01—Abstract
Summary
Summary of the 10-Q filed April 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Republic Services, Inc. reported revenues of $1,998.6 milliona for the first quarter of 2013, a slight increase of 0.8% from the prior year's $1,982.4 million.
Despite revenue growth, net income attributable to Republic Services, Inc. declined to $124.6 millionb ($0.34 per diluted share) from $142.9 million ($0.38 per diluted share) in the same period of 2012. This decrease was largely driven by significant one-time charges, most notably a $62.2 million negotiation and withdrawal cost related to the Central States Pension Fund and $4.9 million in restructuring charges. Excluding these items, adjusted net income was $167.4 million, resulting in adjusted diluted EPS of $0.46, an increase from the prior year's adjusted figure.
The company's operational performance saw mixed results. While core price increases and acquisitions contributed positively, a decrease in volume (partly due to one less workday) and lower recycling commodity prices impacted revenue. Cost of operations increased as a percentage of revenue, driven by higher labor costs and maintenance expenses, although partially offset by lower fuel costs.
The company continues to invest in its long-term infrastructure, with significant capital expenditures and a large pipeline of future landfill investments. From a balance sheet perspective, Republic Services maintained a stable financial position with total assets of $19.6 billionc.
The company managed its debt effectively, with a debt-to-EBITDA ratio of 3.07, well within its covenant requirements. The company also demonstrated strong free cash flow generation of $208.2 milliond for the quarter, up significantly from $64.8 million in the prior year, underscoring its ability to fund operations and shareholder returns.
02—Key points
Key Highlights
- Revenue increased by 0.8% to $1,998.6 million for Q1 2013, driven by core price increases and acquisitions, partially offset by lower volumes and recycling commodity prices.
- Net income attributable to Republic Services, Inc. decreased to $124.6 million ($0.34 per diluted share) from $142.9 million ($0.38 per diluted share) in Q1 2012.
- Significant one-time charges impacting reported net income include $62.2 million for Central States Pension Fund withdrawal costs and $4.9 million in restructuring charges.
- Adjusted net income (excluding special items) was $167.4 million, leading to adjusted diluted EPS of $0.46, an increase from the prior year's adjusted $0.38.
- Operating income margin declined to 13.7% from 16.5% year-over-year, primarily due to the pension fund withdrawal costs and higher cost of operations.
- Free cash flow significantly increased to $208.2 million from $64.8 million in the prior year, indicating strong cash generation from operations.
- The company maintained strong liquidity with $130.1 million in cash and cash equivalents and $1,519.4 million in availability under its credit facilities as of March 31, 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Republic Services, Inc. kept $0.06.
- Revenue$2.00B100.0%
- Cost of revenue−$1.22B61.2%
- Gross profit$775.5M38.8%
- Operating costs−$501.3M25.1%
- Operating income$274.2M13.7%
- Interest, other & tax−$149.6M7.5%
- Net income$124.6M6.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed April 26, 2013Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $2.00B$1.98B | +0.8% |
| Cost of Revenue | $1.22B$1.20B | +1.7% |
| Gross Profit | $775.50M$779.20M | −0.5% |
| SG&A Expenses | $206.50M$222.40M | −7.1% |
| Operating Income | $274.20M$326.90M | −16.1% |
| Interest Expense | $89.60M$104.30M | −14.1% |
| Net Income | $124.60M$142.90M | −12.8% |
| EPS (Basic) | $0.34$0.39 | −12.8% |
| EPS (Diluted) | $0.34$0.38 | −10.5% |
| Shares Outstanding (Basic) | 362.66M371.00M | −2.2% |
| Shares Outstanding (Diluted) | 364.09M372.49M | −2.3% |
05—Questions
Frequently Asked Questions
What is the primary reason for the decrease in net income in the first quarter of 2013 compared to the same period in 2012?
The primary reason for the decrease in net income was the recognition of significant one-time charges. The largest of these was a $62.2 million charge related to negotiation and withdrawal costs from the Central States Pension Fund, along with $4.9 million in restructuring charges stemming from a 2012 operational overhaul. Excluding these items, the company's performance on an adjusted basis showed improvement.
How did the company's revenue performance change in the first quarter of 2013?
Republic Services saw a modest revenue increase of 0.8% to $1,998.6 million. This growth was supported by a 1.2% increase in core pricing across its services and a 0.5% contribution from acquisitions. However, this was partially offset by a 1.0% decrease in volume, attributed to factors like contract losses and one less workday, and a 0.2% decline in revenue from recycling commodities due to lower market prices.
What is the company's outlook regarding its financial position and liquidity?
Republic Services maintains a strong financial position, with total assets of $19.6 billion and a healthy liquidity profile. As of March 31, 2013, the company had $130.1 million in cash and cash equivalents and substantial availability under its credit facilities. The company's debt-to-EBITDA ratio was 3.07, well within covenant limits. Furthermore, the significant increase in free cash flow to $208.2 million indicates robust operational cash generation, supporting its ability to fund capital expenditures, acquisitions, and shareholder returns.
Are there any significant environmental or legal matters that investors should be aware of?
The company is involved in several legal and environmental matters. Key items include ongoing discussions and potential resolutions for remediation at landfills like Bridgeton and Congress Landfills, with significant potential ranges for future costs. There is also an ongoing environmental matter with the EPA and a previously disclosed legal matter with Ronald Luri that saw a reduced punitive damages award on appeal. The company accrues for probable and estimable losses, but the ultimate outcomes could impact financial results. A settlement is pending for the Countywide Matter, and the company is also engaged in discussions with the Missouri Attorney General's office regarding the Bridgeton Landfill.
06—Continue