Economic Impact

Non-GAAP Measures

The “Economic Impact” section of our Sustainability Report presents Adjusted Income from Operations, Adjusted Operating Margin, Adjusted Operating EBITDA, Adjusted Operating EBITDA Margin, Adjusted Earnings Per Diluted Share (Adjusted EPS) and as-adjusted 2014 Revenue, each of which exclude certain items affecting comparability of our results and are not defined by generally accepted accounting principles (GAAP). We believe that non-GAAP measures provide useful information to investors by excluding items that the company does not believe reflect its fundamental business performance and/or are not representative or indicative of our results of operations. The company defines Operating EBITDA as income from operations before depreciation and amortization.

The “Economic Impact” section of our Sustainability Report also presents Free Cash Flow, which is a non-GAAP measure. The company discusses Free Cash Flow because we believe that it is indicative of the company’s ability to pay its quarterly dividends, repurchase common stock, fund acquisitions and other investments and, in the absence of refinancings, to repay its debt obligations; however, the use of Free Cash Flow as a liquidity measure has material limitations because it excludes certain expenditures that are required or that the company has committed to, such as declared dividend payments and debt service requirements. The company defines Free Cash Flow as net cash provided by operating activities, less capital expenditures, plus proceeds from divestitures of businesses and other assets (net of cash divested).

Non-GAAP measures should not be considered a substitute for financial measures presented in accordance with GAAP. Operating EBITDA and Free Cash Flow may not be comparable to similarly titled measures reported by other companies. For quantitative reconciliations of non-GAAP measures to the most comparable measure calculated in accordance with GAAP, please see the financial tables accompanying WM’s press release dated February 18, 2016, announcing full year 2015 earnings and comparisons to 2014: