Good morning. My name is Junisha, and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter 2015 earnings release conference call. [Operator Instructions] I would now like to turn the call over to Mr. Ed Egl, Director of Investor Relations. Thank you, Mr. Egl, you may begin.

Thank you, Junisha. Good morning, everyone, and thank you for joining us for our third quarter 2015 earnings conference call. With me this morning are David Steiner, President and Chief Executive Officer; Jim Fish, Executive Vice President and Chief Financial Officer; and Jim Trevathan, Executive Vice President and Chief Operating Officer. Before we get started, please note that we have filed a Form 8-K this morning that includes the earnings press release, and is available on our website at www.wm.com. The Form 8-K, the press release and the schedules to the press release include important information. During the call, you will hear forward-looking statements, which are based on current expectations, projections or opinions about future periods. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and in our filings with the SEC, including our most recent Form 10-K. David and Jim will discuss our results in the areas of yield and volume, which unless otherwise stated, are more specifically references to internal revenue growth, or IRG, from yield or volume. During the call, David and Jim will also discuss our earnings per diluted share, which they may refer to as EPS, or earnings per share. And David and Jim will address operating EBITDA and operating EBITDA margin, as defined in the earnings press release. Any comparison, unless otherwise stated, will be with the third quarter of 2014. The third quarter of 2014 results have been adjusted to enhance comparability by excluding certain items that management believes do not reflect the fundamental business performance or results of operations, and by excluding amounts attributed to businesses and assets divested in 2014. These adjusted measures, in addition to free cash flow, are non-GAAP measures. Please refer to the earnings press release footnote and schedules, which can be found on the company's website at www.wm.com for reconciliations to the most comparable GAAP measures and additional information of our use of non-GAAP measures. This call is being recorded and will be available 24 hours a day beginning approximately 1:00 p.m. Eastern Time today, until 5:00 p.m. Eastern Time on November 10. 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 (855) 859-2056 and enter reservation code 32546520. Time-sensitive information provided during today's call, which is occurring on October 27, 2015, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited. Now I'll turn the call over to Waste Management's President and CEO, David Steiner.

Thanks, Ed, and good morning from Houston. Our strong third quarter results continued what we saw through the first 6 months of the year. Disciplined pricing and cost control programs driving improvement in our business. In the third quarter, we earned $0.74 per share, an increase of more than 10% from the third quarter of 2014. Each of our net income, operating income and margin, operating EBITDA and margin, and earnings per diluted share improved when compared to the third quarter of 2014. Through the first 9 months of the year, our operations have generated almost $2 billion in cash provided from operating activities, which is a 16.5% increase from the prior year when you exclude divested businesses. Our strong performance puts us on track to exceed our full year goals, and we're excited about the positive momentum built into the fourth quarter and heading into 2016. Again, in the third quarter, our pricing programs continue to be a big part of our earnings growth and margin expansion. For the third quarter, our collection and disposal core price was 4%, which is consistent with the third quarter of 2014 and yield was 1.8%. Core price in the industrial line was 8.4%. In the commercial line, it was 5.7%. In our residential line, it was 2.2%. And in our landfill line, it was 2.3%. Year-to-date, through September, core price was 4.2%, which exceeds our 2015 core price target of 3.8%. As we saw in the first half of the year, core price continues to drive margin expansion as our traditional solid waste business operating EBITDA and operating EBITDA margin increased, when compared to the third quarter of 2014. Turning to volumes. When we look at our business, we track traditional solid waste volumes, which excludes recycling and non-solid waste revenues. Our traditional solid waste volumes were basically flat, declining only 0.1% in the third quarter of 2015 versus a decline of 1.9% in the third quarter of 2014, 180-basis-point year-over-year improvement and a 50-basis-point sequential improvement from the 0.6 decline in the second quarter of 2015. Overall volume, which includes recycling and those non-solid waste volumes, declined 1.4% in the third quarter. In our industrial line of business, the positive momentum that we saw in the second quarter continued into the third quarter. Strong new business pricing outpaced the price of lost business. So we were able to get both a strong price and positive volumes in the quarter, as industrial volume was a positive 0.4% in the third quarter of 2015, improving 290 basis points from negative 2.5% in the third quarter of 2014. We also saw the rate of decline in our commercial line of business improve again, as the rate of loss in commercial volumes improved 360 basis points compared to the third quarter of 2014 and 90 basis points, sequentially, from a negative 4.9% in the third quarter of 2014 to a negative 1.3% in the third quarter of 2015. This is the best commercial volume that we've seen since 2006. Our service increases continued to exceed decreases, and new business in our commercial and industrial lines combined exceeded lost business for the second consecutive quarter. These are all positive signs that make us optimistic that volume should continue to strengthen into 2016. Turning to recycling. We continue to work together with our customers, vendors and industry groups to improve the long-term outlook for recycling through educating the public on what and how to recycle to bring down contamination levels. We have also made progress on renegotiating contractual terms with our customers, including exiting some unprofitable contracts. Ultimately, we want to provide recycling solutions that both meet our customers' needs and generate an appropriate return for us. Recycling is the right option for the environment, and we're working to make it the right business decision for our shareholders as well. Moving to current results from our recycling operations in the third quarter, earnings per share from the recycling operations were flat compared to the third quarter of 2014, despite a 15% drop in average commodity prices and a 6.4% decline in volumes, which is largely associated with contractual losses as we shed unprofitable business. Our recycling employees performed incredibly in reducing operating costs and improving the business. In the third quarter, we saw a 7% improvement in operating cost per ton compared to 2014. So we're moving in the right direction and our results in 2015 will exceed the expectations we laid out earlier in the year, but there's still a long way to go to get the appropriate returns on our existing assets. With respect to potential acquisitions, as we mentioned on our second quarter conference call, we believe that we can execute agreements to add an additional $50 million to $75 million of operating EBITDA in 2016. Recently, we closed on 2 acquisitions that we expect to generate approximately $18 million in operating EBITDA in 2016. Our pipeline still looks strong, and we're in the advanced stages of some transactions. Consequently, we still believe that we can close transactions that will generate $50 million to $70 million of additional 2016 operating EBITDA. So we expect to see strong operating EBITDA growth from our core business and from acquisitions in 2016. But I'll remind you that the operating EBITDA from acquisitions won't translate to earnings per share in 2016 because we'll have corresponding intangible amortization. However, the transactions will generate cash flow, which is the most important metric in our business. And we expect that our cash flow in 2016 will be strong. In conclusion, we've seen 3 consecutive quarters of strong results, and we're confident that strength will continue as we conclude the year and look forward to 2016. This performance is a tribute to our employees executing our pricing, disciplined growth and cost control strategies. We're confident that our employees' focus on our core business will allow us to meet the analysts' fourth quarter consensus of $0.67 of adjusted earnings per diluted share, which will allow us to exceed the upper end of our 2015 adjusted earnings per diluted share guidance of $2.55. We also expect to exceed the upper end of our full year free cash guidance of $1.5 billion, in which case, we may decide to prepay some items to help offset tax and other cash flow headwinds in 2016. I'll now turn the call over to Jim to discuss our third quarter results in more detail.

Thanks, David. In the third quarter of 2015, SG&A costs continue to be a bright spot in our results even as we face tougher comparisons to the prior year. Overall, SG&A costs improved $8 million compared to the third quarter of 2014. As a percent of revenue, SG&A costs were 9.8%, an improvement of 10 basis points compared to the third quarter of 2014. With the strong results in the first 9 months of 2015, we expect to achieve our full year goal of reducing SG&A costs by $60 million. Turning to cash flow for the third quarter. Net cash provided by operating activities was $657 million compared to $627 million in the third quarter of 2014 after adjusting for $45 million from the divested operations. Other impacts on our cash provided by operating activities were $40 million paid to complete our withdrawal from the central states pension plan and a $60 million reduction in cash taxes paid. During the third quarter, we continued to improve our working capital position, as we reduced days sales outstanding by 1.4 days and increased days payables outstanding by 3.9 days. We're pleased with these results as our team has done a terrific job of making these improvements, and we expect to see continued improvement into 2016. Free cash flow was $358 million in the third quarter 2015, an increase of $20 million when excluding free cash flow from divested operations in 2014. Our capital expenditures for the quarter were $335 million, $28 million more than the third quarter of 2014. As David mentioned, we've generated almost $2 billion of cash provided by operating activities through the first 9 months of 2015. In addition, we've generated over $1.2 billion of free cash flow. Given that, we expect that free cash flow in 2015 will exceed the upper end of our guidance range of $1.5 billion. David mentioned that we would prepay some expenses in the event that we exceed our free cash flow guidance. An example might be prepaying cash taxes. We currently anticipate that our 2016 cash taxes will increase by $300 million to $400 million. If we have excess free cash flow, we may elect to prepay some of the cash tax increase at year-end to lessen the impact of this increase. Third quarter revenues were $3.36 billion. We saw a $53 million increase in revenues from acquisitions and a $48 million increase in our traditional solid waste business. We also saw an overall revenue decline of $186 million from divestitures, a $49 million decline from lower recycling revenues, $47 million in lower fuel surcharge revenues and $41 million in foreign currency fluctuations. Looking at internal revenue growth in the third quarter. Our collection and disposal core price was 4%, with total volumes declining 1.4%. This led to total company income from operations growing $24 million, operating income margin expanding 110 basis points, operating EBITDA growing $29 million and operating EBITDA margin growing 140 basis points. In each case, compared to third quarter 2014 results. Our collection lines of business continues to see the benefit of core price and disciplined growth as operating EBITDA and operating EBITDA margins grew. In the landfill line of business, we saw the benefits of both positive volume and positive core price in the third quarter. We saw same-store average MSW rates increase year-over-year for the 10th consecutive quarter, up 3.6% from Q3 2014. MSW volumes grew 5.9%, C&D volume grew 4.9% and special waste volumes were a positive 2.4%. Total landfill volumes increased 4%. Our special waste pipeline looks strong and we expect to see landfill volumes remain strong through 2016. Moving to operating expenses. As a percent of revenue, operating costs improved 140 basis points to 62.4%. Lower diesel costs and lower recycling commodity rebates to our customers contributed $73 million to the improvements. We also had reduced expenses from foreign currency fluctuations. Subcontractor costs improved $17 million and labor and related benefits improved to $12 million when compared to the third quarter of 2014 as we continue to see improvement from our service delivery optimization program. These savings were partially offset by increased disposal costs related to our improved volumes and slightly higher maintenance costs. Overall, operating costs improved $91 million in the third quarter. Finally, looking at our other financial metrics. At the end of the third quarter, our debt-to-total capital ratio was 63.3% and our weighted average cost of debt was 4.4%. The floating rate portion of our total debt portfolio was 8% at the end of the quarter. In the third quarter, we repurchased 5.9 million of our outstanding shares for $300 million and paid $172 million in dividends. This $472 million reflects our confidence in the cash generation of our business and our commitment to return cash to our shareholders. Our income tax rate in the third quarter was 32.3%, which compares to the 30.6% for the third quarter of 2014. A tribute to the late and great Hall of Famer, Yogi Berra, our third quarter results were déjà vu all over again. We've seen 3 consecutive quarters of year-over-year improvement, and we expect that to continue into the fourth quarter. All of our employees have worked hard to deliver these solid results and for that, I want to thank them. We are very confident that we'll continue to deliver strong earnings and cash flow to complete a successful 2015 and set us up for continued improvement throughout 2016. And with that, Junisha, let's open the line up for questions.

[Operator Instructions] Your first question comes from the line of Scott Levine of Imperial Capital.

So just looking for maybe a little bit of an update on the pricing environment, core pricing looked like it was pretty strong in the quarter, but it sounds like a lot of the gross margin expansion you're getting is from lower fuel and commodity costs. But are you still seeing a pretty good pricing environment out there? How are you progressing with regard to your price gauge? Are you still getting good margin expansion associated with your internal pricing activities?

Yes, I'd say sort of as a follow-on to last quarter, I would say that the overall pricing environment is as solid as I've seen it since I've been at Waste Management. We see real good progress across all lines of business, except for our residential line. And as you all know, the residential line is traditionally the most competitive line. I would say even in the residential line, though, we're seeing very disciplined pricing based on return on invested capital type of metrics from the large national players. It's always sort of those small, local and regional players that seem to sometimes forget that if you offer a lower price and you invest a lot of capital in those residential contracts that over the term of those contracts, you don't make as much money as you think. But even in the residential line, what we're seeing is sort of those large national companies are bidding based on return on capital not on chasing low-priced volume. So I'd say, overall, I'm extremely encouraged by the pricing environment, we expect it to hold into 2016.

Got it. And maybe shifting to tax a little bit here. So I don't know if Jim had given a tax rate assumption for the fourth quarter. Did you give one?

I did not. Tax rate in the fourth quarter is going to be similar to the third quarter.

Okay. So, let's say, about 32%. And then with 2016, you mentioned $300 million to $400 million pickup in cash tax, but for some of this prepayment, maybe a little bit more elaboration there. And if we do get renewal bonus depreciation, might you see a significant benefit associated with that, and one that you might be able to take an early shot of quantifying?

Yes, if we do get bonus depreciation -- and thanks to our slow-moving Congress, it seems like that always happens at the very end of the year, but it's probably going to be in the neighborhood of $70 million, Scott, for bonus depreciation. And then when you think about that $300 million to $400 million, really that's, of course, that's the prepayment from last year of 2 14. It's the 150 or so from the early extinguishment of debt transaction earlier in the year. And then combining all those benefits with earnings growth in 2016, our cash tax headwind will be somewhere in that $300 million to $400 million, which is why David and I both mentioned the fact that we probably will prepay. Certainly the -- probably half of that benefit from the early extinguishment of debt will get pushed forward into '16. And then depending on how we do with respect to free cash flow, it's possible that we will prepay additional taxes at the end of the quarter.

Got it. So said another way, maybe -- it's like maybe at least half of that increase in '16 to be pulled into 4Q based on what you expect right now?

I think that sounds about right.

Got it. One last one on the M&A side. So you're essentially, I guess, affirming the EBITDA, the target that you expected to acquire for next year. Should we assume those are kind of your traditional solid waste acquisitions? Or has your review changed at all with regard to, call it, the nontraditional waste business, whether it's industrial, energy or otherwise.

Yes. No, that would be core solid waste. We would consider hazardous waste and energy services both to be core businesses. And if we found some transactions in those areas, we'd look at them. Obviously, we would look at them based on today's environment, not on tomorrow's environment or yesterday's environment. But when we talk about that $50 million to $70 million of additional on top of the $18 million that we already closed, we would -- yes, we'd look at those more as traditional solid -- you'd look at it as traditional solid waste businesses.

Your next question comes from the line of Corey Greendale of First Analysis.

First, I wanted to follow-up on Scott's question about price, it sounds like the environment is favorable, overall. But I guess, first of all, can you just verify, I had from my notes that about 40% of your revenue base is tied directly to CPI? Do I have that right?

That's about right, yes.

So can you just address that portion specifically? Given where CPI is at, should we expect a lower price in those markets in '16 and what does that imply for overall price growth in '16 relative to '15?

Yes, when we look at our CPI business, we always look at it and say, look, there's nothing we can do about CPI because it's a government-posted stat that we cannot control. So sometimes we're going to get hurt, sometimes we're going to get helped by it. It seems over the last few years, all we've done is get hurt by it. So in 2016, we don't expect to have a benefit from CPI. In fact, we'd expect to have a little bit of a detriment to pricing from CPI in 2016. But like we've always said, we can't control that. What we can control is the core price on the rest of our business. And so if we aren't going to -- my guess is that we will have sort of a consistent core price target next year that we've had both in '14 and '15. And if we're not going to get it from CPI, we'll make up for it by getting core price on our other lines of business.

Got it. And just to clarify. When you say you can't control CPI, obviously, that's true. But one of your large competitors has talked about trying to shift customers to more of a sewer water waste index instead of CPI. Is that something that you've thought about or doing at all?

Oh, absolutely. We've actually done that. We've tried to use that index. We've also used what we call sort of our solid waste index. And so every time that we talked to the customers, look, this goes back 10 to 12 years ago when we first instituted a fuel surcharge because we saw fuel prices fluctuating. What has to happen is that everyone in the industry needs to say, look, this just doesn't make sense for us unless we look at these contracts with this type of adjustment in it. And so going back 10 years ago, when we first put in the fuel surcharge on our residential contracts, everyone said that's never going to happen because the municipalities won't accept it. And as the industry said, we're just not going to bid unless we have a fuel surcharge, customer started to accept it. It's the same thing with CPI. Look, every single company has been hurt by CPI in the last 5 years. And I think it's incumbent upon the largest companies to say, look, we're just not going to bid these under the traditional CPIs, or even worse, 75% of CPI type of contracts. And if the industry is able to do that, then you'll see municipalities change. But they're not going to change when only one player is out there doing it. So we've been doing that particularly in California for the last number of years and we'll continue to do that throughout the country.

Yes, I understand. And David, can you just talk a little bit about how you are thinking about new business, kind of your selling effort in an improving economic environment? Whether -- what's the state of your sales force, you're growing the sales force, so you're changing how they're incentivized or anything like that to try to win new business?

Yes, I'm not sure I'd say that we're growing our sales force. I'd say what we're doing is we're sort of reallocating our sales force. From our perspective, what we've tried to do is put our sales force in those areas where it's growing. So when we look at a market area that's not growing, we might reduce the sales force. Whereas, when we look at a market area there that is growing, we might add the sales force. And so there won't be a drastic addition to our sales force, there will certainly be a reallocation of our efforts in those lines of business that are growing and in those geographies that are growing.

Okay. And then one more for me. Dave, it sounds like you're making good progress on reducing your recycling processing costs. Can you just give us a couple of sentences on what that constitutes, whether it's a labor question or you're putting in different equipment, just what you're doing there? And then, secondly, the reduction that you've seen so far, how far does that take you towards your goal, I think the goal is reducing average cost per ton by $10 or something like that?

Yes, I would say we're probably 70%, 2/3, 70% of the way there on our goals. There's still plenty of room for improvement. And those cost improvements have come from sort of all of the above. First and foremost, you'd have the operational improvements. But secondly, you have shutting down some of our more high-cost operations. And so we've basically shut down those operations that we would expect to shut down. There are some contracts that we need to get out of that are high processing contracts. And then, finally, we need to reduce those contamination levels. That's -- frankly, that's what drove the highest increase in our operating costs. And so working with our customers, we need to make sure that when we have a contamination rate goal in each -- in our contracts, which we have in virtually all of our contracts, we need to make sure that our customers are meeting those goals, and so we'll go in and do the audits to make sure that we're dropping those contamination rates. And so, look, our recycling folks have really done a spectacular job of approaching the operating cost from every angle. I think there's still some room for improvement in 2016, but they've done a heck of a job so far.

They're still there with some of those contracts that will fall off during '16. It will provide some structural improvement as well to the recycling business.

Corey, I think that this is the first time that we have talked about, internally at least, 2016 not being a big down year versus the prior year in recycling. It's -- by the way, it's not because of any help we're getting on the commodity line, it's just that the efforts of our team to really permanently change the way the business operates on the cost side are starting to really bear some fruit.

Your next question comes from the line of Joe Box of KeyBanc Capital Markets.

So I just wanted to dig into the moderating decline in solid waste volumes. How would you explain the 180 basis point of improvement year-over-year? Is that more a function of waste fundamentals improving? Is it better sales execution? Or is it maybe just a function of your pricing is up, but it's not up quite as much? Just any color on that would be helpful.

Yes, I would say that, primarily, it's related to improving fundamentals in the industry. We really aren't using price to go out and chase volumes. So you've got improving fundamentals across some lines like the industrial line where, frankly, in the industrial line, we probably could've grown it more in the last couple of quarters. But we're constrained by the number of containers and drivers and trucks that we have on the road. And so primarily, it's improving industry fundamentals. But we really have seen a nice improvement in productivity from our sales force. When I talked about it earlier, we're not adding a lot of folks to our sales force, but we are top-grading our sales force. And the folks we have right now are much more productive than they'd been in the past. And so it's really sales productivity and mostly improving business fundamentals.

Joe, we've talked a lot about, also, the fact that on the disposal side how important pricing is there. And when we see same-store average MSW rates up approaching 4% and kind of we just talked about CPI being close to 0 in almost a 0 inflation economy, we're pretty happy with that. I -- and at the same time, we see almost 6% growth in MSW volumes. To us, that's really where we've got to dig in is on the disposal side of our business.

Joe, I was going to add, also, that you've mentioned you're open with price comment, and we've maintained that approximate 4% core price number while improving volumes. We also had rollbacks for the quarter at about 18%. So that's a real improvement versus prior year. So all of those factors have helped improve volume. Yes, we've been maintained the price focus.

And to Jim's point, on the industrial line, our new business pricing is actually higher than our average rates, and so we're seeing real strong pricing on the industrial side. Look, industrial volumes are as close to a spot market as we have, as we've talked about many times. And the spot market right now is very strong. And so you should be getting both positive price and positive volume. Obviously, that will moderate as we come into the seasonality and the weather of the fourth quarter and the first quarter. But I would expect to see that improve, both volume and price improve, as we come out of the winter and get into the seasonal uptick next year.

That's great color. And let me actually just follow up on that. You guys have made it clear that you do want to manage to a certain price increase, and I guess the specific metric that you're looking at is core price. Jim, you mentioned better rollbacks. And I think, David, you said something about the industrial business not necessarily coming in at a lower price. So I understand there are some nuances here. But how are you incentivizing the sales force to really minimize the impact of rollbacks and lower new business coming online with the exception of industrial?

Joe, our sales incentive plan for the account managers that manage our current business is directly linked to how much price they get for their current customers, and whether or not they're rolled back. So it is a direct impact on that sales rep when they increase rollbacks or they don't get their price, so it's a direct link. And that has...

Okay. So it's not just core price?

No.

It's also looking at rollbacks and where they're bringing on new business.

Absolutely. New business pricing, yes, the payout as well.

And Joe, look, when it comes to the sales incentive plan, I think everyone that's ever managed a sales force would love to have EBIT as their core metric rather than revenue growth, right? Because you can get revenue growth at low margins and that doesn't do anyone very much good. We've got a tool that we're rolling out in '15. It'll be fully rolled out in 2016 that will allow us to measure profitability at the customer level. At that point in time, I would expect us to really look at the compensation plans and say, okay, rather than focusing on revenue and price, let's start now focusing on the actual EBIT that we're generating and start incentivizing folks to generate higher EBIT. How do you do that? By selling the right volume. By selling the right volume at the right price. And so we've got compensation plans in place right now that I think drive the right behavior. That's only going to get better through '16 and into '17.

In the meantime, Joe, we have absolute control over the pricing, the area level and the corporate for larger accounts. So we know exactly where our reps are going in from a price standpoint on an overall basis. So we're not waiting for that tool to help us in that regard.

Your next question comes from the line of Michael Hoffman of Stifel.

If I could, just want to back up a little bit around the solid waste and the commentary on volumes, just to slice it once a little bit differently. If you looked at the same store volume trends on front-end loaded business, residential and your permanent roll-off, because I get the temporary has been very strong on the permanent. What's the trend on a same-store basis for each of those lines in collection?

As far as waste go?

Yes, the volume. Just -- the direction, is it positive? Flat? Negative?

Yes. I mean, obviously, it fluctuates slightly quarter-to-quarter. But I would tell you that the trend line is that both of them were slightly -- actually slightly negative this quarter, but the prior 2 quarters they were up. And so I would tell you that the trend line is up. So we -- and service increases have exceeded service decreases. So I would tell you that every trend line that we look at -- and as you know, Michael, I haven't been saying this for the last 3 years, but every trend line we look at is -- right now is positive.

Okay, so just to make sure I understood that. The overall trend in permanent roll-off front-end loader and residential since -- wait, since every day this stuff goes across the scale is positive, which indicates this improving volume pattern structurally.

Yes, I would say that's true for commercial and industrial. Residential, we, frankly, we don't look at that. We look at that a little bit differently than we look at the other lines of business. So we're not as focused on waste in the residential side.

And fair enough, because it's really about the asset utilization of the equipment going down the route. How would you frame your churn trend at this juncture as well, with both the direction and then the rate of replacement?

Yes, so the rate of replacement actually has improved fairly dramatically over the last 4 quarters. And the churn rate, so this quarter, we saw about an 80 basis improvement in the churn rate. But its stubbornly stuck at sort of that 10% to 10.5% churn. Our focus in 2016 is going to be to try to drive that churn rate down below 10%. Now look, again, this is a simple business if you want to use price as your lever. We can drive that churn rate well below 10% if we just exceeded every single customer asking for a price rollback. But as Jim pointed out, our price rollback trends are actually very positive, too. So again, when you look at the combination of trends, you can look at rollback and say, boy, rollbacks are going great. But if you're doing it by a price, not so great. And what we've done over the last 2 years is seen the churn rate come down marginally, not as much as we'd like to see it come down, but we've seen the rollback rates also perform very well while not giving away the price. And so the combination of the 3 is very positive.

Fair enough. And if you -- go ahead, sorry.

I want to add another thing quickly to it, and that's the addition rate. I think you had mentioned -- questioned as well, Dave said it was very positive. I mean, we're about 200 basis points positive on the addition rate, and that's really helped some of the -- especially the commercial volume. We're positive in dollars in 15 of the 17 areas. The other 2 are fairly close and making real improvements versus prior years. So the trends are positive, but stay stressed.

Okay. And on the churn, given maybe stubbornly where it is. How do you think about it as that which you control versus that which you don't? And that which you control isn't so much about price as it's more service oriented. Things that you could fix and then you could keep doing what you're doing in price.

Yes, I mean -- and roughly half of it is structural. The companies going out of businesses are relocating. And so that leaves you 500 to 600 basis points of churn that is voluntary. And you've hit the nail right on the head. I mean, every study that we've done since I've been at this company for 15 years, tells us that price is not the primary reason for churn. Now price becomes the primary reason for churn when you have a service failure. And so I always liken it to the cable companies. We all get a flyer every week that offers us a lower price for cable. There's probably a lot of people that accept that and say let's take it every time we can get it. But 90% of the folks say, you know what, the cost of changing out is too high. So I'll accept the fact that this price might be a little bit higher, but I'll accept it because the pain of switching is too high. Until the cable starts going out or the satellite dish starts going out. And then all of a sudden, that price offer looks pretty attractive. But every study we've ever done says that service failures drive churn, and that's why we've reinstituted what we have when I first came to this company 15 years ago, the service machine program, which when I came here 15 years ago did a great job of rallying the company around the customer. And we've tried to do that in the last 14 months. That's exactly what we've been trying to do, rally our company around the customer, and we're seeing some really nice progress in that regard.

And when you think about the efforts in productivity and the service optimization, is that what's giving you the comfort to say, 10 goes -- we go below 10% in 2016, as you correct that missed pickup, which is usually driven by a truck that broke down, things like that.

Yes, I mean -- and you hit another great point, which is not just wanting to have great service. It's also being able to provide great service by having a truck that's operating, which goes back to maintenance and fleet and all of those types of issues. And so what we've done, Michael, is try to take a holistic view of what causes a service failure. And you're absolutely right, a lot of times it's because we don't have a truck that can service it. And so when we look at driving it below 10%, we really need to have all of our operations working in conjunction with our sales folks to execute flawlessly. And I will tell you not just at Waste Management, but throughout the entire solid waste industry, it is stunning to me that we do our jobs every day as well as we do them. But at Waste Management, what we said is good is not good enough. We have to be great, and that's what James got the company focused on.

Michael, one thing that we've changed in that regard, you mentioned the missed pickups, if you do a missed pickup measurement, and we're pretty good. We compete with almost any industry around this pickup that are reported by the customer. We've taken another view of that. We're looking now at -- Dave mentioned the maintenance side, we're looking at service failures where perhaps a truck went down late in the day, and we missed half a route, we're point to get back up tomorrow. Well, that's a missed pickup from the customers view and we're adding that to the metric and looking at it a little differently than just past when the customer responded to a missed pick up, trying to add and restore that confidence where a truck went down, and fleet's part of it. But the real issue is also -- is around our call centers and how well they are connected to the field, and we can respond to that customer's need in a more timely manner. So we -- it's a huge focus for us. It's been that way in the past but we're adding a little bit more color to it.

Okay. And then, Jim Fish, I think I understand what you're saying about free cash flow, I just want to say it out load to make sure I get it. So I'm picking a number just to frame it. If $1.5 billion is this year's number, and all things being equal, that number would be midpoint of the $300 million to $340 million is $350 million. So if $1.5 billion is down by $350 million because of more cash tax, and then it grows based on all the other things you would do, and you're intention is to pay some of that $350 million this year, so that the $15 million would be less -- it's smoothing your cash is what I -- which is perfectly appropriate. I just want to make sure I understand it.

Yes, I think that's -- I'm not sure I'd use the word smoothing, but that's about right. One thing I would say, Michael, about free cash is that we're pleased with here is we've been kind of a $1.2 billion to $1.3 billion free cash flow company over the last 6 years. And I think what you're seeing is, in 2015 and going into '16, for those 2 years, is we're starting to become a more of a $1.4 billion free cash flow company. And that is really a function of all these things we've talked about. But is largely organic growth for us.

Right. So if you didn't prepay anything, it's not an unreasonable observation that sequentially the cash could be down. That's not a bad sign, since the timing of big flows like that. If we didn't have BD and all that, we wouldn't be having this conversation.

That's right. Without question, Michael, if we didn't prepay anything, because of the big headwind that we've got, we'd be down.

I think Jim's point shouldn't be lost, which is we're sort of establishing a new baseline to say we're a $1.4 billion baseline free cash flow-generating company. Now some years we might generate $1.5 billion $1.6 billion, other years -- and to the extent that we can prepay those cash taxes to ensure that next year we hit that baseline of $1.4 million and who don't have those headwinds, we ought to do that. But going forward, I would tell you, Michael, that $1.4 billion is sort of our stepping off point. Obviously, we'll give more specific guidance when we give it in February. But at this point, I think we've gone from saying we're a $1.2 billion to $1.3 billion baseline free cash flow company to the -- we're a $1.4 billion baseline free cash flow company.

Yes, we agree. So how do you think about the sustainable growth rate of that $1.4 billion, if you took a 5-year view?

Yes, I mean, as we've said, we think it's sort of 3% of 5% a year type of free cash flow growth. When I think about free cash flow, Michael, I will tell you. I think about 2 things. I think about -- and it comes back to our capital allocation program, which is, we can grow free cash flow by doing acquisitions. As Jim Fish like to point out, we basically replaced the Wheelabrator EBITDA not through acquisitions but through improvements to our business. We'll continue to add a little bit more acquisitions in 2016, as we talked about that $50 million to $70 million of EBITDA. But then I also look at cash flow on a per share basis. And as we buy back shares, cash flow per share is going to go up. And so as I look at it, when we look at our capital allocation program, we're going to have a nice balance that's going to both increase operating cash flow, but it's also going to increase cash flow per share.

Okay. And then, Jim Trevathan, how would you frame your current on a same-store basis recycling plant capacity utilization? It's got 1,000 tons per day. Is it 60% or 80% run rate? And what can you do to improve that?

Michael, we're closer to that 80% than 60%. Part of it is volume-driven as well as specific plans, part of it is shutting down the plant in cities where we have to dual capacity. But that's the goal. And there's still room for improvement there. We won't stop at where we are with that, what, 7% to 8% improvement in cost. Year-to-date, that's still going to go further into '16.

Your next question comes from the line of Al Kaschalk of Wedbush Securities.

I don't know if the fair question for this morning's call or not, but we'll give it a shot and see how we do. If I take a step back and look at the cost improvement side of the equation, and to your point about nearly replacing all of the EBITDA from Wheelabrator, are you suggesting that your -- at the goal line on sort of the cost -- annual cost improvements in the business? Or what's left in the tank?

I wouldn't say that, Al. I'd say that's, on the cost side, first of all, I'll tackle it from OpEx and then SG&A. On the OpEx side, we put -- over the last few years, we put on more computers in all of these trucks. And I would tell you, we're only kind of at halftime with respect to using the onboard computer to its fullest capability. For example, we can route our trucks dynamically, but that doesn't any good unless the driver follows the route that the computer generates. And then we're only following that route -- if you think about best-in-class, FedEx or UPS probably follows the route 95%, 97% of the time. We're kind of about 80% of the time. So while that may seem like pretty good and it is okay, that lasts 15 to 20 percentage points is worth a lot of money. So there's a lot of process work that's going into. We put the technology in place, there's a lot of process improvement that still needs to take place on the OpEx site. Maintenance cost is another component of OpEx. And I would tell you, we're probably not at halftime on maintenance costs. We're more like in the first quarter on maintenance costs. We don't use data as well as a lot of the companies, a lot of big companies use data to really proactively address maintenance cost as opposed to reactively addressing it, so you're not breaking down on the road. And we don't use it to the extent that we could. And so there's, I think, a lot of upside with respect operating cost going forward. Jim Trevathan talked a bit about the upside on the recycling side of our business with cost. And then SG&A, look, our goal for the last 3 years has been to get to a number below 10% of SG&A, I think that's -- because we haven't fully replaced the revenue side of Wheelabrator and the divested businesses, 10% of SG&A is going to be a challenge. But holding flat on SG&A while we still give our employees a merit increase, is no easy task. And so we planned from '15 to '16, again, to hold flat on SG&A, and that's on top of the $60 million that we said we would get this year.

Al, I might to Jim's mentioning of the onboard units, we were positive in all 3 lines of business on the collection side in Q3 and efficiency. And we're really starting a hard look at cost per unit and starting to move the needle on a CPU basis, which is where the money is, not just in a unit measurement, on a COGS per hour, for example. And that'll have a real impact. Volume has helped, but that's not the driver. We're still negative, for example, in residential volume, as Dave mentioned, and yet we were positive on the efficiency side. And moving that way on the CPU with real upside left as we fully implement SPO and some of the process work that will continue to work across all business.

Are you able to -- or as David put it, any thresholds in terms of the dollars, the cost of operation that come out on an annual basis or margin improvement beyond basis points? I mean, all of these -- I appreciate the macro commentary, and I know there was one on truck efficiencies down that 15, 20 basis points. But is there any way to help on the operations side to talk about maybe some goals and where that's at on a quantified basis?

Al, we don't -- I don't think at this time we're going to give you guidance for 2016. But we absolutely have targets both in dollars and in metrics. At the area level, the district level and all of these, we expect improvement. And hold people, ourselves, accountable as well as their areas, they hold their districts accountable. But this isn't just a shot in the dark. We have absolute dollar and metric goals for each of these metrics.

And as -- in that regard, I would say we're 33% to 40% there on the cost target. Like anything, when you start out with a cost program, it is the hardest thing to do in a company. And so we're about 33% to 40% there, but we're pretty confident that we're going to hit that target. It's a multi-year target, we're pretty confident that we'll hit it in the next 2 years.

Great. We'll certainly be watching, right?

We will as well.

On the acquisition side. Did I hear all areas where targets including energy service and energy waste, is that fair? But what you have in your line of sight is not -- is more on the solid waste side.

Yes. What I'd say is we're primarily focused on our traditional solid waste business, but -- we'll, let's now retract that. We are only focused on our core solid waste business. We're not looking to do acquisition outside of our core solid waste business. Right now, what we're looking at mostly is what I would call our traditional solid waste business. But we do believe that industrial waste and energy services are part of our core solid waste business. But when it comes to industrial base, we would certainly look at assets in that arena, because that dovetails perfectly with our industrial footprint. On the energy services side, I'd tell you that if we were to do a deal with energy services, we'd do an opportunistic deal. We are not actively looking to go out and expand our footprint dramatically in energy services business like we have been in the past. But if we combined some deals that are opportunistic and at the right price, we certainly think that, that long-term energy services is going to be a good line of business. It's not going to be a good line of business for the next year or 2. So we've got to see something on the long-term horizon at an opportunistic price if we're going to invest in energy services.

I don't have much in the way of discussion on hazardous waste. Is that something you're less focused on? Or just -- it's not imperative from an operational distribution point, collection route, density type of...

No, I think that's exactly right. It is a great line of business that completely overlays our footprint. The reality is that there are a lot more traditional solid waste providers out there that we can buy than there are industrial waste providers. And so I wouldn't say that we would -- we certainly would not preclude any transaction industrial waste. But right now, we're a little bit more focused on traditional solid waste.

Your next question comes from the line of Tyler Brown of Raymond James.

I don't want to get too caught up in the vernaculars here, but can you give us what average yield was in industrial and commercial? I just assumed that, including the impact of churn, it's a bit more meaningful in volumes are improving.

Yes, the average yield on the commercial side was 2.6%. And on the industrial side was 3%.

Perfect. And Jim Fish, just a quick clarification, but when you talk about exceeding the $1.5 billion of free cash, are you including or excluding divestitures?

Yes, we're including it. There's not a lot there. It's a -- we excluded the big ones last year. So we've always included them, but they are cats, dogs and add up to not a huge number. But obviously, last year, we had to exclude them because they were all so big.

Okay, but you are including them in the $15 billion this year?

Correct.

Yes, okay. So I'm just curious, so what is exactly exceeding -- what's driving the exceeding of the range? I mean, are you coming in better on cash from ops? Or is it the CapEx just tracking towards the lower end? Or is a little bit of both?

No, it's definitely not -- it's not the latter for sure. CapEx is just kind of at the high end of the range. The range we gave for CapEx was $1.2 billion to $1.3 billion. We're at the high end of that range, we maybe even go a little over the top of that range, so it's certainly not because we're tightening down on CapEx. I think it is more -- when I look at EBITDA, that's really in my mind, kind of the best barometer for how a business is performing, and our EBITDA seems to be performing quite well. Some of it's from yield. The big puts there are really yield, operating expense. And then that takes are kind of the for energy services business. Our energy services business will be down as much as 30% for the year. So that's been a big take that we haven't really talked about. But -- and it just nets out against the progress we're making on the others on the EBITDA outside.

Tyler, the improving volumes have obviously helped as well on the free cash flow for sure.

Sure. Sure. Okay, good. If I think about it, though, and I appreciate that you're not giving '16 guidance, but I'm just looking at the buckets. So if we start from cash from ops of, call it, 2 7, 2 8, wherever you guys end up this year. You're going to get back the $40 million of Central States Payment that you won't make next year. You're going to get some core EBITDA growth, just in the base business. You've got -- we've talked about the M&A that may be in the pipeline that comes on. And then you're going to lose the $300 million to $400 million of higher cash taxes, and then kind of whatever you think you'll do with that prepay. Is there anything else, big buckets wise, though, that I'm missing?

I think working capital -- we're making some progress on working capital, there's a lot that runs through that line. But you mentioned this one big thing that ran through at this quarter, the Central States Pension is what makes it. But we're making a lot of progress, it kind of got masked a bit this quarter because of that Central States. But with DPO up 3.9 days and DSO down 1.4, it's pretty impressive improvement considering that it wasn't too long ago, a couple of years ago, where we were kind of a 20- to 25-day difference in the wrong direction. It was 45, 47 on DSO and 22 on DPO. We're now up over 30, approaching 31 on the DPO and down at 42 on DSO. So that we shouldn't lose sight of that. That has a big impact on cash.

Sure. Okay. So working capital might help a little next year as well. Okay, and then on the M&A, I'm just curious, is at $50 million to $17 million EBITDA with justice at this point, for review?

Yes.

Or does it have to go to review?

Yes. That level of purchase price, it has to go through Justice. And we do have one transaction that's going through Justice and some others in the pipeline.

Okay. Perfect. And then maybe just my last question for Jim Trevathan. It sounds like you're core solid waste business is pretty solid. But I'm curious, have you guys seen anything, even small, a deterioration in the hazardous waste side of the house or maybe anything on your industrial services lines?

No, Tyler, we haven't. It's been very strong for us this year. The base business, more so than the event business, we -- our sites are, from a geography standpoint, sitting right where most of the construction in the petrochemical industry is occurring. Given the low energy cost, therefore, the low feedstock for that petrochemical industry. Our Alabama and our Louisiana sites, it's really good spot for base businesses as that industry grows. Even business on the West Coast on the haz side has been very good, especially the Pacific Northwest. And in places in the Southeast, maybe not so much, but that's kind of a mixed bag. But we're very happy with that business, and expect it to continue to improve.

Tyler, we -- anecdotally, Jim and I met with some of our big customers a couple of weeks ago over Louisiana. And those guys are all, as Jim said, kind of the beneficiaries of lower energy price. You've got the producers that are -- and the service providers that are kind of taking it on the chin, but you have the consumers that are benefiting. And we met with some big benefits of ours who are consumers, and they're very positive about their industrial business with us in '16. In fact, our haz business, even though it's still small relative to our solid waste business, our haz business is up year-over-year.

Okay. Yes, I assume the Mill is very well positioned to capture that petrochemical story over the next few years.

Really...

Lake Charles, is sitting right in the middle of it.

Lake Charles. Okay.

The Mill is good, but Lake Charles is better.

Yes, perfect. Okay. And then just lastly, have you guys seen anything in the coal ash side? Is there anything to think about as we look to '16?

Yes. I mean, look we're in the early stages here of this opportunity. What we are seeing is that it's -- we think it's a good long-term opportunity for us. But it's also pretty capital-intensive. And I guess, that can be a good thing, because it serves to differentiate us from some of the small guys who can't put the capital into it. But it's still is very early. We're starting to see some of these companies make some decisions about coal ash and we feel like we're well positioned.

The next question comes from the line of Tony Bancroft of Gabelli.

On the -- back to the energy waste business with the slower sustained crude prices, customers probably are pretty cash strapped by now. Are you seeing any issues with your contracts with them, negotiations for concessions?

Yes, I mean, they've come back to us over the last probably 12 months and asked for price concessions. In some cases, we've made some price concessions; in some cases, we haven't. It's as much as anything a function of where our assets are relative to the drilling that's taking place. But certainly, there's been some real pressure in that business and that's why our revenue will be down probably 30% for the year.

Got it. And then I know you've discussed the M&A on your services side. But what would you -- so if a deal were to be done on a one-off basis like you mentioned, what would you -- what would be a -- what's the going rate right now? I -- can you give me sort of a ballpark what you would think you'd be paying?

Going rate in terms of a multiple, is that what you're asking?

Yes, yes.

Oh, it's -- I don't know.

I'm not sure the multiple changes. But your forecast changes, right? In other words, it's a multiple of EBITDA and we aren't paying trailing 12 on EBITDA. What we're going to do is say, okay, let's look at a forecast of what we think is going to happen over the next 3, 5, 10-year horizon and let's discount it forward and figure out a reasonable multiple to pay. But I would tell you, again, when I look at our pipeline of acquisition, I would say that the pipeline that is the least full would be energy services. I mean, we are not actively looking at any transactions in any services of any magnitude. And so like I say, we'll be opportunistic. But we're not going to be as actively searching for deals in energy waste as we are going to be actively searching for deals in solid waste.

Your final question comes from the line of Adam Baumgarten of Macquarie.

Just a quick one on dividend. I mean, you talked about this sort of 3% to 5% free cash flow growth going forward. I mean, is that what we should expect for the dividend? Or could we see some upside there in the years ahead?

Yes, we've always said we want to have a balanced dividend, where we want to have a payout ratio somewhere around 50%. We want to be in the top quartile of S&P 500 dividend paying companies. We're in that sweet spot right now. We've had pretty consistent growth in our dividend over the last few years and I'd expect that to continue.

You have a question from the line of Barbara Noverini. I'm sorry. I will now turn the call back over to Mr. Egl for closing remarks.

Thank you. I'll fill in for Ed. I wanted to thank the entire Waste Management team for some spectacular business results. But every once in a while, an event happens that makes you realize that the reason that we all are here is not for business, it's for family. And we actually had one of those events yesterday when Jim and René Trevathan welcomed Georgia Marie, their grandchild. And...

Number 8, Dave. Number 8. It makes me feel old.

Number 8. So Jim is going to start some routing programs for his grandchildren, because he now has 8 of them running around. It makes you realize what's important. And I certainly hope that Georgia Marie has as good a 2016 as we expect to have at Waste Management. Thank you.

Thank you for participating in today's Waste Management conference call. This call will be available for replay beginning at 1:00 p.m. Eastern Standard Time today through 11:59 p.m. Eastern Standard Time on November 10, 2015. The conference ID number for the replay is 32546520. The number to dial for the replay is (855) 859-2056. This concludes today's Waste Management conference call. You may now disconnect.