In an effort to keep our shareholders and the public informed about our business, we may make "forward-looking statements." Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements generally include statements containing:

• projections about accounting and finances;

• plans and objectives for the future;

• projections or estimates about assumptions relating to our performance; and

• our opinions, views or beliefs about the effects of current or future events, circumstances or performance.

You should view these statements with caution. These statements are not guarantees of future performance, circumstances or events. They are based on the facts and circumstances known to us as of the date the statements are made. All phases of our business are subject to uncertainties, risks and other influences, many of which we do not control. Any of these factors, either alone or taken together, could have a material adverse effect on us and could change whether any forward-looking statement ultimately turns out to be true. Additionally, we assume no obligation to update any forward-looking statement as a result of future events, circumstances or developments. The following discussion should be read together with the Condensed Consolidated Financial Statements and the notes thereto.

Some of the risks that we face and that could affect our business and financial statements for 2009 and beyond include the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• problems with the operation of our current information technology or the development and deployment of new information systems could decrease our efficiencies and increase our costs;

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

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

General

Our principal executive offices are located at 1001 Fannin Street, Suite 4000, Houston, Texas 77002. Our telephone number at that address is (713) 512-6200. Our website address is http://www.wm.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are all available, free of charge, on our website as soon as practicable after we file the reports with the SEC. Our stock is traded on the New York Stock Exchange under the symbol "WMI."

We are the leading provider of integrated waste services in North America. Using our vast network of assets and employees, we provide a comprehensive range of waste management services. Through our subsidiaries we provide collection, transfer, recycling, disposal and waste-to-energy services. In providing these services, we actively pursue projects and initiatives that we believe make a positive difference for our environment, including recovering and processing the methane gas produced naturally by landfills into a renewable energy source. Our customers include commercial, industrial, municipal and residential customers, other waste management companies, electric utilities and governmental entities.

Overview

In the first quarter of 2009, our revenues were $2.8 billion compared with $3.3 billion for the first quarter of 2008. Net income attributable to Waste Management, Inc. for the quarter was $155 million, or $0.31 per diluted share, compared with $241 million, or $0.48 per diluted share, for the first quarter of 2008. In order to meaningfully

compare the results of our first quarter of 2009 with the prior year period, it is important to highlight the following items, which significantly affected our 2009 results:

• The decrease in demand for recyclable commodities both domestically and internationally and the resulting sharp decline in recyclable commodity prices that we experienced in the fourth quarter of 2008 continued into the first quarter of 2009. The decrease in recyclable commodity prices reduced our revenues by $178 million when comparing the first quarter of 2009 with the first quarter of 2008. Although these revenue declines were offset in part by a reduction in our operating expenses, we have determined that the change in the recyclable commodities markets had a negative $0.09 impact on our diluted earnings per share.

• We recognized a pre-tax, non-cash charge of $49 million related to the abandonment of SAP software as our revenue management system, which had a negative $0.06 impact on our diluted earnings per share.

• We recognized a pre-tax charge of $38 million for our January 2009 restructuring, which was primarily related to severance and benefit costs. The restructuring charge reduced diluted earnings per share for the quarter by $0.05, although we are beginning to see significant cost reductions, particularly in our selling, general and administrative expenses, that indicate that we will quickly realize the benefit of our streamlined structure. In 2009, we expect annualized cost savings from this restructuring to exceed $120 million.

We believe that our operating results demonstrate our success in pricing discipline, operating efficiently and generating strong earnings and cash flows through a challenging economic environment.

Revenues declined by $456 million when comparing the first quarter of 2009 with the first quarter of 2008. Over 70% of this decrease was due to commodity impacts related to recycling materials, fuel and energy, and non-operational items including foreign currency translation and one fewer workday during the first quarter of 2009. The remaining decrease can be attributed to volume declines, which were partially offset by increased revenues from yield on our collection and disposal business. Volume declines during the first quarter of 2009 were generally due to the slowdown in the economy, which is significantly affecting the volumes of our more economically sensitive industrial collection operations, although our commercial collection volumes have also declined due to the significant decreases in consumer and business spending. These revenue declines were partially offset by internal revenue growth from yield on our collection and disposal operations, which increased our first quarter 2009 revenues by $84 million, or 2.6%, reflecting our commitment to pricing even in the current economic environment.

Our operating expenses decreased from $2.1 billion, or 64.1% of revenues, in the first quarter of 2008 to $1.7 billion, or 61.4% of revenues in the current period. The significant decrease in these expenses is primarily due to lower costs of goods sold as a result of the weakened commodities markets, lower direct and indirect fuel costs as a result of a 38% reduction in diesel fuel prices and lower costs in each of our ten operating expense categories due to the decrease in volumes. Our selling, general and administrative expenses decreased by $31 million, or 8.4%, from $368 million in the first quarter of 2008 to $337 million in the first quarter of 2009. The decrease is due in large part to the cost savings that we are beginning to realize as a result of our January 2009 restructuring and our focus on identifying and reducing discretionary costs. The reductions in our operating and selling, general and administrative expenses when comparing the first quarter of 2009 with the first quarter of 2008 demonstrate our focus on operating efficiently. While we are encouraged that these efforts are allowing us to maintain our margins on our base business, we believe that it is necessary to identify and manage potential exposures over the short- and long-term. Steps taken to date include the implementation of a salary freeze, reductions in planned spending for travel and meetings and an increased focus on monitoring the financial health of suppliers and customers. We are also in the process of fully implementing our restructuring plan intended to streamline our field-based management structure and increase the efficiency of our Corporate organization.

As is our practice, we are including free cash flow, which is a non-GAAP measure of liquidity, in our disclosures because we use this measure in the evaluation and management of our business. We also believe it is indicative of our ability to pay our quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay our debt obligations. Free cash flow is not intended to replace "Net cash provided by operating activities," which is the most comparable GAAP measure. However, we believe free cash flow gives investors greater insight into how we view our liquidity. Nonetheless, the use of free cash flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that we have committed to, such as declared dividend payments and debt service requirements.

We calculate free cash flow as shown in the table below (in millions), which may not be the same as similarly titled measures presented by other companies:

                                                                          Three Months
                                                                             Ended
                                                                           March 31,
                                                                        2009        2008

Net cash provided by operating activities                              $  519      $  561
Capital expenditures                                                     (325 )      (213 )
Proceeds from divestitures of businesses (net of cash divested) and
other sales of assets                                                       5          14

Free cash flow                                                         $  199      $  362

We believe that our ability to generate over $500 million in operating cash flow during the first quarter of 2009 in spite of this challenging economic environment is an indication of the strength and resilience of our solid waste business. Our continued ability to generate cash flows in line with our expectations has allowed us to continue to make capital investments intended to sustain and grow our business. For example, our capital expenditures for the first quarter of 2009 included approximately $30 million related to the purchase of a permitted landfill development project in our Southern Group. The remaining increase in capital expenditures when comparing the first quarter of 2009 with the prior year period can generally be attributed to timing differences associated with cash payments for the previous year's fourth quarter capital spending. We generally use a significant portion of our free cash flow on capital spending in the fourth quarter of each year. A more significant portion of our fourth quarter 2008 spending was paid in cash in 2009 than in the preceding year.

Basis of Presentation of Consolidated and Segment Financial Information

Accounting Changes

SFAS No. 157 - In September 2006, the Financial Accounting Standards Board issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are measured at fair value on a recurring basis. Effective January 1, 2009, we adopted SFAS No. 157 with respect to non-financial assets and liabilities measured on a non-recurring basis. The application of the fair value framework established by SFAS No. 157 to these fair value measurements did not have a material impact on our consolidated financial position, results of operations or cash flows.

SFAS No. 141(R) - In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which establishes principles for how the acquirer recognizes and measures in the financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. This statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Effective January 1, 2009, we adopted SFAS No. 141(R). The portions of the statement that relate to business combinations completed on or before January 1, 2009 did not have a material impact on our consolidated financial statements. Further, business combinations completed in the first quarter of 2009 were not material to our financial position, results of operations or cash flows. However, to the extent that future business combinations are material, our adoption of SFAS No. 141(R) will significantly impact our accounting and reporting for future acquisitions, principally as a result of (i) expanded requirements to value acquired assets, liabilities and contingencies at their fair values; and
(ii) the requirement that acquisition-related transaction and restructuring costs be expensed as incurred rather than capitalized as a part of the cost of the acquisition.

SFAS No. 160 - In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51, which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The standard also establishes that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as

equity in the consolidated financial statements. We adopted SFAS No. 160 on January 1, 2009. The presentation and disclosure requirements of SFAS No. 160, which must be applied retrospectively for all periods presented, have resulted in reclassifications to our prior period consolidated financial information and the remeasurement of our 2008 effective tax rate.

Reclassifications

Segments - During the first quarter of 2009, we transferred responsibility for the oversight of day-to-day recycling operations at our material recovery facilities and secondary processing facilities to the management teams of our geographic Groups. We believe that by integrating the management of these aspects of our recycling operations with the remainder of our solid waste business we can ensure that we are focusing on maximizing the profitability and return on invested capital of all aspects of our business as well as more efficiently providing comprehensive environmental solutions to our customers. As a result of this operational change, we also changed the way we review the financial results of our geographic Groups. Beginning in 2009, the financial results of our material recovery facilities and secondary processing facilities are included as a component of their respective geographic Group or segment and the financial results of our recycling brokerage business and electronics recycling services are included as part of our "Other" operations. We have reflected the impact of this change for all periods presented to provide financial information that consistently reflects our current approach to managing our geographic Group operations.

Critical Accounting Estimates and Assumptions

In preparing our financial statements, we make numerous estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment. In preparing our financial statements the most difficult, subjective and complex estimates and the assumptions that deal with the greatest amount of uncertainty relate to our accounting for landfills, environmental remediation liabilities, asset impairments and self-insurance reserves and recoveries, as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements.

Results of Operations

Operating Revenues

We manage and evaluate our operations primarily through our Eastern, Midwest,
Southern, Western, and Wheelabrator (which includes our waste-to-energy
facilities and independent power production plants, or IPPs) Groups. These five
operating Groups are our reportable segments. Shown below (in millions) is the
contribution to revenues during each period provided by our five operating
Groups and our Other waste services:


                                            Three Months
                                                Ended
                                              March 31,
                                          2009        2008

                          Eastern        $   692     $   797
                          Midwest            649         774
                          Southern           833         932
                          Western            757         834
                          Wheelabrator       201         213
                          Other              132         231
                          Intercompany      (454 )      (515 )

                          Total          $ 2,810     $ 3,266

The mix of operating revenues from our major lines of business is reflected in the table below (in millions):

                                            Three Months
                                                Ended
                                              March 31,
                                          2009        2008

                          Collection     $ 1,952     $ 2,138
                          Landfill           600         685
                          Transfer           321         380
                          Wheelabrator       201         213
                          Recycling          143         320
                          Other               47          45
                          Intercompany      (454 )      (515 )

                          Total          $ 2,810     $ 3,266

The following table provides details associated with the period-to-period change in revenues (dollars in millions) along with an explanation of the significant components of current period changes:

                                                  Period-to-Period Change
                                                       2009 vs. 2008
                                                        As a% of         As a% of
                                                         Related           Total
                                          Amount       Business(a)      Company(b)

     Average yield:
     Collection, landfill and transfer   $     84               3.3 %           2.6 %
     Waste-to-energy disposal(c)                -                 -               -

     Collection and disposal(c)                84               3.1             2.6
     Recycling commodity                     (178 )           (53.0 )          (5.5 )
     Electricity(c)                            (9 )           (10.8 )          (0.3 )
     Fuel surcharges and mandated fees        (64 )           (42.1 )          (2.0 )

     Total                                   (167 )            (5.2 )          (5.2 )
     Volume                                  (265 )                            (8.1 )

     Internal revenue growth                 (432 )                           (13.3 )
     Acquisition                               23                               0.7
     Divestitures                             (12 )                            (0.3 )
     Foreign currency translation             (35 )                            (1.1 )

                                         $   (456 )                           (14.0 )%

(a) These percentages are calculated by dividing the increase or decrease for the three months ended March 31, 2009 by related business revenue for the three months ended March 31, 2008, adjusted to exclude the impacts of divestitures of operations that contributed to revenues for the three months ended March 31, 2008 ($12 million). The table below summarizes the related business revenues for the three months ended March 31, 2008, adjusted to exclude the impacts of divestitures, which represents the denominator used to calculate the percentages of related business:

                   Related business revenues:
                   Collection, landfill and transfer   $ 2,582
                   Waste-to-energy disposal                101

                   Collection and disposal               2,683
                   Recycling commodity                     336
                   Electricity                              83
                   Fuel surcharges and mandated fees       152

                   Total Company                       $ 3,254

(b) These percentages are calculated by dividing the amount of the increase or decrease for the three months ended March 31, 2009 by total company revenue for the three months ended March 31, 2008 ($3,266 million) adjusted to exclude the impacts of divestitures ($12 million).

(c) Average yield from "Collection and disposal" excludes all electricity-related revenues generated by our Wheelabrator Group, which are reported as "Electricity" revenues. In prior periods, amounts reported as "Electricity" revenues were attributable to Wheelabrator's IPPs only. Beginning with our current period reporting, "Electricity" also includes electricity-related revenues at our waste-to-energy facilities. Accordingly, beginning in 2009, the "Waste-to-energy disposal" component of "Collection and disposal" average yield is principally related to disposal revenues.

Our revenues decreased $456 million, or 14.0%, for the three months ended March 31, 2009 as compared with the prior year period. Over 70% of this decline can be attributed to (i) recyclable commodity prices; (ii) lower fuel prices, which reduced revenue provided by our fuel surcharge program; (iii) foreign currency translation on revenues from our Canadian operations; (iv) fewer work days in the current quarter than in the same quarter of the prior year; and
(v) the effect of lower electricity prices on our waste-to-energy business. In addition, revenues continue to decline due to lower volumes, which has been . . .