Waste Management 2012 Annual Report Download

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2012 ANNUAL REPORT
We
Are All
About Solutions
KNOWING
CUSTOMERS
BETTER
POWERING
MORE
COMMUNITIES
MAKING
CITIES
GREENER
FLEET
WITH A CLEANER
CLEARING
THE AIR

Table of contents

  • Page 1
    We BETTER CuStoMeRS KnoWInG Are All GREENER CItIeS MAKInG About Solutions MoRe CoMMunItIeS poWeRInG CleARInG tHe AIR WItH A CleAneR Flee t 2012 AnnuAl RepoRt

  • Page 2
    ..., industrial and municipal customers through a network of 390 collection operations, 310 transfer stations, 269 landfill disposal sites, 17 waste-to-energy plants, 114 recycling facilities, 36 organic processing facilities and 137 landfill-gas-to-energy projects. To learn more about Waste Management...

  • Page 3
    ... At Waste Management, we are embracing the challenge of "zero waste" because our industry is changing and our customers' waste has great potential value. We are in the forefront of developing and implementing new ways to handle and extract value from waste. We also remain committed to our day-to-day...

  • Page 4
    ... rates by waste type, and provides documentation to support leeD certification. We continue to develop our Sustainability Services suite of solutions for national accounts customers. During the year, we continued to integrate the operations of oakleaf Global Holdings, which we acquired in 2011...

  • Page 5
    ...form of waste can have new life as a fuel or a feedstock for new materials. Waste Management continues to invest in and develop technologies and processes to extract value from the broad range of materials that our customers rely on us to handle, from cardboard, glass and plastic to food, industrial...

  • Page 6
    ...is organic. Waste Management uses proven technologies such as composting to process organic wastes, and is pioneering ways to further process organic material into higher-value materials. We operate 36 organics processing facilities. Working with our customers and partners, we are developing ways to...

  • Page 7
    StAteMent AnD pRoxy FORM 10-K

  • Page 8
    ... Center Waste Management, Inc. 1021 Main Street Houston, Texas 77002 Purpose: • To elect eight directors; • To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013; • To approve our executive compensation...

  • Page 9
    ...Board of Directors Governing Documents ...Non-Employee Director Compensation ...Election of Directors (Item 1 on the Proxy Card) ...Director and Officer Stock Ownership ...Security Ownership of Certain Beneficial Owners ...Section 16(a) Beneficial Ownership Reporting Compliance ...Executive Officers...

  • Page 10
    ... the website referred to in the Notice or request that a printed set of the proxy materials be sent to them. Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the costs of the annual meeting, and conserve natural resources. Record Date Quorum Shares...

  • Page 11
    ...if you hold shares in street name, bring your bank or broker statement showing your beneficial ownership of Waste Management stock in order to be admitted to the meeting. If you are planning to attend our annual meeting and require directions to the meeting, please contact our Corporate Secretary at...

  • Page 12
    ... to the use of the mail, proxies may be solicited personally, by Internet or telephone, or by Waste Management officers and employees without additional compensation. We pay all costs of solicitation, including certain expenses of brokers and nominees who mail proxy materials to their customers or...

  • Page 13
    ...to increased regulation under federal securities laws, national stock exchange rules and other federal and state regulatory changes. More recently, on-going market challenges and economic conditions have increased the demands made on boards of directors. The Non-Executive Chairman's responsibilities...

  • Page 14
    ... meetings, our President and Chief Executive Officer; Chief Financial Officer; and General Counsel are asked to report to the Board and, when appropriate, specific committees. Additionally, other members of management and employees are requested to attend meetings and present information, including...

  • Page 15
    ... the Company's subsidiaries purchasing goods and services in the ordinary course of business. The categorical standards our Board uses in determining independence are included in our Corporate Governance Guidelines, which can be found on our website. The Board has determined that each non-employee...

  • Page 16
    ... of internal controls over financial reporting; and • Review executive officer certifications related to our reports and filings. Audit Committee Report The role of the Audit Committee is, among other things, to oversee the Company's financial reporting process on behalf of the Board of...

  • Page 17
    ... Company's financial statements be included in its annual report: • First, the Audit Committee discussed with Ernst & Young, the Company's independent registered public accounting firm for fiscal year 2012, those matters required to be discussed by Public Company Accounting Oversight Board (United...

  • Page 18
    ... responsibilities: • Review and establish policies governing the compensation and benefits of all of our executives; • Approve the compensation of our senior management and set the bonus plan goals for those individuals; • Conduct an annual evaluation of our Chief Executive Officer by all...

  • Page 19
    ... MD&C Committee. No member of the MD&C Committee was an officer or employee of Waste Management during 2012; no member of the MD&C Committee is a former officer of the Company; and during 2012, none of our executive officers served as a member of a board of directors or compensation committee of any...

  • Page 20
    ...the Nominating and Governance Committee, Waste Management, Inc., 1001 Fannin Street, Suite 4000, Houston, Texas 77002, between October 29, 2013 and November 28, 2013. Related Party Transactions The Board of Directors has adopted a written Related Party Transactions Policy for the review and approval...

  • Page 21
    ... Nominating and Governance Committee, and our Code of Conduct free of charge by contacting the Corporate Secretary, c/o Waste Management, Inc., 1001 Fannin Street, Suite 4000, Houston, Texas 77002 or by accessing the "Corporate Governance" section of the "Investor Relations" page on our website at...

  • Page 22
    ... table above presents total compensation to non-employee directors for two years of Board service. (2) Amounts in this column represent the grant date fair value of stock awards granted in 2012, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. 13

  • Page 23
    ... knowledge of management and operations of large public companies, including experience implementing customer focused strategies. He also has over 16 years of experience as a member of a public company board of directors. Mr. Clark served in executive positions at a large public utility company for...

  • Page 24
    ..., Inc., a global business and information technology firm, where he was principal executive officer for over 30 years. As a result, he has extensive experience in applying information technology and advanced data analytics in global companies. His background, education and board service also provide...

  • Page 25
    ... range of business functions. Mr. Reum also brings over 20 years of experience as a director on public company boards of directors. David P. Steiner, 52 Chief Executive Officer and Director since 2004; President since June 2010 Executive Vice President and Chief Financial Officer from April 2003...

  • Page 26
    ... page 39 of this Proxy Statement. The Stock Ownership Table below shows the number of shares of Common Stock each director nominee and each executive officer named in the Summary Compensation Table on page 41 beneficially owned as of March 13, 2013, our record date for the annual meeting, as well as...

  • Page 27
    (3) Executive officers may choose a Waste Management stock fund as an investment option under the Company's 409A Deferral Savings Plan described in the Nonqualified Deferred Compensation table on page 48. Interests in the fund are considered phantom stock because they are equal in value to shares of...

  • Page 28
    ... OWNERSHIP REPORTING COMPLIANCE The federal securities laws require our executive officers and directors to file reports of their holdings and transactions in our Common Stock with the SEC and the New York Stock Exchange. Based on a review of the forms and written representations from our executive...

  • Page 29
    ... and Marketing from January 2005 to June 2011. • Chief Information Officer and Senior Vice President, Technology, Logistics and Customer Service since August 2012. • Senior Vice President and Chief Information Officer from December 2009 to August 2012. • Senior Vice President - Global Product...

  • Page 30
    ... Senior Manager of Financial Reporting from July 2007 to June 2010. • Senior Vice President - Human Resources since May 2012. • Vice President and Assistant General Counsel - Labor and Employment from December 2000 to May 2012. • Executive Vice President and Chief Operating Officer since July...

  • Page 31
    ... geographic operating Groups; consolidation and reduction of the number of Areas managing the core collection, disposal and recycling businesses from 22 to 17; and reduction of corporate support staff in an effort to better align support with the needs of the operating units. Voluntary separation...

  • Page 32
    ...to support our dividend, debt reduction, share repurchases, and appropriate acquisition and investment opportunities. In line with the Company's financial results, the following is a summary of the 2012 compensation program results: • the Company did not grant annual merit increases to base salary...

  • Page 33
    ... to encourage executives to embrace the change necessary to achieve the Company's goals and to lead the Company in setting aspirations that will drive a change in Company-wide culture. With respect to our named executive officers, the MD&C Committee believes that total direct compensation at target...

  • Page 34
    .... Stock options have a term of ten years. Unvested options are generally forfeited if the executive voluntarily terminates employment. Vested options may be exercised up to 90 days following voluntary termination. Restricted Stock Units Used on a limited basis (e.g. promotion and new hire) to make...

  • Page 35
    ..., retirement plan documents and employment agreements. We enter into employment agreements with our named executive officers because they encourage continuity of our leadership team, which is particularly valuable as leadership manages the Company through the change needed to successfully implement...

  • Page 36
    ...approving the Company's compensation philosophy, policies, plans and programs for our named executive officers. In the performance of its duties, the MD&C Committee regularly reviews the total compensation, including the base salary, target annual bonus award opportunities, long-term incentive award...

  • Page 37
    ...of total direct compensation levels and compensation mixes for our executive officers during the second half of 2011, using information from: • Size-adjusted median compensation data from two general industry surveys in which management annually participates; the Aon Hewitt 2011 Total Compensation...

  • Page 38
    ...&C Committee each year. The selection process for the comparison group begins with all companies in the Standard & Poor's North American database that are publicly traded U.S. companies in 16 different Global Industry Classifications. These industry classifications are meant to provide a collection...

  • Page 39
    ... the allocation of total 2012 compensation among base salary, annual cash incentive at target and long-term incentives at target for (a) our President and Chief Executive Officer and (b) for our other named executives who are still with the Company, on average. (The chart below takes account of Mr...

  • Page 40
    ... executive officers to drive results while avoiding unnecessary or excessive risk taking that could harm the long-term value of the Company. During 2012, the MD&C Committee reviewed the Company's assessment of risk created by the Company's compensation policies and practices, which was conducted...

  • Page 41
    ..., former Senior Vice President, Customer Experience, departed the Company effective August 31, 2012. Ms. Cowan was entitled to certain payments, compensation and benefits set forth in her employment agreement; additionally, in connection with the execution of a release and undertaking of certain...

  • Page 42
    ... Executives' 2012 Compensation Program and Results Base Salary The Company did not grant base salary increases to named executives in 2012 except in the case of Mr. Fish upon his promotion. Management decided the Company would forego base salary increases in 2012 to support the Company's cost saving...

  • Page 43
    ... of 2012 before he was promoted to his current corporate-level position.) We believe using fieldbased results is appropriate in some cases because it ties our field-based named executive officers' compensation directly to the success or failure of operations that receive their primary attention...

  • Page 44
    ... (i) restructuring undertaken as part of our cost savings programs; (ii) certain asset impairments and related charges; (iii) charges related to integration of the acquired Oakleaf business; (iv) a credit for CNG/LNG fuel; and (v) labor disruption costs. The calculation of field-based performance on...

  • Page 45
    ... named executive officers annually to align compensation with the achievement of our long-term financial goals and to build stock ownership. Performance share units provide an immediate retention value to the Company because there is unvested potential value at the date of grant. The number of PSUs...

  • Page 46
    ... our named executive officers to ensure the strategic direction of the Company is being followed and forces them to balance the short-term incentives awarded for growth with the long-term incentives awarded for value generated. ROIC in our plan is defined generally as net operating profit after...

  • Page 47
    ...) changes in ten-year Treasury rates, which are used to discount remediation reserves; (iii) withdrawal from underfunded multiemployer pension plans and labor disruption costs; (iv) charges related to the acquisition and integration of the acquired Oakleaf business; and (v) benefits from investments...

  • Page 48
    ... Executive Officer was increased from 165,000 shares to 225,500 shares, which is approximately six times base salary. The stock ownership guidelines vary depending on the individual's title and are expressed as a fixed number of shares. Shares owned outright, deferred stock units, stock equivalents...

  • Page 49
    ...the Company may not enter into new severance arrangements with its executive officers, as defined in the federal securities laws, that provide for benefits, less the value of vested equity awards and benefits provided to employees generally, in an amount that exceeds 2.99 times the executive officer...

  • Page 50
    ... Stock Awards ($)(1) Option Awards ($)(2) Non-Equity Incentive Plan All Other Compensation Compensation ($)(3) ($)(4) Name and Principal Position Year Salary ($) Bonus ($) Total ($) David P. Steiner ...2012 1,127,500 President and Chief Executive 2011 1,120,625 Officer 2010 1,073,077 James...

  • Page 51
    ... Topic 718. The grant date fair value of the options was estimated using the BlackScholes option pricing model. The assumptions made in determining the grant date fair values of options are disclosed in Note 16 in the Notes to the Consolidated Financial Statements in our 2012 Annual Report on Form...

  • Page 52
    ... for business use; therefore, we do not include the fixed costs associated with the ownership or operation such as pilots' salaries, purchase costs and non-trip related maintenance. (b) The Company provided Mr. Fish with temporary rental housing in Houston following his promotion. The Company also...

  • Page 53
    ... from the Company. Please see "Compensation Discussion and Analysis - Named Executive's 2012 Compensation Program and Results - Annual Cash Bonus" for additional information about these awards, including performance criteria. (2) Represents the number of shares of Common Stock potentially issuable...

  • Page 54
    ...Represents the number of shares of Common Stock potentially issuable upon the exercise of options granted under our 2009 Stock Incentive Plan. Please see "Compensation Discussion and Analysis - Named Executive's 2012 Compensation Program and Results - Long-Term Equity Incentives - Stock Options" for...

  • Page 55
    ...Number of Securities Underlying Unexercised Options Exercisable (#)(2) Number of Securities Underlying Unexercised Options Unexercisable (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#)(10) Market Value of Shares or Units of Stock...

  • Page 56
    ... vesting of such performance share units was performed by the MD&C Committee in February 2013. Following such determination, shares of the Company's Common Stock earned under this award were issued on February 14, 2013. The following number of performance share units have a performance period ending...

  • Page 57
    ... our named executive officers because they encourage continuity of our leadership team, which is particularly valuable as leadership manages the Company through the change needed to successfully implement our transformational business strategy. Employment agreements also provide a form of protection...

  • Page 58
    ...of the employee's termination of employment. The terms "Cause," "Good Reason," and "Change-in-Control" as used in the table below are defined in the executives' employment agreements and/or the applicable equity award agreement and have the meanings generally described below. You should refer to the...

  • Page 59
    ... away. "Change-in-Control" generally means that: • at least 25% of the Company's Common Stock has been acquired by one person or persons acting as a group; • the majority of the Board of Directors consists of individuals other than those serving as of the date of the named executive's employment...

  • Page 60
    ... by the Company or For Good Reason by the Employee Six Months Prior to or Two Years Following a Change-in-Control (Double Trigger) Severance Benefits • Three times base salary plus target annual cash bonus, paid in lump sum(1) ...• Continued coverage under health and welfare benefit plans for...

  • Page 61
    ... share units (contingent on actual performance at end of performance period) ...447,190 Total ...2,473,814 Termination Without Cause by the Company or For Good Reason by the Employee Six Months Prior to or Two Years Following a Change-inControl (Double Trigger) Severance Benefits • Two times...

  • Page 62
    ... restricted stock units ...Total ... 1,850,000 22,080 259,359 19,974 2,151,413 Termination Without Cause by the Company or For Good Reason by the Employee Six Months Prior to or Two Years Following a Change-inControl (Double Trigger) Severance Benefits • Two times base salary plus target annual...

  • Page 63
    ... vesting of restricted stock units ...10,459 Total ...2,302,247 Termination Without Cause by the Company or For Good Reason by the Employee Six Months Prior to or Two Years Following a Change-in-Control (Double Trigger) Severance Benefits • Three times base salary plus target annual cash bonus...

  • Page 64
    ...restricted stock units ...238,238 • Prorated maximum annual cash bonus ...729,252 • Gross-up payment for any excise taxes(1) ...1,130,396 Total ...5,327,364 Termination Without Cause by the Company or For Good Reason by the Employee Six Months Prior to or Two Years Following a Change-in-Control...

  • Page 65
    ... to his employment agreement, his separation agreement and the Company's VERP Cash severance payable in lump sum ...Cash severance payable over two years ...Payment in lieu of benefits, payable in lump sum ...Separation bonus payable on or about March 13, 2013 ...Value of group health and dental...

  • Page 66
    ...Employee Plan. No awards under the Broad-Based Plan are held by, or may be granted to, any of our directors or executive officers. The Broad-Based Plan allows for the granting of equity awards on such terms and conditions as the MD&C Committee may decide; provided that, the exercise price of options...

  • Page 67
    ...: 2012 2011 (In millions) Audit Fees ...Audit-Related Fees ...Tax Fees ...All Other Fees ...Total ... $ 6.0 1.1 - - $ 7.1 $ 5.3 1.6 - - $ 6.9 Audit includes fees for the annual audit, reviews of the Company's Quarterly Reports on Form 10-Q, work performed to support the Company's debt issuances...

  • Page 68
    ... recent employment agreements, as well as a general clawback policy designed to recoup compensation in certain cases when cause and/or misconduct are found; • our executive officer severance policy implemented a limitation on the amount of benefits the Company may provide to its executive officers...

  • Page 69
    ...the affirmative vote of a majority of the shares present at the meeting, in person or represented by proxy, and entitled to vote. Because the vote is advisory, it will not be binding upon the Board or the MD&C Committee and neither the Board nor the MD&C Committee will be required to take any action...

  • Page 70
    ...of shares acquired through equity pay programs until reaching normal retirement age. For the purpose of this policy, normal retirement age shall be defined by the Company's qualified retirement plan that has the largest number of plan participants. The shareholders recommend that the committee adopt...

  • Page 71
    ...retention after termination of an executive's employment contributes to the long-term value of the Company. We also note that the proponent's proposal makes reference to the number of options issued to our Chief Executive Officer last year; however, such options vest over time and then must later be...

  • Page 72
    ... If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the meeting, in person or represented by proxy, and entitled to vote. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST THE ADOPTION OF THIS PROPOSAL. 63

  • Page 73
    ...(s) of the person(s) in the Company responsible decision-making. 2. The report shall be represented to the board of directors or relevant board committee and posted on the Company's website. Stockholder Supporting Statement As long-term shareholders of Waste Management, we support transparency and...

  • Page 74
    ....com. Waste Management believes it is important to participate in the political process because it is of intrinsic benefit to our business and employees. We do not expect the candidates to whom we contribute funds to agree with our positions on all issues at all times. We do however seek to support...

  • Page 75
    ...percentile of the Company's peers. The Committee shall implement this policy in a manner that does not violate any existing employment agreement or compensation plan. Supporting Statement In our opinion, peer group benchmarking of target awards for senior executive compensation results in a constant...

  • Page 76
    ... profile, profitability profile, size, shareholder return, annual revenue and nature of operations, and we strongly disagree with any insinuation that we have "cherry-picked" a peer group to include high levels of executive pay. Imposing the rigid restrictions in the proposal could harm the Company...

  • Page 77
    ... any other matters before the annual meeting, nor do we have any present knowledge that any other matters will be presented by others for action at the meeting. If any other matters are properly presented, your proxy card authorizes the people named as proxy holders to vote using their judgment. 68

  • Page 78
    ... aggregate market value was computed by using the closing price of the common stock as of that date on the New York Stock Exchange ("NYSE"). (For purposes of calculating this amount only, all directors and executive officers of the registrant have been treated as affiliates.) The number of shares of...

  • Page 79
    ...Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 80
    ... developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States. During 2012, our largest customer represented approximately 1% of annual revenues. We employed approximately 43,500 people as of December 31, 2012. We own or operate 269 landfill sites...

  • Page 81
    ... manage each year; ‰ Grow our customer loyalty; ‰ Grow into new markets by investing in greener technologies; and ‰ Pursue initiatives that improve our operations and cost structure. These efforts will be supported by ongoing improvements in information technologies. We believe that execution...

  • Page 82
    ..., type of collection equipment we furnish, type and volume or weight of the waste collected, distance to the disposal facility, labor costs, cost of disposal and general market factors. As part of the service, we provide steel containers to most customers to store their solid waste between pick-up...

  • Page 83
    ...are based on several factors, including competition and the type and weight or volume of solid waste deposited. We also operate five secure hazardous waste landfills in the United States. Under environmental laws, the federal government (or states with delegated authority) must issue permits for all...

  • Page 84
    ... upon the exchange rates at December 31, 2012, to be used for the development and construction of the facility. In 2010, we made two investments which increased the total assets of our Wheelabrator business by $318 million. In the first quarter of 2010, we paid $142 million to acquire a 40% equity...

  • Page 85
    ... Sustainability Services organization offers our customers in all Areas a variety of services in collaboration with our Areas and strategic accounts program, including (i) in-plant services, where our employees work full-time inside our customers' facilities to provide full-service waste management...

  • Page 86
    ... construction debris and household or yard waste, through our Bagster® program; the development, operation and marketing of plasma gasification facilities; operation of a landfill gas-to-liquid natural gas plant; solar powered trash compactors; and organic waste-to-fuel conversion technology...

  • Page 87
    ...on the slower winter months, when waste flows are generally lower, to perform scheduled maintenance at our waste-to-energy facilities. Employees At December 31, 2012, we had approximately 43,500 full-time employees, of which approximately 7,500 were employed in administrative and sales positions and...

  • Page 88
    ... of surety bonds or insurance that we may obtain, making our financial assurance under this agreement limited only by the guidelines and restrictions of surety and insurance regulations. WM has a $2.0 billion revolving credit facility with a term ending May 2016. At December 31, 2012, we had $400...

  • Page 89
    ...the Company, as the Company is not insured for any money it advances for defense costs or pays as indemnity to the insured directors and officers. Regulation Our business is subject to extensive and evolving federal, state or provincial and local environmental, health, safety and transportation laws...

  • Page 90
    ...delegates authority to states to develop programs to ensure the safe disposal of solid waste. In 1991, the EPA issued its final regulations under Subtitle D of RCRA, which set forth minimum federal performance and design criteria for solid waste landfills. These regulations are typically implemented...

  • Page 91
    ... and procedures for identifying whether NHSM are solid waste under RCRA when used as fuels or ingredients in combustion units. The EPA also published new source performance standards and emission guidelines for commercial and industrial solid waste incineration units, and Maximum Achievable Control...

  • Page 92
    ... adopted regulations governing the design, operation, maintenance and closure of landfills and transfer stations. Some counties, municipalities and other local governments have adopted similar laws and regulations. Our facilities and operations are likely to be subject to these types of requirements...

  • Page 93
    ... service them than anyone else; use conversion and processing technology to extract more value from the materials we manage; and continuously improve our operational efficiency. In the short-term, we intend to pursue these initiatives through efforts to: ‰ Grow our markets by implementing customer...

  • Page 94
    ... forth above, implementation of our business strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses and changes in industry trends. Further...

  • Page 95
    ... The costs of complying with these regulations could be substantial. In order to develop, expand or operate a landfill or other waste management facility, we must have various facility permits and other governmental approvals, including those relating to zoning, environmental protection and land use...

  • Page 96
    ... the development of new service offerings and lines of business, it is reasonably possible that our revenues and our operating margins could be negatively affected due to disposal alternatives. Developments in technology could trigger a fundamental change in the waste management industry, as waste...

  • Page 97
    ...of our business, we have in the past, we are currently, and we may in the future, become involved in legal and administrative proceedings relating to land use and environmental laws and regulations. These include proceedings in which: ‰ agencies of federal, state, local or foreign governments seek...

  • Page 98
    ... our costs. Our ability to meet our financial and operating objectives depends in part on our ability to obtain and maintain the permits necessary to operate landfill sites. Permits to build, operate and expand solid waste management facilities, including landfills and transfer stations, have...

  • Page 99
    ... classes of sensitive and/or confidential information and intellectual property, including customers' personal information, private information about employees, and financial and strategic information about the Company and its business partners. We also rely on a Payment Card Industry compliant...

  • Page 100
    ... be higher than the charges we have recognized. Our business is subject to operational and safety risks, including the risk of personal injury to employees and others. Providing environmental and waste management services involves risks such as truck accidents, equipment defects, malfunctions and...

  • Page 101
    ... our earnings due to any number of events that could cause impairments to our assets. In accordance with GAAP, we capitalize certain expenditures and advances relating to disposal site development, expansion projects, acquisitions, software development costs and other projects. Events that could, in...

  • Page 102
    ... business in investing in growing its waste-to-energy business in China and Europe through projects to develop, construct and/or operate new facilities. Development and construction of a waste-toenergy facility is a complex, capital intensive, long-term process subject to risks of delays, cost...

  • Page 103
    ... with United States federal, state and local foreign corrupt practices laws; ‰ changes in government policies or personnel; ‰ changes in general economic conditions affecting each country, including conditions in financial markets; ‰ changes in labor relations in operations outside the United...

  • Page 104
    ...this report. The following table summarizes our various operations at December 31 for the periods noted: 2012 2011 Landfills: Owned ...Operated through lease agreements ...Operated through contractual agreements ...Transfer stations ...Material recovery facilities ...Secondary processing facilities...

  • Page 105
    ..., the closing sale price as reported on the NYSE was $36.55 per share. The number of holders of record of our common stock on February 7, 2013 was 13,036. The graph below shows the relative investment performance of Waste Management, Inc. common stock, the Dow Jones Waste & Disposal Services Index...

  • Page 106
    ... for future business plans and other factors the Board of Directions may deem relevant. Additionally, the Board of Directors authorized up to $500 million in share repurchases in connection with the 2013 financial plan. Any future share repurchases will be made at the discretion of management and...

  • Page 107
    ..., 2011(a) 2010(a) 2009 (In millions, except per share amounts) 2008 Statement of Operations Data: Operating revenues ...Costs and expenses: Operating ...Selling, general and administrative ...Depreciation and amortization ...Restructuring ...(Income) expense from divestitures, asset impairments and...

  • Page 108
    ... manage each year; ‰ Grow our customer loyalty; ‰ Grow into new markets by investing in greener technologies; and ‰ Pursue initiatives that improve our operations and cost structure. These efforts will be supported by ongoing improvements in information technologies. We believe that execution...

  • Page 109
    ... environmental remediation liability at a closed landfill, which had a positive impact of $0.01 on our diluted earnings per share; ‰ The recognition of non-cash, pre-tax asset impairment charges of $9 million primarily related to two of our medical waste services facilities. The impairment charges...

  • Page 110
    ... as continued benefit from our cost savings programs, including our 2012 restructuring. We will also continue to emphasize strong cash flow to support our dividend, debt reduction, share repurchases, and appropriate acquisition and investment opportunities. Free Cash Flow As is our practice, we are...

  • Page 111
    ... in 2010. We acquired Oakleaf to advance our growth and transformation strategies and increase our national accounts customer base while enhancing our ability to provide comprehensive environmental solutions. For the year ended December 31, 2011, we incurred $1 million of acquisition-related costs...

  • Page 112
    ... following pro forma consolidated results of operations have been prepared as if the acquisition of Oakleaf occurred at January 1, 2010 (in millions, except per share amounts): Years Ended December 31, 2011 2010 Operating revenues ...Net income attributable to Waste Management, Inc...Basic earnings...

  • Page 113
    ... material impact on our consolidated financial statements. Goodwill Impairment Testing - In September 2011, the FASB amended authoritative guidance associated with goodwill impairment testing. The amended guidance provides companies the option to first assess qualitative factors to determine whether...

  • Page 114
    ... 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...

  • Page 115
    ... 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...

  • Page 116
    ... 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 cost for the likely remedy are then either developed using our internal resources or by third-party environmental engineers or other service...

  • Page 117
    ... our reporting units. Fair value computed by these two methods is arrived at using a number of 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...

  • Page 118
    ...this method provides a reasonable approach to estimating the fair value of the reporting units. Refer to Note 6 to the Consolidated Financial Statements for additional information related to indefinitelived intangible assets impairment considerations made during the reported periods. Deferred Income...

  • Page 119
    ... solid waste at a disposal site. Recycling revenue generally consists of tipping fees and the sale of recyclable commodities to third parties. The fees we charge for our collection, disposal, transfer and recycling services generally include fuel surcharges, which are indexed to current market costs...

  • Page 120
    The mix of operating revenues from our major lines of business is reflected in the table below (in millions): Years Ended December 31, 2012 2011 2010 Collection: Commercial ...Residential ...Industrial ...Other ...Total collection ...Landfill ...Transfer ...Wheelabrator ...Recycling ...Other ......

  • Page 121
    ... average yield for the total Company. We also analyze the changes in average yield in terms of related-business revenues in order to differentiate the changes in yield attributable to our pricing strategies from the changes that are caused by market-driven price changes in commodities. The following...

  • Page 122
    ..., transfer, landfill and waste-to-energy disposal operations, exclusive of volume changes. Revenue growth from collection and disposal average yield during both years includes not only base rate changes and environmental and service fee increases, but also (i) certain average price changes related...

  • Page 123
    ... facilities during 2011 contributed to these revenue increases due to volume. We also experienced volume-related revenue increases of $37 million for the year ended December 31, 2011 from our strategic growth businesses and our landfill gas-to-energy operations. Additionally, our total landfill...

  • Page 124
    ... in operating expenses resulting from acquired businesses was more than offset by increased revenues from acquired businesses. Market prices for recyclable commodities - In both 2012 and 2011, volatile market prices for recyclable commodities was the main driver of the changes in cost of goods sold...

  • Page 125
    ...-to-Period Change 2011 Period-to-Period Change 2010 Labor and related benefits ...Transfer and disposal costs ...Maintenance and repairs ...Subcontractor costs ...Cost of goods sold ...Fuel ...Disposal and franchise fees and taxes ...Landfill operating costs ...Risk management ...Other ... $2,407...

  • Page 126
    ... costs associated with our efforts to implement these initiatives; and ‰ An increase in costs, primarily labor, of approximately $34 million and $53 million during 2012 and 2011, respectively, incurred to support our strategic plan to grow into new markets and provide expanded service offerings...

  • Page 127
    ... summarizes the major components of our selling, general and administrative costs for the years ended December 31 (dollars in millions): Period-toPeriod Change Period-toPeriod Change 2012 2011 2010 Labor and related benefits ...Professional fees ...Provision for bad debts ...Other ... $ 850 163...

  • Page 128
    ...fair values. Our medical waste services business is included in our "Other" operations in Note 21. We also recognized (i) $20 million of charges related to investments we had made in prior years in waste diversion technologies; (ii) $6 million for the impairment of an oil & gas well due to projected...

  • Page 129
    During the year ended December 31, 2011, we recognized impairment charges relating to two facilities in our medical waste services business, in addition to the three facilities impaired in 2012 and discussed above, as a result of the closure of one site and as a result of continuing operating losses...

  • Page 130
    ... ‰ impairment charges of $77 million recognized during 2012, primarily in (i) our medical waste services business, (ii) investments in waste diversion technologies, and (iii) an oil and gas producing property; ‰ losses in 2012 and 2011 from our growth initiatives and integration costs associated...

  • Page 131
    ...net charges of $50 million during 2010 for estimates associated with environmental remediation liabilities at certain of our closed sites; ‰ changes in U.S. Treasury rates used to estimate the present value of our environmental remediation obligations and recovery assets. As a result of changes in...

  • Page 132
    ..., 2011. Refer to Note 9 to the Consolidated Financial Statements for more information related to our refined coal investment. On July 28, 2011, we acquired Oakleaf and its primary operations. As a result of the acquisition, we received income tax attributes (primarily federal and state net operating...

  • Page 133
    ... $49 million in 2010. These amounts are principally related to third parties' equity interests in two limited liability companies that own three waste-to-energy facilities operated by our Wheelabrator business. Refer to Note 20 to the Consolidated Financial Statements for information related to the...

  • Page 134
    .... The following table reflects landfill capacity and airspace changes, as measured in tons of waste, for landfills owned or operated by us during the years ended December 31, 2012 and 2011 (in millions): December 31, 2012 Remaining Permitted Expansion Total Capacity Capacity Capacity December 31...

  • Page 135
    ... 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...

  • Page 136
    ...294 The comparison of these costs for the reported periods has been significantly affected by accounting for changes in the risk-free discount rate that we use to estimate the present value of our environmental remediation liabilities and environmental remediation recovery assets, which is based on...

  • Page 137
    ... 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. In addition to our working capital needs for the general and administrative costs...

  • Page 138
    ... are primarily included within long-term "Other assets" in our Consolidated Balance Sheets. Debt - We use long-term borrowings in addition to the cash we generate from operations as part of our overall financial strategy to support and grow our business. We primarily use senior notes and tax-exempt...

  • Page 139
    ... charges in 2012 related to impairments and restructuring costs of $89 million and $48 million, respectively; ‰ lower non-cash charges attributable to equity-based compensation expense and interest accretion and discount rate adjustments on environmental remediation liabilities and recovery assets...

  • Page 140
    ... Consolidated Statement of Cash Flows. ‰ Changes in assets and liabilities, net of effects from business acquisitions and divestitures - Our cash flow from operations was favorably impacted in 2011 by changes in our working capital accounts. Although our working capital changes may vary from year...

  • Page 141
    ... payment made to acquire a 40% equity investment in SEG, a subsidiary of Shanghai Chengtou Holding Co., Ltd. As a joint venture partner in SEG, we participate in the operation and management of waste-to-energy and other waste services in the Chinese market. SEG's focus also includes building new...

  • Page 142
    ...at the discretion of management and will depend on factors similar to those considered by the Board of Directors in making dividend declarations. ‰ Proceeds from the exercise of common stock options - The exercise of common stock options and the related excess tax benefits generated a total of $43...

  • Page 143
    ... place additional tons within the permitted airspace at our landfills. (b) The amounts reported here represent the scheduled principal payments related to our long-term debt, excluding related interest. Refer to Note 7 to the Consolidated Financial Statements for information regarding interest rates...

  • Page 144
    ... business, we are exposed to market risks, including changes in interest rates, Canadian currency rates and certain commodity prices. From time to time, we use derivatives to manage some portion of these risks. Our derivatives are agreements with independent counterparties that provide for payments...

  • Page 145
    ...the risks associated with changes in the market prices of these commodities during the three years ended December 31, 2012. Alternatively, we attempt to manage these risks through operational strategies that focus on capturing our costs in the prices we charge our customers for the services provided...

  • Page 146
    ... these changes in fair value would not have a material impact to the Company. Refer to Note 8 of the Consolidated Financial Statements for additional information regarding our foreign currency derivatives. The foreign currency exposure associated with our investments in China and the United Kingdom...

  • Page 147
    ... STATEMENTS Page Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2012 and 2011 ...Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011 and 2010...

  • Page 148
    ... Company, including the principal executive and financial officers, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Our internal controls are designed...

  • Page 149
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Waste Management, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, cash flows, and changes in equity for each of the three years in...

  • Page 150
    ... 1, 2010, the Company adopted certain provisions of ASC Topic 810, "Consolidation" related to the consolidation of variable interest entities. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Waste Management, Inc.'s internal...

  • Page 151
    ...' equity: Common stock, $0.01 par value; 1,500,000,000 shares authorized; 630,282,461 shares issued ...Additional paid-in capital ...Retained earnings ...Accumulated other comprehensive income ...Treasury stock at cost, 166,062,235 and 169,749,709 shares, respectively ...Total Waste Management, Inc...

  • Page 152
    WASTE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, Except per Share Amounts) Years Ended December 31, 2012 2011 2010 Operating revenues: Service revenues ...Tangible product revenues ...Total operating revenues ...Costs and expenses: Operating costs (exclusive of ...

  • Page 153
    WASTE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions) Years Ended December 31, 2012 2011 2010 Consolidated net income ...Other comprehensive income (loss), net of taxes: Unrealized losses on derivative instruments: Unrealized losses, resulting from changes in fair ...

  • Page 154
    ...provision ...Interest accretion on landfill liabilities ...Interest accretion on and discount rate adjustments to environmental remediation liabilities and recovery assets ...Provision for bad debts ...Equity-based compensation expense ...Excess tax benefits associated with equity-based transactions...

  • Page 155
    ..., INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Millions, Except Shares in Thousands) Waste Management, Inc. Stockholders' Equity Accumulated Other Additional Paid-In Retained Comprehensive Shares Amounts Capital Earnings Income (Loss) Common Stock Treasury Stock Shares Amounts Total...

  • Page 156
    ... that are not managed through our Solid Waste or Wheelabrator businesses, including our strategic accounts program that expanded with the acquisition of Oakleaf Global Holdings on July 28, 2011 ("Oakleaf"), which are presented in this report as "Other." Additional information related to our segments...

  • Page 157
    ... material impact on our consolidated financial statements. Goodwill Impairment Testing - In September 2011, the FASB amended authoritative guidance associated with goodwill impairment testing. The amended guidance provides companies the option to first assess qualitative factors to determine whether...

  • Page 158
    ... equivalents, investments held within our trust funds and escrow accounts, accounts receivable and derivative instruments. We make efforts to control our exposure to credit risk associated with these instruments by (i) placing our assets and other financial interests with a diverse group of credit...

  • Page 159
    ...; landfill gas collection systems; environmental monitoring equipment for groundwater and landfill gas; and directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes asset retirement costs...

  • Page 160
    ... final capping changes. In managing our landfills, our engineers look for ways to reduce or defer our construction costs, including final capping costs. The benefit recognized in these years was generally the result of (i) concerted efforts to improve the operating efficiencies of our landfills and...

  • Page 161
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) future purchase and development costs required to develop the landfill site to its remaining permitted and expansion capacity; and (iv) projected asset retirement costs related to landfill final capping, closure and post...

  • Page 162
    ... 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...

  • Page 163
    ...and the risk-free discount rate applied as of each reporting date: Years Ended December 31, 2012 2011 2010 Charge to Operating expenses ...Risk-free discount rate applied to environmental remediation liabilities and recovery assets ... $ 3 1.75% $ 17 2.00% $ 2 3.50% The portion of our recorded...

  • Page 164
    ...fixtures and office equipment. These costs include direct external costs of materials and services used in developing or obtaining the software and internal costs for employees directly associated with the software development project. As of December 31, 2012 and 2011, capitalized costs for software...

  • Page 165
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Acquisitions We generally recognize assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, based on fair value estimates as of the date of acquisition. Contingent ...

  • Page 166
    ...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...

  • Page 167
    ... our reporting units. Fair value computed by these two methods is arrived at using a number of 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...

  • Page 168
    ... of industrial revenue bonds for the construction of disposal facilities and for equipment necessary to provide waste management services. Proceeds from these arrangements are directly deposited into trust accounts, and we do not have the ability to use the funds in regular operating activities...

  • Page 169
    ...the general market factors influencing a region's rates. The fees we charge for our services generally include fuel surcharges, which are intended to pass through to customers increased direct and indirect costs incurred because of changes in market prices for fuel. We generally recognize revenue as...

  • Page 170
    ... on certain projects under development, including internal-use software and landfill expansion projects, and on certain assets under construction, including operating landfills, landfill gas-to-energy projects and waste-to-energy facilities. During 2012, 2011 and 2010, total interest costs were $509...

  • Page 171
    ... for 2011 and 2012, respectively, related to our year-end annual review of final landfill capping, closure and post-closure obligations. (b) The amount reported in 2011 for our environmental remediation liabilities primarily relates to the impact of a decrease in the risk-free discount rate used to...

  • Page 172
    ... and operating agreements. See Note 20 for additional information related to these trusts. 5. Property and Equipment Property and equipment at December 31 consisted of the following (in millions): 2012 2011 Land ...Landfills ...Vehicles ...Machinery and equipment ...Containers ...Buildings and...

  • Page 173
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) evaluate and oversee our Solid Waste subsidiaries from 22 to 17. With the elimination of the geographic Groups, we have determined that our Areas constitute reporting units and we now assess whether a goodwill impairment...

  • Page 174
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Our other intangible assets as of December 31, 2012 and 2011 were comprised of the following (in millions): Customer Contracts and Customer Relationships Covenants Not-toCompete Licenses, Permits and Other Total ...

  • Page 175
    ... incurred for general corporate purposes, including additions to working capital, capital expenditures and the funding of acquisitions and investments. Due to the short-term maturities of these borrowings, we have reported certain of these cash flows on a net basis in the Consolidated Statement of...

  • Page 176
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Canadian Credit Facility - We repaid $68 million of net advances under our Canadian credit facility during the year ended December 31, 2012. Due to the short-term maturities of these borrowings, we have reported certain ...

  • Page 177
    ... classified as a change in "Other assets" within "Net cash provided by operating activities" in the Consolidated Statement of Cash Flows. We designated our interest rate swaps as fair value hedges of our fixed-rate senior notes. Fair value hedge accounting for interest rate swap contracts increased...

  • Page 178
    ...related hedged items are recorded. The following table summarizes the fair value adjustments from active interest rate swaps and the underlying hedged items on our results of operations (in millions): Years Ended December 31 Gain (Loss) on Gain (Loss) on Swap Fixed-Rate Debt 2012 2011 2010 2012 2011...

  • Page 179
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The active forward-starting interest rate swaps outstanding as of December 31, 2012 relate to an anticipated debt issuance in March 2014. As of December 31, 2012, the fair value of these active interest rate derivatives ...

  • Page 180
    ... associated with our cash flow hedges during the years ended December 31, 2012, 2011 or 2010. Credit-Risk-Related Contingent Features Our interest rate derivative instruments have in the past and may in the future contain provisions related to the Company's credit rating. These provisions generally...

  • Page 181
    ...2011 2010 Income tax expense at U.S. federal statutory rate ...State and local income taxes, net of federal income tax benefit ...Miscellaneous federal tax credits ...Noncontrolling interests ...Taxing authority audit settlements and other tax adjustments ...Nondeductible costs relating to acquired...

  • Page 182
    ... a result of new information, we recognized the above referenced tax benefit related to additional Oakleaf federal net operating losses received in the acquisition. Investment in Refined Coal Facility - In January 2011, we acquired a noncontrolling interest in a limited liability company, which was...

  • Page 183
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) no provision for U.S. income taxes has been accrued for these unremitted earnings. Determination of the unrecognized deferred U.S. income tax liability is not practicable due to uncertainties related to the timing and ...

  • Page 184
    ...the Waste Management retirement savings plans. These employees are members of collective bargaining units. In addition, Wheelabrator Technologies Inc., a wholly-owned subsidiary, sponsors a pension plan for its former executives and former Board members. As of December 31, 2012, the combined benefit...

  • Page 185
    ... Private Scavengers and Garage Attendants Pension Trust Fund New England Teamsters and Trucking Industry Pension Fund Suburban Teamsters of Northern Illinois Pension Plan Teamsters Employers Local 945 Pension Fund Critical Critical as of 5/31/2011 Endangered as of 9/30/2011 Critical as of 9/30/2011...

  • Page 186
    ... statements were issued, Forms 5500 were not available for the plan years ended in 2012. (e) While the subject of pending litigation, the Company has no collective bargaining agreements remaining that require contributions to this fund. Our portion of the projected benefit obligation, plan assets...

  • Page 187
    ... covers only individual executive liability, often referred to as "Broad Form Side A," and does not provide corporate reimbursement coverage, often referred to as "Side B." The Side A policy covers directors and officers directly for loss, including defense costs, when corporate indemnification is...

  • Page 188
    ... to make royalty payments to third parties including prior land owners, lessors or host communities where our operations are located. Our obligations generally are based on per ton rates for waste actually received at our transfer stations, landfills or waste-to-energy facilities. Royalty agreements...

  • Page 189
    ... used for the development and construction of the facility. Through December 31, 2012, we had funded approximately £34 million, or $54 million, through loans. In 2011, we made a noncontrolling equity investment in an entity focused on the conversion of municipal solid waste into advanced bio-fuels...

  • Page 190
    ...are working toward a cost-sharing agreement. We generally expect to receive any amounts due from other participating parties at or near the time that we make the remedial expenditures. The other 64 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental...

  • Page 191
    ... 2011, the Harris County Attorney in Houston, Texas filed suit against McGinnes Industrial Maintenance Corporation ("MIMC"), WM and Waste Management of Texas, Inc., et. al, seeking civil penalties and attorneys' fees for alleged violations of the Texas Water Code and the Texas Health and Safety Code...

  • Page 192
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) individually. During the third quarter of 2011, the Court ruled in favor of WM and two former employees dismissing all claims brought by the plaintiffs related to the decision to offer WM stock as an investment option ...

  • Page 193
    ...the United States and Canada. As a result of some of these agreements, certain of our subsidiaries are participating employers in a number of trustee-managed multiemployer defined benefit pension plans for the affected employees. Refer to Note 10 for additional information about our participation in...

  • Page 194
    ... millions): Solid Waste ...Wheelabrator ...Corporate and Other ...Total ...$19 3 45 $67 2011 Restructurings - Beginning in July 2011, we took steps to streamline our organization as part of our cost savings programs. This reorganization eliminated over 700 employee positions throughout the Company...

  • Page 195
    ...fair values. Our medical waste services business is included in our "Other" operations in Note 21. We also recognized (i) $20 million of charges related to investments we had made in prior years in waste diversion technologies; (ii) $6 million for the impairment of an oil & gas well due to projected...

  • Page 196
    ... and we did not repurchase any shares of common stock in 2012. The following is a summary of activity under our stock repurchase programs for 2011 and 2010: Years Ended December 31, 2011 2010 Shares repurchased (in thousands) ...Per share purchase price ...Total repurchases (in millions) ... 17,338...

  • Page 197
    ... key employees were granted a combination of PSUs, RSUs and stock options. In 2010, 2011 and 2012, the annual LTIP awards granted to the Company's senior leadership team, which generally includes the Company's executive officers, included a combination of PSUs and stock options. During the reported...

  • Page 198
    ...(a) The total fair market value of RSUs that vested during the years ended December 31, 2012, 2011 and 2010 was $11 million, $9 million and $14 million, respectively. Net of units deferred and units used for payment of associated taxes, we issued approximately 196,000, 162,000 and 264,000 shares of...

  • Page 199
    ... PSUs. In early 2012, we issued approximately 581,000 shares of common stock for these vested PSUs, net of units deferred and units used for payment of associated taxes. (c) The Company's financial results for the three-year performance period ended December 31, 2010, as measured for purposes of...

  • Page 200
    ...common stock. The new option award is for the equivalent number of shares used as payment of the exercise price and has the same expiration date as the original option. (b) The weighted average grant-date fair value of stock options granted during the years ended December 31, 2012, 2011 and 2010 was...

  • Page 201
    ... expense associated with RSU, PSU and stock option awards as a component of "Selling, general and administrative" expenses in our Consolidated Statement of Operations. Our "Provision for income taxes" for the years ended December 31, 2012, 2011 and 2010 includes related deferred income tax benefits...

  • Page 202
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The 2012 annual equity based incentive award for all LTIP eligible employees, including retirement-eligible employees, was comprised of a much smaller percentage of stock options as compared to 2011. According to the ...

  • Page 203
    ...$- - - $- Total Fair Value Measurements at December 31, 2011 Using Quoted Significant Prices in Other Significant Active Observable Unobservable Markets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets: Money market funds ...Fixed-income securities ...Redeemable preferred stock ...Interest rate...

  • Page 204
    ... the fair value of these securities using quoted prices for identical or similar assets in inactive markets. The fair value of our fixed-income securities approximates our cost basis in the investments. Redeemable Preferred Stock In November 2011, we made a non-controlling investment in redeemable...

  • Page 205
    .... During the year ended December 31, 2012, we paid $94 million for interests in oil and gas producing properties through two transactions. The purchase price was allocated primarily to "Property and equipment." Additionally, we acquired 32 other businesses related to our Solid Waste business. Total...

  • Page 206
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Prior Year Acquisitions In 2011, we acquired businesses primarily related to our Solid Waste business, including the acquisition of Oakleaf discussed below. Total consideration, net of cash acquired, for all acquisitions...

  • Page 207
    ... Operating revenues ...Net income attributable to Waste Management, Inc...Basic earnings per common share ...Diluted earnings per common share ... $13,693 955 2.03 2.03 $13,059 935 1.95 1.94 In 2010, we acquired businesses primarily related to our Solid Waste and waste-to-energy operations. Total...

  • Page 208
    ... applying this accounting guidance; (ii) the equity owners share power over the significant activities of the LLCs; and (iii) we are the entity within the related party group whose activities are most closely associated with the LLCs. As of December 31, 2012 and 2011, our Consolidated Balance Sheets...

  • Page 209
    ..., we formed a U.K. joint venture (the "Ltd."), together with a commercial waste management company, to develop, construct, operate and maintain a waste-to-energy and recycling facility in England. We own a 50% interest in this joint venture. The total cost of constructing this facility is expected...

  • Page 210
    ... method of accounting and do not consolidate the entity. Additional information related to this investment is discussed in Note 9. Investment in Federal Low-income Housing Tax Credits - In April 2010, we acquired a noncontrolling interest in a limited liability company established to invest in and...

  • Page 211
    ... of Areas located in the Midwest and Northeast United States; and Tier 3, which encompasses all Areas not included in Tier 1 or Tier 2. Our Wheelabrator business, which manages waste-to-energy facilities and independent power production plants, continues to be a separate reportable segment as...

  • Page 212
    ... revenues managed by our Sustainability Services and Renewable Energy organizations, respectively, that are not included with the operations of our reportable segments; (ii) our recycling brokerage and electronic recycling services; and (iii) the impacts of investments that we are making...

  • Page 213
    ..., treasury, legal, information technology, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills. Income from operations for "Corporate and other" also includes costs associated with our long-term incentive program and any...

  • Page 214
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (h) Goodwill is included within each segment's total assets. As discussed above, for segment reporting purposes, our material recovery facilities and secondary processing facilities are included as a component of their ...

  • Page 215
    ... MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Net operating revenues relating to operations in the United States and Puerto Rico, as well as Canada are as follows (in millions): Years Ended December 31, 2012 2011 2010 United States and Puerto Rico ...Canada ...Total...

  • Page 216
    ... facilities in our medical waste services business as a result of projected operating losses at each of these facilities; (ii) $6 million of charges related to investments we had made in prior years in waste diversion technologies; (iii) $5 million for the impairment of a facility not currently used...

  • Page 217
    ... severance and benefit costs and negatively affected our diluted earnings per share by $0.02. ‰ Income from operations was negatively impacted by the recognition of net non-cash, pre-tax charges of $8 million arising from the accounting effect of lower ten-year Treasury rates, which are used to...

  • Page 218
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2012 WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ...Property and ...

  • Page 219
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEETS (Continued) December 31, 2011 WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ......

  • Page 220
    ... ...Provision for (benefit from) income taxes ...Consolidated net income ...Less: Net income attributable to noncontrolling interests ...Net income attributable to Waste Management, Inc...Year Ended December 31, 2011 Operating revenues ...Costs and expenses ...Income from operations ...Other income...

  • Page 221
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (continued) WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated Year Ended December 31, 2010 Operating revenues ...Costs and expenses ...Income from ...

  • Page 222
    ... Non-Guarantor Subsidiaries Eliminations Consolidated Year Ended December 31, 2012 Comprehensive income ...Less: Comprehensive income attributable to noncontrolling interests ...Comprehensive income attributable to Waste Management, Inc...Year Ended December 31, 2011 Comprehensive income ...Less...

  • Page 223
    ... (used in) operating activities ...Cash flows from investing activities: Acquisitions of businesses, net of cash acquired ...Capital expenditures ...Proceeds from divestitures of businesses (net of cash divested) and other sales of assets ...Net receipts from restricted trust and escrow accounts and...

  • Page 224
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued) WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated Year Ended December 31, 2011 Cash flows from operating activities: Consolidated net income...

  • Page 225
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued) WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated Year Ended December 31, 2010 Cash flows from operating activities: Consolidated net income...

  • Page 226
    ... CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 24. Subsequent Event In January 2013, we acquired Greenstar, LLC, an operator of recycling and resource recovery facilities. We paid cash consideration of $170 million, subject to post-closing adjustments. Pursuant to the sale and purchase agreement...

  • Page 227
    ... Officers and Corporate Governance. The information required by this Item is incorporated by reference to the sections entitled "Board of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance," and "Executive Officers," in the Company's definitive Proxy Statement for its 2013 Annual...

  • Page 228
    ... Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item is incorporated herein by reference to the sections entitled "Equity Compensation Plan Table," "Director Nominee and Officer Stock Ownership," and "Persons Owning More than 5% of Waste Management...

  • Page 229
    ... duly authorized. WASTE MANAGEMENT, INC. By: /s/ DAVID P. STEINER David P. Steiner President, Chief Executive Officer and Director Date: February 14, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 230
    ... statements of Waste Management, Inc. as of December 31, 2012 and 2011, and for each of the three years in the period ended December 31, 2012, and have issued our report thereon dated February 14, 2013 (included elsewhere in this Form 10-K). Our audits also included the financial statement schedule...

  • Page 231
    WASTE MANAGEMENT, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In Millions) Balance Beginning of Year Charged (Credited) to Income Accounts Written Off/Use of Reserve Balance End of Year Other(a) 2010 - Reserves for doubtful accounts(b) ...2011 - Reserves for doubtful accounts(b) ...2012 ...

  • Page 232
    ... Statement on Schedule 14A filed April 8, 2004]. Employee Stock Purchase Plan [incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed March 28, 2012]. Waste Management, Inc. 409A Deferral Savings Plan. [incorporated by reference to Exhibit 10.4 to Form 10-K for the year...

  • Page 233
    ... as Co-Documentation Agents and Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, and Barclays Capital, as Joint Lead Arrangers and Book Managers [incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2011]. Employment Agreement between...

  • Page 234
    ...10.1 to Form 8-K dated August 4, 2005]. General Release Agreement between Waste Management Holdings, Inc. and Patrick DeRueda dated September 28, 2012. Form of Director and Executive Officer Indemnity Agreement. Form of 2012 Restricted Stock Unit Award Agreement [incorporated by reference to Exhibit...

  • Page 235
    ....PRE** * ** †Consent of Independent Registered Public Accounting Firm. Certification Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, of David P. Steiner, President and Chief Executive Officer. Certification Pursuant to Rule 13a-14(a) and 15d-14...

  • Page 236
    ... Diluted Share, as reported Adjustments to Net Income and Earnings Per Diluted Share: Asset impairments (b) ...Restructuring ...Oakleaf related integration activities ...Legal reserve and landfill operating costs (c) ...Partial withdrawal from multiemployer pension plan ...Labor dispute ...Adjusted...

  • Page 237
    ... the Company is scheduled to be held at 11:00 a.m. on May 10, 2013 at: the Maury Myers Conference Center Waste Management, Inc. 1021 Main Street Houston, texas 77002 WEB SITE www.wm.com (A) Audit Committee (C) Management Development and Compensation Committee (n) nominating and Governance Committee...

  • Page 238
    1001 Fannin, Suite 4000 • Houston, Texas 77002 www.wm.com