Revenues for the fourth quarter of 2008 were $3.11 billion compared with $3.36 billion for the same 2007 period. Net income for the quarter was $218 million, or $0.44 per diluted share, compared with $309 million, or $0.61 per diluted share, for the fourth quarter of 2007.

“The fourth quarter was a challenge on a number of fronts, and I am pleased with the way we have reacted to the tough economic circumstances. Despite the challenges, our adjusted earnings per share for the quarter beat consensus, we met our full year expectations for earnings per share, we increased our adjusted margins, and we generated strong free cash flow,” stated David P. Steiner, chief executive officer of Waste Management. “We have consistently shown the ability to generate strong free cash flow, and we have exhibited this strength once again. Full year 2008 net cash from operations increased $136 million and free cash flow for the year exceeded the $1.4 billion we forecasted at the beginning of the year.”

The company noted several items that impacted results in the 2008 and 2007 fourth quarters. Excluding these items, net income would have been $241 million, or $0.49 per diluted share, in the fourth quarter of 2008 compared with $276 million, or $0.54 per diluted share, in the fourth quarter of 2007.

Results in the fourth quarter of 2008 included a decrease of $0.05 per diluted share from:

A $13 million reduction in net income due to charges related to our withdrawal from union sponsored multi-employer pension plans in Milwaukee, New Jersey and Detroit;

A $16 million reduction in net income caused primarily by the accounting effect of a decline in long-term interest rates, which are used to calculate the present value of our remediation liabilities at our landfills; and

A $6 million benefit resulting primarily from favorable tax audit settlements.

Results in the fourth quarter of 2007 included a net benefit of $0.07 per diluted share consisting of a $31 million income tax benefit resulting primarily from a reduction in Canadian income tax rates; a $7 million benefit in net income due to gains from divestitures of operations; and a $5 million reduction in net income related to labor disruptions in California.

“As we anticipated in November 2008, we did see a negative impact of $0.08 per diluted share in the fourth quarter of 2008, compared with the prior year period, as a result of the deterioration of the recycling commodities markets,” stated Steiner. “Conditions have stabilized somewhat, but we still expect a negative year over year impact from recycling operations of $0.15 to $0.20 for the full year 2009, most of which is expected to be in the first half of the year.”

Key Highlights for the Fourth Quarter and the Full Year 2008

Internal revenue growth from yield on base business was 2.1% in the quarter and 2.8% for the full year.

Internal revenue growth from volume was negative 5.9% in the quarter and negative 4.2% for the full year 2008.

Foreign currency translation caused a revenue decrease of 1.1% in the quarter with no effect for the full year.

Operating expenses for the fourth quarter of 2008 were essentially flat as a percentage of revenue compared with the prior year period. On an as adjusted basis, operating expenses were 61.7% of revenue in the fourth quarter of 2008, compared to 63.2% of revenue in the fourth quarter of 2007, or a 150 basis point improvement compared with the prior year period.

Net cash provided by operating activities was $673 million in the quarter and $2.58 billion for the full year.

Capital expenditures were $434 million in the quarter and $1.22 billion for the full year.

Free cash flow was $259 million in the quarter and $1.47 billion for the full year.

We returned $132 million to shareholders through dividend payments in the quarter. For the full year, we returned $941 million to shareholders, consisting of $410 million of common stock repurchases and dividends of $531 million.

The effective tax rate in the quarter, adjusted to exclude the $6 million in non-recurring tax items mentioned above, was around 38.4%. This rate reflects a benefit from the utilization of state tax loss and credit carry-forwards.

Steiner added, “The majority of our business, which relates to commercial and residential customers, is recession resistant, and the fourth quarter reflected that. Internal revenue growth from volume in those lines was consistent across all quarters of 2008. But the sharp decline in economic activity in the fourth quarter did cause further volume declines in our more economically sensitive industrial collection, transfer and recycling businesses. Recycling commodity revenues were affected by both steep price declines and greatly reduced volumes as a result of the lack of demand for these commodities. We expect volumes in these economically sensitive lines of business to remain soft in 2009. So, we will redouble our focus on pricing discipline and driving continued efficiency throughout our organization. On the pricing front, we are setting minimum yield targets for each of our Market Areas, Groups and the Corporation. These targets must be met in order for eligible employees to receive the financial performance portion of their 2009 annual bonuses. This will help to ensure that we maintain our focus on our pricing programs in 2009.”

The Company announced a reorganization that will cost around $50 million to implement, but will result in annualized savings in excess of $100 million.

Savings will result from:

The restructuring of our field operations through consolidation, reducing our Market Areas from 45 to 25 and eliminating duplicative functions;

The realignment of our corporate staff to more efficiently support the new field operations;

The elimination of calendar year 2009 merit-based salary increases for salaried exempt personnel, unless we see a turnaround in the economy and our business; and

Delaying until June 30, 2009 our merit-based pay process for hourly personnel.

“Our recent actions have prepared our company to perform well in a slow economy. As a company that focuses on free cash flow, we expect that through a combination of pricing, expense control and capital discipline we will achieve between $1.3 billion and $1.4 billion of free cash flow in 2009,” Steiner continued.

“We expect that in 2009 we will acquire more revenue than we divest, as valuations and prices for assets reach lower levels. We believe our new organization makes us more nimble and able to assimilate acquired operations. However, we will not make any acquisitions that would jeopardize our strong balance sheet or our credit rating.”

Steiner concluded, “The fourth quarter demonstrated the strength of our business model during a very challenging economic time. The recession resistant qualities and strong cash flows of our solid waste business, combined with the proactive steps we are taking to strengthen our pricing programs and reduce our costs, give us confidence that we will continue to generate strong cash returns for our shareholders and emerge from this economic downturn even stronger than before.”