Waste Management 2013 Annual Report Download

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Where Opportunity
Innovation Meet
and
2013 ANNUAL REPORT

Table of contents

  • Page 1
    Where Opportunity Innovation Meet and 2013 ANNUAL REPORT

  • Page 2
    ... through a network of 390 collection operations, 310 transfer stations, 267 landfill disposal sites, 17 waste-to-energy plants, 120 recycling facilities, 36 organic processing facilities and 137 landfill-gas-to-energy projects. To learn more about Waste Management, visit www.wm.com or www.thinkgreen...

  • Page 3
    ... to continue to use our free cash to pay our dividend, repurchase shares, reduce debt, and make acquisitions in our traditional solid waste business. Our efforts to lower selling, general and administrative (SG&A) expenses produced very encouraging results for the year. In 2013, SG&A costs were our...

  • Page 4
    ... production industry is among a number of industries capturing the benefits of sustainable operation. Our Waste Management Energy Service line of business provides single-source environmental management services to the oil and gas industry, including pad services, industrial cleaning, transportation...

  • Page 5
    ... to U.S. Department of Energy data. In 2013, we brought three new landfill-gas-to-energy facilities on line. We now have 137 plants in operation, which collectively generate 683 megawatts of power annually. Our Wheelabrator Technologies subsidiary operates 17 plants that use waste as a clean-burning...

  • Page 6
    ... Management works with customers and partners to develop ways to use organic waste for products such as soil amendments, organic fertilizers and renewable energy. We use proven technologies such as composting to process organics into higher-value materials. In late 2013, the New York City Department...

  • Page 7
    Proxy Statement and Form 10-K

  • Page 8
    ... Conference Center Waste Management, Inc. 1021 Main Street Houston, Texas 77002 Purpose: • To elect eight directors; • To vote on a proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014; • To...

  • Page 9
    ... ...Management Development and Compensation Committee ...Compensation Committee Report ...Compensation Committee Interlocks and Insider Participation ...Nominating and Governance Committee ...Related Party Transactions ...Special Committee ...Board of Directors Governing Documents ...Non-Employee...

  • Page 10
    ... lower the costs of the annual meeting, and conserve natural resources. Record Date Quorum Shares Outstanding Voting by Proxy Voting at the Meeting March 17, 2014. A majority of shares outstanding on the record date must be present in person or by proxy. There were 465,192,040 shares of Common Stock...

  • Page 11
    ... the ratification of the Company's independent registered public accounting firm, the broker may vote your shares at its discretion. But for other proposals, including the election of directors, the advisory vote on executive compensation, the approval of our 2014 Plan, and the stockholder proposal...

  • Page 12
    ... 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 713-512-6200. If you do not wish to participate in householding in the future, and prefer to receive separate...

  • 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
    ... members of management and employees are requested to attend meetings and present information, including those responsible for our Internal Audit, Environmental Audit, Business Ethics and Compliance, Human Resources, Government Affairs, Information Technology, Risk Management, Safety and Accounting...

  • Page 15
    ..., providing waste management services in the ordinary course of business and the Company's subsidiaries purchasing goods and services in the ordinary course of business. The categorical standards our Board uses in determining independence are included in our Corporate Governance Guidelines, which...

  • 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
    ... the information, opinions, reports and statements presented to them by Company management and by the independent registered public accounting firm. Based on the reviews and discussions explained above (and without other independent verification), the Audit Committee recommended to the Board (and...

  • 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
    ...in accordance with the rules and regulations of the New York Stock Exchange. In 2013, the Nominating and Governance Committee met five times. The Nominating and Governance Committee has a written charter that has been approved by the Board of Directors and can be found on our website. It is the duty...

  • Page 20
    ...the Nominating and Governance Committee, Waste Management, Inc., 1001 Fannin Street, Suite 4000, Houston, Texas 77002, between October 28, 2014 and November 27, 2014. Related Party Transactions The Board of Directors has adopted a written Related Party Transactions Policy for the review and approval...

  • Page 21
    ... 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 http://www.wm.com. Non-Employee Director...

  • Page 22
    ...$10,000 for Special Committee Other Annual Retainers The table below shows the aggregate cash paid, and stock awards issued, to the non-employee directors in 2013 in accordance with the descriptions set forth above: Name Fees Earned or Paid in Cash ($)(1) Stock Awards ($)(1)(2) Total ($) Bradbury...

  • Page 23
    ... member of our Board. Director Nominees Director Qualifications Bradbury H. Anderson, 64 Director since 2011 Vice Chairman and Chief Executive Officer - Best Buy Co., Inc. (multinational retailer of technology and entertainment products and services) from 2002 to 2009; President and Chief Operating...

  • Page 24
    ... Management Systems, 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...

  • Page 25
    ...Chief Executive Officer of The Interlake Corporation, a public diversified metal products company, from 1991 to 1999. As a result, he has extensive management experience within a wide range of business functions. Mr. Reum also brings over 20 years of experience as a director on public company boards...

  • Page 26
    ... to Mr. Fish based on their holdings in the Company's Retirement Savings Plan stock fund. (2) The number of options includes options currently exercisable and options that will become exercisable within 60 days of our record date. (3) Executive officers may choose a Waste Management stock fund as an...

  • Page 27
    ... the shares held by Steiner Family Holdings, LLC are pledged as security for a loan. (7) Included in the "All directors and executive officers as a group" are 15,215 stock equivalents attributable to the executive officers' collective holdings in the Company's Retirement Savings Plan stock fund. 18

  • Page 28
    ... executive officers and directors, we believe that all applicable requirements were complied with in 2013, except that Mr. Morris failed to timely make one report on Form 4 relating to the transfer of funds (i) out of the Company stock fund of our Retirement Savings Plan and (ii) out of the Company...

  • Page 29
    ... Information Officer from December 2009 to August 2012. • Senior Vice President - Global Product & Technology, Monster Worldwide (provider of global online employment solutions) from April 2005 to November 2009. • President, WM Recycle America, L.L.C., a wholly-owned subsidiary of the Company...

  • Page 30
    ...Years James E. Trevathan, Jr... 61 Mark A. Weidman ...Rick L Wittenbraker ... 57 66 • Executive Vice President and Chief Operating Officer since July 2012. • Executive Vice President - Growth, Innovation and Field Support from June 2011 to July 2012. • Senior Vice President - Southern Group...

  • Page 31
    ... a policy that prohibits it from entering into new agreements with executive officers that provide for certain death benefits or tax gross-up payments. 2013 Company Performance and Compensation Results Every day, we are helping industries, communities and individuals reduce, reuse and remove waste...

  • Page 32
    ... expect will benefit us in 2014, allowing us to focus on generating solid earnings and cash flow driven by increased yield and cost controls. The Company also expects to continue to use free cash flow to pay dividends, repurchase shares, reduce debt and make appropriate acquisitions and investments...

  • Page 33
    ... of Net Revenue. • Allocation of Long-Term Incentive Plan Awards: As in 2013, the total value of each named executive's annual long-term incentive plan award for 2014 will continue to be allocated 80% to performance share units and 20% to stock options. Performance Share Unit Performance Goals: As...

  • Page 34
    ... of grant. Stock options have a term of ten years. 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 agreements. Our equity...

  • Page 35
    ... plan, participating employees can generally elect to receive distributions commencing six months after the employee leaves the Company in the form of annual installments or a lump sum payment. We believe that providing a program that allows and encourages planning for retirement is a key factor...

  • Page 36
    ...total compensation, including the base salary, target annual cash incentive award opportunities, long-term incentive award opportunities and other benefits, including potential severance payments for each of our named executive officers. At a regularly scheduled meeting each year, the MD&C Committee...

  • Page 37
    ...of total direct compensation levels and compensation mixes for our executive officers during the second half of 2012, using information from: • Size-adjusted median compensation data from two general industry surveys in which management annually participates; the Aon Hewitt 2012 Total Compensation...

  • Page 38
    ... forms in which total compensation will be paid to executive officers and seeks to achieve an appropriate balance between base salary, annual cash incentive compensation and long-term incentive compensation. The MD&C Committee determines the size of each element based primarily on comparison group...

  • Page 39
    ... of total 2013 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) our other named executives, on average. These charts reflect the MD&C Committee's 2013 desired total mix of compensation for...

  • Page 40
    ...three years, the results of the stockholder advisory votes have not caused the MD&C Committee to recommend any changes to our compensation practices. Named Executives' 2013 Compensation Program and Results Base Salary After foregoing base salary increases in 2012 to support the Company's cost saving...

  • Page 41
    ... (ii) costs related to integration of the acquired Greenstar business; (iii) changes in ten-year Treasury rates, which are used to discount remediation reserves; (iv) labor disruption costs and litigation settlements; and (v) the accounting reclassification of labor costs associated with the Oakleaf...

  • Page 42
    ...revenue based on analyses of pricing and volume trends, as affected by operational and general economic factors; expected wage, maintenance, fuel and other operational costs; and expected SG&A costs. The MD&C Committee believes these financial performance measures support and align with the strategy...

  • Page 43
    ... units are granted to our 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...

  • Page 44
    ... are used to discount remediation reserves; (iii) withdrawal from underfunded multiemployer pension plans and labor disruption costs; (iv) charges related to acquisition and integration, and earnings on account of, the acquired Oakleaf, Greenstar and RCI businesses; and (v) benefits from investments...

  • Page 45
    ...-term goals. Stock Options - The MD&C Committee believes use of stock options is appropriate to support the growth element of the Company's strategy. The grant of options made to the named executive officers in the first quarter of 2013 in connection with the annual grant of long-term equity awards...

  • Page 46
    ... Benefits and Gross-up Payments - The Company has adopted a "Policy Limiting Certain Compensation Practices," which generally provides that the Company will not enter into new compensation arrangements that would obligate the Company to pay a death benefit or gross-up payment to an executive officer...

  • Page 47
    ... executive compensation philosophy, programs and decisions. Summary Compensation Table Stock Awards ($)(1) Option Awards ($)(2) Non-Equity Incentive Plan Compensation ($)(3) All Other Compensation ($)(4) Year David P. Steiner President and Chief Executive Officer 2013 2012 2011 Salary ($) Total...

  • Page 48
    ... 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-trip related maintenance. (b) The Company provided relocation assistance in accordance with Company policy to Mr. Fish and Mr...

  • Page 49
    ... 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 2013 Compensation Program and Results - Long-Term Equity Incentives - Stock Options" for additional information...

  • Page 50
    ...(1) Values are based on the closing price of the Company's Common Stock on December 31, 2013 of $44.87. (2) Represents vested stock options granted on March 9, 2010, March 9, 2011 and March 9, 2012 pursuant to our 2009 Stock Incentive Plan. (3) Represents stock options granted on March 8, 2013 that...

  • Page 51
    ...the MD&C Committee in February 2014. Following such determination, shares of the Company's Common Stock earned under this award were issued on February 18, 2014, based on the average of the high and low market price of the Company's Common Stock on that date. (2) We withheld shares in payment of the...

  • Page 52
    ... and individual equity award 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 our business...

  • Page 53
    ... act that caused or was intended to cause a violation of the Company's policies, generally accepted accounting principles or applicable laws and that materially increased the value of the equity award. Further, our MD&C Committee has adopted a clawback policy applicable to our Annual Incentive Plan...

  • Page 54
    ...-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 agreement or...

  • Page 55
    ... 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 • Three times base salary plus target annual cash bonus, paid in lump sum(1) ...• Continued coverage under health and welfare benefit plans for...

  • Page 56
    ... 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 cash bonus, paid in lump sum ...• Continued coverage under benefit plans for two years • Health and...

  • Page 57
    ... restricted stock units ...Total ... 1,905,500 23,040 975,653 92,567 2,996,760 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 58
    ... 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 • Three times base salary plus target annual cash bonus, paid in lump sum(1) ...• Continued coverage under health and welfare benefit plans for...

  • Page 59
    ...restricted stock units ...Total ... 1,662,500 23,040 455,027 209,094 2,349,661 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 60
    ... 2009 Stock Incentive Plan. Only our 2009 Stock Incentive Plan is available for awards. Also includes our Employee Stock Purchase Plan (ESPP). (b) Includes: options outstanding for 9,657,869 shares of Common Stock; 296,975 shares of Common Stock to be issued in connection with deferred compensation...

  • Page 61
    ... 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 of each year, all audit and audit-related services...

  • Page 62
    ... Company's long-term prospects; • the Company has clawback provisions 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...

  • Page 63
    ... take any action as a result of the outcome of the vote on this proposal. The MD&C Committee will carefully consider the outcome of the vote in connection with future executive compensation arrangements. THE BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE COMPANY'S EXECUTIVE COMPENSATION. 54

  • Page 64
    ... and reward opportunities designed to enhance the profitable growth of the Company by providing for additional shares of Common Stock to be available for such awards. In addition, as described below, under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), we generally are...

  • Page 65
    ...restrictions related to an award under the 2014 Plan may be exercised only in connection with a participant's death, disability, or retirement; in connection with a Corporate Change (as defined below); upon certain dispositions; and subject to an exception for up to 5% of the total shares authorized...

  • Page 66
    ...restrictions related to an award under the 2014 Plan may be exercised only in connection with a participant's death, disability, or retirement; in connection with a Corporate Change (as defined below); upon certain dispositions; and or to the extent such actions involve an aggregate number of shares...

  • Page 67
    ...and shares withheld for payment of applicable employment taxes and/or withholding obligations associated with an award shall again be available for the grant of an award under the 2014 Plan. In addition, the number of shares authorized under the plan is subject to adjustment in the case of corporate...

  • Page 68
    ... relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, or (iii) with the consent of the MD&C Committee. Types of Awards The 2014 Plan permits the granting of any or all of the following types of awards: Stock...

  • Page 69
    ... the 2014 Plan as "performancebased" compensation under Code Section 162(m), the performance goals may be one or more performance measures established by the MD&C Committee that are based on (i) the price of a share of Common Stock, (ii) earnings per share, (iii) market share, (iv) revenues or sales...

  • Page 70
    ...Corporate Change, specified by the MD&C Committee, in which event the MD&C Committee shall thereupon cancel such awards and the Company shall pay (or cause to be paid) to each participant an amount of cash per share equal to the excess, if any, of Change of Control Value (as defined in the 2014 Plan...

  • Page 71
    ...-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The participant's tax basis for the Common Stock acquired under a nonqualified stock option will be equal to the exercise price paid...

  • Page 72
    ... time over the amount, if any, paid by the participant with respect to the shares. Other Stock or Cash-Based Awards. The U.S. federal income tax consequences of other stock or cashbased awards will depend upon the specific terms of each award. Tax Consequences to the Company. In the foregoing cases...

  • Page 73
    Vote Required for Approval Approval of the 2014 Plan 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 FOR THE APPROVAL OF THE 2014 STOCK INCENTIVE PLAN. 64

  • Page 74
    ... of Waste Management, Inc. ("Company") hereby request that the Company provide a report, updated semiannually, disclosing the Company's: 1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene...

  • Page 75
    ... of its policies and procedures pertaining to political contributions in the Company's Code of Conduct, disseminated to all employees. It too is available to the public under the Investor Relations - Corporate Governance tab at www.wm.com. Waste Management believes it is important to participate in...

  • Page 76
    ...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 .... OTHER MATTERS We do not intend to bring any other matters before the annual meeting, nor do we have any present knowledge that any other matters will...

  • Page 77
    ... Stock Award. (f) "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. (g) "Committee" means the Management Development...

  • Page 78
    ... like number of shares of Common Stock under such Award. (n) "Effective Date" shall have the meaning assigned to such term in Paragraph III. (o) "Employee" means any person (including a Director) in an employment relationship with the Company or any Affiliate. (p) "Exchange Act" means the Securities...

  • Page 79
    ...Committee. (y) "Phantom Stock Award" means an Award granted under Paragraph X of the Plan. (z) "Phantom Stock Award Agreement" means a written agreement between the Company and a Participant with respect to a Phantom Stock Award. (aa) "Plan" means the Waste Management, Inc. 2014 Stock Incentive Plan...

  • Page 80
    ...of the Plan, the Committee shall have authority, in its discretion, to determine which Employees, Consultants, or Directors shall receive an Award, the time or times when such Award shall be made, the type of Award that shall be made, the number of shares of Common Stock to be subject to each Option...

  • Page 81
    ...the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan. The shares of the Company's stock to be issued pursuant to any Award may be represented by physical stock certificates or may be uncertificated. Notwithstanding references in the Plan to...

  • Page 82
    ..., such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is granted, the option price is at...

  • Page 83
    ... the Board or the board of directors (or analogous governing body) of an Affiliate of the Company, as applicable, on the exercisability of the Option. An Option Agreement may provide for the payment of the option price, in whole or in part, by the delivery of a number of shares of Common Stock (plus...

  • Page 84
    ... the third month following the date the dividends are paid to stockholders of such class of shares. At the time a Restricted Stock Award is granted, the Committee may, in its sole discretion, prescribe additional terms, conditions, or restrictions relating to Restricted Stock Awards, including, but...

  • Page 85
    ... to the terms and conditions determined by the Committee and in accordance with the provisions of the Waste Management, Inc. 409A Deferral Savings Plan. (g) Termination of Award. A Performance Award shall terminate if the Participant does not remain continuously in the employ of the Company and its...

  • Page 86
    ... conditions determined by the Committee and in accordance with the provisions of the Waste Management, Inc. 409A Deferral Savings Plan. (f) Termination of Award. A Phantom Stock Award shall terminate if the Participant does not remain continuously in the employ of the Company and its Affiliates or...

  • Page 87
    ... or liquidation of the Company or any Affiliate, any sale, lease, exchange, or other disposition of all or any part of its assets or business, or any other corporate act or proceeding. (b) Subdivision or Consolidation of Shares; Stock Dividends. The shares with respect to which Awards may be granted...

  • Page 88
    ... under the provisions of the Plan) as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Awards and the Company shall pay (or cause to be paid) to each Participant an amount of cash per share equal to the excess, if...

  • Page 89
    ... issue any Common Stock pursuant to any Award granted under the Plan at any time when the shares covered by such Award have not been registered under the Securities Act of 1933, as amended, and such other state and federal laws, rules, and regulations as the Company or the Committee deems applicable...

  • Page 90
    ... to the contrary, any portion of the payments and benefits provided under the Plan or the sale of shares of Common Stock shall be subject to a clawback or other recovery by the Company to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd...

  • Page 91
    ... 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 value New...

  • Page 92
    ...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 93
    ... and resource recovery, and disposal services. Through our subsidiaries, we are also a leading developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States. During 2013, our largest customer represented less than 2% of annual revenues. We employed...

  • Page 94
    ... with the operations of one of the nation's largest private recyclers. In July 2013, we acquired substantially all of the assets of RCI Environnement, Inc. ("RCI"), the largest waste management company in Quebec, and certain related entities. RCI provides collection, transfer, recycling and disposal...

  • Page 95
    ... provide include collection, landfill (solid and hazardous waste landfills), transfer, operation of waste-to-energy facilities and independent power production plants, recycling and resource recovery and other services, as described below. The following table shows revenues (in millions) contributed...

  • Page 96
    ..., which are referred to as tipping fees, are based on several factors, including competition and the type and weight or volume of solid waste deposited. Under environmental laws, the federal government (or states with delegated authority) must issue permits for all hazardous waste landfills. All of...

  • Page 97
    ... to the prices charged for changes in market conditions such as inflation, electricity prices and other general market factors. In recent years several of our long-term energy contracts and short-term pricing arrangements expired, significantly increasing our waste-toenergy revenues' exposure to...

  • Page 98
    ...employees work full-time inside our customers' facilities to provide full-service waste management solutions and consulting services; (ii) specialized disposal services for oil and gas exploration and production operations and (iii) services associated with the disposal of fly ash, residue generated...

  • Page 99
    ..., labor costs and amount and type of equipment furnished to the customer. We face intense competition in our Solid Waste business based on pricing and quality of service. We have also begun competing for business based on service offerings. As companies, individuals and communities look for ways to...

  • Page 100
    ... time span, as a result of significant start-up costs and other factors, such revenue sometimes generates earnings at comparatively lower margins. Employees At December 31, 2013, we had approximately 42,700 full-time employees, of which approximately 7,400 were employed in administrative and sales...

  • Page 101
    ... letter of credit facilities with terms ending through December 2016. This letter of credit capacity was fully utilized as of December 31, 2013. Our funded trust and escrow accounts generally have been established to support landfill final capping, closure, post-closure and environmental remediation...

  • Page 102
    ... various other federal, state, provincial 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 compliance with these laws and regulations and have the power to enforce...

  • Page 103
    ... settlement agreement with the Environmental Defense Fund to evaluate the 1996 new source performance standards and emission guidelines for new and existing landfills as required by the Clean Air Act every eight years and revise them if deemed necessary. The EPA is scheduled to issue a proposed rule...

  • Page 104
    ...the effect of climate change may require our landfills to deploy more stringent emission controls, with associated capital or operating costs; however, we do not believe that such regulations will have a material adverse impact on our business as a whole. See Item 1A. Risk Factors - "The adoption of...

  • Page 105
    ... 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 106
    ... customer demand for and opportunities to develop waste services offering verifiable carbon reductions, such as waste reduction, increased recycling, and conversion of landfill gas and discarded materials into electricity and fuel. We use carbon life cycle tools in evaluating potential new services...

  • Page 107
    ... upon our ability to implement our business strategy successfully. Implementation of our strategy will require effective management of our operational, financial and human resources and will place significant demands on those resources. See Item 7. Management's Discussion and Analysis of Financial...

  • Page 108
    ... have a substantial impact on our business, and compliance with such regulations is costly. A large number of complex laws, rules, orders and interpretations govern environmental protection, health, safety, land use, zoning, transportation and related matters. In recent years, we have perceived an...

  • Page 109
    ...on siting and constructing new waste disposal, transfer, recycling or processing facilities or on expanding existing facilities; ‰ limitations, regulations or levies on collection and disposal prices, rates and volumes; ‰ limitations or bans on disposal or transportation of out-of-state waste or...

  • Page 110
    ... price fluctuations in the price of methane gas, electricity and other energy-related products that are marketed and sold by our landfill gas recovery, waste-to-energy and independent power production plant operations that can significantly impact our revenue from yield provided by such businesses...

  • Page 111
    .... The Waste Management brand name, trademarks and logos and our reputation are powerful sales and marketing tools, and we devote significant resources to promoting and protecting them. Adverse publicity, whether or not justified, relating to activities by our operations, employees or agents...

  • Page 112
    ... litigation. Costs to remediate or restore the condition of closed sites may be significant. General economic conditions can directly and adversely affect our revenues and our income from operations margins. Our business is directly affected by changes in national and general economic factors that...

  • Page 113
    ... Countries ("OPEC") and other oil and gas producers, regional production patterns, weather conditions and environmental concerns. Average diesel fuel prices decreased in 2013 but increased in both 2012 and 2011. We need diesel fuel to run a significant portion of our collection and transfer trucks...

  • Page 114
    ... and its business partners. We also rely on a Payment Card Industry compliant third party to protect our customers' credit card information. Further, as the Company pursues its strategy to grow through acquisitions and to pursue new initiatives that improve our operations and cost structure, the...

  • Page 115
    ...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, including constructing and operating landfills, involves risks such as truck accidents, equipment...

  • Page 116
    ... advances relating to such asset or project reduced by any portion of the capitalized costs that we estimate will be recoverable, through sale or otherwise. We also carry a significant amount of goodwill on our Consolidated Balance Sheet, which is required to be assessed for impairment annually, and...

  • Page 117
    ... our control, including changes in oil and gas prices. Additionally, changes in laws or government regulations regarding GHG emissions from oil and gas operations and/or hydraulic fracturing could increase our customers' costs of doing business and reduce oil and gas exploration and production by...

  • Page 118
    ... weather-related and other "one-time" occurrences can boost revenues through additional work for a limited time span, as a result of significant start-up costs and other factors, such revenue sometimes generates earnings at comparatively lower margins. For these and other reasons, operating results...

  • Page 119
    ...in financial markets; ‰ changes in labor relations in operations outside the United States; ‰ political, economic or military instability and civil unrest; and ‰ credit quality of entities that purchase our power. The legal and financial environment in foreign countries could also make it more...

  • Page 120
    ... periods noted: 2013 2012 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 ... 209 22 36 267...

  • Page 121
    ...7, 2014, the closing sales price as reported on the NYSE was $42.84 per share. The number of holders of record of our common stock on February 7, 2014 was 12,527. The graph below shows the relative investment performance of Waste Management, Inc. common stock, the Dow Jones Waste & Disposal Services...

  • Page 122
    ... Issuer Purchases of Equity Securities Total Number of Shares Purchased Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs Period Average Price Paid per Share(a) October...

  • Page 123
    ... Years Ended December 31, 2012(a) 2011(a) 2010 (In millions, except per share amounts) 2009 Statement of Operations Data: Operating revenues ...Costs and expenses: Operating ...Selling, general and administrative ...Depreciation and amortization ...Restructuring ...Goodwill impairments ...(Income...

  • Page 124
    ...projects and initiatives that benefit the waste industry, the customers and communities we serve and the environment. We are also committed to providing long-term value to our stockholders by successfully executing on our strategic goals of optimizing our business, knowing and servicing the customer...

  • Page 125
    ... related to (i) a $483 million charge to impair goodwill associated with our Wheelabrator business; (ii) $262 million of charges to impair certain landfills, primarily in our Eastern Canada Area; (iii) $144 million of charges to write down the carrying value of three waste-to-energy facilities...

  • Page 126
    ... we expect will benefit us in 2014, allowing us to focus on generating solid earnings and cash flow driven by increased yield and cost controls. We also expect to continue to use our free cash flow to pay our dividends, repurchase shares, reduce debt and make appropriate acquisitions and investments...

  • Page 127
    ... expand the Company's existing assets and operations in Quebec. Since the acquisition date, the RCI business has recognized revenues of $87 million and net income of $7 million, which are included in our Consolidated Statement of Operations. Oakleaf Global Holdings - On July 28, 2011, we paid $432...

  • Page 128
    ... 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 129
    ...gas collection systems, environmental monitoring equipment for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road construction and other capital infrastructure costs. Additionally, landfill development includes all land purchases for the landfill footprint...

  • Page 130
    ... the permit application processes do not meet the one- or five-year requirements. When we include the expansion airspace in our calculations of remaining permitted and expansion airspace, we also include the projected costs for development, as well as the projected asset retirement costs related to...

  • Page 131
    ... 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 132
    ...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 133
    ... the associated goodwill was impaired. As a result, we recognized an impairment charge of $483 million, which had no related tax benefit. We estimated the implied fair value of our Wheelabrator reporting unit goodwill using a combination of income and market approaches. Because the annual impairment...

  • Page 134
    ... generally affect our business. Fair value computed by this method 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...

  • Page 135
    ... are recorded as assets when we believe that the receipt of such amounts is probable. Results of Operations Operating Revenues Our operating revenues generally come from fees charged for our collection, disposal, transfer, recycling and resource recovery, and waste-to-energy services and from sales...

  • Page 136
    The mix of operating revenues from our major lines of business is reflected in the table below (in millions): Years Ended December 31, 2013 2012 2011 Collection: Commercial ...Residential ...Industrial ...Other ...Total collection ...Landfill ...Transfer ...Wheelabrator ...Recycling ...Other ......

  • Page 137
    ... of divestitures (in millions): Denominator 2013 2012 Related-business revenues: Collection, landfill and transfer ...Waste-to-energy disposal ...Collection and disposal ...Recycling commodities ...Electricity ...Fuel surcharges and mandated fees ...Total Company ... $10,939 431 11,370 1,357 266...

  • Page 138
    ... average price changes related to the overall mix of services, which are due to both the types of services provided and the geographic locations where our services are provided; (ii) changes in average price from new and lost business and (iii) price decreases to retain customers. Revenue growth...

  • Page 139
    ... our revenue increase on account of volume of $67 million, or 0.5%, for the year ended December 31, 2012. Our volume fluctuations are generally attributable to economic conditions, pricing changes, competition and diversion of waste by customers. Our collection business experienced revenue declines...

  • Page 140
    ... our Energy Service and recycling lines of business. These acquisitions demonstrate our focus on identifying strategic growth opportunities in new, complementary lines of business. Operating Expenses Our operating expenses include (i) labor and related benefits (excluding labor costs associated with...

  • Page 141
    ... loss of certain strategic accounts. These decreases were offset, in part, by higher costs associated with the acquired RCI operations. The increase in 2012 was driven in part by (i) the acquisition of Oakleaf in July 2011 and (ii) increased volumes related to Hurricane Sandy. ‰ Cost of goods sold...

  • Page 142
    ... oil and gas development expense in 2012 and (iii) higher rental costs in 2012, primarily associated with Oakleaf. Selling, General and Administrative Our selling, general and administrative expenses consist of (i) labor and related benefit costs, which include salaries, bonuses, related insurance...

  • Page 143
    ... associated with each final capping event and (iv) amortization of intangible assets with a definite life, using either a 150% declining balance approach or a straight-line basis over the definitive terms of the related agreements, which are generally from two to 15 years depending on the type...

  • Page 144
    ...with our Puerto Rico operations and (iii) $9 million associated with a majority-owned waste diversion technology company. During the years ended December 31, 2012 and 2011, we recognized goodwill impairment charges of $4 million and $1 million, respectively, related to certain of our non-Solid Waste...

  • Page 145
    ... to (i) $31 million of charges to impair various recycling assets; (ii) $20 million of charges to write down assets related to a majorityowned waste diversion technology company and (iii) a $15 million charge to write down the carrying value of an oil and gas property to its estimated fair value...

  • Page 146
    ... to (i) lower prices for commodities primarily affecting the 2012 period; (ii) higher processing costs driven in part by increased outbound quality control in 2013 and (iii) operating losses related to the acquired operations of Greenstar in 2013; ‰ The accretive benefits of the RCI acquisition...

  • Page 147
    ... timing and scope of planned maintenance activities and (iv) increased international development costs. Other - Our "Other" income from operations includes (i) those elements of our in-plant services, landfill gas-to-energy operations, and third-party subcontract and administration revenues managed...

  • Page 148
    ... and $4 million in 2013, 2012 and 2011, respectively. The expense in 2013 was impacted by impairment charges of $71 million relating to other-thantemporary declines in the value of investments in waste diversion technology companies accounted for under the cost method. We wrote down the carrying...

  • Page 149
    ... $48 million in 2011. 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 150
    ... or permitted as designed, the weighted average remaining landfill life for all owned or operated landfills is approximately 49 years when considering remaining permitted airspace, expansion airspace and projected annual disposal volume. The number of landfills we own or operate as of December...

  • Page 151
    ... in the future are reviewed annually by our engineers and are based on a number of factors, including standard engineering techniques and site-specific factors such as current and projected mix of waste type; initial and projected waste density; estimated number of years of life remaining; depth...

  • Page 152
    ..., environmental monitoring equipment for groundwater and landfill gas, directly related engineering, capitalized interest, and on-site road construction and other capital infrastructure costs. The cost basis of our landfill assets also includes estimates of future costs associated with landfill...

  • Page 153
    ... costs ...Other landfill site costs ...Total landfill operating costs ... $ 87 (9) 77 9 68 $232 $ 84 6 67 - 67 $224 $ 84 23 76 - 72 $255 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...

  • Page 154
    ... 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, we have cash requirements for: (i) the construction and expansion of our landfills; (ii) additions to...

  • Page 155
    ... 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 156
    ... year to year, they are typically driven by changes in accounts receivable, which are affected by both revenue changes and timing of payments received, and accounts payable, which are affected by both cost changes and timing of payments. Additionally, accruals for our annual incentive plan favorably...

  • Page 157
    ... in oil and gas producing properties and $14 million related to certain of our medical waste service operations and a transfer station in our Greater Mid-Atlantic Area. The remaining amount reported for 2013, as well as the proceeds in 2012 and 2011, generally relate to the sale of fixed assets...

  • Page 158
    ... primarily related to furthering our goal of expanding our service offerings and developing waste diversion technologies. In 2011, our investments included a $48 million payment made to acquire a noncontrolling interest in a limited liability company, which was established to invest in and manage...

  • Page 159
    ... options and the related excess tax benefits generated a total of $132 million of financing cash inflows during 2013 compared with $43 million during 2012 and $45 million during 2011. The increase in exercised stock options during 2013 is primarily due to the increase in the Company's stock price...

  • Page 160
    ... 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. (c) Our debt obligations...

  • Page 161
    ... 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 162
    ... revenues at our waste-to-energy facilities will be at market rates by the end of 2014. Our exposure to variability associated with changes in market prices for electricity has increased over the last few years as long-term power purchase agreements have expired. The energy markets have changed...

  • Page 163
    ... value of our foreign currency derivatives, we believe these changes in fair value would not have a material impact to the Company. Refer to Notes 8 and 14 of the Consolidated Financial Statements for additional information regarding our foreign currency derivatives. The foreign currency exposure...

  • Page 164
    ... Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2013 and 2012 ...Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011 ...Consolidated...

  • Page 165
    ... of compliance with the policies or procedures may deteriorate. Management of the Company assessed the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of...

  • Page 166
    ... with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of...

  • Page 167
    ... the standards of the Public Company Accounting Oversight Board (United States), Waste Management, Inc.'s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of...

  • Page 168
    ...; 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, 165,961,646 and 166,062,235 shares, respectively ...Total Waste Management, Inc. stockholders' equity ...Noncontrolling...

  • Page 169
    WASTE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Millions, Except per Share Amounts) Years Ended December 31, 2013 2012 2011 Operating revenues: Service revenues ...Tangible product revenues ...Total operating revenues ...Costs and expenses: Operating costs (exclusive of ...

  • Page 170
    WASTE MANAGEMENT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Millions) Years Ended December 31, 2013 2012 2011 Consolidated net income ...Other comprehensive income (loss), net of taxes: Gains and losses on derivative instruments: Unrealized gains (losses), resulting from changes in ...

  • Page 171
    ... 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 ...Net gain on disposal of assets ...Effect of goodwill impairments ...Effect of (income...

  • Page 172
    ..., 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 173
    ...energy facilities and independent power production plants. We also provide additional services that are not managed through our Solid Waste or Wheelabrator businesses, which are presented in this report as "Other." Additional information related to our segments can be found in Note 21. 2. Accounting...

  • Page 174
    ... 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 175
    ...; 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 176
    ... and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. Generally, we are required to maintain and monitor landfill sites for a 30-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is...

  • Page 177
    ...result in a material change in these liabilities, related assets and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts change. Changes in inflation rates or the estimated costs, timing or extent of...

  • Page 178
    ... rates for each landfill for assets associated with each final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change. It is...

  • Page 179
    ... 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 180
    ... developing or obtaining internal-use software within furniture, fixtures and office equipment. These costs include direct external costs of materials and services used in developing or obtaining the software and internal costs for employees directly associated with the software development project...

  • Page 181
    ... the assets' economic useful lives. Management expects that in the normal course of business our operating leases will be renewed, replaced by other leases, or replaced with fixed asset expenditures. Our rent expense during each of the last three years and our future minimum operating lease payments...

  • Page 182
    ...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 183
    ... down to their estimated fair values using a market approach considering the highest and best use of the assets. Refer to Note 13 for additional information related to landfill asset impairments recognized during the reported periods. Goodwill - At least annually, and more frequently if warranted on...

  • Page 184
    ... generally affect our business. Fair value computed by this method 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...

  • Page 185
    ... through 2014 to effectively lock in a fixed interest rate for those anticipated issuances. Foreign currency exchange rate derivatives are used to hedge our exposure to changes in exchange rates for anticipated intercompany debt transactions, and related interest payments, between Waste Management...

  • Page 186
    ... Revenue Recognition Our revenues are generated from the fees we charge for waste collection, transfer, disposal and recycling and resource recovery services; from the sale of electricity, steam, and landfill gas, which are byproducts of our waste-to-energy and landfill operations; and from the sale...

  • Page 187
    ... 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 2013, 2012 and 2011, total interest costs were $500...

  • Page 188
    ... of the timing of closure and post-closure activities at two of our landfills related to landfill asset impairments, discussed further in Note 13. (b) The amount reported in 2012 for our environmental remediation liabilities includes the impact of a decrease in the risk-free discount rate used to...

  • Page 189
    ... of charges to impair goodwill associated with (i) our Wheelabrator business, which is discussed in more detail below; (ii) our Puerto Rico operations and (iii) an investment in a majority-owned waste diversion technology company. These decreases were partially offset by consideration paid for...

  • Page 190
    ... the associated goodwill was impaired. As a result, we recognized an impairment charge of $483 million, which had no related tax benefit. We estimated the implied fair value of our Wheelabrator reporting unit goodwill using a combination of income and market approaches. Because the annual impairment...

  • Page 191
    ... Puerto Rico operations and $4 million to impair goodwill associated with our recycling business and (ii) $4 million of charges in 2012 to impair goodwill related to certain of our nonSolid Waste operations. We incurred no impairment charges in 2011 as a result of our annual fourth quarter goodwill...

  • Page 192
    ...term through July 2018. This facility provides us with credit capacity to be used for either cash borrowings or to support letters of credit. The rates we pay for outstanding loans are generally based on LIBOR plus a spread depending on the Company's debt rating assigned by Moody's Investors Service...

  • Page 193
    ...500 million of term credit was established specifically to fund the acquisition of the assets of RCI Environnement, Inc. and was fully drawn in July 2013. The term credit is non-revolving credit and principal amounts repaid may not be re-borrowed. For additional information related to borrowings and...

  • Page 194
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Capital Leases and Other - The increase in our capital leases and other debt obligations is primarily related to the deferred purchase price of (i) land needed to support a landfill expansion and (ii) Greenstar LLC, ...

  • Page 195
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We have not offset fair value amounts recognized for our derivative instruments. For information related to the inputs used to measure our derivative assets and liabilities at fair value, refer to Note 18. Fair Value ...

  • Page 196
    ... into forward-starting interest rate swaps with a total notional value of $525 million to hedge the risk of changes in semi-annual interest payments due to fluctuations in the forward ten-year LIBOR swap rate for anticipated fixed-rate debt issuances in 2011, 2012 and 2014. We designated these...

  • Page 197
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Electricity Commodity Derivatives We use short-term, "receive fixed, pay variable" electricity commodity swaps to reduce the variability in our revenues and cash flows caused by fluctuations in the market prices for ...

  • Page 198
    ... refinement processes qualify for federal tax credits that are expected to be realized through 2019 in accordance with Section 45 of the Internal Revenue Code. Our initial consideration for this investment consisted of a cash payment of $48 million. We account for our investment in this entity using...

  • Page 199
    ... of statutes of limitations, all tax years prior to 2009 are closed. In July 2011, we acquired Oakleaf Global Holdings ("Oakleaf"), which is subject to potential IRS examinations for the years 2010 and 2011. Pursuant to the terms of our acquisition of Oakleaf, we are entitled to indemnification for...

  • Page 200
    ...Deferred tax assets: Net operating loss, capital loss and tax credit carry-forwards ...Miscellaneous and other reserves, net ...Subtotal ...Valuation allowance ...Deferred tax liabilities: Landfill and environmental remediation liabilities ...Property and equipment ...Goodwill and other intangibles...

  • Page 201
    ... 401(k) retirement savings plan under terms specified in their collective bargaining agreement. Certain employees outside the United States including those in Canada, the United Kingdom and Puerto Rico, participate in defined contribution plans maintained by the Company in compliance with laws of...

  • Page 202
    ..." and long-term "Other liabilities" in our Consolidated Balance Sheet. Multiemployer Defined Benefit Pension Plans - We are a participating employer in a number of trusteemanaged multiemployer, defined benefit pension plans for employees who are covered by collective bargaining agreements. The risks...

  • Page 203
    ... 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 of the multiemployer plans considered to be individually significant as providing more than 5% of the total contributions...

  • Page 204
    ...but not reported losses, is based on an actuarial valuation and internal estimates. The accruals for these liabilities could be revised if future occurrences or loss development significantly differ from our assumptions used. As of December 31, 2013, our commercial General Liability Insurance Policy...

  • Page 205
    ... 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 206
    ...energy and recycling facility in England. In connection with this investment, we are committed to provide funding of up to £57 million, or $94 million, based on the exchange rate as of December 31, 2013, to be used for the development and construction of the facility. Additional information related...

  • Page 207
    ...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 63 NPL sites, which we do not own, are at various procedural stages under the Comprehensive Environmental...

  • Page 208
    ... 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 209
    ... subsidiaries are participating employers in a number of trustee-managed multiemployer defined benefit pension plans for the covered employees. Refer to Note 10 for additional information about our participation in multiemployer defined benefit pension plans considered individually significant. In...

  • Page 210
    ...total of $18 million of pre-tax restructuring charges, of which $7 million was related to employee severance and benefit costs, including costs associated with our acquisitions of Greenstar and RCI and our 2012 restructurings discussed below. The remaining charges were primarily related to operating...

  • Page 211
    ...with our Puerto Rico operations and (iii) $9 million associated with a majority-owned waste diversion technology company. During the years ended December 31, 2012 and 2011, we recognized goodwill impairment charges of $4 million and $1 million, respectively, related to certain of our non-Solid Waste...

  • Page 212
    ... to (i) $31 million of charges to impair various recycling assets; (ii) $20 million of charges to write down assets related to a majorityowned waste diversion technology company and; (iii) a $15 million charge to write down the carrying value of an oil and gas property to its estimated fair value...

  • Page 213
    ...) Recognized in OCI (Effective Portion) Years Ended December 31, 2013 2012 2011 Derivatives Designated as Cash Flow Hedges Forward-starting interest rate swaps ...Foreign currency derivatives ...Electricity commodity derivatives ...Total before tax ...Tax (expense) benefit ...Net of tax ... $14 17...

  • Page 214
    ... by our Board of Directors. The following is a summary of our share repurchases for the periods presented. We did not repurchase any shares of common stock in 2012. Years Ended December 31, 2013 2011 Shares repurchased (in thousands) ...Weighted average per share purchase price ...Total repurchases...

  • Page 215
    ...by the Management Development and Compensation Committee of our Board of Directors. The 2013 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. The annual LTIP awards granted...

  • Page 216
    ... and units used for payment of associated taxes. The shares of common stock that were earned during the years ended December 31, 2013 and 2012 on account of PSU awards had a fair market value of $14 million and $32 million, respectively. No shares of common stock were earned in 2011, as the Company...

  • Page 217
    ... an exercise price ranging from $29.24 to $37.59. We received cash proceeds of $132 million, $43 million and $45 million during the years ended December 31, 2013, 2012 and 2011, respectively, from employee stock option exercises. We also realized tax benefits from these stock option exercises during...

  • Page 218
    ... with other relevant factors including implied volatility in market-traded options on the Company's stock. The dividend yield is the annual rate of dividends per share over the exercise price of the option as of the grant date. For the years ended December 31, 2013, 2012 and 2011 we recognized $54...

  • Page 219
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 17. Earnings Per Share Basic and diluted earnings per share were computed using the following common share data (shares in millions): Years Ended December 31, 2013 2012 2011 Number of common shares outstanding at year-...

  • Page 220
    ... 31, 2013 Using Quoted Significant Prices in Other Significant Active Observable Unobservable Markets Inputs Inputs (Level 1) (Level 2) (Level 3) Total Assets: Money market funds ...Fixed-income securities ...Redeemable preferred stock ...Foreign currency derivatives ...Total assets ...Liabilities...

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    ... valued using a third-party pricing model that incorporates information about forward Canadian dollar rates, or observable market data, as of the reporting date. The third-party pricing model used to value our foreign currency derivatives also incorporates Company and counterparty credit valuation...

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    ...During the year ended December 31, 2013, we acquired Greenstar, LLC and substantially all of the assets of RCI Environnement, Inc., which are discussed further below. Additionally, we acquired 14 other businesses related primarily to our collection and energy services operations. Total consideration...

  • Page 223
    ...of the purchase price for the Greenstar acquisition (in millions): December 31, 2013 Accounts and other receivables ...Parts and supplies ...Other current assets ...Property and equipment ...Goodwill ...Other intangible assets ...Accounts payable ...Accrued liabilities ...Landfill and environmental...

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    ... price for the RCI acquisition (in millions): December 31, 2013 Accounts and other receivables ...Property and equipment ...Goodwill ...Other intangible assets ...Deferred revenues ...Landfill and environmental remediation liabilities ...Long-term debt, less current portion ...Total purchase price...

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    ... 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 consideration, net of cash acquired, for all acquisitions was $244...

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    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) increase our national accounts customer base while enhancing our ability to provide comprehensive environmental solutions. For the year ended December 31, 2011, subsequent to the acquisition date, Oakleaf recognized ...

  • Page 227
    ... within the related party group whose activities are most closely associated with the LLCs. As of December 31, 2013 and 2012, our Consolidated Balance Sheets included $284 million and $296 million, respectively, of net property and equipment associated with the LLCs' waste-to-energy facilities and...

  • Page 228
    ... - In January 2011, we acquired a noncontrolling interest in a limited liability company established to invest in and manage a refined coal facility. Along with the other equity investor, we support the operations of the entity in exchange for a pro-rata share of the tax credits it generates. Our...

  • Page 229
    ... remaining Areas, including the Northwest and Mid-Atlantic regions of the United States and Eastern Canada. Our Wheelabrator business, which manages waste-to-energy facilities and independent power production plants, continues to be a separate reportable segment as it meets one of the quantitative...

  • Page 230
    ...,241 Total ...$15,409 (a) Our "Other" net operating revenues and "Other" income from operations include (i) the effects of those elements of our in-plant services, landfill gas-to-energy operations, and third-party subcontract and administration revenues managed by our Sustainability Services and...

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    ... support services include, among other things, treasury, legal, information technology, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills. Income from operations for "Corporate and other" also includes costs associated...

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    ... following table presents changes in goodwill during 2012 and 2013 by reportable segment (in millions): Tier 1 Solid Waste Tier 2 Tier 3 Wheelabrator Other Total Balance, December 31, 2011 ...Acquired goodwill ...Divested goodwill, net of assets held-for-sale ...Impairments ...Translation and other...

  • Page 233
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) (b) Intercompany revenues between lines of business are eliminated within the Consolidated Financial Statements included herein. Net operating revenues relating to operations in the United States and Puerto Rico, as well...

  • Page 234
    ... related to our Puerto Rico operations, which positively affected our diluted earnings per share by $0.01. Fourth Quarter 2013 ‰ Net income was negatively impacted by the recognition of net pre-tax charges aggregating $1 billion comprised of (i) a $483 million charge to impair goodwill associated...

  • Page 235
    ... to investments in waste diversion technology companies; (v) $31 million of charges to impair various recycling assets; (vi) a $15 million charge to write down the carrying value of an oil and gas property to its estimated fair value and (vii) other charges to impair goodwill and write down the...

  • Page 236
    ... of projected operating losses at each of these facilities; (ii) $6 million of charges related to investments in waste diversion technology companies; (iii) $5 million for the impairment of a facility not currently used in our operations and (iv) $4 million of charges to impair goodwill related to...

  • Page 237
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2013 WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ...Property and ...

  • Page 238
    WASTE MANAGEMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) CONDENSED CONSOLIDATING BALANCE SHEETS (Continued) December 31, 2012 WM WM Holdings Non-Guarantor Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents ...Other current assets ......

  • Page 239
    ... before income taxes ...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, 2012 Operating revenues ...Costs and expenses (b) ...Income from...

  • Page 240
    ... Consolidated Year Ended December 31, 2011 Operating revenues ...Costs and expenses (b) ...Income from operations ...Other income (expense): Interest income (expense) ...Equity in earnings of subsidiaries, net of taxes ...Other, net ...Income before income taxes ...Provision for (benefit...

  • Page 241
    ...Consolidated Year Ended December 31, 2013 Comprehensive income ...Less: Comprehensive income attributable to noncontrolling interests ...Comprehensive income attributable to Waste Management, Inc...Year...income attributable to Waste Management, Inc...Year Ended December 31, 2011 Comprehensive income ...

  • Page 242
    ... (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 243
    ... (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 244
    ... (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 245
    ...Accounting Officer, as well as other officers, directors and employees of the Company. The code of ethics, entitled "Code of Conduct," is posted on our website at www.wm.com under the section "Corporate Governance" within the "Investor Relations" tab. Item 11. Executive Compensation. The information...

  • Page 246
    ... 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 247
    ...the undersigned, thereunto duly authorized. WASTE MANAGEMENT, INC. By: /s/ DAVID P. STEINER David P. Steiner President, Chief Executive Officer and Director Date: February 18, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 248
    ...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, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, and have issued our report...

  • Page 249
    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 2011 - Reserves for doubtful accounts(a) ...2012 - Reserves for doubtful accounts(a) ...2013 - Reserves...

  • Page 250
    ... 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 ended...

  • Page 251
    ... and Waste Management Holdings, Inc., as guarantors, the Lenders from time to time party thereto, and The Bank of Nova Scotia, as administrative agent [incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2013]. Employment Agreement between the Company and David...

  • Page 252
    ...9, 2011]. Form of 2011 Stock Option Award Agreement [incorporated by reference to Exhibit 10.2 to Form 8-K dated March 9, 2011]. Computation of Ratio of Earnings to Fixed Charges. Subsidiaries of the Registrant. Consent of Independent Registered Public Accounting Firm. Certification Pursuant to Rule...

  • Page 253
    ...- $7 million; and Partial withdrawal from multiemployer pension plan- $2 million. (b) Adjustments include impairment charges (net of non-controlling interest associated with certain of our impaired assets) associated with assets in the "Asset Impairments and Unusual Items" financial caption, as well...

  • Page 254

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    ... of the Company is scheduled to be held at 11:00 a.m. on May 13, 2014 at: The Maury Myers Conference Center Waste Management, Inc. 1021 Main Street Houston, Texas 77002 (A) Audit Committee (C) Management Development and Compensation Committee (N) Nominating and Governance Committee WEB SITE www.wm...

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