Republic Services, Inc. Reports Third Quarter Results - Reports third quarter earnings of $0.42 per share, $0.47 per share as adjusted

- Restructures field and corporate operations

- Updates 2012 financial guidance and provides preliminary 2013 outlook

PHOENIX, Nov. 1, 2012 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $152.7 million, or $0.42 per diluted share, for the three months ended September 30, 2012, versus $193.5 million, or $0.52 per diluted share, for the comparable 2011 period. 

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

Republic's net income for the three months ended September 30, 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 September 30, 2012 and 2011 would have been $170.7 million, or $0.47 per diluted share, and $198.5 million, or $0.53 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 September 30, 2012 would have been $572.5 million, or 28.0% as a percentage of revenue, compared to $648.7 million, or 30.7% as a percentage of revenue, for the comparable 2011 period.

Revenue for the three months ended September 30, 2012 decreased to $2,046.9 million compared to $2,116.2 million for the comparable 2011 period.  This decrease in revenue of 3.3% was made up of increases in core price of 1.0% and acquisitions, net of divestitures of 0.2% that were more than offset by decreases in fuel surcharges of 0.4%, volumes of 2.1% (0.5% of which is due to one less workday)  and recycling commodities pricing of 2.0%.

For the nine months ended September 30, 2012, net income was $444.8 million, or $1.20 per diluted share, versus $398.2 million, or $1.05 per diluted share, for the comparable 2011 period.

Republic's net income for the nine months ended September 30, 2012 and 2011 includes a number of charges, other expenses and benefits that impacted its results.  A detail of these charges, other expenses and benefits is contained in the Reconciliation of Certain Non-GAAP Measures section of this document.  Excluding these items, net income for the nine months ended September 30, 2012 and 2011 would have been $530.0 million, or $1.44 per diluted share, and $543.1 million, or $1.43 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 EBITDA for the nine months ended September 30, 2012 would have been $1,754.0 million, or 28.8% as a percentage of revenue, compared to $1,898.7 million, or 30.8% as a percentage of revenue, for the comparable 2011 period.

Revenue for the nine months ended September 30, 2012 decreased to $6,089.9 million compared to $6,167.7 million for the comparable 2011 period.  This decrease in revenue of 1.3% was made up of increases in core price of 0.7% and acquisitions, net of divestitures of 0.4% that were more than offset by decreases in volumes of 1.1% and recycling commodities pricing of 1.3%.  Fuel surcharges were flat versus the comparable 2011 period.

Commenting on these results, Donald W. Slager, President and Chief Executive Officer, said, "During the third quarter, we have seen improvement in our core price driven by higher resets in our index-based markets. We expect to maintain higher pricing through the end of the year and into 2013. In addition, we had positive volume growth in the collection line of business."

Company Restructures Field and Corporate Operations

In October 2012, we restructured our field and corporate operations to create a more efficient and competitive company.  These changes include consolidating our field regions from four to three and our areas from 28 to 20, relocating office space, and reducing administrative staffing levels.  We expect to record expenses of approximately $30 million with respect to this restructuring, approximately one-half of which will be incurred in the fourth quarter of 2012.  We expect this restructuring will reduce our selling, general and administrative expenses by approximately $23 million annually.

Commenting on the restructuring, Mr. Slager said, "We implemented this realignment to leverage our strong leadership team and organizational capabilities to refine how we operate.  We have not made any changes to the span of control at our business units, keeping the appropriate leadership focus and decision making closest to our customers."

Updated 2012 Financial Guidance and Preliminary 2013 Outlook

Republic is updating its full year 2012 earnings guidance and issuing preliminary outlook for 2013. 

  • 2012 Adjusted Diluted Earnings per Share:  Our previous adjusted diluted earnings per share guidance was $1.91 to $1.93. We now expect adjusted diluted earnings per share to be in a range of $1.85 to $1.87 due to lower commodity pricing, higher fuel expense, and a third quarter 2012 environmental remediation charge, partially offset by a lower effective tax rate.  Adjusted diluted earnings per share excludes a number of charges, other expenses and benefits, as described in the Reconciliation of Updated 2012 Financial Guidance section of this document.   This guidance assumes an effective tax rate of approximately 33.5%.
  • 2012 Adjusted Free Cash Flow:  Our previous adjusted free cash flow guidance was approximately $775 million. We now expect 2012 adjusted free cash flow to be approximately $750 million primarily due to lower commodity pricing and higher fuel expense.  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 and restructuring related expenditures, certain legacy tax settlement payments, cash tax benefit for debt extinguishment and cash paid related to negotiation and withdrawal costs - Central States, net of tax.
  • 2013 Preliminary Outlook:  We also are providing our preliminary outlook for 2013.  We are midway through our 2013 budget process.  Consistent with our prior practice, we will provide 2013 guidance in February 2013.  Given current business conditions, adjusted diluted earnings per share is expected to be in a range of $1.90 to $1.92.  This assumes a full year effective tax rate of approximately 38.0%.  Adjusted diluted earnings per share excludes negotiation and withdrawal costs - Central States, restructuring expenses and (gain) loss on disposition of assets and impairments, net.  

Company Declares Quarterly Dividend

Republic also announced that its Board of Directors declared a regular quarterly dividend of $0.235 per share for stockholders of record on January 2, 2013.  The dividend will be paid on January 16, 2013.

About Republic

Republic is an industry leader in the U.S. non-hazardous solid waste industry.  Through its subsidiaries, Republic's collection companies, transfer stations, recycling centers and landfills focus on providing reliable environmental services and solutions for commercial, industrial, municipal and residential customers.  Republic and its employees believe in protecting the planet and applying common sense solutions to customers' waste and recycling challenges. 

Republic participates in investor presentations and conferences throughout the year.  Interested parties can find a schedule of these conferences at republicservices.com by selecting "Calendar" on the investor relations page.  Audio and other presentations from earnings calls and investor conferences are also available on the investor relations page of the website.

SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION

AND OPERATING DATA





REPUBLIC SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)






September 30,


December 31,


2012


2011


(Unaudited)



ASSETS

Current assets:




Cash and cash equivalents

$

74.0



$

66.3

Accounts receivable, less allowance for doubtful accounts of $44.8 and $48.1, respectively

854.2



825.8

Prepaid expenses and other current assets

217.9



215.9

Deferred tax assets

123.9



157.7

Total current assets

1,270.0



1,265.7

Restricted cash and marketable securities

132.9



189.6

Property and equipment, net

6,903.2



6,792.3

Goodwill

10,678.2



10,647.0

Other intangible assets, net

371.9



409.6

Other assets

278.1



247.3

Total assets

$

19,634.3



$

19,551.5





LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Accounts payable

$

490.6



$

563.6

Notes payable and current maturities of long-term debt

44.4



34.8

Deferred revenue

311.1



290.2

Accrued landfill and environmental costs, current portion

185.4



184.2

Accrued interest

71.6



72.2

Other accrued liabilities

596.1



752.5

Total current liabilities

1,699.2



1,897.5

Long-term debt, net of current maturities

7,060.0



6,887.0

Accrued landfill and environmental costs, net of current portion

1,419.6



1,396.5

Deferred income taxes and other long-term tax liabilities

1,165.3



1,161.1

Self-insurance reserves, net of current portion

288.1



303.9

Other long-term liabilities

260.5



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; 404.4 and 402.1

     issued including shares held in treasury, respectively

4.0



4.0

Additional paid-in capital

6,563.3



6,495.6

Retained earnings

2,361.3



2,164.7

Treasury stock, at cost (39.8 and 32.2 shares, respectively)

(1,169.6)



(961.5)

Accumulated other comprehensive loss, net of tax

(19.8)



(21.5)

Total Republic Services, Inc. stockholders' equity

7,739.2



7,681.3

Noncontrolling interests

2.4



2.1

Total stockholders' equity

7,741.6



7,683.4

Total liabilities and stockholders' equity

$

19,634.3



$

19,551.5




REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)










Three Months Ended September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

Revenue

$

2,046.9



$

2,116.2



$

6,089.9



$

6,167.7

Expenses:








Cost of operations

1,280.5



1,260.0



3,722.2



3,657.5

Depreciation, amortization and depletion

203.5



215.0



632.1



629.4

Accretion

19.7



19.4



59.1



58.6

Selling, general and administrative

193.8



207.5



613.5



611.5

Negotiation and withdrawal costs - Central States

31.3





34.6



Loss (gain) on disposition of assets and impairments, net

0.2



5.8



(3.4)



24.8

Operating income

317.9



408.5



1,031.8



1,185.9

Interest expense

(93.2)



(108.3)



(296.3)



(335.4

Loss on extinguishment of debt

(2.3)



(6.0)



(112.6)



(207.3)

Interest income

0.3





0.8



0.3

Other income, net

0.4



1.8



1.1



3.8

Income before income taxes

223.1



296.0



624.8



647.3

Provision for income taxes

70.3



102.4



179.7



249.4

Net income

152.8



193.6



445.1



397.9

Net (income) loss attributable to noncontrolling interests

(0.1)



(0.1)



(0.3)



0.3

Net income attributable to Republic Services, Inc.

$

152.7



$

193.5



$

444.8



$

398.2

Basic earnings per share attributable to Republic Services,

   Inc. stockholders:








Basic earnings per share

$

0.42



$

0.52



$

1.21



$

1.05

Weighted average common shares outstanding

365.4



373.2



368.1



377.9

Diluted earnings per share attributable to Republic Services,

   Inc. stockholders:








Diluted earnings per share

$

0.42



$

0.52



$

1.20



$

1.05

Weighted average common and common equivalent

     shares outstanding

366.4



374.7



369.3



379.6









Cash dividends per common share

$

0.235



$

0.220



$

0.675



$

0.620




REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


Nine Months Ended September 30,


2012


2011

Cash provided by operating activities:




Net income

$

445.1



$

397.9

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




Depreciation and amortization of property and equipment

387.9



384.3

Landfill depletion and amortization

191.3



188.0

Amortization of intangible and other assets

52.9



57.1

Accretion

59.1



58.6

Non-cash interest expense - debt

10.5



20.9

Non-cash interest expense - other

35.7



37.2

Stock-based compensation

17.2



16.4

Deferred tax benefit

(36.0)



(18.9)

Provision for doubtful accounts, net of adjustments

20.8



10.9

Excess income tax benefit from stock option exercises

(1.6)



(2.4)

Asset impairments

0.3



45.9

Loss on extinguishment of debt

112.6



207.3

Gain on disposition of assets, net

(13.6)



(34.8)

Withdrawal liability - Central States

30.7



Other non-cash items



(6.7)

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




Accounts receivable

(47.3)



(80.7)

Prepaid expenses and other assets

(19.2)



24.5

Accounts payable

(37.2)



6.3

Restructuring and synergy related expenditures

(68.1)



(2.9)

Capping, closure and post-closure expenditures

(54.0)



(73.3)

Remediation expenditures

(49.5)



(26.7)

Other liabilities

19.1



77.9

Cash provided by operating activities

1,056.7



1,286.8





Cash used in investing activities:




Purchases of property and equipment

(707.4)



(696.1)

Proceeds from sales of property and equipment

24.5



23.4

Cash used in acquisitions, net of cash acquired

(73.1)



(40.8)

Cash proceeds from divestitures, net of cash divested

9.6



14.2

Change in restricted cash and marketable securities

54.5



12.3

Other

(0.3)



(2.2)

Cash used in investing activities

(692.2)



(689.2)





Cash used in financing activities:




Proceeds from notes payable and long-term debt

2,038.2



1,137.5

Proceeds from issuance of senior notes, net of discount

847.6



1,844.9

Payments of notes payable and long-term debt

(2,799.3)



(2,827.6)

Premiums paid on extinguishment of debt

(25.8)



(89.6)

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

(16.9)



(58.8)

Issuances of common stock

49.3



35.6

Excess income tax benefit from stock option exercises

1.6



2.4

Purchases of common stock for treasury

(208.1)



(429.9)

Cash dividends paid

(243.4)



(227.8)

Cash used in financing activities

(356.8)



(613.3)





Increase (decrease) in cash and cash equivalents

7.7



(15.7)

Cash and cash equivalents at beginning of period

66.3



88.3

Cash and cash equivalents at end of period

$

74.0



$

72.6

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 and nine months ended September 30:


Three Months Ended September 30,



Nine Months Ended September 30,



2012



2011



2012



2011


Collection:
















Residential

$

542.0



26.5

%


$

538.3



25.4

%


$

1,614.0



26.5

%


$

1,601.6



26.0

%

Commercial

632.4



30.9



625.9



29.6



1,884.4



30.9



1,871.5



30.3


Industrial

395.9



19.3



397.5



18.8



1,154.7



19.0



1,141.7



18.5


Other

8.4



0.4



8.5



0.4



24.9



0.4



24.4



0.4


Total collection

1,578.7



77.1



1,570.2



74.2



4,678.0



76.8



4,639.2



75.2


















Transfer

247.7





258.8





721.4





750.9




Less: Intercompany

(146.4)





(146.3)





(427.5)





(433.0)




Transfer, net

101.3



5.0



112.5



5.3



293.9



4.8



317.9



5.2


















Landfill

477.7





496.4





1,408.7





1,400.3




Less: Intercompany

(218.2)





(219.8)





(650.0)





(636.1)




Landfill, net

259.5



12.7



276.6



13.1



758.7



12.5



764.2



12.4


















Sale of recyclable materials

78.4



3.8



120.0



5.7



266.5



4.4



341.2



5.5


Other non-core

29.0



1.4



36.9



1.7



92.8



1.5



105.2



1.7


Other

107.4



5.2



156.9



7.4



359.3



5.9



446.4



7.2


















Total revenue

$

2,046.9



100.0

%


$

2,116.2



100.0

%


$

6,089.9



100.0

%


$

6,167.7



100.0

%