Waste Management 2011 Annual Report Download

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2011 ANNUAL REPORT
Driving change
in a changing world

Table of contents

  • Page 1
    Driving change in a changing world 2011 ANNUAL REPORT

  • Page 2
    ... 31, 2011, the company served nearly 20 million residential, commercial, industrial and municipal customers through a network of 390 collection operations, 287 transfer stations, 271 landfill disposal sites, 17 waste-to-energy plants, 107 recycling facilities and 131 beneficial-use landfill gas...

  • Page 3
    ... by focusing on yield management, operational efficiency and providing valuable solutions for our customers. Although waste volumes were down in our landfill operations, recycling volumes were up, resulting in a record year for that important and growing business. This demonstrates clearly that...

  • Page 4
    ...as single stream recycling, household hazardous waste removal and the use of natural gas powered trucks. As these examples demonstrate, we constantly seek to improve the ways we meet the changing needs of our customers and enhance the experience of doing business with Waste Management. INVESTING IN...

  • Page 5
    ... marketer and distributor of organic lawn and garden products. Recycling organics through composting and other Recycling. Waste Management has long been a leader in realizing the value of recycling significant components of the waste stream. 2011 was a record growth year for our recycling business...

  • Page 6
    ... America, with more under development. In 2011, we opened new natural gas fueling stations in Camden, New Jersey, and Chicago, Illinois. During 2011, we made many investments in emerging technologies and operations that move us closer to reaching the sustainability goals we set out to achieve by...

  • Page 7
    Proxy Statement and Form 10-K

  • Page 8
    ...Stock Purchase Plan ("ESPP") to increase the number of shares authorized for issuance under the ESPP; • To vote on a stockholder proposal relating to a stock retention policy requiring senior executives to retain a significant percentage of stock acquired through equity pay programs until one year...

  • Page 9
    ... ...Board of Directors Governing Documents ...Non-Employee Director Compensation ...Election of Directors (Item 1 on the Proxy Card) ...Director Nominee and Officer Stock Ownership ...Persons Owning More than 5% of Waste Management Common Stock ...Section 16(a) Beneficial Ownership Reporting...

  • Page 10
    ... 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 Outstanding Voting by Proxy...

  • Page 11
    ... in Person Only stockholders, their proxy holders and our invited guests may attend the meeting. If you plan to attend, please bring identification and, if you hold shares in street name, bring your bank or broker statement showing your beneficial ownership of Waste Management stock in order...

  • Page 12
    ... separate copies. This procedure helps reduce our printing costs and postage fees. If you wish to receive a separate copy of this Proxy Statement and the Annual Report, please contact: Waste Management, Inc., Corporate Secretary, 1001 Fannin Street, Suite 4000, Houston, Texas 77002, telephone 713...

  • Page 13
    ...-employee directors should address their communications to Mr. W. Robert Reum, Non-Executive Chairman of the Board, c/o Waste Management, Inc., P.O. Box 53569, Houston, Texas 77052-3569. Leadership Structure We separated the roles of Chairman of the Board and Chief Executive Officer at our Company...

  • Page 14
    ...Directors on all Company risks. At each of these meetings, our President and Chief Executive Officer; principal 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...

  • Page 15
    ... SEC's rules based on a thorough review of their education and financial and public company experience. Mr. Gross was a founder of American Management Systems where he was principal executive officer for over 30 years. He has served as Chairman of The Lovell Group, a private investment and advisory...

  • Page 16
    ... press releases and discuss with management the type of earnings guidance that we provide to analysts and rating agencies; • Discuss with the independent auditor any material changes to our accounting principles and matters required to be communicated by Public Company Accounting Oversight Board...

  • Page 17
    ... 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 2011, those matters required to be discussed by Public Company Accounting Oversight Board (United States) Audit Standard AU...

  • Page 18
    ... accordance with the rules and regulations of the New York Stock Exchange. The MD&C Committee met six times in 2011. Our MD&C Committee is responsible for overseeing all of our executive and senior management compensation, as well as developing the Company's compensation philosophy generally. The MD...

  • Page 19
    ... on the MD&C Committee. No member of the MD&C Committee was an officer or employee of Waste Management during 2011; no member of the MD&C Committee is a former officer of the Company; and during 2011, none of our executive officers served as a member of a board of directors or compensation committee...

  • Page 20
    ... responsible for overseeing the policy. All executive officers and directors are required to notify the General Counsel or the Corporate Secretary as soon as practicable of any proposed transaction that they or their family members are considering entering into that involves the Company. The General...

  • Page 21
    ...the Company's 2009 Stock Incentive Plan. There are no restrictions on the shares; however, non-employee directors are subject to ownership guidelines that establish a minimum ownership standard and require that all net shares received in connection with a stock award, after selling shares to pay all...

  • Page 22
    ...not receive meeting fees in addition to the retainers. The cash retainers are payable in two equal installments in January and July of each year. The payments of the retainers for each six-month period are not subject to refund. The table below sets forth the cash retainers for 2011: Annual Retainer...

  • Page 23
    ... to 2009; President and Chief Operating Officer of Best Buy from 1991 to 2002. Director of General Mills, Inc. since 2007. Mr. Anderson served in the positions of chief executive officer and chief operating officer of a large public retail company for several years, during a customer segmentation...

  • Page 24
    ...of the Board - PFI Group (private Prior to his current service on the boards of multiple investment firm) since July 1994. major corporations, Mr. Pope served in executive operational and financial positions at large airline Director of R.R. Donnelley & Sons Company, or companies for almost 20 years...

  • Page 25
    ... Company, to his service as a member of our Board. Mr. Steiner also brings his experience as a director of other major public companies. Mr. Weidemeyer served in executive positions at a large public company for several years. His roles encompassed significant operational management responsibility...

  • Page 26
    ... 53,098 53,098 153,093 1,915,495 0 0 0 0 0 0 0 0 73,285 0 0 0 4,086 0 94,558 (1) 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 44. Interests in the...

  • Page 27
    ...Restricted stock units were granted to the executive officers under our 2009 Stock Incentive Plan. The restricted stock units will be paid out in shares of our Common Stock upon vesting, subject to forfeiture in certain circumstances. PERSONS OWNING MORE THAN 5% OF WASTE MANAGEMENT COMMON STOCK The...

  • Page 28
    ... from our executive officers and directors, we believe that all applicable requirements were complied with in 2011, except that Ms. Cowan, Senior Vice President, Customer Experience, was late in filing a Form 4 to report the acquisition of 100 shares of Common Stock on the open market. 19

  • Page 29
    ...President - Customer Service, Operations, CNO Financial Group Inc. (insurance holding company) from October 2008 to December 2010. • Senior Vice President - National Practice Leader U.S., Aon Corporation (provider of risk management services, insurance and reinsurance brokerage and human resources...

  • Page 30
    ... Chief Executive Officer of Oakleaf Global Holdings, Inc. (provider of outsourced hauling, disposal, waste diversion and recycling services; the Company acquired Oakleaf in July 2011) from July 2009 to October 2011. • Secretary of the United States Department of Housing and Urban Development from...

  • Page 31
    ... has adopted a policy that prohibits it from entering into new agreements with executive officers that provide for certain death benefits or tax gross-up payments. The executive compensation program for 2011 fulfilled its objective by helping the Company manage through a challenging year and finish...

  • Page 32
    ... value of each named executive's annual long-term incentive plan award for 2012. Stock options will continue to encourage and reward stock price appreciation and will comprise the remaining 20% of the total value of each named executive's award. • Performance Share Unit Performance Goals: Half of...

  • Page 33
    ... on revenue growth could be triggered; • Income from Operations Margin- motivates employees to control and lower costs and operate efficiently, thereby increasing our income from operations as a percentage of revenues (30%); and • Pricing Improvement- promotes discipline in executing our pricing...

  • Page 34
    ...and To increase stockholder alignment through executives' stock ownership Post-Employment and Change-in-Control Compensation. The compensation our named executives receive post-employment is based on provisions included in individual equity award agreements, retirement plan documents and employment...

  • Page 35
    ... market, as discussed below. In the first quarter of each year, the MD&C Committee meets to determine salary increases, if any, for the named executive officers; verifies the results of the Company's performance for annual incentive and performance share unit calculations; reviews the individual...

  • Page 36
    ... the 2011 executive compensation program, the MD&C Committee considered a competitive analysis of total direct compensation levels and compensation mixes for our executive officers, using information from: • two general industry surveys as provided by management; the Hewitt Associates 2010 TCM...

  • Page 37
    ... to the full Board of Directors. The following charts display the allocation of total 2011 compensation among base salary, annual cash incentive at target and long-term incentives at target for our Chief Executive Officer and President and for Messrs. Trevathan (prior to his promotion), Harris and...

  • Page 38
    ... comprises almost 68% of Mr. Steiner's total compensation. Chief Executive Officer and President Senior Group Vice Presidents (average) 15% 29% 49% Base Salary Annual Cash Bonus Long-Term Equity Incentive Awards 17% 68% 22% Internal Pay Equity. The MD&C Committee considers the differentials...

  • Page 39
    ... and reward long-term performance, promote retention and increase Mr. Preston's alignment with stockholders. Additionally, in June 2011, Mr. Trevathan was promoted to the new position of Executive Vice President - Growth, Innovation and Field Support. In this new role, Mr. Trevathan is responsible...

  • Page 40
    ...revenue growth multiplier was not applicable. ** *** Calculated using weighted average rate per unit increase, based on commercial and industrial collection operations; transfer stations; and municipal solid waste and construction and demolition volumes at our landfills, but excluding new business...

  • Page 41
    ... with Wheelabrator's operating business units in their area. The following table sets forth the income from operations excluding depreciation and amortization performance measure, on a stand-alone and an integrated basis, as set by the MD&C Committee for the respective Groups of Messrs. Trevathan...

  • Page 42
    ...ten-year Treasury rates, which are used to discount remediation reserves; (iii) restructuring undertaken as part of our cost savings programs; (iv) impairments at two closed Healthcare Solutions facilities; and (v) charges related to integration of the acquired Oakleaf business and Oakleaf operating...

  • Page 43
    ...profitable revenue, cost cutting and cost control, and making the best use of our assets. When setting threshold, target and maximum performance measures each year, the MD&C Committee looks to the Company's historical results of operations and analyses and forecasts for the coming year. Specifically...

  • Page 44
    ... units that were granted in 2009 with the three-year performance period ended December 31, 2011; based on actual performance against goals described further below. Performance share units are granted to our named executive officers annually to align compensation with the achievement of our long-term...

  • Page 45
    ...below: Named Executive Officer Number of Performance Share Units Mr. Steiner ...Mr. Preston* ...Mr. Simpson** ...Mr. Trevathan ...Mr. Harris ...Mr. Woods ...* 40,263 N/A 10,051 7,529 7,529 7,529 Mr. Preston was not yet employed by the Company at the time that the 2011 performance share units were...

  • Page 46
    ... 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 in low...

  • Page 47
    ... acquired through the Company's longterm incentive plans and Vice Presidents are required to retain at least 50% of such net shares. The requisite stock ownership level must thereafter be retained throughout the officer's employment with the Company. Additionally, the stock ownership guidelines...

  • Page 48
    ... Year Salary ($) Bonus ($) Total ($) David P. Steiner ...2011 1,120,625 President and Chief Executive Officer 2010 1,073,077 2009 1,116,346 Steven C. Preston(5) ...2011 Executive Vice President, Finance, Recycling and Energy Services James E. Trevathan ...2011 Executive Vice President, Growth...

  • Page 49
    ... expenses, on-board catering, landing fees, trip related hangar/parking costs and other variable costs. We own or operate our aircraft primarily 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...

  • Page 50
    ... period. (3) 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 2011 Compensation Program and Results - Long-Term Equity Incentives - Stock...

  • Page 51
    ..., he forfeited any cash bonus for 2011 under the Annual Incentive Plan. Additionally, his performance share units that were granted on March 9, 2011 were prorated based on the portion of the three-year performance period that he was employed by the Company; accordingly, he now has 2,504 performance...

  • Page 52
    ... 31, 2011, and dollar values are based on the closing price of the Company's Common Stock on that date of $32.71 and assume target performance criteria and target payout will be achieved. (2) Represents vested stock options granted (i) on March 9, 2010 pursuant to our 2009 Stock Incentive Plan and...

  • Page 53
    ... in each named executive officer's agreement requires a double trigger in order to receive any payment in the event of a change-in-control situation. First, a change-in-control must occur, and second, the individual must terminate his employment for good reason or the Company must terminate his...

  • Page 54
    ...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 individual agreements for the actual definitions...

  • Page 55
    ...those benefits. • Waste Management's practice is to provide all benefits eligible employees with life insurance that pays one times annual base salary upon death. The insurance benefit is a payment by an insurance company, not the Company, and is payable under the terms of the insurance policy. 46

  • Page 56
    ... Cause by the Company or For Good Reason by the Employee Severance Benefits • Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period) ...• Continued coverage under health and welfare benefit plans...

  • Page 57
    ... Cause by the Company or For Good Reason by the Employee Severance Benefits • Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period) ...• Continued coverage under health and welfare benefit plans...

  • Page 58
    ... the Company or For Good Reason by the Employee Severance Benefits • Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period) ...• Continued coverage under benefit plans for two years ...• Health and...

  • Page 59
    ... Cause by the Company or For Good Reason by the Employee Severance Benefits • Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period) ...• Continued coverage under health and welfare benefit plans...

  • Page 60
    ... Cause by the Company or For Good Reason by the Employee Severance Benefits • Two times base salary plus target annual cash bonus (one-half payable in lump sum; one-half payable in bi-weekly installments over a two-year period) ...• Continued coverage under health and welfare benefit plans...

  • Page 61
    ... payments. In accordance with the applicable equity award agreements, Mr. Simpson will receive the benefits set forth below, which are calculated using the closing price of the Company's Common Stock of $32.71 per share on December 31, 2011. The payout value shown for performance share unit awards...

  • Page 62
    ..., 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 may not be less than 100% of the fair market value of the stock on the date of grant...

  • Page 63
    ... separate subsidiary audits not required by statute or regulation, employee benefit plan audits and financial due diligence services relating to certain potential acquisitions. The Audit Committee has adopted procedures for the approval of Ernst & Young's services and related fees. At the beginning...

  • Page 64
    ...in its equity award agreements and 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...

  • Page 65
    ... 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 as a result...

  • Page 66
    ... subsidiaries to acquire or increase their proprietary interest in the Company through the purchase of shares of Common Stock at a discount. Administration The ESPP is administered by the Administrative Committee of the Waste Management Employee Benefit Plans, a committee appointed by the Board of...

  • Page 67
    ... disposition of the shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder. New Plan Benefits The value of the Common Stock purchased through the ESPP...

  • Page 68
    ... as a group ...All current employees, including all current officers who are not executive officers, as a group ...Vote Required for Approval 679 0 0 0 679 679 7,711 911,817 The affirmative vote of the holders of a majority of the shares of Waste Management Common Stock present or represented by...

  • Page 69
    ...his receiving 331,000 options in 2010. Taken together, these facts suggest that our executive pay practices are not aligned with shareholders' interests. Please encourage our board to respond positively to this proposal: Executives to Retain Significant Stock - Yes on 5. Waste Management Response to...

  • Page 70
    ... such shares are acquired, even if required ownership levels have already been achieved. The Board believes these holding periods discourage these individuals from taking actions in an effort to gain from short-term or otherwise fleeting increases in the market value of our stock. In the case of...

  • Page 71
    ... been used to increase payment to a named executive officer. Vote Required for Approval 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...

  • Page 72
    ... for management. Meetings of stockholders are expensive, and allowing a possibly unlimited number of meetings to be called by the owner of one share of stock is not a responsible use of time or financial resources. The Board believes that the proponent's proposal to permit any person to acquire one...

  • Page 73
    ...question and answer session of an annual meeting. Institutional Shareholder Services, Inc. has rated our shareholder rights practices as a "low concern," which is its lowest rating. The Corporate Library has assigned the Board a "Low" Corporate Governance Risk Assessment, indicating that our Company...

  • Page 74
    ... Waste Management, Inc. Employee Stock Purchase Plan (the "Plan") has been established for the benefit of its eligible employees. The terms of the Plan are set forth below. 1. Definitions. As used in the Plan the following terms shall have the meanings set forth below: (a) "Board" means the Board...

  • Page 75
    ..." means an employee's leave from employment pursuant to the Company's Paid Leave of Absence Policy to perform military service obligations in the United States Air Force, Army, Navy, Marines, Coast Guard, Public Health Service Corps or National Guard, and the employee is either drafted or a member...

  • Page 76
    ...Offering Period a number of whole and fractional shares of the Company's Common Stock determined by dividing such Eligible Employee's payroll deductions accumulated during the Offering Period by the Exercise Price established for such Offering Period. (b) Notwithstanding any provision of the Plan to...

  • Page 77
    ... 9. Such statements will set forth the amounts of payroll deductions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any. 13. Adjustments Upon Changes in Capitalization. (a) If the outstanding shares of Common Stock are increased or decreased, or are...

  • Page 78
    ...Amendment of the Plan. The Board may at any time, or from time to time, amend the Plan in any respect; provided, however, that the Plan may not be amended in any way that will cause rights issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Section...

  • Page 79
    ..., for withholding by the Company pursuant to all applicable tax laws of such amounts as the Company determines it is required to withhold in connection with the purchase or sale by a Participant of any Common Stock acquired pursuant to the Plan. The Company may require a Participant to satisfy any...

  • Page 80
    ..., Suite 4000 Houston, Texas (Address of principal executive offices) Registrant's telephone number, including area code: 77002 (Zip code) (713) 512-6200 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which Registered Common Stock, $.01 par...

  • Page 81
    ...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 82
    ... developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States. Our customers include residential, commercial, industrial and municipal customers throughout North America. During 2011, our largest customer represented approximately 1% of annual revenues...

  • Page 83
    ... maintaining our pricing discipline and increasing the amount of recyclable materials we 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...

  • Page 84
    ... picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility ("MRF") or disposal site. We generally provide collection services under one of two types of arrangements: ‰ For commercial and industrial collection services...

  • Page 85
    ...to haulers who collect waste in areas not in close proximity to disposal facilities. Fees charged to third parties at transfer stations are usually based on the type and volume or weight of the waste deposited at the transfer station, the distance to the disposal site and general market factors. The...

  • Page 86
    ... and our own operations. The cost per ton of material purchased is based on market prices and the cost to transport the processed goods to our customers to whom we sell such materials. The price we pay for recyclable materials is often referred to as a "rebate." Rebates generally are based upon...

  • Page 87
    ... efficient means available for waste collection and disposal. We develop, operate and promote projects for the beneficial use of landfill gas through our WM Renewable Energy Program. Landfill gas is produced naturally as waste decomposes in a landfill. The methane component of the landfill gas is...

  • Page 88
    ... offerings. As companies, individuals and communities look for ways to be more sustainable, we are investing in greener technologies and promoting our comprehensive services that go beyond our core business of collecting and disposing of waste. Seasonal Trends Our operating revenues normally tend to...

  • Page 89
    ... Company is authorized to write up to approximately $1.5 billion in surety bonds or insurance policies for our final capping, closure and post-closure requirements, waste collection contracts and other business-related obligations. (b) We hold a noncontrolling interest in an entity that we use...

  • Page 90
    ... These laws and regulations are administered by the U.S. EPA, Environment Canada, and various other federal, state and local environmental, zoning, transportation, land use, health and safety agencies in the United States and Canada. Many of these agencies regularly examine our operations to monitor...

  • Page 91
    The primary United States federal statutes affecting our business are summarized below: ‰ The Resource Conservation and Recovery Act of 1976, as amended, regulates handling, transporting and disposing of hazardous and non-hazardous waste and delegates authority to states to develop programs to ...

  • Page 92
    ... governing solid waste disposal, water and air pollution, and, in most cases, releases and cleanup of hazardous substances and liabilities for such matters. States and provinces have also adopted regulations governing the design, operation, maintenance and closure of landfills and transfer stations...

  • Page 93
    ...go further and consider the compliance history of the parent, subsidiaries or affiliated companies, in addition to the applicant or permit holder. These laws authorize the agencies to make determinations of an applicant's or permit holder's fitness to be awarded a contract to operate, and to deny or...

  • Page 94
    ... is new to our business, and it could result in fragmentation of our efforts, rather than improved customer relationships. ‰ In efforts to enhance our revenues, we have implemented price increases and environmental fees, and we have continued our fuel surcharge program to offset fuel costs. The...

  • Page 95
    ...In addition to the risks set 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...

  • Page 96
    ...-term contracts, or if market prices are at lower levels for sustained periods, our revenues could be adversely affected. Increasing customer preference for alternatives to landfill disposal and waste-to-energy facilities could reduce our ability to operate at full capacity and cause our revenues...

  • Page 97
    .... Research and development of new technologies often requires significant spending that may divert capital investment away from our traditional business operations. We may experience difficulties or delays in the research, development, production and/or marketing of new products and services which...

  • Page 98
    ... Costs to remediate or restore the condition of closed sites may be significant. General economic conditions can directly and adversely affect our revenues and our operating margins. Our business is directly affected by changes in national and general economic factors that are outside of our control...

  • Page 99
    ... fuel to run our collection and transfer trucks and our equipment used in our landfill operations. Supply shortages could substantially increase our operating expenses. Additionally, as fuel prices increase, our direct operating expenses increase and many of our vendors raise their prices as a means...

  • Page 100
    ... 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. Provision of environmental and waste management services involves risks such as truck accidents, equipment defects, malfunctions and...

  • Page 101
    .... Any such charges could have a material adverse effect on our results of operations. Our capital requirements and our business strategy could increase our expenses or cause us to change our growth and development plans, or fail to maintain our desired credit profile. Recent economic conditions have...

  • Page 102
    ... of our business and "one-time" special projects cause our results to fluctuate, and prior performance is not necessarily indicative of our future results. Our operating revenues tend to be somewhat higher in summer months, primarily due to the higher volume of construction and demolition waste. The...

  • Page 103
    ... new accounting rules and interpretations, could adversely affect our reported financial position or operating results or cause unanticipated fluctuations in our reported operating results in future periods. Item 1B. None. Item 2. Properties. Our principal executive offices are in Houston, Texas...

  • Page 104
    ... 31 for the periods noted: 2011 2010 Landfills: Owned ...Operated through lease agreements ...Operated through contractual agreements ...Transfer stations ...Material recovery facilities ...Secondary processing facilities ...Waste-to-energy facilities ...Independent power production plants ... 211...

  • Page 105
    ... Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "WM." The following table sets forth the range of the high and low per-share sales prices for our common stock as reported on the NYSE: High Low 2010 First Quarter...

  • Page 106
    ... table summarizes common stock repurchases made during the fourth quarter of 2011: Issuer Purchases of Equity Securities Total Number of Shares Purchased Average Price Paid per Share(a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Maximum Dollar...

  • Page 107
    ...to be expected in the future. 2011(a) Years Ended December 31, 2010(a) 2009(a) 2008 (In millions, except per share amounts) 2007 Statement of Operations Data: Operating revenues ...Costs and expenses: Operating ...Selling, general and administrative ...Depreciation and amortization ...Restructuring...

  • Page 108
    ... maintaining our pricing discipline and increasing the amount of recyclable materials we 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...

  • Page 109
    ... million in 2010 to $1,551 million in 2011, primarily due to costs incurred to support our strategic growth plans and initiatives, including our acquisition of Oakleaf, and cost savings programs. We began to see the associated benefits of our cost savings programs in the second half of the year and...

  • Page 110
    ... federal tax refund in the third quarter of 2010 related to the liquidation of a foreign subsidiary in 2009. The increase in capital expenditures is a result of our increased spending on natural gas vehicles and fueling infrastructure, information technology infrastructure and growth initiatives...

  • Page 111
    ... outsourced waste and recycling services through a nationwide network of third-party haulers. The operations we acquired generated approximately $580 million in revenues in 2010. We acquired Oakleaf to advance our growth and transformation strategies and increase our national accounts customer base...

  • 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
    ... landfill gas, directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. Additionally, landfill development includes all land purchases for the landfill footprint and required landfill buffer property. The projection of these landfill costs...

  • Page 114
    ... site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating practices...

  • Page 115
    ...using our internal resources or by third-party environmental engineers or other service providers. Internally developed estimates are based on: ‰ Management's judgment and experience in remediating our own and unrelated parties' sites; ‰ Information available from regulatory agencies as to costs...

  • Page 116
    ... estimate based upon our reporting units' expected long-term performance considering the economic and market conditions that generally affect our business. The market approach estimates fair value by measuring the aggregate market value of publicly-traded companies with similar characteristics to...

  • Page 117
    ... not managed through our five Groups, including the Oakleaf operations we acquired on July 28, 2011, recycling brokerage services, electronic recycling services, in-plant services, landfill gas-to-energy services, integrated medical waste services and the impacts of investments that we are making in...

  • Page 118
    ... we charge for our collection, disposal, transfer and recycling services generally include fuel surcharges, which are indexed to current market costs for fuel. Our waste-to-energy revenues, which are generated by our Wheelabrator Group, are based on the type and weight or volume of waste received at...

  • Page 119
    ... each year, adjusted to exclude the impacts of divestitures (in millions): Denominator 2011 2010 Related-business revenues: Collection, landfill and transfer ...Waste-to-energy disposal ...Collection and disposal ...Recycling commodities ...Electricity ...Fuel surcharges and mandated fees ...Total...

  • Page 120
    ... on collection and disposal, increased by $37 million and $33 million for the years ended December 31, 2011 and 2010, respectively. Environmental fee revenues totaled $288 million in 2011 as compared with $251 million in 2010 and $218 million in 2009. Recycling commodities - Increases in the prices...

  • Page 121
    ...in 2011 as compared with the prior year due to economic conditions, increased pricing, competition and increased focus on waste reduction and diversion by consumers. In 2010, our collection business accounted for $254 million of the total volume-related revenue decline. We experienced commercial and...

  • Page 122
    ...57% increase in 2010 as compared with 2009. Increases in cost of goods sold accounted for 41% and 49% of the year-over-year increases in total operating expenses during 2011 and 2010, respectively. Fuel cost increases - Higher market prices for fuel caused increases in both our direct fuel costs and...

  • Page 123
    ...): 2011 Period-toPeriod Change 2010 Period-toPeriod Change 2009 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...

  • Page 124
    ... our strategic plan to grow into new markets and provide expanded service offerings, including our acquisition of Oakleaf in 2011 and (ii) increased costs of $9 million and $23 million during 2011 and 2010, respectively, resulting from improvements we are making to our information technology systems...

  • Page 125
    ... significant increase in the number of stock option awards granted in 2011 over those granted in 2010 and an increase in the number of retirement-eligible employees receiving those awards. In 2010, our labor and related benefits costs increased primarily due to (i) higher salaries and hourly wages...

  • Page 126
    ...benefit costs associated with this reorganization. In January 2009, we streamlined our organization by (i) consolidating our Market Areas from 45 Market Areas to 25 Market Areas; (ii) integrating the management of our recycling operations with our solid waste businesses in our four geographic Groups...

  • Page 127
    ...with the development of a new waste and recycling revenue management system. A significant portion of these costs was specifically associated with the purchase of a license for waste and recycling revenue management software and the efforts required to develop and configure that software for our use...

  • Page 128
    ...Groups during the three-year period ended December 31, 2011 are summarized below: ‰ revenue growth from yield on our base business; ‰ market prices for recyclable commodities reflected significant year-over-year improvement in both 2011 and 2010; ‰ the accretive benefits of recent acquisitions...

  • Page 129
    ...(i) consulting fees primarily associated with our new cost savings programs focusing on procurement, operational efficiency and back office efficiency and (ii) additional compensation expense due to annual salary and wage increases, headcount increases to support the Company's strategic growth plans...

  • Page 130
    ... acquired or invested in through our organic growth group's business development efforts. These businesses include a landfill gas-to-LNG facility; landfill gas-to-diesel fuels technologies; organic waste streams-to-fuels technologies; and other engineered fuels technologies. The operating results...

  • Page 131
    ... comparability of our reported income taxes for the years ended December 31, 2011, 2010 and 2009 is primarily affected by (i) variations in our income before income taxes; (ii) the utilization of a capital loss carry-back; (iii) the realization of state net operating loss and credit carry-forwards...

  • Page 132
    ...Statements for information related to the consolidation of these variable interest entities. Landfill and Environmental Remediation Discussion and Analysis We owned or operated 266 solid waste and five secure hazardous waste landfills at December 31, 2011 and 2010. At December 31, 2011 and 2010, the...

  • Page 133
    ... are generally responsible for final capping, closure and post-closure obligations under the operating contracts. 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, 2011 and 2010...

  • Page 134
    ... on-site construction projects. When a landfill we own or operate receives certification of closure from the applicable regulatory agency, we generally transfer the management of the site, including any remediation activities, to our closed sites management group. As of December 31, 2011, our closed...

  • Page 135
    ... methane collection and treatment ...Landfill remediation costs ...Other landfill site costs ...Total landfill operating costs ... $ 84 23 76 - 72 $255 $ 82 8 64 63 77 $294 $ 80 (30) 69 23 80 $222 The comparison of these costs for the reported periods has been significantly affected by accounting...

  • Page 136
    ... 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 of our ongoing operations...

  • Page 137
    ... held in trust for the construction of various projects or facilities. These balances 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...

  • Page 138
    ... 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 139
    ... in assets and liabilities, net of effects from business acquisitions and divestitures - Our cash flow from operations was negatively impacted in 2010 and favorably impacted in 2009, by changes in our working capital accounts. Although our working capital changes may vary from year to year, they...

  • Page 140
    ... increased from $281 million during 2009 to $407 million in 2010 and to $867 million in 2011. During the third quarter of 2011, we paid $432 million, net of cash received of $4 million and inclusive of certain adjustments, to acquire Oakleaf, which provides outsourced waste and recycling services...

  • Page 141
    ... liability company established to invest in and manage low-income housing properties. This investment is discussed in detail in Note 9 to the Consolidated Financial Statements. ‰ Other - Net cash used in other financing activities was $46 million in 2011 and $50 million in 2009 while net cash...

  • Page 142
    ... business. Certain of our obligations are quantity driven. For contracts that require us to purchase minimum quantities of goods or services, we have estimated our future minimum obligations based on the current market values of the underlying products or services. Accordingly, the amounts reported...

  • Page 143
    ... collection revenues are generated under long-term agreements with price adjustments based on various indices intended to measure inflation. Additionally, management's estimates associated with inflation have had, and will continue to have, an impact on our accounting for landfill and environmental...

  • Page 144
    ... years ended December 31, 2011. 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. Accordingly, as the market prices for these commodities increase or decrease, our revenues...

  • Page 145
    ... Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2011 and 2010 ...Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009 ...Consolidated...

  • Page 146
    ...Management has excluded from its assessment the internal controls of Oakleaf Global Holdings, which was acquired in July 2011 and, excluding goodwill, accounted for approximately 1% of our consolidated total assets at December 31, 2011 and 2% of our consolidated total operating revenues for the year...

  • Page 147
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Waste Management, Inc. as of December 31, 2011 and 2010, and the related consolidated statements of operations, cash flows, and changes in equity for each of the three years in the period ended...

  • Page 148
    ... 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 control over financial reporting as of December 31, 2011...

  • Page 149
    WASTE MANAGEMENT, INC. CONSOLIDATED BALANCE SHEETS (In Millions, Except Share and Par Value Amounts) December 31, 2011 2010 ASSETS Current assets: Cash and cash equivalents ...Accounts receivable, net of allowance for doubtful accounts of $29 and $26, respectively ...Other receivables ...Parts and ...

  • Page 150
    WASTE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, Except per Share Amounts) Years Ended December 31, 2011 2010 2009 Operating revenues: Service revenues ...Tangible product revenues ...Total operating revenues ...Costs and expenses: Operating costs (exclusive of ...

  • Page 151
    ... divestitures: Receivables ...Other current assets ...Other assets ...Accounts payable and accrued liabilities ...Deferred revenues and other liabilities ...Net cash provided by operating activities ...Cash flows from investing activities: Acquisitions of businesses, net of cash acquired ...Capital...

  • Page 152
    ...INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Millions, Except Shares in Thousands) Waste Management, Inc. Stockholders' Equity Accumulated Other Additional Comprehensive Paid-In Retained Income Amounts Capital Earnings (Loss) Total Comprehensive Income Common Stock Shares Treasury Stock...

  • Page 153
    ...) 630,282 $ 6 $ 4,528 $ 6,400 $ 230 Total Comprehensive Income Treasury Stock Shares Amounts Noncontrolling Interests $ 331 Balance, December 31, 2010 ...$ 6,591 Comprehensive Income: Consolidated net income ...Other comprehensive income (loss), net of taxes: Unrealized losses resulting from...

  • Page 154
    ...operations through five Groups. Our four geographic operating Groups, which are comprised of our Eastern, Midwest, Southern and Western Groups, provide collection, transfer, disposal (in both solid waste and hazardous waste landfills) and recycling services. Our fifth Group is the Wheelabrator Group...

  • Page 155
    ..., 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-worthy...

  • Page 156
    ...credit risk associated with trade receivables is limited due to the large number of geographically diverse customers we service. At December 31, 2011 and 2010, no single customer represented greater than 5% of total accounts receivable. Trade and Other Receivables Our receivables, which are recorded...

  • Page 157
    ...rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted-average rate applicable to our asset retirement obligations at December 31, 2011 is...

  • Page 158
    ...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 volume declines...

  • Page 159
    ... site-specific factors including current and projected mix of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying waste, anticipated access to moisture through precipitation or recirculation of landfill leachate, and operating practices...

  • Page 160
    ...using our internal resources or by third-party environmental engineers or other service providers. Internally developed estimates are based on: ‰ Management's judgment and experience in remediating our own and unrelated parties' sites; ‰ Information available from regulatory agencies as to costs...

  • Page 161
    ... 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, 2011, capitalized costs for software placed in service, net...

  • Page 162
    ... lease obligations are for property and equipment specific to our industry, including real property operated as a landfill, transfer station or waste-to-energy facility. Our leases have varying terms. Some may include renewal or purchase options, escalation clauses, restrictions, penalties...

  • Page 163
    ... For acquisitions completed before 2009, direct costs incurred for a business combination were accounted for as part of the cost of the acquired business. Goodwill and Other Intangible Assets Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We...

  • Page 164
    ... estimate based upon our reporting units' expected long-term performance considering the economic and market conditions that generally affect our business. The market approach estimates fair value by measuring the aggregate market value of publicly-traded companies with similar characteristics to...

  • Page 165
    ... 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 166
    ... in 2011, 2010 or 2009. ‰ Interest Rate Derivatives - Our "receive fixed, pay variable" interest rate swaps associated with outstanding fixed-rate senior notes have been designated as fair value hedges for accounting purposes. Accordingly, derivative assets are accounted for as an increase in...

  • Page 167
    ... increased direct and indirect costs incurred because of changes in market prices for fuel. We generally recognize revenue as services are performed or products are delivered. For example, revenue typically is recognized as waste is collected, tons are received at our landfills or transfer stations...

  • Page 168
    ... for management to make a meaningful estimate of the potential loss or range of loss associated with such contingencies. Supplemental Cash Flow Information Cash paid during the year (in millions): Years Ended December 31, 2011 2010 2009 Interest, net of capitalized interest and periodic settlements...

  • Page 169
    ...30 million for 2010 and 2011, respectively, related to our year-end annual review of final landfill capping, closure and post-closure obligations. (b) The amount reported in 2010 for our environmental remediation liabilities includes increased cost estimates associated with environmental remediation...

  • Page 170
    ... for the benefit of both the Company and the host community in which we operate had an aggregate carrying value of $107 million at December 31, 2011 and $103 million at December 31, 2010. These amounts are included in "Other receivables" and as long-term "Other assets" in our Consolidated Balance...

  • Page 171
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Our other intangible assets as of December 31, 2011 and 2010 were comprised of the following (in millions): Customer Contracts and Customer Lists Covenants Not-toCompete Licenses, Permits and Other Total December 31, ...

  • Page 172
    ... a result of changes in market conditions, which significantly reduced the cost of the facility. We also extended the term through May 2016. This facility provides us with credit capacity to be used for either cash borrowings or to support letters of credit. At December 31, 2011, we had $150 million...

  • Page 173
    ... bonds, which are used as a means of accessing low-cost financing for capital expenditures. The proceeds from these debt issuances may only be used for the specific purpose for which the money was raised, which is generally to finance expenditures for landfill construction and development. We repaid...

  • Page 174
    ... recorded in our Consolidated Balance Sheet (in millions): Derivatives Designated as Hedging Instruments Balance Sheet Location December 31, 2011 2010 Interest rate contracts ...Electricity commodity contracts ...Interest rate contracts ...Total derivative assets ...Interest rate contracts...

  • Page 175
    ... interest rates. The significant terms of our interest rate swap agreements as of December 31, 2011 and 2010 are summarized in the table below (in millions): As of Notional Amount Receive Pay Maturity Date December 31, 2011 ...December 31, 2010 ... $1,000 $ 500 Fixed 5.00%-7.125% Floating 0.38...

  • Page 176
    ... operations (in millions): Decrease to Interest Expense Due to Hedge Accounting for Interest Rate Swaps Years Ended December 31, 2011 2010 2009 Periodic settlements of active swap agreements(a) ...Terminated swap agreements ... $23 12 $35 $29 18 $47 $46 19 $65 (a) These amounts represent the net...

  • Page 177
    ...we executed a new C$370 million intercompany debt arrangement and entered into new forward contracts for the related principal and interest cash flows. The total notional value of the forward contracts was C$401 million at December 31, 2010. Interest of C$10 million was paid on November 30, 2011 and...

  • Page 178
    ..., we use short-term "receive fixed, pay variable" electricity commodity swaps to mitigate the variability in our revenues and cash flows caused by fluctuations in the market prices for electricity. We hedged 672,360 megawatt hours, or approximately 26%, of our Wheelabrator Group's full year 2010...

  • Page 179
    ... effective rate as follows: Years Ended December 31, 2011 2010 2009 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...

  • Page 180
    ... net operating loss and credit carry-forwards, utilization of a capital loss carry-back and miscellaneous federal tax credits. For financial reporting purposes, income before income taxes showing domestic and foreign sources was as follows (in millions) for the years ended December 31, 2011, 2010...

  • Page 181
    .... See Note 20 for additional information related to this investment. 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 manage low-income housing properties. The entity's low-income...

  • Page 182
    ...December 31, 2011 2010 Deferred tax assets: Net operating loss, capital loss and tax credit carry-forwards ...Landfill and environmental remediation liabilities ...Miscellaneous and other reserves ...Subtotal ...Valuation allowance ...Deferred tax liabilities: Property and equipment ...Goodwill and...

  • Page 183
    ... by 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, 2011, the combined...

  • Page 184
    ... Plans - We are a participating employer in a number of trustee-managed multiemployer, defined benefit pension plans for employees who participate in collective bargaining agreements. The risks of participating in these multiemployer plans are different from single-employer plans in that (i) assets...

  • Page 185
    ... employers, however, may eliminate the surcharge by entering into a collective bargaining agreement that meets the requirements of the applicable FIP or RP. (d) The Company was listed in the Form 5500 as providing more than 5% of the total contributions for each of the following plans and plan years...

  • Page 186
    ... required financial assurance instruments for our current operations. In an ongoing effort to mitigate risks of future cost increases and reductions in available capacity, we continue to evaluate various options to access cost-effective sources of financial assurance. Insurance - We carry insurance...

  • Page 187
    ... purchase a minimum number of tons of waste paper. The cost per ton we pay is based on market prices. ‰ Royalties - We have various arrangements that require us to make royalty payments to third parties including prior land owners, lessors or host communities where our operations are located. Our...

  • Page 188
    ... obligations are not fixed as of December 31, 2011. For contracts that require us to purchase minimum quantities of goods or services, we have estimated our future minimum obligations based on the current market values of the underlying products or services. As of December 31, 2011, our estimated...

  • Page 189
    ... 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 63 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental Response...

  • Page 190
    ... of having owned, operated or transported waste to a disposal facility that is alleged to have contaminated the environment or, in certain cases, on the basis of having conducted environmental remediation activities at sites. Some of the lawsuits may seek to have us pay the costs of monitoring of...

  • Page 191
    ... violations of the federal Clean Air Act, based on alleged failure to submit certain reports and design plans required by the EPA, and the failure to begin and timely complete the installation of a gas collection and control system ("GCCS") for the Waimanalo Gulch Sanitary Landfill on Oahu. The...

  • Page 192
    ... locals across 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...

  • Page 193
    ...severance and benefit costs incurred as a result of 2011 restructuring activities. 2009 Restructuring - In January 2009, we streamlined our organization by (i) consolidating many of our Market Areas; (ii) integrating the management of our recycling operations with our other solid waste business; and...

  • Page 194
    ...with the development of a new waste and recycling revenue management system. A significant portion of these costs was specifically associated with the purchase of a license for waste and recycling revenue management software and the efforts required to develop and configure that software for our use...

  • Page 195
    ... of post-retirement benefit obligations, net of taxes of $9 for 2011, $4 for 2010 and $1 for 2009 ... $ (62) 2 243 (11) $172 $ (33) 5 261 (3) $230 $ (8) 2 212 2 $208 15. Capital Stock, Dividends and Share Repurchases Capital Stock We have 1.5 billion shares of authorized common stock with a par...

  • Page 196
    ... rights and stock awards, including restricted stock, restricted stock units, or RSUs, and performance share units, or PSUs. The terms and conditions of equity awards granted under the 2009 Plan are determined by the Management Development and Compensation Committee of our Board of Directors...

  • Page 197
    ... executive officers, was comprised solely of PSUs. In 2010 and 2011, the annual LTIP award to the Company's senior leadership team included a combination of PSUs and stock options. During the reported periods, the Company has also granted restricted stock units and stock options to employees working...

  • Page 198
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Performance Share Units - PSUs are payable in shares of common stock after the end of a three-year performance period and after the Company's financial results for the entire performance period are reported, typically in...

  • Page 199
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) at the end of the deferral period. At December 31, 2011, 2010 and 2009 we had approximately 372,000, 371,000 and 315,000, respectively, vested deferred units outstanding. Stock Options - Prior to 2005, stock options were...

  • Page 200
    ... in 2010 and the increase in retirement-eligible employees receiving stock option awards, offset partially by a decrease in the number of PSUs granted in 2011. According to the terms of the stock option award agreement, retirement-eligible employees are not required to provide any future service to...

  • Page 201
    ... a weighted average period of 1.8 years for unvested RSU, PSU and stock option awards issued and outstanding. Non-Employee Director Plans Our non-employee directors currently receive annual grants of shares of our common stock, payable in two equal installments, under the 2009 Plan described above...

  • Page 202
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. In measuring the fair value of our assets and liabilities, we use market data or assumptions that we ...

  • Page 203
    ...money market funds that invest in U.S. government obligations with original maturities of three months or less. Available-for-Sale Securities Available for-sale securities are recorded at fair value based on quoted market prices. These assets include restricted trusts and escrow accounts invested in...

  • Page 204
    ... outsourced waste and recycling services through a nationwide network of third-party haulers. The operations we acquired generated approximately $580 million in revenues in 2010. We acquired Oakleaf to advance our growth and transformation strategies and increase our national accounts customer base...

  • Page 205
    ... the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill is a result of expected synergies from combining the Company's operations with Oakleaf's national accounts customer...

  • Page 206
    ... 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 207
    ... 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, 2011, our Consolidated Balance Sheet includes $308 million of net property and equipment...

  • Page 208
    ...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 manage low-income housing properties. We support the operations of the entity in exchange for a pro-rata share of the tax...

  • Page 209
    ... segments. Our four geographic operating Groups provide collection, transfer, disposal (in both solid waste and hazardous waste landfills) and recycling services. Our fifth Group is the Wheelabrator Group, which provides waste-to-energy services and manages waste-to-energy facilities and independent...

  • Page 210
    ...natural gas prices in the markets where we operate. Exposure to market fluctuations in electricity prices increased for the Wheelabrator Group in 2009 due in large part to the expiration of several long-term energy contracts. Additionally, the Company's current focus on the expansion of our waste-to...

  • Page 211
    ...104 $6,215 The table below shows the total revenues by principal line of business (in millions): Years Ended December 31, 2011 2010 2009 Collection ...Landfill ...Transfer ...Wheelabrator ...Recycling ...Other(a) ...Intercompany(b) ...Operating revenues ... $ 8,406 2,611 1,280 877 1,580 655 (2,031...

  • Page 212
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property and equipment (net) relating to operations in the United States and Puerto Rico, as well as Canada are as follows (in millions): 2011 December 31, 2010 2009 United States and Puerto Rico ...Canada ...Total ......

  • Page 213
    ... them from an underfunded multiemployer pension plan. This charge reduced diluted earnings per share for the quarter by $0.04. ‰ The severe winter weather experienced in early 2010 reduced our revenues and increased our overtime and landfill operating costs, causing an estimated decrease in our...

  • Page 214
    ...of our environmental remediation obligations and recovery assets. These items increased the quarter's "Net Income attributable to Waste Management, Inc." by $22 million, or $0.05 per diluted share. ‰ Income from operations was negatively affected by the recognition of pre-tax litigation charges of...

  • Page 215
    ... WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ...Property and equipment, net ...Investments in and advances to affiliates ...Other assets ...Total assets ...$ 119 6 125 - 12,006 120 $12,251 $ - - - - 14...

  • Page 216
    ... (Continued) December 31, 2010 WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ...Property and equipment, net ...Investments in and advances to affiliates ...Other assets ...Total assets ...$ 465 4 469 - 10...

  • Page 217
    ... ...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, 2010 Operating revenues ...Costs and expenses ...Income from operations ...Other income...

  • Page 218
    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, 2009 Operating revenues ...Costs and expenses ...Income from ...

  • Page 219
    ... (used in) operating activities ...Cash flows from investing activities: Acquisition 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 220
    ... (used in) operating activities ...Cash flows from investing activities: Acquisition 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 221
    ... (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 222
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued) 24. New Accounting Pronouncements Fair Value Measurements - In May 2011, the FASB amended authoritative guidance associated with fair value measurements. This...

  • Page 223
    ... 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 2012 Annual Meeting of...

  • Page 224
    ...12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item is incorporated herein by reference to the sections entitled "Equity Compensation Plan Table," "Director Nominee and Officer Stock Ownership," and "Persons Owning...

  • Page 225
    ... duly authorized. WASTE MANAGEMENT, INC. By: DAVID P. STEINER David P. Steiner President, Chief Executive Officer and Director /s/ Date: February 16, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 226
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of Waste Management, Inc. We have audited the consolidated financial statements of Waste Management, Inc. as of December 31, 2011 and 2010, and for each of the three years in the period ended December 31,...

  • Page 227
    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) 2009 - Reserves for doubtful accounts(b) ...2010 - Reserves for doubtful accounts(b) ...2011 ...

  • Page 228
    ... of securities authorized does not exceed 10% of the total assets of Waste Management and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Waste Management agrees to furnish a copy of such instruments to the SEC upon request. 2009 Stock...

  • Page 229
    ... June 30, 2011]. CDN $410,000,000 Credit Facility Credit Agreement by and between Waste Management of Canada Corporation (as Borrower), Waste Management, Inc. and Waste Management Holdings, Inc. (as Guarantors), BNP Paribas Securities Corp. and Scotia Capital (as Lead Arrangers and Book Runners) and...

  • Page 230
    ...to Fixed Charges. 21.1* - Subsidiaries of the Registrant. 23.1* - Consent of Independent Registered Public Accounting Firm. 31.1* - 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...

  • Page 231
    ... Calculation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document. XBRL Taxonomy Extension Labels Linkbase Document. XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith. Furnished herewith. Denotes management contract or compensatory plan or arrangement...

  • Page 232
    ..., net- $3 million; Results of the acquired Oakleaf operations and related integration costs- $4 million; and Landfill operating costs- $3 million. (b) Adjustments in 2011 consisted of after-tax charges of $11 million due to the changes in risk-free interest rates offset by an after-tax benefit of...

  • Page 233
    ...P. STEINER President and Chief Executive Officer Waste Management, Inc. THOMAS H. WEIDEMEYER (A, N) Retired Senior Vice President and Chief Operating Officer United Parcel Service, Inc. OFFICERS DAVID P. STEINER President and Chief Executive Officer DAVID A. AARDSMA Chief Sales and Marketing Officer...

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