Ed Egl - Director, IR David Steiner - President and CEO Jim Fish - EVP and CFO Jim Trevathan - EVP and COO.

Corey Greendale - First Analysis Securities Al Kaschalk - Wedbush Securities Adam Baumgarten - Macquarie Research Scott Levine - Imperial Capital Michael Hoffman - Stifel Nicolaus Joe Box - KeyBanc Capital Markets Charles Redding - BB&T Capital Markets Alex Ovshey - Goldman Sachs Barbara Noverini - Morningstar.

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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 Web site 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, 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 stated otherwise are more specifically references to Internal Revenue Growth or IRG from 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 believes do not reflect the fundamental business performance or 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 Web site at www.wm.com for reconciliations to the most comparable GAAP measures and additional information about the use of non-GAAP measures.

This call is being recorded and will be available 24 hours a day beginning approximately 1:00 PM Eastern Time today until 5:00 PM Eastern Time on November 12th. To hear a replay of the call over the Internet, access the Waste Management Web site 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 on 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, and 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 service-well as we begin to look forward to 2015. Jim will discuss the financial benefits of our corporate realignment, but I’d like to touch on the strategic implications. We realized that growth and everything else in our business occurs on the frontlines, 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 in 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 is an expansion 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 you 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 divested 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 details. 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 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 use the proceeds to repurchase our stock and maintain leverage neutrality.

If we do purchase shares, we would likely begin at the end of the first quarter of 2015, after the exploration 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 from the second quarter and the third consecutive quarter of sequential improvement. About 100 basis points of the 130 basis points decline came from lost low margin national accounts.

In the third quarter, we once again saw positive Landfill and transportation 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’ve 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’re 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 in cash flow from the divestiture of Wheelabrator.

Given the timing of the transaction, it’s 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’ll 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’ll 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 to SG&A cost as a percent of revenue being below 10% and for the second consecutive quarter, we achieved this goal. SG&A cost 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 need 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.

The 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.

The 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.

The 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 approved $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 Waste side, we were able to fix labor cost down as our volumes declined.

In the Recycling we saw the benefit of continued focus on enforcement 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 exploration 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 the divestiture proceeds primarily from the sale of certain assets in our Eastern Canada markets in the quarter. Year-to-date 2014 we’ve generated $1.3 billion in total free cash flow and $1.03 billion excluding divestiture proceeds.

This is the highest free cash flow we’ve generated through the first nine months of 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 in disposal yield was 2.3% with volumes declining 1.3%.

This led 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 low margin, 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 positive 4.4%, MSW volumes grew 5.7% and CMB volumes grew 15.3%. MSW yield 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 the depreciation expense added $0.01 per share. The sale is progressing as we anticipated.

We still believe we’re 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’ll 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’ve made the first nine months of 2014 very successful. And with that Rashay let’s open the line for questions..

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(Operator Instructions) And your first question is from line of Corey Greendale with First Analysis..

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?.

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 have what we call the pricing gate.

So that folks have a substantial portion of their bonus at risk if they don’t get their pricing targets. And there is one think I can tell you is that our pricing target will be over 2% for 2015. With respect to volumes, it’s 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 towards that 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 positive than we have seen frankly in the last three years 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?.

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 look, 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’s 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 didn’t do that we saw what happened.

We had a great carrot for the last two years folks are going to do very well by getting their pricing targets. Next year we are going to go 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 getting 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?.

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’d 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 and when is the divestiture going to close.

And so when we look at it we say okay we have got $0.18 of EPS and $120 million of free cash flow that assuming Wheelabrator, would it be gone on January 1st that’s going to be gone in 2015.

So what we are doing right now as we are saying let’s make sure we do the right thing with the proceed 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 bonus depreciation for 2015..

And your next question from the line of Al Kaschalk with Wedbush Securities..

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?.

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?.

Yes well, let’s look at the various lines of business. Obviously 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 highest margin and have a great return on capital so if we’re going to have volumes growing anywhere that’s 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 have got the Residential line of business which generally is our lowest margin, lowest return on capital and we’ve 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’d expect to see volumes down there. On the commercial side that’s -- and so my point is that on the residential side, look would we love to have more volumes 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 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’d say, I’d 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’ve seen sequential improvement all year and that’s 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 have started to see that in 2013, I’d expect to see that continue in 2015 but again we’re not just going to go out and throw a bunch of sales on the street and drop pricing to get new commercial volumes because if we do that as the largest in the business that’s going to have a dramatic effect on our pricing program it’s what I said in the script.

We’re going to go after volumes that don’t have a dramatic effect on our yield program.

There is a lot of great volumes we can get at the Landfill and 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’s what’s going to drive margin expansion for us..

Al I might give a little additional color too to what David said about the industrial line of business, that as I mentioned in my script that’s the 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 in 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’ll be in the last to feel the downturn there.

But we like the prospects for energy services, it’s 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?.

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 is always assets for sale because the multiples are fairly high as you know we did a couple of transactions in that field fairly small transactions but that would be, 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 right.

The way we look at it AL, is we have got sort of a base case of buy back 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’ll absolutely do it but we’re not going to invest in businesses where we have to pay a higher multiple than our own stock I mean the reality is we’ve 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’re going to be fairly judicious in how we look at these acquisitions and if they occur that’s 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?.

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 with where we’re going with the pricing program..

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

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

Look, I would say it’s I think everybody on this phone and certainly everybody at Waste Management would say that the pricing programs are my sort of core focus, right and again look, I have total confidence that our field managers are going to do the right thing and I have total confidence that that the staff here at the corporate office are going to ensure they do the right thing but anytime you have something that’s that important like our pricing programs, you have got to have everything in your company directed to making it happen.

And so having confidence in the field managers is great but that’s not everything we can do, having confidence at the corporate teams are going to support them is great but that’s not everything we can do. You got to have the compensation programs aligned also.

And that’s really what it’s all about, and say 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’s 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 and some lines of business that affected our yield programs but also got us positive volumes at low margins. We are not going to do that again.

Where we’re going to look for volumes our 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 wow they’re going to lower price in order to get volumes and we think there is plenty of places where we can do that in the manufacturing and industrial sector, in the energy services sector.

We can go after good high margin volumes without affecting pricing for example at the commercial line..

And your next question comes from the line of Adam Baumgarten with Macquarie..

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..

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 cost where we felt like we made a lot of improvement on operating cost both on recycling and on core operations and we will continue to work those cost down Jim and Puneet Bhasin and their teams are spending a tremendous amount of time in the field as developing some real efficient operations.

And really on the recycling fronts it is no state secrete here that commodity prices have not been good to us over the last two years. So we’ve had to approach it -- I guess the good news is there, that it’s forced us to approach it from a cost standpoint.

We’ve done that we saw a bit of improvement year-over-year in Q3 and so once commodity prices do return to a more normalized levels we think we’re 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’ll 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 100 million impact overall.

Is there additional SG&A savings out there, we’re always looking but I think what we’ve done in 2012 predominantly consolidation in the field and then in 2014 with more closely aligning our SG&A to fill our strategy. I think you probably see 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 on 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’s hitting the bottom-line and you saw that in that 60 basis points improvement in operating margin. We’re progressing through the 400 or so collection companies and should complete that effort in next year.

So you’ll continue to see that improvement in OpEx as a percentage of net revenue as we rollout not just the technology but the culture of the accountability and get the dollar value out 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?.

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 the one, that process is underway and going on at the other 75%-80% of the location.

So it is a process that about a year we think a year or so left in the implementation process..

Also on the lines of David’s conversation about bonus and pricing, a big component of our bonus the field’s bonus is tied to a huge component and a half of it is tied to operating cost.

So there is certainly carrot out for them if they improve on operating cost we saw as we mentioned the 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?.

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?.

Yes I would say that you really haven’t seen it comedown. 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 cost 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. And again there is one business but I know better than any business we can buy and that’s ours.

And so it basically comes down to a pretty simple fact, why would I pay anymore 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 is 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 is going to 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..

Your next question is from the line of Scott Levine with Imperial Company..

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?.

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’s a small percentage of our overall revenue we increased it substantially in percentage terms 15.2% but it is still as an overall small piece. However, we like the direction, a lot of that came from parts of the South where we are seeing heavy construction, Florida and Texas to name a couple.

So we think that’s -- 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 wastes is for us is a bigger category it includes energy services it includes manufacturing and industrial type waste, we feel very good about that, so we feel like the various entry in that line of business are higher than they would in a business like commercial it’s tougher to get into next on an ExxonMobil refinery if you are not already in there and we have been in there for 30 years than 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 waste stream in terms of percentage growth in 2015.

But I will tell you that that as I mentioned earlier energy services which is a component of that will continue to grow nicely at 20 plus percent 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 have had a number of conversations with big public utilities that 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 cool ash opportunity.

There really are 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 subtitle D and subtitle C.

Second would be asking somebody to come in and actually manage and operate their Landfills for them a lot of them have onsite 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 stream..

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

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?.

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 right.

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 right and we are not going to bid those large 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’re 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 that for national account customers that we see real clear differentiation again are those manufacturing and industrial national accounts where our service offering whether it’s solid waste business or special waste or hazardous waste add real value add to it our balance sheet and those guys like us and we expect to grow in that sector..

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?.

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’re sure looking for the day when CPI becomes a tailwind for us instead of a headwind right.

About 40% of our business is CPI-linked and when we say CPI-linked remember that that can be all over the Board, it can be 100% of CPI can be some kind of localized CPI it can be a percentage of CPI but when we look forward I’d tell you we aren’t going to build our yield programs around CPI, it always amazes me that folks say well we would have gotten excellent yields if it wasn’t for CPI, we take a little bit of a different approach.

We say we’re 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 get 0% from CPI we’re going to find those dollars somewhere else.

And so, you’ll never hear us sort of say that CPI is a drag on yield look that is the fact of life what we get paid to do is to drop certain amount of dollars to the bottom-line and if we can get those dollars from CPI that’s great but if we can’t get those dollars from CPI we’re going to get those dollars somewhere else..

Your next question is from the line of Michael Hoffman with Stifel..

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?.

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’s 463 million..

Okay, and -- sorry, say again..

Okay, and -- sorry, say again..

I will verify that but I think it’s 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 --?.

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 buyback more in the fourth quarter we’ve the $600 million ASR which 70% of it took place at the initiation of that so no plans outside of that $600 million ASR..

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 trend line, is it 9.1 is the way to think about it?.

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 trend line, is it 9.1 is the way to think about it?.

9.1 on I would say that, that’s hard to say but think that’s probably about right..

Okay.

Alright, 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 --?.

Okay.

Alright, 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 that Michael about what it....

Well, so just 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?.

Well, so just 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?.

Yes the way we’ve looked at it Michael is that when you got 17 areas like we’ve got right, 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 have got to hit it at the local point of view.

And look the only way our shareholders win is that the -- a shareholder doesn’t care if 10 out 17 hit the target if the company doesn’t get the target. And so what we’ve always done and 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?.

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, right.

And so what we’re 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’ve 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 from pricing remember what core price is.

That is our price increases across all customers minus rollbacks and plus our fees and surcharges as in the fuel surcharge. And so those are the dollars that drop to the bottom-line. So when we do it we’re going to do it based on core price because that 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’re going to set that core price target both at the company and at the local level and that’s the number that we’re going to use as part of the gate..

Michael, 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 where we’ve been in the -- on the yield side, we’ve been in the 1% to 2% range. This quarter was 1.6% and I’m talking about MSW now 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 what we really look at it most closely when we’re 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?.

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 is have been fairly steady but we have seen Michael, when I talk about the volumes I talk that -- again I don’t expect to see a dramatic turn but I’m much more optimistic that we continue to see progress than 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’re talking about before, commercial volumes follow construction.

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

Okay, great..

Okay, great..

Michael, by the way the other thing, when I talk about commercial volumes you’ll always hear me talk about commercial volumes.

I think the large companies have to look at this as, what we do in commercial volumes especially 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 again the price war on the commercial side and everybody starts losing money.

And so when we look at our commercial business we say let’s make sure that what we’re doing in the commercial business is improving our volumes but not upsetting the pricing dynamics in the market.

So what’s the best way to do that quit losing your current customers, right, I mean if you’re not stealing a customer from someone else you can’t upset the market dynamic. So Jim Trevathan has put a task force together to make sure that our good customer service gets great.

So that -- and the best way for us to grow our commercial volumes would be to retain our current customers and I’d expect to see that occur in 2015..

So more defense of the business as well?.

So more defense of the business as well?.

Look, more defense of the business without using price right I mean we’ve defended the business before by doing, using rollback and we don’t want to go there. We want to defend the business by providing value to our customers. And so what you’ll see in 2015 I think is an improving economy.

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

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

When we keep more of our current customers that set the market dynamic and so now that we have seen the economy start to improve we are starting 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?.

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?.

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

I mean if they are bringing us trash in the front-end it eventually goes out the back-end 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’s what they bring us has to be truly recyclables and not just what they call diversion of materials.

The other side is operating efficiencies and I think we have made some nice improvement on operating efficiencies we have look at how many lines we should run at various plants what’s 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. 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..

And Michael what I would add that 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 detain the material, so that’s the parameter that gets to the Jim’s coaching if you will but part of it just a contractual issue as those contracts expire and we are able and if we have the industry following we are able to get the right kind of pricing and cost controls in place and waste the constituency of the waste material is right that lower the OpEx.

So those two issues are tied together to add more color the Jim’s statement. If I were picking an inning I don’t think we are 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 where we can’t affect but the 100 million we can..

Okay. So it’s 25% to 35% of the 100 million is kind of..

Okay. So it’s 25% to 35% of the 100 million is kind of..

Just one component perhaps on the OpEx side we look further a long 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. I think you have I think 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?.

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. I think you have I think 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 have 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 have just talked about in mind, we lost it to the other competitor in the Philadelphia area and lost that volume but we picked up volume from third-party haulers that that recycler had in their mix and we are making money at that plant.

So it’s a great example of that issue. But we are making the money on that third-party volume is coming because we could 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 a $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 really like to hear what you are doing on the working capital collecting your money faster and paying your bills slower..

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 a $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 really 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 a half day versus Q3 of ’13 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 is 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 have preferred to move a little on quicker on DSO than we did but I still think we have got both of those as improving opportunities going forward. Free cash flow is there is couple of things that affect free cash flow.

As we think about 2015 and while we are not prepared obviously to give a number but we know that the cash taxes related to repatriation of Puerto Rico earnings that will not recur in 2015. So that’s somewhat of a tailwind if you want to think about that that way.

And then I think still TBD on what happens with bonus depreciation we didn’t have it obviously this year, there is rumors that we will have it next year but we are not counting on it.

I still think though that’s and then of course the big impact on free cash flow will be divestiture of Wheelabrator so as David mentioned that’s 120 million in cash in free cash flow that goes away call it January 1, 2015.

So we’re going have to kind of reorient everyone to think about 2015 whether it’s 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’ll go about it with other means by way of share repurchase and leverage neutrality..

And remember Michael on the re-org, we’re basically getting four months of benefit in 2013 from the re-org so you get basically -- 2014 you get basically 8 months of benefit next year. So, it won’t be $100 million next year to be a little less than 100..

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. .

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’m just going year-over-year..

Your next question is from the line of Joe Box with 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 way streams 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, 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 way streams 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 and improving volume environment is always good for pricing right, whether you’re selling widgets or garbage.

And so I do think that what you’ll see is more rational pricing behavior I do think what you’ll see is the larger companies saying that it’s a little easier to take the risk on loosing volumes by using price and we all know that you get a much bigger affect 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?.

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

Well look I can’t control what anyone else does, I can only control what we do and to the earlier question we’re 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’s time for us to say okay, how do we get that yield, we’re 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 whether they need to do a better job of getting higher margin volumes and focusing more on price because I think that look I think that we all know that what helps bottom-line and so we’d always say as I think you’ll see more balance in the overall industry where everybody is doing a little better on volume but everybody is doing better than 2% yield but again I can’t tell you what they’re going to do I can promise you what we’re going to do.

We’re 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 but what I’m saying is I would expect the effects for us on volumes to be better in 2015 than it was in 2014..

Great, I 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?.

Great, I 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?.

Yes, when we look at the reorganization and look what we did these were very good folks a lot of them been with the 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 wouldn’t 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 sort of call it the funnel.

If there is too many things going in 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’re 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’s not driving one of what we call our five swim lanes and those as you can imagine revolve around customer service and pricing and cost but if it’s not driving one of our five swim lanes if that function is not driving it, then it is a function that we can do without for now.

It’s nice to have not a must to have and so that’s 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’re 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..

Your next question comes from the line of Charles Redding with BB&T Capital Markets..

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?.

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?.

Yes look and again as Jim Trevathan pointed out, those national accounts expand 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’re 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 the particular price and then we’re 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’re picking them up once a week it’s going to cost us a lot less to do it. So how do we figure out, how to pick up that container when it’s full rather than picking it up when it’s half full.

And so when we deal with national accounts our view is look we want that help you save money but we can help you save money while we continue to make money. If you can’t take a national account view that what is going to cut the price and make less money. That’s what we will not do because that this doesn’t work for our business.

But what we can do to 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 cost.

So for example the manufacturing industrial customer to buy recycled 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 we do save them money, but how do we save them money while maintaining our profitability..

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?.

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?.

Yes right now that differential is still over $1.5 and so I would say it doesn’t affect what we’re doing on fleet purchases. And as you have seen oil has come down a little bit short but natural gas has come down also. We’re still a long way away from the stepping point where we’d 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..

Your next question comes from the line of Alex Ovshey with Goldman Sachs..

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?.

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?.

Yes, it’s not just an elevated multiple it’s 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’re in an improving market and folks have a lot of confidence going forward on their business.

But it comes down to this, what we’re trying to do is to buy their business at trailing earnings and if they’re looking forward in the future and saying gosh trailing earnings, I’m not sure if those earnings are going to get much better, so trailing earnings looks good to me they’ll sell out a certain multiple.

If they say gosh, those forward earnings look really good to me they will sell in different multiple.

So for example we aren’t buying businesses in the recycling business but there is not a lot of people feeling greatly confident about their recycling business and that’s going to drive to a lower multiple, because they say, look, I’ll take five to six 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’s a little bit different I think people are seeing EBITDA going up and if you look at it from just 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 to hire multiple for your business.

So it’s really just pure sort of 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 call it a post synergy number of five to six 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 in sort of 6 time to 7.5 time earning, 6 times to 8 times earnings -- EBITDA I am sorry.

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

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. So 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 ‘14 would really be the first quarter where we are going to be comping 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?.

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. So 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 ‘14 would really be the first quarter where we are going to be comping 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 could do that tomorrow, the problem is in order to do that we have 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’s going to happen to the competitive dynamic if we do that.

And so we are taking a little bit more of a measured approach towards 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, now that means that the turn in commercial volumes is slower than it would be if we put a 1000 sales people 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’s going to go below that negative 3% but I certainly expect the trend line on that to be positive throughout 2015..

Your next question is from the line of Barbara Noverini with Morningstar..

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 is the 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?.

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 is the 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?.

Yes, 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 contaminated load.

So what we did with recycling was we didn’t do anything at the field level the responsibility of 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 gentlemen 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. The ultimate responsibility remained in the field, the ultimate responsibility for the profitability of that recycling facility remained down the field..

We will now turn 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 our 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 O’clock 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 ID number for the replay is 8203798.

The number to dial for the replay is 1800-585-8367-855-859-2056 or 1404-537-3406. This concludes today’s Waste Management conference call. You may now disconnect..