01—Abstract
Summary
Summary of the 10-Q filed July 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Republic Services, Inc. (RSG) reported its second-quarter 2013 financial results, showing a slight increase in revenue compared to the prior year, driven by a modest rise in average yield and acquisition contributions.
However, net income and earnings per share saw a significant decline primarily due to substantial charges related to the Central States Pension Fund withdrawal liability and a large environmental remediation charge at the Bridgeton Landfill. While core operational performance remains relatively stable, these one-time or significant charges impacted the bottom line considerably for the quarter and the first half of the year. Despite the reported net income decline, management highlighted adjusted figures that excluded these significant charges, aiming to provide a clearer view of ongoing operational performance.
The company also reaffirmed its full-year adjusted earnings per share guidance, indicating confidence in its core business operations. Dividend payouts continued, with an increase announced for the upcoming quarter, signaling a commitment to returning capital to shareholders. Investors should closely monitor the impact of the Central States Pension Fund and ongoing remediation efforts, as these are significant factors influencing profitability in the near to medium term.
02—Key points
Key Highlights
- Revenue for the six months ended June 30, 2013, increased by 1.7% to $4,110.3 million compared to $4,043.0 million for the same period in 2012.
- Net income attributable to Republic Services, Inc. decreased significantly to $56.3 million for the three months ended June 30, 2013, compared to $149.2 million in the prior year period.
- Diluted earnings per share also decreased to $0.15 for the three months ended June 30, 2013, from $0.40 in the same period of 2012.
- The company incurred substantial charges of $42.0 million and $99.9 million for partial withdrawal liability from the Central States Pension Fund during the three and six months ended June 30, 2013, respectively.
- A significant environmental remediation charge of $108.7 million was recorded for the Bridgeton Landfill during the second quarter of 2013.
- Republic Services reaffirmed its full-year 2013 guidance for adjusted diluted earnings per share, indicating a range of $1.86 to $1.91.
- The board of directors approved an increase in the quarterly dividend by 10.6% to $0.26 per share, to be paid in October 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2013, Republic Services, Inc. kept $0.03.
- Revenue$2.11B100.0%
- Cost of revenue−$1.41B66.8%
- Gross profit$701.7M33.2%
- Operating costs−$520.5M24.6%
- Operating income$181.2M8.6%
- Interest, other & tax−$124.9M5.9%
- Net income$56.3M2.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2013filed July 26, 2013Financial Statements
Q2 FY2013 against Q2 FY2012
| Line item | Q2 FY2013Q2 FY2012 | Change |
|---|---|---|
| Revenue | $2.11B$2.06B | +2.5% |
| Cost of Revenue | $1.41B$1.24B | +13.8% |
| Gross Profit | $701.70M$822.10M | −14.6% |
| SG&A Expenses | $228.20M$197.30M | +15.7% |
| Operating Income | $181.20M$387.00M | −53.2% |
| Interest Expense | $90.20M$98.80M | −8.7% |
| Net Income | $56.30M$149.20M | −62.3% |
| EPS (Basic) | $0.16$0.41 | −61.0% |
| EPS (Diluted) | $0.15$0.40 | −62.5% |
| Shares Outstanding (Basic) | 362.95M367.89M | −1.3% |
| Shares Outstanding (Diluted) | 364.39M368.87M | −1.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers behind the significant decrease in net income and EPS for the second quarter of 2013?
The significant decrease in net income and EPS was primarily driven by substantial charges related to the partial withdrawal liability from the Central States Pension Fund, totaling $42.0 million for the quarter, and a large environmental remediation charge of $108.7 million recorded for the Bridgeton Landfill. These one-time or significant charges heavily impacted the reported financial results.
How is the company addressing the impact of these significant charges on investor perception?
Management provided 'adjusted' financial figures that exclude these significant charges (like pension withdrawal costs and remediation expenses) to offer a clearer view of the ongoing operational performance. They also reaffirmed their full-year adjusted earnings per share guidance, suggesting confidence in the underlying business operations despite these specific charges.
What is the company's outlook on returning capital to shareholders?
Republic Services demonstrated its commitment to returning capital by announcing an increase in its quarterly dividend by 10.6% to $0.26 per share, payable in October 2013. This follows a history of consistent dividend payments and increases.
What is the company's approach to managing fuel and commodity price risks?
The company utilizes fuel recovery fees to mitigate the impact of rising fuel costs, though it cannot recover costs from all customers. For recycling commodities, Republic Services uses derivative instruments like swaps and costless collars to hedge against price volatility, aiming to reduce the variability of revenue from these sales.
06—Continue