01—Abstract
Summary
Summary of the 10-Q filed November 10, 2008. Cited figures are marked; the original filing is the authoritative source.
Republic Services, Inc. (RSG) reported its third-quarter 2008 financial results, showing a revenue increase of 3.4% to $834.0 milliona for the quarter and 2.5% to $2,440.7 million for the nine months ended September 30, 2008.
Net income for the quarter rose to $88.7 millionb ($0.48 per diluted share) from $67.0 million ($0.35 per diluted share) in the prior year quarter, though net income for the nine-month period slightly decreased to $205.5 million ($1.11 per diluted share) from $208.1 million ($1.08 per diluted share) in the comparable 2007 period. The company is significantly impacted by substantial environmental charges related to the Countywide and Sunrise landfills, which affected profitability, particularly in the first nine months of the year. A major development is the pending merger with Allied Waste Industries, Inc., expected to close in the fourth quarter of 2008, which has led to the suspension of the company's share repurchase program and significant capitalized transaction costs.
Financially, the company maintained a solid balance sheet with total assets of $4,606.5 millionc. While long-term debt decreased to $1,497.2 million from $1,565.5 million, accrued landfill and environmental costs increased significantly to $377.1 million, largely due to remediation efforts.
The company also secured a new $1.75 billiond revolving credit facility, enhancing its liquidity. Investors should monitor the successful integration of the Allied Waste merger, the resolution of significant environmental liabilities, and the company's ability to maintain pricing power and manage operational costs, especially fuel, in the prevailing economic climate.
02—Key points
Key Highlights
- Revenue increased by 3.4% year-over-year for the quarter to $834.0 million, driven by price increases and fuel surcharges, partially offset by volume declines.
- Net income for the three months ended September 30, 2008, increased to $88.7 million ($0.48 per diluted share) from $67.0 million ($0.35 per diluted share) in the prior year period.
- The company incurred significant pre-tax charges totaling $34.0 million related to environmental remediation at the Sunrise Landfill and $34.0 million for the Countywide facility, impacting profitability.
- A significant event is the proposed merger with Allied Waste Industries, Inc., expected to close in Q4 2008, with $33.3 million in capitalized transaction costs recorded.
- The company secured a new $1.75 billion revolving credit facility in September 2008, enhancing its liquidity, and had $308.2 million in availability under its existing credit lines.
- Accrued landfill and environmental costs rose substantially to $377.1 million from $279.2 million, reflecting ongoing remediation efforts and new orders.
- The company's share repurchase program remained suspended due to the planned merger with Allied.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2008, Republic Services, Inc. kept $0.11.
- Revenue$834.0M100.0%
- Cost of revenue−$499.5M59.9%
- Gross profit$334.5M40.1%
- Operating costs−$167.5M20.1%
- Operating income$167.0M20.0%
- Interest, other & tax−$78.3M9.4%
- Net income$88.7M10.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2008filed November 10, 2008Financial Statements
| Revenue | $834.00M |
| Cost of Revenue | $499.50M |
| Gross Profit | $334.50M |
| SG&A Expenses | $85.60M |
| Operating Income | $167.00M |
| Interest Expense | $22.60M |
| Net Income | $88.70M |
| EPS (Basic) | $0.49 |
| EPS (Diluted) | $0.48 |
| Shares Outstanding (Basic) | 182.30M |
| Shares Outstanding (Diluted) | 184.10M |
05—Questions
Frequently Asked Questions
What is the impact of the environmental remediation charges on the company's profitability?
The company recorded significant pre-tax charges related to environmental remediation at the Countywide and Sunrise landfills. For the nine months ended September 30, 2008, these charges amounted to $34.0 million for Sunrise Landfill and $34.0 million for the Countywide facility. These charges negatively impacted net income, particularly for the nine-month period, where net income decreased slightly year-over-year.
What is the status of the proposed merger with Allied Waste Industries, Inc.?
Republic Services, Inc. entered into a merger agreement with Allied Waste Industries, Inc. on June 22, 2008, and the transaction is expected to close in the fourth quarter of 2008. The merger is subject to shareholder and regulatory approvals. The company has incurred $33.3 million in capitalized costs related to the transaction as of September 30, 2008, and has suspended its share repurchase program in anticipation of the merger.
How has the company's debt structure changed?
Long-term debt, net of current maturities, decreased to $1,497.2 million as of September 30, 2008, from $1,565.5 million as of December 31, 2007. This reduction is primarily due to payments exceeding new borrowings in the period. The company also secured a new $1.75 billion revolving credit facility, which is expected to fund upon closing of the Allied merger, enhancing its liquidity and refinancing existing debt.
What are the key trends in revenue and operational costs?
Revenue grew due to price increases and fuel surcharges, though volumes saw a slight decline, particularly in industrial collection, likely due to broader economic conditions. Cost of operations increased primarily due to the substantial environmental remediation charges. While labor and benefits costs, as a percentage of revenue, decreased, maintenance and operating costs, particularly fuel, saw an increase due to rising prices.
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