Segment Reporting | 9. SEGMENT REPORTING The Company’s revenues are generated from the collection, transfer, recycling and disposal of non-hazardous solid waste and the treatment, recovery and disposal of non-hazardous E&P waste. No single contract or customer accounted for more than 10% of the Company’s total revenues at the consolidated or reportable segment level during the periods presented. The Company manages its operations through five geographic operating segments and its E&P segment , which includes the majority of the Company’s E&P waste treatment and disposal operations. The Company’s five geographic operating segments and its E&P segment comprise the Company’s reportable segments. Each operating segment is responsible for managing several vertically integrated operations, which are comprised of districts. In June 2016, as a result of the Progressive Waste acquisition, described in Note 6, the Company formed two new geographic operating segments, Canada and Southern, and realigned its reporting structure at its existing Central and Eastern segments. The Company’s segment realignment consisted of the transfer of certain operations in Texas and Louisiana from its Central segment to its Southern segment and the transfer of certain operations in Tennessee, Mississippi and Alabama from its Eastern segment to its Southern segment. The Progressive Waste acquisition did not impact the Company’s Western or E&P segments. The segment information presented herein reflects the realignment of these districts. Under the current orientation, the Company’s Southern segment services customers located in Alabama, Arkansas, Florida, Louisiana, Mississippi, southern Oklahoma, western Tennessee and Texas; the Company’s Western segment services customers located in Alaska, California, Idaho, Montana, Nevada, Oregon, Washington and western Wyoming; the Company’s Eastern segment services customers located in Illinois, Iowa, Kentucky, Maryland, Massachusetts, Michigan, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, eastern Tennessee, Vermont, Virginia, Wisconsin and the District of Columbia; the Company’s Canada segment services customers located in the provinces of Alberta, British Columbia, Manitoba, Ontario, Québec and Saskatchewan; and the Company’s Central segment services customers located in Arizona, Colorado, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, South Dakota, western Texas, Utah and eastern Wyoming. The E&P segment services E&P customers located in Arkansas, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, Wyoming and along the Gulf of Mexico. The Company’s Chief Operating Decision Maker (“CODM”) evaluates operating segment profitability and determines resource allocations based on several factors, of which the primary financial measure is segment EBITDA. The Company defines segment EBITDA as earnings before interest, taxes, depreciation, amortization, impairments and other operating items, other income (expense) and foreign currency transaction gain (loss). Segment EBITDA is not a measure of operating income, operating performance or liquidity under GAAP and may not be comparable to similarly titled measures reported by other companies. The Company’s management uses segment EBITDA in the evaluation of segment operating performance as it is a profit measure that is generally within the control of the operating segments. A reconciliation of segment EBITDA to Income before income tax provision is included at the end of this Note 9. Summarized financial information concerning the Company’s reportable segments for the three and nine months ended September 30, 2016 and 2015, is shown in the following tables: Three Months Ended September 30, 2016 Revenue Intercompany Revenue (b) Reported Revenue Segment EBITDA (c) Southern $ 317,727 $ (37,818) $ 279,909 $ 62,189 Western 276,941 (30,050) 246,891 84,214 Eastern 229,525 (34,719) 194,806 59,019 Canada 204,158 (26,413) 177,745 64,915 Central 176,109 (20,842) 155,267 58,079 E&P 33,785 (3,481) 30,304 8,919 Corporate (a) - - - (18,299) $ 1,238,245 $ (153,323) $ 1,084,922 $ 319,036 Three Months Ended September 30, 2015 Revenue Intercompany Revenue (b) Reported Revenue Segment EBITDA (c) Southern $ 43,442 $ (5,954) $ 37,488 $ 9,730 Western 257,480 (27,026) 230,454 76,279 Eastern 113,150 (19,157) 93,993 30,641 Central 150,211 (16,101) 134,110 50,564 E&P 54,901 (3,008) 51,893 17,541 Corporate (a) - - - 2,474 $ 619,184 $ (71,246) $ 547,938 $ 187,229 Nine Months Ended September 30, 2016 Revenue Intercompany Revenue (b) Reported Revenue Segment EBITDA (c) Southern $ 497,863 $ (60,485) $ 437,378 $ 98,906 Western 789,716 (87,160) 702,556 237,839 Eastern 526,565 (81,379) 445,186 138,456 Canada 274,260 (35,931) 238,329 88,471 Central 468,004 (53,130) 414,874 154,510 E&P 97,883 (8,965) 88,918 21,953 Corporate (a) - - - (102,653) $ 2,654,291 $ (327,050) $ 2,327,241 $ 637,482 Nine Months Ended September 30, 2015 Revenue Intercompany Revenue (b) Reported Revenue Segment EBITDA (c) Southern $ 125,597 $ (17,614) $ 107,983 $ 26,715 Western 734,729 (76,261) 658,468 218,185 Eastern 325,788 (54,488) 271,300 87,134 Central 419,875 (44,342) 375,533 138,779 E&P 181,530 (9,464) 172,066 55,003 Corporate (a) - - - 4,856 $ 1,787,519 $ (202,169) $ 1,585,350 $ 530,672 ____________________ (a) Corporate functions include accounting, legal, tax, treasury, information technology, risk management, human resources, training and other administrative functions. Amounts reflected are net of allocations to the six operating segments. For the three and nine months ended September 30, 2016, amounts also include costs associated with the Progressive Waste acquisition. (b) Intercompany 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. (c) For those items included in the determination of segment EBITDA, the accounting policies of the segments are the same as those described in Old Waste Connections’ most recent Annual Report on Form 10-K, with the exception of foreign currency transaction gains (losses) for which the accounting policy is described in Note 2 in these Condensed Consolidated Financial Statements. Total assets for each of the Company’s reportable segments at September 30, 2016 and December 31, 2015, were as follows: September 30, 2016 December 31, 2015 Southern $ 2,867,903 $ 259,046 Western 1,504,750 1,498,296 Eastern 1,542,612 1,062,761 Canada 2,618,008 - Central 1,296,360 1,070,505 E&P 1,072,818 1,115,234 Corporate 285,242 115,956 Total Assets $ 11,187,693 $ 5,121,798 The following tables show changes in goodwill during the nine months ended September 30, 2016 and 2015, by reportable segment: Southern Western Eastern Canada Central E&P Total Balance as of December 31, 2015 $ - $ 373,820 $ 499,237 $ - $ 472,425 $ 77,343 $ 1,422,825 Goodwill transferred (a) 95,710 - (39,705) - (56,005) - - Goodwill acquired 1,338,806 2,696 75,769 1,465,720 48,232 - 2,931,223 Impact of changes in foreign currency - - - (2,878) - - (2,878) Balance as of September 30, 2016 $ 1,434,516 $ 376,516 $ 535,301 $ 1,462,842 $ 464,652 $ 77,343 $ 4,351,170 Southern Western Eastern Central E&P Total Balance as of December 31, 2014 $ - $ 372,915 $ 392,423 $ 460,381 $ 468,070 $ 1,693,789 Goodwill transferred (a) 92,510 - (55,206) (37,304) - - Goodwill acquired 3,341 870 6,855 5,842 21,059 37,967 Impairment loss - - - - (411,786) (411,786) Balance as of September 30, 2015 $ 95,851 $ 373,785 $ 344,072 $ 428,919 $ 77,343 $ 1,319,970 ____________________ (a) In June 2016, as a result of the Progressive Waste acquisition, described in Note 6, the Company realigned its reporting structure and changed its three geographic operating segments (Western, Central and Eastern) to five geographic operating segments (Southern, Western, Eastern, Canada and Central). Additionally, the Company realigned certain of the Company’s districts between operating segments. This realignment resulted in the reallocation of goodwill among its segments, which is reflected in the “Goodwill transferred” line item. A reconciliation of the Company’s primary measure of segment profitability (segment EBITDA) to Income before income tax provision in the Condensed Consolidated Statements of Net Income is as follows: Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 Southern segment EBITDA $ 62,189 $ 9,730 $ 98,906 $ 26,715 Western segment EBITDA 84,214 76,279 237,839 218,185 Eastern segment EBITDA 59,019 30,641 138,456 87,134 Canada segment EBITDA 64,915 - 88,471 - Central segment EBITDA 58,079 50,564 154,510 138,779 E&P segment EBITDA 8,919 17,541 21,953 55,003 Subtotal reportable segments 337,335 184,755 740,135 525,816 Unallocated corporate overhead (18,299) 2,474 (102,653) 4,856 Depreciation (125,744) (61,373) (270,988) (178,318) Amortization of intangibles (26,944) (7,195) (48,719) (21,458) Impairments and other operating items (7,682) (493,813) (4,634) (494,158) Interest expense (27,621) (16,367) (65,291) (47,386) Other income (expense), net 671 (1,303) 179 (1,430) Foreign currency transaction gain (loss) (350) - 339 - Income (loss) before income tax provision $ 131,366 $ (392,822) $ 248,368 $ (212,078) Unallocated corporate overhead for the nine months ended September 30, 2016, includes $31,588 of direct acquisition costs associated with the Progressive Waste acquisition, $24,245 of severance-related expenses payable to personnel of Progressive Waste, $ 5,300 synergy bonus to certain executive officers and key employees, $14,466 from the Company paying excise taxes levied on the unvested or vested and undistributed equity-compensation holdings of the Company’s corporate officers and members of its Board of Directors resulting from the Progressive Waste acquisition and $17,806 of equity-based compensation expenses associated with Progressive Waste’s equity-based compensation plans assumed by the Company. The following tables reflect a breakdown of the Company’s revenue and inter-company eliminations for the periods indicated: Three months ended September 30, 2016 Revenue Intercompany Revenue Reported Revenue % of Reported Revenue Solid waste collection $ 760,281 $ (2,472) $ 757,809 69.9% Solid waste disposal and transfer 377,998 (144,459) 233,539 21.5 Solid waste recycling 32,138 (2,523) 29,615 2.7 E&P waste treatment, recovery and disposal 33,673 (3,608) 30,065 2.8 Intermodal and other 34,155 (261) 33,894 3.1 Total $ 1,238,245 $ (153,323) $ 1,084,922 100.0% Three months ended September 30, 2015 Revenue Intercompany Revenue Reported Revenue % of Reported Revenue Solid waste collection $ 354,490 $ (1,250) $ 353,240 64.5% Solid waste disposal and transfer 180,442 (66,322) 114,120 20.8 Solid waste recycling 12,213 (155) 12,058 2.2 E&P waste treatment, recovery and disposal 54,695 (3,519) 51,176 9.3 Intermodal and other 17,344 - 17,344 3.2 Total $ 619,184 $ (71,246) $ 547,938 100.0% Nine months ended September 30, 2016 Revenue Intercompany Revenue Reported Revenue % of Reported Revenue Solid waste collection $ 1,619,827 $ (5,571) $ 1,614,256 69.4% Solid waste disposal and transfer 804,928 (307,308) 497,620 21.4 Solid waste recycling 60,876 (4,554) 56,322 2.4 E&P waste treatment, recovery and disposal 97,259 (9,228) 88,031 3.8 Intermodal and other 71,401 (389) 71,012 3.0 Total $ 2,654,291 $ (327,050) $ 2,327,241 100.0% Nine months ended September 30, 2015 Revenue Intercompany Revenue Reported Revenue % of Reported Revenue Solid waste collection $ 1,024,078 $ (3,150) $ 1,020,928 64.4% Solid waste disposal and transfer 494,804 (187,486) 307,318 19.4 Solid waste recycling 35,614 (654) 34,960 2.2 E&P waste treatment, recovery and disposal 183,103 (10,879) 172,224 10.9 Intermodal and other 49,920 - 49,920 3.1 Total $ 1,787,519 $ (202,169) $ 1,585,350 100.0% |