Segment and Related Information

9 Months Ended

Sep. 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 September 30:
2022
Solid Waste:
East Tier	$	2,652	$	(508)	$	2,144	$	616
West Tier		2,620		(543)		2,077		622
Solid Waste (a)		5,272		(1,051)		4,221		1,238
Other (b)		912		(58)		854		—
		6,184		(1,109)		5,075		1,238
Corporate and Other (c)		—		—		—		(296)
Total	$	6,184	$	(1,109)	$	5,075	$	942
2021
Solid Waste:
East Tier	$	2,407	$	(456)	$	1,951	$	550
West Tier		2,429		(494)		1,935		548
Solid Waste (a)		4,836		(950)		3,886		1,098
Other (b)		807		(28)		779		10
		5,643		(978)		4,665		1,108
Corporate and Other (c)		—		—		—		(302)
Total	$	5,643	$	(978)	$	4,665	$	806

	Gross		Intercompany		Net		Income
	Operating		Operating		Operating		from
	Revenues		Revenues(d)		Revenues		Operations(e)
Nine Months Ended September 30:
2022
Solid Waste:
East Tier	$	7,644	$	(1,449)	$	6,195	$	1,728
West Tier		7,638		(1,573)		6,065		1,779
Solid Waste (a)		15,282		(3,022)		12,260		3,507
Other (b)		2,670		(167)		2,503		19
		17,952		(3,189)		14,763		3,526
Corporate and Other (c)		—		—		—		(926)
Total	$	17,952	$	(3,189)	$	14,763	$	2,600
2021
Solid Waste:
East Tier	$	6,874	$	(1,289)	$	5,585	$	1,514
West Tier		6,974		(1,424)		5,550		1,577
Solid Waste (a)		13,848		(2,713)		11,135		3,091
Other (b)		2,201		(83)		2,118		36
		16,049		(2,796)		13,253		3,127
Corporate and Other (c)		—		—		—		(880)
Total	$	16,049	$	(2,796)	$	13,253	$	2,247

(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 (i) revenue growth in our collection and disposal businesses driven by both yield and volume and (ii) a $26 million catch-up benefit from the extension of alternative fuel tax credits that was retroactive to January 1, 2022. Our income from operations for the nine months ended September 30, 2022 was favorably impacted by an increase in our recycling line of business as a result of an overall increase in average market prices for recycling commodities during the first half of 2022. These increases were partially offset by (i) inflationary cost pressures; (ii) labor cost increases from frontline employee wage adjustments and (iii) commodity-driven business impacts from higher fuel prices. Additionally, the prior year included a pre-tax net gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations in our East Tier segment and a charge due to management’s decision to close a landfill in our West Tier segment earlier than expected, resulting in acceleration of the timing of capping, closure and post-closure activities in the third quarter of 2021.

(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 sustainability business that includes landfill gas-to-energy operations managed by our WM Renewable Energy business, our environmental solutions services and recycling brokerage services and not included in the operations of our reportable segments; (iii) certain other expanded service offerings and solutions and (iv) 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 increase in income from operations from our Corporate and Other segment for the three months ended September 30, 2022, as compared with the prior year period, was primarily driven by (i) lower long-term incentive compensation costs and (ii) lower integration costs from our acquisition of Advanced Disposal. Increased costs to support strategic investments in our digital platform, including those that support our ongoing sustainability initiatives, and increased labor costs from higher annual incentive costs and merit increases, partially offset the three months ended September 30, 2022, and more than offset the nine months ended September 30, 2022, as compared with 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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Commercial	$	1,392	$	1,214	$	4,034	$	3,523
Industrial		966		829		2,744		2,383
Residential		846		795		2,483		2,371
Other collection		187		140		521		391
Total collection		3,391		2,978		9,782		8,668
Landfill		1,197		1,100		3,442		3,090
Transfer		562		550		1,602		1,547
Recycling		420		464		1,341		1,203
Other (a)		614		551		1,785		1,541
Intercompany (b)		(1,109)		(978)		(3,189)		(2,796)
Total	$	5,075	$	4,665	$	14,763	$	13,253

(a) The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) certain services within our sustainability business, including our landfill gas to energy operations managed by our WM Renewable Energy business, our construction and remediation services and our services associated with the disposal of fly ash and (iii) 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.