美國廢棄物管理公司 (WM) 2014 Q3 法說會逐字稿

Good morning, my name is Rashay and I will be your conference operator today. At this time I would like to welcome everyone to the Waste Management third-quarter earnings release conference call.

(Operator Instructions) Thank you Mr. Egl, you may begin your conference.

Thank you, Rashay. Good morning, everyone, and thank you for joining us for our third-quarter 2014 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 schedule for 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 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 stated otherwise are more specifically references to internal revenue growth, or IRG, form yield or volume. Additionally, any comparisons unless otherwise stated will be with the third quarter of 2013.

During the call David and Jim will discuss our earnings per diluted share which they may refer to as EPS, or earnings per share. David and Jim will also address operating EBITDA and operating EBITDA margin as defined in the Form 8-K filed today.

EPS, income from operations, income from operations margin, operating EBITDA, operating EBITDA margin, SG&A and SG&A as a percent of revenue results discussed during the call have been adjusted. And EPS projections are anticipated to be adjusted to exclude items that management believe do not reflect our fundamental business performance, or are not indicative of results of operations.

These measures in addition to free cash flow are non-GAAP measures. Please refer to the earnings press release footnote and schedules in the Form 8-K filed today which can be found on the Company's website at www.wm.com for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures.

This call is being recorded and will be available 24 hours a day beginning at approximately 1 PM Eastern Time today until 5 PM Eastern Time on November 12. 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 8203798.

Time sensitive information provided during today's call, which is occurring on October 29, 2014, may no longer be accurate at the time of a 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 President and CEO, David Steiner.

Thanks, Ed. Good morning from Houston.

We saw strong results in the third quarter that are a continuation of what we saw through the first six months of the year, yield and cost control programs driving strong improvement in our core business. We saw growth in our income from operations, operating EBITDA and margins in both our traditional solid waste business and our overall business.

In the third quarter we earned $0.72 per share, an increase of over 10% when compared to the third quarter of 2013. When we started the year we had high expectations for our performance and through the first nine months we have met all of our expectations.

Our employees have executed their business plans exceptionally well this year. And we recently took additional steps to align the corporate functions to the needs of the field to further drive performance. This should serve us well as we begin to look forward to 2015.

Jim will discuss the financial benefits of our corporate realignment but I would like to touch on the strategic implications. We realize that growth and everything else in our business occurs on the front lines with support and oversight from our corporate teams. So our reorganization ensures that our corporate and field teams are aligned and working together and focuses our field and corporate resources to drive performance.

Our corporate teams will work with the field to improve operations of our business by targeting volumes that support our yield focus and reducing costs. The corporate and field teams will have joint accountability in achieving these goals. We think of this as an extension of the 2012 reorganization where one of the main outcomes was a more direct line of sight from corporate to the field.

Turning to our waste energy business, Jim will give you more detail on the results of operations but I wanted to give an update on the sale and use of proceeds. The transaction is progressing as we anticipated. We should receive Federal Energy Regulatory Commission approval and close on the transaction at the end of this year or early in 2015.

Regarding the use of proceeds, our philosophy has not changed. We would prefer to replace the $220 million of the vested operating EBITDA at attractive multiples. As we recently announced we entered into an agreement to acquire Deffenbaugh Disposal, which will enable us to replace a portion of that operating EBITDA.

Our agreement limits what we can say now but once the transaction closes we will provide additional financial detail. We are certainly excited about the deal because Deffenbaugh is a very well-run company with both collection and disposal assets and with an excellent market position in Kansas City, where we currently have virtually no presence. This transaction is subject to the Hart-Scott-Rodino Act and is expected to close later this year or in the first quarter of 2015.

We're still looking at other potential targets but if we do not find assets at reasonable prices we will use the proceeds to repurchase our stock and maintain leverage neutrality. If we do purchase shares we would likely began at the end of the first quarter of 2015 after the expiration of our current accelerated share repurchase program.

Returning to our third-quarter results, our yield program continues to be a significant driver of our margin expansion. For the third quarter, our collection and disposal yield was 2.3%, which is the sixth consecutive quarter of yield above 2%. Our core pricing remains solid at 3.8%.

When compared to the third quarter of 2013, same-store average rates in the commercial line of business increased 5.2%, industrial increased 4% and we saw a 2.5% increase in our residential line. This has had some effect on volumes particularly with regard to lower margin national accounts and residential contracts but we continue to see the trade-off as positive as the operating margin in our traditional solid waste business was up 60 basis points.

Volumes in the third quarter were a negative 1.3%, which is an improvement of 10 basis points in the second quarter and the third consecutive quarter of sequential improvement. About 100 basis points of the 130 basis point decline came from lost low-margin national accounts.

In the third quarter, we once again saw positive landfill and transfer station volumes more than offset by declines in the collection lines of business. Despite negative volumes the Company's income from operations grew more than 3% and our income from operations margin grew 60 basis points.

In addition, operating EBITDA increased and operating EBITDA margins increased 30 basis points to 26.6%. Our recycling operations also performed better in the quarter despite an average OCC commodity price decline of 17.1%, reflecting our continued focus on enforcement of restrictions on contaminated loads and modifications to customer rebate structures.

We have seen three successive strong quarters in 2014 and we expect the strength to continue into the fourth quarter and into 2015. We are confident that we can meet or exceed the analyst consensus of $0.60 of adjusted earnings per diluted share for the fourth quarter.

A $0.60 fourth quarter would lead to full-year adjusted earnings per diluted share of $2.41, $0.06 above the high end of our previous range. Cash flow has also been strong through the first three quarters and we expect that we will also exceed the $1.5 billion high end of our free cash flow guidance.

As we did last year, we may look at ways to invest some of this excess cash flow by pulling forward some 2015 spending into 2014.

In summary, we are very pleased with the results so far in 2014 and expect that momentum to continue into 2015. We will be judicious with our use of proceeds from our Wheelabrator divestiture as we look to replace $220 million of operating EBITDA using the proceeds to create long-term shareholder value and not merely to create short-term earnings.

This will likely have a negative effect on earnings and cash flow in the first half of 2015 as we look to offset the loss of $0.18 of EPS and $120 million and cash flow from the divestiture of Wheelabrator. Given the timing of the transaction it is unlikely that we would close on the purchase of new businesses or shares before the end of the first quarter of 2015.

So we would not replace the $0.05 of earnings that Wheelabrator produced in the first quarter of 2014. However, with respect to our core solid waste operations excluding Wheelabrator, we will continue to drive margin expansion and double-digit earnings growth. And we will invest the Wheelabrator proceeds so that we can continue that growth well into the future.

I will now turn the call over to Jim to discuss our third-quarter results and the reorganization of corporate SG&A in more detail.

Thanks, David. I will start by discussing our SG&A, which improved $3 million to $346 million when compared to the third quarter of 2013.

We have a goal of SG&A costs as a percent of revenue being below 10% and for the second consecutive quarter we achieved this goal. SG&A costs as a percent of revenue were 9.6% in the third quarter.

During the quarter we took steps that are intended to better align our corporate leadership staff, cost with the needs of the field operations which resulted in approximately 650 positions being eliminated and a restructuring charge of $0.09 per diluted share in the third quarter. This is a natural progression from the 2012 restructuring of our field organization, which focused on more directly aligning our corporate and field leadership with the elimination of the geographic group functions and empowering our customer-facing employees.

We anticipated saving in excess of $100 million annually from these actions implemented in 2015. But the main reason for this action is to better align and thus strengthen our corporate and field teams to execute our strategy.

We will see the full run rate benefit of labor savings starting in the first quarter of 2015, while the non-labor savings, about 20% of the total savings, should be realized throughout 2015. We plan to be at the full run rate of our savings as we start 2016.

Turning to our third-quarter results, our revenue declined 0.5%, or $19 million to $3.6 billion. Price volume trade-off continues to generate positive results; however, the divestitures of our operations in Puerto Rico and a portion of Eastern Canada and a negative foreign currency translation led to a negative revenue comparison in the third quarter.

Divestitures affected revenue by $24 million and the foreign exchange impact on revenue was approximately $12 million. We were pleased with the improvement in our major operating cost lines. Operating cost as a percent of revenue improved 40 basis points to 63.8% and improved $26 million in the third quarter despite a negative $5 million impact from the accounting effect of lower 10-year treasury rates on our environmental remediation reserves.

The operating cost improvement was primarily driven by improvements in both our solid waste and recycling operations. On the solid wayside, we were able to flex labor cost down as our volumes declined. In the recycling we saw the benefit of continued focus on enforcement of restrictions on contaminated loads and modifications to customer rebate structures.

Turning to cash flow, for the third quarter we generated $418 million of free cash flow, which is very strong but down slightly when compared to 2013. The difference was driven by an increase of $58 million in cash taxes due mostly to the expiration of bonus depreciation and the repatriation of earnings from the divestiture of our operations in Puerto Rico. Our capital expenses for the quarter were $307 million, a decrease of $16 million from the third quarter of 2013.

We also had $53 million in divestiture proceeds primarily from the sale of certain assets in our Eastern Canada markets in the quarter. Year-to-date 2014 we have generated $1.35 billion in total free cash flow and $1.03 billion excluding divestiture proceeds.

This is the highest free cash flow we have generated through the first nine months of the year since 2007. It puts us on track to exceed the upper end of our full-year free cash flow forecast goal of between $1.4 billion and $1.5 billion.

Looking at internal revenue growth for the total Company, in the third quarter our collection and disposal yield was 2.3% with volumes declining 1.3%. This led to total Company income from operations growing $20 million, operating income margin expanding 60 basis points, operating EBITDA growing $5 million and operating EBITDA margin growing 30 basis points.

Our collection lines of business continue to see the benefit of the yield volume trade-off. Our commercial yield increased 50 basis points sequentially to 4.7%.

Our industrial yield was 3.5% and residential was 1.4%. Overall collection yield was 3.2% with volumes declining 3.6%.

The volume change was a 50 basis point improvement from the second quarter. And as David mentioned, most of our volume loss was related to the loss of low margin national account business. This yield and volume led to income from operations growing $3 million and margin expanding 60 basis points.

The industrial line of business including energy services drove the growth in income from operations. In the landfill line of business we saw the benefits of both positive volume and positive yield in the third quarter just as we have all year.

Total landfill volumes increased 4.2%. Combined special waste and revenue generating cover volumes were a positive 4.4%, MSW volumes grew 5.7% and CMB volumes grew 15.2%.

MSW yields rose to 1.6%. This led to income from operations growing $16 million, which is the sixth consecutive quarter of growth and margins grew 130 basis points.

Our waste energy operations were essentially flat in the third quarter when compared to the third quarter of 2013. Since we moved the business to asset held for sale status, the suspension of depreciation expense added $0.01 per share.

The sale is progressing as we anticipated. We still believe we are on track to close the transaction in late fourth quarter or early first quarter.

David already discussed the use of proceeds but I want to reiterate that we will be disciplined with the use of that cash to create long-term shareholder value. Finally, looking at our other financial metrics, at the end of the third quarter our weighted average cost of debt was 4.92% and the floating-rate portion of our total debt was 16% at the end of the quarter.

The effective tax rate was 32.1% compared to 34.3% in the third quarter of 2013. The rate was lower than our expected rate of 35% due primarily to state audit settlements and adjustments to our accruals and related deferred taxes resulting from the filing of our 2013 returns. This benefited the quarter by approximately $0.03 per diluted share.

We expect our tax rate to be approximately 35% for the fourth quarter. The results through the first nine months of the year put us on track to exceed our full-year targets. We are looking forward to the continued improvement in the fourth quarter and throughout 2015 now augmented by our recent corporate actions.

And as always I want to thank our employees for their hard work. They have made the first nine months of 2014 very successful. And with that, Rashay, let's open the line for questions.

(Operator Instructions) Corey Greendale, First Analysis.

Good morning. First of all I appreciate all the detail in the script about the Wheelabrator impact and the timing and the cost savings.

My first question, I know it is early to be talking about 2015 but can you just give us some sense of how you're thinking about the price volume environment going into 2015? Do you expect assuming economic conditions remain stable kind of a similar trend in 2015 as we are seeing in 2014?

Yes, it's a great question, Corey. When we look at 2015 I think everybody recognizes what we have done with our yield program over the years. As I think everybody knows in 2013 we had a very strong incentive plan to drive yield above 2%. In 2015 we are likely to go back to where we were from 2007 to 2010 where we had what we call the pricing gate.

So that folks have a substantial portion of their bonus at risk if they don't hit their pricing targets and if there is one thing I can tell you is that our pricing target will be over 2% for 2015. With respect to volumes, it is a little early to call but I would say, Corey, that the trends -- look, this is not going to change overnight. I think what you have seen during 2013 is a very slow progression toward flat volumes for us.

I don't expect that to dramatically change, but the signs that we are seeing from a volume point of view are more positive than we have seen frankly in the last three or four years. And so I would expect the volumes to continue to improve but I wouldn't expect to see them turn positive at least in early 2015.

Okay, and given what you are seeing now in price, you sound relatively -- I know David, knowing you that you are never going to be totally happy with this, but it sounds like you are generally happy with where the yield is. Why you are thinking about putting the pricing gate back in place and what you expect to be different when you do that?

Yes, you are absolutely right, Corey, we can always do better. On the other hand, as you well know that 2%, 2.3% yield can translate into 8% to 10% price increases across certain customer bases because we have some restricted customers.

But look, I think everybody knows that the one year in recent memory that we sort of fell off on yield was 2012 and we said that is not going to happen again. Now we have a lot of confidence in our field managers doing the right thing and we have a lot of oversight of our field managers to make sure they do the right thing, but I have always been a believer that you need to support those price programs with some type of carrot or stick. In 2012 we can do that, we saw what happened.

We had a great carrot for the last two years. Folks are going to do very well by hitting their pricing targets.

Next year we are going to back to a little bit more of, if you will, of a stick. I would say, Corey, I am not concerned about these folks not hitting their core price targets but having those guardrails in place through the incentive plans supports the program.

And just one more left quickly if you're willing to talk about this. In 2015 with all the moving pieces between Wheelabrator and potentially charges and the cost savings and the bonus depreciation, can you just give us a directional sense of where you expect free cash flow to go in 2015, whether you expect it is going to be up from 2014?

Yes, Corey, I guess the way we talk about 2015 at this point because you are exactly right, there is so many moving pieces -- what are we going to do with the divestiture proceeds; when is the divestiture going to close?

And so when we look at it we say okay we've got $0.18 of EPS and $120 million of free cash flow that assuming Wheelabrator were to be gone on January 1 that is going to be gone in 2015. So what we are doing right now is we are saying let's make sure we do the right thing with the proceeds but then let's take a real good look at the core solid waste business and make sure that what we are doing in the core solid waste business is driving that double-digit earnings growth and driving free cash flow growth.

So you should absolutely see free cash flow growth in the core solid waste business next year. Obviously you would see that much stronger if we saw a bonus depreciation for 2015.

Great. Thank you very much.

Al Kaschalk, Wedbush Securities.

Good morning. I want to focus on the volume topic here. We just posted another 1.3% decline.

You have arguably have anniversaried the pricing story. What fundamentally is not going on in the end markets -- in your end markets -- that that volume can't get closer to positive sooner than exiting 2015?

Let's look at the various lines of business. Let's start at the landfill.

The landfill volumes have been positive for quite some time and we would expect those to continue to be positive in 2015. Those volumes are our highest margin and have a great return on capital, so if we are going to have volumes growing anywhere that is where we want them going is at the landfill. And we have seen that in the last two years, we expect to see that into 2015.

On the collection side, you've got the residential line of business which generally is our lowest margin, lowest return on capital. And we have been pretty judicious in not bidding those residential contracts particularly because they take so much capital, not bidding those residential contracts at a lower margin so you would expect to see volumes down there.

On the commercial side -- and so my point is that on the residential side, look would we love to have more flames on the residential side? Yes.

Are we going to get more volumes by dropping price and lower margins just to get volumes? Absolutely not.

When you look at the industrial side, the industrial side's actually started to turn fairly well for us. I would not be surprised to see the industrial volumes turn positive in 2015. And again, those are great margin, great return on capital volumes.

So the only area where I would say I would like to do a little bit better is on the commercial side. As you all know, when you get commercial volumes you can get great incremental margins because of the route density that you create with commercial volumes. But again, we're not going to go out and get commercial volumes by giving up price.

And so to see those commercial volumes we have seen sequential improvement all year and that is a good thing. To see those commercial volumes turn you've got to get sort of sustained housing starts and sustained new business starts.

We started to see that in 2013. I would expect to see that continue in 2015, but again we are not just going to go out and throw a bunch of salespeople on the street and drop pricing to get new commercial volumes. Because if we do that at the largest in the business that is going to have a dramatic effect on our pricing program.

It's what I said in the script. We are going to go after volumes that don't have a dramatic effect on our yield program. There's a lot of great volumes we can get at the landfill, in energy services, on the industrial side that are going to be high-margin volumes for us.

We don't need to go after low-margin commercial business by dropping price, or low-margin residential business by dropping price and so we view that price volume trade-off as very positive. We expect to see it continue to improve in 2015 and that is what is going to drive margin expansion for us.

I might give a little additional color, too, to what David said about the industrial line of business. As I mentioned in my script, that is line of business that shows a lot of the energy services impact.

It happens to be one of the few areas in the overall economy where we feel like we have really good long-term visibility even with declining oil prices. We happen to be -- our strongest presence in energy services is in basins where the production cost for the E&P companies happens to be the lowest.

So we will be the last to feel the downturn there, but we like the prospects for energy services. It has been growing at -- revenue has been growing at about a 20% clip. We are going to be on track to be 225, 250 in revenue this year and we think we can continue to grow that at a fast pace.

Thank you for the color, Jim. Is there any additional update on the M&A environment as it relates to that particular secular change?

Yes, there's always assets for sale. The multiples are fairly high. As you know we did a couple of transactions in that field, fairly small transactions, but that would absolutely be one of the places where we would look to invest some of the proceeds.

But again whether it's energy services, or hazardous waste, or core solid waste, we're not going to overpay for the business just to use the proceeds. The way we look at it, Al, is we have got sort of a base case of buyback shares and leverage neutrality that would be slightly accretive with the use of proceeds.

If we can do better than that by investing in businesses we will absolutely do it. But we are not going to invest in businesses where we have to pay a higher multiple than our own stock. The reality is we have two choices.

Buy our Company or buy another company. And we would never buy another company at a higher multiple than we can buy our Company. So we are going to be fairly judicious in how we look at these acquisitions and if they occur that is great; if they don't occur, we still think we can buy our stock pretty cheap.

Okay, thank you. And then finally if I may, just a follow-up on the pricing story, or the pricing gate.

I don't understand maybe if there is a -- it comes across that there is a change in how you're going to approach the market. Maybe that is a misinterpretation or understanding on my part but why are you altering at least the cadence on pricing here, or reinstalling for lack of better word a pricing gate?

Yes. No offense, Al, but I think that is a misunderstanding of where we are going with the pricing program.

That's fair. Clarify it for us, David. Thank you.

Look, I would say I think everybody on this phone and certainly everybody at Waste Management would say that the pricing programs are my core focus. And again, I have total confidence that our field managers are going to do the right thing, and I have total confidence that the staff here at the corporate office are going to ensure they do the right thing.

But anytime you have something that is that important like our pricing programs, you have got to have everything in your company directed to making sure it happens. And so having confidence in the field managers is great but that is not everything we can do. Having confidence that the corporate teams are going to support them is great, but that is not everything we can do.

You've got to have the compensation programs aligned also. And that is really what it is all about.

It is saying look, the yield program is the most important thing that we do at Waste Management. So everything we do from the compensation programs to the oversight to the field managers, everything we do is going to be structured to ensure that we drive that yield above CPI and above 2%.

So it is really just, if you will, an insurance policy to make sure that everybody understands that this is going to be the most important thing that we do. Now having said that, we do want to improve our volumes but we don't want to improve our volumes at the price of reducing our yield focus. That's what happened in 2012.

We said look we want to get volumes and we went out and got some low-margin volumes in some lines of business that affected our yield programs but also got us positive volumes at low margins. We're not going to do that again. Where we are going to look for volumes are places where we can get good, high-margin volumes but not have those volumes create a competitive dynamic in our markets such that the market says they are going to lower price in order to get volumes.

And we think there's plenty of places where we can do that in the manufacturing industrial sector, in the energy services sector. We can go after good, high-margin volumes without affecting pricing, for example, at the commercial line.

Okay. I appreciate the color, David.

Adam Baumgarten, Macquarie.

Thanks for taking my question. Could you just give us an update on the progress of some of the various cost initiatives you have had over the last couple of years? I'm just trying to see going forward how much more we should still expect in cost savings from those programs outside of the $100 million you announced today.

So a couple of different approaches here, one is operating costs where we felt like we made a lot of improvement on operating costs, both on recycling and on core operations. And we will continue to work those costs down.

Jim and Puneet Bhasin and their teams are spending a tremendous amount of time in the field with some -- developing some really efficient operations. And really on the recycling front it is no state secret here that commodity prices have not been good to us over the last two years, so we have had to approach -- I guess the good news is there, that it has forced us to approach it from a cost standpoint.

We have done that. We saw a bit of improvement year-over-year in Q3. And so once commodity prices do your return to a more normalized levels we think we are in a great position in the recycling line of business.

SG&A costs, yes, we took about $100 million -- The long-term run rate will be about $100 million -- about 80% of that is labor, 20% non-labor. The labor piece will come out in kind of -- about $10 million of it will come out in Q4, and we will be pretty much done with that labor piece in Q1 of 2015.

Then the non-labor has a bit longer tail to it, but that will all come out by second-half. For the most part, it will be all out by the end of Q2 of next year, for a total of about a $100 million impact overall.

Is there additional SG&A savings out there? There's always -- we are always looking, but I think with what we have done in 2012, predominantly consolidation in the field, and then in 2014 with more closely aligning our SG&A to fit our strategy, I think you probably will see us at this point going forward trying to just hold labor cost flat.

Jim, I might add for Adam's benefit. Adam, on the collection side of the business we now are at about 25% of our collection companies that we are certified. They have the technology, the onboard computer in place. They also have the culture and the accountability process and the dollar improvement to their P&L that is hitting the bottom line, and you saw that in that 60 basis points improvement in operating margin.

We are progressing through the 400 or so collection companies and should complete that effort next year. So you will continue to see that improvement in OpEx as a percentage of net revenue as we roll out not just the technology, but the culture, the accountability, and get the dollar value out of that initiative.

Okay, great. So what kind of run rate are we at for some of the other programs you have announced in the past, such as the routing and logistics and the back-office stuff? Is that sort of what you just spoke about, that that is still a work in progress, or are we at that full run rate?

Well, Adam, that's what I just mentioned. Jim Trevathan again.

We are at about a 20%, 25% of the 400 collection companies, but the others are in the process of implementation. We are not starting them all fresh and new. As we finish one, that process is underway and going on at the other 75%, 80% of the locations. So it is a process that is about a year, we think, a year or so left in the implementation process.

Also, along the lines of David's conversation about bonus and pricing, a big component of our bonus, the fields bonus, is tied to a huge component of it, half of it is tied to operating cost. So there is certainly a carrot out there for them if they improve on operating costs. We saw, as we mentioned, a 30 basis point swing this quarter, which we were pleased with but don't feel like we are done.

Okay, great. Thanks. And then just on the acquisition side, have you seen seller expectations on the solid waste side come down at all over the last few months or so, or is it still pretty high?

I would say that you really haven't seen it come down, but again -- look, I feel about that sort of how I feel about the economy. Nothing we can do about it.

But we are going to take a particular approach to it. And the approach we are going to take is that when we are buying core solid waste type of operations, we know those operations very well.

We know exactly what we can do with them when we tuck them into our operations, what kind of synergies we can get. And so we can get a real good idea of what that company is going to look like once we bring it into our Company and integrate it.

Again, if there's one business that I know better than any business we can buy and that is ours. So it basically comes down to a pretty simple fact, why would I pay any more than our current multiple? Frankly, I can't imagine we would pay our multiple.

We would pay substantially less than our multiple for any business that we don't know as well as ours. And so when it comes to acquisitions, if seller expectations are too high we have certainly proven in the past that we are willing to walk away from those. But I think there's going to be plenty of targets out there that we can look at where we can get that great post-integration synergy that we can hopefully replace some or all of that $220 million of Wheelabrator EBITDA.

Great. Thanks, guys.

Scott Levine, Imperial Capital.

Good morning, guys. So on the volume side I think you mentioned, I don't know if it was Jim, 15% growth in construction and demolition. I was hoping maybe a little bit more color regarding the outlook for C&D, also special waste, the pipeline there and maybe some additional thoughts on coal ash and how that opportunity is potentially progressing?

Sure. Keep in mind when we talk about C&D it is a small percentage of our overall revenue. We increased it substantially in percentage terms, 15.2% but it still is an overall small piece. However, we like the direction.

A lot of that came from the parts of the South where we are seeing heavy construction. Florida and Texas to name a couple, so we think to the extent that this housing recovery and the recovery in general are intact and don't start to retrace their steps, we think C&D will continue to show nice improvements year-over-year.

Special waste is for us is a bigger category. It includes energy services, it includes manufacturing and industrial type waste.

We feel very good about that. We feel like the barriers to entry in that line of business are higher than they would be in a businesslike commercial.

It is tougher to get into an ExxonMobil refinery if you are not already in there and we've been in there for 30 years, then it is to get into a small restaurant. So we like the special waste category and that is a real growth opportunity for us going forward.

I can't say exactly what the expectation is for the whole waystream in terms of percentage growth in 2015. But I will tell you that as I mentioned earlier energy services, which is a component of that, will continue to grow nicely at 20%-plus over the next several years.

And then coal ash, the promulgation of coal ash regulation is coming out here in December. Hard to say exactly what that will mean to us but we are -- we've had a number of conversations with big public utilities. They are starting to take aggressive steps to remediate and ultimately they like working with big companies like Waste Management, so we feel good about the coal ash opportunity.

There are really going to be a couple of different approaches that those utilities might take, one would be moving coal ash to a landfill. We think it will be a subtitle D and not subtitle C.

Second would be asking somebody to come in and actually manage and operate their landfills for them. A lot of them have on-site landfills.

And then the third would be some type of beneficial reuse. Clearly that would be their preference and we can help them with all three. So we like the opportunities across the special waste waystream.

Jim, I might also add for Scott's benefit, on the hazardous waste side we've got facilities that really support our industrial DM&I sector. We've added some rail capability. We've got projects beginning to move here in the fourth quarter by rail into a couple of our hazardous waste sites and that's an advantage that we offer to our customers.

Interesting. Thank you.

And then one other thing on the volume side before turning to price, I think you mentioned that you are still seeing 100 basis point drag to reported volume from lost national accounts. Can you remind us how that headwind, when might that taper off and maybe just your thoughts on the national account business in general at this point in time?

Yes, it should taper off sort of midyear next year. And when we think about the national accounts, frankly we think about them by splitting them depending on what kind of container they have out back.

So if you have a compactor out in back we can't create a lot of route density and so we've got to look at that sort of on a standalone basis. And we're not going to bid those large national compactor accounts at a low margin.

When you look at front-end container national accounts you can create a lot of route density. And so the ability to make good money on those is a little bit higher because you can -- the incremental cost to service them is much lower than servicing a compactor customer.

And so when we look at our national accounts we are not going to bid anything at a low margin. But we would be willing to accept a lower margin on a front-end customer than we would on a compactor customer because we get such benefits out of the route densification.

Dave, one other point for national account customers that we see real clear differentiation again are those manufacturing and industrial national accounts where our service offering, whether it is solid waste business or special waste or haz waste add real value. Add to it our balance sheet and those guys like us and we expect to grow in that sector.

Got it. Thanks. One last one on pricing just very quickly. If you could remind us how much CPI linked pricing business is a percentage of your total revenue and where CPI was running right now, would you think that would be a headwind or a tailwind into 2015 if current trends remain constant?

Yes, we are sure looking for the day when CPI becomes a tailwind for us instead of a headwind. About 40% of our business is CPI linked and when we say CPI linked remember that can be all over the board.

It can be 100% of CPI, it can be some kind of localized CPI. It can be a percentage of CPI. But when we look forward I would tell you we are not going to build our yield programs around CPI.

It always amazes me that folks say, well we would've gotten X in yield if it wasn't for CPI. We take a little bit of a different approach. We say we are going to get X dollars of price despite CPI.

And so when we look at our pricing programs, we say how many dollars are we going to get out of our pricing program to drop to the bottom line. If we get 0% from CPI we're going to find those dollars somewhere else and so you will never hear us say that CPI is a drag on yield.

That is just a fact of life. What we get paid to do is drop a certain amount of dollars to the bottom line and if we can get those dollars from CPI that is great. But if we can't get those dollars from CPI we're going to get those dollars somewhere else.

Got it. Thanks, David.

Michael Hoffman, Stifel.

Thanks for taking my call this morning. Congratulations on the progress.

Jim Fish, a little housekeeping first. Fourth quarter, what is the starting share count in the fourth quarter because if I read everything correctly you have spent $600 million and bought back stock in 3Q. What is my starting share count?

I think it is 463 million.

Okay. Sorry, say again?

I will verify that but I think it is 463 million.

And is there a plan to buy back more in the 4Q, or you did it, you did the $600 million and then --?

No plan to buy back more in the fourth quarter. We had the $600 million ASR of which 70% of it took place at the initiation of that. So no plans outside of that $600 million ASR.

Okay. And then you made a comment I think it was in your prepared remarks around D&A and about Wheelabrator and I think that then explains what my question was going to be that D&A was down yet your landfill volume was up, so that is Wheelabrator as a percent of revenues. So what is the trendline, is it 9.1 is the way to think about it?

So 9.1 -- on --

Percent of sales.

I would say -- it is hard to say but I think that is probably about right.

Okay. All right.

Now getting into the meat of this. On the price gate, David, I guess there is some confusion about what a stick means versus a carrot from your perspective, so --

There is no confusion out in the field though, Michael, about what it --

Well, so for our benefit. The carrot, clearly we tease you with a number but the stick in this case is it an all or nothing meaning if everybody wins or everybody loses, or is it very individual?

The way we have looked at it, Michael, is that when you've got 17 areas like we've got, if 10 of the areas hit their target and 7 of them don't hit the target and the Company doesn't hit the target, guess who doesn't win? The shareholder doesn't win.

And we don't pay our folks including us unless the shareholder wins. And so you've got to do both out in the field. We've got to hit it from a corporate point of view and you've got to hit it at the local point of view.

The only way our shareholders win is if the -- a shareholder doesn't care if 10 out of 17 hit the target if the Company doesn't hit the target. So what we've always done is said the Company has to hit the target and you have to hit the target in order to not be penalized on your bonus.

Okay. And in the past this has been very focused around collection but you alluded in 2Q about disposal and subsequent public appearances by the Company at various forums have talked about it, what is the mix between landfill and collection in that gate? Are you distinguishing the two so that you incentivize both areas of focus?

No, we don't want to overcomplicate the gate. So what we are doing in 2015, and I think as everybody on the phone knows that our reported yield number is a very good approximation of where we have gone with pricing.

But the real number that we look at is the core price number because that is the measure of how many dollars drop to the bottom line for pricing. Remember what core price is. That is our price increases across all customers minus rollbacks and plus our fees and surcharges other than the fuel surcharge, and so those are the dollars that drop to the bottom line.

So when we do it, we are going to do it based on core price. Because again it doesn't matter what our yield is if we don't drop dollars to the bottom line. Our shareholders don't get rewarded unless we drop dollars to the bottom line.

So what we're going to do is we're going to set a target just like we have over the last few years, we are going to set that core price target both at the Company and at the local level. And that is the number that we're going to use as part of the gate.

My guess is that part of your question is related to MSW pricing there and landfill pricing in general. If you look at MSW pricing over the last eight quarters, we've been in the on the yield we've been in the 1% to 2% range. This quarter was 1.6%, and I'm talking about MSW now, was in the was 1.6% kind of in the upper end of that range.

With volume over that same period of time being somewhere between flat and positive 5%, the eight quarters prior to that, so 2011, 2012, yield was between flat and 1% in MSW and volume was between negative 5% and flat. So we've essentially seen a doubling of yield in the MSW line, which is where we really look at it most closely when we are looking at landfill pricing.

Okay. Fair enough. On volume, can you talk about your weight per yard trends and also the dollar per yard trends in front-end loader?

Yes, the weight per yard has been fairly steady but we have seen Michael, when I talk about the volumes I talked that -- again I don't expect to see a dramatic turn but I am much more optimistic that we will continue to see progress than I have been in the past. On the commercial side we have seen service increases outpace service decreases for the last three quarters and five out of the last six quarters. And then what we were talking about before, commercial volumes follow construction.

And so when you see high C&D volumes and you see improving industrial volumes, the next up is you are going to start to see improving commercial volumes. I think you have written about this quite a bit and I think you are absolutely right that I would expect that in 2015 again we're not going to see huge dramatic turn but we are certainly going to see good steady progress on those commercial volumes.

Okay, great.

Michael, by the way, the other thing when I talk about commercial volumes you will always hear me talk about commercial volumes -- I think the large companies have to look at this as what we do on commercial volumes affects the entire market. And so if you go out and you just drop price to get volumes across your commercial base everybody else is going to follow you and before you know it you have a price war on the commercial side and everybody starts losing money.

So when we look at our commercial business we say let's make sure that what we are doing on the commercial business is improving our volumes but not upsetting the pricing dynamics in the market. So what is the best way to do that? Quit losing your current customers.

If you are not stealing a customer from someone else you can't upset the market dynamic. So Jim has put -- Jim Trevathan -- has put a task force together to make sure that our good customer service gets great. So the best way for us to grow our commercial volumes would be to retain our current customers and I would expect to see that occur in 2015.

So more defense of the business as well?

Look, more defense of the business without using price. We have defended the business before by using rollbacks and we don't want to go there. We want to defend the business by providing value to our customers and so what you will see in 2015 I think is an improving economy.

Again, when volumes are growing -- the way you upset a competitive dynamic is by going out and stealing everybody else's business. And we are big enough across the country that if we do that we are going to upset the competitive dynamic.

So the best way to do it is go get volumes when there is growing volumes. When there is growing volumes we can take some new customers and get our fair share of the growth and that is not going to upset the market dynamics.

When we keep more of our current customers that doesn't upset the market dynamic. And so now that we have seen the economy start to improve and we have started to see commercial volumes grow, I think we can make good progress on commercial volumes without upsetting the pricing dynamic.

Okay. Fair enough.

Switching gears to recycling, you have all talked about this peak to trough $200 million profit hit, half of it was price, half of it was in your control. Can you talk about where you are in that part you control? You clearly have made progress in 2Q, 3Q but where are we in that $100 million, how much is left to recapture by running it better?

I will take a shot at it and maybe Jim you can add because really that is an operating cost question, Michael. It is half operating cost and half coaching of our customers to get them to improve the quality of what they bring us.

If they are bringing us trash in the front end it eventually goes out the backend as trash but we incur cost to process it. So part of that is an education process with our customers to help them understand that that is what they bring us has to be truly recyclables and not just what they call a diversion of materials.

The other side is operating efficiencies and I think we've made some nice improvement on operating efficiencies. We have looked at how many lines we should run at various plants, what is the most efficient way to process recyclables.

Really that was the sole improvement for the quarter. It was not in pricing because as David mentioned, OCC pricing was down 17% for us. So the good news is, as I said, we are forcing ourselves to tackle this on the OpEx side as well as the coaching of our customers.

Michael, what I would add -- there is some residential contracts that don't have the parameters that we look for today in that contract that restrict the amount of residue, for example, that is in the material. So that is the parameter that gets to Jim's coaching, if you will, but part of it is just a contractual issue as those contracts expire and we are able -- and we have the industry following -- we are able to get the right kind of pricing and cost controls in place and the constituency of the waste materials right, that lower the OpEx.

So those two issues are tied together to add a little color to Jim's statements. If I were picking an inning I don't think we're quite at the midpoint but we are approaching the midpoint, maybe it is 25% to 50% of the way there of that $200 million.

Obviously the pricing commodity side of it we can't affect. But the $100 million we can.

Okay, so it's 25% to 35% of the $100 million is kind of --

There is one component, perhaps, on the OpEx side we are a little further along. But on the other side, probably in that 25%/30% range.

Okay, fair enough. There's another piece of this, which has been interesting, too, where you're going back and trying to get a processing fee. And I think you have -- its Philadelphia you have talked about in the past recently, where this really made a meaningful difference. Where are we in the success of some of that activity?

Philadelphia is a great example, Michael. We had that business. It had a lot of material in it that was just not recyclable.

The contract expired. We bid it at a profitable level with all the parameters that we just talked about in mind.

We lost it to the other competitor in the Philadelphia area, lost that volume but we have picked up volume from third-party haulers that that recycler had in their mix and we are making money at that plant. It's a great example of that issue. We are making the money on that third-party volume that is coming in because we can price it correctly.

Okay. And then last item for Jim Fish, so as I think about free cash flow, if I end the year this is net of divestitures, so 1.25, I take out Wheelabrator that is 120, if I am using the $80 million -- $100 million -- as the baseline for the risk, I'm getting $80 million of it in 2015.

So I get that $80 million back. And then next component should be there's got to be some growth, there is ongoing operating leverage and then there's working capital. Is that the right way to think about it? And then lastly, I would like to hear what you are doing on the working capital collecting your money faster and paying your bills slower.

So the second question first here on working capital, working capital was down slightly for the quarter. We showed some improvement in DSO of one half day versus Q3 of 2013 but not the same improvement that we showed last year on the DSO front.

Last year we showed a day and a half improvement. So I still think there's quite a bit of opportunity on DSO.

On DPO we did show nice improvement in DPO on how quickly we pay. We improved that by 2.1 days. Less value to improving DPO than improving DSO but both are very valuable to us and we are moving in the right direction.

I would've preferred to move a little quicker on DSO than we did, but I still think we've got both of those as improvement opportunities going forward. Free cash flow, there's a couple of things that affect free cash flow as we think about 2015 and while we are not prepared to give a number, we know that the cash taxes related to the repatriation of Puerto Rico earnings, that will not recur in 2015.

So that is somewhat of a tailwind if you want to think about it that way. And then I think we are still TBD on what happens with bonus depreciation. We didn't have it this year.

There's rumors that we will have it next year but we are not counting on it. I still think though that -- and then of course the big impact on free cash flow will be the divestiture of Wheelabrator. As David mentioned that is $120 million in cash, in free cash flow that goes away, call it January 1 of 2015.

So we're going to have to kind of orient everyone to think about 2015 whether it is EPS, or free cash flow, or EBITDA, any of those financial metrics think about it excluding Wheelabrator as we go through a process of replacing. We've said we want to replace at reasonable prices the EBITDA and free cash flow and if we can't then we will go about it with other means by way of share repurchase and leverage neutrality.

And remember, Michael, on the reorg we are basically getting four months of benefit in 2013 from the reorg. So you get basically -- 2014 -- you get basically eight lots of benefit next year, so it won't be $100 million next year, it will be a little less than $100 million.

Right. I think Jim mentioned you're getting $10 million of it in the fourth quarter but if it is $100 million I'm playing with, I've got 90 million next year and there's sort of $15 million or $20 million of that's the non-labor, the rest is labor.

Yes, I am just going year-over-year.

Okay. All right. Thanks.

Joe Box, KeyBanc Capital Markets.

Yes, David, just a follow-up for you on the competitive dynamics. We are going on our second year of volume recovering in the industry and with commercial picking up now we've pretty much seen all the waystreams get better.

I'm just curious in your historical context, do you think that 2015 is the year where maybe some of your peers start to get behind pricing and we see a nice step-up there? Or do you think that we are probably looking at just a continued slow recovery and just overall industry pricing?

Yes, it's a great question. I think an improving volume environment is always good for pricing, whether you are selling widgets or garbage.

And so I do think that what you will see is more rational pricing behavior. I do think what you'll see is the larger companies saying that it is a little easier to take the risk on losing volumes by using price.

And we all know that you get a much bigger effect on the bottom line from price than volume. And so yes I would say that as you see the volume environment improving you should see the pricing environment stabilize.

Not to put words in your mouth, probably more of a slow recovery than a step function up?

Look, I cannot control what anyone else does. I can only control what we do.

And to the earlier question, we are pretty good at 2% to 2.5% yield. We don't have to do -- we can still improve, don't get me wrong, but we know how to get that 2% to 2.5% yield.

Now it is time for us to say, okay, how do we get that yield where we are not going to give up on that yield but how do we get that yield and stem some of these volume losses. Frankly, I think some of our competition is in a position where they need to do a better job of getting higher margin volumes and focusing more on price.

Because I think that we all know that is what helps the bottom line. And so what I would say is I think you'll see more balance in the overall industry where everybody is doing a little bit better on volume but everybody is doing better than 2% yield.

But again I can't tell you what they are going to do. I can promise you what we are going to do.

We are not going to go below that 2% yield, sort of that 3.5% to 4% core price. We're not going below that no matter what effect it has on volumes. What I'm saying is I would expect the effect for us on volumes to be better in 2015 than it was in 2014.

Great. Appreciate that.

Maybe changing gears to the restructuring real quick. I completely understand the need to align corporate with some of your customer-facing employees. Can you maybe just walk through an example of the type of position that was eliminated, or maybe some of the various efficiency gains that you guys are pursuing that will help align the Company?

When we looked at the reorganization -- and look, what we did, these were very good folks, a lot of them have been with industry a long time, very smart all doing good things for the Company. But what you find when your organization -- we call it the funnel -- one person sends something out to the field and says I need you to work on X. And if that was all that went out to the field, the field would not be distracted, life would be good.

The problem is when you've got 30 people doing that, 30 things goes out to the field and all of a sudden the field gets distracted because they have too many things coming at them from too many directions. We call it the funnel. There's too many things going into the funnel and heading out to the field.

So when we did the reorganization we said we're not going to look at it from a people point of view, we are going to look at it from a function point of view. And when you look at it from a function point of view if it is not driving one of what we call our five swim lanes and those, as you can imagine, revolve around customer service and pricing and costs, but if it is not driving one of our five swim lanes, if that function is not driving it, then it's a function that we can do without for now. It's a nice to have, not a must-have.

And so that is the way we looked at it. We looked at it frankly from a functional point of view. How do we make sure that everything that we are doing at corporate is driving performance out in the field rather than slowing down performance out in the field? And that was the philosophy we took and I think what you'll see is that that philosophy will lead to much more alignment between our corporate staff and our field operations.

Understood. Thanks for the color there.

Charles Redding, BB&T Capital Markets.

Hi, gentlemen. Thanks for taking my call.

Just a brief follow-up on national accounts. Is it fair to assume that this segment does give you some degree of visibility with respect to forward expectations and what are you seeing fundamentally in terms of spending trends among the larger customers?

Again, as Jim Trevathan pointed out, those national accounts span a lot of different types of businesses from front-end container to compactors to industrial clients. But I'm not sure that you see a dramatic change from those large national accounts.

Those large national accounts are just like us. Which is we are looking for ways to drive down costs through efficiency. And so when we work with large national accounts what we try to tell them is you can look at this based on price if you want but the way we look at it is we're going to start out with a particular price and then we are going to figure out how to save you money.

So for example, if you take that compactor customer, if our competition is picking up that customer three times a week and we are picking them up once a week it is going to cost us a lot less to do it. So how do we figure out how to pick up that container when it is full rather than picking it up when it is half-full?

And so when we deal with national accounts our view is we want to help you save money. But we can help you save money while we continue to make money. You can't take a national account view that we are just going to cut the price and make less money.

That's what we will not do because that just doesn't work for our business. But what we can do is find ways for each of those types of customers, the front-end container, the compactors, those large industrial companies, we can find ways where we can make the margins we want to make and they can lower their costs.

So for example, at a manufacturing industrial customer, you might recycle materials like metals that help them lower their overall cost and we can do that better than anyone. So when we approach those national accounts, we do look at it as how do we save them money, but how do we save them money while maintaining our profitability.

That's helpful, thanks. And then quickly in terms of fleet spend, does the drop in crude really have any impact on the current appetite for C&G and I guess if not, is there a price on crude that might impact how you kind of approach future purchases?

Right now that differential is still over $1.50 and so I would say it doesn't affect what we are doing on fleet purchases. And as you have seen oil has come down a little bit sharper but natural gas has come down also.

We are still a long way away from the tipping point where we would say we want to be diesel. But even with neutrality this is also about our customers. Our customers are demanding a cleaner truck and clearly natural gas is going to be cleaner than diesel.

Great. Thanks, David.

Alex Ovshey, Goldman Sachs.

Thank you. Good morning, everyone.

I wanted to ask about the acquisition landscape. You talked about the multiples that the folks are asking.

Can you to put a little more color around where the relevant ranges are for multiples? And then I think you implied that they see elevated. What do you think is driving that because looking at the underlying fundamentals in the business, CPI is pretty low and so that is tough for pricing and volumes are still sluggish and what is sort of driving that elevated multiple for deals out there?

It's not just an elevated multiple. It is also that folks are doing better, just like us.

Everybody is doing better from an EBITDA point of view. And so the valuations have gone up both from a performance point of view. And anytime that you are in an improving market and folks have a lot of confidence going forward on their business, it comes down to this.

What we are trying to do is to buy their business at trailing earnings and if they are looking forward into the future and saying trailing earnings, I'm not sure if those earnings are going to get much better, so trailing earnings looks good to me. They will sell at a certain multiple. If they say gosh, those forward earnings looks really good to me, they will sell at a different multiple.

So for example, we aren't buying businesses in the recycling business but there's not a lot of people feeling greatly confident about their recycling business and that is going to drive to a lower multiple. Because they say look, I will take 5 times to 6 times for my business because I don't see my EBITDA going up dramatically over the next five years.

On the solid waste side it is a little bit different. I think people are seeing EBITDA going up and if you look at it from just a discounted cash flow model point of view, if you think your business is going to get a lot better over the next five years, you're going to want a higher multiple for your business.

So it's really just pure finance and what you believe about the market going forward. And so I still think, back to the original part of the question, I still think that we can buy good local businesses at a post-synergy number of 5 times to 6 times EBITDA.

As you are buying larger sort of regional type of competitors, that multiple is going to be a little bit higher because you get a bigger slug of business with one transaction. But post-synergies I would expect those to be sort of 6 to 7.5 times earnings, 6 to 8 times earnings -- I mean EBITDA, I'm sorry.

So anytime you can buy a business at 5 to 7 times EBITDA or 6 to 8 times EBITDA, you are buying it at below our current market multiple. And that makes it accretive to our shareholders.

Got you, David. I appreciate all that color. And just one last question for me on the collection volume side.

It's been asked a couple of different ways but had a little bit of a follow-up there. As I look at the last four quarters I think specifically that commercial collection volume number has been down 3% to 5%.

So the fourth quarter of 2014 would really be the first quarter where we are going to be comping a material volume decline in that segment. So how are you guys thinking about commercial collection volumes going forward?

Is the expectation that you should see the volume erosion moderate there even as you pursue your pricing initiatives? Or is the expectation that we will continue to see that 3% to 5% volume decline in the commercial collection business as we go forward over the next 12 months?

Yes, and again, look, it would be very easy for me to sit here and say to you all we are going to see that commercial volume turn positive. We can do that tomorrow.

The problem is in order to do that we've got to put a lot of feet on the street, take a lot of business from a lot of people and we all know what is going to happen to the competitive dynamic if we do that. And so we are taking a little bit more of a measured approach toward the commercial business and that is let's make sure that we get our fair share of growth and let's make sure that we don't lose our customers, that we can reduce the churn rate.

And if we can do that we can get volumes without upsetting the competitive dynamic. That means that the turn in commercial volumes is slower than it would be if we put 1,000 salespeople on the street and started trying to upset competitive market dynamics.

But I would absolutely believe that we are going to see that trend -- I would be disappointed if we see that trend coming out of 2015 still at the negative 5%. We haven't put pencil to paper to see do we believe it is going to go below that negative 3% but I certainly expect the trend line on that to be positive throughout 2015.

Okay, got it, David. Thank you very much.

Barbara Noverini, Morningstar.

Hey, thanks for taking the extra time this morning. Can you just give us a quick reminder of how the organizational structure of the recycling business might have changed as a result of your restructuring actions?

How has field and corporate level responsibility for the business shifted and where does recycling fit into these lines of sight that you have described? Is it a more integrated way of managing the business than it might have been pre-2012?

So what we did with the recycling operations is right now I think we all know that the biggest challenge in our recycling operations is an operational challenge. How do we make sure that we continue to make money when we are getting more contaminated loads?

So what we did with recycling was we didn't do anything at the field level. The responsibility at the field level didn't change. At the corporate level we said this is really a process improvement organization that we have here at the corporate level.

And so let's run it like that. And so we took our recycling operations and we basically put them under the gentleman Puneet Bhasin who is running our operating programs.

So whether it is driving efficiency in our routing system or driving efficiency in our recycling plants, they are both about driving efficiency. And so we basically took that operating portion and put it under our operating officer.

But the ultimate responsibility remained in the field. The ultimate responsibility for the profitability of that recycling facility remains out in the field.

Got it. Nice to see some positive changes coming through there. Thanks.

We are now turning the call over to our CEO, David Steiner, for closing comments.

Thank you all for joining us. Just as in Houston we are starting to see the good weather from a weather point of view we are starting to see very good weather from our business point of view. I would tell you that given the state of our business and given the way that we have aligned out organization, I think everybody in our Company is more optimistic about 2015 than we have been in many years.

So we look forward to having you all on our fourth-quarter conference call where we will tell you about our expectations for 2015. Thank you.

Thank you for participating in today's Waste Management conference call. This call will be available for replay beginning at 1:00 Pacific time today through 11:59 PM Eastern time on November 12, 2014.

The conference ID number for the replay is 8203798. Again the conference number is 8203798. The number to dial for the replay is 1-800-585-8367, 855-859-2056, or 1-404-537-3406.

This concludes today's Waste Management conference call. You may now disconnect.