Segment and Related Information

6 Months Ended

Jun. 30, 2022

Segment and Related Information

Segment and Related Information

7.    Segment and Related Information

In 2021, our senior management began evaluating, overseeing and managing the financial performance of our Solid Waste operations through two operating segments. Our East Tier primarily consists of geographic areas located in the Eastern U.S., the Great Lakes region and substantially all of Canada. Our West Tier primarily includes geographic areas located in the Western U.S., including the upper Midwest region, and British Columbia, Canada. Each of our Solid Waste operating segments provides integrated environmental services, including collection, transfer, recycling, and disposal. The Company finalized the assessment of our segments during the fourth quarter of 2021. The East and West Tiers are presented in this report and constitute our existing Solid Waste business. This did not result in a change in our reporting units for purposes of evaluating our goodwill. Reclassifications have been made to our prior period consolidated financial information to conform to the current year presentation.

The operating segments not evaluated and overseen through our East and West Tiers are presented herein as “Other” as these operating segments do not meet the criteria to be aggregated with other operating segments and do not meet the quantitative criteria to be separately reported.

Summarized financial information concerning our reportable segments is shown in the following table (in millions):

	Gross		Intercompany		Net		Income
	Operating		Operating		Operating		from
	Revenues		Revenues(d)		Revenues		Operations(e)
Three Months Ended June 30:
2022
Solid Waste:
East Tier	$	2,609	$	(496)	$	2,113	$	581
West Tier		2,612		(540)		2,072		608
Solid Waste (a)		5,221		(1,036)		4,185		1,189
Other (b)		901		(59)		842		18
		6,122		(1,095)		5,027		1,207
Corporate and Other (c)		—		—		—		(317)
Total	$	6,122	$	(1,095)	$	5,027	$	890
2021
Solid Waste:
East Tier	$	2,339	$	(439)	$	1,900	$	512
West Tier		2,367		(488)		1,879		553
Solid Waste (a)		4,706		(927)		3,779		1,065
Other (b)		729		(32)		697		6
		5,435		(959)		4,476		1,071
Corporate and Other (c)		—		—		—		(280)
Total	$	5,435	$	(959)	$	4,476	$	791

	Gross		Intercompany		Net		Income
	Operating		Operating		Operating		from
	Revenues		Revenues(d)		Revenues		Operations(e)
Six Months Ended June 30:
2022
Solid Waste:
East Tier	$	4,992	$	(941)	$	4,051	$	1,112
West Tier		5,018		(1,030)		3,988		1,157
Solid Waste (a)		10,010		(1,971)		8,039		2,269
Other (b)		1,758		(109)		1,649		19
		11,768		(2,080)		9,688		2,288
Corporate and Other (c)		—		—		—		(630)
Total	$	11,768	$	(2,080)	$	9,688	$	1,658
2021
Solid Waste:
East Tier	$	4,467	$	(833)	$	3,634	$	965
West Tier		4,545		(930)		3,615		1,028
Solid Waste (a)		9,012		(1,763)		7,249		1,993
Other (b)		1,394		(55)		1,339		26
		10,406		(1,818)		8,588		2,019
Corporate and Other (c)		—		—		—		(578)
Total	$	10,406	$	(1,818)	$	8,588	$	1,441

(a) Income from operations provided by our Solid Waste business is generally indicative of the margins provided by our collection, landfill, transfer and recycling lines of business. From time to time, the operating results of our reportable segments are significantly affected by certain transactions or events that management believes are not indicative or representative of our results.

Income from operations in our Solid Waste business increased primarily due to revenue growth in our collection and disposal businesses driven by both yield and volume. These increases were partially offset by inflationary cost pressures and labor cost pressure from frontline employee wage adjustments, increased hiring driving up training costs and higher overtime due to driver shortages and volume growth.

(b) “Other” includes (i) elements of our Strategic Business Solutions (“WMSBS”) business that are not included in the operations of our reportable segments; (ii) elements of our landfill gas-to-energy operations managed by our WM Renewable Energy business and not included in the operations of our reportable segments; (iii) elements of our third-party subcontract and administration revenues managed by our Sustainability and Environmental Solutions (“SES”) business and not included in the operations of our reportable segments; (iv) our recycling brokerage services; (v) certain other expanded service offerings and solutions and (vi) the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.

(c) “Corporate and Other” operating results reflect certain costs incurred for various support services that are not allocated to our reportable segments. These support services include, among other things, treasury, legal, digital, tax, insurance, centralized service center processes, other administrative functions and the maintenance of our closed landfills. Income from operations for “Corporate and Other” also includes costs associated with our long-term incentive program.

The decrease in income from operations from our Corporate and Other segment was primarily driven by increased costs for (i) labor, particularly due to higher incentive compensation costs and merit increases; (ii) strategic investments in our digital platform and (iii) investments in our sustainability initiatives. The impact of these higher

costs was partially offset by lower integration costs related to our acquisition of Advanced Disposal and the impact of adjustments from closure and post- closure activity at our closed landfills in the prior year periods.

(d) Intercompany operating revenues reflect each segment’s total intercompany sales, including intercompany sales within a segment and between segments. Transactions within and between segments are generally made on a basis intended to reflect the market value of the service.

(e) In the fourth quarter of 2021, we discontinued certain allocations from our Corporate and Other segment to our Solid Waste operating segments and Other segment. Reclassifications have been made to our prior period information for comparability purposes.

The mix of operating revenues from our major lines of business are as follows (in millions):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Commercial	$	1,355	$	1,178	$	2,642	$	2,309
Industrial		942		811		1,778		1,554
Residential		832		794		1,637		1,576
Other collection		181		135		334		251
Total collection		3,310		2,918		6,391		5,690
Landfill		1,194		1,075		2,245		1,990
Transfer		554		532		1,040		997
Recycling		468		397		921		739
Other (a)		596		513		1,171		990
Intercompany (b)		(1,095)		(959)		(2,080)		(1,818)
Total	$	5,027	$	4,476	$	9,688	$	8,588

(a) The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) our landfill gas to energy operations managed by our WM Renewable Energy business; (iii) certain services within our SES business, including our construction and remediation services and our services associated with the disposal of fly ash and (iv) certain other expanded service offerings and solutions. In addition, our “Other” line of business reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity. Revenue attributable to collection, landfill, transfer and recycling services provided by our “Other” businesses has been reflected as a component of the relevant line of business for purposes of presentation in this table.

(b) Intercompany revenues between lines of business are eliminated in the Condensed Consolidated Financial Statements included within this report.

Fluctuations in our operating results may be caused by many factors, including period-to-period changes in the relative contribution of revenue by each line of business, changes in commodity prices and general economic conditions. Our revenues and income from operations typically reflect seasonal patterns. Our operating revenues tend to be somewhat higher in summer months, primarily due to the higher construction and demolition waste volumes. The volumes of industrial and residential waste in certain regions where we operate also tend to increase during the summer months. Our second and third quarter revenues and results of operations typically reflect these seasonal trends.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the geographic areas affected. On the other hand, certain destructive weather and climate conditions, such as wildfires in the Western U.S. and hurricanes that most often impact our operations in the Southern and Eastern U.S. during the second half of the year, can increase our revenues in the geographic areas affected as a result of the waste volumes generated by these events. While weather-related and other event-driven special projects can boost

revenues through additional work for a limited time, due to significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.