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Segment and Related Information
 6 Months Ended
Jun. 30, 2021
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 Areas. In the second quarter of 2021, we combined our Eastern and Western Canada Areas reducing the number of Areas we manage from 17 to 16. The 16 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 16 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.

As a result of the combination of our Eastern and Western Canada Areas, we analyzed all 16 Areas’ income from operations margins for purposes of segment reporting and realigned our Solid Waste tiers to reflect changes in their relative economic characteristics and prospects. Reclassifications have been made to our prior period condensed consolidated financial information to conform to the current year presentation.

The operating segments not evaluated and overseen through the 16 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 is shown in the following table (in millions):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross

​

Intercompany

​

Net

​

Income

​

​

Operating

​

Operating

​

Operating

​

from

​

    

Revenues

    

Revenues(d)

    

Revenues

    

Operations

Three Months Ended June 30:

 

​

  

 

​

  

 

​

  

 

​

  

2021

 

​

  

 

​

  

 

​

  

 

​

  

Solid Waste:

 

​

  

 

​

  

 

​

  

 

​

  

Tier 1

​

$

1,214

​

$

(228)

​

$

986

​

$

350

Tier 2

​

 

1,495

​

 

(323)

​

 

1,172

​

 

331

Tier 3

​

 

1,997

​

 

(376)

​

 

1,621

​

 

375

Solid Waste (a)

​

 

4,706

​

 

(927)

​

 

3,779

​

 

1,056

Other (b)

​

 

729

​

 

(32)

​

 

697

​

 

4

​

​

​

5,435

​

​

(959)

​

​

4,476

​

​

1,060

Corporate and Other (c)

​

 

—

​

 

—

​

 

—

​

 

(269)

Total

​

$

5,435

​

$

(959)

​

$

4,476

​

$

791

​

​

​

​

​

​

​

​

​

​

​

​

​

2020

​

 

  

​

 

  

​

 

  

​

 

  

Solid Waste:

​

 

  

​

 

  

​

 

  

​

 

  

Tier 1

​

$

975

​

$

(178)

​

$

797

​

$

270

Tier 2

​

 

1,194

​

 

(252)

​

 

942

​

 

208

Tier 3

​

 

1,599

​

 

(306)

​

 

1,293

​

 

244

Solid Waste (a)

​

 

3,768

​

 

(736)

​

 

3,032

​

 

722

Other (b)

​

 

554

​

 

(25)

​

 

529

​

 

(10)

​

​

 

4,322

​

 

(761)

​

 

3,561

​

 

712

Corporate and Other (c)

​

 

—

​

 

—

​

 

—

​

 

(185)

Total

​

$

4,322

​

$

(761)

​

$

3,561

​

$

527

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross

​

Intercompany

​

Net

​

Income

​

​

Operating

​

Operating

​

Operating

​

from

​

    

Revenues

    

Revenues(d)

    

Revenues

    

Operations

Six Months Ended June 30:

​

​

​

​

​

​

​

​

​

​

​

​

2021

 

​

  

 

​

  

 

​

  

 

​

  

Solid Waste:

 

​

  

 

​

​

 

​

  

 

​

  

Tier 1

​

$

2,302

​

$

(429)

​

$

1,873

​

$

657

Tier 2

​

 

2,890

​

 

(625)

​

 

2,265

​

 

622

Tier 3

​

 

3,820

​

 

(709)

​

 

3,111

​

 

695

Solid Waste (a)

​

 

9,012

​

 

(1,763)

​

 

7,249

​

 

1,974

Other (b)

​

 

1,394

​

 

(55)

​

 

1,339

​

 

22

​

​

​

10,406

​

​

(1,818)

​

​

8,588

​

​

1,996

Corporate and Other (c)

​

 

—

​

 

—

​

 

—

​

 

(555)

Total

​

$

10,406

​

$

(1,818)

​

$

8,588

​

$

1,441

​

​

​

​

​

​

​

​

​

​

​

​

​

2020

​

 

  

​

 

  

​

 

  

​

 

  

Solid Waste:

​

 

  

​

 

  

​

 

  

​

 

  

Tier 1

​

$

1,999

​

$

(360)

​

$

1,639

​

$

558

Tier 2

​

 

2,450

​

 

(517)

​

 

1,933

​

 

477

Tier 3

​

 

3,295

​

 

(631)

​

 

2,664

​

 

532

Solid Waste (a)

​

 

7,744

​

 

(1,508)

​

 

6,236

​

 

1,567

Other (b)

​

 

1,108

​

 

(54)

​

 

1,054

​

 

(35)

​

​

 

8,852

​

 

(1,562)

​

 

7,290

​

 

1,532

Corporate and Other (c)

​

 

—

​

 

—

​

 

—

​

 

(432)

Total

​

$

8,852

​

$

(1,562)

​

$

7,290

​

$

1,100

(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.

The increase in income from operations across the Tiers was primarily due to (i) revenue growth in our collection and disposal businesses driven by both volume and yield; (ii) improved profitability in our recycling business from higher market prices for recycling commodities, volume recovery from facilities where we temporarily suspended operations during the pandemic and improved costs at facilities where we have made investments in enhanced technology and equipment; (iii) a decrease in the provision for bad debts and (iv) the continuation of our proactive cost management efforts as volumes increased. These increases were partially offset by (i) higher incentive compensation costs; (ii) inflationary cost pressures and (iii) increased overtime driven by increased volumes and driver shortages. Additionally, the prior year periods were impacted by non-cash impairment charges, as further discussed below. The positive earnings contributions of Advanced Disposal were offset by elevated depreciation and amortization of the related acquired assets.

During the second quarter of 2020, income from operations was impacted by $61 million of non-cash impairments consisting of (i) $41 million of non-cash asset impairment charges in our Tier 2 segment primarily related to two landfills and an oil field waste injection facility and (ii) a $20 million non-cash impairment charge in our Tier 3 segment related to management’s decision to close a landfill once its constructed airspace is filled and abandon any remaining permitted airspace.

(b)“Other” includes (i) our Strategic Business Solutions (“WMSBS”) business; (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 Energy and Environmental Services (“EES”) business and not included in the operations of our reportable segments; (iv) our
recycling brokerage services and (v) 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.

The increase in income from operations was primarily driven by (i) increased market values for renewable energy credits generated by our WM Renewable Energy business; (ii) increased revenues for our WMSBS business as a result of new contracts, improved pricing and increased customer activity and (iii) higher market prices for commodities benefiting our recycling brokerage services. The increase in income from operations for the six months ended June 30, 2021, as compared with the prior year period, was also due to a gain from the divestiture of certain ancillary operations during the first quarter of 2021.

(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 these costs was driven by (i) higher incentive compensation costs; (ii) strategic investments in our digital platform; (iii) increases in health and welfare costs attributable to medical care activity generally returning to pre-pandemic levels from the lower levels experienced during 2020 and (iv) increased labor and support costs from our acquisition of Advanced Disposal. The six months ended June 30, 2021, as compared with the prior year period, was further impacted by a charge pertaining to reserves for certain loss contingencies recognized during the first quarter of 2021, as well as changes in the measurement of our environmental remediation obligations and recovery assets in both the first quarter of 2020 and 2021.

(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):

​

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​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Six Months Ended

​

​

June 30, 

​

June 30, 

​

    

2021

    

2020

    

2021

    

2020

Commercial

​

$

1,178

​

$

928

​

$

2,309

​

$

1,991

Residential

​

 

794

​

 

657

​

 

1,576

​

 

1,307

Industrial

​

 

811

​

 

625

​

 

1,554

​

 

1,318

Other collection

​

 

135

​

 

115

​

 

251

​

 

227

Total collection

​

 

2,918

​

 

2,325

​

 

5,690

​

 

4,843

Landfill

​

 

1,075

​

 

874

​

 

1,990

​

 

1,761

Transfer

​

 

532

​

 

439

​

 

997

​

 

880

Recycling

​

 

397

​

 

275

​

 

739

​

 

529

Other (a)

​

 

513

​

 

409

​

 

990

​

 

839

Intercompany (b)

​

 

(959)

​

 

(761)

​

 

(1,818)

​

 

(1,562)

Total

​

$

4,476

​

$

3,561

​

$

8,588

​

$

7,290

(a)The “Other” line of business includes (i) certain services provided by our WMSBS business; (ii) our landfill gas-to-energy operations; (iii) certain services within our EES 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.

Prior year period 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.

Service disruptions caused by severe storms, extended periods of inclement weather or climate events can significantly impact 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 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, as a result of significant start-up costs and other factors, such revenue can generate earnings at comparatively lower margins.