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:

• volatility and 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 "WM."

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 spite of current economic conditions, our operating results for the third quarter of 2009 were solid and our results continue to demonstrate our focus on pricing and controlling our costs. Highlights of our financial results for the quarter include:

• Revenues of $3,023 million compared with $3,525 million in the third quarter of 2008;

• Internal revenue growth from yield on collection and disposal business measured as a percentage of the related business of 2.9% in the current period compared with 3.0% in the same period of the prior year;

• Operating expenses of $1,856 million, or 61.4% of revenues, compared with $2,221 million, or 63.0% of revenues, in the third quarter of 2008;

• Selling, general and administrative expenses decreased by $30 million, from $369 million in the prior year period to $339 million in the third quarter of 2009, due in large part to the benefits of our January 2009 restructuring and our focus on reducing controllable spending;

• Income from operations of $525 million, or 17.4% of revenues, for the third quarter of 2009 compared with $632 million, or 17.9% of revenues, for the third quarter of 2008; and

• Net income attributable to Waste Management, Inc. of $277 million, or $0.56 per diluted share for the current quarter, as compared with $310 million, or $0.63 per diluted share, for the prior year period.

During the third quarter of 2009, we continued to face a challenging economic environment that significantly affected the comparability of our results of operations. The most significant challenges of the current quarter were:

• The negative effect on our revenues and income from operations of significantly lower recyclable commodity prices and the negative effect natural gas prices had on our waste-to-energy and landfill gas-to-energy businesses. Combined, these items had a negative $0.09 per diluted share impact on our current quarter's "Net income attributable to Waste Management, Inc."; and

• Declines in revenues due to reduced volumes, particularly in our industrial collection and disposal operations, due to the contraction of the economy, pricing and competition.

Although the current market environment continues to present challenges, we have seen a steady recovery in recyclable commodity prices from the record lows experienced in the fourth quarter of 2008 and early 2009. In addition, volumes appear to be stabilizing and we are optimistic that some of our more economically sensitive lines of business will begin to compare more favorably with prior periods. We also expect to continue to benefit from our January 2009 restructuring and believe that the cost savings of our leaner organization will provide even more pronounced benefits when volumes improve.

In August 2009, we entered into an agreement to purchase a 40 percent equity investment in Shanghai Environment Group ("SEG") for approximately $140 million. As a joint venture partner in SEG, we will participate in the operation and management of waste-to-energy and other waste services in the Chinese market. Our purchase of an interest in SEG is subject to regulatory approval, and the transaction is currently expected to be approved in early 2010. Our experience in the waste-to-energy business has shown that investments in this business generally provide strong and predictable returns. Accordingly, we are actively pursuing other waste-to-energy projects in the United States and Europe and are hopeful that we will be making additional investments in this business in the near term.

Free Cash Flow

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. 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              Nine Months
                                                               Ended                    Ended
                                                           September 30,            September 30,
                                                         2009         2008        2009         2008

Net cash provided by operating activities               $   575      $  771      $ 1,642      $ 1,902
Capital expenditures                                       (240 )      (301 )       (823 )       (787 )
Proceeds from divestitures of businesses (net of cash
divested) and other sales of assets                           8          54           20           92

Free cash flow                                          $   343      $  524      $   839      $ 1,207

We believe that our ability to generate strong cash flow from operations in spite of this challenging economic environment is an indication of the strength and resilience of our solid waste business. Our ability to generate strong cash flows from operating activities has allowed us to continue to make capital investments that are intended to sustain and grow our business, although we have been monitoring our capital spending and making appropriate adjustments for the changes in our operating results.

Given the stabilization of the capital markets and economic conditions, we resumed our share repurchases in the third quarter of 2009. As a result, during the current period, we returned value to our shareholders by repurchasing $65 million of our common stock and paying $143 million of dividends.

Basis of Presentation of Consolidated and Segment Financial Information

Adoption of New Accounting Standards

Fair Value Measurements - In September 2006, the Financial Accounting Standards Board issued new authoritative guidance associated with fair value measurements. This guidance defined fair value, established a framework for measuring fair value, and expanded disclosures about fair value measurements. In February 2008, the FASB delayed the effective date of the new guidance for all non-financial assets and non-financial liabilities, except those that are measured at fair value on a recurring basis. Accordingly, we adopted this guidance for assets and liabilities recognized at fair value on a recurring basis effective January 1, 2008 and adopted the guidance for non-financial assets and liabilities measured on a non-recurring basis effective January 1, 2009. The application of the fair value framework did not have a material impact on our consolidated financial position, results of operations or cash flows.

Business Combinations - In December 2007, the FASB issued revisions to the authoritative guidance associated with business combinations. This guidance clarified and revised the principles for how an acquirer recognizes and measures identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree. This guidance also addressed the recognition and measurement of goodwill acquired in business combinations and expanded disclosure requirements related to business combinations. Effective January 1, 2009, we adopted the FASB's revised guidance associated with business combinations. The portions of this guidance that relate to business combinations completed before January 1, 2009 did not have a material impact on our consolidated financial statements. Further, business combinations completed in 2009 have not been material to our financial position, results of operations or cash flows. However, to the extent that future business combinations are material, our adoption of the FASB's revised authoritative guidance associated with business combinations 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 when such amounts can be determined 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.

Noncontrolling Interests in Consolidated Financial Statements - In December 2007, the FASB issued new authoritative guidance that established accounting and reporting standards for noncontrolling interests in

subsidiaries and for the deconsolidation of a subsidiary. The guidance also established 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 this new guidance on January 1, 2009. The presentation and disclosure requirements of this guidance, 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 rates.

Subsequent Events - In May 2009, the FASB established standards related to accounting for, and disclosure of, events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. We have adopted the provisions of this new authoritative guidance, which became effective for interim and annual reporting periods ending after June 15, 2009. Subsequent events have been evaluated through the date and time the financial statements were issued on October 29, 2009. No material subsequent events have occurred since September 30, 2009 that required recognition or disclosure in our current period financial statements.

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 four 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 more efficiently provide comprehensive environmental solutions to our customers and ensure that we are focusing on maximizing the profitability and return on invested capital of all aspects of our business. 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 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 these changes for all periods presented to provide financial information that consistently reflects our current approach to managing our geographic Group operations.

New Accounting Standards Pending Adoption

Consolidation of Variable Interest Entities - In June 2009, the FASB issued revised authoritative guidance associated with the consolidation of variable interest entities. This revised guidance replaces the current quantitative-based assessment for determining which enterprise has a controlling interest in a variable interest entity with an approach that is now primarily qualitative. This qualitative approach focuses on identifying the enterprise that has (i) the power to direct the activities of the variable interest entity that can most significantly impact the entity's performance; and (ii) the obligation to absorb losses and the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This revised guidance also requires an ongoing assessment of whether an enterprise is the primary beneficiary of a variable interest entity rather than a reassessment only upon the occurrence of specific events. The new FASB-issued authoritative guidance associated with the consolidation of variable interest entities is effective for the Company January 1, 2010. The change in accounting may either be applied by recognizing a cumulative-effect adjustment to retained earnings on the date of adoption or by retrospectively restating one or more years and recognizing a cumulative-effect adjustment to retained earnings as of the beginning of the earliest year restated. We currently are in the process of assessing the provisions of this new guidance, but have not determined whether the adoption will have a material impact on our consolidated financial statements.

Multiple-Deliverable Revenue Arrangements - In September 2009, the FASB amended authoritative guidance associated with multiple-deliverable revenue arrangements. This amended guidance addresses the determination of when individual deliverables within an arrangement may be treated as separate units of accounting and modifies the manner in which transaction consideration is allocated across the separately identifiable deliverables. The amendments to authoritative guidance associated with multiple-deliverable revenue arrangements are effective for the Company January 1, 2011, although the FASB does permit early adoption of the guidance provided that it is retroactively applied to the beginning of the year of adoption. The new accounting standard may be applied either retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the date of adoption. We are in the process of assessing the provisions of this new guidance and currently do not

expect that the adoption will have a material impact on our consolidated financial statements. However, our adoption of this guidance may significantly impact our accounting and reporting for future revenue arrangements to the extent they are material.

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 and Western Groups, and our Wheelabrator Group, which includes our
waste-to-energy facilities and independent power production plants, or IPPs.
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              Nine Months
                                       Ended                    Ended
                                   September 30,            September 30,
                                 2009        2008         2009         2008

                 Eastern        $   763     $   869     $  2,211     $  2,550
                 Midwest            749         876        2,121        2,531
                 Southern           836         957        2,509        2,846
                 Western            801         886        2,343        2,592
                 Wheelabrator       214         245          627          683
                 Other              163         248          441          712
                 Intercompany      (503 )      (556 )     (1,467 )     (1,634 )

                 Total          $ 3,023     $ 3,525     $  8,785     $ 10,280

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

                                   Three Months              Nine Months
                                       Ended                    Ended
                                   September 30,            September 30,
                                 2009        2008         2009         2008

                 Collection     $ 2,024     $ 2,233     $  5,975     $  6,608
                 Landfill           666         787        1,929        2,258
                 Transfer           359         417        1,046        1,221
                 Wheelabrator       214         245          627          683
                 Recycling          202         344          510          988
                 Other               61          55          165          156
                 Intercompany      (503 )      (556 )     (1,467 )     (1,634 )

                 Total          $ 3,023     $ 3,525     $  8,785     $ 10,280

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 the current period changes:

                                                         Period-to-Period Change                              Period-to-Period Change
                                                        for the Three Months Ended                           for the Nine Months Ended
                                                              September 30,                                        September 30,
                                                              2009 vs. 2008                                        2009 vs. 2008
                                                                As a % of         As a % of                         As a % of         As a % of
                                                                 Related            Total                            Related            Total
                                                Amount         Business(a)       Company(b)          Amount        Business(a)       Company(b)

Average yield:
Collection, landfill and transfer             $       85                3.1 %            2.4 %     $      256               3.2 %            2.5 %
Waste-to-energy disposal(c)                           (3 )             (2.6 )           (0.1 )             (5 )            (1.5 )           (0.1 )

Collection and disposal(c)                            82                2.9              2.3              251               3.0              2.4
Recycling commodity                                 (139 )            (38.7 )           (3.9 )           (482 )           (46.6 )           (4.7 )
. . .