10-QPeriod: Q1 FY2015

REPUBLIC SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 24, 2015For Securities:RSG

Summary

Republic Services, Inc. (RSG) reported strong financial results for the first quarter ended March 31, 2015. The company demonstrated robust revenue growth of 4.4% year-over-year, reaching $2.17 billion. This increase was driven by a combination of factors including higher average pricing (yield), increased collection volumes, and contributions from recent acquisitions, notably Tervita, LLC. Profitability also saw a significant improvement, with Net Income attributable to Republic Services, Inc. rising by 30.1% to $172.4 million, translating to diluted earnings per share of $0.49, up from $0.37 in the prior year's first quarter. Operationally, the company managed its costs effectively, despite some increases in labor and maintenance. A notable factor contributing to improved profitability was the significant decrease in fuel costs, a direct benefit from lower diesel prices and the company's ongoing transition to compressed natural gas (CNG) vehicles. Furthermore, the prior year's results were impacted by a substantial remediation charge related to the Bridgeton Landfill, which did not recur in the current period, providing a favorable year-over-year comparison. The company also highlighted its solid liquidity position and sufficient financial resources to meet its obligations and fund future growth initiatives.

Financial Highlights

54 data points
Beta

Revenue

$2.17B

39.9% Gross Margin

Net Income

$172.40M

7.9% Net Margin

EPS (Diluted)

$0.49

Total Assets

$20.59B

Cash & Equivalents

$134.30M

Free Cash Flow

$226.50M

Financial Statements
Beta
Revenue$2.17B
Cost of Revenue$1.30B
Gross Profit$865.10M
SG&A Expenses$239.20M
Operating Income$372.80M
Interest Expense$88.60M
Net Income$172.40M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)353.30M
Shares Outstanding (Diluted)354.81M

Key Highlights

  • 1Revenue increased by 4.4% to $2.17 billion in Q1 2015, driven by yield, volume, and acquisitions.
  • 2Net income attributable to Republic Services, Inc. grew 30.1% to $172.4 million.
  • 3Diluted earnings per share improved to $0.49 from $0.37 in the prior year's comparable quarter.
  • 4Acquisitions, particularly Tervita, LLC, contributed positively to revenue growth.
  • 5Significant decrease in fuel costs due to lower diesel prices and CNG fleet expansion positively impacted profitability.
  • 6Free cash flow increased to $229.7 million from $185.2 million in the prior year's quarter.
  • 7The company maintained strong credit ratings (BBB+ from S&P) and sufficient liquidity through its revolving credit facilities.

Frequently Asked Questions

Revenue grew by 4.4% to $2.17 billion, primarily due to an increase in average yield (pricing) of 2.1%, a 1.9% rise in volume, and a 2.1% contribution from net acquisitions. These positive factors were partially offset by a 0.7% decrease in fuel recovery fees and a 1.0% decrease in recycled commodities revenue.

The company experienced a decrease in overall Cost of Operations from $1.32 billion in Q1 2014 to $1.30 billion in Q1 2015. Key factors influencing this were significantly lower fuel costs due to decreased diesel prices and the shift to CNG vehicles, and a reduction in risk management expenses. However, labor and related benefits, as well as maintenance and repairs, increased due to higher volumes, acquisitions, and fleet investments.

Republic Services maintains a strong liquidity position with $134.3 million in cash and cash equivalents and $112.7 million in restricted cash and marketable securities as of March 31, 2015. The company has access to a $1.25 billion revolving credit facility, with no borrowings outstanding as of the reporting date. Debt covenants are being met, with an EBITDA to interest ratio of 6.58 and a total debt to EBITDA ratio of 3.22. The company believes its cash flow from operations and credit facilities provide sufficient resources for its capital needs, dividends, and share repurchases.

The company recorded a $36.1 million remediation charge in Q1 2014 related to the Bridgeton Landfill, which did not recur in Q1 2015, favorably impacting the year-over-year comparison. As of March 31, 2015, the company has accrued approximately $62 million for legal proceedings, with a potential additional liability of up to $75 million. Environmental remediation liabilities, primarily related to the Bridgeton and Congress Landfills, are actively managed and provisioned for.