10-QPeriod: Q1 FY2012

REPUBLIC SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 27, 2012For Securities:RSG

Summary

Republic Services, Inc. (RSG) reported its first-quarter 2012 financial results, showing modest revenue growth compared to the prior year. Revenue increased by 0.9% to $1.98 billion, driven by slight increases in core pricing and fuel surcharges, although this was partially offset by a decline in recycling commodity prices. Operating income saw a decrease of 13.1% year-over-year to $326.9 million, impacted by higher costs in labor, maintenance, transportation, and fuel, which outpaced revenue gains. Net income attributable to Republic Services, Inc. declined by 7.8% to $142.9 million, translating to diluted earnings per share of $0.38, down from $0.41 in the first quarter of 2011. The company continued its share repurchase program and paid quarterly dividends. Management noted ongoing efforts to manage costs and optimize operations, while also highlighting updated full-year 2012 guidance reflecting higher anticipated costs and current business conditions, including an expected charge related to the refinancing of senior notes.

Financial Highlights

54 data points
Beta

Revenue

$1.98B

39.3% Gross Margin

Net Income

$142.90M

7.2% Net Margin

EPS (Diluted)

$0.38

Total Assets

$19.46B

Cash & Equivalents

$73.50M

Free Cash Flow

$60.00M

Financial Statements
Beta
Revenue$1.98B
Cost of Revenue$1.20B
Gross Profit$779.20M
SG&A Expenses$222.40M
Operating Income$326.90M
Interest Expense$104.30M
Net Income$142.90M
EPS (Basic)$0.39
EPS (Diluted)$0.38
Shares Outstanding (Basic)371.00M
Shares Outstanding (Diluted)372.49M

Key Highlights

  • 1Revenue increased by 0.9% to $1.98 billion for the three months ended March 31, 2012, compared to $1.96 billion in the same period of 2011.
  • 2Operating income decreased by 13.1% to $326.9 million in Q1 2012 from $376.2 million in Q1 2011.
  • 3Net income attributable to Republic Services, Inc. declined by 7.8% to $142.9 million ($0.38 per diluted share) in Q1 2012, from $158.2 million ($0.41 per diluted share) in Q1 2011.
  • 4Cost of operations increased by 3.7% year-over-year, impacting operating margins, driven by higher labor, maintenance, and fuel costs.
  • 5The company repurchased $9.0 million of its common stock during the quarter under its existing share repurchase program.
  • 6Republic Services paid quarterly cash dividends of $0.22 per share, totaling $81.4 million for the quarter.
  • 7The company updated its full-year 2012 guidance, anticipating adjusted diluted EPS between $1.86 to $1.90, reflecting higher expected costs.

Frequently Asked Questions

The primary driver for the decrease in operating income was an increase in 'Cost of Operations', which rose by $43.5 million year-over-year. This increase was largely due to higher labor costs (wage increases and an additional workday), increased maintenance and repairs expenses, higher transportation and subcontract costs, and an increase in average fuel costs. These cost increases outpaced the modest revenue growth.

Total debt remained relatively stable. Long-term debt, net of current maturities, slightly decreased from $6.887 billion at December 31, 2011 to $6.870 billion at March 31, 2012. The company made net debt repayments of $22.4 million during the quarter.

Republic Services disclosed several significant legal and environmental matters, including ongoing litigation related to the Countywide Landfill and Luri Matter (employee retaliation lawsuit). The company also settled a matter with the City of Chicago for $11 million and is involved in proceedings related to the Congress Development Landfill and environmental matters in Forward, Sunshine Canyon, Lorain County, and Queen Creek.

Republic Services updated its full-year 2012 guidance, expecting adjusted diluted earnings per share (excluding certain items like debt extinguishment costs) to be in the range of $1.86 to $1.90. This guidance was lowered from previous expectations due to higher anticipated costs. The company also expects to incur a significant charge related to the refinancing of $750 million of its senior notes.