Segment and Related Information

9 Months Ended

Sep. 30, 2023

Segment and Related Information

Segment and Related Information

7.    Segment and Related Information

Our senior management evaluates, oversees and manages 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 East and West Tiers are presented in this report and constitute our existing Solid Waste business.

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 and are not qualitatively significant at this time.

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
Three Months Ended September 30:
2023
Solid Waste:
East Tier	$	2,789	$	(575)	$	2,214	$	671
West Tier		2,694		(580)		2,114		653
Solid Waste (a)		5,483		(1,155)		4,328		1,324
Other (b)		930		(60)		870		(13)
		6,413		(1,215)		5,198		1,311
Corporate and Other (c)		—		—		—		(290)
Total	$	6,413	$	(1,215)	$	5,198	$	1,021
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

	Gross		Intercompany		Net		Income
	Operating		Operating		Operating		from
	Revenues		Revenues(d)		Revenues		Operations
Nine Months Ended September 30:
2023
Solid Waste:
East Tier	$	8,192	$	(1,678)	$	6,514	$	1,846
West Tier		7,897		(1,716)		6,181		1,843
Solid Waste (a)		16,089		(3,394)		12,695		3,689
Other (b)		2,686		(172)		2,514		(30)
		18,775		(3,566)		15,209		3,659
Corporate and Other (c)		—		—		—		(869)
Total	$	18,775	$	(3,566)	$	15,209	$	2,790
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

(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 and includes elements of profitability from our “Other” segment. 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 business driven by yield. These increases were partially offset by (i) inflationary cost pressures; (ii) labor cost increases from frontline employee wage adjustments and annual merit increases and (iii) reduced profitability in our recycling business from the decline in recycling commodity prices. In addition, fuel tax credits in 2022 were not recognized until August 2022 due to the timing of the Inflation Reduction Act of 2022 (“IRA”). This created a $26 million negative impact to income from operations for the three months ended September 30, 2023, but is broadly flat for the nine months ended September 30, 2023.

(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 Sustainability and Environmental Solutions business 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.

The decrease in income from operations was due to (i) reduced profitability in our WM Renewable Energy business primarily driven by decreases in the value of energy prices and renewable fuel standard credits and (ii) the decline in recycling brokerage commodity prices affecting profitability in our recycling business.

(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 improvement in income from operations was primarily driven by (i) lower annual incentive compensation costs; (ii) lower professional fees in connection with investments in our digital program, as certain strategic projects have now been implemented and (iii) a charge during the first quarter of 2022 to adjust an indirect wholly-owned subsidiary’s estimated potential share of the liability for a proposed environmental remediation plan at a closed site. These lower costs were partially offset by annual merit increases and litigation costs.

(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.

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,
	2023		2022		2023		2022
Commercial	$	1,464	$	1,392	$	4,300	$	4,034
Industrial		982		966		2,889		2,744
Residential		875		846		2,595		2,483
Other collection		193		187		556		521
Total collection		3,514		3,391		10,340		9,782
Landfill		1,261		1,197		3,678		3,442
Transfer		594		562		1,719		1,602
Recycling		366		420		1,094		1,341
Other (a)		678		614		1,944		1,785
Intercompany (b)		(1,215)		(1,109)		(3,566)		(3,189)
Total	$	5,198	$	5,075	$	15,209	$	14,763

(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; (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. 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 or operational disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly affect the operating results of the geographic areas affected. Extreme weather events may also lead to supply chain disruption and delayed project development, or disruption of our customers’ businesses, reducing the amount of waste generated by their operations.

Conversely, 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.