Waste Management Announces Third Quarter 2008 Earnings

October 30, 2008 at 7:32 AM EDT

Company Posts 16.7% Increase in Earnings Per Share

HOUSTON--(BUSINESS WIRE)--Oct. 30, 2008--Waste Management, Inc. (NYSE:WMI) today announced financial results for its third quarter ended September 30, 2008. Revenue for the third quarter of 2008 was $3.53 billion compared with $3.40 billion in the year ago period, an increase of 3.6%. Net income for the quarter was $310 million, or $0.63 per diluted share, compared with $278 million, or $0.54 per diluted share, in the prior year period, an increase of 16.7% in earnings per diluted share.

The Company noted several items that impacted the results in the 2007 and 2008 third quarters. Results in the third quarter of 2008 included an after-tax benefit of $0.03 per diluted share due to gains from the divestiture of operations offset by a decrease of $0.03 per diluted share related to the cost of a labor disruption in Milwaukee, including more than a $0.02 per diluted share charge related to the local bargaining unit agreeing to our proposal to withdraw the bargaining unit from the Teamsters' under-funded Central States pension fund.

Results in the third quarter of 2007 included a decrease of $0.03 per diluted share related to the cost of a labor disruption in Oakland offset by a $0.03 per diluted share benefit from income tax items.

Excluding those items, earnings would have been $312 million, or $0.63 per diluted share, in the third quarter of 2008 compared with $280 million, or $0.54 per diluted share, in the third quarter of 2007.(a)

Income from operations as a percent of revenue was 18.0% in the third quarter of 2008, a 60 basis point improvement compared with the third quarter of 2007, both periods adjusted for the items noted above.(a)

For the nine months ended September 30, 2008, Waste Management reported operating revenue of $10.28 billion, compared with $9.95 billion for the same period last year. Net income was $869 million, or $1.75 per diluted share, for the nine months ended September 30, 2008, compared with net income of $854 million, or $1.62 per diluted share, for the same period in 2007.

"We have delivered another solid financial performance, and accomplished our primary goals of earnings growth, operating margin expansion and strong free cash flow," said David P. Steiner, Chief Executive Officer of Waste Management. "Our financial performance continues to be driven by the success of our pricing and operational excellence programs. We are very happy with the 16.7% growth in adjusted earnings per share which demonstrates the strength of our business, even in a slowing economy.(a)

"Revenue grew by 3.6% during the third quarter of 2008. Internal revenue growth from yield on base business was 2.7%. Including the positive impact of higher recycling commodity prices and higher fuel surcharge revenue, internal revenue growth from yield was 6.5%. Internal revenue growth at our landfills was at the highest level since the third quarter of 2006 and internal revenue growth from yield in our municipal solid waste disposal line was at the highest level since 2005.

"Our operational excellence and pricing excellence programs continue to improve operating margins. Excluding a 40 basis point impact from higher diesel fuel prices, our as-adjusted income from operations as a percent of revenue increased to 18.4% in the third quarter of this year. This is a 100 basis point improvement when compared with the as-adjusted income from operations as a percent of revenue for the prior year period.(a) We also overcame the impact of a slowing economy and difficult credit markets during the third quarter of 2008, displaying the defensive nature of our business.

"The recycling commodity markets have become very volatile over the last two weeks. During 2008, we have benefited from high recycling commodity prices. We do not expect a year-over-year benefit in the fourth quarter. In fact, we currently estimate that our recycling line of business could negatively impact earnings per share by as much as $0.03 in the fourth quarter. We expect our solid waste business, with its recession resistant qualities and strong cash flows, to perform very well, just as it has all year."

    Key Highlights for the Third Quarter of 2008

    --  Internal revenue growth from yield on base business was 2.7%.
        Including the positive impact of higher recycling commodity
        prices and higher fuel surcharge revenue, internal revenue
        growth from yield was 6.5%.

    --  Internal revenue growth from volumes was a negative 3.2% due
        to our pricing excellence program and the economy.

    --  Acquisitions contributed 0.8% to higher revenue in the
        quarter, while divestitures caused a 0.7% decline in revenue
        in the quarter.

    --  Operating expenses were 63.0% of revenue in the third quarters
        of both 2007 and 2008. Excluding the impacts in 2008 of higher
        diesel fuel prices, higher recycling commodity prices on both
        operating expenses and revenue, and the impact of the
        Milwaukee labor disruption costs, operating expenses were
        61.1% of revenue in the third quarter of 2008, or a 120 basis
        point improvement compared with the prior year period as
        adjusted for the labor disruption costs in Oakland in 2007.(a)

    --  Depreciation and amortization expenses were 9.2% of revenue,
        down from 9.7% of revenue in the third quarter of 2007.

    --  Net cash provided by operating activities was $771 million.

    --  Free cash flow was $524 million, compared with $550 million in
        the prior year quarter.(a) Capital expenditures were $301
        million, or $61 million more than in the 2007 quarter.
        Proceeds from divestitures of businesses, net of cash
        divested, and from other sales of assets, were $54 million, or
        $35 million higher than the prior year quarter.

    --  We returned $142 million to shareholders through $133 million
        in dividend payments and $9 million in common stock
        repurchases.

(a) This earnings release contains a discussion of non-GAAP measures, as defined in Regulation G of the Securities Exchange Act of 1934, as amended. The Company reports its financial results in compliance with GAAP, but believes that also discussing non-GAAP measures provides investors with (i) additional, meaningful comparisons of current results to prior periods' results by excluding items that the Company does not believe reflect its fundamental business performance and (ii) financial measures the Company uses in the management of its business. GAAP measures that have been adjusted to exclude the impact of certain unusual, non-recurring or otherwise non-operational items include:

    --  Net income;

    --  Earnings per diluted share;

    --  Earnings per diluted share growth;

    --  Income from operations as a percent of revenue; and

    --  Operating expenses as a percent of revenue.

The Company also discusses free cash flow, which is a non-GAAP measure, because it believes that investors are interested in the cash produced by the Company from non-financing activities that is available for uses such as the Company's acquisitions, its share repurchase program, and the payment of dividends. However, free cash flow has material limitations, as it does not represent cash flow available for discretionary expenditures because it excludes certain expenditures that we have committed to such as debt service obligations. The Company defines free cash flow as:

    --  Net cash provided by operating activities

    --  Less, capital expenditures

    --  Plus, proceeds from divestitures of businesses, net of cash
        divested, and other sales of assets.

The Company's definition of free cash flow may not be comparable to similarly titled measures presented by other companies, and therefore not subject to comparison.

The quantitative reconciliations of the non-GAAP measures to the most comparable GAAP measures are included in the accompanying schedules. Investors are urged to take into account GAAP measures as well as non-GAAP measures in evaluating the Company.

The Company has scheduled an investor and analyst conference call for later this morning to discuss the results of today's earnings announcement. The information in this press release should be read in conjunction with the information on the conference call. The call will begin at 10:00 a.m. Eastern time and is open to the public. To listen to the conference call, which will be broadcast live over the Internet, go to the Waste Management Website at http://www.wm.com, and select "Earnings Webcast." You may also listen to the analyst conference call by telephone by contacting the conference call operator 5 to 10 minutes prior to the scheduled start time and asking for the "Waste Management Conference Call - Call ID 66401070." US/Canada Dial-In Number: (877) 710-6139. Int'l/Local Dial-In Number: (706) 643-7398. For those unable to listen to the live call, a replay will be available 24 hours a day beginning at approximately 1:00 p.m. Eastern time on October 30th through 5:00 p.m. Eastern time on November 13th. To hear a replay of the call over the Internet, access the Waste Management Website at http://www.wm.com. To hear a telephonic replay of the call, dial (800) 642-1687 or (706) 645-9291 and enter reservation code 66401070.

Waste Management, Inc., based in Houston, Texas, is the leading provider of comprehensive waste management services in North America. Through its subsidiaries, the Company provides collection, transfer, recycling and resource recovery, and disposal services. It is also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States. The Company's customers include residential, commercial, industrial, and municipal customers throughout North America.

The Company, from time to time, provides estimates of financial and other data, comments on expectations relating to future periods and makes statements of opinion, view or belief about current and future events. Statements relating to future events and performance are "forward-looking statements." The forward-looking statements that the Company makes are the Company's expectations, opinion, view or belief at the point in time of issuance but may change at some future point in time. By issuing estimates or making statements based on current expectations, opinions, views or beliefs, the Company has no obligation, and is not undertaking any obligation, to update such estimates or statements or to provide any other information relating to such estimates or statements. Outlined below are some of the risks that the Company faces and that could affect our financial statements for 2008 and beyond and that could cause actual results to be materially different from those that may be set forth in forward-looking statements made by the Company. However, they are not the only risks that the Company faces. There may be additional risks that we do not presently know or that we currently believe are immaterial which could also impair our business. We caution you not to place undue reliance on any forward-looking statements, which speak only as of their dates. The following are some of the risks that we face:

    --  competition may negatively affect our profitability or cash
        flows, our price increases may have negative effects on
        volumes, and price roll-backs and lower than average pricing
        to retain and attract customers may negatively affect our
        yield on base business;

    --  we may be unable to maintain or expand margins if we are
        unable to control costs or raise prices;

    --  we may not be able to successfully execute or continue our
        operational or other margin improvement plans and programs,
        including pricing increases, passing on increased costs to our
        customers, reducing costs due to our operational improvement
        programs, and divesting under-performing assets and purchasing
        accretive businesses, any of which could negatively affect our
        revenues and margins;

    --  weather conditions cause our quarter-to-quarter results to
        fluctuate, and harsh weather or natural disasters may cause us
        to temporarily shut down operations;

    --  continued volatility and further deterioration in the credit
        markets, inflation, higher interest rates and other general
        and local economic conditions may negatively affect the
        volumes of waste generated, our liquidity, our financing costs
        and other expenses;

    --  economic conditions may negatively affect parties with whom we
        do business, which could result in late payments or the
        uncollectability of receivables as well as the non-performance
        of certain agreements, including expected funding under our
        credit agreement, which could negatively impact our liquidity
        and results of operations;

    --  possible changes in our estimates of costs for site
        remediation requirements, final capping, closure and
        post-closure obligations, compliance and regulatory
        developments may increase our expenses;

    --  regulations may negatively impact our business by, among other
        things, restricting our operations, increasing costs of
        operations or requiring additional capital expenditures;

    --  climate change legislation, including possible limits on
        carbon emissions, may negatively impact our results of
        operations by increasing expenses related to tracking,
        measuring and reporting our greenhouse gas emissions and
        increasing operating costs and capital expenditures that may
        be required to comply with any such legislation;

    --  if we are unable to obtain and maintain permits needed to
        open, operate, and/or expand our facilities, our results of
        operations will be negatively impacted;

    --  limitations or bans on disposal or transportation of
        out-of-state, cross-border, or certain categories of waste, as
        well as mandates on the disposal of waste, can increase our
        expenses and reduce our revenue;

    --  fuel price increases or fuel supply shortages may increase our
        expenses or restrict our ability to operate;

    --  increased costs or the inability to obtain financial assurance
        or the inadequacy of our insurance coverages could negatively
        impact our liquidity and increase our liabilities;

    --  possible charges as a result of shut-down operations,
        uncompleted development or expansion projects or other events
        may negatively affect earnings;

    --  fluctuations in commodity prices may have negative effects on
        our operating results;

    --  trends requiring recycling, waste reduction at the source and
        prohibiting the disposal of certain types of waste could have
        negative effects on volumes of waste going to landfills and
        waste-to-energy facilities;

    --  efforts by labor unions to organize our employees may increase
        operating expenses and we may be unable to negotiate
        acceptable collective bargaining agreements with those who
        have chosen to be represented by unions, which could lead to
        labor disruptions, including strikes and lock-outs, which
        could adversely affect our results of operations and cash
        flows;

    --  negative outcomes of litigation or threatened litigation or
        governmental proceedings may increase our costs, limit our
        ability to conduct or expand our operations, or limit our
        ability to execute our business plans and strategies;

    --  problems with the operation of our current information
        technology or the development and deployment of new
        information systems could decrease our efficiencies, increase
        our costs, or lead to an impairment charge;

    --  the adoption of new accounting standards or interpretations
        may cause fluctuations in reported quarterly results of
        operations or adversely impact our reported results of
        operations; and

    --  we may reduce or permanently eliminate our dividend or share
        repurchase program, reduce capital spending and cease
        acquisitions if cash flows are less than we expect and we are
        not able to obtain capital needed to refinance our debt
        obligations, including near-term maturities, on acceptable
        terms.

Additional information regarding these and/or other factors that could materially affect results and the accuracy of the forward-looking statements contained herein may be found in Part I, Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

                        Waste Management, Inc.
           Condensed Consolidated Statements of Operations
               (In Millions, Except Per Share Amounts)
                             (Unaudited)


                                        Quarters Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------

Operating revenues                     $        3,525  $        3,403
                                       --------------- ---------------

Costs and expenses:
   Operating                                    2,221           2,143
   Selling, general and administrative            369             365
   Depreciation and amortization                  326             331
   Restructuring                                    -               -
   (Income) expense from divestitures,
    asset impairments and unusual
    items                                         (23)             (1)
                                       --------------- ---------------
                                                2,893           2,838
                                       --------------- ---------------
Income from operations                            632             565
                                       --------------- ---------------

Other income (expense):
   Interest expense                              (114)           (128)
   Interest income                                  5              10
   Equity in net earnings (losses) of
    unconsolidated entities                         -               1
   Minority interest                              (13)            (12)
   Other, net                                       1               -
                                       --------------- ---------------
                                                 (121)           (129)
                                       --------------- ---------------

Income before income taxes                        511             436
Provision for income taxes                        201             158
                                       --------------- ---------------
Net income                             $          310  $          278
                                       =============== ===============


Basic earnings per common share        $         0.63  $         0.54
                                       =============== ===============

Diluted earnings per common share      $         0.63  $         0.54
                                       =============== ===============

Basic common shares outstanding                 490.8           515.9
                                       =============== ===============

Diluted common shares outstanding               494.1           520.1
                                       =============== ===============

Cash dividends declared per common
 share                                 $         0.27  $         0.24
                                       =============== ===============

                        Waste Management, Inc.
                          Earnings Per Share
                (In Millions, Except Per Share Amounts)
                              (Unaudited)


                                        Quarters Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------

EPS Calculation:

Net income                             $           310 $           278
                                       =============== ===============



Number of common shares outstanding at
 end of period                                   490.6           509.8
   Effect of using weighted average
    common shares outstanding                      0.2             6.1
                                       --------------- ---------------
Weighted average basic common shares
 outstanding                                     490.8           515.9
   Dilutive effect of equity-based
    compensation awards, warrants and
    other contingently issuable shares             3.3             4.2
                                       --------------- ---------------
Weighted average diluted common shares
 outstanding                                     494.1           520.1
                                       =============== ===============



Basic earnings per common share        $          0.63 $          0.54
                                       =============== ===============

Diluted earnings per common share      $          0.63 $          0.54
                                       =============== ===============

                        Waste Management, Inc.
           Condensed Consolidated Statements of Operations
               (In Millions, Except Per Share Amounts)
                             (Unaudited)


                                       Nine Months Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------

Operating revenues                     $       10,280  $        9,949
                                       --------------- ---------------

Costs and expenses:
   Operating                                    6,494           6,269
   Selling, general and administrative          1,095           1,061
   Depreciation and amortization                  941             963
   Restructuring                                    -              10
   (Income) expense from divestitures,
    asset impairments and unusual
    items                                         (25)            (33)
                                       --------------- ---------------
                                                8,505           8,270
                                       --------------- ---------------
Income from operations                          1,775           1,679
                                       --------------- ---------------

Other income (expense):
   Interest expense                              (341)           (395)
   Interest income                                 14              39
   Equity in net earnings (losses) of
    unconsolidated entities                        (4)            (45)
   Minority interest                              (33)            (33)
   Other, net                                       2               2
                                       --------------- ---------------
                                                 (362)           (432)
                                       --------------- ---------------

Income before income taxes                      1,413           1,247
Provision for income taxes                        544             393
                                       --------------- ---------------
Net income                             $          869  $          854
                                       =============== ===============


Basic earnings per common share        $         1.76  $         1.64
                                       =============== ===============

Diluted earnings per common share      $         1.75  $         1.62
                                       =============== ===============

Basic common shares outstanding                 492.5           521.4
                                       =============== ===============

Diluted common shares outstanding               495.8           526.0
                                       =============== ===============

Cash dividends declared per common
 share                                 $         0.81  $         0.72
                                       =============== ===============

                        Waste Management, Inc.
                          Earnings Per Share
                (In Millions, Except Per Share Amounts)
                              (Unaudited)


                                       Nine Months Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------

EPS Calculation:

Net income                             $           869 $           854
                                       =============== ===============



Number of common shares outstanding at
 end of period                                   490.6           509.8
   Effect of using weighted average
    common shares outstanding                      1.9            11.6
                                       --------------- ---------------
Weighted average basic common shares
 outstanding                                     492.5           521.4
   Dilutive effect of equity-based
    compensation awards, warrants and
    other contingently issuable shares             3.3             4.6
                                       --------------- ---------------
Weighted average diluted common shares
 outstanding                                     495.8           526.0
                                       =============== ===============



Basic earnings per common share        $          1.76 $          1.64
                                       =============== ===============

Diluted earnings per common share      $          1.75 $          1.62
                                       =============== ===============

                        Waste Management, Inc.
                 Condensed Consolidated Balance Sheets
                             (In Millions)



                                        September 30,   December 31,
                                            2008            2007
                                       --------------- ---------------
                                         (Unaudited)
Assets

Current assets:
  Cash and cash equivalents            $           504 $           348
  Receivables, net                               1,816           1,892
  Other                                            273             240
                                       --------------- ---------------
    Total current assets                         2,593           2,480

Property and equipment, net                     11,291          11,351
Goodwill                                         5,493           5,406
Other intangible assets, net                       147             124
Other assets                                       819             814
                                       --------------- ---------------
    Total assets                       $        20,343 $        20,175
                                       =============== ===============


Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable, accrued
   liabilities, and deferred revenues  $         2,190 $         2,269
  Current portion of long-term debt                816             329
                                       --------------- ---------------
    Total current liabilities                    3,006           2,598

Long-term debt, less current portion             7,613           8,008
Other liabilities                                3,524           3,467
                                       --------------- ---------------
    Total liabilities                           14,143          14,073

Minority interest in subsidiaries and
 variable interest entities                        304             310
Stockholders' equity                             5,896           5,792
                                       --------------- ---------------
    Total liabilities and
     stockholders' equity              $        20,343 $        20,175
                                       =============== ===============

                        Waste Management, Inc.
           Condensed Consolidated Statements of Cash Flows
                            (In Millions)
                             (Unaudited)


                                       Nine Months Ended September 30,
                                       -------------------------------
                                            2008            2007
                                       --------------- ---------------

Cash flows from operating activities:
  Net income                           $          869  $          854
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Depreciation and amortization                 941             963
    Other                                          92              64
    Change in operating assets and
     liabilities, net of effects of
     acquisitions and divestitures                  -             (35)
                                       --------------- ---------------
Net cash provided by operating
 activities                                     1,902           1,846
                                       --------------- ---------------

Cash flows from investing activities:
  Acquisitions of businesses, net of
   cash acquired                                 (230)            (86)
  Capital expenditures                           (787)           (721)
  Proceeds from divestitures of
   businesses (net of cash divested)
   and other sales of assets                       92             235
  Purchases of short-term investments               -          (1,221)
  Proceeds from sales of short-term
   investments                                      -           1,288
  Net receipts from restricted trust
   and escrow accounts, and other                 149              98
                                       --------------- ---------------
Net cash used in investing activities            (776)           (407)
                                       --------------- ---------------

Cash flows from financing activities:
  New borrowings                                1,091             439
  Debt repayments                              (1,206)           (658)
  Common stock repurchases                       (410)         (1,059)
  Cash dividends                                 (399)           (374)
  Exercise of common stock options and
   warrants                                        36             137
  Other, net                                      (82)             (4)
                                       --------------- ---------------
Net cash used in financing activities            (970)         (1,519)
                                       --------------- ---------------

Effect of exchange rate changes on
 cash and cash equivalents                          -               3
                                       --------------- ---------------

Increase (decrease) in cash and cash
 equivalents                                      156             (77)
Cash and cash equivalents at beginning
 of period                                        348             614
                                       --------------- ---------------
Cash and cash equivalents at end of
 period                                $          504  $          537
                                       =============== ===============

                        Waste Management, Inc.
                          Summary Data Sheet
                     (Dollar Amounts in Millions)
                             (Unaudited)


                                     Quarters Ended
                          ------------------------------------
                          September 30, June 30, September 30,
                              2008        2008       2007
                          ------------- -------- -------------
Operating Revenues by
 Lines of Business
-------------------------

  Collection                    $2,233   $2,237        $2,210
  Landfill                         787      786           789
  Transfer                         417      424           426
  Wheelabrator                     245      225           222
  Recycling                        344      324           294
  Other                             55       56            45
  Intercompany (a)                (556)    (563)         (583)
                          ------------- -------- -------------
    Operating revenues          $3,525   $3,489        $3,403
                          ============= ======== =============

Internal Growth of
 Operating Revenues from
 Comparable Prior Periods
-------------------------

  Internal growth                  3.5%     3.2%          0.5%
  Less: Yield changes due
   to recycling
   commodities,
   electricity (IPP),
   fuel surcharge and
   mandated fees                   4.0%     3.9%          2.2%
                          ------------- -------- -------------
    Adjusted internal
     growth                       -0.5%    -0.7%         -1.7%
                          ============= ======== =============

Acquisition Summary (b)
-------------------------

  Gross annualized
   revenue acquired             $   94   $   39        $   39
                          ============= ======== =============

  Total consideration           $  109   $   60        $   44
                          ============= ======== =============

  Cash paid for
   acquisitions                 $  100   $   55        $   38
                          ============= ======== =============

WMRA Segment Supplemental
 Data (c)
-------------------------

  Operating revenues            $  292   $  270        $  243
                          ============= ======== =============

  Operating expenses            $  247   $  226        $  207
                          ============= ======== =============


                              Quarters Ended       Nine Months Ended
                              September 30,          September 30,
                          ---------------------- ---------------------
                              2008        2007       2008       2007
                          ------------- -------- ------------- -------
Free Cash Flow Analysis
 (d)
-------------------------

Net cash provided by
 operating activities           $  771   $  771        $1,902  $1,846
Capital expenditures              (301)    (240)         (787)   (721)
Proceeds from
 divestitures of
 businesses (net of cash
 divested) and other
 sales of assets                    54       19            92     235
                          ------------- -------- ------------- -------
Free cash flow                  $  524   $  550        $1,207  $1,360
                          ============= ======== ============= =======

(a) Intercompany revenues between lines of business are eliminated
     within the Condensed Consolidated Financial Statements included
     herein.

(b) Represents amounts associated with business acquisitions
     consummated during the indicated periods.

(c) Information provided is after the elimination of intercompany
     revenues and related expenses.

(d) The summary of free cash flows has been prepared to highlight and
     facilitate understanding of the principal cash flow elements.
     Free cash flow is not a measure of financial performance under
     generally accepted accounting principles and is not intended to
     replace the consolidated statement of cash flows that was
     prepared in accordance with generally accepted accounting
     principles.

                        Waste Management, Inc.
                          Summary Data Sheet
                     (Dollar Amounts in Millions)
                             (Unaudited)


                                          Quarters Ended
                             -----------------------------------------
                             September 30,   June 30,    September 30,
                                 2008          2008          2007
                             ------------- ------------- -------------
Balance Sheet Data
----------------------------

Cash, cash equivalents and
 short-term investments
 available for use (a)       $        504  $        210  $        654
                             ============= ============= =============

Debt-to-total capital ratio:

   Long-term indebtedness,
    including current
    portion                  $      8,429  $      8,393  $      8,278
   Total equity                     5,896         5,722         5,932
                             ------------- ------------- -------------
     Total capital           $     14,325  $     14,115  $     14,210
                             ============= ============= =============

   Debt-to-total capital             58.8%         59.5%         58.3%
                             ============= ============= =============

Capitalized interest         $          5  $          4  $          6
                             ============= ============= =============


Other Operational Data
----------------------------

Internalization of waste,
 based on disposal costs             67.5%         67.6%         66.5%
                             ============= ============= =============

Total landfill disposal
 volumes (tons in millions)          28.5          28.4          29.5
Total waste-to-energy
 disposal volumes (tons in
 millions)                            1.8           1.7           1.7
                             ------------- ------------- -------------
   Total disposal volumes
    (tons in millions)               30.3          30.1          31.2
                             ============= ============= =============

Active landfills                      277           279           279
                             ============= ============= =============

Landfills reporting volume            262           262           261
                             ============= ============= =============



Amortization and SFAS No.
 143 Expenses for Landfills
 Included in Operating
 Groups
----------------------------
Non - SFAS No. 143
 amortization expense        $       99.9  $      101.1  $      102.1
Amortization expense related
 to SFAS No. 143 obligations         22.5          13.5          21.1
                             ------------- ------------- -------------
  Total amortization expense
   (b)                              122.4         114.6         123.2
Accretion and other related
 expense                             16.2          16.1          15.8
                             ------------- ------------- -------------
  Landfill amortization,
   accretion and other
   related expense           $      138.6  $      130.7  $      139.0
                             ============= ============= =============

(a) The quarters ended September 30, 2008, June 30, 2008, and
     September 30, 2007 include short-term investments available for
     use of $0 million, $0 million, and $117 million, respectively.

(b) The quarter ended September 30, 2008, as compared with the quarter
     ended June 30, 2008 reflects a $7.8 million increase in
     amortization expense, of which $7.2 million is due to a charge to
     landfill amortization expense for revisions in estimates of
     closure and post-closure cost estimates. The quarter ended
     September 30, 2008, as compared with the quarter ended September
     30, 2007 reflects a $0.8 million decline in amortization expense,
     as the $7.2 million amortization charge discussed above was
     offset by the impacts of reduced landfill amortization expense
     primarily due to lower volumes.

                        Waste Management, Inc.
             Reconciliation of Certain Non-GAAP Measures
           (Dollars In Millions, Except Per Share Amounts)
                             (Unaudited)

                          Quarter Ended            Quarter Ended
                        September 30, 2008       September 30, 2007
                     ------------------------ ------------------------
Adjusted Net income
 and Diluted          After-tax    Per Share   After-tax   Per Share
 Earnings Per Share     Amount      Amount      Amount       Amount
                     ------------------------ ------------------------

Net income and
 Diluted EPS, as
 reported            $       310  $     0.63  $      278  $      0.54

Adjustments to Net
 income and Diluted
 EPS:
  Tax items                    -           -         (14)       (0.03)
  (Income) expense
   from
   divestitures,
   asset impairments
   and unusual items         (14)      (0.03)          -            -
  Labor disruptions           16        0.03          16         0.03
                     ------------ ----------- ----------- ------------

Net income and
 Diluted EPS, as
 adjusted (a)        $       312  $     0.63  $      280  $      0.54
                     ============ =========== =========== ============


                          Quarters Ended
                          September 30,
                     ------------------------
Adjusted Income from
 Operations as a
 percent of Revenues     2008        2007
                     ------------ -----------

As reported:
  Operating revenues $     3,525  $    3,403
  Income from
   operations        $       632  $      565

Income from
 Operations as a
 percent of Revenues        17.9%       16.6%

Adjustments to
 Operating Revenues:
  (Income) expense
   from
   divestitures,
   asset impairments
   and unusual items $         -  $        -
  Labor disruptions  $         -  $        1

Adjustments to
 Income from
 Operations:
  (Income) expense
   from
   divestitures,
   asset impairments
   and unusual items $       (23) $        -
  Labor disruptions  $        26  $       26

As adjusted:
  Operating revenues $     3,525  $    3,404
  Income from
   operations        $       635  $      591

Adjusted Income from
 Operations as a
 percent of Revenues
 (b)                        18.0%       17.4%

Additional
 Adjustment for Fuel
 Impact:
  Operating revenues $       (83) $        -
  Income from
   operations        $         -  $        -

As further adjusted:
  Operating revenues $     3,442  $    3,404
  Income from
   operations        $       635  $      591

Further Adjusted
 Income from
 Operations as a
 percent of Revenues
 (c)                        18.4%       17.4%

(a) Increase in Diluted EPS, as adjusted, of 16.7%.
(b) Increase in Income from Operations as a percent of revenues, as
     adjusted, of 60 basis points.
(c) Increase in Income from Operations as a percent of revenues, as
     adjusted for fuel impact, of 100 basis points.
                        Waste Management, Inc.
             Reconciliation of Certain Non-GAAP Measures
                        (Dollars In Millions)
                             (Unaudited)


                                        Quarters Ended September 30,
                                       -------------------------------
Impacts of Labor Disruption Costs,
 Rising Diesel Fuel Prices, and Higher
 Recycling Commodity Prices on
 Operating Expenses as a percent of
 Revenues                                   2008            2007
                                       --------------- ---------------

Adjusted Operating Expenses as a
 percent of Revenues

As reported:
  Operating revenues                   $        3,525  $        3,403
  Operating expenses                   $        2,221  $        2,143

Operating Expenses as a percent of
 Revenues                                        63.0%           63.0%

Adjustment for Labor Disruption Costs:
  Operating Revenues                   $            -  $            1
  Operating Expenses                   $          (26) $          (24)

As adjusted:
  Operating revenues                   $        3,525  $        3,404
  Operating expenses                   $        2,195  $        2,119

Adjusted Operating Expenses as a
 percent of Revenues                             62.3%           62.3%

Additional adjustments:
  Adjustments to Operating Revenues:
    Fuel surcharges (a)                $          (83) $            -
    Recycling commodity prices (b)     $          (51) $            -

  Adjustments to Operating Expenses:
    Fuel (c)                           $          (83) $            -
    Cost of goods sold due to
     recycling commodity prices (d)    $          (39) $            -

As further adjusted:
  Operating revenues                   $        3,391  $        3,404
  Operating expenses                   $        2,073  $        2,119

Further Adjusted Operating Expenses as
 a percent of Revenues (e)                       61.1%           62.3%

(a)  Increase in fuel surcharge revenue due to higher diesel fuel
      prices. Excludes changes in fuel surcharge revenue caused by
      volume fluctuations.

(b)  Increase in revenues due to increase in recycling commodity
      prices. Excludes changes in recycling commodity revenues caused
      by volume fluctuations.

(c)  Increase in fuel costs due to higher diesel fuel prices. Excludes
      changes in fuel costs caused by volume fluctuations.

(d)  Increase in cost of goods sold due to increase in recycling
      commodity prices. Excludes changes in cost of goods sold caused
      by recycling commodity volume fluctuations.

(e)  Increase in Operating Expenses as a percent of revenues, as
      adjusted for fuel, recycling commodity prices, and cost of labor
      disruptions of 120 basis points.


    CONTACT: Waste Management, Inc.
             Jim Alderson, 713-394-2281 (Analysts)
             Lynn Brown, 713-394-5093 (Media)
             http://www.wm.com

    SOURCE: Waste Management, Inc.