Republic Services, Inc. Reports First Quarter Results - First quarter earnings per share of $0.38

- Company declares quarterly dividend of $0.22 per share

- Company updates full year guidance

PHOENIX, April 26, 2012 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $142.9 million, or $0.38 per diluted share, for the three months ended March 31, 2012, versus $158.2 million, or $0.41 per diluted share, for the comparable period last year. 

(Logo:  http://photos.prnewswire.com/prnh/20100304/RSLOGO)

Republic's net income for the three months ended March 31, 2012 and 2011 includes a number of charges and other expenses that impacted its results.  A detail of these charges and other expenses is contained in the Reconciliation of Certain Non-GAAP Measures section of this document.  Excluding these items, net income for the three months ended March 31, 2012 and 2011 would have been $140.8 million, or $0.38 per diluted share, and $159.7 million, or $0.42 per diluted share, respectively. 

Excluding certain charges and other expenses recorded during 2012 and 2011 as described in the Reconciliation of Certain Non-GAAP Measures section of this document, adjusted earnings before interest, taxes, depreciation, depletion, amortization and accretion (adjusted EBITDA) for the three months ended March 31, 2012 would have been $556.7 million, or 28.1% as a percentage of revenue, compared to $601.3 million, or 30.6% as a percentage of revenue, for the comparable 2011 period.

Revenue for the three months ended March 31, 2012 increased to $1,982.4 million compared to $1,964.9 million for the same period in 2011.  This increase in revenue of 0.9% was made up of increases in core price of 0.6%, fuel recovery fees of 0.5%, volumes of 0.2% and acquisitions, net of divestitures of 0.4%, partially offset by a decrease in recycling commodities pricing of 0.8%.

"We are updating our full year guidance to reflect higher costs and current business conditions," said Donald W. Slager, President and Chief Executive Officer of Republic Services, Inc.  "We will continue to invest in our core business including recycling, fleet maintenance, automation and natural gas initiatives. In addition, we have a robust pipeline of potential acquisitions and have completed approximately $65 million of acquisition activity through April."

Updated Guidance for Fiscal Year 2012

Republic is updating its full year 2012 guidance to reflect higher costs and current business conditions.  Please refer to the Information Regarding Forward-Looking Statements section of this document.  Specific updates are as follows: 

  • Adjusted Free Cash Flow:  We expect adjusted free cash flow to be at the lower end of the range of our previous guidance of $775 million to $800 million.  Adjusted free cash flow consists of cash provided by operating activities, less property and equipment received, plus proceeds from the sales of property and equipment.   Adjusted free cash flow guidance excludes merger related expenditures, certain legacy tax settlement payments and the cash tax benefit for debt extinguishment.
  • Adjusted Diluted Earnings per Share:  We expect adjusted diluted earnings per share to be in a range of $1.86 to $1.90.  Adjusted diluted earnings per share exclude loss on extinguishment of debt.  Our previous guidance was a range of $1.98 to $2.02 per adjusted diluted share.
  • Price and volume:  We expect the increase in revenue due to price and volume to be approximately 1.0%.  This consists of an increase of 1.0% resulting from core price and 0% from volume.  Our previous guidance was an increase of 1.0 to 1.5% from core price and 0.5% from volume.
  • Margin:  We expect EBITDA margin to be approximately 29.5%.  Our previous guidance was 30.5%.
  • Taxes:  We expect our provision for income taxes, excluding loss on extinguishment of debt, to be approximately 37%.  Our previous guidance was 39%.

Company Declares Quarterly Dividend

Republic also announced that its Board of Directors declared a regular quarterly dividend of $0.22 per share for stockholders of record on July 2, 2012.  The dividend will be paid on July 16, 2012.

About Republic

Republic Services, Inc. provides recycling and solid waste collection, transfer and disposal services in the United States.  The Company's various operating units, including collection companies, transfer stations, recycling centers and landfills, are focused on providing reliable environmental services and solutions for commercial, industrial, municipal and residential customers.  For more information, visit the Republic Services website at republicservices.com.  The Company participates in investor presentations and conferences throughout the year.  Interested parties can find a schedule of these conferences at republicservices.com by selecting "Calendar" under the Investor Relations tab.  Live audio presentations from earnings calls and investor conferences are webcast on the Republic website.

SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION

AND OPERATING DATA





REPUBLIC SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

 (in millions, except per share amounts)






March 31,


December 31,


2012


2011


(Unaudited)



ASSETS

Current assets:




   Cash and cash equivalents

$           73.5


$               66.3

   Accounts receivable, less allowance for doubtful accounts of $45.8 and $48.1, respectively

808.4


825.8

   Prepaid expenses and other current assets

152.9


215.9

   Deferred tax assets

144.4


157.7

   Total current assets

1,179.2


1,265.7

Restricted cash and marketable securities

151.4


189.6

Property and equipment, net

6,813.0


6,792.3

Goodwill

10,653.1


10,647.0

Other intangible assets, net

398.1


409.6

Other assets

261.1


247.3

   Total assets

$    19,455.9


$        19,551.5





LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




   Accounts payable

451.0


563.6

   Notes payable and current maturities of long-term debt

34.2


34.8

   Deferred revenue

309.0


290.2

   Accrued landfill and environmental costs, current portion

182.6


184.2

   Accrued interest

80.3


72.2

   Other accrued liabilities

658.7


752.5

   Total current liabilities

1,715.8


1,897.5

Long-term debt, net of current maturities

6,870.3


6,887.0

Accrued landfill and environmental costs, net of current portion

1,402.6


1,396.5

Deferred income taxes and other long-term tax liabilities

1,165.0


1,161.1

Self-insurance reserves, net of current portion

307.5


303.9

Other long-term liabilities

241.0


222.1

Commitments and contingencies




Stockholders' equity:




   Preferred stock, par value $0.01 per share; 50 shares authorized; none issued

-


-

   Common stock, par value $0.01 per share; 750 shares authorized; 403.3 and 402.1

      issued including shares held in treasury, respectively

4.0


4.0

   Additional paid-in capital

6,532.0


6,495.6

   Retained earnings

2,225.8


2,164.7

   Treasury stock, at cost (32.5 and 32.2 shares, respectively)

(992.8)


(961.5)

   Accumulated other comprehensive loss, net of tax

(17.3)


(21.5)

   Total Republic Services, Inc. stockholders' equity

7,751.7


7,681.3

   Noncontrolling interests

2.0


2.1

   Total stockholders' equity

7,753.7


7,683.4

   Total liabilities and stockholders' equity

$    19,455.9


$        19,551.5





REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 (in millions, except per share data)








Three Months Ended March 31,



2012


2011

Revenue


$ 1,982.4


$ 1,964.9

Expenses:





Cost of operations


1,203.2


1,159.7

Depreciation, amortization and depletion


213.7


205.8

Accretion


19.7


19.7

Selling, general and administrative


222.5


203.9

Gain on disposition of assets and impairments, net


(3.6)


(0.4)

Operating income


326.9


376.2

Interest expense


(104.3)


(115.7)

Loss on extinguishment of debt


-


(1.8)

Interest income


0.3


0.2

Other income, net


0.2


1.1

Income before income taxes


223.1


260.0

Provision for income taxes


80.3


101.9

Net income


142.8


158.1

Net loss attributable to noncontrolling interests


0.1


0.1

Net income attributable to Republic Services, Inc.


$    142.9


$    158.2

Basic earnings per share attributable to Republic Services, Inc. stockholders:





Basic earnings per share


$      0.39


$      0.41

Weighted average common shares outstanding


371.0


382.2

Diluted earnings per share attributable to Republic Services, Inc. stockholders:





Diluted earnings per share


$      0.38


$      0.41

Weighted average common and common equivalent

      shares outstanding


372.5


384.0






Cash dividends per common share


$      0.22


$      0.20






REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in millions)








Three Months Ended March 31,



2012


2011

Cash provided by operating activities:





Net income


$ 142.8


$ 158.1

Adjustments to reconcile net income to cash provided by operating activities:





Depreciation and amortization of property and equipment


129.3


127.5

Landfill depletion and amortization


66.7


59.6

Amortization of intangible and other assets


17.7


18.7

Accretion


19.7


19.7

Non-cash interest expense - debt


4.9


10.1

Non-cash interest expense - other


12.3


12.1

Stock-based compensation


8.0


7.6

Deferred tax provision


2.9


13.3

Provision for doubtful accounts, net of adjustments


7.2


0.4

Excess income tax benefit from stock option exercises


(1.1)


(0.7)

Asset impairments


0.1


0.4

Loss on extinguishment of debt


-


1.8

Gain on disposition of assets, net


(7.9)


(5.3)

Other non-cash items


0.8


(0.2)

Change in assets and liabilities, net of effects from business acquisitions and divestitures:





Accounts receivable


10.5


(11.4)

Prepaid expenses and other assets


56.9


23.9

Accounts payable


(44.1)


(45.9)

Restructuring and synergy related expenditures


(68.1)


(2.0)

Capping, closure and post-closure expenditures


(11.8)


(13.2)

Remediation expenditures


(14.5)


(8.5)

Other liabilities


1.9


67.7

Cash provided by operating activities


334.2


433.7






Cash used in investing activities:





Purchases of property and equipment


(274.2)


(297.2)

Proceeds from sales of property and equipment


4.8


6.9

Cash used in acquisitions, net of cash acquired


(19.7)


(16.5)

Cash proceeds from divestitures, net of cash divested


9.5


4.9

Change in restricted cash and marketable securities


37.4


7.9

Other


(0.1)


(0.3)

Cash used in investing activities


(242.3)


(294.3)






Cash used in financing activities:





Proceeds from notes payable and long-term debt


564.3


486.5

Payments of notes payable and long-term debt


(586.7)


(431.1)

Premiums paid on extinguishment of debt


-


(1.5)

Fees paid to issue and retire senior notes and certain hedging relationships


-


(0.1)

Issuances of common stock


27.0


10.3

Excess income tax benefit from stock option exercises


1.1


0.7

Purchases of common stock for treasury


(9.0)


(147.9)

Cash dividends paid


(81.4)


(76.7)

Cash used in financing activities


(84.7)


(159.8)






Increase (decrease) in cash and cash equivalents


7.2


(20.4)

Cash and cash equivalents at beginning of period


66.3


88.3

Cash and cash equivalents at end of period


$   73.5


$   67.9






You should read the following information in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2011.  All amounts below are in millions and as a percentage of our revenue, except per share data.

REVENUE

The following table reflects our total revenue by line of business for the three months ended March 31:



2012



2011


Collection:











Residential


$    530.9


26.8

%


$    525.7


26.7

%

Commercial


621.1


31.3



618.1


31.5


Industrial


367.7


18.5



353.6


18.0


Other


7.9


0.4



7.9


0.4


Total collection


1,527.6


77.0



1,505.3


76.6













Transfer


220.6





226.7




Less: Intercompany


(130.0)





(131.9)




Transfer, net


90.6


4.6



94.8


4.8













Landfill


447.7





422.2




Less: Intercompany


(207.6)





(195.2)




Landfill, net


240.1


12.1



227.0


11.6













Sale of recyclable materials


91.2


4.6



105.3


5.4


Other non-core


32.9


1.7



32.5


1.6


Other 


124.1


6.3



137.8


7.0













Total revenue


$ 1,982.4


100.0

%


$ 1,964.9


100.0

%












The following table reflects changes in our revenue for the three months ended March 31:



2012


2011


Core price


0.6

%

1.0

%

Fuel surcharges


0.5


0.6


Recycling commodities


(0.8)


1.0


Total price


0.3


2.6








Volume


0.2


(0.7)








San Mateo and Toronto contract losses


-


(1.4)








Total internal growth


0.5


0.5








Acquisitions / divestitures, net


0.4


(0.1)


Total


0.9

%

0.4

%







COST OF OPERATIONS

Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers who transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel credits; disposal franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs, which includes landfill accretion, financial assurance, leachate disposal and other landfill maintenance costs; risk management, which includes casualty insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers associated with recycling commodities; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations.

The following table summarizes the major components of our cost of operations for the three months ended March 31:



2012



2011


Labor and related benefits


$    388.9


19.6

%


$    377.3


19.2

%

Transfer and disposal costs


143.3


7.2



148.8


7.6


Maintenance and repairs


165.9


8.4



147.4


7.5


Transportation and subcontract costs


106.3


5.4



98.5


5.0


Fuel


131.2


6.6



118.3


6.0


Franchise fees and taxes


97.1


4.9



91.8


4.7


Landfill operating costs


26.7


1.3



27.9


1.4


Risk management


46.4


2.3



47.9


2.4


Cost of goods sold


30.7


1.5



33.2


1.7


Other


66.7


3.5



68.6


3.5


Total cost of operations


$ 1,203.2


60.7

%


$ 1,159.7


59.0

%












The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include salaries, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems and clerical and administrative departments. Other expenses include rent and office costs, fees for professional services provided by third parties, marketing, investor and community relations, directors' and officers' insurance, general employee relocation, travel, entertainment and bank charges, but excludes any such amounts recorded as restructuring charges.

The following table provides the components of our selling, general and administrative costs for the three months ended March 31:



2012



2011


Salaries


$ 150.5


7.6

%


$ 135.7


6.9

%

Provision for doubtful accounts


7.2


0.4



0.4


-


Other


64.8


3.2



67.8


3.5


Total selling, general and

      administrative expenses


$ 222.5


11.2

%


$ 203.9


10.4

%












The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to that of other companies.

RECONCILIATION OF CERTAIN NON-GAAP MEASURES

Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Accretion

The following table calculates earnings before interest, taxes, depreciation, depletion, amortization and accretion (EBITDA), which is not a measure determined in accordance with U.S. generally accepted accounting principles (GAAP), for the three months ended March 31:



2012


2011

Net income attributable to Republic Services, Inc.


$ 142.9


$ 158.2

Net loss attributable to noncontrolling interests


(0.1)


(0.1)

Provision for income taxes


80.3


101.9

Other income, net


(0.2)


(1.1)

Interest income


(0.3)


(0.2)

Loss on extinguishment of debt


-


1.8

Interest expense


104.3


115.7

Depreciation, amortization and depletion


213.7


205.8

Accretion


19.7


19.7

EBITDA


$ 560.3


$ 601.7






We believe that presenting EBITDA is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash and other costs.  EBITDA demonstrates our ability to execute our financial strategy, which includes reinvesting in existing capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit rating and minimizing debt, paying cash dividends, repurchasing our common stock, and maintaining and improving our market position through business optimization.  This measure has limitations.  Although depreciation, depletion, amortization and accretion are considered operating costs in accordance with GAAP, they represent the allocation of non-cash costs generally associated with long-lived assets acquired or constructed in prior years.  Our definition of EBITDA may not be comparable to similarly titled measures presented by other companies.

Adjusted Earnings

Reported diluted earnings per share were $0.38 for the three months ended March 31, 2012 versus $0.41 for the comparable 2011 period.  We recorded a loss on extinguishment of debt and a net (gain) loss on disposition of assets and impairments that impacted our EBITDA, pre-tax income, net income attributable to Republic Services, Inc. (Net Income – Republic) and diluted earnings per share, as follows: 



Three Months Ended March 31, 2012



Three Months Ended March 31, 2011



EBITDA


Pre-tax

Income


Net

Income -

Republic


Diluted

Earnings

per Share



EBITDA


Pre-tax

Income


Net

Income -

Republic


Diluted

Earnings

per Share

As reported


$560.3


$223.1


$142.9


$0.38



$601.7


$260.0


$158.2


$0.41

Loss on extinguishment of debt


-


-


-


-



-


1.8


1.1


0.01

(Gain) loss on disposition of assets and impairments, net


(3.6)


(3.6)


(2.1)


-