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, 2018. 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. Our “Traditional Solid Waste” business excludes our 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 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. Due to this, we monitor these developments to adapt our services 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.

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. We also encounter competition for acquisition and growth opportunities. Our industry is directly affected by changes in general economic factors, as increases and decreases in consumer spending, business expansions and construction starts generally correlate to volumes of waste generated and our revenues. Negative economic conditions, in addition to competitor actions, can make it more challenging to negotiate, renew or expand service contracts with acceptable margins and customers may reduce their service needs. General economic factors and the market for consumer goods, in addition to regulatory developments, can also significantly impact commodity prices for 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.

The generally favorable macro-economic environment, including steady spending by consumers and businesses and construction starts, has benefited our volume growth and gross margins in recent quarters. We are not expecting any significant shift in the near term, but there is increased market volatility and uncertainty about longer-term macro-economic indicators. Disruptions in the global movement of recycling commodities, due in part to actions by the Chinese government, resulted in significantly lower average markets prices in 2018 compared to 2017; however, we currently expect market price declines for recycling commodities to moderate in 2019. The recycling industry is continuing to adapt to the heightened quality standards and regulations. In addition, we are also focusing on managing processing costs, developing alternative markets and educating customers to reduce contamination in the recycling stream.

Current Year Financial Results

During 2018, we continued to produce strong operating results from our Traditional Solid Waste business, driven by strong yield and volume growth in our collection and disposal business. Net income and earnings per diluted share both increased primarily as a result of the strong operating results from our Traditional Solid Waste business as well as the favorable impact on our effective tax rate due to enactment of tax reform. The Company continued its commitment to supporting both organic and inorganic growth during 2018, allocating $1,694 million of available cash to capital expenditures and $466 million to the acquisition of solid waste businesses. We also allocated $1,806 million to our shareholders during 2018 through common stock repurchases and dividends.

Key items of our 2018 financial results include:

	·		Revenues of $14,914 million for 2018 compared with $14,485 million in 2017, an increase of $429 million, or 3.0%. This increase is primarily attributable to (i) higher volumes due to improving market conditions; (ii) increased yield in our collection and disposal business and (iii) increased recycling brokerage volumes, partially offset by (i) lower market prices for recycling commodities and (ii) fluctuations in foreign currency and other;

	·		Operating expenses of $9,249 million in 2018, or 62.0% of revenues, compared with $9,021 million, or 62.3% of revenues, in 2017. This increase of $228 million is primarily attributable to higher volumes and cost inflation in the current year period, partially offset by (i) changes in accounting for rebates and certain franchise fees required by the adoption of ASU 2014-09 and (ii) decreased cost of goods sold due to lower market prices for recycling commodities;

	·		Selling, general and administrative expenses of $1,453 million in 2018, or 9.7% of revenues, compared with $1,468 million, or 10.1% of revenues, in 2017. This decrease of $15 million is primarily attributable to lower incentive compensation accruals partially offset by increased professional fees and bad debt expense;

	·		Income from operations of $2,789 million, or 18.7% of revenues, in 2018 compared with $2,636 million, or 18.2% of revenues, in 2017, an increase of $153 million;

	·		Net income attributable to Waste Management, Inc. of $1,925 million, or $4.45 per diluted share, for 2018 as compared with $1,949 million, or $4.41 per diluted share, for 2017. The comparability is impacted by an increase in the effective income tax rate in the current year period of 19% compared with 11% in the prior year period primarily due to the one-time impacts associated with enactment of tax reform in late 2017. The current year was favorably impacted by (i) improved operating results in our Traditional Solid Waste business and (ii) net gains associated with the sale of certain hauling and ancillary operations. Partially offsetting these increases was lower earnings from our recycling line of business due to lower market prices for recycling commodities and the impairment of a landfill;

	·		Net cash provided by operating activities was $3,570 million in 2018 compared with $3,180 million in 2017; and

	·		Free cash flow was $2,084 million in 2018 compared with $1,770 million in 2017. The $314 million increase was a result of (i) higher earnings from our Traditional Solid Waste business; (ii) lower income tax payments associated with enactment of tax reform in late 2017 and timing of income tax payments and (iii) divestitures of certain hauling and ancillary operations partially offset by higher capital expenditures to support organic growth in our business. Free cash flow is a non-GAAP measure of liquidity. Refer to Free Cash Flow below for our definition of free cash flow, additional information about our use of this measure, and a reconciliation to net cash provided by operating activities, which is the most comparable GAAP measure.

Results of Operations

Operating Revenues

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. These operations are presented in our “Other” segment in the table below. The following table summarizes revenues during the years ended December 31 (in millions):

	2018			2017			2016
Solid Waste	$	15,537		$	14,832		$	13,968
Other		2,487			2,538			2,278
Intercompany		(3,110)			(2,885)			(2,637)
Total	$	14,914		$	14,485		$	13,609

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):

			2018			2017			2016
Commercial			$	3,972		$	3,714		$	3,480
Residential				2,529			2,528			2,487
Industrial				2,773			2,583			2,412
Other				450			439			423
Total collection				9,724			9,264			8,802
Landfill				3,560			3,370			3,110
Transfer				1,711			1,591			1,512
Recycling				1,293			1,432			1,221
Other (a)				1,736			1,713			1,601
Intercompany (b)				(3,110)			(2,885)			(2,637)
Total			$	14,914		$	14,485		$	13,609

	(a)		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.

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

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

		2018 vs. 2017													2017 vs. 2016
					As a % of						As a % of						As a % of						As a % of
					Related						Total						Related						Total
		Amount			Business(a)			Amount			Company(b)			Amount			Business(a)			Amount			Company(b)
Collection and disposal		$	291		2.3	%								$	241		2.0	%
Recycling commodities			(273)		(19.1)										237		20.1
Fuel surcharges and mandated fees			111		21.3										73		16.3
Total average yield (c)								$	129		0.9	%								$	551		4.1	%
Volume									478		3.3										289		2.1
Internal revenue growth									607		4.2										840		6.2
Acquisitions									199		1.4										48		0.3
Divestitures									(133)		(0.9)										(27)		(0.2)
Foreign currency translation and other									(244)		(1.7)										15		0.1
Total								$	429		3.0	%								$	876		6.4	%

	(a)		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)		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)		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.

Revenue growth from collection and disposal average yield was $291 million, or 2.3%, and $241 million, or 2.0%, for the years ended December 31, 2018 and 2017, respectively. We experienced growth in yield for all of our collection and disposal lines of business in both 2018 and 2017. The period-to-period changes are as follows (dollars in millions):

			2018 vs. 2017					2017 vs. 2016
						As a % of					As a % of
						Related					Related
			Amount			Business		Amount			Business
Commercial			$	99		2.9	%	$	99		3.0	%
Industrial				107		4.4			69		3.1
Residential				47		1.9			44		1.8
Total collection				253		2.9			212		2.6
Landfill				22		1.1			17		0.9
Transfer				16		1.9			12		1.5
Total collection and disposal			$	291		2.3	%	$	241		2.0	%

Our increase in collection and disposal yield for the years ended December 31, 2018 and 2017, compared with the prior years, includes increased revenues from our environmental fees of $74 million and $67 million, respectively.

Recycling Commodities — Fluctuations in the market prices for recycling commodities resulted in revenue decline of $273 million and revenue growth of $237 million for the years ended December 31, 2018 and 2017, respectively, as compared with the prior years. Disruptions in the global movement of recycling commodities began in September 2017 and continued throughout 2018. Average market prices for recycling commodities at the Company’s facilities were 40% lower in 2018 compared to 2017. We currently expect market prices for recycling commodities to moderate in 2019.

Fuel Surcharges and Mandated Fees — These revenues, which are predominantly generated by our fuel surcharge program, increased $111 million and $73 million for the years ended December 31, 2018 and 2017, respectively, as compared with the prior years. These revenues fluctuate in response to changes in the national average prices for diesel fuel on which our surcharge is based. Market prices for diesel fuel increased 20% and 15% for the years ended December 31, 2018 and 2017, respectively, compared with the prior years. The mandated fees included in this line item are primarily related to fees and taxes assessed by various state, county and municipal government agencies at our landfills and transfer stations where we are the primary obligor in the contractual arrangement.

Volume

Our revenues from volume increased $478 million, or 3.3%, and $289 million, or 2.1%, for the years ended December 31, 2018 and 2017, respectively, as compared with the prior years. The comparison does not include volumes from acquisitions.

We experienced higher volumes throughout 2018 and 2017 due to our focus on customer service and disciplined growth, combined with favorable market conditions in our Traditional Solid Waste business. We have experienced significant volume growth with existing customers, particularly in our commercial collection business. The volume growth is the result of proactive efforts taken to work with our customers as their businesses expand and grow to identify service upgrade opportunities. Contributors to our volume increase in both 2018 and 2017 included a large new contract addition in the second half of 2017 that continued to favorably impact volume growth for our commercial collection business into 2018. Additionally, a large contract executed in the second half of 2017 increased our volumes at our transfer stations with incremental volume additions during 2018 that will continue to favorably impact our volumes into 2019. The clean-up efforts of natural disasters throughout the U.S. in the second half of 2017 favorably affected our landfill volumes primarily in the fourth quarter of 2017 as compared with 2016 but negatively impacted the comparability of volumes for 2018. Furthermore, our WMSBS organization experienced favorable volume growth in both 2018 and 2017.

Additionally, a volume increase from our recycling brokerage services affected the comparability of volumes for 2018 and 2017. Drivers affecting the comparability of volumes for 2017 and 2016 included a volume increase from an eleven-month outage at a waste-to-energy facility in Virginia that ended in mid-December 2017 offset, in part, by one less workday in 2017 that negatively impacted our volume growth.

Foreign Currency Translation and Other

Fluctuations in foreign currency affect revenues from our Canadian operations. We also experienced revenue decline associated with the adoption of ASU 2014-09 and other changes. See Notes 2 and 3 to the Consolidated Financial Statements for further discussion.

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.

The following table summarizes the major components of our operating expenses for the years ended December 31 (dollars in millions):

				Period-to-Period									Period-to-Period
	2018			Change						2017			Change					2016
Labor and related benefits	$	2,703		$	203		8.1	%		$	2,500		$	90		3.7	%	$	2,410
Transfer and disposal costs		1,105			109		10.9				996			22		2.3			974
Maintenance and repairs		1,255			85		7.3				1,170			94		8.7			1,076
Subcontractor costs		1,375			139		11.2				1,236			43		3.6			1,193
Cost of goods sold		783			(186)		(19.2)				969			111		12.9			858
Fuel		409			34		9.1				375			75		25.0			300
Disposal and franchise fees and taxes		598			(155)		(20.6)				753			51		7.3			702
Landfill operating costs		331			3		0.9				328			(24)		(6.8)			352
Risk management		235			16		7.3				219			27		14.1			192
Other		455			(20)		(4.2)				475			46		10.7			429
	$	9,249		$	228		2.5	%		$	9,021		$	535		6.3	%	$	8,486
Percentage of revenues		62.0	%								62.3	%							62.4	%

The increase in volumes in the current year periods, as discussed above in Operating Revenues, affect the comparability of operating expenses for the periods presented. In addition, cost inflation affects the comparability of operating expenses particularly between 2018 and 2017.

Other 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 2018 as compared with 2017 was driven by (i) volume growth in our collection line of business; (ii) a bonus plan established in early 2018 targeted at improving employee retention and (iii) merit increases. The increase in labor and related benefits costs in 2017 as compared with 2016 was due to (i) merit increases; (ii) increased headcount driven by higher volumes and (iii) charges for the withdrawal from certain underfunded Multiemployer Pension Plans. These cost increases were partially offset by one less workday in 2017.

Maintenance and Repairs — The increase in maintenance and repairs costs in 2018 and 2017 as compared with the prior year periods was primarily driven by (i) higher labor costs from volume growth and cost inflation and (ii) higher third-party service and parts costs.

Cost of Goods Sold — 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 the current year period. See Notes 2 and 3 to the Consolidated Financial Statements for further discussion of ASU 2014‑09. The increase in cost of goods sold in 2017 as compared with 2016 was due to higher market prices for recycling commodities, partially offset by lower costs due to (i) continued efforts to restructure recycling rebates paid to customers and (ii) the divestiture of a majority-owned organics company in 2016.

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. We recognized the benefit in the first quarter of 2018 when the legislation was passed, though the credits relate to 2017 business

activity and these credits were not extended into 2018. The increase in fuel costs in 2017 as compared with 2016 was primarily due to (i) higher market prices for diesel fuel; (ii) the expiration of certain natural gas fuel excise tax credits as of December 31, 2016 and (iii) higher volumes in our collection line of business. These cost increases were partially offset by (i) lower costs resulting from the continued conversion of our fleet to natural gas vehicles and (ii) reduced fuel consumption due to efficiency gains in the routing of our fleet.

Disposal and Franchise Fees and Taxes — 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 the current year period; specifically, certain franchise fees were treated as disposal fees and taxes in the prior year periods and are treated as a reduction in operating revenues in the current year period. See Notes 2 and 3 to the Consolidated Financial Statements for further discussion of ASU 2014-09. The increase in disposal and franchise fees and taxes in 2017 as compared with 2016 is primarily due to higher landfill volumes and increased municipal franchise fees.

Risk Management — The increase in risk management costs in 2018 and 2017 was primarily due to increases in losses within our self-insured retention.

Other — The decrease in other operating costs in 2018 as compared with 2017 was primarily driven by net gains on sales of certain assets in the current year period. The increase in other operating costs in 2017 as compared with 2016 was principally driven by favorable adjustments to our contingent consideration liabilities associated with certain acquisitions in 2016 and higher operating lease expenses in 2017.

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 settlements generally are included in our “Other” selling, general and administrative expenses.

The following table summarizes the major components of our selling, general and administrative expenses for the years ended December 31 (dollars in millions):

					Period-to-Period								Period-to-Period
		2018			Change					2017			Change					2016
Labor and related benefits		$	957		$	(43)		(4.3)	%	$	1,000		$	32		3.3	%	$	968
Professional fees			113			11		10.8			102			5		5.2			97
Provision for bad debts			53			11		26.2			42			2		5.0			40
Other			330			6		1.9			324			19		6.2			305
		$	1,453		$	(15)		(1.0)	%	$	1,468		$	58		4.1	%	$	1,410
Percentage of revenues			9.7	%							10.1	%							10.4	%

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

Labor and Related Benefits — The decrease in labor and related benefits costs in 2018 compared with 2017 was primarily due to (i) lower incentive compensation accruals in the current year period and (ii) severance costs for former executives incurred in 2017 partially offset by merit increases and a bonus plan established in early 2018 targeted at improving employee retention. The increase in labor and related benefits costs in 2017 compared with 2016 was primarily due to (i) merit increases; (ii) higher incentive compensation accruals and (iii) higher severance costs for former executives in 2017.

Professional Fees — The increase in professional fees in 2018 compared with 2017 was primarily due to the investments we are making in technology to improve our operations and our customer service and higher legal fees.

Provision for Bad Debts — Our provision for bad debts increased in 2018 compared with 2017 primarily due to (i) an increase in revenues and (ii) the bankruptcy of a strategic customer in our WMSBS organization.

Other — The increase in other expenses in 2018 compared with 2017 was primarily due to higher litigation settlements in 2018, which were partially offset by lower costs associated with advertising and travel and entertainment as we continued to focus on controlling costs. The increase in other expenses in 2017 compared with 2016 was primarily due to favorable litigation settlements in 2016 and charitable contributions made for hurricane relief efforts in 2017.

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):

					Period-to-Period								Period-to-Period
		2018			Change					2017			Change					2016
Depreciation of tangible property and equipment		$	838		$	55		7.0	%	$	783		$	10		1.3	%	$	773
Amortization of landfill airspace			538			41		8.2			497			69		16.1			428
Amortization of intangible assets			101			5		5.2			96			(4)		(4.0)			100
		$	1,477		$	101		7.3	%	$	1,376		$	75		5.8	%	$	1,301
Percentage of revenues			9.9	%							9.5	%							9.6	%

The increase in depreciation of tangible property and equipment during 2018 as compared to 2017 is primarily due to increased capital expenditures to support organic growth in our business. The increase in amortization of landfill airspace during 2018 and 2017 as compared with the prior year periods is primarily due to higher volumes at our landfills and changes in our landfill estimates.

(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):

		2018			2017			2016
(Gain) loss from divestitures		$	(96)		$	(38)		$	9
Asset impairments			38			41			59
Other			—			(19)			44
		$	(58)		$	(16)		$	112

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 hauling 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 10 to the Consolidated Financial Statements and (iii) $7 million of charges to write down certain renewable energy assets.

During the year ended December 31, 2016, we recognized net charges of $112 million, primarily related to (i) $44 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 10 to the Consolidated Financial Statements; (ii) a $43 million charge to impair a landfill in Tier 3 due to a loss of expected volumes; (iii) $12 million of goodwill impairment charges primarily related to our LampTracker® reporting unit and (iv) an $8 million loss on the sale of a majority-owned organics company.

See Note 3 to the Consolidated Financial Statements for additional information related to the accounting policy and analysis involved in identifying and calculating impairments.

Income from Operations

The following table summarizes income from operations for the years ended December 31 (dollars in millions):

					Period-to-								Period-to-
					Period								Period
		2018			Change					2017			Change					2016
Solid Waste:
Tier 1		$	1,642		$	104		6.8	%	$	1,538		$	108		7.6	%	$	1,430
Tier 2			542			(10)		(1.8)			552			30		5.7			522
Tier 3			1,211			12		1.0			1,199			205		20.6			994
Solid Waste			3,395			106		3.2			3,289			343		11.6			2,946
Other			(66)			2		(2.9)			(68)			32		(32.0)			(100)
Corporate and Other			(540)			45		(7.7)			(585)			(35)		6.4			(550)
Total		$	2,789		$	153		5.8	%	$	2,636		$	340		14.8	%	$	2,296
Percentage of revenues			18.7	%							18.2	%							16.9	%

Our segments are discussed further in Note 19 to the Consolidated Financial Statements.

Solid Waste — The most significant items affecting the results of operations of our Solid Waste business during the three years ended December 31, 2018 are summarized below:

The following items affected both comparable periods:

	·		Our Solid Waste business benefited from internal revenue growth offset, in part, by merit increases and increased maintenance and repair costs.

In addition, the following items affected 2018 when compared with 2017:

	·		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 bonus plan established in early 2018 targeted at improving employee retention and (iii) increased depreciation and amortization expenses to support growth of our business. During 2018, Tier 1 also benefited from the divestiture of certain hauling operations and Tier 3 was negatively impacted by an impairment of a landfill.

In addition, the following items affected 2017 when compared with 2016:

	·		Our Solid Waste business benefited from (i) higher market prices for recycling commodities; (ii) decreased landfill leachate management costs in Tier 3 and (iii) an impairment charge for a landfill in Tier 3 in 2016. However, our income from operations was negatively impacted by (i) charges for the withdrawal from certain underfunded Multiemployer Pension Plans, primarily in Tier 3 and (ii) increased landfill amortization expense related to higher volumes at our landfills and changes in our landfill estimates, primarily in Tier 3.

Other — 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 businesses, partially offset by higher risk management costs. A reduction in contingent consideration obligations in our EES business favorably affected 2017 when compared with 2016.

Corporate and Other — Corporate and other was affected by charges in 2016, and to a lesser extent 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.

In addition, the following items affected 2018 when compared with 2017:

	·		Decreased expenses in 2018 as a result of lower incentive compensation accruals and severance costs for former executives incurred in 2017. These decreases were offset, in part, by higher professional fees primarily due to the investments we are making in technology to improve our operations and our customer service in 2018.

In addition, the following items affected 2017 when compared with 2016:

	·		Increased expenses in 2017 as a result of higher incentive compensation accruals and severance costs. These increases were offset, in part, by a favorable litigation settlement in 2016.

Interest Expense, Net

Our interest expense, net was $374 million, $363 million and $376 million in 2018, 2017 and 2016, respectively. Our 2017 interest expense benefited from higher capitalized interest on certain projects under development and the early repayment of high-coupon senior notes and issuance of new senior notes at lower coupon interest rates in 2017.

Equity in Net Losses of Unconsolidated Entities

We recognized equity in net losses of unconsolidated entities of $41 million, $68 million and $44 million in 2018, 2017 and 2016, respectively. 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. The remaining 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 8 to the Consolidated Financial Statements.

Other, Net

We recognized other, net income of $2 million in 2018 compared to other, net expense of $14 million and $54 million in 2017 and 2016, respectively. The expenses for 2017 and 2016 were impacted by impairment charges of $11 million and $42 million, respectively, related to other-than-temporary declines in the value of minority-owned investments in waste diversion technology companies. In addition, we also recognized (i) $8 million of expense during 2016 associated with the termination of our cross-currency swaps, which is discussed further in Note 7 to the Consolidated Financial Statements and (ii) a loss on early extinguishment of debt of $6 million and $4 million in 2017 and 2016, respectively.

Income Tax Expense

We recorded income tax expense of $453 million, $242 million and $642 million in 2018, 2017 and 2016, respectively, resulting in effective income tax rates of 19.0%, 11.0% and 35.2% for the years ended December 31, 2018, 2017 and 2016, respectively. The comparability of our income tax expense for the reported periods has been primarily affected by the following:

	·		Enactment of Tax Reform — For the year ended December 31, 2018, we recognized measurement period adjustments related to enactment of the Tax Cuts and Jobs Act primarily due to the filing of our income tax returns resulting in a reduction in our income tax expense of $12 million. The reduction consisted of a net income tax benefit of (i) $7 million for the remeasurement of our deferred income tax assets and liabilities and other reserves

due to the decrease in the federal corporate income tax rate and (ii) a $5 million adjustment for the one-time, mandatory transition tax. For the year ended December 31, 2017, we recognized a reduction in our income tax expense of $529 million consisting of a net tax benefit of $595 million for the initial remeasurement of our deferred income tax assets and liabilities due to the decrease in the federal corporate income tax rate, partially offset by income tax expense of $66 million for the one-time, mandatory transition tax.

	·		Other Adjustments – We recognized reductions in our income tax expense of $92 million, $7 million and $21 million for the years ended December 31, 2018, 2017 and 2016, respectively, associated with adjustments to accruals and related deferred taxes and tax audit settlements.

See Note 8 to the Consolidated Financial Statements for more information related to income taxes.

Landfill and Environmental Remediation Discussion and Analysis

We owned or operated 247 solid waste and five secure hazardous waste landfills as of December 31, 2018 and 244 solid waste and five secure hazardous waste landfills as of December 31, 2017. For these landfills, the following table reflects changes in capacity, as measured in tons of waste, for the years ended December 31 and remaining capacity, measured in cubic yards of waste, as of December 31 (in millions):

		2018						2017
		Remaining						Remaining
		Permitted		Expansion		Total		Permitted		Expansion		Total
		Capacity		Capacity		Capacity		Capacity		Capacity		Capacity
Balance as of beginning of year (in tons)		4,799		186		4,985		4,754		219		4,973
Acquisitions, divestitures, newly permitted landfills and closures		5		—		5		6		—		6
Changes in expansions pursued (a)		—		72		72		—		65		65
Expansion permits granted (b)		42		(42)		—		98		(98)		—
Airspace consumed		(116)		—		(116)		(112)		—		(112)
Changes in engineering estimates and other (c)		32		4		36		53		—		53
Balance as of end of year (in tons)		4,762		220		4,982		4,799		186		4,985
Balance as of end of year (in cubic yards)		4,735		194		4,929		4,815		169		4,984

	(a)		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)		We received expansion permits at six of our landfills during 2018 and nine of our landfills during 2017, demonstrating our continued success in working with municipalities and regulatory agencies to expand the disposal capacity of our existing landfills.

	(c)		Changes in engineering estimates can result in changes to the estimated available remaining capacity of a landfill or changes in the utilization of such landfill capacity, 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 are shown below (tons in thousands):

		2018						2017
		# of		Total		Tons per		# of		Total		Tons per
		Sites		Tons		Day		Sites		Tons		Day
Solid waste landfills		247	(a)	115,972		426		244		112,849		415
Hazardous waste landfills		5		739		3		5		584		2
		252		116,711		429		249		113,433		417
Solid waste landfills closed, divested or contract expired during related year		1		424				1		139
				117,135	(b)					113,572	(b)

	(a)		In 2018, we acquired four landfills and closed one landfill.

	(b)		These amounts include 1.5 million tons and 1.8 million tons as of December 31, 2018 and 2017, 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, 2018, our environmental legacy management group managed 207 closed landfills.

Based on remaining permitted airspace as of December 31, 2018 and projected annual disposal volumes, the weighted average remaining landfill life for all of our owned or operated landfills is approximately 41 years. Many of our landfills have the potential for expanded disposal capacity beyond what is currently permitted. We monitor the availability of permitted disposal capacity at each of our landfills and evaluate whether to pursue an expansion at a given landfill based on estimated future waste volumes, disposal prices, construction and operating costs, remaining capacity 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 43 years when considering remaining permitted airspace, expansion airspace and projected annual disposal volume.

The number of landfills owned or operated as of December 31, 2018, segregated by their estimated operating lives based on remaining permitted and expansion capacity and projected annual disposal volume, was as follows:

		# of Landfills
0 to 5 years		30
6 to 10 years		16
11 to 20 years		35
21 to 40 years		68
41+ years		103
Total		252	(a)

	(a)		Of the 252 landfills, 204 are owned, 35 are operated under lease agreements and 13 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, 2018, we have 16 landfills which are not currently accepting waste. During the year ended December 31, 2018, we performed tests of recoverability for seven of these landfills with an aggregate net recorded capitalized landfill asset cost of $270 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.

The changes to the cost basis of our landfill assets and accumulated landfill airspace amortization for the year ended December 31, 2018 are reflected in the table below:

					Accumulated
		Cost Basis of			Landfill Airspace
		Landfill Assets			Amortization			Landfill Assets
December 31, 2017		$	14,904		$	(8,788)		$	6,116
Capital additions			513			—			513
Asset retirement obligations incurred and capitalized			83			—			83
Acquisitions			2			—			2
Amortization of landfill airspace			—			(538)			(538)
Foreign currency translation			(89)			35			(54)
Asset retirements and other adjustments			(173)			134			(39)
December 31, 2018		$	15,240		$	(9,157)		$	6,083

As of December 31, 2018, we estimate that we will spend approximately $600 million in 2019, and approximately $1.25 billion in 2020 and 2021 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, 2018 are reflected in the table below (in millions):

					Environmental
		Landfill			Remediation
December 31, 2017		$	1,675		$	251
Obligations incurred and capitalized			83			—
Obligations settled			(108)			(26)
Interest accretion			95			5
Revisions in estimates and interest rate assumptions (a) (b)			(3)			9
Acquisitions, divestitures and other adjustments (c)			18			(2)
December 31, 2018		$	1,760		$	237

	(a)		The amount reported for our landfill liabilities includes a net decrease of $15 million primarily related to our year-end annual review of landfill final capping, closure and post-closure obligations partially offset by an increase of

$12 million due to the acceleration of the expected timing of capping activities for a landfill. See Note 11 to the Consolidated Financial Statements for discussion of the impairment charge related to this landfill.

	(b)		The amount reported for our environmental remediation liabilities includes changes in cost estimates associated with environmental remediation projects resulting in an increase in the required obligation. These charges were partially offset by a decrease of $3 million in our environmental remediation liabilities due to an increase in the risk-free discount rate used to measure our liabilities from 2.5% at December 31, 2017 to 2.75% at December 31, 2018.

	(c)		The amount reported for our landfill liabilities includes an increase of $27 million due to landfill acquisitions partially offset by landfill divestitures and other adjustments.

Landfill Operating Costs — The following table summarizes our landfill operating costs for the years ended December 31 (in millions):

		2018			2017			2016
Interest accretion on landfill liabilities		$	95		$	92		$	91
Interest accretion on and discount rate adjustments to environmental remediation liabilities and recovery assets			(2)			3			—
Leachate and methane collection and treatment			150			143			176
Landfill remediation costs			13			14			15
Other landfill site costs			75			76			70
Total landfill operating costs		$	331		$	328		$	352

Amortization of Landfill Airspace — Amortization of landfill airspace, which is included as a component of depreciation and amortization expenses, includes the following:

	·		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 by the number of tons needed to fill the corresponding asset’s 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 airspace capacity. 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 airspace capacity. 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:

		2018			2017			2016
Amortization of landfill airspace (in millions)		$	538		$	497		$	428
Tons received, net of redirected waste (in millions)			116			112			104
Average landfill airspace amortization expense per ton		$	4.64		$	4.44		$	4.10

Different per-ton amortization rates are applied at each of our 252 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 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):

		2018			2017
Cash and cash equivalents		$	61		$	22
Restricted trust and escrow accounts:
Insurance reserves (a)		$	252		$	203
Final capping, closure, post-closure and environmental remediation funds			103			101
Other			11			15
Total restricted trust and escrow accounts		$	366		$	319
Debt:
Current portion		$	432		$	739
Long-term portion			9,594			8,752
Total debt		$	10,026		$	9,491

(a)Includes $70 million as of December 31, 2018 and 2017 in other current assets in our Consolidated Balance Sheets.

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, 2018 are described in Note 7 to the Consolidated Financial Statements.

Changes in our outstanding debt balances from December 31, 2017 to December 31, 2018 were primarily attributable to (i) net debt cash borrowings of $313 million; (ii) our recent federal low-income housing investment discussed in Note 8 to the Consolidated Financial Statements and new capital leases, which increased our debt obligations by $250 million and (iii) the impacts of other non-cash changes in our debt balances such as divestitures, debt issuance costs, discounts, premiums, foreign currency translation and terminated interest rate derivatives.

As of December 31, 2018, we had $1.9 billion of debt maturing within the next 12 months, including (i) $990 million of short-term borrowings under our commercial paper program; (ii) $705 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months, which is prior to their scheduled maturities; (iii) $161 million of other debt with scheduled maturities within the next 12 months, including $106 million of tax-exempt bonds and (iv) C$15 million, or $11 million, of Canadian borrowings under our $2.75 billion revolving credit facility. Of the $990 million of short-term borrowings outstanding under our commercial paper program as of December 31, 2018 that are supported by our $2.75 billion revolving credit facility, we have the intent and ability to refinance or maintain approximately $730 million of these borrowings on a long-term basis, and we have classified these amounts as long-term debt. As of December 31, 2018, we have classified an additional $705 million 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 $2.75 billion revolving credit facility, as discussed below. The remaining $432 million of debt maturing in the next 12 months is classified as current obligations.

As of December 31, 2018, we also have $268 million of variable-rate tax-exempt bonds that are supported by letters of credit under our $2.75 billion revolving credit facility. The interest rates on our variable-rate tax-exempt bonds are generally reset on either a daily or weekly basis through a remarketing process. All recent tax-exempt bond remarketings have successfully placed Company bonds with investors at market-driven rates and we currently expect future remarketings to be successful. However, if the remarketing agent is unable to remarket our bonds, the remarketing agent can put the bonds to us. In the event of a failed remarketing, we have the availability under our $2.75 billion revolving credit facility to fund these bonds until they are remarketed successfully. Accordingly, we have also classified these borrowings as long-term in our Consolidated Balance Sheet as of December 31, 2018.

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):

		2018			2017
Revolving credit facility (a)		$	587		$	642
Other letter of credit facilities (b)			556			507
		$	1,143		$	1,149

	(a)		As of December 31, 2018, we had an unused and available credit capacity of $1.2 billion.

	(b)		As of December 31, 2018, these other letter of credit facilities are both committed and uncommitted with terms extending through December 2020.

Refinancing of Revolving Credit Facility

In June 2018, we entered into the $2.75 billion revolving credit facility, which amended and restated our prior long-term U.S. revolving credit facility. Amendments to the credit agreement included (i) increasing total capacity under the facility from $2.25 billion to $2.75 billion; (ii) establishment of a $750 million accordion feature that may be used to increase total capacity in future periods; (iii) extending the term through June 2023 and (iv) inclusion of two one-year extension options. Waste Management of Canada Corporation and WM Quebec Inc., each an indirect wholly-owned subsidiary of WM, were added as additional borrowers under the $2.75 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 of the obligations under the $2.75 billion revolving credit facility.

Summary of Cash Flow Activity

The following is a summary of our cash flows for the years ended December 31 (in millions):

		2018			2017(a)			2016(a)
Net cash provided by operating activities		$	3,570		$	3,180		$	3,003
Net cash used in investing activities		$	(2,169)		$	(1,620)		$	(1,929)
Net cash used in financing activities		$	(1,508)		$	(1,361)		$	(1,084)

	(a)		Prior year information was revised to reflect the adoption of ASU 2016‑15 and ASU 2016-18 and conform to our current year presentation. See Note 2 to the Consolidated Financial Statements for further discussion.

Net Cash Provided by Operating Activities — 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 from our Traditional Solid Waste 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.

Our operating cash flows increased by $177 million for the year ended December 31, 2017, as compared with the prior year period, as a result of higher earnings from our Traditional Solid Waste business and recycling line of business.

This increase is partially offset by cash paid for income taxes, which was $120 million higher in 2017, largely driven by higher earnings and timing of income tax payments.

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:

	·		Acquisitions — Our spending on acquisitions was $466 million, $200 million and $611 million in 2018, 2017 and 2016, respectively, of which $460 million, $198 million and $608 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 subsequent to the adoption of ASU 2016-15. Substantially all of these acquisitions are related to our Solid Waste business. Our acquisitions in 2016 included $525 million for certain operations and business assets of Southern Waste Systems/Sun Recycling. See Notes 2 and 17 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.

	·		Capital Expenditures — We used $1,694 million, $1,509 million and $1,339 million for capital expenditures in 2018, 2017 and 2016, respectively. The Company continues to maintain a disciplined focus on capital management and fluctuations in our capital expenditures are a result of new business opportunities, growth in our existing business, the timing of replacement of aging assets and investment in assets that support our strategy of continuous improvement through efficiency and innovation.

	·		Proceeds from Divestitures — Proceeds from divestitures of businesses and other assets (net of cash divested) were $208 million, $99 million and $43 million in 2018, 2017 and 2016, respectively. In 2018, 2017 and 2016, $153 million, $62 million and $2 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.

	·		Other, Net — Our spending within other, net was $223 million, $12 million, and $25 million in 2018, 2017 and 2016, respectively. The increase in 2018 is 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 16 to the Consolidated Financial Statements for additional information.

Net Cash Used in Financing Activities — The most significant items affecting the comparison of our financing cash flows for the periods presented are summarized below:

	·		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):

		2018			2017(a)			2016(a)
Borrowings:
Revolving credit facility (b)		$	119		$	302		$	1,889
Canadian term loan and revolving credit facility			8			9			347
Senior notes			—			745			496
Tax-exempt bonds			185			299			143
Other debt			47			124			182
		$	359		$	1,479		$	3,057
Repayments:
Revolving credit facility (b)		$	(108)		$	(728)		$	(1,483)
Canadian term loan and revolving credit facility			(117)			(146)			(193)
Senior notes			—			(590)			(510)
Tax-exempt bonds			(167)			(251)			(289)
Other debt			(107)			(192)			(207)
		$	(499)		$	(1,907)		$	(2,682)
Net cash borrowings (repayments)		$	(140)		$	(428)		$	375

(a)	Prior year information was revised to reflect the adoption of ASU 2016-18 and conform to our current year presentation. See Note 2 to the Consolidated Financial Statements for further discussion.
(b)	Our revolving credit facility was amended and restated in June 2018.

During 2018, we had $250 million of non-cash financing activities from our recent federal low-income housing investment discussed in Note 8 to the Consolidated Financial Statements and new capital leases. During 2017 and 2016, we did not have any significant non-cash investing and financing activities. Non-cash investing and financing activities are generally excluded from the Consolidated Statements of Cash Flows.

Refer to Note 7 to the Consolidated Financial Statements for additional information related to our debt borrowings and repayments.

	·		Commercial Paper Program — During 2018 and 2017, we had net cash borrowings of $453 million and $513 million (net of the related discounts on issuance), respectively, under our commercial paper program. Borrowings were primarily to support new business opportunities and for general corporate purposes.

	·		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 $1,008 million, $750 million and $725 million of our common stock during 2018 (including $4 million paid in January 2019), 2017 and 2016, respectively. See Note 13 to the Consolidated Financial Statements for additional information.

We announced in December 2018 that our Board of Directors has authorized up to $1.5 billion in future share repurchases. 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.

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

We paid aggregate cash dividends of $802 million, $750 million and $726 million during 2018, 2017 and 2016, respectively. The increase in dividend payments is due to our quarterly per share dividend increasing from $0.41 in 2016 to $0.425 in 2017 and to $0.465 in 2018 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 2018, we announced that our Board of Directors expects to increase the quarterly dividend from $0.465 to $0.5125 per share for dividends declared in 2019. 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.

	·		Proceeds from the Exercise of Common Stock Options — The exercise of common stock options generated financing cash inflows of $52 million, $95 million and $63 million during 2018, 2017 and 2016, 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

As is our practice, 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:

		2018			2017			2016
Net cash provided by operating activities (a)		$	3,570		$	3,180		$	3,003
Capital expenditures			(1,694)			(1,509)			(1,339)
Proceeds from divestitures of businesses and other assets (net of cash divested)			208			99			43
Free cash flow (a)		$	2,084		$	1,770		$	1,707

	(a)		Prior year information was revised to reflect the adoption of ASU 2016‑18 and conform to our current year presentation. See Note 2 to the Consolidated Financial Statements.

Summary of Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2018 and the anticipated effect of these obligations on our liquidity in future years (in millions):

		2019			2020			2021			2022			2023			Thereafter			Total
Recorded Obligations:
Expected environmental liabilities: (a)
Final capping, closure and post-closure		$	143		$	170		$	132		$	105		$	98		$	2,450		$	3,098
Environmental remediation			26			19			65			37			13			81			241
			169			189			197			142			111			2,531			3,339
Debt payments (b) (c) (d)			1,166			780			584			622			614			6,382			10,148
Unrecorded Obligations: (e)
Interest on debt (f)			340			319			291			278			254			2,101			3,583
Non-cancelable operating lease obligations			74			69			54			40			37			370			644
Estimated unconditional purchase obligations (g)			138			121			110			45			41			399			854
Anticipated liquidity impact as of December 31, 2018		$	1,887		$	1,478		$	1,236		$	1,127		$	1,057		$	11,783		$	18,568

	(a)		Environmental liabilities include final capping, closure, post-closure and environmental remediation costs recorded in our Consolidated Balance Sheet as of December 31, 2018, 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)		These amounts represent the scheduled principal payments related to our long-term debt, excluding interest.

	(c)		Our debt obligations as of December 31, 2018 include $705 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, 2018, refer to Note 7 to the Consolidated Financial Statements.

	(d)		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)		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 10 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)		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, 2018. For debt balances outstanding under our commercial paper program, we have reflected limited interest amounts due to the short-term nature of the borrowings. For debt balances outstanding under our $2.75 billion revolving credit facility, we have reflected interest based on the current outstanding principal assuming the amount remains unchanged through maturity. As of December 31, 2018, we had $82 million of accrued interest related to our debt obligations.

	(g)		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. 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 10 to the Consolidated Financial Statements for discussion of the nature and terms of our unconditional purchase obligations.

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 capacity. 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 capacity 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 capacity associated with each final capping event is then quantified and the final capping costs for each event are amortized over the related capacity 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 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:

	·		Personnel are actively working on the expansion of an existing landfill, including efforts to obtain land use and local, state or provincial approvals;

	·		We have a legal right to use or obtain land to be included in the expansion plan;

	·		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

	·		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 and a review by the Audit Committee of our Board of Directors 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 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

We are subject 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:

	·		Management’s judgment and experience in remediating our own and unrelated parties’ sites;

	·		Information available from regulatory agencies as to costs of remediation;

	·		The number, financial resources and relative degree of responsibility of other PRPs who may be liable for remediation of a specific site; and

	·		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. 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.

Beginning in 2018, 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 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.

In December 2017, we elected to 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 18 to the Consolidated Financial Statements. Additionally, we are party to guarantee arrangements with unconsolidated entities as discussed in the Guarantees section of Note 10 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, 2018, nor are they expected to have a material impact on our future financial position, results of operations or liquidity.

New Accounting Standard Pending Adoption

Leases — In February 2016, the FASB issued ASU 2016‑02 associated with lease accounting. There have been 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. The amended guidance requires the recognition of lease assets and lease liabilities on the balance sheet for those leases with terms in excess of 12 months and currently classified as operating leases. Disclosure of key information about leasing arrangements will also be required. We elected the optional transition method which allows entities to continue to apply historical accounting guidance in the comparative periods presented in the year of adoption.

At transition, lessees and lessors may elect to apply a package of practical expedients permitting entities not to reassess: (i) whether any expired or existing contracts are or contain leases; (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. These practical expedients must be elected as a package and consistently applied. We have elected to apply the package of practical expedients upon adoption.

We identified our leases or other contracts impacted by the new standard and are currently in the process of (i) finalizing our implementation of a software solution to manage and account for leases under the new standard and (ii) updating our business processes and related policies, systems and controls to support recognition and disclosure under the new standard.

Upon adoption of the amended guidance, we expect to recognize right-of-use assets and related liabilities of approximately $300 million to $350 million for our contracts which contain an operating lease. We currently do not expect the amended guidance to have any other material impacts on our consolidated financial statements.

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, 2018, approximately 35% 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.