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Segment and Related Information | 3 Months Ended
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Mar. 31, 2020
Segment and Related Information |
Segment and Related Information | 7. Segment and Related Information We evaluate, oversee and manage the financial performance of our Solid Waste business subsidiaries through our 17 Areas. The 17 Areas constitute operating segments and we have evaluated the aggregation criteria and concluded that, based on the similarities between our Areas, including the fact that our Solid Waste business is homogenous across geographies with the same services offered across the Areas, aggregation of our Areas is appropriate for purposes of presenting our reportable segments. Accordingly, we have aggregated our 17 Areas into three tiers that we believe have similar economic characteristics and future prospects based in large part on a review of the Areas’ income from operations margins. The economic variations experienced by our Areas are attributable to a variety of factors, including regulatory environment of the Area; economic environment of the Area, including level of commercial and industrial activity; population density; service offering mix and disposal logistics, with no one factor being singularly determinative of an Area’s current or future economic performance. In the fourth quarter of 2019, as part of our annual review process, we analyzed the Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect recent changes in their relative economic characteristics and prospects. These changes are the results of various factors including acquisitions, divestitures, business mix and the economic climate of various geographies. As a result, we reclassified Western Canada from Tier 1 to Tier 2 and Northern California from Tier 3 to Tier 2. Reclassifications have been made to our prior period condensed consolidated financial information to conform to the current year presentation. Tier 1 is comprised of our operations across the Southern U.S., with the exception of Southern California and the Florida area, and also includes the New England states and the tri-state area of Michigan, Indiana and Ohio. Tier 2 includes California, Canada, Wisconsin and Minnesota. Tier 3 encompasses all the remaining operations including the Pacific Northwest, the Mid-Atlantic region of the U.S., the Florida area, Illinois and Missouri. The operating segments not evaluated and overseen through the 17 Areas 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 for the three months ended March 31 is shown in the following table (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gross | ​ | Intercompany | ​ | Net | ​ | Income
​ | ​ | Operating | ​ | Operating | ​ | Operating | ​ | from
​ |  | Revenues |  | Revenues(c) |  | Revenues |  | Operations(d)
2020 |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Solid Waste: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Tier 1 | ​ | $ | 1,503 | ​ | $ | (280) | ​ | $ | 1,223 | ​ | $ | 393
Tier 2 | ​ |  | 932 | ​ |  | (198) | ​ |  | 734 | ​ |  | 188
Tier 3 | ​ |  | 1,541 | ​ |  | (294) | ​ |  | 1,247 | ​ |  | 264
Solid Waste | ​ |  | 3,976 | ​ |  | (772) | ​ |  | 3,204 | ​ |  | 845
Other (a) | ​ |  | 554 | ​ |  | (29) | ​ |  | 525 | ​ |  | (25)
​ | ​ | ​ | 4,530 | ​ | ​ | (801) | ​ | ​ | 3,729 | ​ | ​ | 820
Corporate and Other (b) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (247)
Total | ​ | $ | 4,530 | ​ | $ | (801) | ​ | $ | 3,729 | ​ | $ | 573
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
2019 | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Solid Waste: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Tier 1 | ​ | $ | 1,453 | ​ | $ | (265) | ​ | $ | 1,188 | ​ | $ | 398
Tier 2 | ​ |  | 904 | ​ |  | (182) | ​ |  | 722 | ​ |  | 200
Tier 3 | ​ |  | 1,508 | ​ |  | (279) | ​ |  | 1,229 | ​ |  | 270
Solid Waste | ​ |  | 3,865 | ​ |  | (726) | ​ |  | 3,139 | ​ |  | 868
Other (a) | ​ |  | 588 | ​ |  | (31) | ​ |  | 557 | ​ |  | (18)
​ | ​ |  | 4,453 | ​ |  | (757) | ​ |  | 3,696 | ​ |  | 850
Corporate and Other (b) | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | (229)
Total | ​ | $ | 4,453 | ​ | $ | (757) | ​ | $ | 3,696 | ​ | $ | 621
(a) | “Other” includes (i) our Strategic Business Solutions (“WMSBS”) organization; (ii) those elements of our landfill gas-to-energy operations and third-party subcontract and administration revenues managed by our Energy and Environmental Services (“EES”) and WM Renewable Energy organizations that are not included in the operations of our reportable segments; (iii) our recycling brokerage services and (iv) certain other expanded service offerings and solutions. In addition, our “Other” segment reflects the results of non-operating entities that provide financial assurance and self-insurance support for our Solid Waste business, net of intercompany activity.
(b) | Corporate 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, information technology, 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 and any administrative expenses or revisions to our estimated obligations associated with divested operations.
(c) | 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.
(d) | 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. In 2020, we revised allocations between our segments including (i) the discontinuation of certain allocations from Corporate and Other to Solid Waste and (ii) allocating certain insurance costs from Other to Solid Waste. Reclassifications have been made to our prior period information for comparability purposes. Current quarter operating results were negatively impacted by revenue declines in March 2020 as a result of the COVID-19 pandemic. These declines were not material to the reported periods.
The mix of operating revenues from our major lines of business for the three months ended March 31 are as follows (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019
Commercial | ​ | $ | 1,063 | ​ | $ | 1,026
Residential | ​ |  | 650 | ​ |  | 640
Industrial | ​ |  | 693 | ​ |  | 680
Other collection | ​ |  | 112 | ​ |  | 109
Total collection | ​ |  | 2,518 | ​ |  | 2,455
Landfill | ​ |  | 887 | ​ |  | 864
Transfer | ​ |  | 441 | ​ |  | 412
Recycling | ​ |  | 254 | ​ |  | 291
Other (a) | ​ |  | 430 | ​ |  | 431
Intercompany (b) | ​ |  | (801) | ​ |  | (757)
Total | ​ | $ | 3,729 | ​ | $ | 3,696
(a) | The “Other” line of business includes (i) our WMSBS organization; (ii) our landfill gas-to-energy operations; (iii) certain services within our EES organization, 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. Activity related to collection, landfill, transfer and recycling within “Other” has been reclassified to the appropriate line of business for purposes of the 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. Current quarter operating results were negatively impacted by COVID-19, as volumes declined beginning in March 2020 in our landfill, industrial and commercial collection businesses due to steps taken by national and local governments to slow the spread of the virus, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. In addition, 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 extremes resulting from climate change can significantly affect the operating results of the 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 Areas affected. While weather-related and other event driven special projects can boost revenues through additional work for a limited time, as a result of significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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