost synergies that are anticipated from the planned acquisition of
Advanced Disposal.
The benefits that are expected to result from the planned acquisition of Advanced Disposal will depend, in part, on
our ability to realize anticipated cost synergies. Our success in realizing these benefits and cost synergies, and the timing
of this realization, depends on the successful integration of Advanced Disposal. There is a significant degree of difficulty
and management distraction inherent in the process of integrating an acquisition of this size. The process of integrating
operations could cause business interruption and distraction. Some members of our management may be required to devote
considerable time to this integration process, which will decrease the time they will have to manage our Company, service
existing customers, attract new customers and develop new products or strategies. If management is not able to effectively
manage the integration process, or if any significant business activities are interrupted as a result of the integration process,
our business, financial condition and results of operations could suffer.
The acquisition of Advanced Disposal may not result in realization of the benefits and cost synergies that we currently
expect, and we cannot guarantee that these benefits and cost synergies will be achieved within anticipated time frames or
at all. Additionally, we may incur substantial expenses in connection with the integration of Advanced Disposal, which
may exceed expectations and offset certain benefits.
17
Compliance with existing or increased future regulations and/or enforcement of such regulations can restrict or
change our operations, increase our operating costs or require us to make additional capital expenditures, and a
decrease in regulation may lower barriers to entry for our competitors.
Stringent government regulations at the federal, state, provincial and local level in the U.S. and Canada have a
substantial impact on our business, and compliance with such regulations is costly. Many complex laws, rules, orders and
interpretations govern environmental protection, health, safety, land use, zoning, transportation and related matters.
Among other things, governmental regulations and enforcement actions restrict our operations at times and may adversely
affect our financial condition, results of operations and cash flows by imposing conditions such as:
•(cid:2)
•(cid:2)
•(cid:2)
limitations on siting and constructing new waste disposal, transfer, recycling or processing facilities or on
expanding existing facilities;
limitations, regulations or levies on collection and disposal prices, rates and volumes;
limitations or bans on disposal or transportation of out-of-state waste or certain categories of waste;
•(cid:2) mandates regarding the management of solid waste, including requirements to recycle, divert or otherwise process
certain waste, recycling and other streams; or
•(cid:2)
limitations or restrictions on the recycling, processing or transformation of waste, recycling and other streams.
Regulations affecting the siting, design and closure of landfills require us, at times, to undertake investigatory or
remedial activities, curtail operations or close landfills temporarily or permanently. We have significant financial
obligations relating to final capping, closure, post-closure and environmental remediation at our existing landfills and we
establish accruals for these estimated costs. Expenditures could be accelerated or materially exceed our accruals due to the
types of waste collected and manner in which it is transported and disposed of, including actions taken in the past by
companies we have acquired or third-party landfill operators; environmental regulatory changes; new information about
waste types previously collected, such as PFAS or other emerging contaminates, and other reasons.
In order to develop, expand or operate a landfill or other waste management facility, we must have various facility
permits and other governmental approvals, including those relating to zoning, environmental protection and land use. The
permits and approvals are often difficult, time consuming and costly to obtain and sometimes contain conditions that limit
our operations.
Various states have enacted, or are considering enacting, laws that restrict the disposal within the state of solid waste
generated outside the state. From time to time, the U.S. Congress has considered legislation authorizing states to adopt
regulations, restrictions, or taxes on the importation of out-of-state or out-of-jurisdiction waste. Additionally, several state
and local governments have enacted “flow control” regulations, which attempt to require that all waste generated within
the state or local jurisdiction be deposited at specific sites. The U.S. Congress’ adoption of legislation allowing restrictions
on interstate transportation of out-of-state or out-of-jurisdiction waste certain types of flow control, or courts’
interpretations of interstate waste and flow control legislation, could adversely affect our solid and hazardous waste
management services.
Additionally, regulations establishing extended producer responsibility (“EPR”) are being considered or implemented
in many places around the world, including in the U.S. and Canada. EPR regulations are designed to place either partial
or total responsibility on producers to fund the post-use life cycle of the products they create. Along with the funding
responsibility, producers may be required to undertake additional responsibilities, such as taking over management of local
recycling programs by taking back their products from end users or managing the collection operations and recycling
processing infrastructure. There is no federal law establishing EPR in the U.S. or Canada; however, state, provincial and
local governments could, and in some cases have, taken steps to implement EPR regulations. If wide-ranging EPR
regulations were adopted, they could have a fundamental impact on the waste streams we manage and how we operate our
business, including contract terms and pricing. A significant reduction in the waste, recycling and other streams we manage
could have a material adverse effect on our financial condition, results of operations and cash flows.
18
The regulatory environment in which we operate is influenced by changes in leadership at the federal, state, provincial
and local levels. The policies set forth under the current U.S. administration, for example, have included substantial
changes to foreign trade policy and generally have been in favor of reducing regulation, including environmental
regulation. We cannot predict what impact the current administration will have on future regulations impacting our
industry, especially given the number of rules currently in litigation, nor can we predict the timing of any such changes.
Reduction of regulation may have a favorable impact on our operating costs, but the extensive environmental regulation
governing landfills is a substantial barrier to entry that benefits our Company. Moreover, the risk reduction provided by
stringent regulation is valuable to our customers and the communities we serve. It is likely that some policies adopted by
the current administration will benefit us and others will negatively affect us.
Our revenues, earnings and cash flows will fluctuate based on changes in commodity prices, and commodity prices
for recyclable materials are particularly susceptible to volatility based on regulations and tariffs that affect our ability
to export products.
Enforcement or implementation of foreign and domestic regulations can affect our ability to export products.
A significant portion of the fiber that we market has historically been shipped to export markets across the globe,
particularly China. In recent years, the Chinese government announced bans on certain materials and begun to enforce
extremely restrictive quality and other requirements that have significantly reduced China’s import of recyclables. The
Chinese government has also limited the flow of material into China by restricting the issuance of required import licenses
and the restriction on import licenses is expected to constrict further in 2020. In addition, changes to foreign trade policy
and tariffs imposed by the current U.S. administration have resulted in China imposing new tariffs on the import of
recyclables. We anticipate China will ban the import of recyclables completely in 2021. Many other markets, both domestic
and foreign, have tightened their quality expectations and limited or restricted the import of certain recyclables as well.
Such trade restrictions and tariffs have disrupted the global trade of recyclables, particularly fiber, creating excess
supply and decreasing recyclable commodity prices. We have been actively working to identify alternative markets for
recycling commodities, but there may not be demand for all of the material we produce. The heightened quality
requirements have been difficult for the industry to achieve and have driven up operating costs. In particular, single-stream
MRFs process a wide range of commingled materials and tend to receive a higher percentage of non-recyclables, which
results in increased processing and residual disposal costs to achieve quality standards. As recyclable commodity prices
have fallen and operating costs have increased, we and other recyclers are seeking to pass cost increases through to
customers. The resulting price increase for recycling services in communities and at businesses in the U.S. has resulted in
some customers reducing or eliminating their recycling service.
Reductions in market prices for recycling commodities, and reduction in demand for recycling commodities and
recycling services, have negatively impacted our operating income and cash flows in 2018 and 2019. The decline in market
prices in 2019 and 2018 for recycling commodities resulted in a decrease in revenue of $248 million and $273 million,
respectively. As we have increased the size of our recycling operations, we have also increased our exposure to commodity
price fluctuations. Additionally, future regulation, tariffs or initiatives may result in further reduced demand or increased
operating costs, which would cause the profitability of our recycling operations to decline.
Fluctuation in energy prices also affects our business, including recycling of plastics manufactured from petroleum
products. Significant variations in the price of methane gas, electricity and other energy-related products that are marketed
and sold by our landfill gas recovery operations can result in a corresponding significant impact to our revenue from yield
from such operations. Additionally, we provide specialized disposal services for oil and gas exploration and production
operations through our EES organization. Demand for these services decreases when drilling activity slows due to
depressed oil and gas prices, such as the low prices throughout the last few years. Any of the commodity prices to which
we are subject may fluctuate substantially and without notice in the future.
19
Changes in regulations applicable to oil and gas exploration, production and disposal could adversely affect our EES
organization.
Our EES organization provides specialized environmental management and disposal services for fluids used and
wastes generated by customers engaged in oil and gas exploration and production, and these disposal services include the
use of underground injection wells. Demand for these services is adversely affected if drilling activity slows due to
regulation and industry conditions beyond our control, in addition to changes in oil and gas prices. There is heightened
federal regulatory focus on emissions of methane that occur during drilling and transportation, as well as state attention to
protective disposal of drilling residuals. There also remains heightened attention from the public, some states and the EPA
to the alleged potential for hydraulic fracturing that occurs during drilling to impact drinking water supplies. Increased
regulation of oil and gas exploration and production, including GHG emissions or hydraulic fracturing, could make it more
difficult or cost-prohibitive for our EES customers to continue operations, adversely affecting our business.
Additionally, any new regulations regarding the treatment and disposal of wastes associated with exploration and
production operations, including through the use of injection wells, could increase our costs to provide oilfield services
and reduce our margins and revenue from such services. Conversely, any loosening of regulations regarding how such
wastes are handled or disposed of could adversely impact demand for our EES services.
Changes to the regulatory framework related to renewable fuel standards could affect our financial performance in
that sector as a renewable fuel producer.
The Company acts as a renewable fuel producer in the RFS program enacted by Congress under the Energy Policy
Act and Energy Independence and Security Act. Oil refiners and importers are required through the RFS program to blend
specified volumes of renewable transportation fuels with gasoline or buy credits, referred to as RINs, from renewable fuel
producers. The Company has invested, and continues to invest, in facilities that capture and convert landfill gas into
renewable natural gas so that we can participate in the program. The value of the RINs associated with our landfill gas is
set through a market established by the program. The EPA finalized a rule in December 2019 increasing refiners’
obligations to purchase renewable natural gas and other cellulosic biofuels under the RFS program for compliance year
2020. Unlike in prior years, however, market uncertainty stemming from the EPA’s administration of the RFS program
led to a rapid decline in RIN values. We continue to advocate for the EPA to implement policies that ensure long-term
stability for renewable transportation fuels as changes in the RFS market or the structure of the RFS program can and has
reduced the value of renewable natural gas RINs and negatively impacted the financial performance of the facilities
constructed to capture and treat the gas.
Increasing customer preference for alternatives to landfill disposal and bans on certain types of waste could reduce
our landfill volumes and cause our revenues and operating results to decline.
Our customers are increasingly diverting waste to alternatives to landfill disposal, such as recycling and composting,
while also working to reduce the amount of waste they generate. 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, such as yard
waste, food waste and electronics at landfills. Where such organic waste is not banned from the landfill, some large
customers such as grocery stores and restaurants are choosing to divert their organic waste from landfills. Zero-waste goals
(sending no waste to the landfill) have been set by many of North America’s largest companies. Although such mandates
and initiatives help to protect our environment, these developments reduce the volume of waste going to our landfills
which may affect the prices that we can charge for landfill disposal. Our landfills currently provide our highest income
from operations margins. If we are not successful in expanding our service offerings, growing lines of businesses to service
waste streams that do not go to landfills providing services for customers that wish to reduce waste entirely, then our
revenues and operating results may decline. Additionally, despite the development of new service offerings and lines of
business, it is possible that our revenues and our income from operations margins could be negatively affected due to
disposal alternatives.
With a heightened awareness of the global problems caused by plastic waste in the environment, an increasing number
of cities across the country have passed ordinances banning certain types of plastics from sale or use. Over 800 pieces of
20
legislation, approximately 50% of which are bans on plastic bags, have been introduced in the U.S. regulating plastics;
660 passed, including 585 city ordinances. Others include bans on the sale or use of plastic straws, polystyrene plastic and
single use packaging. These bans have increased pressure by manufacturers on our recycling facilities to accept a broader
array of materials in curbside recycling programs to alleviate public pressures to ban the sale of those materials. However,
there are currently no viable end markets for recycling these materials and inclusion of such materials in our recycling
stream increases contamination and operating costs and can negatively affect the results of our recycling operations.
Developments in technology could trigger a fundamental change in the waste management industry, as waste streams
are increasingly viewed as a resource, which may adversely impact volumes at our landfills and our profitability.
Our Company and others have recognized the value of the traditional waste stream as a potential resource. Research
and development activities are on-going to provide disposal alternatives that maximize the value of waste, including using
waste as a source for renewable energy and other valuable by-products. We and many other companies are investing in
these technologies. It is possible that such investments and technological advancements may reduce the cost of waste
disposal or the value of landfill gas recovery to a level below our costs and may reduce the demand for landfill space. As
a result, our revenues and margins could be adversely affected due to advancements in disposal alternatives.
If we are not able to develop new service offerings and protect intellectual property or if a competitor develops or
obtains exclusive rights to a breakthrough technology, our financial results may suffer.
Our existing and proposed service offerings to customers require that we invest in, develop or license, and protect
new technologies. Research and development of new technologies and investment in emerging technologies often requires
significant spending that may divert capital investment away from our traditional business operations. We may experience
difficulties or delays in the research, development, production and/or marketing of new products and services or emerging
technologies in which we have invested, which may negatively impact our operating results and prevent us from recouping
or realizing a return on the investments required to bring new products and services to market. Further, protecting our
intellectual property rights and combating unlicensed copying and use of intellectual property is difficult, and any inability
to obtain or protect new technologies could impact our services to customers and development of new revenue sources.
Our Company and others are increasingly focusing on new technologies that innovate our operations, improve the customer
experience and provide alternatives to traditional disposal and maximize the resource value of waste. If a competitor
develops or obtains exclusive rights to a “breakthrough technology” that provides a revolutionary change in traditional
waste management, or if we have inferior intellectual property to our competitors, our financial results may suffer.
Our business depends on our reputation and the value of our brand.
We believe we have developed a reputation for high-quality service, reliability and social and environmental
responsibility, and we believe our brand symbolizes these attributes. The Waste Management brand name, trademarks and
logos and our reputation are powerful sales and marketing tools, and we devote significant resources to promoting and
protecting them. Adverse publicity, whether or not justified, relating to activities by our operations, employees or agents
could tarnish our reputation and reduce the value of our brand. Damage to our reputation and loss of brand equity could
reduce demand for our services. This reduction in demand, together with the dedication of time and expense necessary to
defend our reputation, could have an adverse effect on our financial condition, liquidity and results of operations, as well
as require additional resources to rebuild our reputation and restore the value of our brand.
Our operations are subject to environmental, health and safety laws and regulations, as well as contractual
obligations that may result in significant liabilities.
There is risk of incurring significant environmental liabilities in the use, treatment, storage, transfer and disposal of
waste materials. Under applicable environmental laws and regulations, we could be liable if it is alleged that our operations
cause environmental damage to our properties or to the property of other landowners, particularly as a result of the
contamination of air, drinking water or soil. Under current law, we could also be held liable for damage caused by
conditions that existed before we acquired the assets or operations involved and for conditions resulting from waste types
or compounds previously considered non-hazardous but later determined to present possible threat to public health or the
21
environment. The risks of successor liability and emerging contaminants are of particular concern as we execute our
growth strategy, partially though acquisitions, because we may be unsuccessful in identifying and assessing potential
liabilities during our due diligence investigations. Further, the counterparties in such transactions may be unable to perform
their indemnification obligations owed to us. Any substantial liability for environmental damage could have a material
adverse effect on our financial condition, results of operations and cash flows.
In the ordinary course of our business, we have in the past, we are currently, and we may in the future, become
involved in legal and administrative proceedings relating to land use and environmental laws and regulations. These
include proceedings in which:
•(cid:2)
•(cid:2)
agencies of federal, state, local or foreign governments seek to impose liability on us under applicable statutes,
sometimes involving civil or criminal penalties for violations, or to revoke or deny renewal of a permit we need;
and
local communities, citizen groups, landowners or governmental agencies oppose the issuance of a permit or
approval we need, allege violations of the permits under which we operate or laws or regulations to which we are
subject, or seek to impose liability on us for environmental damage.
We generally seek to work with the authorities or other persons involved in these proceedings to resolve any issues
raised. If we are not successful, the adverse outcome of one or more of these proceedings could result in, among other
things, material increases in our costs or liabilities as well as material charges for asset impairments.
Further, 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. Costs to remediate or restore
the condition of closed sites may be significant.
General economic conditions can directly and adversely affect our revenues and our income from operations margins.
Our business is directly affected by changes in national and general economic factors that are outside of our control,
including consumer confidence, interest rates and access to capital markets. A weak economy generally results in
decreased consumer spending and decreases in volumes of waste generated, which negatively impacts the ability to grow
through new business or service upgrades, and may result in customer turnover and reduction in customers’ waste service
needs. Consumer uncertainty and the loss of consumer confidence may also reduce the number and variety of services
requested by customers. Additionally, a weak market for consumer goods can significantly decrease demand by paper
mills for recycled corrugated cardboard used in packaging; such decrease in demand can negatively impact commodity
prices and our operating income and cash flows.
A decrease in waste volumes generated results in an increase in competitive pricing pressure; such economic
conditions may also interfere with our ability to implement our pricing strategy. Many of our contracts have price
adjustment provisions that are tied to an index such as the Consumer Price Index, and our costs may increase more than
the increase, if any, in the Consumer Price Index. This is partially due to our relatively high fixed-cost structure, which is
difficult to quickly adjust to match shifting volume levels and vendor costs, and may not correlate with the Consumer Price
Index or the waste industry.
Weakness in the economy may expose us to credit risk of governmental entities and municipalities and other major
customers, which could negatively impact our operating results.
We provide service to a number of governmental entities, municipalities, and large national accounts. During periods
of economic weakness, governmental entities and municipalities can suffer significant financial difficulties, due in part to
reduced tax revenue and/or high cost structures. During these periods, such entities, and our non-governmental customers,
could be unable to pay amounts owed to us or renew contracts with us at previous or increased rates.
22
Purchasers of our recycling commodities can be particularly vulnerable to financial difficulties in times of commodity
price volatility. The inability of our customers to pay us in a timely manner or to pay increased rates, particularly large
national accounts, could negatively affect our operating results.
In addition, the financial difficulties of municipalities could result in a decline in investors’ demand for municipal
bonds and a correlating increase in interest rates. As of December 31, 2019, we had $669 million of tax-exempt bonds
with term interest rate periods that expire within the next 12 months and $355 million of variable-rate tax-exempt bonds
with interest rates reset on either a daily or a weekly basis. If market dynamics resulted in repricing of our tax-exempt
bonds at significantly higher interest rates, we would incur increased interest expenses that may negatively affect our
operating results and cash flows.
We may be unable to obtain or maintain required permits or expand existing permitted capacity of our landfills, which
could decrease our revenue and increase our costs.
Our ability to meet our financial and operating objectives depends in part on our ability to obtain and maintain the
permits necessary to operate landfill sites. Permits to build, operate and expand solid waste management facilities,
including landfills and transfer stations, have become more difficult and expensive to obtain and maintain. Permits often
take years to obtain as a result of numerous hearings and compliance requirements with regard to zoning, environmental
and other regulations. These permits are also often subject to resistance from citizen or other groups and other political
pressures. Local communities and citizen groups, adjacent landowners or governmental agencies may oppose the issuance
of a permit or approval we may need, allege violations of the permits under which we currently operate or laws or
regulations to which we are subjected, or seek to impose liability on us for environmental damage. Responding to these
challenges has, at times, increased our costs and extended the time associated with establishing new facilities and
expanding existing facilities. In addition, failure to receive regulatory and zoning approval may prohibit us from
establishing new facilities or expanding existing facilities. Our failure to obtain the required permits to operate our landfills
could have a material adverse impact on our financial condition, results of operations and cash flows.
Significant shortages in diesel fuel supply or increases in diesel fuel prices will increase our operating expenses.
The price and supply of diesel fuel can fluctuate significantly based on international, political and economic
circumstances, as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting
Countries (“OPEC”) and other oil and gas producers, regional production patterns, weather conditions and environmental
concerns. We need diesel fuel to run a significant portion of our collection and transfer trucks and our equipment used in
our landfill operations. Supply shortages could substantially increase our operating expenses. Additionally, if fuel prices
increase, our direct operating expenses increase and many of our vendors raise their prices to offset their own rising costs.
We have in place a fuel surcharge program, designed to offset increased fuel expenses; however, we may not be able to
pass through all of our increased costs and some customers’ contracts prohibit any pass-through of the increased costs.
Additionally, lawsuits have challenged our fuel and environmental charges included on our invoices. Regardless of any
offsetting surcharge programs, increased operating costs due to higher diesel fuel prices will decrease our income from
operations margins.
We have made significant investments in an extensive natural gas truck fleet, which makes us partially dependent on
the availability of natural gas and fueling infrastructure and vulnerable to natural gas prices, and requirements to
transition to other vehicle types could impair these investments.
We operate a large fleet of natural gas vehicles, and we plan to continue to invest in these assets for our collection
fleet. However, natural gas fueling infrastructure is not yet broadly available in North America; as a result, we have
constructed and operate natural gas fueling stations, some of which also serve the public or pre-approved third parties. It
will remain necessary for us to invest capital in fueling infrastructure in order to power our natural gas fleet. Concerns
have been raised about the potential for emissions from fueling infrastructure that serve natural gas-fueled vehicles. New
regulation of, or restrictions on, natural gas fueling infrastructure or reductions in associated tax incentives could increase
our operating costs. Additionally, fluctuations in the price and supply of natural gas could substantially increase our
operating expenses; a reduction in the existing cost differential between natural gas and diesel fuel could materially reduce
23
the benefits we anticipate from our investment in natural gas vehicles. Further, our fuel surcharge program is currently
indexed to diesel fuel prices, and price fluctuations for natural gas may not effectively be recovered by this program.
There is increasing pressure to reduce the use of fossil fuel in the heavy-duty truck industry, and some cities and states
are beginning to discuss requirements for using more advanced engine technology, such as electric powered vehicles,
rather than natural gas or diesel vehicles. Although current options for heavy-duty electric vehicles lack sufficient range
and proven experience for our operations, requirements to transition to electric powered vehicles could increase our cost
of vehicles and impair our investment in our natural gas fleet and infrastructure
We are increasingly dependent on technology in our operations and if our technology fails, our business could be
adversely affected.
We may experience problems with the operation of our current information technology systems or the technology
systems of third parties on which we rely, as well as the development and deployment of new information technology
systems, that could adversely affect, or even temporarily disrupt, all or a portion of our operations until resolved. Inabilities
and delays in implementing new systems can also affect our ability to realize projected or expected cost savings.
Additionally, any systems failures could impede our ability to timely collect and report financial results in accordance with
applicable laws and regulations.
We are implementing a new enterprise resource planning system, and challenges with the implementation of the
system may impact our business and operations.
We are in the process of a complex, multi-year implementation of a new enterprise resource planning (“ERP”) system.
The ERP system implementation requires the integration of the new ERP system with multiple new and existing
information systems and business processes and is designed to accurately maintain our books and records and provide
information to our management team important to the operation of the business. Such an implementation is a major
undertaking from a financial, management, and personnel perspective. The implementation of the ERP system may prove
to be more difficult, costly, or time consuming than expected, and it is possible that the system will not yield the benefits
anticipated. Any disruptions, delays or deficiencies in the design and implementation of our new ERP system could
adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations,
resulting in negative impacts on our business and operations and subject us to potential liability. Additionally, our
implementation of the ERP system involves greater utilization of third-party “cloud” computing services in connection
with our business operations. Problems faced by us or our third-party providers, including technological or business-related
disruptions, as well as cybersecurity threats, could adversely impact our business, results of operations and financial
condition for future periods.
A cybersecurity incident could negatively impact our business and our relationships with customers and expose us to
increased liability.
Substantially all aspects of our business operations rely on digital technology. We use computers, mobile devices,
social networking and other online platforms to connect with our employees and our customers. These uses give rise to
cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information.
Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and
intellectual property, including customers’ personal information, private information about employees, and financial and
strategic information about the Company and its business partners. We also rely on a Payment Card Industry compliant
third party to protect our customers’ credit card information.
We are regularly the target of attempted cyber intrusions, and we must commit substantial resources to continuously
monitor and further develop our networks and infrastructure to prevent, detect, and address the risk of unauthorized access,
misuse, computer viruses and other events. Our preventative measures and incident response efforts may not be effective
in all cases. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or
intellectual property, or interference with our information technology systems or the technology systems of third parties
on which we rely, could result in business disruption, direct financial loss, negative publicity, brand damage, alleged
24
violation of privacy laws, loss of customers, potential regulatory enforcement or private litigation liability and competitive
disadvantage.
Further, as the Company pursues its strategy to grow through acquisitions and to pursue new initiatives that improve
our operations and cost structure, the Company is also expanding and improving its information technologies, resulting in
a larger technological presence and corresponding exposure to cybersecurity risk. Certain new technologies, such as use
of autonomous vehicles, remote-controlled equipment and virtual reality, present new and significant cybersecurity safety
risks that must be analyzed and addressed before implementation. If we fail to assess and identify cybersecurity risks
associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks.
Increasing regulatory focus on privacy and data protection issues and expanding laws could negatively impact our
business, subject us to criticism and expose us to increased liability.
The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving and is
likely to remain uncertain for the foreseeable future. We collect certain personally identifiable information and other
sensitive information as integral parts of our business and in connection with providing services to our customers. We are
subject to a variety of laws and regulations that govern the collection and use of such information obtained from individuals
and businesses. These laws and regulations are inconsistent across jurisdictions and are subject to evolving interpretations.
Government officials, regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies
collect, process, use, store, share and transmit personal data. We must continually monitor the development and adoption
of new and emerging laws and regulations, such as the California Consumer Privacy Act (“CCPA”) that took effect on
January 1, 2020. The CCPA, among other things, contains new disclosure obligations for businesses that collect personal
information about California residents and affords those individuals new rights relating to their personal information that
can expand the scope of our potential liability. We must commit substantial time and resources toward compliance with
the CCPA and similar laws and regulations, Any inability, or perceived inability, to adequately address privacy and data
protection concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards,
contractual obligations, or other legal obligations, including at newly acquired companies, could subject us to regulatory
enforcement, private litigation, public criticism, disrupt our operations, cause us to lose customers, result in additional
costs and legal liability, damage our reputation, and otherwise harm our business.
Our operating expenses could increase as a result of labor unions organizing or changes in regulations related to
labor unions.
Labor unions continually attempt to organize our employees, and these efforts will likely continue in the future.
Certain groups of our employees are currently represented by unions, and we have negotiated collective bargaining
agreements with these unions. Additional groups of employees may seek union representation in the future, and, if
successful, would enhance organized labor’s leverage to obtain higher than expected wage and benefits costs and resist
the introduction of new technology and other initiatives, which can result in increased operating expenses and lower net
income. If we are unable to negotiate acceptable collective bargaining agreements, our operating expenses could increase
significantly as a result of work stoppages, including strikes. Any of these matters could adversely affect our financial
condition, results of operations and cash flows.
We could face significant liabilities for withdrawal from Multiemployer Pension Plans.
We are a participating employer in a number of trustee-managed multiemployer defined benefit pension plans
(“Multiemployer Pension Plans”) for employees who are covered by collective bargaining agreements. In the event of our
withdrawal from a Multiemployer Pension Plan, we may incur expenses associated with our obligations for unfunded
vested benefits at the time of the withdrawal. Depending on various factors, future withdrawals could have a material
adverse effect on results of operations or cash flows for a particular reporting period. See Notes 10 and 11 to the
Consolidated Financial Statements for more information related to our participation in Multiemployer Pension Plans.
25
Our business is subject to operational and safety risks, including the risk of personal injury to employees and others.
Providing environmental and waste management services, including constructing and operating landfills, transfer
stations, MRFs and other disposal facilities, involves risks such as truck accidents, equipment defects, malfunctions and
failures. Additionally, we closely monitor and manage landfills to minimize the risk of waste mass instability, releases of
hazardous materials, and odors that are sometimes triggered by weather or natural disasters. There are also risks presented
by the potential for subsurface heat reactions causing elevated landfill temperatures and increased production of leachate,
landfill gas and odors. We also build and operate natural gas fueling stations, some of which also serve the public or third
parties. Operation of fueling stations and landfill gas collection and control systems involves additional risks of fire and
explosion. Any of these risks could potentially result in injury or death of employees and others, a need to shut down or
reduce operation of facilities, increased operating expense and exposure to liability for pollution and other environmental
damage, and property damage or destruction.
While we seek to minimize our exposure to such risks through comprehensive training, compliance and response and
recovery programs, as well as vehicle and equipment maintenance programs, if we were to incur substantial liabilities in
excess of any applicable insurance, our business, results of operations and financial condition could be adversely affected.
Any such incidents could also tarnish our reputation and reduce the value of our brand. Additionally, a major operational
failure, even if suffered by a competitor, may bring enhanced scrutiny and regulation of our industry, with a corresponding
increase in operating expense.
We have substantial financial assurance and insurance requirements, and increases in the costs of obtaining
adequate financial assurance, or the inadequacy of our insurance coverages, could negatively impact our liquidity
and increase our liabilities.
The amount of insurance we are required to maintain for environmental liability is governed by statutory requirements.
We believe that the cost for such insurance is high relative to the coverage it would provide and, therefore, our coverages
are generally maintained at the minimum statutorily-required levels. We face the risk of incurring additional costs for
environmental damage if our insurance coverage is ultimately inadequate to cover those damages. We also carry a broad
range of other insurance coverages that are customary for a company our size. We use these programs to mitigate risk of
loss, thereby enabling us to manage our self-insurance exposure associated with claims. The inability of our insurers to
meet their commitments in a timely manner and the effect of significant claims or litigation against insurance companies
may subject us to additional risks. To the extent our insurers are unable to meet their obligations, or our own obligations
for claims are more than we estimated, there could be a material adverse effect to our financial results.
In addition, to fulfill our financial assurance obligations with respect to variable-rate tax-exempt debt, final capping,
closure, post-closure and environmental remediation obligations, we generally obtain letters of credit or surety bonds, rely
on insurance, including captive insurance, fund trust and escrow accounts or rely upon WM financial guarantees. We
currently have in place all financial assurance instruments necessary for our operations. Our financial position, which can
be negatively affected by asset impairments, our credit profile and general economic factors, may adversely affect the cost
of our current financial assurance instruments, and changes in regulations may impose stricter requirements on the types
of financial assurance that will be accepted. Additionally, in the event we are unable to obtain sufficient surety bonding,
letters of credit or third-party insurance coverage at reasonable cost, or one or more states cease to view captive insurance
as adequate coverage, we would need to rely on other forms of financial assurance. It is possible that we could be forced
to deposit cash to collateralize our obligations. Other forms of financial assurance could be more expensive to obtain, and
any requirements to use cash to support our obligations would negatively impact our liquidity and capital resources and
could affect our ability to meet our obligations as they become due.
We may record material charges against our earnings due to impairments to our assets.
In accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we capitalize certain expenditures and
advances relating to disposal site development, expansion projects, acquisitions, software development costs and other
projects. Events that have in the past and may in the future lead to an impairment include, but are not limited to, shutting
down a facility or operation or abandoning a development project or the denial of an expansion permit. Additionally,
26
declining waste volumes and development of, and customer preference for, alternatives to traditional waste disposal could
warrant asset impairments. If we determine an asset or expansion project is impaired, we will charge against earnings any
unamortized capitalized expenditures and advances relating to such asset or project reduced by any portion of the
capitalized costs that we estimate will be recoverable, through sale or otherwise. We also carry a significant amount of
goodwill on our Consolidated Balance Sheets, which is required to be assessed for impairment annually, and more
frequently in the case of certain triggering events. We have in the past and may in the future be required to incur charges
against earnings if such impairment tests indicate that the fair value of a reporting unit is below its carrying amount. Any
such charges could have a material adverse effect on our results of operations.
Our capital requirements and our business strategy could increase our expenses, cause us to change our growth and
development plans, or result in an inability to maintain our desired credit profile.
If economic conditions or other risks and uncertainties cause a significant reduction in our cash flows from operations,
we may reduce or suspend capital expenditures, growth and acquisition activity, implementation of our business strategy,
dividend declarations or share repurchases. We may choose to incur indebtedness to pay for these activities, although our
access to capital markets is not assured and we may not be able to incur indebtedness at a cost that is consistent with
current borrowing rates. We also may need to incur indebtedness to refinance scheduled debt maturities, and it is possible
that the cost of financing could increase significantly, thereby increasing our expenses and decreasing our net income.
Further, our ability to execute our financial strategy and our ability to incur indebtedness is somewhat dependent upon our
ability to maintain investment grade credit ratings on our senior debt. The credit rating process is contingent upon our
credit profile and several other factors, many of which are beyond our control, including methodologies established and
interpreted by third-party rating agencies. If we were unable to maintain our investment grade credit ratings in the future,
our interest expense would increase and our ability to obtain financing on favorable terms could be adversely affected.
Additionally, we have $1.0 billion of debt as of December 31, 2019 that is exposed to changes in market interest rates
within the next 12 months because of the impact of our tax-exempt bonds. If interest rates increase, our interest expense
would also increase, lowering our net income and decreasing our cash flow.
We may use our $3.5 billion revolving credit facility to meet our cash needs, to the extent available, until maturity in
November 2024. As of December 31, 2019, we had no outstanding borrowings and $412 million of letters of credit issued
and supported by the facility, leaving unused and available credit capacity of $3.1 billion. In the event of a default under
our credit facility, we could be required to immediately repay all outstanding borrowings and make cash deposits as
collateral for all obligations the facility supports, which we may not be able to do. Additionally, any such default could
cause a default under many of our other credit agreements and debt instruments. Without waivers from lenders party to
those agreements, any such default would have a material adverse effect on our ability to continue to operate.
The impact of climate change, and the adoption of climate change legislation or regulations restricting emissions of
“greenhouse gases,” could increase our costs to operate.
We continue to assess the physical risks to our operations from the effects of climate change. Although we have made
investments to mitigate risk associated with severe storm events, damage to our facilities or disruption of service caused
by more frequent or more severe storms associated with climate extremes could negatively impact operating results. We
have also identified risk to our assets and our employees associated with drought or water scarcity, flooding, extreme heat
and rain events, and fire conditions associated with climate change. For example, wildfires influenced by climate change
can damage landfill infrastructure such as gas collection systems, flooding in low-lying areas enhanced by sea level rise
can result in greater maintenance expenses at our facilities and service disruption, and more frequent or extreme rain events
can erode the protective vegetative caps on our landfills and generate increased volumes of leachate to manage. Those
areas of the country most prone to these occurrences have protocols in place, or are developing protocols to address these
conditions, including employee safety, driver training, and equipment and facility protection protocols. We have incurred
and will incur costs to develop and implement these protocols, and these protocols may not be effective in offsetting these
risks. Additionally, the actions of others in response to climate change effects, such as the rolling power blackouts
implemented in California in 2019 due to wildfire risks, can result in service disruptions and increase our costs to operate.
27
Our landfill operations emit methane, identified as a GHG. There are a number of legislative and regulatory efforts at
the state, provincial, regional and federal levels to cap and/or curtail the emission of GHGs to ameliorate the effect of
climate change. We continue to monitor these efforts and the potential impacts to our operations. Should comprehensive
federal climate change legislation be enacted, we expect it could impose costs on our operations that might not be offset
by the revenue increases associated with our lower-carbon service options, the materiality of which we cannot predict. In
2010, the EPA published a Prevention of Significant Deterioration and Title V GHG Tailoring Rule, which expanded the
EPA’s federal air permitting authority to include the six GHGs. The rule sets new thresholds for GHG emissions that
define when Clean Air Act permits are required. The current requirements of these rules have not significantly affected
our operations or cash flows, due to the tailored thresholds and exclusions of certain emissions from regulation; however,
if certain changes to these regulations were enacted, such as lowering the thresholds or the inclusion of biogenic emissions,
then the amendments could have an adverse effect on our operating costs.
The seasonal nature of our business, severe weather events resulting from climate change and event driven special
projects cause our results to fluctuate, and prior performance is not necessarily indicative of our future results.
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 can significantly affect 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 special
projects can boost revenues through additional work for a limited time, due to significant start-up costs and other factors,
such revenue can generate earnings at comparatively lower margins.
For these and other reasons, operating results in any interim period are not necessarily indicative of operating results
for an entire year, and operating results for any historical period are not necessarily indicative of operating results for a
future period. Our stock price may be negatively impacted by interim variations in our results.
We could be subject to significant fines and penalties, and our reputation could be adversely affected, if our
businesses, or third parties with whom we have a relationship, were to fail to comply with U.S. or foreign laws or
regulations.
Some of our projects and new business may be conducted in countries where corruption has historically been
prevalent. It is our policy to comply with all applicable anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act,
and with applicable local laws of the foreign countries in which we operate, and we monitor our local partners’ compliance
with such laws as well. Our reputation may be adversely affected if we were reported to be associated with corrupt practices
or if we or our local partners failed to comply with such laws. Such damage to our reputation could adversely affect our
ability to grow our business. Additionally, violations of such laws could subject us to significant fines and penalties.
28
Currently pending or future litigation or governmental proceedings could result in material adverse consequences,
including judgments or settlements.
From time to time we are involved in governmental proceedings relating to the conduct of our business. We are also
party to civil 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. 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:
•(cid:2)
•(cid:2)
•(cid:2)
alleged environmental contamination, including releases of hazardous materials and odors;
sales and marketing practices, customer service agreements, prices and fees; and
federal and state wage and hour and other laws.
The timing of the final resolutions to these types of matters is often uncertain. Additionally, the possible outcomes or
resolutions to these matters could include adverse judgments or settlements, either of which could require substantial
payments, adversely affecting our liquidity.
We may experience adverse impacts on our reported results of operations as a result of adopting new accounting
standards or interpretations.
Our implementation of and compliance with changes in accounting rules, including new accounting rules and
interpretations, could adversely affect our reported financial position or operating results or cause unanticipated
fluctuations in our reported operating results in future periods.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our principal executive offices are in Houston, Texas, where we occupy approximately 345,000 square feet under
leases expiring through 2020. We plan to relocate our principal executive offices within Houston, Texas during 2020. We
also have administrative offices in Arizona, Connecticut, Illinois and India. We own or lease real property in most locations
where we have operations or administrative functions. We have operations in all 50 states except Montana, the District of
Columbia and throughout Canada.
Our principal property and equipment consist of land (primarily landfills and other disposal facilities, transfer stations
and bases for collection operations), buildings, vehicles and equipment. We believe that our operating properties, vehicles
and equipment are adequately maintained and sufficient for our current operations. However, we expect to continue to
make investments in additional property and equipment for expansion, for the replacement of aging assets and investment
in assets that support our strategy of continuous improvement through efficiency and innovation. For more information,
see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included within this
report.
The following table summarizes our various operations as of December 31:
Landfills owned or operated (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Material recovery facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2018
249
302
103
252
314
102
(a)(cid:2) As of December 31, 2019 and 2018, our landfills owned or operated consisted of total acreage of 159,080 and 157,369;
permitted acreage of 42,992 and 42,730; and expansion acreage of 795 and 944, respectively. Total acreage includes
29
permitted acreage, expansion acreage, other acreage available for future disposal that has not been permitted, buffer
land and other land. Permitted acreage consists of all acreage at the landfill encompassed by an active permit to dispose
of waste. Expansion acreage consists of unpermitted acreage where the related expansion efforts meet our criteria to
be included as expansion airspace. A discussion of the related criteria is included within Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates and
Assumptions included within this report.
Item 3. Legal Proceedings.
Information regarding our legal proceedings can be found under the Environmental Matters and Litigation sections
of Note 11 to the Consolidated Financial Statements included within this report.
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 annual report.
30
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “WM.” The number of
holders of record of our common stock on February 7, 2020 was 8,712.
The graph below shows the relative investment performance of Waste Management, Inc. common stock, the
S&P 500 Index and the Dow Jones Waste & Disposal Services Index for the last five years, assuming reinvestment of
dividends at date of payment into the common stock. The graph is presented pursuant to SEC rules and is not meant to be
an indication of our future performance.
(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:3)(cid:10)(cid:11)(cid:3)(cid:12)(cid:11)(cid:2)(cid:13)(cid:4)(cid:13)(cid:14)(cid:6)(cid:15)(cid:8)(cid:16)(cid:17)(cid:11)(cid:18)(cid:8)(cid:16)(cid:17)(cid:11)(cid:19)(cid:17)(cid:6)(cid:7)(cid:11)(cid:20)(cid:3)(cid:15)(cid:6)(cid:14)(cid:11)(cid:21)(cid:17)(cid:15)(cid:13)(cid:7)(cid:10)(cid:11)
(cid:3)(cid:8)(cid:4)(cid:4)
(cid:15)(cid:16)(cid:17)(cid:18)(cid:19)(cid:2)(cid:20)(cid:16)(cid:21)(cid:16)(cid:22)(cid:19)(cid:23)(cid:19)(cid:21)(cid:18)(cid:24)(cid:2)(cid:25)(cid:21)(cid:26)(cid:27)
(cid:3)(cid:7)(cid:5)(cid:4)
(cid:28)(cid:29)(cid:30)(cid:2)(cid:5)(cid:4)(cid:4)(cid:2)(cid:25)(cid:21)(cid:31)(cid:19)
!"#(cid:2)$"(cid:21)(cid:19)(cid:17)(cid:2)(cid:15)(cid:16)(cid:17)(cid:18)(cid:19)(cid:2)(cid:29)(cid:2)!%(cid:17)&"(cid:17)(cid:16)’(cid:2)(cid:28)(cid:19)()%(cid:26)(cid:19)(cid:17)(cid:2)(cid:25)(cid:21)(cid:31)(cid:19)
(cid:3)(cid:7)(cid:4)(cid:4)
(cid:3)(cid:6)(cid:5)(cid:4)
(cid:3)(cid:6)(cid:4)(cid:4)
(cid:3)(cid:5)(cid:4)
(cid:3)(cid:4)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:10)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:5)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:11)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:12)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:13)
(cid:6)(cid:7)(cid:9)(cid:8)(cid:6)(cid:9)(cid:6)(cid:14)
Waste Management, Inc. . . . . . . . . . . . . . . . . . . . . $
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Dow Jones Waste & Disposal Services Index . . . . $
12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19
250
146 $
174
114 $
200
126 $
192 $
132 $
148 $
182 $
138 $
148 $
107 $
101 $
104 $
100 $
100 $
100 $
The Company repurchases shares of its common stock as part of capital allocation programs authorized by our Board
of Directors. In December 2019, we publicly confirmed that the Company has $1.32 billion remaining on its existing Board
of Directors’ authorization for future share repurchases. During 2019, we repurchased an aggregate of $244 million of our
common stock under accelerated share repurchase agreements and open market repurchases, which equated to 2.3 million
shares with a weighted average price per share of $108.60. See Note 14 to the Consolidated Financial Statements for
additional information.
Any future share repurchases will be made at the discretion of management and will depend on various factors
including our net earnings, financial condition and cash required for future business plans, growth and acquisitions.
31
Item 6. Selected Financial Data.
The information below was derived from the audited Consolidated Financial Statements included within this report
and in previous annual reports we filed with the SEC. This information should be read together with those Consolidated
Financial Statements and the notes thereto. These historical results are not necessarily indicative of the results to be
expected in the future.
Years Ended December 31,
2019(a)
2018(a)
(In Millions, Except per Share Amounts)
2017(a)
2016
2015
Statement of Operations Data:
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,455 $ 14,914 $ 14,485 $ 13,609 $ 12,961
752
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
753
Net income attributable to Waste Management, Inc. . . . . . . . . .
1.66
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . .
1.65
Balance Sheet Data:
Working capital (deficit) (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,065 $
Total assets (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, including current portion . . . . . . . . . . . . . . . . .
Total Waste Management, Inc. stockholders’ equity . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(165)
20,367
8,929
5,345
5,367
20,859
9,310
5,297
5,320
22,650
10,026
6,275
6,276
21,829
9,491
6,019
6,042
27,743
13,498
7,068
7,070
1,180
1,182
2.66
2.65
1,923
1,925
4.49
4.45
1,949
1,949
4.44
4.41
1,671
1,670
3.93
3.91
(463) $ (568) $
(418) $
(a)(cid:2) For more information see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
(b)(cid:2) For disclosures associated with the impact of the adoption of new accounting standards on the comparability of this
information, see Note 2 to the Consolidated Financial Statements included in this report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section includes a discussion of our results of operations for the three years ended December 31, 2019. This
discussion may contain forward-looking statements that anticipate results based on management’s plans that are subject
to uncertainty. We discuss in more detail various factors that could cause actual results to differ materially from
expectations in Item 1A. Risk Factors. The following discussion should be read considering those disclosures and together
with the Consolidated Financial Statements and the notes thereto.
Overview
We are North America’s leading provider of comprehensive waste management environmental services. 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. 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. Additionally, we are a leading recycler
in North America, 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 our subsidiaries, we are also a leading developer,
operator and owner of landfill gas-to-energy facilities in the U.S.
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
32
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.
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 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. These factors generally correlate to volumes of waste
generated and impact our revenue. Negative economic conditions, in addition to competitor actions, can make it more
challenging to negotiate, renew or expand service contracts with acceptable margins and in addition, customers may reduce
their service needs. 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. Our operating expenses are directly impacted by volume levels; as volume
levels shift, due to economic and other factors, we must manage our network capacity and cost structure accordingly.
In 2019, we have benefited from a generally favorable macro-economic environment, including steady spending by
consumers and businesses, which have led to volume and gross margin growth. We experienced growth in our collection
and disposal lines of business, particularly in the segments of our business driven by the consumer portion of the economy.
Volume growth is also the result of proactive efforts taken to work with our customers as their needs expand to identify
service upgrade opportunities. Overall in 2019, our landfill volumes were favorably impacted by growth in our municipal
solid waste business, clean-up efforts from natural disasters in California during 2019 and event-driven projects. The
portion of our business driven by the industrial segment of the economy, such as special waste, continues to show growth,
although the pace of growth is starting to moderate as large industrial customers take a more cautious approach to awarding
work for special projects. Additionally, we continued our focus on developing a sustainable recycling business model that
meets customers’ environmental needs, but is also economically sustainable. Given pressures on the business from lower
market values for recycled commodities and higher contamination fees, we have been working to improve its financial
returns by driving a fee-based pricing model that addresses the cost of processing materials and the impact on our costs of
contamination. These efforts provided significant value to our 2019 results, though that value was more than offset by
continued declines in market prices for recycled commodities. We will continue to take steps necessary to improve
long-term profitability of our recycling line of business.
Overall, the Company’s operations performed well in 2019. We expect the Company’s industry-leading asset network
and strategic focuses on investing in people, technology and growth to drive continued growth in the year ahead.
33
Current Year Financial Results
During 2019, we continued to produce strong operating results from our collection and disposal business, driven by
favorable market conditions and our focus on delivering an outstanding customer experience and continuous improvement.
The Company continued its commitment to supporting both organic and inorganic growth during 2019, allocating
$1,818 million of available cash to capital expenditures and $527 million to the acquisition of solid waste businesses, of
which $6 million was recorded as cash flow from financing activities related to the timing of contingent consideration
paid. We also allocated $1,124 million to our shareholders during 2019 through dividends and common stock repurchases.
Key items of our 2019 financial results include:
•(cid:2) Revenues of $15,455 million for 2019 compared with $14,914 million in 2018, an increase of $541 million, or
3.6%. The increase is primarily attributable to (i) higher yield and volumes in our collection and disposal business
and (ii) acquisitions, net of divestitures, partially offset by lower market prices for recycling commodities;
•(cid:2) Operating expenses of $9,496 million in 2019, or 61.4% of revenues, compared with $9,249 million, or 62.0% of
revenues, in 2018. The $247 million increase is primarily attributable to higher volumes and cost inflation in the
current year period, partially offset by (i) decreased cost of goods sold primarily due to lower market prices for
recycling commodities and (ii) the favorable impact of a year-over-year increase in federal natural gas fuel credits;
•(cid:2) Selling, general and administrative expenses of $1,631 million in 2019, or 10.6% of revenues, compared with
$1,453 million, or 9.7% of revenues, in 2018. This increase of $178 million is primarily attributable to (i) higher
costs associated with planned investments in our people and technology; (ii) increased acquisition-related costs
and (iii) litigation reserves;
•(cid:2)
Income from operations of $2,706 million, or 17.5% of revenues, in 2019 compared with $2,789 million, or
18.7% of revenues, in 2018. Although 2019 benefited from strong operating results, primarily in our collection
and disposal business, and the favorable impact of a year-over-year increase in federal natural gas fuel credits,
cost inflation across various cost categories, costs associated with investments in our people and technology,
acquisition-related costs and goodwill impairments drove a reduction in income from operations as compared
with 2018. Additionally, 2018 was favorably impacted by net gains associated with the sale of certain collection
and disposal operations and certain ancillary operations, partially offset by the impairment of a landfill;
•(cid:2) Net income attributable to Waste Management, Inc. was $1,670 million, or $3.91 per diluted share, compared
with $1,925 million, or $4.45 per diluted share, in the prior year period. In addition to the decrease in income
from operations, the current year was impacted by (i) increased depreciation and amortization expense related to
new collection fleet and increased landfill volume; (ii) an $85 million loss on early extinguishment of debt; (iii) a
$52 million impairment charge related to our minority-owned investment in a waste conversion technology
business that was not deductible for tax purposes and (iv) a $27 million impairment of goodwill. Additionally,
the prior year period was favorably impacted by net gains associated with the sale of operations discussed above;
•(cid:2) Net cash provided by operating activities was $3,874 million compared with $3,570 million in the prior year
period; and
•(cid:2) Free cash flow was $2,105 million compared with $2,084 million in the prior year period. The increase in cash
flow provided by operating activities noted above was offset by an increase in capital expenditures resulting from
our intentional focus on accelerating certain collection fleet and landfill spending to support the Company’s strong
collection and disposal growth and lower proceeds from divestitures, which resulted in free cash flow being
$21 million higher on a year-over-year basis. Free cash flow is a non-GAAP measure of liquidity. Refer to Free
Cash Flow within Liquidity and Capital Resources 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.
34
Results of Operations
Operating Revenues
Our operating revenues set forth below 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. We also provide additional services that are not managed through our Solid Waste business, including both
our WMSBS and EES organizations, recycling brokerage services, landfill gas-to-energy services and certain other
expanded service offerings and solutions.
The mix of operating revenues from our major lines of business is reflected in the table below for the years ended
December 31 (in millions):
2019
2018
2017
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,229 $ 3,972 $ 3,714
2,528
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,583
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
439
Other collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,264
Total collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,370
Landfill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,591
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,432
Recycling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,713
(2,885)
Intercompany (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,455 $ 14,914 $ 14,485
2,529
2,773
450
9,724
3,560
1,711
1,293
1,736
(3,110)
2,613
2,916
482
10,240
3,846
1,820
1,040
1,758
(3,249)
(a)(cid:2) The “Other” line of business includes (i) our WMSBS organization; (ii) our landfill gas-to-energy operations;
(iii) certain services within our EES organization, 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, net of intercompany activity. Activity related to collection, landfill, transfer and recycling has
been reclassified to the appropriate line of business for purposes of presentation.
(b)(cid:2) Intercompany revenues between lines of business are eliminated in the Consolidated Financial Statements included
within this report.
35
The following table provides details associated with the period-to-period change in revenues and average yield for the
years ended December 31 (dollars in millions):
2019 vs. 2018
2018 vs. 2017
As a % of
Related
As a % of
Total
As a % of
Related
As a % of
Total
Amount Business(a) Amount Company(b) Amount Business(a) Amount Company(b)
Collection and disposal . . . . . $ 364
Recycling commodities (c) . . (248)
Fuel surcharges and
mandated fees . . . . . . . . . . . (22)
Total average yield (d) . . .
Volume . . . . . . . . . . . . . . .
Internal revenue growth . .
Acquisitions . . . . . . . . . . .
Divestitures . . . . . . . . . . . .
Foreign currency
translation and other . . .
Total . . . . . . . . . . . . . . .
2.8 %
(20.0)
(3.5)
$ 291
(273)
2.3 %
(19.1)
111
21.3
$
94
346
440
222
(104)
(17)
$ 541
0.6 %
2.3
2.9
1.5
(0.7)
(0.1)
3.6 %
$ 129
478
607
199
(133)
(244)
$ 429
0.9 %
3.3
4.2
1.4
(0.9)
(1.7)
3.0 %
(a)(cid:2) Calculated by dividing the increase or decrease for the current year by the prior year’s related business revenue
adjusted to exclude the impacts of divestitures for the current year.
(b)(cid:2) Calculated by dividing the increase or decrease for the current year by the prior year’s total Company revenue adjusted
to exclude the impacts of divestitures for the current year.
(c)(cid:2) Includes net impact of commodity price variability and changes in fees.
(d)(cid:2) The amounts reported herein represent the changes in our revenue attributable to average yield for the total Company.
The following provides further details about our period-to-period change in revenues:
Average Yield
Collection and Disposal Average Yield — This measure reflects the effect on our revenue from the pricing activities
of our collection, transfer and landfill operations, exclusive of volume changes. Revenue growth from collection and
disposal average yield includes not only base rate changes and environmental and service fee increases, 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.
The details of our revenue growth from collection and disposal average yield for the years ended December 31 are as
follows (dollars in millions):
2019 vs. 2018
2018 vs. 2017
As a % of
Related
Amount (cid:2) (cid:2)(cid:2)(cid:2) Business
As a % of
Related
Amount (cid:2) (cid:2)(cid:2)(cid:2) Business
3.0 %(cid:2)(cid:2) $
4.0
3.3
3.3
2.0
2.9
2.8 %(cid:2)(cid:2) $
99
107
47
253
22
16
291
2.9 %
4.4
1.9
2.9
1.1
1.9
2.3 %
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landfill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total collection and disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
109
103
81
293
44
27
364
36
Our strategic pricing efforts focus on ensuring we overcome inflationary cost pressures and grow margins. This
strategy has been most successful in our collection line of business for both 2019 and 2018. We are also experiencing solid
growth in our landfill and transfer businesses, with our municipal solid waste business experiencing 3.8% and 2.2%
average yield growth for the years ended December 31, 2019 and 2018, respectively, as compared with the prior year
periods.
Recycling Commodities — Decreases in the market prices for recycling commodities resulted in revenue declines of
$248 million and $273 million for the years ended December 31, 2019 and 2018, respectively, as compared with the prior
year periods. We partially offset our revenue decline by assessing fees to cover the higher costs of handling contaminated
recycling materials. Average market prices for recycling commodities at the Company’s facilities were 35% lower in 2019
compared to 2018 and 40% lower in 2018 compared to 2017. We have seen a decreased demand from paper mills around
the world which had driven prices to historical low averages. There are several domestic mill projects anticipated to start
during 2020 that we expect will add additional capacity and more local demand for recycled materials. However, we do
not expect material changes in market prices for recycling commodities as a result of this additional capacity. The
cardboard packaging industry has been impacted by slower global demand, retail store closures and e-commerce packaging
efficiency. We will continue to take steps necessary to improve long-term profitability of our recycling line of business.
Fuel Surcharges and Mandated Fees — These fees, which are predominantly generated by our fuel surcharge
program, declined $22 million for 2019 and increased $111 million for 2018, 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. Market
prices for diesel fuel decreased approximately 4% and increased 20% for the years ended December 31, 2019 and 2018,
respectively, compared with the prior year periods. The decline in fuel surcharges for 2019 was partially offset by an
increase in mandated fees. 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.
Volume
Our revenues from volume increased $346 million, or 2.3%, and $478 million, or 3.3%, for the years ended
December 31, 2019 and 2018, respectively, as compared with the prior year periods, excluding volumes from acquisitions
and divestitures.
We experienced higher volumes throughout 2019 and 2018 due to our focus on customer service and disciplined
growth, combined with favorable market conditions in our collection and disposal business. We have experienced
significant volume growth with existing customers, particularly in our commercial collection business as a result of
proactive efforts taken to work with our customers as their needs expand to identify service upgrade opportunities. Our
event-driven projects in our special waste business and growth in our municipal solid waste business contributed to our
landfill volume growth in both 2019 and 2018. Additionally, a large contract executed in the second half of 2017 increased
volume at our transfer stations for 2018, with incremental volume additions during 2018 that favorably impacted our
volumes in 2019. Furthermore, our WMSBS organization experienced favorable volume growth in both 2019 and 2018.
The clean-up efforts of natural disasters throughout the U.S. in the first half of 2019 also contributed to volume growth
in 2019. However, volume decline from our recycling brokerage services negatively impacted our volume growth in 2019.
Additionally, a volume increase from our recycling brokerage services affected the comparability of volumes for 2018 and
2017.
Foreign Currency Translation and Other
Fluctuations in foreign currency affect revenues from our Canadian operations. Additionally, 2018 was unfavorably
impacted by a revenue decline associated with the adoption of ASU 2014-09.
37
Operating Expenses
Our operating expenses are comprised of (i) labor and related benefits costs (excluding labor costs associated with
maintenance and repairs discussed below), which include salaries and wages, bonuses, related payroll taxes, insurance and
benefits costs and the costs associated with contract labor; (ii) transfer and disposal costs, which include tipping fees paid
to third-party disposal facilities and transfer stations; (iii) maintenance and repairs costs relating to equipment, vehicles
and facilities and related labor costs; (iv) subcontractor costs, which include the costs of independent haulers who transport
waste collected by us to disposal facilities and are affected by variables such as volumes, distance and fuel prices; (v) costs
of goods sold, which includes the cost to purchase recycling materials for our recycling line of business, including certain
rebates paid to suppliers; (vi) fuel costs, which represent the costs of fuel and oil to operate our truck fleet and landfill
operating equipment; (vii) disposal and franchise fees and taxes, which include landfill taxes, municipal franchise fees,
host community fees, contingent landfill lease payments and royalties; (viii) landfill operating costs, which include interest
accretion on landfill liabilities, interest accretion on and discount rate adjustments to environmental remediation liabilities
and recovery assets, leachate and methane collection and treatment, landfill remediation costs and other landfill site costs;
(ix) risk management costs, which include general liability, automobile liability and workers’ compensation claims
programs costs and (x) other operating costs, which include gains and losses on sale of assets, telecommunications,
equipment and facility lease expenses, property taxes, utilities and supplies. Variations in volumes year-over-year, as
discussed above in Operating Revenues, in addition to cost inflation, affect the comparability of the components of our
operating expenses.
The following table summarizes the major components of our operating expenses for the years ended
December 31 (dollars in millions and as a percentage of revenues):
2019
2018
2017
Labor and related benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,791 18.0 % $ 2,703 18.1 % $ 2,500 17.2 %
Transfer and disposal costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subcontractor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposal and franchise fees and taxes . . . . . . . . . . . . . . . . . . .
Landfill operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4
8.4
9.2
5.3
2.7
4.0
2.2
1.6
3.1
61.4 % $ 9,249 62.0 % $ 9,021 62.3 %
1,160
1,355
1,532
553
336
627
379
267
496
$ 9,496
996
1,170
1,236
969
375
753
328
219
475
1,105
1,255
1,375
783
409
598
331
235
455
7.5
8.8
9.9
3.6
2.2
4.1
2.4
1.7
3.2
6.9
8.1
8.5
6.7
2.6
5.2
2.3
1.5
3.3
Significant items affecting the comparison of operating expenses between reported periods include:
Labor and Related Benefits — The increase in labor and related benefits costs in 2019 as compared with 2018 was
driven by (i) volume growth in our collection and disposal business; (ii) merit increases and (iii) cost inflation noted above.
These cost increases were offset, in part, by lower bonus costs related to a one-time plan established in early 2018 targeted
at improving employee retention. The increase in labor and related benefits costs in 2018 as compared with 2017 was
driven by (i) volume growth in our collection line of business; (ii) the one-time bonus plan established in early 2018 and
(iii) merit increases.
Transfer and Disposal Costs — The increase in transfer and disposal costs in 2019 as compared with 2018, and 2018
as compared with 2017, was driven by overall volume growth in our collection and disposal business and, to a lesser
extent, cost inflation.
Maintenance and Repairs — The increase in maintenance and repairs costs in 2019 as compared with 2018 was
largely driven by (i) cost inflation noted above which primarily impacted labor, parts, third-party services, tires and
building costs and (ii) a $16 million non-cash charge to write off certain equipment costs related to our Other segment.
38
The increase in maintenance and repairs costs in 2018 as compared with 2017 was primarily driven by (i) higher labor
costs from volume growth and cost inflation and (ii) higher third-party service and parts costs.
Subcontractor Costs — The increase in subcontractor costs in 2019 as compared to 2018 was primarily driven by
(i) volume growth in our collection and disposal business, largely attributable to a significant contract executed in the
second half of 2017 that generated incremental volumes in 2019; (ii) volume growth in our WMSBS and EES
organizations and (iii) cost inflation related to capacity constraints of our subcontractors in certain markets. The increase
in 2018 as compared to 2017 was driven primarily by volume growth in our collection and disposal business.
Cost of Goods Sold — The decrease in cost of goods sold in 2019 as compared with 2018 was primarily driven by
lower market prices for recycling commodities and by lower costs due to the sale of certain ancillary operations in the
second quarter of 2018. The decrease in cost of goods sold in 2018 as compared with 2017 was primarily driven by
(i) lower market prices for recycling commodities and (ii) a change in accounting for certain customer rebates due to the
adoption of ASU 2014-09 in 2018.
Fuel — The decrease in fuel costs in 2019 as compared with 2018 was due to (i) recognition of a $70 million benefit
from the extension of federal natural gas fuel credits in 2019 compared to $28 million in 2018; (ii) lower costs resulting
from the continued conversion of our fleet to natural gas vehicles and (iii) lower market prices for diesel fuel. The increase
in fuel costs in 2018 as compared with 2017 was due to higher market prices for diesel fuel, partially offset by the
recognition of a $28 million benefit from the extension of federal natural gas fuel credits.
Disposal and Franchise Fees and Taxes — The increase in disposal and franchise fees and taxes in 2019 as compared
with 2018 was primarily related to higher volumes in our landfill line of business. The decrease in disposal and franchise
fees and taxes in 2018 as compared with 2017 was driven by the adoption of ASU 2014-09 in 2018; specifically, certain
franchise fees were treated as disposal fees and taxes in the prior year periods and beginning in 2018, were treated as a
reduction in operating revenues in the current year period.
Landfill Operating Costs — The increase in landfill operating costs in 2019 as compared with 2018 was primarily due
to higher leachate management costs driven largely by inclement weather in certain parts of North America and increased
ongoing site maintenance costs. Additionally, 2019 was impacted by a decrease in the risk-free discount rate used in the
measurement of our environmental remediation obligations and recovery assets due to a decrease in U.S. treasury rates.
See Note 4 to the Consolidated Financial Statements for additional information.
Risk Management — The increase in risk management costs in 2019 as compared with 2018 was primarily due to an
increase in claims expense as a result of growth in the business and cost inflation. The increase in risk management costs
in 2018 as compared with 2017 was primarily due to an increase in claims expense.
Other — Net gains on sales of certain assets in 2018 impacted the comparability of the reported periods.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist of (i) labor and related benefits costs, which include salaries,
bonuses, related insurance and benefits, contract labor, payroll taxes and equity-based compensation; (ii) professional fees,
which include fees for consulting, legal, audit and tax services; (iii) provision for bad debts, which includes allowances
for uncollectible customer accounts and collection fees and (iv) other selling, general and administrative expenses, which
include, among other costs, facility-related expenses, voice and data telecommunication, advertising, bank charges,
computer costs, travel and entertainment, rentals, postage and printing. In addition, the financial impacts of litigation
reserves generally are included in our “Other” selling, general and administrative expenses.
39
The following table summarizes the major components of our selling, general and administrative expenses for
the years ended December 31 (dollars in millions and as a percentage of revenues):
2019
Labor and related benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,020
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
183
38
390
$ 1,631
2018
2017
6.6 % $ 957 6.4 % $ 1,000 6.9 %
113
1.2
53
0.3
2.5
330
10.6 % $ 1,453
102
0.8
42
0.3
2.2
324
9.7 % $ 1,468
0.7
0.3
2.2
10.1 %
Significant items affecting the comparison of our selling, general and administrative expenses between reported
periods include:
Labor and Related Benefits — The increase in labor and related benefits costs in 2019 compared with 2018 was
primarily due to (i) an increase in headcount, merit increases and higher incentive compensation and (ii) increased contract
labor costs driven by our planned investments in technology. The decrease in labor and related benefits costs in 2018
compared with 2017 was primarily due to (i) lower incentive compensation accruals in 2018 and (ii) severance costs for
former executives incurred in 2017, which were partially offset by merit increases and a one-time bonus plan established
in early 2018 targeted at improving employee retention.
Professional Fees — The increase in professional fees in 2019 compared with 2018 was primarily driven by higher
consulting fees related to our strategic investments in operating, customer facing and back-office technologies, as well as
costs incurred in preparation for our pending acquisition of Advanced Disposal Services, Inc. (“Advanced Disposal”). The
increase in professional fees in 2018 compared with 2017 was primarily due to the investments we are making in
technology and higher legal fees.
Provision for Bad Debts — The decrease in provision for bad debts in 2019 compared with 2018 was due to
(i) collection of certain fully reserved receivables and (ii) higher prior year bad debt expense associated with the
bankruptcy of a strategic customer. The increase in provision of bad debts in 2018 compared with 2017 was primarily due
to increased revenues and the bankruptcy of a strategic customer.
Other — The increase in other expenses in 2019 compared with 2018 was principally driven by higher litigation
reserves and increased infrastructure costs associated with our investments in technology. The increase in other expenses
in 2018 compared with 2017 was primarily due to higher litigation reserves in 2018, which were partially offset by lower
costs associated with advertising and travel and entertainment as we continued to focus on controlling costs.
Depreciation and Amortization Expenses
The following table summarizes the components of our depreciation and amortization expenses for the years ended
December 31 (dollars in millions and as a percentage of revenues):
2019
2018
2017
Depreciation of tangible property and equipment . . . . . . . . . . . . $ 893 5.8 % $ 838 5.6 % $ 783 5.4 %
Amortization of landfill airspace . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
497
96
$ 1,574 10.2 % $ 1,477 9.9 % $ 1,376
3.4
0.7
9.5 %
538
101
575
106
3.6
0.7
3.7
0.7
The increase in depreciation of tangible property and equipment during the reported periods was primarily related to
higher capital expenditures due to an intentional focus on accelerating certain fleet and landfill spending to support the
Company’s strong collection and disposal growth. The increase in amortization of landfill airspace during the reported
periods was driven by higher volumes at our landfills and changes in landfill estimates.
40
(Gain) Loss from Divestitures, Asset Impairments and Unusual Items, Net
The following table summarizes the major components of (gain) loss from divestitures, asset impairments and unusual
items, net for the years ended December 31 (in millions):
(Gain) loss from divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2019
2018
2017
— $
42
—
42 $
(96) $
38
—
(58) $
(38)
41
(19)
(16)
During the year ended December 31, 2019, we recognized asset impairments of $42 million, related to (i) $27 million
of goodwill impairment charges, as discussed further in Note 6, of which $17 million related to our EES organization and
$10 million related to our LampTracker® reporting unit and (ii) $15 million of asset impairment charges primarily related
to certain solid waste operations.
During the year ended December 31, 2018, we recognized net gains of $58 million, primarily related to (i) a
$52 million gain associated with the sale of certain collection and disposal operations in Tier 1 and (ii) net gains of
$44 million substantially all from divestitures of certain ancillary operations. These gains were partially offset by (i) a
$30 million charge to impair a landfill in Tier 3 based on an internally developed discounted projected cash flow analysis,
taking into account continued volume decreases and revised capping cost estimates and (ii) $8 million of impairment
charges primarily related to our LampTracker® reporting unit.
During the year ended December 31, 2017, we recognized net gains of $16 million, primarily related to (i) gains of
$31 million from the sale of certain oil and gas producing properties and (ii) a $30 million reduction in post-closing,
performance-based contingent consideration obligations associated with an acquired business in our EES organization.
These gains were partially offset by (i) $34 million of goodwill impairment charges primarily related to our EES
organization; (ii) $11 million of charges to adjust our subsidiary’s estimated potential share of an environmental
remediation liability and related costs for a closed site in Harris County, Texas, as discussed in Note 11 to the Consolidated
Financial Statements and (iii) $7 million of charges to write down certain renewable energy assets.
See Note 3 to the Consolidated Financial Statements for additional information related to the accounting policy and
analysis involved in identifying and calculating impairments.
41
Income from Operations
The following table summarizes income from operations for the years ended December 31 and has been updated to
reflect our realigned segments which are discussed further in Note 20 to the Consolidated Financial Statements (dollars in
millions):
2019
Period-to-
Period
Change
Period-to-
Period
Change
2018
2017
Solid Waste:
Tier 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tier 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solid Waste . . . . . . . . . . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other (b) . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Percentage of revenues . . . . . . . . . . . . . . . . . .
$
1,682
854
1,136
3,672
(203)
(763)
2,706
$
17.5 %
63
70
144
277
(137)
(223)
(83)
3.9 % $ 1,619 $ 113 7.5 % $ 1,506
7 0.9
8.9
777
(14) (1.4)
1,006
14.5
106 3.2
3,289
8.2
(68)
2 (2.9)
*
41.3
(585)
(7.7)
45
(3.0)% $ 2,789 $ 153 5.8 % $ 2,636
784
992
3,395
(66)
(540)
18.7 %
18.2 %
* Percentage change does not provide a meaningful comparison.
(a)(cid:2) “Other” includes (i) our WMSBS organization; (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 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)(cid:2) 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. “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.
Solid Waste — The most significant items affecting the results of operations of our Solid Waste business during the
three years ended December 31, 2019 are summarized below:
The following items affected both comparable periods:
•(cid:2)
•(cid:2)
Income from operations for our collection and disposal business continued to see strong operating results,
primarily driven by (i) internal revenue growth; (ii) acquisitions and divestitures and (iii) decreased fuel costs due
in part to a year-over-year increase in federal natural gas fuel credits.
However, the following items negatively impacted our results from operations and resulted in lower income from
operations in 2019 when compared with 2018:
(i) higher operating costs, driven by increased volumes, higher depreciation related to new collection fleet and
higher labor, maintenance and repair costs; (ii) lower recycling commodity prices and (iii) asset impairments.
The 2018 period was favorably impacted by net gains associated with the sale of certain collection and disposal
operations in our Tier 1 segment, partially offset by the impairment of a landfill in our Tier 3 segment.
In addition, the following items affected 2018 when compared with 2017:
•(cid:2) Our income from operations for our Solid Waste business benefited from certain federal natural gas fuel credits
in the first quarter of 2018 and was negatively impacted by (i) lower market prices for recycling commodities;
(ii) higher operating costs, including a one-time bonus plan established in early 2018 targeted at improving
42
employee retention and (iii) increased depreciation and amortization expenses to support growth of our business.
During 2018, Tier 1 also benefited from net gains associated with the sale of certain collection and disposal
operations and Tier 3 was negatively impacted by an impairment of a landfill.
Other — In 2019 compared with 2018, lower income from operations is a result of (i) net gains from divestitures of
certain ancillary operations in the prior year period of $44 million; (ii) $27 million of goodwill impairment charges, of
which $17 million related to our EES organization and $10 million related to our LampTracker® reporting unit; (iii) lower
commodity prices in 2019 associated with our WM Renewable Energy organization; (iv) a $16 million non-cash charge
to write off certain equipment costs in 2019 and (v) an increase in claims expense as a result of growth in the business and
cost inflation. In 2018 compared with 2017, our Other segment benefited from net gains from divestitures of certain
ancillary operations and improved results in our EES and WM Renewable Energy organizations, partially offset by higher
risk management costs. Our 2017 results were also favorably affected by a reduction in contingent consideration
obligations in our EES organization.
Corporate and Other — The most significant items affecting the results of operations for Corporate and Other during
the three years ended December 31, 2019 are summarized below:
The following items affected 2019 when compared with 2018:
•(cid:2) The decrease in income from operations was driven by increased expenses as a result of (i) higher consulting
fees, largely due to the investments we are making in operating, customer facing and back-office technologies;
(ii) higher litigation reserves; (iii) preparation for our pending acquisition of Advanced Disposal and
(iv) a decrease in the risk-free discount rate used in the measurement of our environmental remediation
obligations and recovery assets in 2019. Additionally, we recognized higher incentive compensation costs during
2019.
In addition, the following items affected 2018 when compared with 2017:
•(cid:2) Decreased expenses in 2018 as a result of lower incentive compensation costs and severance costs for former
executives incurred in 2017, and to a lesser extent, charges in 2017 to adjust our subsidiary’s estimated potential
share of an environmental remediation liability and related costs for a closed site in Harris County, Texas. These
decreases were offset, in part, by higher professional fees primarily due to investments in technology.
Interest Expense, Net
Our interest expense, net was $411 million, $374 million and $363 million in 2019, 2018 and 2017, respectively. The
increase in 2019 is primarily attributable to our May 2019 issuance of $4.0 billion senior notes, partially offset by related
increases in interest income as a result of higher cash and cash equivalents balances. These items are discussed further
below in Liquidity and Capital Resources.
Loss on Early Extinguishment of Debt
In May 2019, WM issued $4.0 billion 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 million of
the net proceeds from the newly issued senior notes to retire $257 million of certain high-coupon senior notes. The cash
paid 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 Consolidated Statement of Operations, and $3 million of accrued interest. The principal
amount of senior notes redeemed within each series was as follows:
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
$304 million of WM Holdings 7.10% senior notes due 2026, of which $56 million were tendered;
$395 million of WM 7.00% senior notes due 2028, of which $64 million were tendered;
$139 million of WM 7.375% senior notes due 2029, of which $58 million were tendered;
$210 million of WM 7.75% senior notes due 2032, of which $57 million were tendered; and
$274 million of WM 6.125% senior notes due 2039, of which $22 million were tendered.
43
In the third quarter of 2019, we elected to refund and reissue $99 million of tax-exempt bonds, which resulted in the
recognition of a $1 million loss on early extinguishment of debt in our Consolidated Statement of Operations.
Equity in Net Losses of Unconsolidated Entities
We recognized equity in net losses of unconsolidated entities of $55 million, $41 million and $68 million in 2019,
2018 and 2017, respectively. The losses for each period are primarily related to our noncontrolling interests in entities
established to invest in and manage low-income housing properties and a refined coal facility. We generate tax benefits,
including tax credits, from the losses incurred from these investments, which are discussed further in Note 9 to the
Consolidated Financial Statements. The amount in 2017 includes impairment charges of $29 million to write down equity
method investments in waste diversion technology companies to their estimated fair values.
Other, Net
We recognized other, net expense of $50 million and $8 million in 2019 and 2017, respectively, compared to other,
net income of $2 million in 2018. In 2019, we recognized a $52 million 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 recent third-party investor’s transactions in securities of this business. 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). The expense for
2017 was impacted by impairment charges of $11 million related to other-than-temporary declines in the value of
minority-owned investments in waste diversion technology companies.
Income Tax Expense
We recorded income tax expense of $434 million, $453 million and $242 million in 2019, 2018 and 2017 respectively,
resulting in effective income tax rates of 20.6%, 19.0% and 11.0% for the years ended December 31, 2019, 2018 and 2017,
respectively. The comparability of our income tax expense for the reported periods has been primarily affected by the
following:
•(cid:2)
Investments Qualifying for Federal Tax Credits – Our low-income housing properties and refined coal facility
investments reduced our income tax expense by $96 million, $57 million and $51 million, primarily due to tax
credits realized from these investments for the years ended December 31, 2019, 2018 and 2017, respectively. See
Note 19 for additional information related to these unconsolidated variable interest entities.
•(cid:2) Equity-Based Compensation — During 2019, 2018 and 2017, we recognized excess tax benefits related to the
vesting or exercise of equity-based compensation awards resulting in a reduction in our income tax expense of
$25 million, $17 million and $37 million, respectively.
•(cid:2) Adjustments to Accruals and Deferred Taxes — Adjustments to our accruals and deferred taxes due to the filing
of our income tax returns, analysis of our deferred tax balances and changes in state and foreign laws resulted in
a reduction in our income tax expense of $22 million, $52 million and $5 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
•(cid:2) Tax Audit Settlements — We file income tax returns in the U.S. and Canada, as well as other state and local
jurisdictions. We are currently under audit by various taxing authorities and our audits are in various stages of
completion. During the reported periods, we settled various tax audits, which resulted in a reduction in our income
tax expense of $2 million, $40 million and $2 million for the years ended December 31, 2019, 2018 and 2017,
respectively.
•(cid:2) Enactment of Tax Reform — In accordance with applicable accounting guidance, the Company recognized the
provisional tax impacts and subsequent measurement period adjustments related to the remeasurement of our
deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation of
previously tax-deferred and unremitted foreign earnings, resulting in a reduction in our income tax expense of
$12 million and $529 million for the years ended December 31, 2018 and 2017, respectively.
44
See Note 9 to the Consolidated Financial Statements for more information related to income taxes.
Landfill and Environmental Remediation Discussion and Analysis
We owned or operated 244 solid waste landfills and five secure hazardous waste landfills as of December 31, 2019
and 247 solid waste and five secure hazardous waste landfills as of December 31, 2018. For these landfills, the following
table reflects changes in capacity, as measured in tons of waste, for the years ended December 31 and remaining airspace,
measured in cubic yards of waste, as of December 31 (in millions):
Balance as of beginning of year (in tons) . . . . . . . . . . . .
Acquisitions, divestitures, newly permitted landfills
2019
(cid:2)
Expansion
Remaining
Permitted
Capacity Capacity Capacity Capacity Capacity Capacity
4,985
Remaining
Permitted Expansion
4,762
4,982
4,799
220
186
(cid:2)
Total
(cid:2)
Total
2018
(cid:2)
and closures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in expansions pursued (a) . . . . . . . . . . . . . . . . .
Expansion permits granted (b) . . . . . . . . . . . . . . . . . . . . .
Tons received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in engineering estimates and other (c) . . . . . . .
Balance as of end of year (in tons) . . . . . . . . . . . . . . . . . .
Balance as of end of year (in cubic yards) . . . . . . . . . . . .
27
—
57
(121)
29
4,754
4,694
—
36
(57)
—
1
200
166
27
36
—
(121)
30
4,954
4,860
5
—
42
(116)
32
4,762
4,735
—
72
(42)
—
4
220
194
5
72
—
(116)
36
4,982
4,929
(a)(cid:2) Amounts reflected here relate to the combined impacts of (i) new expansions pursued; (ii) increases or decreases in
the airspace being pursued for ongoing expansion efforts; (iii) adjustments for differences between the airspace being
pursued and airspace granted and (iv) decreases due to decisions to no longer pursue expansion permits, if any.
(b)(cid:2) We received expansion permits at seven of our landfills during 2019 and six of our landfills during 2018,
demonstrating our continued success in working with municipalities and regulatory agencies to expand the disposal
airspace of our existing landfills.
(c)(cid:2) Changes in engineering estimates can result in changes to the estimated available remaining airspace of a landfill or
changes in the utilization of such landfill airspace, affecting the number of tons that can be placed in the future.
Estimates of the amount of waste that can be placed in the future are reviewed annually by our engineers and are based
on a number of factors, including standard engineering techniques and site-specific factors such as current and
projected mix of waste type; initial and projected waste density; estimated number of years of life remaining; depth
of underlying waste; anticipated access to moisture through precipitation or recirculation of landfill leachate and
operating practices. We continually focus on improving the utilization of airspace through efforts that may include
recirculating landfill leachate where allowed by permit; optimizing the placement of daily cover materials and
increasing initial compaction through improved landfill equipment, operations and training.
The tons received at our landfills for the years ended December 31 are shown below (tons in thousands):
Solid waste landfills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 (a) 120,556
703
Hazardous waste landfills . . . . . . . . . . . . . . . . . . . . . . . . . .
121,259
5
249
# of
Sites
2019
Total
Tons
2018
Tons per
Tons per # of Total
Sites Tons
Day
443 247 115,972
739
5
446 252 116,711
3
Day
426
3
429
Solid waste landfills closed, divested or contract
expired during related year . . . . . . . . . . . . . . . . . . . . . . .
8
692
121,951 (b)
424
1
117,135 (b)
(a)(cid:2) In 2019, we acquired five landfills, we closed one landfill and seven landfills under contract either closed or the
contract expired.
45
(b)(cid:2) These amounts include 1.3 million tons and 1.5 million tons as of December 31, 2019 and 2018, respectively, that
were received at our landfills but were used for beneficial purposes and generally were redirected from the permitted
airspace to other areas of the landfill. Waste types that are frequently identified for beneficial use include green waste
for composting and clean dirt for on-site construction projects.
When a landfill we own or operate receives certification of closure from the applicable regulatory agency, we
generally transfer the management of the site, including any remediation activities, to our environmental legacy
management group. As of December 31, 2019, our environmental legacy management group managed 212 closed
landfills.
Based on remaining permitted airspace as of December 31, 2019 and projected annual disposal volume, the weighted
average remaining landfill life for all of our owned or operated landfills is approximately 39 years. Many of our landfills
have the potential for expanded airspace beyond what is currently permitted. We monitor the availability of permitted
airspace at each of our landfills and evaluate whether to pursue an expansion at a given landfill based on estimated future
disposal volume, disposal prices, construction and operating costs, remaining airspace and likelihood of obtaining an
expansion permit. We are seeking expansion permits at 15 of our landfills that meet the expansion criteria outlined in the
Critical Accounting Estimates and Assumptions — Landfills section below. Although no assurances can be made that all
future expansions will be permitted or permitted as designed, the weighted average remaining landfill life for all owned or
operated landfills is approximately 41 years when considering remaining permitted airspace, expansion airspace and
projected annual disposal volume.
The number of landfills owned or operated as of December 31, 2019, segregated by their estimated operating lives
based on remaining permitted and expansion airspace and projected annual disposal volume, was as follows:
0 to 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11 to 20 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21 to 40 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41+ years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
# of Landfills
27
16
39
65
102
249 (a)
(a)(cid:2) Of the 249 landfills, 207 are owned, 32 are operated under lease agreements and 10 are operated under other
contractual agreements. For the landfills not owned, we are usually responsible for final capping, closure and
post-closure obligations.
As of December 31, 2019, we have 14 landfills which are not currently accepting waste. During the year ended
December 31, 2019, we performed tests of recoverability for five of these landfills with an aggregate net recorded
capitalized landfill asset cost of $272 million, for which the undiscounted expected future cash flows resulting from our
probability-weighted estimation approach exceeded the carrying values. We did not perform recoverability tests for the
remaining nine landfills as the net recorded capitalized landfill asset cost was not material.
Landfill Assets — We capitalize various costs that we incur to prepare a landfill to accept waste. These costs generally
include expenditures for land (including the landfill footprint and required landfill buffer property), permitting, excavation,
liner material and installation, landfill leachate collection systems, landfill gas collection systems, environmental
monitoring equipment for groundwater and landfill gas, directly related engineering, capitalized interest, and on-site road
construction and other capital infrastructure costs. The cost basis of our landfill assets also includes estimates of future
costs associated with landfill final capping, closure and post-closure activities, which are discussed further below.
46
The changes to the cost basis of our landfill assets and accumulated landfill airspace amortization for the year ended
December 31, 2019 are reflected in the table below (in millions):
(cid:2)
(cid:2)
Cost Basis of
Accumulated
Landfill Airspace
(cid:2)
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2) Landfill Assets Amortization
December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Capital additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations incurred and capitalized . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of landfill airspace . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirements and other adjustments . . . . . . . . . . . . . . . . . . . . . .
December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,240 $
656
72
289
—
52
(399)
15,910 $
(9,157) $
—
—
—
(575)
(22)
428
(9,326) $
Landfill Assets
6,083
656
72
289
(575)
30
29
6,584
As of December 31, 2019, we estimate that we will spend approximately $600 million in 2020, and approximately
$1.3 billion in 2021 and 2022 combined, for the construction and development of our landfill assets. The specific timing
of landfill capital spending is dependent on future events and spending estimates are subject to change due to fluctuations
in landfill waste volumes, changes in environmental requirements and other factors impacting landfill operations.
Landfill and Environmental Remediation Liabilities — As we accept waste at our landfills, we incur significant asset
retirement obligations, which include liabilities associated with landfill final capping, closure and post-closure activities.
These liabilities are accounted for in accordance with authoritative guidance on accounting for asset retirement obligations
and are discussed in Note 3 to the Consolidated Financial Statements. We also have liabilities for the remediation of
properties that have incurred environmental damage, which generally was caused by operations or for damage caused by
conditions that existed before we acquired operations or a site. We recognize environmental remediation liabilities when
we determine that the liability is probable and the estimated cost for the likely remedy can be reasonably estimated.
The changes to landfill and environmental remediation liabilities for the year ended December 31, 2019 are reflected
in the table below (in millions):
December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations incurred and capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revisions in estimates and interest rate assumptions (a) (b) . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, divestitures and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Landfill
Environmental
Remediation
237
—
(22)
4
21
—
240
1,760 $
72
(113)
98
33
5
1,855 $
(a)(cid:2) The amount reported for our landfill liabilities includes revisions in estimates resulting primarily from changes in the
timing and amount of costs as well as changes in estimates of remaining airspace.
(b)(cid:2) The amount reported for our environmental remediation liabilities includes an increase of $11 million due to a
decrease in the risk-free discount rate used to measure our liabilities from 2.75% at December 31, 2018 to 1.75% at
December 31, 2019.
47
Landfill Operating Costs — The following table summarizes our landfill operating costs for the years ended
December 31 (in millions):
Interest accretion on landfill liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest accretion on and discount rate adjustments to environmental
remediation liabilities and recovery assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leachate and methane collection and treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landfill remediation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other landfill site costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2018
2017
98 $
95 $
92
13
173
4
91
(2)
150
13
75
3
143
14
76
328
Total landfill operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
379 $
331 $
Amortization of Landfill Airspace — Amortization of landfill airspace, which is included as a component of
depreciation and amortization expenses, includes the following:
•(cid:2)
•(cid:2)
the amortization of landfill capital costs, including (i) costs that have been incurred and capitalized and
(ii) estimated future costs for landfill development and construction required to develop our landfills to their
remaining permitted and expansion airspace; and
the amortization of asset retirement costs arising from landfill final capping, closure and post-closure obligations,
including (i) costs that have been incurred and capitalized and (ii) projected asset retirement costs.
Amortization expense is recorded on a units-of-consumption basis, applying cost as a rate per ton. The rate per ton is
calculated by dividing each component of the amortizable basis of a landfill (net of accumulated amortization) by the
number of tons needed to fill the corresponding asset’s remaining permitted and expansion airspace. Landfill capital costs
and closure and post-closure asset retirement costs are generally incurred to support the operation of the landfill over its
entire operating life and are, therefore, amortized on a per-ton basis using a landfill’s total permitted and expansion
airspace. Final capping asset retirement costs are related to a specific final capping event and are, therefore, amortized on
a per-ton basis using each discrete final capping event’s estimated permitted and expansion airspace. Accordingly, each
landfill has multiple per-ton amortization rates.
The following table presents our landfill airspace amortization expense on a per-ton basis for the years ended
December 31:
Amortization of landfill airspace (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Tons received, net of redirected waste (in millions) . . . . . . . . . . . . . . . . . . . . . . . . .
Average landfill airspace amortization expense per ton . . . . . . . . . . . . . . . . . . . . . . $
575
121
4.75
$
$
538 $
116
4.64 $
497
112
4.44
2019
2018
2017
Different per-ton amortization rates are applied at each of our 249 landfills, and per-ton amortization rates vary
significantly from one landfill to another due to (i) inconsistencies that often exist in construction costs and provincial,
state and local regulatory requirements for landfill development and landfill final capping, closure and post-closure
activities and (ii) differences in the cost basis of landfills that we develop versus those that we acquire. Accordingly, our
landfill airspace amortization expense measured on a per-ton basis can fluctuate due to changes in the mix of volumes we
receive across the Company each year.
Liquidity and Capital Resources
The Company consistently generates cash flow from operations that meets and exceeds its working capital needs, the
payments of its dividend and investment in the business through capital expenditures and 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 activities that may arise during the year as a result of changing business conditions
or new opportunities. The Company believes that its investment grade credit ratings, large value of unencumbered assets
48
and modest leverage enable it to obtain adequate financing to meet its ongoing capital, operating and other liquidity
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
as of December 31 (in millions):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted trust and escrow accounts:
2019
3,561 $
Insurance reserves (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Final capping, closure, post-closure and environmental remediation funds . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restricted trust and escrow accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
270 $
109
4
383 $
2018
61
252
103
11
366
Debt:
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
218 $
13,280
13,498 $
432
9,594
10,026
(a) Includes $70 million as of December 31, 2019 and 2018 in other current assets in our Consolidated Balance Sheets.
Cash and cash equivalents — Cash and cash equivalents at December 31, 2019 primarily include proceeds from the
May 2019 issuance of senior notes and our September 2019 issuance of Canadian senior notes. These items are discussed
further below and in Note 7 to the Consolidated Financial Statements.
Debt — We use long-term borrowings in addition to the cash we generate from operations as part of our overall
financial strategy to support and grow our business. We primarily use senior notes and tax-exempt bonds to borrow on a
long-term basis, but we also use other instruments and facilities, when appropriate. The components of our borrowings as
of December 31, 2019 are described in Note 7 to the Consolidated Financial Statements.
As of December 31, 2019, we had $1.5 billion of debt maturing within the next 12 months, including (i) $600 million
of 4.75% senior notes that mature in June 2020; (ii) $669 million 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) $218 million of other debt with
scheduled maturities within the next 12 months, including $112 million of tax-exempt bonds. As of December 31, 2019,
we have classified $1.3 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 $218 million of debt maturing in the next 12 months is classified as current obligations.
As of December 31, 2019, we also have $169 million of variable-rate tax-exempt bonds that are supported by letters
of credit under our $3.5 billion revolving credit facility, of which $15 million mature within the next 12 months. The
interest rates on our variable-rate tax-exempt bonds are generally reset on either a daily or weekly basis through a
remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at
market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is
unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have
the availability under our $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully.
Accordingly, we have classified $154 million of these borrowings as long-term in our Consolidated Balance Sheet as of
December 31, 2019.
49
In May 2019, WM issued $4.0 billion of senior notes consisting of:
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
$750 million of 2.95% senior notes due June 15, 2024;
$750 million of 3.20% senior notes due June 15, 2026;
$1.0 billion of 3.45% senior notes due June 15, 2029;
$500 million of 4.00% senior notes due July 15, 2039; and
$1.0 billion of 4.15% senior notes due July 15, 2049.
The net proceeds from these debt issuances were $3.97 billion. Concurrently, we used $344 million of the net proceeds
from the newly issued senior notes to retire $257 million of certain high-coupon senior notes. The cash paid includes the
principal amount of the debt retired, $84 million of related premiums and $3 million of accrued interest as discussed above
in Loss on Early Extinguishment of Debt. We used a portion of the proceeds to repay our commercial paper borrowings.
We intend to use the remaining net proceeds to pay a portion of the consideration related to our pending acquisition of
Advanced Disposal, which is discussed in Pending Acquisition below, and for general corporate purposes. The
newly-issued senior notes due 2024, 2026, 2029 and 2039 include a special mandatory redemption feature, which provides
that if the acquisition of Advanced Disposal is not completed on or prior to July 14, 2020, or if, prior to such date, the
Merger Agreement is terminated for any reason, we will be required to redeem all of such outstanding notes equal to 101%
of the aggregate principal amounts of such notes, plus accrued but unpaid interest.
In September 2019, Waste Management of Canada Corporation, an indirect wholly-owned subsidiary of WM, issued
C$500 million, or $377 million, of 2.6% senior notes due September 23, 2026, all of which are fully and unconditionally
guaranteed on a senior unsecured basis by WM and WM Holdings. The net proceeds from the debt issuance were
C$496 million, or $373 million, which we intend to use for general corporate purposes.
See Note 7 to the Consolidated Financial Statements for more information related to the debt transactions.
We have credit facilities in place to support our liquidity and financial assurance needs. The following table summarizes
our outstanding letters of credit, categorized by type of facility as of December 31 (in millions):
Revolving credit facility (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other letter of credit facilities (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2019
412 $
532
944 $
2018
587
556
1,143
(a)(cid:2) As of December 31, 2019, we had an unused and available credit capacity of $3.1 billion.
(b)(cid:2) As of December 31, 2019, these other letter of credit facilities are both committed and uncommitted with terms
extending through April 2021.
Refinancing of Revolving Credit Facility
In November 2019, we entered into the $3.5 billion revolving credit facility, which amended and restated our prior
long-term U.S. and Canadian revolving credit facility. Amendments to the credit agreement included (i) increasing total
capacity under the facility from $2.75 billion to $3.5 billion; (ii) increasing the accordion feature that may be used to
increase total capacity in future periods from $750 million to $1.0 billion and (iii) extending the term through
November 2024. The agreement provides the Company with two one-year extension options. Waste Management of
Canada Corporation and WM Quebec Inc., each an indirect wholly-owned subsidiary of WM, are borrowers under the
$3.5 billion revolving credit facility, and the agreement permits borrowing in Canadian dollars up to the U.S. dollar
equivalent of $375 million, with such borrowings to be repaid in Canadian dollars. WM Holdings, a wholly-owned
subsidiary of WM, guarantees all the obligations under the $3.5 billion revolving credit facility.
50
Summary of Cash Flow Activity
The following is a summary of our cash flows for the years ended December 31 (in millions):
2017
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,180
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,376) $ (2,169) $ (1,620)
1,964 $ (1,508) $ (1,361)
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . $
2018
3,570 $
2019
3,874 $
Net Cash Provided by Operating Activities — Our operating cash flows increased by $304 million for the year ended
December 31, 2019, as compared with the prior year period, as a result of (i) higher cash-based earnings in the current
year period primarily associated with our collection and disposal business; (ii) lower bonus payments in the current year;
(iii) lower income tax payments of $57 million in the current year and (iv) net favorable changes in our operating assets
and liabilities, net of effects of acquisitions and divestitures, offset slightly by higher interest payments in the current year
period primarily due to our May 2019 issuance of senior notes.
Our operating cash flows increased by $390 million for the year ended December 31, 2018, as compared with the
prior year period, as a result of (i) higher earnings primarily associated with our collection and disposal business and
(ii) lower income tax payments of $213 million, driven by enactment of tax reform and timing of income tax payments
partially offset by lower earnings from our recycling line of business.
Net Cash Used in Investing Activities — The most significant items affecting the comparison of our investing cash
flows for the periods presented are summarized below:
•(cid:2) Acquisitions — Our spending on acquisitions was $527 million, $466 million and $200 million in 2019, 2018 and
2017, respectively, of which $521 million, $460 million and $198 million, respectively, are considered cash used
in investing activities. The remaining spend is either cash used in a financing or an operating activity related to
the timing of contingent consideration paid. Substantially all of these acquisitions are related to our Solid Waste
business. Our acquisition spending in 2019 is primarily attributable to Petro Waste Environmental LP. See
Note 18 to the Consolidated Financial Statements for additional information. We continue to focus on accretive
acquisitions and growth opportunities that will enhance and expand our existing service offerings.
•(cid:2) Capital Expenditures — We used $1,818 million, $1,694 million and $1,509 million for capital expenditures in
2019, 2018 and 2017, respectively. The increase is primarily due to an intentional focus on accelerating certain
collection fleet and landfill spending to support the Company’s strong collection and disposal growth.
•(cid:2) Proceeds from Divestitures — Proceeds from divestitures of businesses and other assets (net of cash divested)
were $49 million, $208 million and $99 million in 2019, 2018 and 2017, respectively. In 2019, 2018 and 2017,
$8 million, $153 million and $62 million of these divestitures, respectively, were made as part of our continuous
focus on improving or divesting certain non-strategic or underperforming operations, with the remaining amounts
generally related to the sale of fixed assets.
•(cid:2) Other, Net — Our spending within other, net was $86 million, $223 million, and $12 million in 2019, 2018 and
2017, respectively. Cash used for other investing activities for the year ended December 31, 2019 was primarily
related to (i) changes in our investments portfolio associated with a wholly-owned insurance captive from
restricted cash and cash equivalents to available-for-sale securities and (ii) an initial cash payment for low-income
housing investments, which is discussed further in Note 9 to the Consolidated Financial Statements. These items
were partially offset by cash proceeds from the redemption of our preferred stock received in conjunction with
the 2014 sale of our Puerto Rico operations, which is discussed in Note 17 to the Consolidated Financial
Statements. The increase in 2018 was primarily due to changes in our investments portfolio associated with our
wholly-owned insurance captive from restricted cash and cash equivalents to available-for-sale securities. See
Note 17 to the Consolidated Financial Statements for additional information.
51
Net Cash Provided by (Used in) Financing Activities — The most significant items affecting the comparison of our
financing cash flows for the periods presented are summarized below:
•(cid:2) Debt Borrowings (Repayments) — The following summarizes our cash borrowings and repayments of debt
(excluding our commercial paper program discussed below) for the years ended December 31 (in millions):
Borrowings:
2019
2018
2017
Revolving credit facility (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Canadian term loan and revolving credit facility . . . . . . . . . . .
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canadian senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-exempt bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 119 $
—
3,971
373
339
—
302
9
745
—
299
124
$ 4,683 $ 359 $ 1,479
8
—
—
185
47
Repayments:
Revolving credit facility (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (11) $ (108) $ (728)
—
(146)
Canadian term loan and revolving credit facility . . . . . . . . . . .
(117)
(590)
—
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(257)
(251)
Tax-exempt bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (204)
(167)
(192)
(61)
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(107)
$ (533) $ (499) $ (1,907)
Net cash borrowings (repayments) . . . . . . . . . . . . . . . . . . . . . . . . $ 4,150 $ (140) $ (428)
(a) Our revolving credit facility was amended and restated in November 2019.
Refer to Note 7 to the Consolidated Financial Statements for additional information related to our debt borrowings
and repayments.
•(cid:2) Premiums Paid on Early Extinguishment of Debt — During the year ended December 31, 2019, we paid
premiums of $84 million to retire certain high-coupon senior notes. See Note 7 to the Consolidated Financial
Statements for further discussion of this debt transaction.
•(cid:2) Commercial Paper Program — During 2019, we had net cash repayments of $1,001 million compared to net
cash borrowings of $453 million and $513 million (net of the related discounts on issuance) during 2018 and
2017, respectively, under our commercial paper program. We repaid the outstanding balance with proceeds from
the May 2019 issuance of senior notes discussed above. Borrowings were primarily to support acquisitions, new
business opportunities and for general corporate purposes.
•(cid:2) Common Stock Repurchase Program — For the periods presented, all share repurchases have been made in
accordance with financial plans approved by our Board of Directors. We repurchased $244 million,
$1,008 million (including $4 million paid in January 2019) and $750 million of our common stock during 2019,
2018 and 2017, respectively. As a result of the pending acquisition of Advanced Disposal discussed in Pending
Acquisition below, we limited our 2019 share repurchases to an amount sufficient to offset dilution impacts from
our stock-based compensation plans. See Note 14 to the Consolidated Financial Statements for additional
information.
In December 2019, we publicly confirmed that the Company has $1.32 billion remaining on its existing Board of
Directors’ authorization to repurchase shares of the Company’s common stock. Any future share repurchases 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.
•(cid:2) Cash Dividends — For the periods presented, all dividends have been declared by our Board of Directors.
We paid aggregate cash dividends of $876 million, $802 million and $750 million during 2019, 2018 and 2017,
respectively. The increase in dividend payments is due to our quarterly per share dividend increasing from $0.425
52
in 2017 to $0.465 in 2018 and to $0.5125 in 2019 and has been offset, in part, by a reduction in our common
stock outstanding as a result of our common stock repurchase program.
In December 2019, we announced that our Board of Directors expects to increase the quarterly dividend from
$0.5125 to $0.545 per share for dividends declared in 2020. However, all future dividend declarations are at the
discretion of the Board of Directors and depend on various factors, including our net earnings, financial condition,
cash required for future business plans, growth and acquisitions and other factors the Board of Directors may
deem relevant.
•(cid:2) Proceeds from the Exercise of Common Stock Options — The exercise of common stock options generated
financing cash inflows of $67 million, $52 million and $95 million during 2019, 2018 and 2017, respectively.
The year-over-year changes are generally due to the number of stock options exercised and the exercise price of
those options.
Free Cash Flow
We are presenting free cash flow, which is a non-GAAP measure of liquidity, in our disclosures because we use this
measure in the evaluation and management of our business. We define free cash flow as net cash provided by operating
activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets (net of cash divested).
We believe it is indicative of our ability to pay our quarterly dividends, repurchase common stock, fund acquisitions and
other investments and, in the absence of refinancings, to repay our debt obligations. Free cash flow is not intended to
replace net cash provided by operating activities, which is the most comparable GAAP measure. We believe free cash
flow gives investors useful insight into how we view our liquidity, but the use of free cash flow as a liquidity measure has
material limitations because it excludes certain expenditures that are required or that we have committed to, such as
declared dividend payments and debt service requirements.
Our calculation of free cash flow and reconciliation to net cash provided by operating activities is shown in the table
below for the years ended December 31 (in millions), and may not be calculated the same as similarly-titled measures
presented by other companies:
2019
2018
2017
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,874 $ 3,570 $ 3,180
(1,509)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99
Proceeds from divestitures of businesses and other assets (net of cash divested) . . .
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,105 $ 2,084 $ 1,770
(1,818)
49
(1,694)
208
53
Summary of Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019 and the anticipated effect of
these obligations on our liquidity in future years (in millions):
2020
2021
2022
2023
2024
Thereafter Total
Recorded Obligations:
Expected environmental liabilities: (a)
Final capping, closure and post-closure . . . . . . . . . . . . . . . $ 138 $ 161 $ 114 $
44
Environmental remediation . . . . . . . . . . . . . . . . . . . . . . . . .
57
Non-cancelable operating lease obligations . . . . . . . . . . . .
215
660
33
58
252
629
27
63
228
823
96 $ 133 $ 2,587 $ 3,229
232
34
628
51
181
4,089
646 1,220 9,701 13,679
72
359
3,018
22
40
195
Debt payments (b) (c) (d) . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecorded Obligations: (e)
Interest on debt (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated unconditional purchase obligations (g) . . . . . . .
371 3,446 5,552
847
379
Anticipated liquidity impact as of December 31, 2019 . . $ 1,679 $ 1,463 $ 1,365 $ 1,283 $ 1,833 $ 16,544 $ 24,167
399
57
425
65
472
156
439
143
47
(a)(cid:2) Environmental liabilities include final capping, closure, post-closure and environmental remediation costs recorded
in our Consolidated Balance Sheet as of December 31, 2019, without the impact of discounting and inflation. Our
recorded environmental liabilities for final capping, closure and post-closure will increase as we continue to place
additional tons within the permitted airspace at our landfills.
(b)(cid:2) These amounts represent the scheduled principal payments related to our long-term debt and financing leases,
excluding interest.
(c)(cid:2) Our debt obligations as of December 31, 2019 include $669 million of tax-exempt bonds with term interest rate
periods that expire within the next 12 months. If the remarketings of our bonds are unsuccessful, then the bonds can
be put to us, requiring immediate repayment. We have classified the anticipated cash flows for these contractual
obligations based on the scheduled maturity of the borrowings for purposes of this disclosure. For additional
information regarding the classification of these borrowings in our Consolidated Balance Sheet as of
December 31, 2019, refer to Note 7 to the Consolidated Financial Statements.
(d)(cid:2) Our recorded debt obligations include non-cash adjustments associated with debt issuance costs, discounts, premiums
and fair value adjustments attributable to terminated interest rate derivatives. These amounts have been excluded as
they will not impact our liquidity in future periods.
(e)(cid:2) Our unrecorded obligations represent operating lease obligations and purchase commitments from which we expect
to realize an economic benefit in future periods and interest payable on our debt. We have also made certain
guarantees, as discussed in Note 11 to the Consolidated Financial Statements, that we do not expect to materially
affect our current or future financial position, results of operations or liquidity.
(f)(cid:2) Interest on our fixed-rate debt was calculated based on contractual rates and interest on our variable-rate debt was
calculated based on interest rates as of December 31, 2019. As of December 31, 2019, we had $122 million of accrued
interest related to our debt obligations.
(g)(cid:2) Our unconditional purchase obligations are for various contractual obligations that we generally incur in the ordinary
course of our business. Certain of our obligations are quantity driven. For contracts that require us to purchase
minimum quantities of goods or services, we have estimated our future minimum obligations based on the current
market values of the underlying products or services or contractually stated amounts. Accordingly, the amounts
reported in the table are subject to change and actual cash flow obligations in the near future may be different. See
Note 11 to the Consolidated Financial Statements for discussion of the nature and terms of our unconditional purchase
obligations.
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Pending Acquisition
On April 14, 2019, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) to acquire all
outstanding shares of Advanced Disposal for $33.15 per share in cash, representing a total enterprise value of $4.9 billion
when including approximately $1.9 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. On June 28, 2019, Advanced Disposal announced that 85.9% of the outstanding shares of its common stock
entitled to vote were voted in favor of the proposal to adopt the Merger Agreement at a special meeting of stockholders
held that day. We anticipate that we will obtain antitrust regulatory approval by the end of March 2020 and close the
Advanced Disposal transaction soon thereafter.
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 and reserves associated with our insured and self-insured claims. Each
of these items is discussed in additional detail below and in Note 3 to the Consolidated Financial Statements. Actual results
could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.
Landfills
Accounting for landfills requires that significant estimates and assumptions be made regarding (i) the cost to construct
and develop each landfill asset; (ii) the estimated fair value of final capping, closure and post-closure asset retirement
obligations, which must consider both the expected cost and timing of these activities; (iii) the determination of each
landfill’s remaining permitted and expansion airspace and (iv) the airspace associated with each final capping event.
Landfill Costs — We estimate the total cost to develop each of our landfill sites to its remaining permitted and
expansion airspace. This estimate includes such costs as landfill liner material and installation, excavation for airspace,
landfill leachate collection systems, landfill gas collection systems, environmental monitoring equipment for groundwater
and landfill gas, directly related engineering, capitalized interest, on-site road construction and other capital infrastructure
costs. Additionally, landfill development includes all land purchases for the landfill footprint and required landfill buffer
property. The projection of these landfill costs is dependent, in part, on future events. The remaining amortizable basis of
each landfill includes costs to develop a site to its remaining permitted and expansion airspace and includes amounts
previously expended and capitalized, net of accumulated airspace amortization, and projections of future purchase and
development costs.
Final Capping Costs — We estimate the cost for each final capping event based on the area to be capped and the
capping materials and activities required. The estimates also consider when these costs are anticipated to be paid and factor
in inflation and discount rates. Our engineering personnel allocate landfill final capping costs to specific final capping
events. The landfill airspace associated with each final capping event is then quantified and the final capping costs for
each event are amortized over the related airspace associated with the event as waste is disposed of at the landfill. We
review these costs annually, or more often if significant facts change. Changes in estimates, such as timing or cost of
construction, for final capping events immediately impact the required liability and the corresponding asset. When the
change in estimate relates to a fully consumed asset, the adjustment to the asset must be amortized immediately through
expense. When the change in estimate relates to a final capping event that has not been fully consumed, the adjustment to
the asset is recognized in income prospectively as a component of landfill airspace amortization.
Closure and Post-Closure Costs — We base our estimates for closure and post-closure costs on our interpretations of
permit and regulatory requirements for closure and post-closure monitoring and maintenance. The estimates for landfill
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closure and post-closure costs also consider when the costs are anticipated to be paid and factor in inflation and discount
rates. The possibility of changing legal and regulatory requirements and the forward-looking nature of these types of costs
make any estimation or assumption less certain. Changes in estimates for closure and post-closure events immediately
impact the required liability and the corresponding asset. When the change in estimate relates to a fully consumed asset,
the adjustment to the asset must be amortized immediately through expense. When the change in estimate relates to a
landfill asset that has not been fully consumed, the adjustment to the asset is recognized in income prospectively as a
component of landfill airspace amortization.
Remaining Permitted Airspace — Our engineers, in consultation with third-party engineering consultants and
surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted airspace
is determined by an annual survey, which is used to compare the existing landfill topography to the expected final landfill
topography.
Expansion Airspace — We also include currently unpermitted expansion airspace in our estimate of remaining
permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion effort,
we must generally expect the initial expansion permit application to be submitted within one year and the final expansion
permit to be received within five years. Second, we must believe that obtaining the expansion permit is likely, considering
the following criteria:
•(cid:2) Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and
local, state or provincial approvals;
•(cid:2) We have a legal right to use or obtain land to be included in the expansion plan;
•(cid:2) There are no significant known technical, legal, community, business, or political restrictions or similar issues
that could negatively affect the success of such expansion; and
•(cid:2) Financial analysis has been completed based on conceptual design, and the results demonstrate that the expansion
meets Company criteria for investment.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the
expansion effort must meet all the criteria listed above. These criteria are evaluated by our field-based engineers,
accountants, managers and others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace
is included, our policy provides that airspace may continue to be included in remaining permitted and expansion airspace
even if certain of these criteria are no longer met as long as we continue to believe we will ultimately obtain the permit,
based on the facts and circumstances of a specific landfill. In these circumstances, continued inclusion must be approved
through a landfill-specific review process that includes approval by our Chief Financial Officer on a quarterly basis.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also
include the projected costs for development, as well as the projected asset retirement costs related to final capping, closure
and post-closure of the expansion in the amortization basis of the landfill.
Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor
(“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using
the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The
amount of settlement that is forecasted will take into account several site-specific factors including current and projected
mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying
waste, anticipated access to moisture through precipitation or recirculation of landfill leachate and operating practices. In
addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group and the
AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the
impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches
its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion capacity at each of our landfills, we determine the
per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the
56
corresponding number of tons. We calculate per ton amortization rates for each landfill for assets associated with each
final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be
capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and post-
closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be
significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove
to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or
higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that
expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required
to recognize an asset impairment or incur significantly higher amortization expense. If at any time management makes the
decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
Environmental Remediation Liabilities
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 operations, or for damage caused by
conditions that existed before we acquired a site. These liabilities include PRP investigations, settlements, and certain legal
and consultant fees, as well as costs directly associated with site investigation and clean up, such as materials, external
contractor costs and incremental internal costs directly related to the remedy. We provide for expenses associated with
environmental remediation obligations when such amounts are probable and can be reasonably estimated. We routinely
review and evaluate sites that require remediation and determine our estimated cost for the likely remedy based on a
number of estimates and assumptions.
Where it is probable that a liability has been incurred, we estimate costs required to remediate sites based on
site-specific facts and circumstances. We routinely review and evaluate sites that require remediation, considering whether
we were an owner, operator, transporter, or generator at the site, the amount and type of waste hauled to the site and the
number of years we were associated with the site. Next, we review the same type of information with respect to other
named and unnamed PRPs. Estimates of the costs for the likely remedy are then either developed using our internal
resources or by third-party environmental engineers or other service providers. Internally developed estimates are based
on:
•(cid:2) Management’s judgment and experience in remediating our own and unrelated parties’ sites;
•(cid:2)
Information available from regulatory agencies as to costs of remediation;
•(cid:2) The number, financial resources and relative degree of responsibility of other PRPs who may be liable for
remediation of a specific site; and
•(cid:2) The typical allocation of costs among PRPs, unless the actual allocation has been determined.
Long-Lived Asset Impairments
We assess our long-lived assets for impairment as required under the applicable accounting standards. If necessary,
impairments are recorded in (gain) loss from divestitures, asset impairments and unusual items, net in our Consolidated
Statement of Operations.
Property and Equipment, Including Landfills and Definite-Lived Intangible Assets — We monitor the carrying value
of our long-lived assets for potential impairment on an ongoing basis and test the recoverability of such assets generally
using significant unobservable (“Level 3”) inputs whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. These events or changes in circumstances, including management decisions pertaining
to such assets, are referred to as impairment indicators. If an impairment indicator occurs, we perform a test of
recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows.
57
If cash flows cannot be separately and independently identified for a single asset, we will determine whether an impairment
has occurred for the group of assets for which we can identify the projected cash flows. If the carrying values are in excess
of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset
group to its carrying value and the difference is recorded in the period that the impairment indicator occurs. Fair value is
generally determined by considering (i) internally developed discounted projected cash flow analysis of the asset or asset
group; (ii) actual third-party valuations and/or (iii) information available regarding the current market for similar assets.
Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually
realized, which could impact our ability to accurately assess whether an asset has been impaired.
The assessment of impairment indicators and the recoverability of our capitalized costs associated with landfills and
related expansion projects require significant judgment due to the unique nature of the waste industry, the highly regulated
permitting process and the sensitive estimates involved. During the review of a landfill expansion application, a regulator
may initially deny the expansion application although the expansion permit is ultimately granted. In addition, management
may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace, or a landfill
may be required to cease accepting waste, prior to receipt of the expansion permit. However, such events occur in the
ordinary course of business in the waste industry and do not necessarily result in impairment of our landfill assets because,
after consideration of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit.
As a result, our tests of recoverability, which generally make use of a probability-weighted cash flow estimation approach,
may indicate that no impairment loss should be recorded.
Indefinite-Lived Intangible Assets, Including Goodwill — At least annually, and more frequently if warranted, we
assess the indefinite-lived intangible assets including the goodwill of our reporting units for impairment using Level 3
inputs.
We first performed a qualitative assessment to determine if it was more likely than not that the fair value of a reporting
unit was less than its carrying value. If the assessment indicated a possible impairment, we completed a quantitative review,
comparing the estimated fair value of a reporting unit to its carrying amount, including goodwill. An impairment charge
was recognized if the asset’s estimated fair value was less than its carrying amount. Fair value is typically estimated using
an income approach. However, when appropriate, we may also use a market approach. The income approach is based on
the long-term projected future cash flows of the reporting units. We discount the estimated cash flows to present value
using a weighted average cost of capital that considers factors such as market assumptions, the timing of the cash flows
and the risks inherent in those cash flows. We believe that this approach is appropriate because it provides a fair value
estimate based upon the reporting units’ expected long-term performance considering the economic and market conditions
that generally affect our business. The market approach estimates fair value by measuring the aggregate market value of
publicly-traded companies with similar characteristics to our business as a multiple of their reported earnings. We then
apply that multiple to the reporting units’ earnings to estimate their fair values. We believe that this approach may also be
appropriate in certain circumstances because it provides a fair value estimate using valuation inputs from entities with
operations and economic characteristics comparable to our reporting units.
Fair value is computed using several factors, including projected future operating results, economic projections,
anticipated future cash flows, comparable marketplace data and the cost of capital. There are inherent uncertainties related
to these factors and to our judgment in applying them in our analysis. However, we believe our methodology for estimating
the fair value of our reporting units is reasonable.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Gain) Loss
from Divestitures, Asset Impairments and Unusual Items, Net and Note 6 to the Consolidated Financial Statements for
information related to goodwill impairments recognized during the reported periods.
Insured and Self-Insured Claims
We have retained a significant portion of the risks related to our health and welfare, general liability, automobile
liability and workers’ compensation claims programs. The exposure for unpaid claims and associated expenses, including
incurred but not reported losses, are based on an actuarial valuations and internal estimates. The accruals for these liabilities
58
could be revised if future occurrences or loss developments significantly differ from our assumptions used. Estimated
recoveries associated with our insured claims are recorded as assets when we believe that the receipt of such amounts is
probable.
We use a wholly-owned insurance captive to insure the deductibles for our general liability, automobile liability and
workers’ compensation claims programs. We continue to maintain conventional insurance policies with third-party
insurers. In addition to certain business and operating benefits of having a wholly-owned insurance captive, we expect to
receive certain cash flow benefits related to the timing of tax deductions related to these claims. WM will pay an annual
premium to the insurance captive, typically in the first quarter of the year, for the estimated losses based on the external
actuarial analysis. These premiums are held in a restricted escrow account to be used solely for paying insurance claims,
resulting in a transfer of risk from WM to the insurance captive and are allocated between current and long-term assets in
our Consolidated Balance Sheets depending on timing on the use of funds.
Off-Balance Sheet Arrangements
We have financial interests in unconsolidated variable interest entities as discussed in Note 19 to the Consolidated
Financial Statements. Additionally, we are party to guarantee arrangements with unconsolidated entities as discussed in
the Guarantees section of Note 11 to the Consolidated Financial Statements. These arrangements have not materially
affected our financial position, results of operations or liquidity during the year ended December 31, 2019, nor are they
expected to have a material impact on our future financial position, results of operations or liquidity.
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, as of December 31, 2019, approximately 30% 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 7A. Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, we are exposed to market risks, including changes in interest rates, certain
commodity prices and Canadian currency rates. From time to time, we use derivatives to manage some portion of these
risks. The Company had no derivatives outstanding as of December 31, 2019.
Interest Rate Exposure — Our exposure to market risk for changes in interest rates relates primarily to our financing
activities. As of December 31, 2019, we had $13.6 billion of long-term debt, excluding the impacts of accounting for debt
issuance costs, discounts, premiums and fair value adjustments attributable to terminated interest rate derivatives. We have
$1.0 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised of
(i) $669 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months and
(ii) $355 million of variable-rate tax-exempt bonds that are subject to repricing on either a daily or weekly basis. We
currently estimate that a 100-basis point increase in the interest rates of our outstanding variable-rate debt obligations
would increase our 2020 interest expense by $7 million.
Our remaining outstanding debt obligations have fixed interest rates through either the scheduled maturity of the debt
or, for certain of our fixed-rate tax-exempt bonds, through the end of a term interest rate period that exceeds 12 months.
The fair value of our fixed-rate debt obligations can increase or decrease significantly if market interest rates change.
We performed a sensitivity analysis to determine how market rate changes might affect the fair value of our market
risk-sensitive debt instruments. This analysis is inherently limited because it reflects a singular, hypothetical set of
assumptions. Actual market movements may vary significantly from our assumptions. An instantaneous, 100-basis point
59
increase in interest rates across all maturities attributable to these instruments would have decreased the fair value of our
debt by approximately $1.0 billion as of December 31, 2019.
We are also exposed to interest rate market risk from our cash and cash equivalent balances, as well as assets held in
restricted trust funds and escrow accounts. These assets are generally invested in high quality, liquid instruments including
money market funds that invest in U.S. government obligations with original maturities of three months or less. We believe
that our exposure to changes in fair value of these assets due to interest rate fluctuations is insignificant as the fair value
generally approximates our cost basis. We also invest a portion of our restricted trust and escrow account balances in
available-for-sale securities, including U.S. Treasury securities, U.S. agency securities, municipal securities, mortgage-
and asset-backed securities and equity securities, which generally mature over the next 10 years.
Commodity Price Exposure — In the normal course of our business, we are subject to operating agreements that
expose us to market risks arising from changes in the prices for commodities such as diesel fuel; recyclable materials,
including old corrugated cardboard, old newsprint and plastics; and electricity, which generally correlates with natural gas
prices in many of the markets in which we operate. We attempt to manage these risks through operational strategies that
focus on capturing our costs in the prices we charge our customers for the services provided. Accordingly, as the market
prices for these commodities increase or decrease, our revenues may also increase or decrease.
Currency Rate Exposure — We have operations in Canada as well as certain support functions in India. Where
significant, we have quantified and described the impact of foreign currency translation on components of income,
including operating revenue and operating expenses. However, the impact of foreign currency has not materially affected
our results of operations.
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Item 8. Financial Statements and Supplementary Data.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017 . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2019, 2018 and 2017 . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017 . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2019, 2018 and 2017 . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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67
68
68
69
70
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Waste Management, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Waste Management, Inc.’s internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Waste Management, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the 2019 consolidated financial statements of the Company, and our report dated February 13, 2020
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Houston, Texas
February 13, 2020
/s/ ERNST & YOUNG LLP
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Waste Management, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Waste Management, Inc. (the Company) as of
December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, cash flows, and
changes in equity for each of the three years in the period ended December 31, 2019, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated February 13, 2020 expressed an unqualified opinion
thereon.
Adoption of ASU No. 2016-02 (Topic 842)
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases
in the 2019 financial statements to reflect the accounting method change due to the adoption of ASU No. 2016-02, Leases
(Topic 842), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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Landfill Amortization
Description of
Matter
the
At December 31, 2019, the Company’s landfill assets totaled $6.6 billion and the
associated amortization expense for 2019 was $575 million. As discussed in Note 3 of the
financial statements, the Company updates the estimates used to calculate individual
landfill amortization rates at least annually, or more often if significant facts change.
Landfill amortization rates are used in the computation of landfill amortization expense.
How We Addressed
the Matter
in Our
Audit
Auditing landfill amortization rates and related amortization expense is complex due to
the highly judgmental nature of assumptions used in estimating the rates. Significant
assumptions used in the calculation of the rates include: estimated future development
costs associated with the construction and retirement of the landfill, estimated remaining
permitted airspace and unpermitted expansion airspace, airspace utilization factors,
projected annual tonnage intakes, and projected timing of retirement activities.
We obtained an understanding, evaluated the design, and tested the operating effectiveness
of the Company’s controls over determining landfill amortization rates and calculating
amortization expense. Our audit procedures included, among others, testing controls over:
the Company’s process for evaluating and updating the significant assumptions used in
the development of the landfill amortization rates, management’s review of those
significant assumptions, and the mathematical accuracy of the calculation and recording
of amortization expense.
To test the landfill asset amortization rates, our audit procedures included, among others,
assessing methodologies used by the Company and testing the significant assumptions
discussed above, inclusive of the underlying data used by the Company in its development
of these assumptions. We compared the significant assumptions used by management to
historical trends and, when available, to comparable size landfills accepting a similar type
of waste. Regarding unpermitted expansion airspace, we evaluated the Company’s criteria
for inclusion in remaining airspace. In addition, we considered the professional
qualifications and objectivity of management’s internal engineers responsible for
developing the assumptions. We involved EY’s engineering specialists to assist with the
application of these procedures. We also tested the completeness and accuracy of the
historical data utilized in the development of the landfill amortization rates.
Landfill – Final Capping, Closure and Post-Closure Costs
Description of
Matter
the
At December 31, 2019, the carrying value of the Company’s landfill asset retirement
obligations related to final capping, closure and post-closure costs totaled $1.9 billion. As
discussed in Note 3 of the financial statements, the Company updates the estimates used
to measure the asset retirement obligations annually, or more often if significant facts
change.
Auditing the landfill asset retirement obligation is complex due to the highly judgmental
nature of the assumptions used in the measurement process. These assumptions include:
estimated future costs associated with the capping, closure and post closure activities at
each specific landfill; airspace consumed to date in relation to total estimated permitted
airspace; the projected annual tonnage intake; and the projected timing of retirement
activities.
How We Addressed
the Matter
in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness
of the Company’s controls over the calculation of asset retirement obligations. Our audit
procedures included, among others, testing the Company’s controls over the landfill asset
retirement obligation estimation process and management’s review of the significant
64
Description of
Matter
the
assumptions used in the estimation of the liability, including the amount and timing of
retirement costs.
To test the landfill asset retirement obligation valuation, we performed audit procedures
that included, among others, assessing methodologies used by the Company, testing the
completeness of activities included in the estimate (e.g., gas monitoring and extraction),
and testing the significant assumptions discussed above, inclusive of the underlying data
used by the Company in its development of these assumptions. We compared the
significant assumptions used by management to historical trends and, when available, to
comparable size landfills accepting the same type of waste. In addition, we considered the
professional qualifications and objectivity of management’s internal engineers responsible
for developing the assumptions. We involved EY and external engineering specialists to
assist us with these procedures. Specifically, we utilized the EY engineering specialists to
evaluate the reasons for significant changes in assumptions from the historical trend, and
to determine whether the change from the historical trend was appropriate and identified
timely. We utilized the external engineers to evaluate the estimates of remaining landfill
airspace. We also tested the completeness and accuracy of the historical data utilized in
preparing the estimate.
Environmental Remediation Liabilities
At December 31, 2019, environmental remediation liabilities totaled $240 million. As
discussed in Note 3 of the financial statements, the Company performs a review of sites
that require remediation and prepares cost estimates for the anticipated remedy using
internal resources and, as needed, external resources (e.g., environmental engineers). The
Company estimates the costs required to remediate sites based on: site-specific facts and
circumstances; input from third party engineers or management’s judgment and
experience in remediating their own and unrelated parties’ sites; and information available
from regulatory agencies as to costs of remediation. The liability recorded by the Company
represents its estimated share of the total obligation to remediate the site. The number of
other potentially responsible parties (PRP’s) who may be liable for remediation of a
specific site, their financial resources, and their relative degree of responsibility are used
to determine the Company’s estimated share of the total obligation. Where the amount of
an environmental remediation liability and the timing of the payments are fixed or reliably
determinable, the forecasted cost is inflated until the expected time of payment and then
discounted back to the present value.
Auditing environmental remediation liabilities is complex due to the highly judgmental
nature of the assumptions used in the estimate. Significant judgment can be involved in
determining whether the environmental liability is reasonably estimable. If the liability is
determined to be reasonably estimable, significant assumptions used in the accounting for
environmental remediation liabilities include: estimating the internal and external costs
directly associated with site investigation and clean up, potential settlements with
regulatory bodies or other affected parties, and legal and consultant fees; as well as
determining the degree to which the remediation obligation is shared with other parties.
65
How We Addressed
the Matter
in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of the Company’s controls over the calculation of environmental remediation liabilities.
Our audit procedures included, among others, testing controls over management’s review
of: the estimated costs to perform the remedial obligation, as provided by a regulatory
agency or determined by a PRP group or internal engineers; the identification of PRPs and
the Company’s assumptions regarding the degree of responsibility for the action; and
management’s controls over the completeness and accuracy of the calculated remediation
liability.
To test the environmental liabilities, we performed audit procedures that included, among
others, assessing methodologies used by the Company and testing the significant
assumptions discussed above, as well as the underlying costs and other estimates used by
the Company in its development of these assumptions. We compared the significant
assumptions used by management to historical data and trends, or to notifications or
decisions from regulatory agencies or the PRP group specifying remedial plans of action
required, as available. When appropriate to discount the liability, we evaluate the
appropriateness of the discount rate and inflation rate utilized and the accuracy of the
computation. We also involve EY engineering specialists to assist us with evaluating the
completeness of the Company’s environmental liabilities.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2002.
Houston, Texas
February 13, 2020
66
WASTE MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share and Par Value Amounts)
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts receivable, net of allowance for doubtful accounts of $28 and $29, respectively . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parts and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,561 $
1,949
370
106
223
6,209
61
1,931
344
102
207
2,645
Property and equipment, net of accumulated depreciation and amortization of $18,657 and
December 31,
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
2019
2018
$18,264, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted trust and escrow accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,942
6,430
572
296
406
359
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,743 $ 22,650
12,893
6,532
521
313
483
792
Current liabilities:
LIABILITIES AND EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Landfill and environmental remediation liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,065 $ 1,037
1,117
1,327
522
534
432
218
3,108
3,144
9,594
13,280
1,291
1,407
1,828
1,930
553
912
16,374
20,673
Commitments and contingencies
Equity:
Waste Management, Inc. stockholders’ equity:
Common stock, $0.01 par value; 1,500,000,000 shares authorized; 630,282,461 shares
6
issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,993
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,797
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(87)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8,434)
Treasury stock at cost, 205,956,366 and 206,299,352 shares, respectively . . . . . . . . . . . . . . .
6,275
Total Waste Management, Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,276
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,743 $ 22,650
6
5,049
10,592
(8)
(8,571)
7,068
2
7,070
See Notes to Consolidated Financial Statements.
67
WASTE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except per Share Amounts)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss from divestitures, asset impairments and unusual items, net . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net losses of unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interests . . . . . . . . . . .
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . . . . . . . . . . . $
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Years Ended December 31,
2018
14,914 $
2019
15,455 $
2017
14,485
9,496
1,631
1,574
6
42
12,749
2,706
9,249
1,453
1,477
4
(58)
12,125
2,789
(411)
(85)
(55)
(50)
(601)
2,105
434
1,671
1
1,670 $
3.93 $
3.91 $
(374)
—
(41)
2
(413)
2,376
453
1,923
(2)
1,925 $
4.49 $
4.45 $
9,021
1,468
1,376
—
(16)
11,849
2,636
(363)
(6)
(68)
(8)
(445)
2,191
242
1,949
—
1,949
4.44
4.41
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Millions)
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss), net of tax:
Derivative instruments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post-retirement benefit obligation, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Comprehensive income (loss) attributable to noncontrolling interests .
Comprehensive income attributable to Waste Management, Inc. . . . . . . . . . . . . $
Years Ended December 31,
2018
1,923 $
2019
1,671 $
2017
1,949
8
15
55
1
79
1,750
1
1,749 $
8
5
(105)
2
(90)
1,833
(2)
1,835 $
7
2
76
3
88
2,037
—
2,037
See Notes to Consolidated Financial Statements.
68
WASTE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
Years Ended December 31,
2018
2017
2019
(cid:2)(cid:2)(cid:2)
Cash flows from operating activities:
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile consolidated net income to net cash provided by operating
1,671 $
1,923 $
1,949
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accretion on landfill liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss from divestitures, asset impairments and other, net . . . . . . . . . . . . . . . . . . . . . .
Equity in net losses of unconsolidated entities, net of dividends . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from divestitures of businesses and other assets (net of cash divested) . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
New borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums paid on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net commercial paper borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax payments associated with equity-based compensation transactions . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and restricted cash and cash
1,574
100
98
39
86
(27)
113
55
85
(53)
(23)
10
243
(97)
3,874
(521)
(1,818)
49
(86)
(2,376)
4,683
(533)
(84)
(1,001)
(248)
(876)
67
(33)
(11)
1,964
1,477
25
95
54
89
(47)
(58)
41
—
(16)
(16)
(14)
203
(186)
3,570
(460)
(1,694)
208
(223)
(2,169)
359
(499)
—
453
(1,004)
(802)
52
(29)
(38)
(1,508)
1,376
(251)
92
43
101
(20)
43
39
6
(271)
50
(66)
126
(37)
3,180
(198)
(1,509)
99
(12)
(1,620)
1,479
(1,907)
(8)
513
(750)
(750)
95
(47)
14
(1,361)
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents . . . . . .
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period . . . . . .
Cash, cash equivalents and restricted cash and cash equivalents at end of period . . . . . . . . . . . $
2
3,464
183
3,647 $
(3)
(110)
293
183 $
—
199
94
293
Reconciliation of cash, cash equivalents and restricted cash and cash equivalents at end
of period:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restricted cash and cash equivalents included in other current assets . . . . . . . . . . . . . . . . . . . .
Restricted cash and cash equivalents included in restricted trust and escrow accounts . . . . . . .
Cash, cash equivalents and restricted cash and cash equivalents at end of period . . . . . . . . . . . $
3,561 $
15
71
3,647 $
61 $
49
73
183 $
22
70
201
293
See Notes to Consolidated Financial Statements.
69
WASTE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Millions, Except Shares in Thousands)
Waste Management, Inc. Stockholders’ Equity
Common Stock
Additional
Paid-In (cid:2)Retained(cid:2) Comprehensive Treasury Stock
Accumulated
Other
Total Shares Amounts Capital Earnings Income (Loss) Shares Amounts
Noncontrolling
Interests
Balance, December 31, 2016 . . . . . $ 5,320 630,282 $
Consolidated net income . . . . . . . . 1,949
—
Other comprehensive
6 $
—
4,850 $
—
7,388 $
1,949
(80) (190,967) $ (6,867) $
—
—
—
income (loss), net of tax . . . . . . .
88
—
—
—
—
88
—
—
Cash dividends declared of $1.70
per common share . . . . . . . . . . .
(750)
—
—
—
(750)
—
—
—
Equity-based compensation
transactions, net of tax . . . . . . . .
185
—
—
38
1
—
4,064
146
Common stock repurchase
—
program . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . .
—
Balance, December 31, 2017 . . . . . $ 6,042 630,282 $
Adoption of new accounting
(750)
—
—
—
6 $
45
—
4,933 $
—
—
8,588 $
—
—
(795)
(10,058)
—
(3)
8 (196,964) $ (7,516) $
standards . . . . . . . . . . . . . . . . . .
80
Consolidated net income . . . . . . . . 1,923
Other comprehensive
—
—
—
—
—
—
85
1,925
(5)
—
—
—
—
—
income (loss), net of tax . . . . . . .
(90)
—
—
—
—
(90)
—
—
Cash dividends declared of $1.86
per common share . . . . . . . . . . .
(802)
—
—
—
(802)
—
—
—
Equity-based compensation
transactions, net . . . . . . . . . . . . .
151
—
—
60
1
—
2,345
90
Common stock repurchase
program . . . . . . . . . . . . . . . . . . . (1,008)
—
—
—
—
—
(11,673) (1,008)
Divestiture of noncontrolling
interest . . . . . . . . . . . . . . . . . . .
—
Other, net . . . . . . . . . . . . . . . . . . .
—
Balance, December 31, 2018 . . . . . $ 6,276 630,282 $
Consolidated net income . . . . . . . . 1,671
—
Other comprehensive
(19)
(1)
—
—
6 $
—
—
—
4,993 $
—
—
—
9,797 $
1,670
—
—
—
—
—
(7)
(87) (206,299) $ (8,434) $
—
—
—
income (loss), net of tax . . . . . . .
79
—
—
—
—
79
—
—
Cash dividends declared of $2.05
per common share . . . . . . . . . . .
(876)
—
—
—
(876)
—
—
—
Equity-based compensation
transactions, net . . . . . . . . . . . . .
164
—
—
56
1
—
2,585
107
Common stock repurchase
—
program . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . .
—
Balance, December 31, 2019 . . . . . $ 7,070 630,282 $
(244)
—
—
—
6 $
—
—
—
—
5,049 $ 10,592 $
(244)
(2,247)
—
—
—
5
(8) (205,956) $ (8,571) $
See Notes to Consolidated Financial Statements.
23
—
—
—
—
—
—
23
—
(2)
—
—
—
—
(19)
(1)
1
1
—
—
—
—
—
2
70
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2019, 2018 and 2017
1. Business
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 19. 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.
We are North America’s leading provider of comprehensive waste management environmental services. 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.
Our “Solid Waste” business is operated and managed locally by our subsidiaries that focus on distinct geographic areas
and provide collection, transfer, disposal, and recycling and resource recovery services. Through our subsidiaries, we are
also a leading developer, operator and owner of landfill gas-to-energy facilities in the United States (“U.S.”).
We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our
17 Areas. We also provide additional services that are not managed through our Solid Waste business, which are presented
in this report as “Other.” Additional information related to our segments is included in Note 20.
2. New Accounting Standards and Reclassifications
Adoption of New Accounting Standard
Leases — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2016-02 associated with lease accounting. There were further amendments, including practical
expedients, with the issuance of ASU 2018-01 in January 2018, ASU 2018-11 in July 2018 and ASU 2018-20 in
December 2018. On January 1, 2019, we adopted these ASUs using the optional transition method which allows entities
to continue to apply historical accounting guidance in the comparative periods presented in the year of adoption.
Accordingly, our financial statements for the reported periods after January 1, 2019 are presented under this amended
guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting
guidance.
We elected to apply the following package of practical expedients on a consistent basis permitting entities not to
reassess: (i) whether any expired or existing contracts are or contain a lease; (ii) lease classification for any expired or
existing leases and (iii) whether initial direct costs for any expired or existing leases qualify for capitalization under the
amended guidance. In addition, we applied (i) the practical expedient for land easements, which allows the Company to
not apply the lease standard to certain existing land easements at transition and (ii) the practical expedient to include both
the lease and non-lease components as a single component and account for it as a lease.
The impact of adopting the amended guidance primarily relates to the recognition of lease assets and lease liabilities
on the balance sheet for all leases previously classified as operating leases. We recognized $385 million of right-of-use
assets and $385 million of related lease liabilities as of January 1, 2019 for our contracts that are classified as operating
leases. Leases with an initial term of 12 months or less have not been recorded on the balance sheet. Our accounting for
financing leases, which were formerly referred to as capital leases, remained substantially unchanged. There were no other
material impacts on our consolidated financial statements. See Note 8 for additional information and disclosures related
to our adoption of this amended guidance.
71
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
New Accounting Standards Pending Adoption
Financial Instrument Credit Losses — In June 2016, the FASB issued ASU 2016-13 associated with the measurement
of credit losses on financial instruments. The amended guidance replaces the current 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 will generally result in the earlier recognition of an allowance for losses.
For trade receivables, the Company will rely on, among other factors, historical loss trends and existing economic
conditions. For other receivables as well as loans and other instruments, the Company will rely primarily on credit ratings.
All receivables as well as other instruments may be adjusted for our expectation of future conditions and trends.
The amended guidance is effective for the Company on January 1, 2020 and will not have a material impact on our
consolidated financial statements as current processes primarily align with the expected loss model. The cumulative effect
will be recognized as an adjustment to retained earnings upon adoption. We are in the process of updating our business
processes and related policies, systems and controls to support recognition and disclosure under the new standard.
Implementation Costs Incurred in a Cloud Computing Arrangement — In August 2018, the FASB issued
ASU 2018-15 associated with 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 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 amended guidance is effective for the Company
on January 1, 2020 and will not have a material impact on our consolidated financial statements.
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.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of WM, its wholly-owned and
majority-owned subsidiaries and certain variable interest entities for which we have determined that we are the primary
beneficiary. All material intercompany balances and transactions have been eliminated. Investments in unconsolidated
entities are accounted for under the appropriate method of 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 and reserves associated with our insured and self-insured claims. Each
72
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of these items is discussed in additional detail below. Actual results could differ materially from the estimates and
assumptions that we use in the preparation of our financial statements.
Cash and Cash Equivalents
Cash in excess of current operating requirements is invested in short-term interest-bearing instruments with maturities
of three months or less at the date of purchase and is stated at cost, which approximates market value.
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. As of December 31, 2019 and 2018, no single customer represented greater than
5% of total accounts receivable.
Accounts and Other Receivables
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
doubtful accounts, represents the estimated net realizable value. We estimate our allowance for doubtful accounts based
on historical collection trends; type of customer, such as municipal or commercial; the age of outstanding receivables and
existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be
impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly.
The activity within our allowance for doubtful accounts was not material for the reported periods. 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.
Other receivables, as of December 31, 2019 and 2018, include receivables related to income tax payments in excess
of our current income tax obligations of $231 million and $284 million, respectively. Other receivables as of
December 31, 2019 also includes a receivable of $70 million related to federal natural gas fuel credits.
Parts and Supplies
Parts and supplies consist primarily of spare parts, fuel, tires, lubricants and processed recycling materials. Our parts
and supplies are stated at the lower of cost, using the average cost method, or market.
Landfill Accounting
Cost Basis of Landfill Assets — We capitalize various costs that we incur to make a landfill ready to accept waste.
These costs generally include expenditures for land (including the landfill footprint and required landfill buffer property);
permitting; excavation; liner material and installation; landfill leachate collection systems; landfill gas collection systems;
environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized
73
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes
asset retirement costs, which represent estimates of future costs associated with landfill final capping, closure and post-
closure activities. These costs are discussed below.
Final Capping, Closure and Post-Closure Costs — Following is a description of our asset retirement activities and
our related accounting:
•(cid:2) Final Capping — Involves the installation of flexible membrane liners and geosynthetic clay liners, drainage and
compacted soil layers and topsoil over areas of a landfill where total airspace has been consumed. Final capping
asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed related to the
specific final capping event with a corresponding increase in the landfill asset. Each final capping event is
accounted for as a discrete obligation and recorded as an asset and a liability based on estimates of the discounted
cash flows and airspace associated with each final capping event.
•(cid:2) Closure — Includes the construction of the final portion of methane gas collection systems (when required),
demobilization and routine maintenance costs. These are costs incurred after the site ceases to accept waste, but
before the landfill is certified as closed by the applicable state regulatory agency. These costs are recorded as an
asset retirement obligation as airspace is consumed over the life of the landfill with a corresponding increase in
the landfill asset. Closure obligations are recorded over the life of the landfill based on estimates of the discounted
cash flows associated with performing closure activities.
•(cid:2) Post-Closure — Involves the maintenance and monitoring of a landfill site that has been certified closed by the
applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year
period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is
consumed over the life of the landfill with a corresponding increase in the landfill asset. Post-closure obligations
are recorded over the life of the landfill based on estimates of the discounted cash flows associated with
performing post-closure activities.
We develop our estimates of these obligations using input from our operations personnel, engineers and accountants.
Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended
to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information,
including the results of present value techniques. In many cases, we contract with third parties to fulfill our obligations for
final capping, closure and post-closure. We use historical experience, professional engineering judgment and quoted or
actual prices paid for similar work to determine the fair value of these obligations. We are required to recognize these
obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances
where we perform the work with internal resources, the incremental profit margin realized is recognized as a component
of operating income when the work is completed.
Once we have determined final capping, closure and post-closure costs, we inflate those costs to the expected time of
payment and discount those expected future costs back to present value. During the years ended December 31, 2019, 2018
and 2017, we inflated these costs in current dollars to the expected time of payment using an inflation rate of 2.5%. We
discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred,
consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the
estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are
discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free
discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation.
The weighted average rate applicable to our long-term asset retirement obligations as of December 31, 2019 was
approximately 5.25%.
74
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We record the estimated fair value of final capping, closure and post-closure liabilities for our landfills based on the
airspace consumed through the current period. The fair value of final capping obligations is developed based on our
estimates of the airspace consumed to date for each final capping event and the expected timing of each final capping
event. The fair value of closure and post-closure obligations is developed based on our estimates of the airspace consumed
to date for the entire landfill and the expected timing of each closure and post-closure activity. Because these obligations
are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final
capping, closure and post-closure activities could result in a material change in these liabilities, related assets and results
of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more
often if significant facts change.
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-closure
activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and (ii) a change in
liability and asset amounts to be recorded prospectively over either the remaining permitted and expansion airspace (as
defined below) of the related discrete final capping event or the remaining permitted and expansion airspace of the landfill,
as appropriate. Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance
with our amortization policy, which would generally result in amortization expense being recognized prospectively over
the remaining permitted and expansion airspace of the final capping event or the remaining permitted and expansion
airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully utilized result
in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill
airspace amortization expense.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest method
and is recorded as final capping, closure and post-closure expense, which is included in operating expenses within our
Consolidated Statements of Operations.
Amortization of Landfill Assets — The amortizable basis of a landfill includes (i) amounts previously expended and
capitalized; (ii) capitalized landfill final capping, closure and post-closure costs; (iii) projections of future purchase and
development costs required to develop the landfill site to its remaining permitted and expansion airspace and (iv) projected
asset retirement costs related to landfill final capping, closure and post-closure activities.
Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is
calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the
corresponding asset’s airspace. For landfills that we do not own, but operate through lease or other contractual agreements,
the rate per ton is calculated based on expected airspace to be utilized over the lesser of the contractual term of the
underlying agreement or the life of the landfill.
We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:
•(cid:2) Remaining Permitted Airspace — Our engineers, in consultation with third-party engineering consultants and
surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining permitted
airspace is determined by an annual survey, which is used to compare the existing landfill topography to the
expected final landfill topography.
•(cid:2) Expansion Airspace — We also include currently unpermitted expansion airspace in our estimate of remaining
permitted and expansion airspace in certain circumstances. First, to include airspace associated with an expansion
effort, we must generally expect the initial expansion permit application to be submitted within one year and the
final expansion permit to be received within five years. Second, we must believe that obtaining the expansion
permit is likely, considering the following criteria:
•(cid:2) Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use
and local, state or provincial approvals;
75
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•(cid:2) We have a legal right to use or obtain land to be included in the expansion plan;
•(cid:2) There are no significant known technical, legal, community, business, or political restrictions or similar
issues that could negatively affect the success of such expansion; and
•(cid:2) Financial analysis has been completed based on conceptual design, and the results demonstrate that the
expansion meets Company criteria for investment.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion airspace, the
expansion effort must meet all the criteria listed above. These criteria are evaluated by our field-based engineers,
accountants, managers and others to identify potential obstacles to obtaining the permits. Once the unpermitted airspace
is included, our policy provides that airspace may continue to be included in remaining permitted and expansion airspace
even if certain of these criteria are no longer met as long as we continue to believe we will ultimately obtain the permit,
based on the facts and circumstances of a specific landfill. In these circumstances, continued inclusion must be approved
through a landfill-specific review process that includes approval by our Chief Financial Officer on a quarterly basis. Of
the 15 landfill sites with expansions included as of December 31, 2019, one landfill required the Chief Financial Officer
to approve the inclusion of the unpermitted airspace because the permit application process did not meet the one- or
five-year requirements.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also
include the projected costs for development, as well as the projected asset retirement costs related to final capping, closure
and post-closure of the expansion in the amortization basis of the landfill.
Once the remaining permitted and expansion airspace is determined in cubic yards, an airspace utilization factor
(“AUF”) is established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using
the measured density obtained from previous annual surveys and is then adjusted to account for future settlement. The
amount of settlement that is forecasted will take into account several site-specific factors including current and projected
mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying
waste, anticipated access to moisture through precipitation or recirculation of landfill leachate and operating practices. In
addition, the initial selection of the AUF is subject to a subsequent multi-level review by our engineering group and the
AUF used is reviewed on a periodic basis and revised as necessary. Our historical experience generally indicates that the
impact of settlement at a landfill is greater later in the life of the landfill when the waste placed at the landfill approaches
its highest point under the permit requirements.
After determining the costs and remaining permitted and expansion capacity at each of our landfills, we determine the
per ton rates that will be expensed as waste is received and deposited at the landfill by dividing the costs by the
corresponding number of tons. We calculate per ton amortization rates for each landfill for assets associated with each
final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be
capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and
post-closure activities, our airspace utilization or the success of our expansion efforts could ultimately turn out to be
significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove
to be significantly different than actual results, lower profitability may be experienced due to higher amortization rates or
higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that
expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required
to recognize an asset impairment or incur significantly higher amortization expense. If at any time management makes the
decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
76
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Environmental Remediation Liabilities
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.
Where it is probable that a liability has been incurred, we estimate costs required to remediate sites based on
site-specific facts and circumstances. We routinely review and evaluate sites that require remediation, considering whether
we were an owner, operator, transporter, or generator at the site, the amount and type of waste hauled to the site and the
number of years we were associated with the site. Next, we review the same type of information with respect to other
named and unnamed PRPs. Estimates of the costs for the likely remedy are then either developed using our internal
resources or by third-party environmental engineers or other service providers. Internally developed estimates are based
on:
•(cid:2) Management’s judgment and experience in remediating our own and unrelated parties’ sites;
•(cid:2)
Information available from regulatory agencies as to costs of remediation;
•(cid:2) The number, financial resources and relative degree of responsibility of other PRPs who may be liable for
remediation of a specific site; and
•(cid:2) The typical allocation of costs among PRPs, unless the actual allocation has been determined.
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 $140 million
higher than the $240 million recorded in the Consolidated Balance Sheet as of December 31, 2019. 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.
Where we believe that both the amount of a particular environmental remediation liability and the timing of the
payments are fixed or reliably determinable, we inflate the cost in current dollars (by 2.5% as of December 31, 2019 and
2018) until the expected time of payment and discount the cost to present value using a risk-free discount rate, which is
based on the rate for U.S. Treasury bonds with a term approximating the weighted average period until settlement of the
underlying obligation. We determine the risk-free discount rate and the inflation rate on an annual basis unless interim
changes would materially impact our results of operations. For remedial liabilities that have been discounted, we include
interest accretion, based on the effective interest method, in operating expenses in our Consolidated Statements of
Operations. The following table summarizes the impacts of revisions in the risk-free discount rate applied to our
77
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
environmental remediation liabilities and recovery assets for the years ended December 31 (in millions) and the risk-free
discount rate applied as of December 31:
Increase (decrease) in operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Risk-free discount rate applied to environmental remediation liabilities and
2019
2018
2017
9
$
(2)
$
—
recovery assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.75 %
2.75 %
2.5 %
The portion of our recorded environmental remediation liabilities that were not subject to inflation or discounting, as
the amounts and timing of payments are not fixed or reliably determinable, was $36 million and $35 million as of
December 31, 2019 and 2018, respectively. Had we not inflated and discounted any portion of our environmental
remediation liability, the amount recorded would have decreased by $8 million and increased by $3 million as of
December 31, 2019 and 2018, respectively.
Property and Equipment (exclusive of landfills, discussed above)
We record property and equipment at cost. Expenditures for major additions and improvements are capitalized and
maintenance activities are expensed as incurred. We depreciate property and equipment over the estimated useful life of
the asset using the straight-line method. We assume no salvage value for our depreciable property and equipment. When
property and equipment are retired, sold or otherwise disposed of, the cost and accumulated depreciation are removed from
our accounts and any resulting gain or loss is included in results of operations as an offset or increase to operating expense
for the period.
The estimated useful lives for significant property and equipment categories are as follows (in years):
Vehicles — excluding rail haul cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles — rail haul cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment — including containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Useful Lives
3 to 10
10 to 30
3 to 30
5 to 40
3 to 10
We include capitalized costs associated with developing or obtaining internal-use software within furniture, fixtures
and office equipment. These costs include direct external costs of materials and services used in developing or obtaining
the software and internal costs for employees directly associated with the software development project.
Leases
We lease property and equipment in the ordinary course of our business. Our operating lease activities primarily
consist of leases for real estate, landfills and operating equipment. Our financing lease activities primarily consist of leases
for operating equipment, railcars and landfill assets. Our leases have varying terms. Some may include renewal or purchase
options, escalation clauses, restrictions, penalties or other obligations that we consider in determining minimum lease
payments. The leases are classified as either operating leases or financing leases, as appropriate. See Note 8 for additional
information.
Operating Leases (excluding landfill leases discussed below) — The majority of our leases are operating leases. This
classification generally can be attributed to either (i) relatively low fixed minimum lease payments as a result of real
property lease obligations that vary based on the volume of waste we receive or process or (ii) minimum lease terms that
are much shorter than the assets’ economic useful lives. Management expects that in the normal course of business our
78
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
operating leases will be renewed, replaced by other leases, or replaced with fixed asset expenditures. Our rent expense
during each of the last three years and our future minimum operating lease payments for each of the next five years for
which we are contractually obligated as of December 31, 2019 are disclosed in Note 8.
Financing Leases (excluding landfill leases discussed below) — Assets under financing leases are capitalized using
interest rates determined at the commencement of each lease and are amortized over either the useful life of the asset or
the lease term, as appropriate, on a straight-line basis. The present value of the related lease payments is recorded as a debt
obligation. Our future minimum annual financing lease payments are disclosed in Note 8.
Landfill Leases — From an operating perspective, landfills that we lease are similar to landfills we own because
generally we will operate the landfill for the life of the operating permit. The most significant portion of our rental
obligations for landfill leases is contingent upon operating factors such as disposal volume and often there are no
contractual minimum rental obligations. Contingent rental obligations are expensed as incurred. For landfill financing
leases that provide for minimum contractual rental obligations, we record the present value of the minimum obligation as
part of the landfill asset, which is amortized on a units-of-consumption basis over the shorter of the lease term or the life
of the landfill. Our future minimum annual lease payments for our landfill leases are disclosed in Note 8.
Acquisitions
We generally recognize assets acquired and liabilities assumed in business combinations, including contingent assets
and liabilities, based on fair value estimates as of the date of acquisition.
Contingent Consideration — In certain acquisitions, we agree to pay additional amounts to sellers contingent upon
achievement by the acquired businesses of certain negotiated goals, such as targeted revenue levels, targeted disposal
volumes or the issuance of permits for expanded landfill airspace. We have recognized liabilities for these contingent
obligations based on their estimated fair value as of the date of acquisition with any differences between the acquisition-
date fair value and the ultimate settlement of the obligations being recognized as an adjustment to income from operations.
Acquired Assets and Assumed Liabilities — Assets and liabilities arising from contingencies such as pre-acquisition
environmental matters and litigation are recognized at their acquisition-date fair value when their respective fair values
can be determined. If the fair values of such contingencies cannot be determined, they are recognized as of the acquisition
date if the contingencies are probable and an amount can be reasonably estimated.
Acquisition-date fair value estimates are revised as necessary if, and when, additional information regarding these
contingencies becomes available to further define and quantify assets acquired and liabilities assumed. Subsequent to
finalization of purchase accounting, these revisions are accounted for as adjustments to income from operations. All
acquisition-related transaction costs are expensed as incurred.
Goodwill and Other Intangible Assets
Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We do not
amortize goodwill, but as discussed in the Long-Lived Asset Impairments section below, we assess our goodwill for
impairment at least annually.
Other intangible assets consist primarily of customer and supplier relationships, covenants not-to-compete, licenses,
permits (other than landfill permits, as all landfill-related intangible assets are combined with landfill tangible assets and
amortized using our landfill amortization policy), and other contracts. Other intangible assets are recorded at fair value on
the acquisition date and are generally amortized using either a 150% declining balance approach or a straight-line basis as
we determine appropriate. Customer and supplier relationships are typically amortized over a term of 10 years. Covenants
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
not-to-compete are amortized over the term of the non-compete covenant, which is generally five years. Licenses, permits
and other contracts are amortized over the definitive terms of the related agreements. If the underlying agreement does not
contain definitive terms and the useful life is determined to be indefinite, the asset is not amortized.
Long-Lived Asset Impairments
We assess our long-lived assets for impairment as required under the applicable accounting standards. If necessary,
impairments are recorded in (gain) loss from divestitures, asset impairments and unusual items, net in our Consolidated
Statement of Operations.
Property and Equipment, Including Landfills and Definite-Lived Intangible Assets — We monitor the carrying value
of our long-lived assets for potential impairment on an ongoing basis and test the recoverability of such assets generally
using significant unobservable (“Level 3”) inputs whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable. These events or changes in circumstances, including management decisions pertaining
to such assets, are referred to as impairment indicators. If an impairment indicator occurs, we perform a test of
recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected future cash flows.
If cash flows cannot be separately and independently identified for a single asset, we will determine whether an impairment
has occurred for the group of assets for which we can identify the projected cash flows. If the carrying values are in excess
of undiscounted expected future cash flows, we measure any impairment by comparing the fair value of the asset or asset
group to its carrying value and the difference is recorded in the period that the impairment indicator occurs. Fair value is
generally determined by considering (i) internally developed discounted projected cash flow analysis of the asset or asset
group; (ii) actual third-party valuations and/or (iii) information available regarding the current market for similar assets.
Estimating future cash flows requires significant judgment and projections may vary from the cash flows eventually
realized, which could impact our ability to accurately assess whether an asset has been impaired.
The assessment of impairment indicators and the recoverability of our capitalized costs associated with landfills and
related expansion projects require significant judgment due to the unique nature of the waste industry, the highly regulated
permitting process and the sensitive estimates involved. During the review of a landfill expansion application, a regulator
may initially deny the expansion application although the expansion permit is ultimately granted. In addition, management
may periodically divert waste from one landfill to another to conserve remaining permitted landfill airspace, or a landfill
may be required to cease accepting waste, prior to receipt of the expansion permit. However, such events occur in the
ordinary course of business in the waste industry and do not necessarily result in impairment of our landfill assets because,
after consideration of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit.
As a result, our tests of recoverability, which generally make use of a probability-weighted cash flow estimation approach,
may indicate that no impairment loss should be recorded.
Indefinite-Lived Intangible Assets, Including Goodwill — At least annually using a measurement date of October 1,
and more frequently if warranted, we assess the indefinite-lived intangible assets including the goodwill of our reporting
units for impairment.
We first performed a qualitative assessment to determine if it was more likely than not that the fair value of a reporting
unit was less than its carrying value. If the assessment indicated a possible impairment, we completed a quantitative review,
comparing the estimated fair value of a reporting unit to its carrying amount, including goodwill. An impairment charge
was recognized if the asset’s estimated fair value was less than its carrying amount. Fair value is typically estimated using
an income approach using Level 3 inputs. However, when appropriate, we may also use a market approach. The income
approach is based on the long-term projected future cash flows of the reporting units. We discount the estimated cash flows
to present value using a weighted average cost of capital that considers factors such as market assumptions, the timing of
the cash flows and the risks inherent in those cash flows. We believe that this approach is appropriate because it provides
a fair value estimate based upon the reporting units’ expected long-term performance considering the economic and market
80
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
conditions that generally affect our business. The market approach estimates fair value by measuring the aggregate market
value of publicly-traded companies with similar characteristics to our business as a multiple of their reported earnings. We
then apply that multiple to the reporting units’ earnings to estimate their fair values. We believe that this approach may
also be appropriate in certain circumstances because it provides a fair value estimate using valuation inputs from entities
with operations and economic characteristics comparable to our reporting units.
Fair value is computed using several factors, including projected future operating results, economic projections,
anticipated future cash flows, comparable marketplace data and the cost of capital. There are inherent uncertainties related
to these factors and to our judgment in applying them in our analysis. However, we believe our methodology for estimating
the fair value of our reporting units is reasonable.
Refer to Notes 6 and 12 for information related to impairments recognized during the reported periods.
Insured and Self-Insured Claims
We have retained a significant portion of the risks related to our health and welfare, general liability, automobile
liability and workers’ compensation claims programs. The exposure for unpaid claims and associated expenses, including
incurred but not reported losses, generally is estimated with the assistance of external actuaries and by factoring in pending
claims and historical trends and data. The gross estimated liability associated with settling unpaid claims is included in
accrued liabilities in our Consolidated Balance Sheets if expected to be settled within one year; otherwise, it is included in
other long-term liabilities. Estimated insurance recoveries related to recorded liabilities are reflected as other current
receivables or other long-term assets in our Consolidated Balance Sheets when we believe that the receipt of such amounts
is probable.
We use a wholly-owned insurance captive to insure the deductibles for our general liability, automobile liability and
workers’ compensation claims programs. We continue to maintain conventional insurance policies with third-party
insurers. In addition to certain business and operating benefits of having a wholly-owned insurance captive, we expect to
receive certain cash flow benefits related to the timing of tax deductions related to these claims. WM will pay an annual
premium to the insurance captive, typically in the first quarter of the year, for the estimated losses based on the external
actuarial analysis. These premiums are held in a restricted escrow account to be used solely for paying insurance claims,
resulting in a transfer of risk from WM to the insurance captive and are allocated between current and long-term assets
depending on timing on the use of funds.
Restricted Trust and Escrow Accounts
Our restricted trust and escrow accounts consist principally of funds deposited for purposes of funding insurance
claims and settling landfill final capping, closure, post-closure and environmental remediation obligations. These funds
are allocated between cash, money market funds and available-for-sale securities depending on the estimated timing and
purpose of the use of funds. We use a wholly-owned insurance captive to insure the deductibles for certain claims
programs, as discussed above in Insured and Self-Insured Claims, and the premiums paid were directly deposited into a
restricted escrow account to be used solely for paying insurance claims. At several of our landfills, we provide financial
assurance by depositing cash into restricted trust or escrow accounts for purposes of settling final capping, closure, post-
closure and environmental remediation obligations. Balances maintained in these restricted trust and escrow accounts will
fluctuate based on (i) changes in statutory requirements; (ii) future deposits made to comply with contractual
arrangements; (iii) the ongoing use of funds; (iv) acquisitions or divestitures and (v) changes in the fair value of the
financial instruments held in the restricted trust or escrow accounts. The current portion of restricted trust and escrow
accounts as of December 31, 2019 and 2018 of $70 million is included in other current assets in our Consolidated Balance
Sheets.
81
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
See Note 19 for additional discussion related to restricted trust and escrow accounts for final capping, closure,
post-closure or environmental remediation obligations.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which the Company has significant influence are accounted for under the
equity method of accounting. Equity investments in which the Company does not have the ability to exert significant
influence over the investees’ operating and financing activities are measured using a quantitative approach as these
investments do not have readily determinable fair values. The quantitative approach, or measurement alternative, is equal
to its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer. The fair value of our redeemable preferred stock has been
measured based on third-party investors’ recent or pending transactions in these securities, which are considered the best
evidence of fair value. The following table summarizes our investments in unconsolidated entities as of December 31 (in
millions):
Equity method investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investments without readily determinable fair values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
377 $
57
49
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
483 $
257
83
66
406
2019
2018
We monitor and assess the carrying value of our investments throughout the year for potential impairment and write
them down to their fair value when other-than-temporary declines exist. Fair value is generally based on (i) other third-
party investors’ recent transactions in the securities; (ii) other information available regarding the current market for
similar assets; (iii) a market or income approach, as deemed appropriate and/or (iv) a quantitative approach, or
measurement alternative, as noted above. Impairments of our investments are recorded in equity in net losses of
unconsolidated entities or other, net in the Consolidated Statements of Operations in accordance with appropriate
accounting guidance.
Refer to Notes 12 and 17 for information related to impairments and other adjustments recognized during the reported
periods.
Foreign Currency
We have operations in Canada, as well as certain support functions in India. Local currencies generally are considered
the functional currencies of our operations and investments outside the U.S. The assets and liabilities of our foreign
operations are translated to U.S. dollars using the exchange rate as of the balance sheet date. Revenues and expenses are
translated to U.S. dollars using the average exchange rate during the period. The resulting translation difference is reflected
as a component of other comprehensive income (loss).
Revenue Recognition
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,
82
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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,
fuel surcharge and regulatory recovery fees, which are intended to pass through to customers direct and indirect costs
incurred. We also provide additional services that are not managed through our Solid Waste business, including operations
managed by both our Strategic Business Solutions (“WMSBS”) and Energy and Environmental Services (“EES”)
organizations, recycling brokerage services, landfill gas-to-energy services and certain other expanded service offerings
and solutions.
Our revenue from sources other than customer contracts primarily relates to lease revenue associated with compactors
and balers. Revenue from our leasing arrangements was not material and represented approximately 1% of total revenue
for each of the reported periods.
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
revenues and recognized as revenue in the period service is provided.
See Note 20 for additional information related to revenue by reportable segment and major lines of business.
Deferred Revenues
We record deferred revenues when cash payments are received or due in advance of our performance and classify
them as current since they are earned within a year and there are no significant financing components. Substantially all
our deferred revenues during the reported periods are realized as revenues within one to three months, when the related
services are performed.
Contract Acquisition Costs
Our incremental direct costs of obtaining a contract, which consist primarily of sales incentives, are generally deferred
and amortized to selling, general and administrative expense over the estimated life of the relevant customer relationship,
ranging from 5 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 Consolidated Balance Sheet.
As of December 31, 2019 and 2018, we had $153 million and $145 million of deferred contract costs, respectively,
of which $117 million and $109 million was related to deferred sales incentives, respectively. During the years ended
December 31, 2019 and 2018, we amortized $23 million and $22 million of sales incentives to selling, general and
administrative expense, respectively, and $17 million and $35 million of other contract acquisition costs as a reduction in
revenue, respectively.
Long-Term Contracts
Approximately 25% of our total revenue is derived from contracts with a remaining term greater than one year. The
consideration for these contracts is primarily variable in nature. The variable elements of these contracts primarily include
the number of homes and businesses served and annual rate changes based on consumer price index, fuel prices or other
operating costs. Such contracts are generally within our collection, recycling and other lines of business and have a
weighted average remaining contract life of approximately five years. We do not disclose the value of unsatisfied
performance obligations for these contracts as our right to consideration corresponds directly to the value provided to the
83
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance
obligations.
Capitalized Interest
We capitalize interest on certain projects under development, including landfill expansion projects, certain assets
under construction, including operating landfills and landfill gas-to-energy projects and internal-use software. During
2019, 2018 and 2017, total interest costs were $485 million, $400 million and $383 million, respectively, of which
$21 million, $16 million and $15 million was capitalized in 2019, 2018 and 2017, respectively.
Income Taxes
The Company is subject to income tax in the U.S. and Canada. Current tax obligations associated with our income tax
expense are reflected in the accompanying Consolidated Balance Sheets as a component of accrued liabilities and our
deferred tax obligations are reflected in deferred income taxes.
Deferred income taxes are based on the difference between the financial reporting and tax basis of assets and liabilities.
Deferred income tax expense represents the change during the reporting period in the deferred tax assets and liabilities,
net of the effect of acquisitions and dispositions. Deferred tax assets include tax loss and credit carry-forwards and are
reduced by a valuation allowance if, based on available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. We establish reserves for uncertain tax positions when, despite our belief that our
tax return positions are supportable, we believe that certain positions may be challenged and potentially disallowed. When
facts and circumstances change, we adjust these reserves through our income tax expense.
Should interest and penalties be assessed by taxing authorities on any underpayment of income tax, such amounts
would be accrued and classified as a component of our income tax expense in our Consolidated Statements of Operations.
See Note 9 for discussion of our income taxes.
Contingent Liabilities
We estimate the amount of potential exposure we may have with respect to claims, assessments and litigation in
accordance with authoritative guidance on accounting for contingencies. We are party to pending or threatened legal
proceedings covering a wide range of matters in various jurisdictions. It is difficult to predict the outcome of litigation, as
it is subject to many uncertainties. Additionally, it is not always possible for management to make a meaningful estimate
of the potential loss or range of loss associated with such contingencies. See Note 11 for discussion of our commitments
and contingencies.
Supplemental Cash Flow Information
The following table shows supplemental cash flow information for the years ended December 31 (in millions):
Interest, net of capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
397 $
292
339 $
349
380
562
2019
2018
2017
During 2019, we had $299 million of non-cash financing activities from our recent federal low-income housing
investment discussed in Note 9 and new financing leases. During 2018, we had $250 million of non-cash financing
activities from a federal low-income housing investment and new financing leases. During 2017, we did not have any
84
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
significant non-cash investing and financing activities. Non-cash investing and financing activities are generally excluded
from the Consolidated Statements of Cash Flows.
4. Landfill and Environmental Remediation Liabilities
Liabilities for landfill and environmental remediation costs as of December 31 are presented in the table below (in
millions):
2019
Environmental
Remediation
Landfill
Total
Landfill
2018
Environmental
Remediation
Total
Current (in accrued liabilities) . . $
Long-term . . . . . . . . . . . . . . . . .
$
138 $
1,717
1,855 $
27 $
213
240 $
165 $
1,930
2,095 $
143 $
1,617
1,760 $
26 $
211
237 $
169
1,828
1,997
The changes to landfill and environmental remediation liabilities for the year ended December 31, 2019 are reflected
in the table below (in millions):
Landfill
Environmental
Remediation
December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Obligations incurred and capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligations settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revisions in estimates and interest rate assumptions (a) (b) . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, divestitures and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,760 $
72
(113)
98
33
5
1,855 $
237
—
(22)
4
21
—
240
(a)(cid:2) The amount reported for our landfill liabilities includes revisions in estimates resulting primarily from changes in the
timing and amount of costs as well as changes in estimates of remaining airspace.
(b)(cid:2) The amount reported for our environmental remediation liabilities includes an increase of $11 million due to a
decrease in the risk-free discount rate used to measure our liabilities from 2.75% at December 31, 2018 to 1.75% at
December 31, 2019.
Our recorded liabilities as of December 31, 2019 include the impacts of inflating certain of these costs based on our
expectations of the timing of cash settlement and of discounting certain of these costs to present value. Anticipated
payments of currently identified environmental remediation liabilities, as measured in current dollars, are $27 million
in 2020, $33 million in 2021, $44 million in 2022, $34 million in 2023, $22 million in 2024 and $72 million thereafter.
At several of our landfills, we provide financial assurance by depositing cash into restricted trust funds or escrow
accounts for purposes of settling final capping, closure, post-closure and environmental remediation obligations.
Generally, these trust funds are established to comply with statutory requirements and operating agreements. See
Notes 17 and 19 for additional information related to these trusts.
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. Property and Equipment
Property and equipment as of December 31 consisted of the following (in millions):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Landfills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Containers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation of tangible property and equipment . . . . . . . . . . . . . . . . .
Less: Accumulated amortization of landfill airspace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
656 $
15,910
5,344
3,140
2,616
3,174
710
31,550
(9,331)
(9,326)
12,893 $
2018
656
15,240
5,059
2,988
2,588
2,998
677
30,206
(9,107)
(9,157)
11,942
Depreciation and amortization expense, including amortization expense for assets recorded as financing leases,
consisted of the following for the years ended December 31 (in millions):
Depreciation of tangible property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of landfill airspace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
2018
893 $
575
1,468 $
838 $
538
1,376 $
2017
783
497
1,280
6. Goodwill and Other Intangible Assets
Goodwill was $6,532 million and $6,430 million as of December 31, 2019 and 2018, respectively. The $102 million
increase in goodwill during 2019 is primarily related to acquisitions partially offset by impairment charges, which are
discussed below, and translation adjustments related to our Canadian operations.
As discussed in Note 3, we perform our annual impairment test of goodwill balances for our reporting units using a
measurement date of October 1. We will also perform interim tests if an impairment indicator exists. As a result of our
annual impairment test performed in the fourth quarter of 2019, we recorded goodwill impairment charges of $27 million,
of which $17 million related to our EES organization and $10 million related to our LampTracker® reporting unit, because
the carrying value including goodwill exceeded the estimated fair value. Fair value was estimated using an income
approach based on long-term projected discounted future cash flows of the reporting unit (Level 3).
See Notes 12, 18 and 20 for additional information related to goodwill.
86
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our other intangible assets consisted of the following as of December 31 (in millions):
Covenants Licenses, (cid:2)
Customer
and Supplier
Not-to-
Relationships Compete and Other
Permits
Total
2019
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2018
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
906 $
(469)
437 $
72 $
(36)
36 $
110 $ 1,088
(567)
(62)
521
48 $
949 $
(461)
488 $
60 $
(24)
36 $
109 $ 1,118
(546)
(61)
572
48 $
Amortization expense for other intangible assets was $106 million, $101 million and $96 million for 2019, 2018 and
2017, respectively. As of December 31, 2019, we had $19 million of licenses, permits and other intangible assets that are
not subject to amortization because they do not have stated expirations or have routine, administrative renewal processes.
Additional information related to other intangible assets acquired through business combinations is included in Note 18.
As of December 31, 2019, we expect annual amortization expense related to other intangible assets to be $99 million
in 2020, $85 million in 2021, $70 million in 2022, $61 million in 2023 and $56 million in 2024.
7. Debt
The following table summarizes the major components of debt as of each balance sheet date (in millions) and provides
the maturities and interest rate ranges of each major category as of December 31:
Revolving credit facility (weighted average interest rate of 3.1% as of December 31, 2018) . . . . . $
Commercial paper program (weighted average interest rate of 2.9% as of December 31, 2018) . .
Senior notes, maturing through 2049, interest rates ranging from 2.4% to 7.75% (weighted
average interest rate of 3.9% as of December 31, 2019 and 4.3% as of December 31, 2018) . . .
Canadian senior notes, maturing September 2026, interest rate of 2.6% . . . . . . . . . . . . . . . . . . . . .
Tax-exempt bonds, maturing through 2048, fixed and variable interest rates ranging from
1.35% to 4.3% (weighted average interest rate of 2.3% as of December 31, 2019 and
2.35% as of December 31, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing leases and other, maturing through 2071, weighted average interest rate of 4.7% . . . . .
Debt issuance costs, discounts and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
2018
— $
—
11
990
9,965
385
6,222
—
2,523
710
(85)
13,498
218
2,388
467
(52)
10,026
432
$ 13,280 $ 9,594
Debt Classification
As of December 31, 2019, we had $1.5 billion of debt maturing within the next 12 months, including (i) $600 million
of 4.75% senior notes that mature in June 2020; (ii) $669 million 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) $218 million of other debt with
scheduled maturities within the next 12 months, including $112 million of tax-exempt bonds. As of December 31, 2019,
87
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
we have classified $1.3 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 $218 million of debt maturing in the next 12 months is classified as current obligations.
As of December 31, 2019, we also have $169 million of variable-rate tax-exempt bonds that are supported by letters
of credit under our $3.5 billion revolving credit facility, of which $15 million mature within the next 12 months. The
interest rates on our variable-rate tax-exempt bonds are generally reset on either a daily or weekly basis through a
remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at
market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is
unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have
the availability under our $3.5 billion revolving credit facility to fund these bonds until they are remarketed successfully.
Accordingly, we have classified $154 million of these borrowings as long-term in our Consolidated Balance Sheet as of
December 31, 2019.
Access to and Utilization of Credit Facilities and Commercial Paper Program
$3.5 Billion Revolving Credit Facility — In November 2019, we entered into the $3.5 billion revolving credit facility,
which amended and restated our prior long-term U.S. and Canadian revolving credit facility. Amendments to the credit
agreement included (i) increasing total capacity under the facility from $2.75 billion to $3.5 billion; (ii) increasing the
accordion feature that may be used to increase total capacity in future periods from $750 million to $1.0 billion and
(iii) extending the term through November 2024. The agreement provides the Company with two one-year extension
options. Waste Management of Canada Corporation and WM Quebec Inc., each an indirect wholly-owned subsidiary of
WM, are borrowers under the $3.5 billion revolving credit facility, and the agreement permits borrowing in Canadian
dollars up to the U.S. dollar equivalent of $375 million, with such borrowings to be repaid in Canadian dollars. WM
Holdings, a wholly-owned subsidiary of WM, guarantees all the obligations under the $3.5 billion revolving credit facility.
The $3.5 billion revolving credit facility provides us with credit capacity to be used for cash borrowings, to support
letters of credit or 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. The spread above LIBOR or CDOR ranges from 0.575% to 1.015%.
Our $3.5 billion revolving credit facility was drafted in anticipation of the phaseout of LIBOR and contains provisions to
replace LIBOR with an appropriate alternate benchmark rate as needed. As of December 31, 2019, we had no outstanding
borrowings and $412 million of letters of credit issued and supported by the facility, leaving unused and available credit
capacity of $3.1 billion.
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. In November 2019, we amended
our commercial paper program, increasing our ability to borrow funds from $2.75 billion to $3.5 billion, provided that the
aggregate outstanding amount of commercial paper borrowings, together with borrowings and issued letters of credit under
the $3.5 billion revolving credit facility, shall not at any time exceed the aggregate authorized borrowing capacity of such
facility. As of December 31, 2019, we had no outstanding borrowings under our commercial paper program.
Other Letter of Credit Facilities — As of December 31, 2019, we had utilized $532 million of other letter of credit
facilities, which are both committed and uncommitted, with terms maturing through April 2021.
88
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Debt Borrowings and Repayments
Revolving Credit Facility — In 2019, we repaid C$15 million, or $11 million, of Canadian borrowings under our
revolving credit facility with available cash.
Senior Notes — In May 2019, WM issued $4.0 billion of senior notes consisting of:
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
$750 million of 2.95% senior notes due June 15, 2024;
$750 million of 3.20% senior notes due June 15, 2026;
$1.0 billion of 3.45% senior notes due June 15, 2029;
$500 million of 4.00% senior notes due July 15, 2039; and
$1.0 billion of 4.15% senior notes due July 15, 2049.
The net proceeds from these debt issuances were $3.97 billion. Concurrently, we used $344 million of the net proceeds
from the newly issued senior notes to retire $257 million of certain high-coupon senior notes. The cash paid 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 Consolidated Statement of Operations, and $3 million of accrued interest. The principal amount of senior
notes redeemed within each series was as follows:
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
•(cid:2)
$304 million of WM Holdings 7.10% senior notes due 2026, of which $56 million were tendered;
$395 million of WM 7.00% senior notes due 2028, of which $64 million were tendered;
$139 million of WM 7.375% senior notes due 2029, of which $58 million were tendered;
$210 million of WM 7.75% senior notes due 2032, of which $57 million were tendered; and
$274 million of WM 6.125% senior notes due 2039, of which $22 million were tendered.
We used a portion of the proceeds to repay our commercial paper borrowings as discussed further below. We intend
to use the remaining net proceeds to pay a portion of the consideration related to our pending acquisition of Advanced
Disposal Services, Inc. (“Advanced Disposal”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”)
which is discussed further in Note 18, and for general corporate purposes. The newly-issued senior notes due 2024, 2026,
2029 and 2039 include a special mandatory redemption feature, which provides that if the acquisition of Advanced
Disposal is not completed on or prior to July 14, 2020, or if, prior to such date, the Merger Agreement is terminated for
any reason, we will be required to redeem all of such outstanding notes equal to 101% of the aggregate principal amounts
of such notes, plus accrued but unpaid interest.
Canadian Senior Notes — In September 2019, Waste Management of Canada Corporation, an indirect wholly-owned
subsidiary of WM, issued C$500 million, or $377 million, of 2.6% senior notes due September 23, 2026, all of which are
fully and unconditionally guaranteed on a senior unsecured basis by WM and WM Holdings. The net proceeds from the
debt issuance were C$496 million, or $373 million, which we intend to use for general corporate purposes.
Commercial Paper Program — During the year ended December 31, 2019, we made net cash repayments of
$1.0 billion (net of the related discount on issuance).
Tax-Exempt Bonds — We issued $240 million of new tax-exempt bonds in 2019. 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. In the third quarter of 2019, we elected to refund and reissue $99 million of tax-exempt bonds which
resulted in the recognition of a $1 million loss on early extinguishment of debt in our Consolidated Statement of
Operations. Additionally, during the year ended December 31, 2019, we repaid $105 million of our tax-exempt bonds with
available cash.
89
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Financing Leases and Other — The increase in our financing leases and other debt obligations during 2019 is
primarily related to (i) our new federal low-income housing investment discussed in Note 9, which increased our debt
obligations by $140 million, and (ii) an increase of $159 million attributable to non-cash financing arrangements. These
increases were offset by a net decrease of $56 million, primarily due net cash repayments of debt at maturity.
Scheduled Debt Payments
Principal payments of our debt for the next five years and thereafter, based on scheduled maturities are as follows:
$823 million in 2020, $629 million in 2021, $660 million in 2022, $646 million in 2023, $1,220 million in 2024 and
$9,701 million thereafter. Our recorded debt and financing lease obligations include non-cash adjustments associated with
debt issuance costs, discounts, premiums and fair value adjustments attributable to terminated interest rate derivatives,
which have been excluded from these amounts because they will not result in cash payments. See Note 8 below for further
discussion of our financing lease arrangements.
Secured Debt
Our debt balances are generally unsecured, except for financing leases and the notes payable associated with our
investments in low-income housing properties.
Debt Covenants
The terms of certain of our financing arrangements require that we comply with financial and other covenants. Our
most restrictive financial covenant is the one contained in our $3.5 billion revolving credit facility, which sets forth a
maximum total debt to consolidated earnings before interest, taxes, depreciation and amortization ratio (the “Leverage
Ratio”). This covenant requires that the Leverage Ratio for the preceding four fiscal quarters will not be more than
3.75 to 1, provided that if an acquisition permitted under the $3.5 billion revolving credit facility involving aggregate
consideration in excess of $200 million occurs during the fiscal quarter, the Company shall have the right to increase the
Leverage Ratio to 4.25 to 1 during such fiscal quarter and for the following three fiscal quarters (the “Elevated Leverage
Ratio Period”). There shall be no more than two Elevated Leverage Ratio Periods during the term of the $3.5 billion
revolving credit facility, and the Leverage Ratio must return to 3.75 to 1 for at least one fiscal quarter between Elevated
Leverage Ratio Periods. The calculation of all components used in the Leverage Ratio covenant are as defined in the
$3.5 billion revolving credit facility.
Our $3.5 billion revolving credit facility, senior notes and other financing arrangements also contain certain
restrictions on the ability of the Company’s subsidiaries to incur additional indebtedness as well as restrictions on the
ability of the Company and its subsidiaries to, among other things, incur liens; engage in sale-leaseback transactions and
engage in mergers and consolidations. We monitor our compliance with these restrictions, but do not believe that they
significantly impact our ability to enter into investing or financing arrangements typical for our business. As of
December 31, 2019 and 2018, we were in compliance with all covenants and restrictions under our financing arrangements
that may have a material effect on our Consolidated Financial Statements.
8. Leases
Our operating lease activities primarily consist of leases for real estate, landfills and operating equipment. Our
financing lease activities primarily consist of leases for operating equipment, railcars and landfill assets. Leases with an
initial term of 12 months or less, which are not expected to be renewed beyond one year, are not recorded on the balance
sheet and are recognized as lease expense on a straight-line basis over the lease term. Most leases include one or more
options to renew, with renewal terms generally ranging from one to 10 years. The exercise of lease renewal options is at
our sole discretion. We include the renewal term in the calculation of the right-of-use asset and related lease liability when
90
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
such renewals are reasonably certain of being exercised. Certain leases also include options to purchase the leased property.
The depreciable life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer
of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments based
on usage and other lease agreements include rental payments adjusted periodically for inflation; these payments are treated
as variable lease payments. Our lease agreements do not contain any material residual value guarantees or material
restrictive covenants.
When the implicit interest rate is not readily available for our leases, we discount future cash flows of the remaining
lease payments using the current interest rate that would be paid to borrow on collateralized debt over a similar term, or
incremental borrowing rate, at the commencement date.
Supplemental balance sheet information for our leases is as follows (in millions):
Leases
Assets
Long-term:
Classification
December 31, 2019
Operating . . . . . . . . . . . . . . . . . . Other assets
Financing . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated
depreciation and amortization
Total lease assets . . . . . . . . . .
Liabilities
Current:
Operating . . . . . . . . . . . . . . . . . . Accrued liabilities
Financing . . . . . . . . . . . . . . . . . .
Current portion of long-term debt
Long-term:
Operating . . . . . . . . . . . . . . . . . . Other liabilities
Financing . . . . . . . . . . . . . . . . . .
Total lease liabilities . . . . . . .
Long-term debt, less current portion
$
$
$
$
424
374
798
79
36
366
323
804
Operating lease expense was $132 million, $129 million and $134 million during 2019, 2018 and 2017, respectively,
and is included in operating and selling, general and administrative expenses in our Consolidated Statement of Operations.
Financing lease expense for 2019 was $48 million and is included in depreciation and amortization expense and interest
expense, net in our Consolidated Statement of Operations.
91
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Minimum contractual obligations for our leases (undiscounted) as of December 31, 2019 are as follows (in millions):
(cid:2)
(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)(cid:2) $
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)(cid:2)
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)(cid:2)
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)(cid:2)
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)
Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2) $
Less: interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2)
Discounted lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2) $
Operating
Financing
63 $
58
57
51
40
359
628 $
(183)
445 $
47
45
45
44
41
256
478
(119)
359
As of December 31, 2019, we entered into leases, primarily for real estate, that have not yet commenced with future
lease payments of $26 million that are not reflected in the table above. These leases will commence through 2020 with
non-cancelable lease terms up to 15 years.
Cash paid during 2019 for our operating and financing leases was $87 million and $40 million, respectively. During
2019, right-of-use assets obtained in exchange for lease obligations for our operating and financing leases were
$149 million and $134 million, respectively.
As of December 31, 2019, the weighted average remaining lease terms of our operating and financing leases were
approximately 16 years and 14 years, respectively. The weighted average discount rates used to determine the lease
liabilities as of December 31, 2019 for our operating and financing leases were approximately 3.50% and 4.10%,
respectively.
9. Income Taxes
Income Tax Expense
Our income tax expense consisted of the following for the years ended December 31 (in millions):
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
2018
2017
204 $
94
36
334
94
8
(2)
100
434 $
256 $
132
40
428
59
(32)
(2)
25
453 $
400
56
37
493
(316)
62
3
(251)
242
92
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate for the years ended
December 31 as follows:
Income tax expense at U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . . . . . .
State and local income taxes, net of federal income tax benefit . . . . . . . . . . . .
Impacts of enactment of tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxing authority audit settlements and other tax adjustments . . . . . . . . . . . . . .
Tax impact of equity-based compensation transactions . . . . . . . . . . . . . . . . . . .
Tax impact of impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax rate differential on foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019
21.00 %
4.39
—
(4.38)
(0.74)
(0.91)
0.72
0.40
0.13
20.61 %
2018
21.00 %
4.41
(0.51)
(2.44)
(3.85)
(0.54)
0.03
0.43
0.51
19.04 %
2017
35.00 %
3.25
(24.14)
(2.31)
0.03
(1.45)
0.66
(0.55)
0.55
11.04 %
The comparability of our income tax expense for the reported periods has been primarily affected by (i) variations in
our income before income taxes; (ii) federal tax credits; (iii) excess tax benefits associated with equity-based compensation
transactions (iv) adjustments to our accruals and deferred taxes; (v) the tax implications of impairments; (vi) the realization
of state net operating losses and credits; (vii) tax audit settlements and (viii) the impacts of enactment of tax reform.
For financial reporting purposes, income before income taxes by source for the years ended December 31 was as
follows (in millions):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
2,025 $
80
2,105 $
2018
2,235 $
141
2,376 $
2017
2,040
151
2,191
(a) Foreign income before income taxes for the year ended December 31, 2019 includes a $52 million impairment charge
related to our minority-owned investment in a waste conversion technology business. See Note 12 for further
discussion.
Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to
invest in and manage low-income housing properties and a refined coal facility. On August 28, 2019 we acquired an
additional noncontrolling interest in a limited liability company established to invest in and manage low-income housing
properties. Our consideration for this investment totaled $160 million, which was comprised of a $140 million note payable
and an initial cash payment of $20 million. 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 and the coal facility’s refinement processes qualify for
federal tax credits that we expect to realize through 2030 under Section 42, through 2024 under Section 45D, and through
2019 under Section 45 of the Internal Revenue Code.
We account for our investments in these entities using the equity method of accounting, recognizing our share of each
entity’s pre-tax results of operations and other reductions in the value of our investments in equity in net losses of
unconsolidated entities, within our Consolidated Statements of Operations. During the years ended December 31, 2019,
2018 and 2017, we recognized $46 million, $30 million and $30 million of net losses and a reduction in our income tax
expense of $96 million, $57 million and $51 million, respectively, primarily due to tax credits realized from these
investments. In addition, during the years ended December 31, 2019, 2018 and 2017, we recognized interest expense of
$9 million, $3 million and $2 million, respectively, associated with our investments in low-income housing properties. See
Note 19 for additional information related to these unconsolidated variable interest entities.
93
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Federal Tax Credits — During 2019, 2018 and 2017, we recognized federal tax credits in addition to the tax
credits realized from our investments in low-income housing properties and the refined coal facility, resulting in a
reduction in our income tax expense of $11 million, $10 million and $13 million, respectively.
Equity-Based Compensation — During 2019, 2018 and 2017, we recognized excess tax benefits related to the vesting
or exercise of equity-based compensation awards resulting in a reduction in our income tax expense of $25 million,
$17 million and $37 million, respectively.
Adjustments to Accruals and Deferred Taxes — Adjustments to our accruals and deferred taxes due to the filing of
our income tax returns, analysis of our deferred tax balances and changes in state and foreign laws resulted in a reduction
in our income tax expense of $22 million, $52 million and $5 million for the years ended December 31, 2019, 2018 and
2017, respectively.
Tax Implications of Impairments — Portions of the impairment charges recognized during the reported periods are
not deductible for tax purposes resulting in an increase in income tax expense of $15 million, $1 million and $15 million
for the years ended December 31, 2019, 2018 and 2017, respectively. See Note 12 for more information related to our
impairment charges.
State Net Operating Losses and Credits — During 2019, 2018 and 2017, we recognized state net operating losses and
credits resulting in a reduction in our income tax expense of $14 million, $22 million and $12 million, respectively.
Tax Audit Settlements — We file income tax returns in the U.S. and Canada, as well as other state and local
jurisdictions. We are currently under audit by various taxing authorities, as discussed below, and our audits are in various
stages of completion. During the reported periods, we settled various tax audits which resulted in a reduction in our income
tax expense of $2 million, $40 million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
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 2019 tax years and expect these audits to be completed within the next 15 months. We are also currently
undergoing audits by various state and local jurisdictions for tax years that date back to 2013.
Enactment of Tax Reform – In accordance with applicable accounting guidance, the Company recognized the
provisional tax impacts and subsequent measurement period adjustments related to the remeasurement of our deferred
income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation of previously
tax-deferred and unremitted foreign earnings, resulting in a reduction in our income tax expense of $12 million and
$529 million for the years ended December 31, 2018 and 2017, respectively.
Unremitted Earnings in Foreign Subsidiaries — No additional income taxes have been provided for any remaining
undistributed foreign earnings not subject to the one-time, mandatory transition tax, or any additional outside basis
difference, as these amounts continue to be indefinitely reinvested in foreign operations.
94
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred Tax Assets (Liabilities)
The components of net deferred tax liabilities as of December 31 are as follows (in millions):
Deferred tax assets:
Net operating loss, capital loss and tax credit carry-forwards . . . . . . . . . . . . . . . . . . . . . . . $
Landfill and environmental remediation liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous and other reserves, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
2019
2018
150 $
156
114
150
570
(162)
258
143
—
175
576
(261)
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(842)
(865)
(108)
(1,407) $
(752)
(854)
—
(1,291)
The valuation allowance decreased by $99 million in 2019 primarily due to the utilization and expiration of federal
capital loss carry-forwards.
As of December 31, 2019, we had $1.8 billion of state net operating loss carry-forwards with expiration dates through
2039. We also had $27 million of federal capital loss carry-forwards with expiration dates through 2024, $32 million of
foreign tax credit carry-forwards with expiration dates through 2029 and $17 million of state tax credit carry-forwards
with expiration dates through 2035.
We have established valuation allowances for uncertainties in realizing the benefit of certain tax loss and credit carry-
forwards and other deferred tax assets. While we expect to realize the deferred tax assets, net of the valuation allowances,
changes in estimates of future taxable income or in tax laws may alter this expectation.
Liabilities for Uncertain Tax Positions
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including accrued interest,
is as follows (in millions):
Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . .
Additions based on tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019
2018
2017
36 $
5
—
2
—
(3)
40 $
109 $
6
12
2
(88)
(5)
36 $
82
19
11
4
(1)
(6)
109
These liabilities are included as a component of other long-term liabilities in our Consolidated Balance Sheets because
the Company does not anticipate that settlement of the liabilities will require payment of cash within the next 12 months.
As of December 31, 2019, we have $33 million of net unrecognized tax benefits that, if recognized in future periods, would
impact our effective income tax rate.
95
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We recognize interest expense related to unrecognized tax benefits in our income tax expense, which was not material
for the reported periods. We did not have any accrued liabilities or expense for penalties related to unrecognized tax
benefits for the reported periods.
10. Employee Benefit Plans
Defined Contribution Plans — Waste Management sponsors a 401(k) retirement savings plan that covers employees,
except those working subject to collective bargaining agreements that do not provide for coverage under the plan.
U.S. employees who are not subject to such collective bargaining agreements are generally eligible to participate in the
plan following a 90-day waiting period after hire and may contribute as much as 50% of their eligible annual compensation
and 80% of their annual incentive plan bonus, subject to annual contribution limitations established by the IRS. Under the
retirement savings plan, for non-union employees, we match 100% of employee contributions on the first 3% of their
eligible annual compensation and 50% of employee contributions on the next 3% of their eligible annual compensation,
resulting in a maximum match of 4.5% of eligible annual compensation. Non-union employees hired on or after
January 1, 2018 are automatically enrolled in the plan at a 3% contribution rate upon eligibility. Both employee and
Company contributions are in cash and vest immediately. Certain U.S. employees who are subject to collective bargaining
agreements may participate in the 401(k) retirement savings plan under terms specified in their collective bargaining
agreement. Certain employees outside the U.S., including those in Canada, participate in defined contribution plans
maintained by the Company in compliance with laws of the appropriate jurisdiction. Charges to operating and selling,
general and administrative expenses for our defined contribution plans totaled $88 million, $80 million and $70 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
Defined Benefit Plans (other than multiemployer defined benefit pension plans discussed below) — WM Holdings
sponsors a defined benefit plan for certain employees who are subject to collective bargaining agreements that provide for
participation in this plan. Further, certain of our Canadian subsidiaries sponsor defined benefit plans that are frozen to new
participants. As of December 31, 2019, the combined benefit obligation of these pension plans was $141 million supported
by $136 million of combined plan assets, resulting in an aggregate unfunded benefit obligation for these plans of
$5 million. As of December 31, 2018, the combined benefit obligation of these pension plans was $120 million supported
by $117 million of combined plan assets, resulting in an aggregate unfunded benefit obligation for these plans of
$3 million.
In addition, WM Holdings and certain of its subsidiaries provided post-retirement health care and other benefits to
eligible retirees. In conjunction with our acquisition of WM Holdings in July 1998, we limited participation in these plans
to participating retirees as of December 31, 1998. The unfunded benefit obligation for these plans was $14 million and
$18 million as of December 31, 2019 and 2018, respectively.
Our accrued benefit liabilities for our defined benefit pension and other post-retirement plans were $19 million and
$21 million as of December 31, 2019 and 2018, respectively, and are included as components of accrued liabilities and
long-term other liabilities in our Consolidated Balance Sheets.
Multiemployer Defined Benefit Pension Plans — We are a participating employer in a number of trustee-managed
multiemployer defined benefit pension plans (“Multiemployer Pension Plans”) for employees who are covered by
collective bargaining agreements. The risks of participating in these Multiemployer Pension Plans are different from
single-employer plans in that (i) assets contributed to the Multiemployer Pension Plan by one employer may be used to
provide benefits to employees or former employees of other participating employers; (ii) if a participating employer stops
contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the remaining participating
employers and (iii) if we choose to stop participating in any of our Multiemployer Pension Plans, we may be required to
96
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
pay those plans a withdrawal amount based on the underfunded status of the plan. The following table outlines our
participation in Multiemployer Pension Plans considered to be individually significant (dollars in millions):
Pension Fund
Automotive Industries Pension Plan . . . . . . . . . EIN: 94-1133245;
Plan Number: 001
EIN: 36-6155778;
Plan Number: 001
Pension Plan . . . . . . . . . . . . . . . . . . . . . .
Suburban Teamsters of Northern Illinois
EIN/Pension Plan
Number
Pension Protection Act
Reported Status(a)
2018
2019
FIP/RP
Status(b)(c)
Implemented $
Critical and
Declining
Critical and
Declining
Endangered Endangered Implemented
Company
Contributions(d)
2018
2017
2019
Expiration Date
of Collective
Bargaining
Agreement(s)
1 $
1 $
1
9/30/2021
3
3
3 Various dates
through
3/31/2023
Western Conference of Teamsters
Pension Plan . . . . . . . . . . . . . . . . . . . . . . .
EIN: 91-6145047;
Plan Number: 001
Not
Endangered
or Critical
Not
Endangered
or Critical
Not
Applicable
32
29
27 Various dates
through
12/31/2024
Contributions to other Multiemployer
Pension Plans . . . . . . . . . . . . . . . . . . . . . . (cid:2)
Total contributions to Multiemployer
Pension Plans (e) . . . . . . . . . . . . . . . . . . . . (cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
$
36 $
33 $
(cid:2)
16 (cid:2)
14 (cid:2)
(cid:2) $
52 (cid:2) $
47 (cid:2) $
31
16 (cid:2)
47 (cid:2)
(cid:2)
(cid:2)
(a)(cid:2) The most recent Pension Protection Act zone status available in 2019 and 2018 is for the plan’s year-end as of
December 31, 2018 and 2017, respectively. The zone status is based on information that we received from the plan
and is certified by the plan’s actuary. As defined in the Pension Protection Act of 2006, among other factors, plans
reported as critical are generally less than 65% funded and plans reported as endangered are generally less than 80%
funded. Under the Multiemployer Pension Reform Act of 2014, a plan is generally in critical and declining status if it
(i) is certified to be in critical status pursuant to the Pension Protection Act of 2006 and (ii) is projected to be insolvent
within the next 15 years or, in certain circumstances, 20 years.
As of the date the financial statements were issued, Forms 5500 were not available for the plan years ended in 2019.
(b)(cid:2) The “FIP/RP Status” column indicates plans for which a Funding Improvement Plan (“FIP”) or a Rehabilitation Plan
(“RP”) has been implemented.
(c)(cid:2) A Multiemployer Pension Plan that has been certified as endangered, seriously endangered or critical may begin to
levy a statutory surcharge on contribution rates. Once authorized, the surcharge is at the rate of 5% for the first
12 months and 10% for any periods thereafter. Contributing employers, however, may eliminate the surcharge by
entering into a collective bargaining agreement that meets the requirements of the applicable FIP or RP.
(d)(cid:2) Of the Multiemployer Pension Plans considered to be individually significant, the Company was listed in the
Form 5500 of the Suburban Teamsters of Northern Illinois Pension Plan as providing more than 5% of the total
contributions for plan years ending December 31, 2018 and 2017.
(e) Total contributions to Multiemployer Pension Plans excludes contributions related to withdrawal liabilities discussed
below.
Our portion of the projected benefit obligation, plan assets and unfunded liability for the Multiemployer Pension Plans
is not material to our financial position. However, the failure of participating employers to remain solvent could affect our
portion of the plans’ unfunded liability. Specific benefit levels provided by union pension plans are not negotiated with or
known by the employer contributors.
In connection with our ongoing renegotiations of various collective bargaining agreements, we may discuss and
negotiate for the complete or partial withdrawal from one or more of these pension plans. Further, business events, such
as the discontinuation or nonrenewal of a customer contract, the decertification of a union, or relocation, reduction or
discontinuance of certain operations, which result in the decline of Company contributions to a Multiemployer Pension
Plan could trigger a partial or complete withdrawal. In the event of a withdrawal, we may incur expenses associated with
our obligations for unfunded vested benefits at the time of the withdrawal. In 2019, 2018 and 2017, we recognized charges
97
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of less than $1 million, $3 million and $12 million, respectively, to operating expenses for the withdrawal from certain
underfunded Multiemployer Pension Plans. Refer to Note 11 for additional information related to our obligations to
Multiemployer Pension Plans for which we have withdrawn or partially withdrawn.
Multiemployer Plan Benefits Other Than Pensions — During the years ended December 31, 2019, 2018 and 2017, the
Company made contributions of $45 million, $43 million and $42 million, respectively, to multiemployer health and
welfare plans that also provide other post-retirement employee benefits. Funding of benefit payments for plan participants
are made at negotiated rates in the respective collective bargaining agreements as costs are incurred.
11. 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 established for that purpose. These facilities
are discussed further in Note 7. Surety bonds and insurance policies are supported by (i) a diverse group of third-party
surety and insurance companies; (ii) an entity in which we have a noncontrolling financial interest or (iii) a wholly-owned
insurance captive, the sole business of which is to issue surety bonds and/or insurance policies on our behalf.
Management does not expect that any claims against or draws on these instruments would have a material adverse
effect on our financial condition, results of operations or cash flows. We have not experienced any unmanageable difficulty
in obtaining the required financial assurance instruments for our current operations. In an ongoing effort to mitigate risks
of future cost increases and reductions in available capacity, we continue to evaluate various options to access cost-
effective sources of financial assurance.
Insurance — We carry insurance coverage for protection of our assets and operations from certain risks including
general liability, automobile liability, workers’ compensation, real and personal property, directors’ and officers’ liability,
pollution legal liability 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. As of
December 31, 2019, both our commercial General Liability Insurance Policy and our workers’ compensation insurance
program carried self-insurance exposures of up to $5 million per incident. As of December 31, 2019, our automobile
liability insurance program included a per-incident deductible of up to $10 million. Our receivable balance associated with
98
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
insurance claims was $126 million and $130 million as of December 31, 2019 and 2018, respectively. The changes to our
insurance reserves for the years ended December 31 are summarized below (in millions):
Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Self-insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term portion as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
567 $
171
(163)
575 $
145 $
430 $
582
142
(157)
567
137
430
2019(a)
2018
(a)(cid:2) Based on current estimates, we anticipate that most of our insurance reserves will be settled in cash over the next
six years.
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.
Operating and Financing Leases — Our operating and financing leases are discussed in Note 8.
Other Commitments
•(cid:2) Disposal — We have several agreements expiring at various dates through 2052 that require us to dispose of a
minimum number of tons at third-party disposal facilities. Under these put-or-pay agreements, we are required to
pay for the agreed upon minimum volumes regardless of the actual number of tons placed at the facilities.
Following the 2014 divestiture of our Wheelabrator business, which provides waste-to-energy services and
manages waste-to-energy facilities and independent power production plants, we entered into several agreements
to dispose of a minimum number of tons of waste at certain Wheelabrator facilities. These agreements generally
provide for fixed volume commitments with certain market price resets through 2021. We generally fulfill our
minimum contractual obligations by disposing of volumes collected in the ordinary course of business at these
disposal facilities.
•(cid:2) Waste Paper — We are party to waste paper purchase agreements expiring at various dates through 2023 that
require us to purchase a minimum number of tons of waste paper. The cost per ton we pay is based on market
prices.
•(cid:2) Royalties — We have various arrangements that require us to make royalty payments to third parties including
prior land owners, lessors or host communities where our operations are located. Our obligations generally are
based on per ton rates for waste actually received at our transfer stations or landfills. Royalty agreements that are
non-cancelable and require fixed or minimum payments are included in our financing leases and other debt
obligations in our Consolidated Balance Sheets as disclosed in Note 7.
Our unconditional purchase obligations are generally established in the ordinary course of our business and are
structured in a manner that provides us with access to important resources at competitive, market-driven rates. As of
December 31, 2019, our estimated minimum obligations associated with unconditional purchase obligations, which are
not recognized in our Consolidated Balance Sheets, were $156 million in 2020, $143 million in 2021, $65 million in 2022,
$57 million in 2023, $47 million in 2024 and $379 million thereafter. We may also establish unconditional purchase
obligations in conjunction with acquisitions or divestitures. Our actual future minimum obligations under these outstanding
purchase agreements are generally quantity driven and, as a result, our associated financial obligations are not fixed as of
December 31, 2019. For contracts that require us to purchase minimum quantities of goods or services, we have estimated
our future minimum obligations based on the current market values of the underlying products or services or contractually
stated amounts. We currently expect the products and services provided by these agreements to continue to meet the needs
99
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of our ongoing operations. Therefore, we do not expect these established arrangements to materially impact our future
financial position, results of operations or cash flows.
Guarantees — We have entered into the following guarantee agreements associated with our operations:
•(cid:2) As of December 31, 2019, WM Holdings has fully and unconditionally guaranteed all of WM’s senior
indebtedness, including its senior notes, $3.5 billion revolving credit facility and certain letter of credit facilities,
which mature through 2049. WM has fully and unconditionally guaranteed the senior indebtedness of WM
Holdings, which matures in 2026. Performance under these guarantee agreements would be required if either
party defaulted on their respective obligations. No additional liabilities have been recorded for these intercompany
guarantees because all of the underlying obligations are reflected in our Consolidated Balance Sheets. See
Note 22 for further discussion.
•(cid:2) WM and WM Holdings have guaranteed subsidiary debt obligations, including tax-exempt bonds, financing
leases and other indebtedness. If a subsidiary fails to meet its obligations associated with its debt agreements as
they come due, WM or WM Holdings will be required to perform under the related guarantee agreement.
No additional liabilities have been recorded for these intercompany guarantees because all of the underlying
obligations are reflected in our Consolidated Balance Sheets. See Note 7 for information related to the balances
and maturities of these debt obligations.
•(cid:2) Before the divestiture of our Wheelabrator business in 2014, WM had guaranteed certain operational and financial
performance obligations of Wheelabrator and its subsidiaries in the ordinary course of business. In conjunction
with the divestiture, certain WM guarantees of Wheelabrator obligations were terminated, but others continued
and are now guarantees of third-party obligations. When possible, Wheelabrator seeks to have the applicable
third-party beneficiaries release WM from these guarantees, but until such efforts are successful, or the underlying
financial commitments are restructured, WM has agreed to retain the guarantees and, in exchange, receive a credit
support fee or other financial assurances guaranteed by a third-party financial institution to protect WM in the
event of non-compliance by Wheelabrator. The most significant of these guarantees specifically define WM’s
maximum financial obligation over the course of the relevant agreements. In February 2019, Wheelabrator was
acquired by a third party, at which time we agreed to retain certain remaining guarantees. As of
December 31, 2019, WM’s maximum future payments under these guarantees were $45 million. WM’s exposure
under certain of the performance guarantees is variable and a maximum exposure is not defined. We have
recorded the fair value of the operational and financial performance guarantees, some of which could extend
through 2038 if not terminated, in our Consolidated Balance Sheets. We currently do not expect the financial
impact of such operational and financial performance guarantees to materially exceed the recorded fair value.
•(cid:2) Certain of our subsidiaries have guaranteed the market or contractually-determined value of certain homeowners’
properties that are adjacent to or near certain of our landfills. These guarantee agreements extend over the life of
the respective landfill. Under these agreements, we would be responsible for the difference, if any, between the
sale value and the guaranteed market or contractually-determined value of the homeowners’ properties. As of
December 31, 2019, we have agreements guaranteeing certain market value losses for certain properties adjacent
to or near 18 of our landfills. We do not believe that these contingent obligations will have a material adverse
effect on the Company’s financial position, results of operations or cash flows.
•(cid:2) We have indemnified the purchasers of businesses or divested assets for the occurrence of specified events under
certain of our divestiture agreements. Other than certain identified items that are currently recorded as obligations,
we do not believe that it is possible to determine the contingent obligations associated with these indemnities.
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 currently believe that contingent obligations to provide
indemnification or pay additional post-closing consideration in connection with our divestitures or acquisitions
100
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
will have a material adverse effect on the Company’s business, financial condition, results of operations or cash
flows.
•(cid:2) WM and WM Holdings guarantee the service, lease, financial and general operating obligations of certain of their
subsidiaries. If such a subsidiary fails to meet its contractual obligations as they come due, the guarantor has an
unconditional obligation to perform on its behalf. No additional liability has been recorded for service, financial
or general operating guarantees because the subsidiaries’ obligations are properly accounted for as costs of
operations as services are provided or general operating obligations as incurred. No additional liability has been
recorded for the lease guarantees because the subsidiaries’ obligations are properly accounted for as operating or
financing leases, as appropriate.
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 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.
As of December 31, 2019, we have been notified by the government that we are a PRP in connection with 75 locations
listed on the Environmental Protection Agency’s (“EPA’s”) Superfund National Priorities List (“NPL”). Of the 75 sites at
which claims have been made against us, 15 are sites we own. Each of the NPL sites we own was initially developed by
others as a landfill disposal facility. At each of these facilities, we are working in conjunction with the government to
evaluate 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 60 NPL
sites, which we do not own, are at various procedural stages under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, known as CERCLA or Superfund.
The majority of proceedings involving NPL sites that we do not own are based on allegations that certain of our
subsidiaries (or their predecessors) transported hazardous substances to the sites, often prior to our acquisition of these
subsidiaries. CERCLA generally provides for liability for those parties owning, operating, transporting to or disposing at
the sites. Proceedings arising under Superfund typically involve numerous waste generators and other waste transportation
and disposal companies and seek to allocate or recover costs associated with site investigation and remediation, which
costs could be substantial and could have a material adverse effect on our consolidated financial statements. At some of
the sites at which we have been identified as a PRP, our liability is well defined as a consequence of a governmental
decision and an agreement among liable parties as to the share each will pay for implementing that remedy. At other sites,
where no remedy has been selected or the liable parties have been unable to agree on an appropriate allocation, our future
costs are uncertain.
On October 11, 2017, the EPA issued its Record of Decision (“ROD”) with respect to the previously proposed
remediation plan for the San Jacinto 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 December 31, 2019 and 2018, the recorded liability for MIMC’s estimated potential share of the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
EPA’s proposed remedy and related costs was $56 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 matter is disclosed in accordance with that requirement. We do not currently believe that the
eventual outcome of such matter could have a material adverse effect on the Company’s business, financial condition,
results of operations or cash flows.
On July 10, 2013, the EPA issued a Notice of Violation ("NOV") to Waste Management of Wisconsin, Inc., an indirect
wholly-owned subsidiary of WM, alleging violations of the Resource Conservation Recovery Act concerning acceptance
of certain waste that was not permitted to be disposed of at the Metro Recycling & Disposal Facility in Franklin, Wisconsin.
The parties are exchanging information and working to resolve the NOV.
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
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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Multiemployer Pension Plans for the covered employees. Refer to
Note 10 for additional information about our participation in Multiemployer Pension Plans considered individually
significant. 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.
In 2019, 2018 and 2017, we recognized less than $1 million, $3 million and $12 million, respectively, of charges to
operating expenses for the withdrawal from certain underfunded Multiemployer Pension Plans.
We do not believe that any future liability relating to our past or current participation in, or withdrawals from, the
Multiemployer Pension Plans to which we contribute will have a material adverse effect on our business, financial
condition or liquidity. However, liability for future withdrawals could have a material adverse effect on our results of
operations or cash flows for a particular reporting period, depending on the number of employees withdrawn and the
financial condition of the Multiemployer Pension Plan(s) at the time of such withdrawal(s).
Tax Matters — We maintain a liability for uncertain tax positions, the balance of which management believes is
adequate. Results of audit assessments by taxing authorities are not currently expected to have a material adverse effect
on our financial condition, results of operations or cash flows. See Note 9 for additional discussion regarding income taxes.
12. Asset Impairments and Unusual Items
(Gain) Loss from Divestitures, Asset Impairments and Unusual Items, Net
The following table summarizes the major components of (gain) loss from divestitures, asset impairments and unusual
items, net for the years ended December 31 (in millions):
(Gain) loss from divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2019
2018
2017
— $
42
—
42 $
(96) $
38
—
(58) $
(38)
41
(19)
(16)
During the year ended December 31, 2019, we recognized asset impairments of $42 million, related to (i) $27 million
of goodwill impairment charges, as discussed further in Note 6, of which $17 million related to our EES organization and
$10 million related to our LampTracker® reporting unit and (ii) $15 million of asset impairment charges primarily related
to certain solid waste operations.
During the year ended December 31, 2018, we recognized net gains of $58 million, primarily related to (i) a
$52 million gain associated with the sale of certain collection and disposal operations in our Tier 1 segment and (ii) net
gains of $44 million primarily all from divestitures of certain ancillary operations. These gains were partially offset by (i)
a $30 million charge to impair a landfill in our Tier 3 segment based on an internally developed discounted projected cash
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
flow analysis, taking into account continued volume decreases and revised capping cost estimates and (ii) $8 million of
impairment charges primarily related to our LampTracker® reporting unit.
During the year ended December 31, 2017, we recognized net gains of $16 million, primarily related to (i) gains of
$31 million from the sale of certain oil and gas producing properties and (ii) a $30 million reduction in post-closing,
performance-based contingent consideration obligations associated with an acquired business in our EES organization.
These gains were partially offset by (i) $34 million of goodwill impairment charges primarily related to our EES
organization; (ii) $11 million of charges to adjust our subsidiary’s estimated potential share of an environmental
remediation liability and related costs for a closed site in Harris County, Texas, as discussed in Note 11 and (iii) $7 million
of charges to write down certain renewable energy assets.
See Note 3 for additional information related to the accounting policy and analysis involved in identifying and
calculating impairments and see Note 20 for additional information related to the impact of impairments on the results of
operations of our reportable segments.
Equity in Net Losses of Unconsolidated Entities
During the year ended December 31, 2017, we recognized $29 million of impairment charges to write down equity
method investments in waste diversion technology companies to their estimated fair values.
Other, Net
During the first quarter of 2019, we recognized a $52 million 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 recent third-party investor’s transactions in securities of this business. 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).
During the year ended December 31, 2017, we recognized impairment charges of $11 million related to
other-than-temporary declines in the value of minority-owned investments in waste diversion technology companies. We
wrote down our investments to their estimated fair values which was primarily determined using an income approach
based on estimated future cash flow projections and, to a lesser extent, third-party investors’ recent transactions in these
securities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. 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 WM stockholders’ equity, are as follows (in millions, with amounts in parentheses
representing decreases to accumulated other comprehensive income):
Foreign
Available- Currency Retirement
Post-
Balance, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
for-Sale Translation
Derivative
Instruments Securities Adjustments Obligations Total
(6) $ (80)
(47) $
(40) $
13 $
Benefit
Other comprehensive income (loss) before reclassifications,
net of tax expense (benefit) of $0, $2, $0 and $1,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive
(income) loss, net of tax (expense) benefit of $5, $(1), $0
and $0, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss) . . . . . . . .
Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss) before reclassifications,
net of tax expense (benefit) of $0, $2, $0 and $1,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive
(income) loss, net of tax (expense) benefit of $3, $0, $0
and $0, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss) . . . . . . . .
Adoption of new accounting standard (a) . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss) before reclassifications,
net of tax expense (benefit) of $0, $5, $0 and $1,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated other comprehensive
(income) loss, net of tax (expense) benefit of $3, $0, $0
and $0, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current period other comprehensive income (loss) . . . . . . . .
Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
3
76
3
82
7
7
(33) $
(1)
2
15 $
—
76
29 $
—
3
(3) $
6
88
8
—
5
(105)
2
(98)
8
8
(7)
(32) $
—
5
3
23 $
—
(105)
—
(76) $
8
—
(90)
2
(1)
(5)
(2) $ (87)
—
15
55
2
72
8
8
(24) $
—
15
38 $
—
55
(21) $
7
(1)
1
79
(1) $ (8)
(a)(cid:2) As of January 1, 2018, we adopted ASU 2018-02 and reclassified stranded tax effects to retained earnings.
We had no derivatives outstanding during the reported periods. Amounts reclassified to interest expense associated
with our previously terminated cash flow hedges were $11 million, or $8 million net of tax expense, for 2019, $11 million,
or $8 million net of tax expense, for 2018 and $12 million, or $7 million net of tax expense, for 2017.
14. Capital Stock, Dividends and Common Stock Repurchase Program
Capital Stock
We have 1.5 billion shares of authorized common stock with a par value of $0.01 per common share. As of
December 31, 2019, we had 424.3 million shares of common stock issued and outstanding. The Board of Directors is
authorized to issue preferred stock in series, and with respect to each series, to fix its designation, relative rights (including
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
voting, dividend, conversion, sinking fund, and redemption rights), preferences (including dividends and liquidation) and
limitations. We have 10 million shares of authorized preferred stock, $0.01 par value, none of which is currently
outstanding.
Dividends
Our quarterly dividends have been declared by our Board of Directors. Cash dividends declared and paid were
$876 million in 2019, or $2.05 per common share, $802 million in 2018, or $1.86 per common share, and $750 million in
2017, or $1.70 per common share.
In December 2019, we announced that our Board of Directors expects to increase the quarterly dividend from
$0.5125 to $0.545 per share for dividends declared in 2020. However, all future dividend declarations are at the discretion
of the Board of Directors and depend on various factors, including our net earnings, financial condition, cash required for
future business plans, growth and acquisitions and other factors the Board of Directors may deem relevant.
Common Stock Repurchase Program
The Company repurchases shares of its common stock as part of capital allocation programs authorized by our Board
of Directors. Share repurchases during the reported periods were completed through accelerated share repurchase (“ASR”)
agreements and, to a lesser extent, open market transactions. The terms of these ASR agreements required that we deliver
cash at the beginning of each ASR repurchase period. In exchange, we received a portion of the total shares expected to
be repurchased based on the then-current market price of our common stock. The remaining shares repurchased over the
course of each repurchase period are delivered to us once the repurchase period is complete. Shares repurchased are
reflected in the period the shares are delivered to us. The following is a summary of our share repurchases under our
common stock repurchase program for the years ended December 31:
Shares repurchased (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total repurchases (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,247
108.60 $
244 $
2019(a)
2018(b)
11,673
86.35 $
1,008 $
2017(c)
10,058
77.67
750
(a)(cid:2) During 2019, we executed and completed an ASR agreement to repurchase $180 million of our common stock and
received 1.6 million shares in connection with this ASR agreement. We also repurchased an additional 0.7 million
shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18 of the
Exchange Act for $64 million, inclusive of per-share commissions. As a result of the pending acquisition of Advanced
Disposal discussed in Note 18, we limited our 2019 share repurchases to an amount sufficient to offset dilution impacts
from our stock-based compensation plans.
(b)(cid:2) During 2018, we executed and completed four ASR agreements to repurchase $850 million of our common stock and
we received 9.8 million shares in connection with these ASR agreements. We also repurchased an additional
1.9 million shares of our common stock in open market transactions in compliance with Rule 10b5-1 and Rule 10b-18
of the Exchange Act for $158 million, inclusive of per-share commissions, which includes $4 million paid in 2019.
(c)(cid:2) During 2017, we executed and completed two ASR agreements to repurchase $750 million of our common stock. Our
“Shares repurchased” includes the 0.4 million shares related to the ASR agreement executed in November 2016.
In December 2019, we publicly confirmed that the Company has $1.32 billion remaining on its existing Board of
Directors’ authorization to repurchase shares of the Company’s common stock. Any future share repurchases will be made
at the discretion of management and will depend on factors similar to those considered by the Board of Directors in making
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
dividend declarations, including our net earnings, financial condition and cash required for future business plans, growth
and acquisitions.
15. Equity-Based Compensation
Employee Stock Purchase Plan
We have an Employee Stock Purchase Plan (“ESPP”) under which employees that have been employed for at least
30 days may purchase shares of our common stock at a discount. The plan provides for two offering periods for purchases:
January through June and July through December. At the end of each offering period, enrolled employees purchase shares
of our common stock at a price equal to 85% of the lesser of the market value of the stock on the first and last day of such
offering period. The purchases are made at the end of an offering period with funds accumulated through payroll
deductions over the course of the offering period. Subject to limitations set forth in the plan and under IRS regulations,
eligible employees may elect to have up to 10% of their base pay deducted during the offering period. The total number
of shares issued under the plan for the offering periods in 2019, 2018 and 2017 was approximately 537,000, 582,000 and
594,000, respectively. After the January 2020 issuance of shares associated with the July to December 2019 offering
period, 0.8 million shares remain available for issuance under the ESPP.
As a result of our ESPP, annual compensation expense increased by $10 million, or $7 million net of tax expense, for
2019, $9 million, or $7 million net of tax expense, for 2018 and $7 million, or $4 million net of tax expense, for 2017.
Employee Stock Incentive Plans
In May 2014, our stockholders approved our 2014 Stock Incentive Plan (the “2014 Plan”) to replace our 2009 Stock
Incentive Plan (the “2009 Plan”). The 2014 Plan authorized 23.8 million shares of our common stock for issuance pursuant
to the 2014 Plan, plus the approximately 1.1 million shares that then remained available for issuance under the 2009 Plan,
and any shares subject to outstanding awards under both incentive plans that are subsequently cancelled, forfeited,
terminate, expire or lapse. As of December 31, 2019, approximately 20.0 million shares were available for future grants
under the 2014 Plan. All of our equity-based compensation awards described herein have been made pursuant to either our
2009 Plan or our 2014 Plan, collectively referred to as the “Incentive Plans.” We currently utilize treasury shares to meet
the needs of our equity-based compensation programs.
Pursuant to the Incentive Plans, we have the ability to issue stock options, stock appreciation rights and stock awards,
including restricted stock, restricted stock units (“RSUs”) and performance share units (“PSUs”). The terms and conditions
of equity awards granted under the Incentive Plans are determined by the Management Development and Compensation
Committee of our Board of Directors.
The 2019 annual Incentive Plan awards granted to the Company’s senior leadership team, which generally includes
the Company’s executive officers, included a combination of PSUs and stock options. The annual Incentive Plan awards
granted to other eligible employees included a combination of PSUs, RSUs and stock options in 2019. The Company also
periodically grants RSUs to employees working on key initiatives, in connection with new hires and promotions and to
field-based managers.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Restricted Stock Units — A summary of our RSUs is presented in the table below (units in thousands):
Unvested as of January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average
Per Share
Fair Value
Units
392 $
121 $
(151) $
(14) $
348 $
70.52
99.91
56.74
86.11
86.15
The total fair market value of RSUs that vested during the years ended December 31, 2019, 2018 and 2017 was
$15 million, $13 million and $12 million, respectively. During the year ended December 31, 2019, we issued
approximately 106,000 shares of common stock for these vested RSUs, net of approximately 45,000 units deferred or used
for payment of associated taxes.
RSUs may not be voted or sold by award recipients until time-based vesting restrictions have lapsed. RSUs primarily
provide for three-year cliff vesting and include dividend equivalents accumulated during the vesting period. Unvested
units are subject to forfeiture in the event of voluntary or for-cause termination. RSUs are subject to pro-rata vesting upon
an employee’s retirement or involuntary termination other than for cause and generally payout at the end of the three-year
vesting period and become immediately vested in the event of an employee’s death or disability.
Compensation expense associated with RSUs is measured based on the grant-date fair value of our common stock and
is recognized on a straight-line basis over the required employment period, which is generally the vesting period.
Compensation expense is only recognized for those awards that we expect to vest, which we estimate based upon an
assessment of expected forfeitures.
Performance Share Units — Two types of PSUs are currently outstanding: (i) PSUs for which payout is dependent on
total shareholder return relative to the S&P 500 (“TSR PSUs”) and (ii) PSUs for which payout is dependent on the
Company’s performance against pre-established adjusted cash flow metrics (“Cash Flow PSUs”). Both types of PSUs are
payable in shares of common stock after the end of a three-year performance period, when the Company’s financial
performance for the entire performance period is reported, typically in mid- to late-February of the succeeding year. At
the end of the performance period, the number of shares awarded can range from 0% to 200% of the targeted amount,
depending on the performance against the pre-established targets. A summary of our PSUs, at 100% of the targeted amount,
is presented in the table below (units in thousands):
Unvested as of January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average
Per Share
Fair Value
Units
1,164 $
364 $
(427) $
(24) $
1,077 $
90.17
116.26
93.03
98.33
99.66
The determination of achievement of performance results and corresponding vesting of PSUs for the three-year
performance period ended December 31, 2019 was performed by the Management Development and Compensation
Committee in February 2020. Accordingly, vesting information for such awards is not included in the table above as of
December 31, 2019. The “vested” PSUs are for the three-year performance period ended December 31, 2018, as
achievement of performance results and corresponding vesting was determined in February 2019. The Company’s
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
financial results, as measured for purposes of these awards, achieved the maximum performance criteria. Accordingly,
recipients of these PSU awards were entitled to receive a payout of 200% of the vested TSR PSUs and Cash Flow PSUs.
In February 2019, approximately 853,000 PSUs vested and we issued approximately 532,000 shares of common stock for
these vested PSUs, net of units deferred or used for payment of associated taxes. The shares of common stock that were
issued or deferred during the years ended December 31, 2019, 2018 and 2017 for prior PSU award grants had a fair market
value of $84 million, $78 million and $80 million, respectively.
PSUs have no voting rights. PSUs receive dividend equivalents that are paid out in cash based on the number of shares
that vest at the end of the awards’ performance period. Subject to attainment of the performance metrics described above,
PSUs are payable to an employee (or his beneficiary) upon death or disability as if that employee had remained employed
until the end of the performance period. PSUs are generally subject to pro-rata vesting upon an employee’s involuntary
termination other than for cause and are subject to forfeiture in the event of voluntary or for-cause termination. The terms
of the award agreements for outstanding PSUs provide for continued vesting following retirement as if the employee had
remained employed until the end of the performance period, and compensation expense for PSUs granted to
retirement-eligible employees is accelerated over the period that the recipient becomes retirement-eligible plus a defined
service requirement.
Compensation expense associated with our Cash Flow PSUs is based on the grant-date fair value of our common
stock. Compensation expense is recognized ratably over the performance period based on our estimated achievement of
the established performance criteria. Compensation expense is only recognized for those awards that we expect to vest,
which we estimate based upon an assessment of both the probability that the performance criteria will be achieved and
expected forfeitures. The grant-date fair value of our TSR PSUs is based on a Monte Carlo valuation and compensation
expense is recognized on a straight-line basis over the vesting period. Compensation expense is recognized for all TSR
PSUs whether or not the market conditions are achieved less expected forfeitures.
Deferred Units — Certain employees can elect to defer some or all of the vested RSU or PSU awards until a specified
date or dates they choose. Deferred units are not invested, nor do they earn interest, but deferred amounts do receive
dividend equivalents paid in cash during deferral at the same time and at the same rate as dividends on the Company’s
common stock. Deferred amounts are paid out in shares of common stock at the end of the deferral period. As of
December 31, 2019, we had approximately 225,000 vested deferred units outstanding.
Stock Options — Stock options granted vest primarily in 25% increments on the first two anniversaries of the date of
grant with the remaining 50% vesting on the third anniversary. The exercise price of the options is the average of the high
and low market value of our common stock on the date of grant, and the options have a term of 10 years. A summary of
our stock options is presented in the table below (options in thousands):
Weighted Average
Per Share
Outstanding as of January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding as of December 31, 2019 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable as of December 31, 2019 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options
4,441 $
839 $
(1,278) $
(64) $
3,938 $
2,063 $
Exercise Price
59.46
98.90
107.96
83.20
69.66
52.90
(a)(cid:2) Stock options outstanding as of December 31, 2019 have a weighted average remaining contractual term of 6.5 years
and an aggregate intrinsic value of $174 million based on the market value of our common stock on
December 31, 2019.
109
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(b)(cid:2) Stock options exercisable as of December 31, 2019 have an aggregate intrinsic value of $126 million based on the
market value of our common stock on December 31, 2019.
We received cash proceeds of $67 million, $52 million and $95 million during the years ended December 31, 2019,
2018 and 2017, respectively, from employee stock option exercises. The aggregate intrinsic value of stock options
exercised during the years ended December 31, 2019, 2018 and 2017 was $71 million, $41 million and $71 million,
respectively.
Stock options exercisable as of December 31, 2019 were as follows (options in thousands):
Range of Exercise Prices
$33.49-$50.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$50.01-$70.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$70.01-$98.90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$33.49-$98.90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
829 $
809 $
425 $
2,063 $
Weighted Average
Per Share
Options Exercise Price
Weighted Average
Remaining Years
2.6
5.7
7.5
4.8
37.94
55.58
76.98
52.90
All unvested stock options shall become exercisable upon the award recipient’s death or disability. In the event of a
recipient’s retirement, stock options shall continue to vest pursuant to the original schedule set forth in the award
agreement. If the recipient is terminated by the Company without cause or voluntarily resigns, the recipient shall be entitled
to exercise all stock options outstanding and exercisable within a specified time frame after such termination. All
outstanding stock options, whether exercisable or not, are forfeited upon termination for cause.
We account for our employee stock options under the fair value method of accounting using a Black-Scholes valuation
model to measure stock option expense at the date of grant. The weighted average grant-date fair value of stock options
granted during the years ended December 31, 2019, 2018 and 2017 was $12.22, $12.16 and $11.71, respectively. The fair
value of stock options at the date of grant is amortized to expense over the vesting period less expected forfeitures, except
for stock options granted to retirement-eligible employees, for which expense is accelerated over the period that the
recipient becomes retirement-eligible. The following table presents the weighted average assumptions used to value
employee stock options granted during the years ended December 31 under the Black-Scholes valuation model:
Expected option life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 %
2.1 %
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.5 %
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.9 %
2.2 %
2.6 %
15.3 %
2.3 %
1.7 %
2019
4.2 years
2018
4.3 years
2017
3.5 years
The Company bases its expected option life on the expected exercise and termination behavior of its optionees and an
appropriate model of the Company’s future stock price. The expected volatility assumption is derived from the historical
volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of
the Company’s stock options, combined with other relevant factors including implied volatility in market-traded options
on the Company’s stock. The dividend yield is the annual rate of dividends per share over the exercise price of the option
as of the grant date.
For the years ended December 31, 2019, 2018 and 2017, we recognized $75 million, $79 million and $92 million,
respectively, of compensation expense associated with RSU, PSU and stock option awards as a component of selling,
general and administrative expenses in our Consolidated Statements of Operations. Our income tax expense for the years
ended December 31, 2019, 2018 and 2017 includes related income tax benefits of $17 million, $17 million and
$36 million, respectively. We have not capitalized any equity-based compensation costs during the reported periods.
110
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The higher compensation expense in 2017 was primarily due to charges related to the retirement treatment for
unexercised stock options of certain former employees. As of December 31, 2019, we estimate that $40 million of
currently unrecognized compensation expense will be recognized over a weighted average period of 1.5 years for our
unvested RSU, PSU and stock option awards issued and outstanding.
Non-Employee Director Plan
Our non-employee directors currently receive annual grants of shares of our common stock, generally payable in two
equal installments, under the 2014 Plan described above.
16. Earnings Per Share
Basic and diluted earnings per share were computed using the following common share data for the years ended
December 31 (shares in millions):
Number of common shares outstanding at end of period . . . . . . . . . . . . . . . . . . . . . . .
Effect of using weighted average common shares outstanding . . . . . . . . . . . . . . .
Weighted average basic common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of equity-based compensation awards and other contingently
issuable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average diluted common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .
Potentially issuable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of anti-dilutive potentially issuable shares excluded from diluted
2019
424.3
0.3
424.6
2.9
427.5
6.7
2018
424.0
5.1
429.1
3.1
432.2
7.4
2017
433.3
5.5
438.8
3.1
441.9
8.1
common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.7
1.5
1.9
17. Fair Value Measurements
Assets and Liabilities Accounted for at Fair Value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When measuring assets and liabilities that are required
to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company
would transact. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure
fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available
and significant to the fair value measurement:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices
for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that
market participants would use in pricing the asset or liability.
We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market
111
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
participants would use in pricing an asset or liability, including assumptions about risk when appropriate. Our assets and
liabilities that are measured at fair value on a recurring basis include the following as of December 31 (in millions):
Quoted prices in active markets (Level 1):
Cash equivalents and money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,527 $
70
Significant other observable inputs (Level 2):
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
350
Significant unobservable inputs (Level 3):
Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
49
3,926 $
288
66
424
2019
2018
Cash Equivalents and Money Market Funds
Cash equivalents primarily include short-term interest-bearing instruments with maturities of three months or less.
We invest portions of our restricted trust and escrow account balances in money market funds and we measure the fair
value of these investments using quoted prices in active markets for identical assets. The fair value of our cash equivalents
and money market funds approximates our cost basis in these instruments. The increase in 2019 is primarily due to
proceeds from our May 2019 issuance of senior notes and our September 2019 issuance of Canadian senior notes. See
Note 7 for additional information.
Available-for-Sale Securities
Our available-for-sale securities include restricted trust and escrow account balances and an investment in an
unconsolidated entity, as discussed in Note 19. We invest primarily in debt securities, including U.S. Treasury securities,
U.S. agency securities, municipal securities and mortgage- and asset-backed securities, which generally mature over the
next 10 years. Additionally, some funds are invested in equity securities. We measure the fair value of these securities
using quoted prices for identical or similar assets in inactive markets. Any changes in fair value of these trusts related to
unrealized gains and losses have been appropriately reflected as a component of accumulated other comprehensive income
(loss).
Redeemable Preferred Stock
Redeemable preferred stock is related to noncontrolling investments in unconsolidated entities and is included in
investments in unconsolidated entities in our Consolidated Balance Sheets. The fair value of our 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. In the first quarter of 2019, we
redeemed our preferred stock received in conjunction with the 2014 sale of our Puerto Rico operations for $17 million. At
the time of redemption, the value of redeemable preferred stock was $20 million, resulting in a $3 million loss on
investment.
Fair Value of Debt
As of December 31, 2019 and 2018, the carrying value of our debt was $13.5 billion and $10.0 billion, respectively.
The estimated fair value of our debt was approximately $14.5 billion and $10.1 billion as of December 31, 2019 and 2018,
respectively. The increase in the fair value of our debt in 2019 is primarily related to net borrowings of $3.1 billion
112
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(inclusive of net commercial paper repayments), which are discussed further in Note 7, and decreases in current market
rates for similar types of instruments.
Although we have determined the estimated fair value amounts using available market information and commonly
accepted valuation methodologies, considerable judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, our estimates are not necessarily indicative of the amounts that we, or holders of the instruments,
could realize in a current market exchange. The use of different assumptions or estimation methodologies could have a
material effect on the estimated fair values. The fair value estimates are based on Level 2 inputs of the fair value hierarchy
available as of December 31, 2019 and 2018. These amounts have not been revalued since those dates, and current
estimates of fair value could differ significantly from the amounts presented.
18. Acquisitions and Divestitures
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 of $4.9 billion when including approximately
$1.9 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. On June 28, 2019,
Advanced Disposal announced that 85.9% of the outstanding shares of its common stock entitled to vote were voted in
favor of the proposal to adopt the Merger Agreement at a special meeting of stockholders held that day. We anticipate that
we will obtain antitrust regulatory approval by the end of March 2020 and close the Advanced Disposal transaction soon
thereafter.
Acquisitions
We continue to pursue the acquisition of businesses that are accretive to our Solid Waste business and enhance and
expand our existing service offerings. During the year ended December 31, 2019, we acquired 18 businesses primarily
related to our Solid Waste business. Total consideration, net of cash acquired, for all acquisitions was $515 million, which
included $501 million in cash paid and other consideration of $14 million, primarily purchase price holdbacks. In 2019,
we paid $6 million of contingent consideration, of which $4 million was related to acquisitions completed prior to 2019.
In addition, we paid $20 million of holdbacks, of which $9 million related to current year acquisitions. Contingent
consideration obligations are primarily based on achievement by the acquired businesses of certain negotiated goals, which
generally include targeted financial metrics.
Total consideration for our 2019 acquisitions was primarily allocated to $350 million of property and equipment,
$53 million of other intangible assets and $111 million of goodwill. Other intangible assets included $38 million of
customer and supplier relationships and $15 million of covenants not-to-compete. The goodwill was primarily a result of
expected synergies from combining the acquired businesses with our existing operations and was tax deductible.
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 seven landfills, which are
included in our property and equipment. The acquisition accounting for this transaction was finalized in 2019 and was
funded with borrowings under our commercial paper program. For the year ended December 31, 2019, the impact of the
acquisition was not material to our consolidated financial statements.
113
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the year ended December 31, 2018, we acquired 32 businesses primarily related to our Solid Waste business.
Total consideration, net of cash acquired, for all acquisitions was $471 million, which included $440 million in cash paid
and $31 million of other consideration, primarily purchase price holdbacks. In 2018, we paid $6 million of contingent
consideration associated with acquisitions completed prior to 2018. In addition, we paid $20 million of holdbacks, of
which $15 million related to current year acquisitions.
Total consideration for our 2018 acquisitions was primarily allocated to $115 million of property and equipment,
$141 million of other intangible assets and $248 million of goodwill. Other intangible assets included $124 million of
customer and supplier relationships, $16 million of covenants not-to-compete and $1 million of other intangible assets.
The goodwill is primarily a result of expected synergies from combining the acquired businesses with our existing
operations and substantially all is tax deductible.
During the year ended December 31, 2017, we acquired 24 businesses related to our Solid Waste business. Total
consideration, net of cash acquired, for all acquisitions was $205 million, which included $183 million in cash paid and
other consideration of $22 million, primarily purchase price holdbacks. In 2017, we paid $3 million of contingent
consideration associated with acquisitions completed prior to 2017. In addition, we paid $14 million of holdbacks, of
which $13 million related to 2017 acquisitions.
Total consideration for our 2017 acquisitions was primarily allocated to $127 million of property and equipment,
$46 million of other intangible assets and $39 million of goodwill. Other intangible assets included $39 million of
customer and supplier relationships and $7 million of covenants not-to-compete. The goodwill was primarily a result of
expected synergies from combining the acquired businesses with our existing operations and was tax deductible.
Divestitures
In 2019, 2018 and 2017, the aggregate sales price for divestitures of certain hauling and ancillary operations was
$8 million, $153 million and $62 million and we recognized net losses of less than $1 million, net gains of $96 million
and net gains of $38 million, respectively. These divestitures were made as part of our continuous focus on improving or
divesting certain non-strategic or underperforming operations. The remaining amounts reported in the Consolidated
Statements of Cash Flows generally relate to the sale of fixed assets.
19. Variable Interest Entities
Following is a description of our financial interests in unconsolidated and consolidated variable interest entities that
we consider significant:
Low-Income Housing Properties 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 $309 million and $189 million as of December 31, 2019 and 2018,
respectively. The debt balance related to our investments in low-income housing properties was $269 million and
$151 million as of December 31, 2019 and 2018, respectively. Additional information related to these investments is
discussed in Note 9.
114
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
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 $101 million and $92 million as
of December 31, 2019 and 2018, 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 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 $109 million and
$103 million as of December 31, 2019 and 2018, respectively.
20. Segment and Related Information
We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our
17 Areas. The 17 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 17 Areas into three 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.
In 2019, as part of our annual review process, we analyzed the 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, divestments, 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 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 Southern California and the
Florida peninsula, and also includes the New England states and the tri-state area of Michigan, Indiana and Ohio. Tier 2
includes California, Canada, Wisconsin and Minnesota. Tier 3 encompasses all the remaining operations including the
Pacific Northwest, the Mid-Atlantic region of the U.S., the Florida peninsula, Illinois and Missouri.
The operating segments not evaluated and overseen through the 17 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.
115
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Summarized financial information concerning our reportable segments as of December 31 and for the years then
ended is shown in the following table (in millions):
Gross
Intercompany
Net
Income
from
Operating
Operating
Revenues Revenues(c) Revenues
Operating Operations
(d)(e)
Depreciation
and
Amortization
Capital
Expenditures
(f)
Total
Assets
(g)(h)
Years Ended December 31:
2019
Solid Waste:
Tier 1 . . . . . . . . . . . . . . . . . . . . $ 6,136 $
Tier 2 . . . . . . . . . . . . . . . . . . . .
Tier 3 . . . . . . . . . . . . . . . . . . . .
Solid Waste . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . .
3,865
6,386
16,387
2,317
18,704
—
Corporate and Other (b) . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . $ 18,704 $
2018
Solid Waste:
Tier 1 . . . . . . . . . . . . . . . . . . . . $ 5,730 $
Tier 2 . . . . . . . . . . . . . . . . . . . .
Tier 3 . . . . . . . . . . . . . . . . . . . .
Solid Waste . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . .
3,675
6,132
15,537
2,487
18,024
—
Corporate and Other (b) . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . $ 18,024 $
2017
Solid Waste:
Tier 1 . . . . . . . . . . . . . . . . . . . . $ 5,441 $
Tier 2 . . . . . . . . . . . . . . . . . . . .
Tier 3 . . . . . . . . . . . . . . . . . . . .
Solid Waste . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . .
3,599
5,792
14,832
2,538
17,370
—
Corporate and Other (b) . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . $ 17,370 $
(1,141) $ 4,995 $ 1,682 $
(777)
(1,209)
(3,127)
(122)
(3,249)
—
3,088
5,177
13,260
2,195
15,455
—
(3,249) $ 15,455 $ 2,706 $
854
1,136
3,672
(203)
3,469
(763)
(1,045) $ 4,685 $ 1,619 $
(724)
(1,146)
(2,915)
(195)
(3,110)
—
2,951
4,986
12,622
2,292
14,914
—
(3,110) $ 14,914 $ 2,789 $
784
992
3,395
(66)
3,329
(540)
(987) $ 4,454 $ 1,506 $
(654)
(1,024)
(2,665)
(220)
(2,885)
—
2,945
4,768
12,167
2,318
14,485
—
(2,885) $ 14,485 $ 2,636 $
777
1,006
3,289
(68)
3,221
(585)
551 $
327
585
1,463
75
1,538
36
1,574 $
508 $ 7,519
5,558
329
8,243
453
21,320
1,290
1,648
118
22,968
1,408
5,042
407
1,815 $ 28,010
493 $
317
546
1,356
91
1,447
30
1,477 $
584 $ 6,736
5,224
322
7,878
493
19,838
1,399
1,571
72
21,409
1,471
1,487
200
1,671 $ 22,896
438 $
274
516
1,228
103
1,331
45
1,376 $
588 $ 6,305
5,214
308
7,485
487
19,004
1,383
1,785
93
20,789
1,476
1,327
92
1,568 $ 22,116
(a)(cid:2) “Other” includes (i) our WMSBS organization; (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 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)(cid:2) 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,
116
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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)(cid:2) 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)(cid:2) For those items included in the determination of income from operations, the accounting policies of the segments are
the same as those described in Note 3.
(e)(cid:2) The 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. Refer to Note 12 for explanations of certain transactions and events affecting
our operating results.
(f)(cid:2) Includes non-cash items. Capital expenditures are reported in our reportable segments at the time they are recorded
within the segments’ property and equipment balances and, therefore, may include amounts that have been accrued
but not yet paid.
(g) The reconciliation of total assets reported above to total assets in the Consolidated Balance Sheets as of December 31
is as follows (in millions):
2019
2018
2017
Total assets, as reported above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,010 $ 22,896 $ 22,116
Elimination of intercompany investments and advances . . . . . . . . . . . . . . . .
(287)
Total assets, per Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,743 $ 22,650 $ 21,829
(246)
(267)
(h) Goodwill is included within each segment’s total assets. For segment reporting purposes, our material recovery
facilities are included as a component of their respective Areas and our recycling brokerage services are included as
part of our “Other” operations. The following table presents changes in goodwill during the reported periods by
segment (in millions):
Solid Waste
Tier 1
Tier 2
Tier 3
Other
Total
Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,117 $ 1,595 $ 2,414 $
Acquired goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Divested goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,193 $ 1,584 $ 2,556 $
Acquired goodwill (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Divested goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,283 $ 1,617 $ 2,562 $
142
—
—
—
23
—
—
(34)
12
—
—
21
82
(6)
—
—
6
—
—
—
90
—
—
—
121 $ 6,247
248
1
(25)
(19)
(6)
(6)
—
(34)
97 $ 6,430
108
—
—
—
(27)
(27)
—
21
70 $ 6,532
(a) Includes $3 million of post-closing adjustments related to prior year acquisitions.
117
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The mix of operating revenues from our major lines of business for the years ended December 31 are as follows
(in millions):
2019
2018
2017
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,229 $ 3,972 $ 3,714
2,528
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,583
Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
439
Other collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,264
Total collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,370
Landfill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,591
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,432
Recycling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,713
(2,885)
Intercompany (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,455 $ 14,914 $ 14,485
2,529
2,773
450
9,724
3,560
1,711
1,293
1,736
(3,110)
2,613
2,916
482
10,240
3,846
1,820
1,040
1,758
(3,249)
(a)(cid:2) The “Other” line of business includes (i) our WMSBS organization; (ii) our landfill gas-to-energy operations;
(iii) certain services within our EES organization, 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, net of intercompany activity. Activity related to collection, landfill, transfer and recycling has
been reclassified to the appropriate line of business for purposes of presentation.
(b)(cid:2) Intercompany revenues between lines of business are eliminated in the Consolidated Financial Statements included
within this report.
Net operating revenues relating to operations in the U.S. and Canada for the years ended December 31 are as follows
(in millions):
2019
2018
2017
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,701 $ 14,167 $ 13,768
717
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,455 $ 14,914 $ 14,485
754
747
Property and equipment, net of accumulated depreciation and amortization, relating to operations in the U.S. and
Canada for the years ended December 31 are as follows (in millions):
2019
2018
2017
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,941 $ 11,044 $ 10,591
968
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,893 $ 11,942 $ 11,559
898
952
118
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
21. Quarterly Financial Data (Unaudited)
The following table summarizes the unaudited quarterly results of operations for 2019 and 2018 (in millions, except
per share amounts):
First
Fourth
Quarter Quarter Quarter Quarter
Second
Third
2019
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,696 $ 3,946
696
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
382
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
381
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . . . . . . .
0.90
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.89
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
621
347
347
0.82
0.81
3,967
734
495
495
1.17
1.16
3,846
655
447
447
1.05
1.05
2018
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,511 $ 3,739 $ 3,822 $ 3,842
767
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
531
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
531
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . . . . . . .
1.25
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.24
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
715
499
499
1.16
1.15
608
395
396
0.91
0.91
699
498
499
1.16
1.16
Basic and diluted earnings per common share for each of the quarters presented above is based on the respective
weighted average number of common and dilutive potential common shares outstanding for each quarter and the sum of
the quarters may not necessarily be equal to the full year basic and diluted earnings per common share amounts.
Our operating revenues tend to be somewhat higher in summer months, primarily due to higher construction and
demolition waste volumes. The volumes of industrial and residential waste in certain regions where we operate also tend
to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect
these seasonal trends. Additionally, from time to time, our operating results are significantly affected by certain
transactions or events that management believes are not indicative or representative of our ongoing results. The following
items significantly impacted our operating results during the periods indicated:
First Quarter 2019
•(cid:2) The recognition of (i) a $52 million impairment charge related to our minority-owned investment in a waste
conversion technology business, which was not deductible for tax purposes and (ii) a $3 million loss upon
redemption of a preferred stock investment, which is discussed further in Note 17. These charges had a negative
impact of $0.13 on our diluted earnings per share.
Second Quarter 2019
•(cid:2) The recognition of a pre-tax loss of $84 million associated with the early extinguishment of $257 million of our
high-coupon senior notes through a cash tender offer, which is discussed further in Note 7. The charge incurred
for the redemption had a negative impact of $0.15 on our diluted earnings per share.
•(cid:2) The recognition of pre-tax charges of $32 million primarily related to (i) a $16 million non-cash charge to write-
off certain equipment costs; (ii) $9 million of charges related to preparation for our pending acquisition of
Advanced Disposal and (iii) $7 million of asset impairments primarily related to certain solid waste operations.
These charges had a negative impact of $0.06 on our diluted earnings per share.
119
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Third Quarter 2019
•(cid:2) The recognition of pre-tax charges of $8 million related to preparation for our pending acquisition of Advanced
Disposal which had a negative impact of $0.02 on our diluted earnings per share.
Fourth Quarter 2019
•(cid:2) The recognition of pre-tax charges of $38 million primarily related to preparation for our pending acquisition of
Advanced Disposal and, to a lesser extent, costs incurred to support our plan to implement a new enterprise
resource planning system. These charges had a negative impact of $0.07 on our diluted earnings per share.
•(cid:2) The recognition of pre-tax charges of $37 million related to (i) goodwill impairment charges of $17 million related
to our EES organization and $10 million related to our LampTracker® reporting unit and (ii) $10 million of asset
impairment charges primarily related to certain solid waste operations and, to a lesser extent, restructuring
charges. These charges had a negative impact of $0.07 on our diluted earnings per share.
Second Quarter 2018
•(cid:2) The recognition of net pre-tax gains of $40 million related to the sale of certain ancillary operations, which had a
favorable impact of $0.07 on our diluted earnings per share.
•(cid:2) An income tax benefit of $33 million due to the settlement of various tax audits, which had a favorable impact of
$0.07 on our diluted earnings per share.
Third Quarter 2018
•(cid:2)
Income tax benefits of $27 million primarily due to impacts of enactment of tax reform and changes in state laws,
which had a favorable impact of $0.06 on our diluted earnings per share.
•(cid:2) The recognition of pre-tax charges of $32 million primarily related to a $29 million charge to impair a landfill in
our Tier 3 segment, which is discussed further in Note 12. These charges had a negative impact of $0.05 on our
diluted earnings per share.
Fourth Quarter 2018
•(cid:2) The recognition of a pre-tax gain of $52 million associated with the sale of certain hauling operations in our Tier 1
segment and $8 million of impairment charges primarily related to our LampTracker® reporting unit. These items
had a favorable impact of $0.07 on our diluted earnings per share.
•(cid:2) A reduction in our income tax expense of $17 million for an adjustment to our deferred taxes to reduce our
deferred tax liability based on an analysis of certain deferred tax balances. This item had a favorable impact of
$0.04 on our diluted earnings per share.
120
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
22. Condensed Consolidating Financial Statements
WM Holdings has fully and unconditionally guaranteed all of WM’s senior indebtedness. WM has fully and
unconditionally guaranteed all of WM Holdings’ senior indebtedness. None of WM’s other subsidiaries have guaranteed
any of WM’s or WM Holdings’ debt. As a result of these guarantee arrangements, we are required to present the following
condensed consolidating financial information (in millions):
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2019
Current assets:
WM
Non-Guarantor
Holdings Subsidiaries
Eliminations Consolidated
WM
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 3,485 $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,714 $ 26,687 $
Current liabilities:
LIABILITIES AND EQUITY
Current portion of long-term debt . . . . . . . . . . . . . . . . $
Accounts payable and other current liabilities . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . .
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity:
Stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . .
2
3,487
—
26,221
—
6
— $
4
4
—
26,673
—
10
15 $
105
120
10,736
19,131
4
29,991
— $
7
7
248
214
—
469
7,068
(7,345)
—
(277)
26,218
—
—
26,218
76 $
— $
—
—
—
(52,894)
(19,047)
—
2,642
2,718
12,893
—
19,047
8,625
43,283 $ (71,941) $
203 $
2,814
3,017
2,296
7,345
4,245
16,903
— $
—
—
—
(26,690)
—
(26,690)
3,561
2,648
6,209
12,893
—
—
8,641
27,743
218
2,926
3,144
13,280
—
4,249
20,673
26,676
(298)
2
26,380
43,283 $ (71,941) $
(52,894)
7,643
—
(45,251)
7,068
—
2
7,070
27,743
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . $ 29,714 $ 26,687 $
121
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS (Continued)
Current assets:
December 31, 2018
WM
Non-Guarantor
Holdings Subsidiaries
Eliminations Consolidated
WM
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
2
2
—
24,547
—
8
— $
5
5
—
24,968
—
31
61 $
61
2,584
2,577
2,645
2,638
11,942
11,942
—
—
—
17,129
8,063
8,024
39,733 $ (66,644) $ 22,650
— $
—
—
—
(49,515)
(17,129)
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,557 $ 25,004 $
Current liabilities:
LIABILITIES AND EQUITY
Current portion of long-term debt . . . . . . . . . . . . . . . . $
Accounts payable and other current liabilities . . . . . .
Long-term debt, less current portion . . . . . . . . . . . . . . . .
Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity:
Stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . .
258 $
82
340
7,377
17,269
5
24,991
— $
9
9
304
146
—
459
174 $
2,585
2,759
1,913
6,709
3,667
15,048
— $
—
—
—
(24,124)
—
(24,124)
432
2,676
3,108
9,594
—
3,672
16,374
6,275
(6,709)
—
(434)
24,545
—
—
24,545
6,275
(49,515)
24,970
—
6,995
(286)
1
—
1
6,276
(42,520)
24,685
39,733 $ (66,644) $ 22,650
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . $ 24,557 $ 25,004 $
122
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
WM
Non-Guarantor
WM Holdings Subsidiaries
Eliminations Consolidated
Years Ended December 31:
2019
Operating revenues (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
— $
—
—
— $
—
—
15,455 $
12,749
2,706
— $
—
—
15,455
12,749
2,706
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries, net of tax . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interests . .
(347)
(70)
1,976
—
1,559
1,559
(111)
1,670
—
(19)
(14)
2,007
68
2,042
2,042
(5)
2,047
—
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . $ 1,670 $ 2,047 $
(45)
(1)
—
(101)
(147)
2,559
550
2,009
1
2,008 $
—
—
(3,983)
(72)
(4,055)
(4,055)
—
(4,055)
—
(4,055) $
(411)
(85)
—
(105)
(601)
2,105
434
1,671
1
1,670
2018
Operating revenues (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
— $
—
—
— $
—
—
14,914 $
12,125
2,789
— $
—
—
14,914
12,125
2,789
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries, net of tax . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interests . .
(312)
2,155
—
1,843
1,843
(82)
1,925
—
(20)
2,169
—
2,149
2,149
(5)
2,154
—
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . $ 1,925 $ 2,154 $
(42)
—
(39)
(81)
2,708
540
2,168
(2)
2,170 $
—
(4,324)
—
(4,324)
(4,324)
—
(4,324)
—
(4,324) $
(374)
—
(39)
(413)
2,376
453
1,923
(2)
1,925
2017
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
— $
555
(555)
— $
—
—
15,040 $
11,849
3,191
(555) $
(555)
—
14,485
11,849
2,636
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . .
Equity in earnings of subsidiaries, net of tax . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income (loss) attributable to noncontrolling interests . .
(299)
(6)
2,469
2
2,166
1,611
(338)
1,949
—
(20)
—
2,482
(1)
2,461
2,461
(8)
2,469
—
Net income attributable to Waste Management, Inc. . . . . . . . . . . . . $ 1,949 $ 2,469 $
(44)
—
—
(77)
(121)
3,070
588
2,482
—
2,482 $
—
—
(4,951)
—
(4,951)
(4,951)
—
(4,951)
—
(4,951) $
(363)
(6)
—
(76)
(445)
2,191
242
1,949
—
1,949
(a)(cid:2) For 2019 and 2018, operating revenues and costs and expenses related to insurance premiums for a wholly-owned
insurance captive are included in Non-Guarantor Subsidiaries to more accurately reflect those transactions.
123
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
WM
Non-Guarantor
WM
Holdings Subsidiaries
Eliminations Consolidated
Years Ended December 31:
2019
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,678 $ 2,047 $
Less: Comprehensive income (loss) attributable to
2,080 $ (4,055) $
1,750
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1
—
1
Comprehensive income attributable to Waste
Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,678 $ 2,047 $
2,079 $ (4,055) $
1,749
2018
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,933 $ 2,154 $
Less: Comprehensive income (loss) attributable to
2,070 $ (4,324) $
1,833
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(2)
—
(2)
Comprehensive income attributable to Waste
Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,933 $ 2,154 $
2,072 $ (4,324) $
1,835
2017
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,955 $ 2,469 $
Less: Comprehensive income (loss) attributable to
2,564 $ (4,951) $
2,037
noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
Comprehensive income attributable to Waste
Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,955 $ 2,469 $
2,564 $ (4,951) $
2,037
124
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Non-Guarantor
WM(a) Holdings(a) Subsidiaries(a) Eliminations Consolidated
WM
Years Ended December 31:
2019
Cash flows provided by (used in):
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash
— $
—
—
— $
—
—
3,874 $
(2,376)
1,964
— $
—
—
3,874
(2,376)
1,964
equivalents and restricted cash and cash equivalents . . .
Intercompany activity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3,485
Increase (decrease) in cash, cash equivalents and restricted
cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
3,485
Cash, cash equivalents and restricted cash and cash
equivalents at beginning of period . . . . . . . . . . . . . . . . . . .
—
Cash, cash equivalents and restricted cash and cash
equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 3,485 $
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
2018
Cash flows provided by (used in):
—
—
—
—
2
(3,485)
(21)
183
—
—
—
—
— $
(cid:2)
(cid:2)
(cid:2)
162 $
(cid:2)
(cid:2)
(cid:2)
— $
(cid:2)
(cid:2)
(cid:2)
2
—
3,464
183
3,647
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash
equivalents and restricted cash and cash equivalents . . .
Increase (decrease) in cash, cash equivalents and restricted
cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash and cash
equivalents at beginning of period . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash and cash
equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $
(cid:2)
2017
Cash flows provided by (used in):
(cid:2)
(cid:2)
(cid:2)
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash
equivalents and restricted cash and cash equivalents . . .
Increase (decrease) in cash, cash equivalents and
restricted cash and cash equivalents . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash and cash
equivalents at beginning of period . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash and cash
— $
—
—
— $
—
—
3,570 $
(2,169)
(1,508)
— $
—
—
3,570
(2,169)
(1,508)
—
—
—
—
—
—
(3)
(110)
293
—
—
—
— $
(cid:2)
(cid:2)
(cid:2)
— $
(cid:2)
(cid:2)
(cid:2)
183 $
(cid:2)
(cid:2)
(cid:2)
— $
(cid:2)
(cid:2)
(cid:2)
(3)
(110)
293
183
— $
—
—
— $
—
—
3,180 $
(1,620)
(1,361)
— $
—
—
3,180
(1,620)
(1,361)
—
—
—
—
—
—
—
199
94
—
—
—
—
199
94
equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
293 $
— $
293
(a) Cash receipts and payments of WM and WM Holdings are transacted by Non-Guarantor Subsidiaries. Cash, cash
equivalents and restricted cash and cash equivalents of WM as of December 31, 2019 include remaining proceeds
from our senior note issuances which are discussed further in Notes 7 and 17.
125
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. 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 December 31, 2019 (the end of
the period covered by this Annual Report on Form 10-K).
Management’s Report on Internal Control Over Financial Reporting
Management of the Company, including the principal executive and financial officers, is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act of 1934, as amended. Our internal controls are designed to provide reasonable assurance as to the
reliability of our financial reporting and the preparation of the consolidated financial statements for external purposes in
accordance with accounting principles generally accepted in the United States and includes those policies and procedures
that:
i.(cid:2) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
ii.(cid:2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company;
and
iii.(cid:2) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management of the Company assessed the effectiveness of our internal control over financial reporting as of
December 31, 2019 based on the Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Based on this assessment, management has concluded
that our internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting has been audited by Ernst & Young LLP, the
independent registered public accounting firm that audited our consolidated financial statements, as stated in their report,
which is included within this report.
126
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 December 31, 2019. We determined that there were no changes in our internal control over
financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this Item is incorporated by reference to the sections entitled “Board of Directors,”
“Delinquent Section 16(a) Reports,” and “Executive Officers,” in the Company’s definitive Proxy Statement for its 2020
Annual Meeting of Stockholders (the “Proxy Statement”), to be held May 12, 2020. The Proxy Statement will be filed
with the SEC within 120 days of the end of our fiscal year.
We have adopted a code of ethics that applies to our CEO, CFO and Chief Accounting Officer, as well as other
officers, directors and employees of the Company. The code of ethics, entitled “Code of Conduct,” is posted on our website
at www.wm.com in the section “ESG — Corporate Governance” on the “Investors” page.
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by reference to the sections entitled “Board of
Directors — Compensation Committee Report,” “— Compensation Committee Interlocks and Insider Participation,”
“— Non-Employee Director Compensation,” “Executive Compensation — Compensation Discussion and Analysis” and
“— Executive Compensation Tables” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated herein by reference to the sections entitled “Executive
Compensation — Executive Compensation Tables — Equity Compensation Plan Table,” “Director and Officer Stock
Ownership,” and “Security Ownership of Certain Beneficial Owners” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item is incorporated herein by reference to the sections entitled “Board of
Directors — Related Party Transactions” and “— Independence of Board Members” in the Proxy Statement.
Item 14. Principal Accounting Fees and Services.
The information required by this Item is incorporated herein by reference to the section entitled “Ratification of
Independent Registered Public Accounting Firm — Independent Registered Public Accounting Firm Fee Information” in
the Proxy Statement.
127
Item 15. Exhibits, Financial Statement Schedules.
(a) (1) Consolidated Financial Statements:
PART IV
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Equity for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
(a) (2) Consolidated Financial Statement Schedules:
All schedules have been omitted because the required information is not significant or is included in the financial
statements or notes thereto, or is not applicable.
(a) (3) Exhibits:
Exhibit No.
2.1
2.2
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Description
— Agreement and Plan 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
April 15, 2019].
— Voting Agreement dated April 14, 2019 by and between WM and Canada Pension Plan Investment
Board [incorporated by reference to Exhibit 2.2 to Form 8-K filed April 15, 2019].
— Third Restated Certificate of Incorporation of Waste Management, Inc. [incorporated by reference to
Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 2010].
— Amended and Restated By-laws of Waste Management, Inc. [incorporated by reference to Exhibit 3.2
to Form 8-K dated November 19, 2019].
— Specimen Stock Certificate [incorporated by reference to Exhibit 4.1 to Form 10-K for the year ended
December 31, 1998].
— Third Restated Certificate of Incorporation of Waste Management Holdings, Inc. [incorporated by
reference to Exhibit 4.2 to Form 10-K for the year ended December 31, 2014].
— Amended and Restated By-laws of Waste Management Holdings, Inc. [incorporated by reference to
Exhibit 4.3 to Form 10-Q for the quarter ended June 30, 2014].
— Indenture for Subordinated Debt Securities dated February 3, 1997, among the Registrant and The Bank
of New York Mellon Trust Company, N.A. (the current successor to Texas Commerce Bank National
Association), as trustee [incorporated by reference to Exhibit 4.1 to Form 8-K dated February 7, 1997].
— Indenture for Senior Debt Securities dated September 10, 1997, among the Registrant and The Bank of
New York Mellon Trust Company, N.A. (the current successor to Texas Commerce Bank National
Association), as trustee [incorporated by reference to Exhibit 4.1 to Form 8-K dated September 10,
1997].
— Officers’ Certificate delivered pursuant to Section 301 of the Indenture dated September 10, 1997 by
and between Waste Management, Inc. and The Bank of New York Mellon Trust Company, N.A., as
Trustee, establishing the terms and form of Waste Management, Inc.’s 4.150% Senior Notes due 2049
[incorporated by reference to Exhibit 4.5 to Form 10-Q for the quarter ended June 30, 2019].
— Guarantee Agreement by Waste Management Holdings, Inc. in favor of The Bank of New York Mellon
Trust Company, N.A., as Trustee for the holders of Waste Management, Inc.’s 4.150% Senior
Notes due 2049 [incorporated by reference to Exhibit 4.10 to Form 10-Q for the quarter ended
June 30, 2019].
128
4.8*
4.9*
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7
10.8
10.9
10.10†
10.11†
10.12†
10.13†
— Schedule of Officers’ Certificates delivered pursuant to Section 301 of the Indenture dated
September 10, 1997 establishing the terms and form of Waste Management, Inc.’s Senior Notes. Waste
Management and its subsidiaries are parties to debt instruments that have not been filed with the SEC
under which the total amount of securities authorized under any single instrument does not exceed 10%
of the total assets of Waste Management and its subsidiaries on a consolidated basis. Pursuant to
paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Waste Management agrees to furnish a copy of
such instruments to the SEC upon request.
— Description of Waste Management, Inc.’s Common Stock.
— 2014 Stock Incentive Plan [incorporated by reference to Exhibit 10.1 to Form 8-K dated May 13, 2014].
— 2009 Stock Incentive Plan [incorporated by reference to Appendix B to the Proxy Statement on
Schedule 14A filed March 25, 2009].
— 2005 Annual Incentive Plan [incorporated by reference to Appendix D to the Proxy Statement on
Schedule 14A filed April 8, 2004].
— Waste Management, Inc. Employee Stock Purchase Plan [incorporated by reference to Exhibit 10.1 to
Form 8-K dated May 15, 2015].
— First Amendment to Waste Management, Inc. Employee Stock Purchase Plan effective as of July 1,
2015 [incorporated by reference to Exhibit 10.5 to Form 10-K for the year ended December 31, 2015].
— Waste Management, Inc. 409A Deferral Savings Plan as Amended and Restated effective January 1,
2014 [incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2014].
— $3.5 Billion Fifth Amended and Restated Revolving Credit Agreement dated as of November 7, 2019
by and among Waste Management, Inc., Waste Management of Canada Corporation, WM Quebec Inc.
and Waste Management Holdings, Inc., certain banks party thereto, and Bank of America, N.A., as
administrative agent [incorporated by reference to Exhibit 10.1 to Form 8-K dated November 7, 2019].
— Commercial Paper Dealer Agreement, substantially in the form as executed with each of Mizuho
Securities USA Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and J.P. Morgan Securities
LLC, as Dealer, dated August 22, 2016 [incorporated by reference to Exhibit 10.11 to Form 10-K for
the year ended December 31, 2016].
— Commercial Paper Issuing and Paying Agent Agreement between Waste Management, Inc. and Bank
of America, National Association dated August 15, 2016 [incorporated by reference to Exhibit 10.12
to Form 10-K for the year ended December 31, 2016].
— First Amended and Restated Employment Agreement between USA Waste-Management Resources,
LLC and James C. Fish, Jr. dated December 22, 2017 [incorporated by reference to Exhibit 10.2 to
Form 8-K dated December 22, 2017].
— Employment Agreement between USA Waste-Management Resources, LLC and Devina A. Rankin
dated December 22, 2017 [incorporated by reference to Exhibit 10.3 to Form 8-K dated December 22,
2017].
— First Amended and Restated Employment Agreement between USA Waste-Management Resources,
LLC and John J. Morris, Jr. [incorporated by reference to Exhibit 10.4 to Form 8-K dated December 22,
2017].
— Employment Agreement between USA Waste-Management Resources, LLC and Charles C. Boettcher
dated December 22, 2017 [incorporated by reference to Exhibit 10.23 to Form 10-K for the year ended
December 31, 2017].
10.14†
— Form of Director and Executive Officer Indemnity Agreement [incorporated by reference to
Exhibit 10.43 to Form 10-K for the year ended December 31, 2012].
10.15†
— Waste Management Holdings, Inc. Executive Severance Plan [incorporated by reference to Exhibit
10.1 to Form 8-K dated December 22, 2017].
10.16
— Form of 2017 Senior Leadership Team Award Agreement [incorporated by reference to Exhibit 10.1
to Form 8-K dated February 27, 2017].
10.17†
— Form of 2017 Long Term Incentive Compensation Award Agreement (Mid-Year Award) [incorporated
10.18†
— Form of 2018 Senior Leadership Team Award Agreement [incorporated by reference to Exhibit 10.1
by reference to Exhibit 10.37 to Form 10-K for the year ended December 31, 2017].
to Form 8-K dated February 19, 2018].
10.19
— Form of 2019 Senior Leadership Team Award Agreement [incorporated by reference to Exhibit 10.1
to Form 8-K dated February 19, 2019].
129
21.1*
23.1*
31.1*
31.2*
— Subsidiaries of the Registrant.
— Consent of Independent Registered Public Accounting Firm.
— Certification Pursuant to Rule 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.
— Certification Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as
amended, of Devina A. Rankin, Senior Vice President and Chief Financial Officer.
32.1**
32.2**
— Certification Pursuant to 18 U.S.C. §1350 of James C. Fish, Jr., President and Chief Executive Officer.
— Certification Pursuant to 18 U.S.C. §1350 of Devina A. Rankin, Senior Vice President and Chief
Financial Officer.
— Mine Safety Disclosures.
95*
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.
† Denotes management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary.
None.
130
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
WASTE MANAGEMENT, INC.
By:
/s/ JAMES C. FISH, JR.
James C. Fish, Jr.
President, Chief Executive Officer and Director
Date: February 13, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ JAMES C. FISH, JR.
James C. Fish, Jr.
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 13, 2020
/s/ DEVINA A. RANKIN
Devina A. Rankin
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
February 13, 2020
/s/ LESLIE K. NAGY
Leslie K. Nagy
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
February 13, 2020
/s/ FRANK M. CLARK, JR.
Frank M. Clark, Jr.
/s/ ANDRÉS R. GLUSKI
Andrés R. Gluski
/s/ PARTICK W. GROSS
Patrick W. Gross
/s/ VICTORIA M. HOLT
Victoria M. Holt
/s/ KATHLEEN M. MAZZARELLA
Kathleen M. Mazzarella
/s/ WILLIAM B. PLUMMER
William B. Plummer
/s/ JOHN C. POPE
John C. Pope
/s/ THOMAS H. WEIDEMEYER
Thomas H. Weidemeyer
Director
Director
Director
Director
Director
Director
Director
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
February 13, 2020
Chairman of the Board and Director
February 13, 2020
131
Corporate Information
BOARD OF DIRECTORS
SROTCERIDFODRAOB
OFFICERS
SRECIFFO
FRANK M. CLARK, JR. (A, C)
FRANK M. CLARK, JR. (A, C)
Retired Chairman
Retired Chairman
and Chief Executive Officer
and Chief Executive Officer
ComEd
ComEd
JAMES C. FISH, JR.
JAMES C. FISH, JR.
President and Chief Executive Officer
President and Chief Executive Officer
Waste Management, Inc.
Waste Management, Inc.
ANDRÉS R. GLUSKI (A, C)
ANDRÉS R. GLUSKI (A, C)
President and Chief Executive Officer
President and Chief Executive Officer
The AES Corporation
The AES Corporation
PATRICK W. GROSS (A, N)
PATRICK W. GROSS (A, N)
Chairman
Chairman
The Lovell Group
The Lovell Group
VICTORIA M. HOLT (A, C)
VICTORIA M. HOLT (A, C)
President and Chief Executive Officer
President and Chief Executive Officer
Proto Labs, Inc.
Proto Labs, Inc.
KATHLEEN M. MAZZARELLA (C, N)
KATHLEEN M. MAZZARELLA (C, N)
Chairman, President and
Chairman, President and
Chief Executive Officer –
Chief Executive Officer
Graybar Electric Company, Inc.
Graybar Electric Company, Inc.
JOHN C. POPE (C, N)
WILLIAM B. PLUMMER (A, C)
Chairman – PFI Group
Retired Executive Vice President
Chairman – R.R. Donnelley & Sons
and Chief Financial Officer
United Rentals, Inc.
THOMAS H. WEIDEMEYER (A, C, N)
JOHN C. POPE (C, N)
Non-Executive Chairman of the Board,
Retired Senior Vice President
Chairman – PFI Group
and Chief Operating Officer
Chairman – R.R. Donnelley &Sons
United Parcel Service, Inc.
THOMAS H. WEIDEMEYER (A, C, N)
Non-Executive Chairman of the Board,
Retired Senior Vice President
(A) Audit Committee
and Chief Operating Officer
(C) Management Development and
United Parcel Service, Inc.
Compensation Committee
(N) Nominating and Governance
Committee
(A) Audit Committee
(C) Management Development and
Compensation Committee
(N) Nominating and Governance
Committee
JAMES C. FISH, JR.
JAMES C. FISH, JR.
President and Chief Executive Officer
President and Chief Executive Officer
STEVEN R. BATCHELOR
STEVEN R. BATCHELOR
Senior Vice President, Operations
Senior Vice President, Operations
CHARLES C. BOETTCHER
CHARLES C. BOETTCHER
Senior Vice President and
Executive Vice President, Corporate
Chief Legal Officer
Development and Chief Legal Officer
TARA J. HEMMER
TARA J. HEMMER
Senior Vice President, Operations
Senior Vice President, Operations
JOHN J. MORRIS, JR.
JOHN J. MORRIS, JR.
Executive Vice President and
Executive Vice President and
Chief Operating Officer
Chief Operating Officer
TAMLA D. OATES-FORNEY
TAMLA D. OATES-FORNEY
Senior Vice President and
Senior Vice President and
Chief Human Resources Officer
Chief Human Resources Officer
DEVINA A. RANKIN
DEVINA A. RANKIN
Senior Vice President and
Executive Vice President and
Chief Financial Officer
Chief Financial Officer
NIKOLAJ H. SJOQVIST
NIKOLAJ H. SJOQVIST
Senior Vice President and
Senior Vice President and
Chief Digital Officer
Chief Digital Officer
MICHAEL J. WATSON
MICHAEL J. WATSON
Senior Vice President and
Senior Vice President and
Chief Customer Officer
Chief Customer Officer
JEFF R. BENNETT
JEFF R. BENNETT
Assistant Treasurer
Assistant Treasurer
MARK A. LOCKETT
MARK A. LOCKETT
Vice President, Tax
Vice President, Tax
LESLIE K. NAGY
LESLIE K. NAGY
Vice President and
Vice President and
Chief Accounting Officer
Chief Accounting Officer
DAVID L. REED
DAVID L. REED
Vice President and Treasurer
Vice President and Treasurer
CHARLES S. SCHWAGER
CHARLES S. SCHWAGER
Vice President and
Vice President and
Chief Compliance and Ethics Officer
Chief Compliance and Ethics Officer
COURTNEY A. TIPPY
COURTNEY A. TIPPY
Vice President and Corporate Secretary
Vice President and Corporate Secretary
CORPORATE HEADQUARTERS
SRETRAUQDAEHETAROPROC
Waste Management, Inc.
Waste Management, Inc.
1001 Fannin
1001 Fannin
Houston, Texas 77002
Houston, Texas 77002
Telephone: (713) 512-6200
Telephone: (713) 512-6200
Facsimile: (713) 512-6299
Facsimile: (713) 512-6299
Street
Street
INDEPENDENT AUDITORS
INDEPENDENT AUDITORS
Ernst & Young LLP
Ernst & Young LLP
5 Houston Center, Suite 1200
5 Houston Center, Suite 2400
1401 McKinney Street
1401 McKinney Street
Houston, Texas 77010
Houston, Texas 77010
(713) 750-1500
(713) 750-1500
COMPANY STOCK
COMPANY STOCK
The Company’s common stock is traded on
The Company’s common stock is traded on
the New York Stock Exchange (NYSE)
the New York Stock Exchange (NYSE)
under the symbol “WM.” The number of
under the symbol “WM.” The number of
holders of record of common stock based on
holders of record of common stock based on
the transfer records of the Company at
the transfer records of the Company at
March 5, 2019 was 8,929.
March 6, 2020 was 8,681.
Based on security position listings, the
Based on security position listings, the
Company believes that, as of March 4, 2019,
Company believes that, as of March 2, 2020
,
it had approximately 633,227 beneficial owners.
it had approximately 853 928 beneficial owners.
TRANSFER AGENT AND REGISTRAR
TRANSFER AGENT AND REGISTRAR
Computershare
Computershare
211 Quality Circle, Suite 210
Jersey City, New Jersey
College Station, TX 77845
(800) 969-1190
(800) 969-1190
INVESTOR RELATIONS
INVESTOR RELATIONS
Security analysts, investment professionals,
Security analysts, investment professionals,
and shareholders should direct inquiries to
and shareholders should direct inquiries to
Investor Relations at the corporate address
Investor Relations at the corporate address
or call (713) 265-1656.
or call (713) 265-1656.
ANNUAL MEETING
ANNUAL MEETING
The annual meeting of the stockholders of
The annual meeting of the stockholders of
the Company is scheduled to be held at
the Company is scheduled to be held at
11:00 a.m. CT on May 12, 2020 at:
11:00 a.m. on May 14, 2019 at:
The Maury Myers Conference Center
The Maury Myers Conference Center
Waste Management, Inc.
Waste Management, Inc.
1021 Main Street
1021 Main Street
Houston, Texas 77002
Houston, Texas 77002
WEB SITE
WEB SITE
www.wm.com
www.wm.com
1001 Fannin Street - Houston, Texas 77002
1001 Fannin - Houston, Texas 77002
www.wm.com
www.wm.com