Good day, ladies and gentlemen and welcome to the Waste Management Third Quarter 2017 Earnings Release Conference Call. At this time participants are in a listen-only mode. Later we'll have a question-and-answer session and instructions will be given at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host for today, Ed Egl, Director of Investor Relations. Sir, you may begin.

Thank you, Nova. Good morning, everyone, and thank you for joining us for our third quarter 2017 earnings conference call. With me this morning are Jim Fish, President and Chief Executive Officer; Jim Trevathan, Executive Vice President and Chief Operating Officer; and Devina Rankin, Senior Vice President and Chief Financial Officer. You will hear prepared comments from each of them today. Jim Fish will cover our high-level financials and provide a strategic overview. Jim Trevathan will cover price and volume details and provide an operating overview. And Devina will cover the details of the financials. Before we get started, please note that we have filed a Form 8-K this morning that includes the earnings press release and is available on our website at www.wm.com. The Form 8-K, the press release, and the schedule to the press release include important information. During the call you will hear forward-looking statements, which are based on current expectations, projections or opinions about future periods. Such statements are subject to risk and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and in our filings with the SEC, including our most recent Form 10-K. Jim and Jim will discuss our results in the areas of yield and volume, which, unless otherwise stated, are more specifically references to internal revenue growth or IRG from yield or volume. All volume results discussed are on a workday adjusted basis. During the call, Jim, Jim, and Devina will discuss our earnings per diluted share, which they may refer to as EPS or earnings per share. Any comparisons unless otherwise stated will be with the third quarter of 2016. Earnings per share, operating expense and margin, income from operations and margin, operating EBITDA and margin and effective tax rate have been adjusted to exclude certain items that management believes do not reflect fundamental business performance or results of operations. These adjusted measures in comparison to these measures, together with free cash flow are non-GAAP measures. Please refer to the earnings press release footnote and schedules, which can be found on the company's website at www.wm.com for additional information and reconciliations to the most comparable GAAP measure. 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 9. To hear a replay of the call over the Internet, access the Waste Management website at www.wm.com. To hear a telephonic replay of the call, dial 855-859-2056 and enter reservation code 93100733. Time-sensitive information provided during today's call, which is occurring on October 26, 2017, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited. Now, I'll turn the call over to Waste Management's President and CEO, Jim Fish.

Thanks, Ed, and thank you all for joining us this morning. In a quarter where two of our biggest operating areas were heavily impacted by hurricanes, our employees maintained their focus on servicing our customers, improving core price, growing profitable volume and controlling costs to produce arguably the best quarter Waste Management has had in its history. Our operating EBITDA grew by about 7% in the quarter to $1.071 billion when compared to the third quarter of 2016. This is the second consecutive quarter of record operating EBITDA. The strong operating EBITDA continued to translate into free cash flow at a conversion rate of almost 50%. And as a result, our free cash flow grew more than 18% for the same comparative period, despite an increase in cash taxes paid and capital spending. Devina will discuss our cash flow in detail. But based upon our performance through the first nine months of the year, we are raising our full year free cash flow guidance. Our new guidance range is $1.7 billion to $1.75 billion, up from $1.5 billion to $1.6 billion. We generated $0.90 of EPS in the third quarter, an increase of 7.1% when compared to the third quarter of 2016. In that EPS number was a $0.01 negative impact from hurricanes Harvey and Irma and a $0.01 drag from the expiration of fuel tax credits. Despite these $0.02 of headwinds, we grew EPS by $0.06 versus the third quarter of 2016. Given our strong earnings performance, we are raising our full year 2017 guidance of adjusted earnings per diluted share. Our new guidance range is $3.19 to $3.21, up from $3.14 to $3.18. As we saw in the second quarter, our strong growth in EPS, EBITDA and free cash flow was driven by solid growth in revenue and…

Thanks, Jim and good morning. The fundamentals of our strategy continue to drive income from operations and operating EBITDA growth. The combined positive price and positive volume led to total company income from operations growing $55 million, an increase of more than 8%. Our operating EBITDA grew $69 million, an increase of about 7%, when compared to the third quarter of 2016. And our operating EBITDA margin was 28.8%, an increase of 60 basis points when compared to last year. Revenues in the third quarter were $3.72 billion, an increase of $168 million or 4.7% when compared to the third quarter of 2016. Third quarter revenue growth in our collection and disposal business from the combined impact of price and volume was $93 million. Third quarter revenues also benefited from higher recycling commodity prices, which drove a $60 million increase in recycling revenues. In the third quarter, our collection and disposal core price was 4.7% and yield was 2%. On the volume front, total volume was 1.1% and traditional solid waste volume was up 2%. As we expected, the year-over-year comparison in the commercial line of business became tougher in the third quarter as we've anniversaried the award of several large national accounts. In addition, and as Jim mentioned, we saw weaker recycling volume from the hurricanes. Overall, we're very pleased with our volume results given these headwinds, as our focus on customer service and disciplined growth are delivering consistent results. Through the first nine months of the year, we achieved about 2% yield and 2% volume. Looking at other revenue metrics, service increases exceeded service decreases for the 15th consecutive quarter, our year-to-date churn rate was 9.3% and rollbacks improved 170 basis points year-over-year. Our collection lines of business continued to perform exceptionally well. In the third quarter, commercial…

Thanks, Jim, and good morning, everyone. Just as we have seen all year, the strength of our operating results continues to drive significant growth in our cash flow from operations and free cash flow. In fact, in the third quarter of 2017, we achieved the highest cash provided by operating activities that we have ever seen at $856 million. This compares to $758 million in the third quarter of 2016 and that's an increase of $98 million or almost 13%. We are particularly pleased with the continued leverage we are achieving in our cash flow from operations conversion metrics. In the third quarter, our operating cash flow as a percentage of revenue was 23% which is a 160 basis point improvement in the measure from the third quarter of 2016. Our free cash flow as a percentage of operating EBITDA was about 48%. These results demonstrate the operating EBITDA growth and margin expansion we are seeing in our business and that contributed $69 million to cash from operations in the quarter. Our diligent focus on more efficient working capital management also benefited the third quarter performance more than offsetting the impact of higher cash taxes. Over the last year our corporate and field teams have been working to leverage a more efficient procure to pay process and the resulting extension of days to pay continued to provide real value and expansion in our cash conversion metrics. In the third quarter, our capital spending increased about 5%. We expect the year-over-year increase to be even more pronounced in the fourth quarter and we now expect our full year capital expenditures to be at the upper-end of our guidance of between $1.4 billion and $1.5 billion. We generated $512 million of free cash flow in the third quarter of 2017, an increase…

Thank you. Our first question comes from the line of Brian Maguire of Goldman Sachs. Derrick Laton - Goldman Sachs & Co. LLC: Hey, good morning, guys. It's Derrick Laton on for Brian.

Hi, Derrick. Derrick Laton - Goldman Sachs & Co. LLC: Thanks for taking my question. Just looking at free cash flow there, the conversion's been strong the last couple quarters and just looking at the revised guidance now, I think, it would imply that, you'd have maybe $300 million, $310 million in free cash flow in the fourth quarter. How should we think about free cash flow as a percentage of EBITDA kind of going forward as we look ahead to 2018?

It's early for us to consider giving guidance for 2018. What I mentioned is that our capital expenditures are going to be higher in the fourth quarter than what we've seen thus far in 2017. And as a result, free cash flow as a percentage of EBITDA will actually tick down a bit in the fourth quarter and we expect that our full year right now should be in about the same range as what you saw in 2016, maybe a little higher given the EBITDA operating leverage that we've seen from the business. Derrick Laton - Goldman Sachs & Co. LLC: Okay. That's helpful. And then just maybe shifting gears to recycling, if I heard correctly I think you said is you're expecting about a $0.04 decline year-over-year in recycling earnings in 2018, kind of heavily weighted to the first half of the year. I'm assuming that kind of implies a recovery there in recycle commodities prices, and is that based more on your thoughts that China is going to return to the market and things will begin to normalize or is that more based on maybe your ability to find some alternative dispositions for your recycle commodities material?

I think it's all of the above. The way we came up with the $0.04 is that we looked at September pricing. September OCC pricing – and OCC is the commodity that's been most impacted by this, and so September OCC pricing, export pricing was down about 24% from the peaks in July. So we took a look at it and said, another 5% decline from there puts us at about export OCC pricing, about the same export OCC pricing that we saw in Q4 of 2016, which felt reasonable to us and that's the number we used to build up to a $0.04 decline in recycle earnings for 2018.

Derrick, I might add to this, to that specific answer, that we're seeing orders now. China has granted a few licenses and we're preparing shipments here in Q4 to their mills. Their mills need the product. We all know there's a growing need for more product based on e-commerce activity. There are more and more products being delivered to my front door every day and probably yours as well. So, we see that activity happening at pricing above that low point here in Q4. Not at the same rate that we saw in the summer or in the spring, but it's starting to happen. Derrick, they've been in our plants for a few years now, their inspectors looking at the material, making sure the quality is right and they're now not only inspecting, but they're granting approval for shipments that meet their requirements, so we're seeing that activity. And then, I guess lastly, and as you mentioned in your question, we have developed for four years or five years now, other markets around Southeast Asia primarily and in India to receive materials. Our large brokerage business requires us to find alternative markets and we've done that and that's helping us as well as we look for ways to get around the short term blip we think in what China's doing. Granted, I don't mean to imply that what they're doing truly is short term. They're looking we think at the long term. But they need material and we're shipping to them, but we're also finding alternatives, so we – I think that bodes well for the numbers that Jim gave you.

Well, I think, Derrick, I think Jim's color there reinforces why we don't feel that the October lows are the right baseline to use, that we're already starting to see, as Jim said, some promising signs coming into November. Derrick Laton - Goldman Sachs & Co. LLC: Great. Appreciate the color there, guys. And then just one final one for me, just to confirm, on an annual basis, is it still the same sensitivity to recycle commodities prices for you guys for a $10 move is roughly the $0.04 impact on an annual basis?

Yeah, that's the same number we used. Derrick Laton - Goldman Sachs & Co. LLC: All right. Great. I'll turn it over. Thank you, guys.

Our next question comes from the line of Hamzah Mazari of Macquarie Capital. Your line is open. Hamzah Mazari - Macquarie Capital (USA), Inc.: Hey. Good morning. Thank you. The first question is just on free cash flow. You mentioned a step change in the dividend. Is that – what free cash flow base, is it $1.7 billion that we should think about with regard to the step change in the dividend? And then, just in conjunction with that, does that change your view on larger M&A given the step change in the dividend or is that just a catch-up to your new baseline?

Sure. So what I would say, Hamzah, is that the new baseline is $1.6 billion and that varies from our current outlook for the current year, because of the impact of proceeds from divestitures. As a reminder, we include proceeds from divestitures in our free cash flow measure, but because that's not recurring activity that's easily predictable, we've backed out the $50 million to $100 million of current year activity that we are projecting. So we're using a baseline free cash flow of $1.6 billion as we look forward to the discussion about capital allocation with the board in December. And when we think about dividend policy, we really target a 50% payout ratio on a consistent basis over the long-term, and expect that the dividend will grow as our free cash flow grows from operating leverage in the business. And so, when we look at the baseline free cash flow moving from $1.4 billion to $1.5 billion to $1.6 billion, that's an increase of 6.5% to 10% depending on which data point you use of the existing – or the previous baseline of $1.4 billion to $1.5 billion. So we'll be looking at our capital allocation in more detail with the board in December and determining what we think the appropriate step change is. But know that we are confident that the baseline has increased to that $1.6 billion. We also continue to be confident that we have the balance sheet to execute large strategic M&A acquisition activity and this in no way changes our outlook for that. Hamzah Mazari - Macquarie Capital (USA), Inc.: Great. And then just on gross margin. It feels like the highest since 2011 for you guys. Maybe if you could just parse out high level how much of that is mix versus just better operational execution and I know, Jim you touched a little bit on the landfill cost side but just curious on the sustainability of that performance.

I think, when you look at the adds (32:21), whether you look at EBITDA margins or gross margins, I mean that was certainly a good story for us this quarter. And last quarter we – it was something we talked about our brokerage business dampening it a bit and it still did. But we were just able to overcome that this quarter. I think it is sustainable going forward. We've talked about, on the EBITDA margins line being 50 basis points to 100 basis points up year-over-year and we think we'll be right in that range when we finish 2017. We continue to focus on operating costs and I mentioned it, I think, in – well, in my script and I think, Devina mentioned in hers, that – or Jim in his, that we have some technology that we're putting into place. We are continually focused through our onboard computers on improving operating costs through efficiency gains. Devina, I know mentioned that SG&A is an area that we have always been focused, at least over the last five years to six years and we're pleased with the results there, so. And then, I think the last thing that I would say, Hamzah, is that what we're really seeing and it's affecting margins, is that we're starting to see the leverage of kind of 2% price and 2% volume. It's something that Steiner mentioned several times over a couple year period and we were never quite able to get there, although we made good strides. We've finally gotten there and it's really, really showing up in spades in our – not only in our EBITDA and free cash flow, but also in our margins.

Hamzah, if you look at, as I have mentioned and Jim as well, the growth in the commercial line of business and in the landfill line of business, both in volume and in core price or yield, you see two highly leveraged lines of business that have created a lot of that margin expansion and we don't see signs of that slowing down in the future. It's really a solid business model. Hamzah Mazari - Macquarie Capital (USA), Inc.: Got it. And just lastly, I'll turn it over. As you look long term from the hurricane, are there any puts and takes investors should look at when comparing the cleanup activity versus what was in Hurricane Andrew or other hurricanes. It feels like a lot of private pickup this stuff, but at the same time, you have a Texas Attorney General probe on some of the cleanup activity. Just curious, is this going to be a big benefit long term for you on the landfill side in 2018 and just curious on your thoughts there? Thank you.

Yeah. Here's what I would say about the hurricanes. I mean, first of all, in terms of predicting the benefit to us and there will be a benefit to us. But in terms of predicting that benefit for – whether it's Q4 or the first part of 2018, it's a bit difficult and I'll give you an example of why it's hard. In Texas for example, in Houston specifically, a lot of that Hurricane debris has gone to these temporary holding areas. And I assume that the reason for that was to get it off of people's yards as quickly as they could. So a lot of the debris has not yet made its way to landfills and so we think there is some real opportunity. The collection side of the business is really handled for the most part by FEMA and so we don't see a whole lot on the collection side. Where we ultimately see benefit from natural disasters is in the landfills. And then once reconstruction begins, we see it in our roll-off line of business. And then as I mentioned in my script, Hamzah, we saw a bit of it just through the temporary suspension of recycling programs in the recycle line of business. To kind of put a cap on this, we think that it's probably somewhere in the neighborhood of a $0.02 impact for us, a bit hard to predict because we're not exactly sure how much volume is out there in either Florida or in Texas, but we think it's probably a $0.02 benefit, could be a little bit higher, could be a little bit lower, but somewhere in that neighborhood over the coming months. Hamzah Mazari - Macquarie Capital (USA), Inc.: Great. Thanks a lot.

Yes.

Our next question comes from the line of Michael Hoffman of Stifel. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Thank you all for taking my questions this morning. Ed, you made a point of drawing out the context of this workday significance, can you sort of tell us why you drew that out this time in the preamble?

So, the volume, we had $0.07 of workday difference year-over-year on volume. So, if you look at as-reported volumes, it shows down to 0.7% positive, adjusted for that workday, it shows 1.1% positive volume for the quarter.

That's total volume, Ed (37:26).

That's total volume on – so for traditional solid waste it's 2%. So just to show you that it's – the volume change really hasn't been significant. If you look at just the raw numbers, it looks like there is a significant drop, but we still see the steady volume that we've seen all year.

But that we've always called that out. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay.

Yeah. We've always done that.

Yeah. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: And then on the free cash flow, Jim Fish, if this was July and you had to do it all over again, would you have actually raised your guidance then given what you knew? Because this is an enormous change in three months.

Look, it's not that we didn't see this coming, but we felt like in July, look, we're halfway through the year, let's – I think every time we've ever raised guidance in the past, we've waited until the third quarter to do it, because things can happen throughout the year that – and what you don't want to do is raise your guidance and then find out that you didn't anticipate something or something happened that's caused the other direction. So I mean, I would answer your question by saying two things. One is, we knew we were having a good year when we were on our second quarter earnings call, but in the interest of being reasonably conservative, we wanted to wait until third quarter to really kind of reaffirm that, and that's why we're raising guidance in Q3.

And I would add to that, Michael, that some of the strength that we've seen in 2017 that we didn't anticipate is related to working capital changes and some traction that we've seen in the procure to pay initiatives and as you know, working capital improvements are really difficult to predict and we're still working through the processes there. And so, rather than over predict what we expected over the remainder of the year, we wanted to be sure that the traction we had seen in the first six months was going to continue, particularly because we had a couple of working capital headwinds that we've discussed with the swap termination and higher incentive compensation plans. The remainder of the cash flow drivers, particularly EBITDA growth, has come in line with our expectations and are outperforming in a way that's consistent with the earnings growth that we're reflecting in our updated guidance.

Yeah, I think, Michael, just to tag on to Devina's comments. Really, the two things that have – this is a story about EBITDA and working capital when it comes to cash from operations. And it's – Devina mentioned, the reasons behind working capital and the procure to pay program, or technology we put into place, but also really strong landfill volumes, really strong volumes across the board, and those landfill volumes and our overall volumes continue as we look at the month of October. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. So to parse that, if we're starting with the original $1.5 billion to $1.6 billion, you're going to $1.7 billion to $1.75 billion, that's a $200 million to $250 million move, how do I break that up between the two. Is it $150 million in working capital and then it's $50 million to $100 million in EBITDA?

So, when we gave guidance of $1.5 billion to $1.6 billion in free cash flow that included $240 million to $290 million in EBITDA growth. We now think that we're at the high end of that range and potentially even above the high end of that range, thinking more in the neighborhood of $280 million to $300 million of EBITDA growth on a year-over-year basis. So that's part of your increase. We also have seen better than expected decreases in our cash interest paid and then the remainder is related to the change in working capital. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. So to parse that there is – say again?

I was just going to say, CapEx comes in right where we said it would, which is the high end of the original guidance. We originally guided $1.4 billion, $1.5 billion and I believe last quarter we said we'd be at the high end of that. And so we're going to come in right at the high end of that CapEx number. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Right, right. So, if I take the $240 million, $290 million and parse the midpoint, that's $50 million, cash interest is $20 million to $25 million. So that's – we're still talking about $100 million to $125 million is working capital, that's the way to think about it?

That's right. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. And so to be clear then – and congratulations – there is no storm debris leverage in that number?

That's correct.

There isn't. I mean, if you look at the storm debris, Michael, for the third quarter and I went through kind of our expectations for Q4 and beyond. But if you look at the third quarter, really the revenue impact for the third quarter was only $1.28 million and that seems amazing, but it's not that surprising when you consider that there is an initial kind of hit both on revenue and on operating cost. The operating cost impact was almost $3.1 million and add to that the SG&A impact from the donations and you get to a negative $6 million for the third quarter and that's where you get the $0.01 in Q3. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Right. So, your total storm related – because you did made that very nice $4 million donation, that $7 million of storm related costs are in your P&L in 3Q?

$6 million. Yeah, a little bit less than $7 million. About $6 million. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. All right. And then – okay. So, help me with why your baseline then isn't $1.7 billion instead of $1.6 billion because it would imply there is about $50 million to $75 million of non-recurring in the way you're thinking about that baseline?

Right. So, we talked about the $50 million to $100 million of proceeds from divestitures. The remainder, I would tell you, has to do with the uncertainty associated with working capital contributions and just wanting to see more time before we put a stake in the ground with respect to the sustainability of working capital growth over the long term. As a reminder, these step changes that we see from working capital initiatives really give you a one-time lift. They don't provide lift year-over-year going forward. Now as we sustain these and that's absolutely our expectation on our plan, we're going to continue to see the free cash flow as a percentage of revenue conversion continue at this new rate of 22% to 23%, up from more like 20% in prior years. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Of cash flow from ops, that's what you're referring to?

Yes. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Right. So, which that's the other – if I translate that through, you've been a long-term sort of circling 40% as your free cash flow conversion of your EBITDA. The 50s that have been running the last couple of periods seems like that's not sustainable, but 45% possibly is, is that the way to think about that?

Yeah. As I mentioned earlier, right now, we expect 45% or higher for the full-year of 2017. I would tell you that given the higher capital expenditures that we expect in the current year with the business growth, we're going to break through the traditional 9% to 10% of revenue that we've typically run on CapEx as a percentage of revenue. And so, when we're thinking about the growth of the business, investing in that capital now is going to provide real value, particularly if you think about the Los Angeles and New York contracts that we've spoken about over the last several calls, over the next 10 years, 20 years. And so the capital as a percentage of revenue being a little higher than our traditional run rate is something that we expected, but it's not something that we expect to be sustained over the long-term at this point. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. So just to put all those pieces together, CapEx in 2018, you should think about, goes back to 9% to 10%, the cash flow from ops runs at a 22% to 23%, which is going to put you in that low-teens as cash flow as a percentage, free cash flow as a percentage of revenues?

That's correct.

Pretty soon you're going to talk us into giving guidance here for 2018.

Yeah. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Yeah. Well...

(45:48). Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: The biggest question – and I don't mean interrupt, I apologize. The $1.7 billion to $1.75 billion brilliant, but can you grow it in 2018 or am I in a pause because all of the things you just described and then another lift in 2019? That's what I'm trying to understand.

Yeah, I mean, look, I think we feel – here's the bottom line. I mean I think, we feel very good about the operating leverage of the business. We feel good about the volumes that we're seeing and the kind of 7% to 8% growth that we're seeing in EBITDA. As Devina mentioned, CapEx is a bit of a – I wouldn't say a wildcard because that implies that we don't control it, we do. But we may or may not be in that 9% to 10% range in 2018. She talked a bit about why. One thing she did mention was investing more heavily in our CNG fleet, because we're seeing a very nice payback for a CNG truck versus a diesel truck in terms of not only the cost of fuel, but also maintenance cost. So I think, we feel good about the long-term growth prospects of the business and we'll talk more about where we think free cash will be for 2018, when we get to the beginning of the quarter next year. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. Two last ones for me, 2% plus 2% has been your mantra forever, 2% price, 2% volume, do we hold that going into 2018, everything we know today?

So, far that's what we're looking for. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. And then why not buy stock more consistently throughout the whole year instead of doing that program you do, which investment bankers make a lot of money and maybe you get a lower average price, but somebody makes a lot of money on the backs of your shareholders doing that as opposed to buying it ratably all year?

I hear you, Michael. What I would tell you is the way that we structure our accelerated share repurchase agreements ensure that we are buying ratably over the entire year. The $500 million that we executed in the third quarter will run through December of this year. Michael E. Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

Our next question comes from the line of Tyler Brown of Raymond James. Patrick Tyler Brown - Raymond James & Associates, Inc.: Hey, good morning.

Good morning, Tyler. Patrick Tyler Brown - Raymond James & Associates, Inc.: Hey, Devina. I know I asked about this a few quarters ago, but I was hoping for an update, but where do we stand with the sun setting of some of those alternative tax strategies. And I know it's early, but can you give us a sense of where the tax rate may pan out in 2018 or is it more of a 2019 story?

So, it's definitely more of a 2019 story. The EPS benefit of those just for specificity is about $0.04. And so, it's a penny a quarter of a benefit to our effective tax rate is the way that you can think about that. And those don't sunset until beginning in 2019. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. And they will provide maybe a cash flow headwind, though it sounds fairly modest?

It's very modest. And what I would tell you is from a free cash flow perspective, you would see a headwind potentially because the benefits that we get from those show up in cash taxes and some of the cash outflows that we pay show up in other parts of the free cash flow (49:13). Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. All right. That's very helpful. And – yeah. No, that's helpful. And then, Jim, just real quick so are you saying there is $0.02 in the Q4 expectations from incremental landfill volumes maybe in Texas and at Okeechobee?

Yeah. We think it's probably $0.02 in the fourth quarter. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. Okay. So, how do we think about maybe MSW landfill volumes next year, I mean, we had this huge Fairfax diversion, you've got some incremental landfill volumes from hurricanes, but do you think that those 2018 MSW landfill volumes will be down?

Well. No, I don't think they're going to be down. I mean, there are always some reasons why year-over-year comps can be difficult and Jim talked about that a bit for Q3, actually having one that was a positive for us that will cause next year to be a difficult comp for us. But, I think largely MSW volumes are driven by two things, driven by us differentiating ourselves and taking potentially a bigger slice of the pie and then driven by the overall growth of the pie itself. I would tell you that on the overall growth of the pie, that the economy feels reasonably good right now. As we look out into 2018, we don't see any storm clouds on the horizon, not that they couldn't show up, but right now it looks reasonably good. And then part of why we're excited about putting Nikolaj in the technology position is that we're already starting to separate ourselves through the use of things like customer analytics and use of data reporting and then technology to our customer in terms of a customer interface. So differentiation in the economy give us some room for optimism here as we think about MSW volumes and total volumes going into 2018.

Hey, Tyler you mentioned the Virginia waste to energy plant. I think, I stated it in the script, but that would have lowered our MSW volume growth but it still would have been mid, high single-digit numbers. So it's still very strong and that trend as Jim mentioned, although it might have a headwind or two to it, is still going to be positive. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. And then was incentive comp a notable headwind in Q3? Devina, it sounds like maybe there's a catch up accrual either in Q3 or Q4.

So in the prior year, our incentive compensation cost accruals were more heavily weighted toward the fourth quarter. In 2017, those have been more ratably spread over the first nine months of the year. And so there's a slight increase in total costs expected in 2017, but for the most part you're going to see just a timing difference and we are – you would notice if you looked at SG&A on a quarter-by-quarter basis that we're kind of at around $350 million a quarter. And so we think that's a reasonable run rate to carry out into the fourth quarter and our expectation is that we'll finish the year right around that $1.45 billion or 10% of revenue. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. Great. And then my last one. Yeah, sorry, go ahead.

It was just going to say, for Q3, Tyler, it was about $8 million, right. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay.

So the $25.6 million increase in absolute dollars in SG&A cost year over year, about $8 million of it was related to that. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. Perfect. And this is my last one just, Jim Trevathan, I know it's small, but can you give any high level thoughts on the hazardous waste side of the house? Is that notably strong just on the better industrial outlook? Thanks.

Yeah, Tyler, we're doing fine with that business. We've got five facilities that are extremely well positioned in the marketplace and they're taking advantage of some of the petrochemical growth that's occurring in the market. Some are up and a couple of them are down, but overall, it's a solid business for us and we expect that to be part of our future strategy. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. Yeah, great. Thanks. Great quarter.

Thank you.

Thank you.

Our next question comes from the line of Jeff Silber of BMO Capital Markets.

Thank you so much. Just wanted to go back to the recycling issues and what's going on in China. From talking to people in the industry, it's not only the limitation of certain streams of waste that they're accepting, but they're also pushing more quality initiatives to try to reduce the contaminant percentage. If that's something that continues going forward, are you able to handle that? Are there going to have to be investments that you're going to have to be making in your facilities to meet those quality initiatives? Thanks.

Jeff, I mentioned that earlier as well, but a little more color to it. We've been looking at reducing contamination for years. It's part of our recycling strategy, when we started two or three years ago talking about improving that business model itself. So we're already ahead of that game. We've got excellent people. We've got really good assets. We have invested in those plants to be able to sort material better and properly. We've got a really good accountability process in place. I mentioned that we've got some of the Chinese inspectors that have been visiting our facilities for a number of years that now look at each prepared shipment and grant approval. So we're meeting their current expectations for that material now. At the same time, I don't tell you that's not a long-term focus for us, it's even going to be stronger focus to make sure that we meet those requirements. We think we generate the best material in the marketplace. It's the same thing for service. We believe we're – that's our goal is world class service, but it's also world class product. We think the companies, the facilities that generate the best material will win in the long run and we're doing that. And I don't want to miss the statement though that we're looking for alternative markets and we've developed them for years to help that brokerage business. It's a real risk aversion support for our recycling business overall when we've done that and we'll do more of that in Southeast Asia and in India, where we ship material in the fourth quarter when China granted no licenses for a period of time. So you're right to focus on it, but we are as well.

All right, that's helpful. And then just shifting gears a bit, there was an article in The Wall Street Journal earlier this week about increased wages for truck drivers. I know that's something you've talked about in the past. Can you give us some kind of quantification what you've been paying, how that's been going up and if you think that'll continue to be a pressure on your operating expenses going forward? Thanks.

Yeah, Jeff, it has been a pressure, but I'll tell you, we look at it also as an opportunity. We've gone at it from a district by district standpoint. We look with our HR team at where are we versus the marketplace by MSA on payment for drivers and for technicians and we adjust accordingly. We've been doing that for a year or two year now. We're going to strengthen that focus to make sure that we're competitive in the marketplace while we look for opportunities to differentiate why a driver ought to work for us versus another trucking operation. So it has been a pressure, but we've overcome that with efficiencies and other opportunities, so you don't see it dramatically on our P&L statement.

I would tell you, Jeff, that while wage inflation is certainly a consideration for us, maybe an even bigger consideration is tackling turnover and making sure that we are doing everything we can to limit the amount of turnover that we have. It's a fact of life for us but to the extent that we can limit it, is a huge, huge value for us. There is a significant cost to every employee, be that a driver or a technician or an accountant when we turn them over and the training cost and kind of the ramp up are all costly to us. So we have put a real focus on reducing turnover.

Okay. Thanks so much for the color.

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

Hey, good morning.

Morning, Corey.

Just a couple quick questions. I don't want the call to go longer than last night's game, so everyone sounds fully recovered. Congratulations on the outcome there. The quick questions I had were, first of all, Devina on the G&A, so you were very clear on what you expect for the year. If the incentive comp is more ratably spread throughout the year, what drives the dollar amount higher in Q4?

The fourth quarter will just be flat with what we've seen in Q2 and Q3 is our current expectations, so there are elements of SG&A that vary with year-end accruals that we can't currently predict and so there may be a plus or minus $10 million range on that current outlook.

Okay. That's helpful, thank you. And then on the – you've addressed a bunch of pieces of this, but the volumes, so given the moving pieces in the quarter with a little bit of the hurricanes and the waste energy plant and the extra work, I'm just trying – can you just comment sort of a summative statement on underlying volume trends if you kind of adjust for all those things relative to what you saw in Q2?

Yeah, I mean, look, I think the underlying trends are good. I briefly mentioned when Michael was questioning us about October. And so October looks very strong. It's always hard to tell what volumes are going to do, looking six months out. We do have a pipeline in our special waste stream that looks promising. C&D was a bit of a – kind of, I wouldn't say a disappointment, because it was expected after the hurricanes, but C&D was definitely impacted by the hurricanes. It's coming off of a small base. And when you don't take in C&D material for a period of two weeks to three weeks in two big C&D markets, Florida and Texas, that affects C&D. So we think C&D will return to more kind of normal numbers. MSW we talked about. And then on the collection side we're very encouraged with the commercial line of business. That's been performing very well for us, continues to perform well when we look at the month of October. Resi has been the one that has been negative for us, it's the only one that's been negative for us and we continue to focus on that, on improving the residential line of business, it's an important line of business for us. We've made some progress there, but still negative and need to continue to work on it.

Really helpful. And the last quick question I had was, can you just remind me on your – for the portion of your business that's contractual, it's tied to CPI, what the timing of kind of the mix of contracts is and do you expect that to benefit price in Q4 relative to Q3?

Yeah, generally, Corey, I mean, we've got a grouping of those contracts that are in the summer range and another in the third quarter where most of that occurs. Remember, that we've worked really hard to move away from just the old fashioned CPI metric or a percentage of CPI, to a wastewater sewer number, it's a little better reflection of our cost structure in our industry and we're doing a pretty good job of that for public sector work and for the national account business. We're not quite at 50% of that revenue but we're – the target is to continue as they expire to move to that number, that again, better reflects our cost and the opportunity in the marketplace.

Yeah. Corey, it's about – 10 basis points of CPI equates to about $0.01 per share for us. Based on the most recent 12 months, we've seen about 10 basis points, I mean a little more, about 12 basis points improvement in CPI and so that will equate to about $0.01 per share in 2018.

Perfect. Thanks very much.

Our next question comes from the line of Noah Kaye of Oppenheimer. Noah Kaye - Oppenheimer & Co., Inc.: Great. Thanks so much. Good morning. Two quick ones from me. First, the guidance for divestitures and M&A. So, I guess around $70 million to $120 million in M&A spend for the remainder of the year, plus something like $30 million to $80 million proceeds from divestitures, that's some shift and I was just wondering if we could get a sense of the profile of the businesses that you're expecting to shed and that which you're expecting to add?

Sure. The additions are traditional solid waste businesses and the divestiture is noncore. Noah Kaye - Oppenheimer & Co., Inc.: Great. And then, the Chief Digital Officer, so congratulations to you, Nikolaj. But I think, in the past, the company referred to bringing on a Chief Technology Officer, you referred to it as the Chief Digital Officer, I guess I just wanted to understand is that sort of functionally the same, maybe, Jim, you could talk about your expectations for the role and what are some of the key initiatives you're really looking at here under that role?

Yeah. So, just the title itself, we felt like Chief Digital Officer was probably more representative of the job that Nikolaj was going to do coming in. It felt a little bit more like kind of a 21st Century title than a 20th Century title. So that's why we changed it a bit. But, I mean, look I would tell you that Nikolaj has a big job in front of him, because it's such an important part of our growth strategy, and it includes things like customer facing technologies, both internal customers and external customers. We tend to think solely about external customers and it's both. It's the use of big data. We've talked a bit about predictive maintenance and how we're already starting down that path and it's already starting to show some promise. And then asset management technologies, there is a whole list of things that I think you'll see this Chief Digital Officer position and Nikolaj in that role, really start to leverage. We visited our national accounts group last week and look, national accounts competes against kind of low margin, low frills brokers all the time. And what we're doing is putting some advanced analytics to use and rolling out a sophisticated reporting tool that really separates us, that differentiates us from those low margin low frills guys. Those are all technologies and difference kind of under that big technology umbrella that that we hope to help differentiate us in the coming years.

You know, Noah, Nikolaj has been around for several years now and he sees clearly what we've done on the operating side with onboard computers on every truck. We now – Jim and I look every morning at yesterday's results by area. And we can drill down by district and see the true operating metrics, whether it's quality of service or other factors. And we're going to leverage off of that to provide more real-time data for those largest customers, as Jim mentioned those nationals, and truly attempt to differentiate ourselves. We've already begun that with tools for the last year and we'll leverage that as we move forward and connect the operating side with the customer side and provide real value that aligns with the customer strategy. Noah Kaye - Oppenheimer & Co., Inc.: Great, thanks. Maybe if I could just squeeze one in. You called out last quarter the dilutive impact of recycling brokerage to overall margins. Can you just tell us what that was this quarter, just the brokerage part of the business?

It was 50 basis points to operating expense margin. Noah Kaye - Oppenheimer & Co., Inc.: Yeah. Okay. Thank you so much for taking the questions.

Yeah. Thank you.

Our next question comes from the line of Michael Feniger of Bank of America Merrill Lynch.

Hey, guys. Yeah, thanks for squeezing me in. When we think about – you mentioned volumes is 2%, pricing 2%, what should we typically think is the right margin expansion more or less on your business model? And then maybe especially when we think about the mix of the business, certainly turned more profitable with commercial and landfill, is there an incremental margin framework we could think about?

Well. So, we've said for this year at least, 50 basis points to 100 basis points of margin improvement on the EBITDA margin line. Going forward, we haven't kind of nailed those down yet, but we did say, we still believe that we have margin expansion opportunities either on the gross margin line or down at the EBITDA margin line in 2018 and we'll be more specific about that in February. And then what was the second part of your question?

And then – no, that's helpful, Jim. And then I guess...

Okay.

...think about on the M&A, I know that when you talk about strategic opportunities, I know recycling was one of the things you listed. Obviously there's a lot of disruption now with what we're seeing in recycling. Is recycling still on that list and what exactly are you looking for when you talk about that and strategic opportunities with the M&A?

Sure, no, recycling certainly is still on the list and we have done a couple of small strategic recycling acquisitions. They tend to be really almost exclusively where we have either not had a presence or where we can really – where we're buying into a recycling business that is a strong return, strong business, strong margin business. There are a couple of places, specifically in Florida, also in Tennessee where I think we bought recycling operations over the past two years. And so, it is certainly still on the list for us as are some of the other kind of ancillary businesses that are not necessarily straight down the middle of the fairway, core solid waste. But for the most part, the $100 million to $200 million range that we've given is going to be comprised more of straight down the middle of the fairway, solid waste tuck-ins.

That makes sense. And then can you just remind us I mean, obviously your leverage is the lowest it's been in years, the free cash flow baseline stepping up. What is your leverage target range and how much room do you have to take on debt and still be able to maintain that investment grade rating?

Well, So, our leverage as of the end of the quarter, as I mentioned is 2.4. We've talked about not really targeting a specific debt-to-EBITDA measure. We think of it more in terms of ensuring that we always have that dry powder so that we are well positioned to be opportunistic if the right transaction presents itself and we're confident that that's absolutely where we are today. We don't see a reason to chase up our debt to EBITDA measure just because we're seeing fantastic growth in the earnings of the business and we're going to continue to look at capital allocation in a disciplined way over the long-term. When I think about how much capacity we have, I'm not sure if you saw, but we actually did just get an upgrade from one of the three main rating agencies here recently. I can't specifically tell you how many dollars of capacity we have, but it's definitely several billion.

And I would just add that that's the really encouraging part about this quarter is – and really the last several quarters, is that it's really almost been all organic growth. It has not been driven by acquisitions, nothing wrong with acquisitions, we like acquisitions, but I would tell you that we're growing cash from operations by 13% and EBITDA by 8% or 7% and free cash by 18% and we're doing it organically and that's the encouraging part about these last couple of earnings reports.

Great. Thanks, guys.

And our next question comes from the line of Barbara Noverini of Morningstar. Your line...

Hey, good morning.

Good morning, Barbara.

Good morning. Just a quick one from me. With the OCC prices falling off at the end of the quarter. Should we expect to see a corresponding decline in rebate costs over the coming quarters? I know over the years you've done some work on improving your contracts and the rebate structure in particular. So I'm curious how you expect a steep decline in commodity prices may flow through your rebate expense line this time around?

Yeah, Barbara, you're exactly right we do monitor that closely and make sure that our areas are rebating the correct amount to our customers. So that's absolutely part of our business strategy to make sure that alignment occurs and it occurs as quickly as we can as OCC or news or other commodity prices change So, you're exactly right.

Okay. Got it. Thanks a lot.

Thanks.

And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Jim Fish for closing remarks.

Okay, thank you. Well, this was an excellent financial and operating quarter for Waste Management. We're very proud of that. But at the same time we recognize that the hurricanes in Southeast Texas, Florida and Puerto Rico and the fires in California have taken a heavy toll on the lives of people who were in the path of those disasters and I tell you, it reemphasizes to all of us, the roles that we play as compassionate human beings and those are truly the most important roles we play each and every day. So, thank you again for your time today. We'll see you next quarter and go Astros.

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