Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2012

Condensed Consolidating Financial Statements

14.    Condensed Consolidating Financial Statements

WM Holdings has fully and unconditionally guaranteed all of WM’s senior indebtedness. WM has fully and unconditionally guaranteed all of WM Holdings’ senior indebtedness. None of WM’s other subsidiaries have guaranteed any of WM’s or WM Holdings’ debt. As a result of these guarantee arrangements, we are required to present the following condensed consolidating financial information (in millions):

CONDENSED CONSOLIDATING BALANCE SHEETS

September 30, 2012

(Unaudited)

	WM		WM Holdings		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	270	$	—	$	128	$	—		$	398
Other current assets		—		—		2,261		—			2,261
		270		—		2,389		—			2,659
Property and equipment, net		—		—		12,518		—			12,518
Investments in and advances to affiliates		12,412		16,417		3,446		(32,275	)		—
Other assets		47		12		7,837		—			7,896
Total assets	$	12,729	$	16,429	$	26,190	$	(32,275	)	$	23,073
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	401	$	—	$	425	$	—		$	826
Accounts payable and other current liabilities		75		5		2,281		—			2,361
		476		5		2,706		—			3,187
Long-term debt, less current portion		5,923		449		2,794		—			9,166
Other liabilities		42		—		4,066		—			4,108
Total liabilities		6,441		454		9,566		—			16,461
Equity:
Stockholders’ equity		6,288		15,975		16,300		(32,275	)		6,288
Noncontrolling interests		—		—		324		—			324
		6,288		15,975		16,624		(32,275	)		6,612
Total liabilities and equity	$	12,729	$	16,429	$	26,190	$	(32,275	)	$	23,073

December 31, 2011

	WM		WM Holdings		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	119	$	—	$	139	$	—		$	258
Other current assets		6		—		2,115		—			2,121
		125		—		2,254		—			2,379
Property and equipment, net		—		—		12,242		—			12,242
Investments in and advances to affiliates		12,006		14,905		3,033		(29,944	)		—
Other assets		120		12		7,816		—			7,948
Total assets	$	12,251	$	14,917	$	25,345	$	(29,944	)	$	22,569
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	298	$	—	$	333	$	—		$	631
Accounts payable and other current liabilities		124		13		2,300		—			2,437
		422		13		2,633		—			3,068
Long-term debt, less current portion		5,727		449		2,949		—			9,125
Other liabilities		32		—		3,954		—			3,986
Total liabilities		6,181		462		9,536		—			16,179
Equity:
Stockholders’ equity		6,070		14,455		15,489		(29,944	)		6,070
Noncontrolling interests		—		—		320		—			320
		6,070		14,455		15,809		(29,944	)		6,390
Total liabilities and equity	$	12,251	$	14,917	$	25,345	$	(29,944	)	$	22,569

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended September 30, 2012

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,461		$	—		$	3,461
Costs and expenses		—			—			2,961			—			2,961
Income from operations		—			—			500			—			500
Other income (expense):
Interest income (expense)		(91	)		(8	)		(22	)		—			(121	)
Equity in earnings of subsidiaries, net of taxes		269			274			—			(543	)		—
Other, net		—			—			(31	)		—			(31	)
		178			266			(53	)		(543	)		(152	)
Income before income taxes		178			266			447			(543	)		348
Provision for (benefit from) income taxes		(36	)		(3	)		164			—			125
Consolidated net income		214			269			283			(543	)		223
Less: Net income attributable to noncontrolling interests		—			—			9			—			9
Net income attributable to Waste Management, Inc.	$	214		$	269		$	274		$	(543	)	$	214

Three Months Ended September 30, 2011

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,522		$	—		$	3,522
Costs and expenses		—			—			2,979			—			2,979
Income from operations		—			—			543			—			543
Other income (expense):
Interest income (expense)		(85	)		(8	)		(24	)		—			(117	)
Equity in earnings of subsidiaries, net of taxes		323			328			—			(651	)		—
Other, net		—			—			(5	)		—			(5	)
		238			320			(29	)		(651	)		(122	)
Income before income taxes		238			320			514			(651	)		421
Provision for (benefit from) income taxes		(34	)		(3	)		173			—			136
Consolidated net income		272			323			341			(651	)		285
Less: Net income attributable to noncontrolling interests		—			—			13			—			13
Net income attributable to Waste Management, Inc.	$	272		$	323		$	328		$	(651	)	$	272

Nine Months Ended September 30, 2012

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	10,215		$	—		$	10,215
Costs and expenses		—			—			8,848			—			8,848
Income from operations		—			—			1,367			—			1,367
Other income (expense):
Interest income (expense)		(267	)		(24	)		(71	)		—			(362	)
Equity in earnings of subsidiaries, net of taxes		755			770			—			(1,525	)		—
Other, net		—			—			(51	)		—			(51	)
		488			746			(122	)		(1,525	)		(413	)
Income before income taxes		488			746			1,245			(1,525	)		954
Provision for (benefit from) income taxes		(105	)		(9	)		443			—			329
Consolidated net income		593			755			802			(1,525	)		625
Less: Net income attributable to noncontrolling interests		—			—			32			—			32
Net income attributable to Waste Management, Inc.	$	593		$	755		$	770		$	(1,525	)	$	593

Nine Months Ended September 30, 2011

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	9,972		$	—		$	9,972
Costs and expenses		—			—			8,496			—			8,496
Income from operations		—			—			1,476			—			1,476
Other income (expense):
Interest income (expense)		(256	)		(25	)		(71	)		—			(352	)
Equity in earnings of subsidiaries, net of taxes		850			865			—			(1,715	)		—
Other, net		—			—			(16	)		—			(16	)
		594			840			(87	)		(1,715	)		(368	)
Income before income taxes		594			840			1,389			(1,715	)		1,108
Provision for (benefit from) income taxes		(101	)		(10	)		488			—			377
Consolidated net income		695			850			901			(1,715	)		731
Less: Net income attributable to noncontrolling interests		—			—			36			—			36
Net income attributable to Waste Management, Inc.	$	695		$	850		$	865		$	(1,715	)	$	695

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	WM		WM Holdings		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Three Months Ended September 30, 2012
Comprehensive income	$	215	$	269	$	319	$	(543	)	$	260
Less: Comprehensive income attributable to noncontrolling interests		—		—		9		—			9
Comprehensive income attributable to Waste Management, Inc.	$	215	$	269	$	310	$	(543	)	$	251
Three Months Ended September 30, 2011
Comprehensive income	$	246	$	323	$	252	$	(651	)	$	170
Less: Comprehensive income attributable to noncontrolling interests		—		—		13		—			13
Comprehensive income attributable to Waste Management, Inc.	$	246	$	323	$	239	$	(651	)	$	157

	WM		WM Holdings		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Nine Months Ended September 30, 2012
Comprehensive income	$	581	$	755	$	842	$	(1,525	)	$	653
Less: Comprehensive income attributable to noncontrolling interests		—		—		32		—			32
Comprehensive income attributable to Waste Management, Inc.	$	581	$	755	$	810	$	(1,525	)	$	621
Nine Months Ended September 30, 2011
Comprehensive income	$	667	$	850	$	843	$	(1,715	)	$	645
Less: Comprehensive income attributable to noncontrolling interests		—		—		36		—			36
Comprehensive income attributable to Waste Management, Inc.	$	667	$	850	$	807	$	(1,715	)	$	609

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2012

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income	$	593		$	755		$	802		$	(1,525	)	$	625
Equity in earnings of subsidiaries, net of taxes		(755	)		(770	)		—			1,525			—
Other adjustments		75			(8	)		1,026			—			1,093
Net cash provided by (used in) operating activities		(87	)		(23	)		1,828			—			1,718
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		—			—			(178	)		—			(178	)
Capital expenditures		—			—			(1,132	)		—			(1,132	)
Proceeds from divestitures of businesses (net of cash divested) and other sales of assets		—			—			28			—			28
Net receipts from restricted trust and escrow accounts and other, net					—			(79	)		—			(79	)
Net cash used in investing activities		—			—			(1,361	)		—			(1,361	)
Cash flows from financing activities:
New borrowings		645			—			40			—			685
Debt repayments		(335	)					(138	)		—			(473	)
Common stock repurchases		—			—			—			—			—
Cash dividends		(493	)		—			—			—			(493	)
Exercise of common stock options		39			—			—			—			39
Distributions paid to noncontrolling interests and other		14			—			9			—			23
(Increase) decrease in intercompany and investments, net		368			23			(391	)		—			—
Net cash provided by (used in) financing activities		238			23			(480	)		—			(219	)
Effect of exchange rate changes on cash and cash equivalents		—			—			2			—			2
Increase (decrease) in cash and cash equivalents		151			—			(11	)		—			140
Cash and cash equivalents at beginning of period		119			—			139			—			258
Cash and cash equivalents at end of period	$	270		$	—		$	128		$	—		$	398

Nine Months Ended September 30, 2011

(Unaudited)

	WM			WM Holdings			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Consolidated net income	$	695		$	850		$	901		$	(1,715	)	$	731
Equity in earnings of subsidiaries, net of taxes		(850	)		(865	)		—			1,715			—
Other adjustments		8			(11	)		1,009			—			1,006
Net cash provided by (used in) operating activities		(147	)		(26	)		1,910			—			1,737
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		—			—			(645	)		—			(645	)
Capital expenditures		—			—			(909	)		—			(909	)
Proceeds from divestitures of businesses (net of cash divested) and other sales of assets		—			—			22			—			22
Net receipts from restricted trust and escrow accounts and other, net		(5	)		—			2			—			(3	)
Net cash used in investing activities		(5	)		—			(1,530	)		—			(1,535	)
Cash flows from financing activities:
New borrowings		893			—			108			—			1,001
Debt repayments		—			(147	)		(278	)		—			(425	)
Common stock repurchases		(528	)		—			—			—			(528	)
Cash dividends		(481	)		—			—			—			(481	)
Exercise of common stock options		40			—			—			—			40
Distributions paid to noncontrolling interests and other		(10	)		—			(56	)		—			(66	)
(Increase) decrease in intercompany and investments, net		(43	)		173			(130	)		—			—
Net cash provided by (used in) financing activities		(129	)		26			(356	)		—			(459	)
Effect of exchange rate changes on cash and cash equivalents		—			—			—			—			—
Increase (decrease) in cash and cash equivalents		(281	)		—			24			—			(257	)
Cash and cash equivalents at beginning of period		465			—			74			—			539
Cash and cash equivalents at end of period	$	184		$	—		$	98		$	—		$	282