Jim Alderson - Director of Investor Relations David P. Steiner - Chief Executive Officer Lawrence O'Donnell, III - President and Chief Operating Officer Robert G. Simpson - Senior Vice President and Chief Financial Officer

Scott Levine - J. P. Morgan Michael Hoffman - Wonderlich Securities David Steinberg - Goldman Sachs Jonathan Ellis - Merrill Lynch William Fisher - Raymond James Nicole Deblase - Deutsche Bank

Good morning. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the Waste Management Fourth Quarter and Year-End 2008 Earnings Release. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). I would now like to introduce Mr. Jim Alderson, Director of Investor Relations. Sir, you may begin your conference.

Thank you, Nicole. Good morning everyone and thank you for joining us on our fourth quarter 2008 earnings conference call. With me this morning are David Steiner, Chief Executive Officer; Larry O'Donnell, President and Chief Operating Officer and Bob Simpson, Senior Vice President and Chief Financial Officer. David will start things off with a summary of the financial results for the quarter and a review of the details of our revenue growth, including price and volume trends. Larry will discuss operating costs and Bob will cover the financial statements. We will conclude with questions-and-answers. Before we started let me remind you that in addition to our press release that was issued this morning, we have filed a Form 8-K that includes the press release as an attachment and is available on our website at www.wm.com the press release and schedule to the release include important information that you should refer to. That is because during these discussions of our 2008 results of operations, we will be providing estimates, projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties that are described in detail in our annual report on Form 10-K for the year ended December 31, 2007, and in our press release this morning. These risks and uncertainties could cause actual results to differ materially from those described in the forward-looking statements. During the course of the presentation, we also will discuss certain financial measures on an as-adjusted basis, just as we have presented them in our press release this morning. These measures include net income, earnings per share, income from operations, operating expenses and certain operating margins, all adjusted for items we deem unusual or non-operational in nature. We will also discuss free cash flow, all of these are non-GAAP financial measures. When David, Larry and Bob discuss the results we've presented in our press release, their comments will also be on an as-adjusted basis. Specifically, these adjustments include, a $13 million reduction in net income due to charges related to our withdrawal from union-sponsored, multi-employer pension plan in Milwaukee, New Jersey and Detroit. The $16 million reduction in net income caused primarily by the accounting effect of a decline in long-term interest rates, which are used to calculate the present value of our remediation liabilities and our landfills. And a $6 million benefit resulting primarily from favorable tax audit settlement. We have given detailed information on all of the non-GAAP measures that will be discussed on this morning's call, and have reconciled them to the most comparable GAAP measures. And you can find that information in the schedule to our earnings press release or on the Form 8-K filed today, which as I mentioned can be found on the Company's website, at www.wm.com. This call will be recorded and will be available 24 hours a day beginning approximately 1 PM Eastern Time today until 5 PM Eastern Time on February 26. To hear a replay of the call over the Internet, access the Waste Management website, at www.wm.com. To hear a telephonic replay of the call, dial 800-642-1687 and enter reservation code 80418207. Time sensitive information given during the course of today's call, which is occurring on February 12, 2009, may no longer be accurate at the time of the replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Waste Management is prohibited. Now I will turn the call over to Waste Management's CEO, David Steiner. David P. Steiner: Thank you, Jim. And good morning from Houston. I'm pleased with the high level of performance throughout our organization. We faced significant challenges in the fourth quarter, as commodity prices dropped shortly and volume declines accelerated, but we still posted strong financial results. Our cash generating abilities were proven once again in 2008, and we expect that to continue in 2009. We earned $0.49 per share in 2008's fourth quarter. In November we announced that we're expecting a negative year-over-year impact of $0.04 to $0.08 per diluted share on our fourth quarter 2008 earnings from our recycling operations and the result was an $0.08 hit. So, if we further adjust the fourth quarter of 2008 for the negative impact of commodity price declines, we earned $0.57 in the fourth quarter of 2008. This is an increase of $0.03 per diluted share, however 5.5% when compared with our fourth quarter 2007 results. For the full year 2008, after adjusting for items other than recycling, we earned $2.22 per diluted share an increase of greater than 7% when compared with 2007 adjusted results. We ended 2008 at the high-end of the guidance that we gave at the beginning of the year, which was $2.19 to $2.23 per diluted share. Again we would have significantly exceeded that guidance if not for the negative impact from recycling operations in the fourth quarter. These are significant accomplishments for our full year and our tribute to the hard work and dedication of our employees. Going back to the fourth quarter, internal revenue growth from volumes declined 5.9% in the quarter. Most of the volume losses were in the collection side of the business which fell by 6.2% during the fourth quarter of 2008. The recession resistant lines of our business, namely commercial and residential collections saw volumes similar to what we've seen all year, at about negative 4%. The most economically sensitive line of our business, the roll-off line, saw volume losses of 11.7%. This loss of volumes was offset by a continued focus on roll-off pricing, which was up 3% for the quarter. We've continued to see good pricing in our roll-off line and certainly we will continue with our pricing strategy in 2009. So, overall, income continued to increase in the collection line of business. Income from operations increased almost 6% in the fourth quarter this year compared with the same period of 2007. And our income from operations margins in our collection business expanded by 230 basis points. Our fourth quarter 2008 internal revenue growth from yield was 2.1%, and was strongest in our three collection lines of business. Combined, the revenue growth from yield in the industrial, commercial and residential lines of our collection business was 3.3% in the fourth quarter which excludes the impact of our fuel surcharge. We produced our strongest results in our commercial collection line of business, where internal revenue growth from yield was 3.8% in the quarter. The yield components of internal revenue growth in our industrial and residential lines of business were 3%, and 2.8% respectively. These levels of revenue growth from yield was significant because they show that we've maintained our pricing discipline despite the difficult economic environment. We will continue to pursue pricing opportunities and believe we can continue achieve yield of at least 50 to 100 basis points above core CPI. Turning to yield and volume on the disposal side of business, the positive volume trends we saw in Q2 and Q3 reversed, as volumes dropped 1.4% in the fourth quarter. The declines occurred in MSW which was down 3.6% and special waste which was down 2.4%. However, despite the lower MSW volumes, we continued our focus on MSW yield, which increased 2.4% in the quarter. We intend to increase this focus in 2009. As we anticipated in November, our recycling operations were particularly weak in the fourth quarter due to the significant decline in recycling commodity prices and volumes, causing a $38 million in net income or $0.08 per diluted share compared to the fourth quarter 2007. For the full year 2008, the commodity price and volume impact to earnings was a negative $16 million or $0.02 per deluded share compared to 2007. We're working on reducing our cost structure and reviving our pricing and rebate model in our recycling operations. We still expect that 2009 will be a difficult year. Energy markets also experienced declines in the fourth quarter of 2008, which adversely impact the revenues of our Wheelabrator and landfill gas to energy operations. Combined, we believe the recycling and energy effects will result in an EPS headwind of between $0.17 and $0.23 for the full year 2009. Most of that would occur in the first half for the year, as we assumed the commodity and energy prices will move towards historic averages later in the year. Given the weak economy and the effect on our volumes, it's more important than ever for us to maintain our disciplined approach to pricing and cost controls. On the pricing front, we're setting minimum yield targets at each of our market areas and groups at and our corporate headquarters. These targets will apply to both our collection and landfill lines of business. If we do not meet the targets, bonus eligible employees will not receive any portion of the annual bonus connected to financial results, for our senior leadership team that is 100% of the annual bonus and for others it's 70%. Certainly this will maximize the focus on our pricing initiatives at all levels of the company. On the cost side, as announced in our press release, we created a new operations and support structure and in the process reduced the number of market areas from 45 to 25 which will reduce our SG&A cost to reflect our lower volumes. This is the next step in our evolution to adjust our organization and operating model so that we can be more efficient and allow us to emerge from an economic downturn as an even stronger company, poised for growth. Larry O'Donnell will give you more information about these changes. As the economy began to weaken in 2008, we began to pluck various scenarios around how we would react to a downturn. When commodity markets collapsed and the economy further weakened in late 2008, we were revised our business plans to take the changes in the economy into account. The reorganization of our business reflects our revised view of the economy and our business. We've also looked at out capital spend, to make sure that we're managing our spend to match our business. As 2009 unfolds, we will continue to ensure that we can respond as conditions warrant. 2009 will certainly be a challenging year. We saw a significant drop-off in demand from October to November. From November to January, we've seen continued declines but at a slower rate. It's hard to determine when these declines will stabilize, so trying to predict volumes in 2009 is challenging. But regardless of how our volumes trend in 2009, we can assure you of three things. First, we've taken the actions necessary to reduce our cost structure by over $100 million and our field operations team has the tools to continue to flex cost if volumes continue to decline. They also have the equipment to handle volumes when they begin to grow again. Second, we will maintain our focus on pricing in our collection and disposal lines. We've demonstrated our resolve by tying annual bonuses for the achievement of specific pricing targets. And third, we're very mindful of our invertors focus on cash generation and we will ensure that we manage our capital in a manner that produces strong free cash flow. For the year, we expect to generate between 1.3 and $1.4 billion of free cash. In 2009, we also expect to acquire more revenue than we divest as valuations and prices for assets reach lower levels. However, we will not make any acquisitions that would jeopardize our strong balance sheet and our credit rating. Finally, I'd also like to highlight the selection of Wheelabrator Technologies as the preferred vendor to construct and operate a new regional waste to energy facility for Frederick and Carroll counties in Maryland. This will be the first new Greenfield waste-to-energy plant constructed in the United States in over a decade. This facility will be paid for and owned by the Northeast Maryland Waste Disposal Authority and is slated to be operational in 2014. It is one of a number waste-to-energy projects that Wheelabrator is pursuing in North America and in Europe. We expect that we will continue to win bids for new waste-to-energy plants both domestically and internationally. Most of the projects that we're bidding on do not require us to have spend significant amounts of capital. Because destruction cost of financed by the public authorities building the plant. For any that we may win that require us to pay some or all of the construction costs, those costs will be incurred until at least two to four years after the award. So, we're excited about the Wheelabrator business and that have provide meaningful future growth but it is not dependent on current capital outlays. We're pleased to have been selected by the authority and we're excited about the opportunity to help them and other communities to generate clean renewable energy from the disposable of their waste. With that I'll turn it over to Larry, who will review our operating cost results for you. Lawrence O'Donnell, III: Thank you David and good morning. I'll begin by reviewing our operating cost results for the quarter and for the full year of 2008 after which I'll discuss details regarding our restructuring. Adjusting for the items noted in our press release, operating expenses in the fourth quarter of 2008 were 1,918 billion or 61.7% of revenue, a decrease of $207 million from the fourth quarter of 2007, and an improvement of 150 basis points as a percentage of revenue. The cost reduction is due primarily to flexing down cost in response to decreased volumes, lower recycling commodity prices which results in lower rebase we pay to our customers, lower fuel cost from the decline in the diesel fuel prices and the decline in the exchange rate of the Canadian Dollar. We lowered fourth quarter 2008 operating cost in 8 of 10 cost category that we break out in our financial statements. For the full year 2008, we lowered operating expenses as a percent of revenue by over 30 basis point to 62.6%. Excluding the impact of higher recycling commodity and higher diesel fuel prices. Operating cost for the full year 2008, were $262 million lower than in 2007 and improved by 110 basis points to 61.8%. I am pleased with the disciplined approach exhibited by our team in managing our controllable operating costs during tough economic conditions. We demonstrated the value of our operational excellence initiatives, by flexing our cost in reaction to the current economic downturn. I will now review our performance for the fourth quarter 2008, compared to the prior year period in a number of the cost categories. Labor and employee benefit cost improved by $28 million in the quarter. This improvement is the result primarily of flexing down our cost in reaction to the volume decline. We reduced our driver hours by about 851,000 hours, approximately 88% of this reduction was due to the same flexing down of our labor cost with the remainder due to divestitures. Our total recordable injury rate was reduced to 2.9 in the fourth quarter a 25.8% improvement, compared to the prior year period. We're very pleased with this achievement, which places us even closer to world class performance in safety. Cost of goods sold decreased by $67 million, which is an improvement of over 160 basis points as a percent of revenue, principally due to recycling decline. Transfer and disposal expenses, which include those costs that our collection companies paid to third-party landfills and transfer stations, improved by $42 million or over 65 basis points as a percent of revenue. We lowered our maintenance and repair cost by $13 million in the fourth quarter of 2008, compared with the fourth quarter of 2007. The efforts we've made to standardize our fleet and institute a cost effective, preventative maintenance program have helped us to react quickly to volume declines and to offset the higher cost we've seen in labor rates, parts and supplies. For the full year 2008, we improved our collection fleet maintenance cost by $35 million, compared to 2007. Falling diesel fuel prices, lowered our direct fuel cost by approximately $13 million and lowered indirect fuel cost charged to us by our subcontract transportation haulers by approximately $2 million, compared to fourth quarter of 2007. Fuel surcharge revenues decline in the fourth quarter of 2008, compared to the fourth quarter of 2007, but at a slower rate than fuel cost decline, giving us approximately $25 million of benefit in the quarter. You will recall that in the first two quarters of 2008, our fuel surcharge fell short of our increase in fuel cost by about the same amount. For the full year, our fuel surcharge program worked as designed and essentially covered our increased fuel cost. As mentioned by David and in our press release, we've restructured our operations and reduced the number of market areas from 45 to 25. The actions we've taken are expected to provide us over a $100 million of cost savings in 2009. We expect to incur a one time charge of approximately $50 million for this restructuring. As we reviewed our strategy, we saw trends that suggested to us that now was the time to take the next step in our evolution. We want to continue to deliver the financial results our shareholders have come to expect from us. The trends we saw include customer desires for even higher quality service levels which in turn allows us to maintain our pricing leadership. We also see customers increasingly turning to us to assist them with their sustainability practices to help them reduce their cost. In addition while we've made progress in improving our operating margin and our returns on invested capital, we know we must continue to improve if we are to become a truly great company. We've also seen the benefits from economies of scale and standardization of practices that our larger market areas have been able achieve. As we've developed our strategy to address these trends, we concluded that we were now ready to roll out this model company wide. When we first went to the market area organizational structure about eight years ago, we had 85 market areas, as our culture has changed and our operating excellence initiatives have become engrained in our daily operating practices, we've been able to further reduce our operational structure that was needed to support our improvement initiatives. This reorganization was just another step in our progression. We believe these changes will help us weather the current economic environment and enable us to emerge from an economic downturn as an even stronger company and poised for growth. Unfortunately, this reorganization has resulted in a lot of really great people having to leave our company. These folks worked hard to put us in the position we're in today, to be able to take the next steps in our progression. I want to thank each of them for all of their efforts and dedications, while they were on our team. With that, I'll turn the call over to Bob. Robert G. Simpson: Thank you Larry. I'd like to start out by discussing SG&A costs. These costs increased $11 million to $382 million during the fourth quarter of 2008 versus the same quarter of 2007. This increase is due primarily to expenditures on our business initiatives as well as a $3 million increase in bad debt expense. David and Larry both spoke about the restructuring plan and I would like to point out that our current estimate is at approximately 70% of the anticipated cost savings will be realized in the SG&A categories, leading to a sharp decline in SG&A costs. We believe this new level of SG&A will be able to support our business going forward even when the economy turns around and revenues grow. Depreciation and amortization expense for the fourth quarter was essentially flat when compared with the fourth quarter of 2007. As a percentage of revenue, depreciation and amortization expense was 9.6%, compared with 8.8% in the prior year quarter primarily due to the decline in revenue. Interest expense for the fourth quarter of 2008, was $114 million, a $12 million decrease from the prior year period. This decrease is due primarily to the decline in interest rates, which impacts the interest expanse associated with our interest rate swaps and our variable rate debt. The floating portion for our debt portfolio was 33% at the end of the quarter, and our debt to total capital ratio was 58.5%. Moving to income taxes, in our press release, we noted a $6 million benefit to net income in the fourth quarter of 2008. This benefit results primarily from favorable tax audit settlements. In the fourth quarter of 2008, our effective tax rate adjusted for this benefit was approximately 38.4%. This rate reflects the utilization of state net operating loss and credit carry forwards. We highlighted in our press release, a $16 million non-cash charge to net income that arises solely due to interest rate used in our accounting calculation of the present value of our environmental remediation obligations. The discount rate used is the tenure treasury rate, which dropped during the quarter from 4% to 2.25%. Turning to cash flow fourth quarter 2008 net cash provided by operating activities, increased to $673 million, a 13.5% improvement over the prior year period. We've benefited from favorable working capital results in the fourth quarter, some of which will reverse in the first quarter of 2009. Our capital expenditures for the quarter were about $430 million and our free cash flow for the quarter was $259 million. We paid $132 million in dividends in the quarter; we have not purchased any shares since early July, but for the year we have returned over $940 million in cash to our shareholders through our share repurchases and cash dividend payments. Since the beginning of 2004, we have returned to our shareholders almost $6.5 billion, reflecting their confidence in our company's strength, and consistent cash generating ability, our Board of Directors has approved a capital allocation program for 2009, authorizing the expenditure of up to $1.3 billion in combined cash dividends, common stock purchases, debt reduction and acquisitions. We currently expect approximately $575 million will be dedicated to dividend payments in 2009, reflecting the Board's stated intention to raise our quarterly dividend pay up by 7.4% to $1.16 per share per year resulting in a current yield of over 4%. To give you some additional guidance on our plans for 2009 we expect capital expenditures to be approximately $1.2 billion and we intend to spend most of the capital in the second of the half the year. Our capital spending is flexible and can be adjusted if circumstances warrant. After capital expenditures we have targeted our full year free cash flow to be in the range of $1.3 to $1.4 billion. We currently forecast total interest expense for 2009 of about $450 million. This estimate include in a number of assumptions. We assumed an overall average borrowing rate of 5.9%. We also assumed that 90 day LIBOR rises during the course of the year ultimately to 2.5% by year-end. We plan to issue a new senior debt to replace maturities in 2009. And we also note that 2008 full year interest expense benefited approximately $24 million from the favorable impact of terminated interest rate swaps that will not reoccur. We expect an effective tax rate in 2009 of 40%, excluding the effective any tax audit settlements. We wanted to give you as much detail as we could around our expectations for 2009. However, we're not giving specific guidance around revenue and earnings per share. Given the dramatic changes in the economy, we think it is prudent hold off until we see how the year is going. Certainly, we expect to first quarter to be week and we expect to see improvement in the economy by the end of year, but the recent volatility makes it difficult to estimate the timing of the improvement. Again regardless of the economy, we will manage the business to continue our strong cash generation and when the economy gets better, we will poised to leverage our reduced cost structure to grow earnings and expand margins. Finally, as a company we are focused on improving return on invested capital for our shareholders. And our strategy is design to accomplish this. For the full year 2008, using the formula outlined in our long-term stock incentive plan, our return on invested capital stood at 16.3%, which is a 460 basis point improvement from the year-end 2004 level. This was accomplished despite a challenging economic environment through the fine efforts of our employees and we thank them for their dedication. And with that Nicole, let's open the line for questions.

(Operator Instructions). Your first question comes from the line of Scott Levine with J. P. Morgan. Scott Levine - J. P. Morgan: Good morning guys.

Good morning Scott Scott Levine - J. P. Morgan: It sounded in the introductory commentary that the weakness that you're seeing in the business that picked up in the fourth quarter is kind of relegated to the industrial segment but you weren't seeing much slippage on the commercial side as yet. What are your expectations there, as it's generally kind of lagged the economy, and/or what are your expectations anecdotally with regards to the volume and/or price trends in the commercial business specifically as we move in and through 2009?

Yeah, I think Scott, what you see here, really is a tale of two companies. And we're very encouraged by what we see in the commercial line both from a volume and a price point of view. I mean it shows the recession resistant nature of our commercial business. Now, we certainly don't expect to see improvement in commercial volumes, but we don't expect to see significant deterioration either, that gives you an opportunity to make sure that you're getting good price. And as you all know, the success that we've had over the last few years has been driven primarily by our pricing program and we continue to... we intend to continue that focus in 2009. Scott Levine - J. P. Morgan: I'm thinking about maybe what were the incremental, if there is incremental volume weakness, is it really a broadening out in the industrial segment beyond call it the housing driven lines of business, where you expect to see that incremental weakness, not on the commercial side, is that an accurate?

I think that's safe to say, I think all across the temporarily roll-off lines of business, we're seeing weakness. Scott Levine - J. P. Morgan: And the permanent roll-offs, that's still holding up relatively well?

Permanent roll-off should hold up, should act a little bit more like the commercial line of business, it should be fairly recession resistance. It will have a little bit more because of the lowered manufacturing statistics you see, but it did should hold up, it's not going to act like temporary roll-off, it's not going to act like commercial, it's going to be somewhere in between. Scott Levine - J. P. Morgan: Somewhere in the middle, got it. And then turning to pricing, so core pricing decelerate 60 basis points quarter-on-quarter, but I guess the interpretation as well as the cost inflation is easing. So, if we think about... if we think about pricing and the expectations there, you said you expect 50 to 100 basis points above the rate of cost inflation. So, would an accurate conclusion be that you're not expecting any deceleration if you'll in that spread 50 to 100 basis points versus what we're seeing caught in 2008 and maybe in 2007? Lawrence O’Donnell, III: I think we're talking about... we're talking about core CPI, fuel was not in that component. Scott Levine - J. P. Morgan: Right. So you're still thinking, core... core pricing can remain 50 to 100 bits above cost inflation, is that roughly equivalent to what you saw in 2008 ex-fuel?

Well, actually we saw a little bit better performance than that in 2008, and frankly we're going to, when we looked at it, you hit the nail right on the head, you see a 50 basis point decrease, now a lot of that is driven by things like lower rates and some things like that to drive our yield calculations. But we said we need to make sure that we keep these 50 to 100 basis points above core CPI number and that's why we put a stake in the ground by saying if we don't do it, no one's going to make their... get their annual bonus. Scott Levine - J. P. Morgan: Got you. So, really looking at from spread perspective, you guys aren't expecting any real slippage on price?

Absolutely not. Scott Levine - J. P. Morgan: Okay. One last one, if I could, and you are not giving EPS guidance but you did give some operating cash flow guidance in the press release. Are there any unusual developments '09 versus '08 on some of the non-cash items like kind of operating cash flow that we should be thinking about or is everything kind of consistent, roughly speaking with 2008? Lawrence O’Donnell, III: I would expect to continue to see some improvement in our management of working capital even in a tough environment, but I don't expect that to be a significant driver, so I would say it would be pretty consistent. Although the timing of the working capital, we had such a working capital benefit at the end of the fourth quarter. Scott Levine - J. P. Morgan: Yes. Lawrence O’Donnell, III: That you could see that reverse a little bit in the first quarter. But overall I think you'll see consistent performance. Scott Levine - J. P. Morgan: That's right. Great. Thanks. Nice quarter.

Thank you. Lawrence O’Donnell, III: Thank you.

Your next question comes from the line of Michael Hoffman with Wonderlich Securities. Michael Hoffman - Wonderlich Securities: Hi guys.

Hello Michael. Lawrence O’Donnell, III: Hi Michael.

Hi Michael. Michael Hoffman - Wonderlich Securities: Hi. So, I apologies, if you have said some of this in your prep, I was scribbling away, I may have missed some of this. Timing of the 50 million and cost for the reorg, are we going to see that all in the first quarter, is it spread, can you give us a sense of sort of how we should model that? Second, are you going to show that as an extraordinary, even if it's a non-GAAP extraordinary adjustment, so we can pull it out?

I would expect that the vast majority of it will be in the first quarter, there maybe some that will go beyond as we just we make some other adjustments in facilities and leased obligations and the like but the vast majority will be in the first quarter, the vast majority has already incurred. We'll give some more and clear numbers on that when we get to the first quarter earnings call in April and I would expect we'll treat the restructuring charge as we call it, I expect we'll treat it as something we would exclude from ongoing earnings or as-adjusted earnings. Now there is a line in our income statement referred to as restructuring expenses and that's where you'll find it. Michael Hoffman - Wonderlich Securities: Okay. And that, your 1.3 to 1.4 assumes data has a cash impact as well. Lawrence O’Donnell, III: The 1.3 to 1.4...

Yeah, I would expect that would include the 50 million in it. Michael Hoffman - Wonderlich Securities: Okay. And then the 100 million in savings, conversely, how quickly do we get to model in the adjustment on a year-over-year basis?

Well, the $100 million savings is the savings we expected to see in current year and 70% of that would go to SG&A. Michael Hoffman - Wonderlich Securities: And I mean if you've taken the impact on the cost side in the first quarter, does that mean by the second quarter, I am seeing a 100% impact of that 70% in SG&A? Lawrence O’Donnell, III: Very nearly.

Very nearly, yes. Michael Hoffman - Wonderlich Securities: Okay, all right. So, that's the speed is what I'm trying to get at.

Yeah. Michael Hoffman - Wonderlich Securities: Do you have an exposure to the Smurfit bankruptcy in your receivables?

Very, very little exposure, it's less than a million dollars. Michael Hoffman - Wonderlich Securities: Okay. And then when it's regards to receivables, I heard you say something about bad debt allowances being up 3 million. So I'm assuming your DSOs start to lengthen a little bit, that's a challenge to working capital improvements, is this sort of. I'd like to hear what you're doing and in those regards, and how you contain that?

Our DSO is even through the fourth quarter continued to improve. And I would expect to see pressure on that. We just haven't seen that yet and when we're through our revenue management center which is located in Phoenix working with... our centralized center working with the market areas, we've been pretty good at identifying problem customers and getting with them quickly to get paid. So, and we've got like a special watch on our... some of our customers who have troubled financials and work with them very closely to make sure we continue to paid. So, like... will that have an impact, I would expect so, but I am thinking we'll be able to manage that fairly well. Michael Hoffman - Wonderlich Securities: Okay. And than I don't want to get carried away with this, but the yellow sheet is showing a little bit of recovery in OCC, nothing in OMP. Are you getting any of the benefit of that into the extraordinary drop in November, starting to recover seeing in the first quarter on those recycling sign? Lawrence O’Donnell, III: Yes, it's definitely better now than it was when the bottom fell out. Certainly the export rates on the coast are higher than what we're seeing in the Midwest and in the Southeast, but we have seen some improvements.

But remember, Michael you have three month of the down cycle for the first quarter when we only had two months in the fourth quarter. So we would expect sort of a similar effect that we saw on the fourth quarter, in the first quarter even though pricing is coming is back, we got lower pricing for the full quarter. So we'd expect about the same impact that we saw on the fourth quarter. Michael Hoffman - Wonderlich Securities: Okay. And then I'm assuming some of the rebate you've had to do all that what was rolling itself backwards as well. So, I mean are you able to put search charge in for commodities where you had contractual relationships about sharing the load here? Lawrence O’Donnell, III: Yeah, we're actually now going back and looking at our whole pricing model. What we want to make sure we're doing is getting paid for our processing cost and put ourselves in a position to get an adequate return on our capital investment. So, we're taking a whole new look at the rebate structure in total. Michael Hoffman - Wonderlich Securities: Okay. You may have said this and I missed. Is there intent for share repurchase in the count of your free cash flow and your dividend guidance?

Yes Michel, when we put the press release out in December on this point, we wanted to emphasize the point we've been making a long time which is the portion of the free cash flow that we put into our capital allocation program that is not going to dividends can be used in a number of different ways, now in the past we've focused on share repurchases but in this environment we're also going to focus on liquidity levels and liquidity issues as well as focus on the acquisition opportunity. So as we get through end of the year, we see how the liquidity is holding up and whether we can...our debt refinancing, we've got coming up happen in accordance with we'd like see then we'll make a decision about share repurchases. In the meantime, we're interested in some acquisitions, we're not going to risk our balance sheet for acquisitions but certainly like to be in a position to make acquisitions as well. Michael Hoffman - Wonderlich Securities: And I am assuming that some of the fear of a rising capital gains tax, you're seeing a lot of companies might not have been sellers, thinking about selling now?

I think Michael, that you'll see that happen throughout the year. Not only the capital gains stack, but I think people has starting to realize that they're not going to get the multiples that they were expecting a couple of years ago. So when we look at 2009 from an acquisition point of view, we're going to be opportunistic, we're going to take advantage of opportunities where we see them. But we're also going to be disciplined, I mean, we're not going to change just like we did in 2008. We're going to make sure that whatever we do we don't risk our balance sheet. And so, and clearly they will gravitate more towards tuck-in acquisitions than any large acquisitions. Michael Hoffman - Wonderlich Securities: Okay. And then two more, just quickly. We elaborate, how do we book, and one, when is the time some of the benefit of Frederick County, and how do we book that in impact to the income statement or is there no income statement impact until it goes live in 2014?

Yes, there is virtually no income statement or balance sheet that impact until close to when it goes live in 2014. That's the point... that's the great thing about these Wheelabrator projects is that, if we had to put up a lot of capital here this would not be a good time to be going into waste energy projects. Most of those projects, we don't put up any of the capital because they're financed by the public authority. But if in the event that we do have to put up capital, you're looking at, at least two, three, four years out before you have to worry about that. Certainly, we all expect that within three or four years the capital market will be in a little bit different position than they are today. Michael Hoffman - Wonderlich Securities: Okay. And then the last one deflation, in a deflationary environment where year are coupled with slow growth, how do you handle pricing as a best practice and a behavior in 2010?

We only talk about 50 to 100 basis point above core CPI. If in fact we get into a deflationary environment, there is only one thing I am certain of. We will do better than 50 to 100 basis point above core CPI because we don't have any intention seeing our pricing program go back to where it's running in the 1 to 2% range. And so what we've seen in our business is that we can get those price increases at 50 to 100 basis points above core CPI but we're never going to let them drop sort of below that 1% to 2% range like they did in the early 2000. Michael Hoffman - Wonderlich Securities: Alright, thank you so much.

Thank you.

Your next question comes from the line of David Steinberg with Goldman Sachs. David Steinberg - Goldman Sachs: Good morning.

Good morning. Lawrence O’Donnell, III: Hello David. David Steinberg - Goldman Sachs: Hi. A few follow ups to first round of questions. In terms of the M&A opportunities you addressed individual were smaller carters or mom and pops that might be coming, or sorry, private companies that might be coming for sale. Any comments on pending sales from Republic Services and what you may or may not be bidding on? We heard about one block of businesses they went out of the door earlier this week?

Yes. Certainly we will take look at all the assets that have become available and will respond accordingly. David Steinberg - Goldman Sachs: Okay. Even talked to... well out of what's left I am assuming then is, have you looked and is there anything you are interested in?

You know we really haven't taken a good hard look at it, obviously we're interested in any asset that we can get at a fair price but for whatever reason they've chosen, Republic has decided to exclude us from a portion of that process. David Steinberg - Goldman Sachs: Understood. David you talked about a November trends being worst in October and December being worst than November, albeit at an improving rate. Any early indication on how January shaped up?

January shaped up pretty similar to December. We saw, and again you really have to look at this, as I think this quarter in particular showed us the dramatic difference between our recession resistant lines and our economically sensitive lines. In the recession resistant lines we have seen a fairly stable situation with volumes, in a couple of those months we actually saw volumes going up, and so you don't see the volumes reacting dramatically in those lines of business. But in the economically sensitive lines like our C&D, special waste and the landfill primarily roll off in collection line of business, we saw that dramatic drop-off in October to November and then fairly similar drop offs in December and January. And that's frankly why we've chosen not to try to peg a revenue number for 2009. I think the question on everybody's mind, no matter what company you are in, is when are these volumes going to trough, and in past years we've always had a pretty good idea on that, I'm not sure but that with state of the economy right now that anyone has that kind of idea. So, rather than put a number out there that reflects the current trends, we certainly expect those trends to get better during the course of the year, as Bob said, it's just difficult to determine when they are going to get better. David Steinberg - Goldman Sachs: As a follow up of there, I think Scott, had touched on this in his questions. It's a little counter intuitive to me, how your commercial business is recession resistant. We hear about small businesses suffering and from a real estate (ph) team, how real estate vacancy ratio increasing, so I would think they commercial volumes would start to fall off albeit maybe on a lagging basis, but it seems from your comments that has not happened. Is that your expectation that as this slow economic period plays out that the commercial is the next leg to fall off, is that how we should think about it or in fact you expect it to hold up throughout?

Yeah. Well remember, when we say they haven't fallen off, they are running at negative 4%, so it's not like they're positive, right. But certainly you would expect to see a little bit of weakening there as businesses close down, but in both the residential and the commercial side, you also have the benefit of less waste if you have a fixed price for the customer and they but less waste in their bin you actually are benefited by that, right. And so, what we've seen in the commercial line is certainly a drop-off but not a dramatic drop-off like we've seen in the economic sensitive lines. Could that get incrementally worse, I'm sure it could. But what I'm saying is that what we saw in November, December, January which was fairly dramatic in the economic sensitive line was not dramatic at all in the commercial line. Now could I get it incrementally worse during the course of the year, I think you're absolutely right, it could. But we don't see it getting worse in the same manner that we see the economically sensitive portion to get worse. David Steinberg - Goldman Sachs: Great and one follow up question for Bob in terms of the cash flow outlook. Again, a follow-up to Scott's question, I think you had said that the working capital would provide a little bit of a benefit here in '09, I guess my question is on D&A and that other line that you lumped together, other historically it's jumped around, any expectations in terms of what the cash flow from operations would be from those other items? And D&A has been trending down overtime, but here in the fourth quarter was flat on a dollar basis year-over-year, your thoughts on those two items in '09?

I would expect the D&A to continue to at about the comparables to the levels you've seen over the last year with the exception that if landfill volumes continue to stay low, we might see a little bit decline in the D&A, because there is a significant portion of it relates to the amortization expense per ton that we take in as with landfills. And with the other... I don't think that was a big item in 2008 and I don't expect it to be any different in 2009. David Steinberg - Goldman Sachs: Okay. Maybe I was confused, I know we'll get more details on this in your 10-K filing, but I think it was over $390 million of cash flow from that those other lines?

That's probably just the change, that was I think the working capital adjustment, so it would fall through there. David Steinberg - Goldman Sachs: I'm sorry. I'm flipping through the press release. I' had seen changes in operating assets and liabilities net of effects negative 89 million. The other 339 is going to include working capital then?

Yes, that's right. David Steinberg - Goldman Sachs: Okay. So, then I misread it. Thanks for the clarity.

Thanks.

Your next question comes from the line of Jonathan Ellis with Merrill Lynch. Jonathan Ellis - Merrill Lynch: Thanks and good morning guys.

Good morning

Good morning Jonathan. Jonathan Ellis - Merrill Lynch: Why don't you, you touched on potential acquisitions and use of cash flow. Can you talk a little bit about, are those acquisitions primarily in your solid waste business or the ancillary businesses, talk a little bit about your acquisition pipeline this year?

Yes, in fact we're getting our business developers together in the next week to talk just about that. Because obviously there going to be opportunities in solid waste and we want to make sure we take advantage of those. But we do think there will be a lot of opportunities in ancillary businesses. For example, I noticed that you wrote a report about medical waste yesterday, certainly that would be an area where we'd be looking to make opportunistic acquisitions. And so we're not going to limit ourselves to solid waste. We're going to be looking at ancillary businesses. We're going to be looking at waste-to-energy opportunities. We're going to make sure that if the right opportunity presents itself, that we're in a position financially to take advantage of it. Jonathan Ellis - Merrill Lynch: Okay, great. And Bob, just on the debt maturity that's come in May, based on what you know, and seeing the credit markets right now, is your expectation that you will be able to refinance that and as of right now you're not planning to pay that bond down?

That's our expectation, yes. Jonathan Ellis - Merrill Lynch: Okay, great. Just turning your attention to the quarter very briefly, I think if I caught this correctly, you talked about MSW pricing at the landfill but I didn't hear you provide an overall pricing figure for disposal this quarter?

Yeah, the overall price for disposal was positive 0.2%. Jonathan Ellis - Merrill Lynch: Okay.

When we look at disposal pricing frankly where we focus on is MSW, special waste is job specific, it can...there is a huge mix element in there and then C&D there is obviously a geographical element in there. And so it's sort of hard to make a determination on overall pricing strategy based on with those two lines. MSW is a line that, that is fairly homogenous throughout the country, so you don't have those types of mix issue. So, when we focus on pricing at the landfill, we focus on MSW, the target that I talked about will focus on MSW. But don't you have a (ph) target for annual bonus, we'll focus on MSW. Jonathan Ellis - Merrill Lynch: Okay. And just since you brought that up, will you be willing to disclose what those minimum thresholds are for those in terms of yield?

Yeah, we were in the process of putting those together as we speak, we're going to put those together, market area by market area. As you can imagine there are differences in market areas where some should do better than others. But we're in the process of putting those together, market area by market area. So, I can promise you they will be aggressive, aggressive but achievable targets, but we haven't set those target for the market area yet. Once we set those then we'll know how they roll up for the groups and for the cooperation. Jonathan Ellis - Merrill Lynch: Okay. Great. Just on... from a pricing standpoint, can you just walk through very briefly both on the collection of landfill side, what portion of your contract grade base at this point has not been reprised over the last few years?

I think we've been through most... very little of it hasn't been reprised at this point. Jonathan Ellis - Merrill Lynch: Okay. So even amongst should I know in particularly on the landfill contracts, I mean that was the area that...

I'm sorry, I thought you were taking about... collections, yeah. Landfill we still save up some long term contracts that will be coming due sometime during year that we haven't touched yet, but on the collection side, I think that that's been, we've certainly been through the business improvement process and there are still some national accounts we're working with, but I think that's not very much anymore. I think we've been through that and we're continuing on with them, it's not like that was a one time project. Jonathan Ellis - Merrill Lynch: Sure. Would you be able to give us just based on kind of what you've been accomplish thus far, what type of price increase you may expect at those, of those landfill contracts as they come up, again just based on what you've been able to accomplish historically?

Well, what we've seen in the last few years is that pricing has run somewhere between 5 and 10%, the repricing of the landfill business probably in excess of that, when we repriced residential bids and we don't expect to back down from that. Jonathan Ellis - Merrill Lynch: Okay. Great. Thanks a lot guys.

Thank you.

Thank you.

David, let me just quickly mention, David Steinberg asked about the other item in the cash flow statement and I was, I was not following, did not get a chance to look. And David the biggest single item in that is deferred taxes and we don't expect that to change drastically in the coming year. Thanks. So, on the call we can move on.

Your next question comes from the line of Bill Fisher with Raymond James. William Fisher - Raymond James: Good morning.

Good morning.

Good morning. William Fisher - Raymond James: Just a David a follow up on just minimum yield targets, it sounds like its major focused, can you just give some color on how you factor in if you see some more volume offset as a result of those or how you balance those to in that instead of comp?

Yeah, we have very consistently said that you could loose 3 to 5% of your volume if you get 1% price and that is the mantra that we're going to follow at Waste Management. When you look at again, I think its interesting to look at the volumes in the fourth quarter and to see that even in a quarter where I certainly haven't seen in my lifetime a quarter that was, that was worst than the fourth quarter, although we might be living in one right now. Hopefully, that will end soon. But even at that point in time, in a bad economy you saw the volumes on the commercial side hold up very well. So, I don't know why we would be less aggressive in pricing there and so when we look at those targets again, what we're going to do, we don't want to put out targets and this is going to be 100% of the annual bonus for the senior leadership team and 70% of the annual bonus for all of our folks out in the field and so you want to make that target achievable but aggressive. William Fisher - Raymond James: Okay, great, thanks. And actually this is for Bob. Just want to clarify the 100 million in savings that is going to be roughly 100% realized in the year.

Yes. William Fisher - Raymond James: Okay. And kind of (inaudible) but then you mentioned you have the obviously, the interest rates going up a fair bit in your forecast. And you mentioned three month LIBOR, can you use one month LIBOR? It's obviously a lot lower than three months right now.

I guess we would look into that. I think right now our swaps are in place already and they are based off at 90 day LIBOR.

The swaps are based on 90, we can borrow under our revolver using 30 and we did do that at the end of 2008. But right now we are in a 90 day LIBOR traunch (ph) even under our revolver. William Fisher - Raymond James: Okay, great. Thanks very much.

Thanks Bill.

And we have one final question. Your final question comes from Nicole Deblase from Deutsche Bank. Nicole Deblase - Deutsche Bank: Good morning.

Good morning.

Good morning Nicole. Nicole Deblase - Deutsche Bank: First of all on pricing, you guys sounded pretty confident that you won't see pricing dip around 1% pricing that you saw during the last downturn. So if we're in a deflationary to flat CPI environment this year, what gives you confidence that you can see more than the 50 to 100 bits spread?

Yeah, I mean it basically comes down to again, it's the beauty of this business. The recession resistant nature of this business. There is not, Sherry Rice likes to say that if you put shoes on sale people are going to buy more shoes. But if you put waste services on sale, people aren't necessarily going to buy more waste services. There is a finite level of demand and there is a, the amount demand is not going to reduce dramatically if you raise prices. And so it's a simple matter of looking at the elasticity of demand and you... in this... when you have a necessary product like our product is in a commercial line of businesses and in our recession resistant businesses, when you have a necessary product, you're always going to better raising price and taking the volume loss because the elasticity of demand is always going to work in your favor. And so, that's basically what our pricing programs are built around, they're built around a fundamental premise, that the elasticity of demand is always going to pay you better if you raise prices and take the volume loss. And so, we are going to continue that in 2009. The good news is, is that, from a return on capital point of view. I think this entire industry has understood that when you look at return on capital you have to look at it from a pricing point of view and that's, so I think we've also seen the pricing hold up very well throughout the country. So, we're going to continue with the program of, letting less the elasticity of demand work in our favor and that's not going to change whether it's a deflationary environment or an inflationary environment. Nicole Deblase - Deutsche Bank: Okay. And I understand that but I mean you are saying that is, if it's deflationary that you can get more than a 100 bit spread, correct?

Correct. In another words, if we have deflation, so core CPI is negative we will not go to negative pricing. Nicole Deblase - Deutsche Bank: Okay, okay, got it. And then what are you guys seeing in the competitive pricing environment?

Yes, I mean, it's what I've said before, we have seen it holding up fairly well across the country, I think there is a lot of factors that come into play there, obviously with fuel coming down, I think that that's been a benefit. And so, we've seen pricing, it's basically the same that we've seen over the last few years. You see a fairly solid pricing environment with pockets of unusual behavior. Nicole Deblase - Deutsche Bank: Okay. Thanks.

Sir, there no further questions at this time.

Well thank you all for joining us. We certainly know that 2009 is going to be a challenging year. We certainly expect to meet those challenges and we look forward to a great year, filled with opportunities and another great strong year of generating free cash that we can return to our shareholders. Thank you all for joining us.

Thank you for participating in today's Waste Management conference call. This will be available for a replay beginning at 1 O'clock PM Eastern Standard Time today through 11:59 PM Thursday February 26, 2009. The conference ID number for the replay is 80418207. Again the conference ID number for the replay is 80418207. The number to dial for the replay is 1800-642-1687 or 1706-645-9291. Thank you. You may now disconnect.