10-QPeriod: Q2 FY2015

REPUBLIC SERVICES, INC. Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 24, 2015For Securities:RSG

Summary

Republic Services, Inc. (RSG) reported a solid financial performance for the second quarter and first half of 2015. Revenue grew by 3.7% and 4.1% respectively for the quarter and year-to-date periods, driven by increases in average yield and volume, bolstered by strategic acquisitions. Net income also saw a healthy increase, demonstrating the company's ability to translate revenue growth into profitability. The company continued to invest in its operations and growth, as evidenced by significant capital expenditures and successful acquisitions, including the notable acquisition of Tervita, LLC. Management has also increased its full-year earnings per share guidance, indicating confidence in future performance. Despite some cost pressures and environmental liabilities, the company's strong operational execution and strategic initiatives position it well for continued success.

Financial Highlights

54 data points
Beta

Revenue

$2.31B

38.5% Gross Margin

Net Income

$190.30M

8.2% Net Margin

EPS (Diluted)

$0.54

Total Assets

$20.67B

Cash & Equivalents

$99.90M

Free Cash Flow

$175.50M

Financial Statements
Beta
Revenue$2.31B
Cost of Revenue$1.42B
Gross Profit$891.00M
SG&A Expenses$236.20M
Operating Income$389.20M
Interest Expense$91.50M
Net Income$190.30M
EPS (Basic)$0.54
EPS (Diluted)$0.54
Shares Outstanding (Basic)350.66M
Shares Outstanding (Diluted)352.02M

Key Highlights

  • 1Revenue increased by 3.7% to $2.31 billion for the three months ended June 30, 2015, and by 4.1% to $4.48 billion for the six months ended June 30, 2015, compared to the prior year periods.
  • 2Net income attributable to Republic Services, Inc. increased to $190.3 million ($0.54 per diluted share) for the three months ended June 30, 2015, and to $362.7 million ($1.03 per diluted share) for the six months ended June 30, 2015.
  • 3The company completed the acquisition of Tervita, LLC in February 2015 for $479.6 million, expanding its environmental solutions and oilfield waste services.
  • 4Capital expenditures for the six months ended June 30, 2015 were $499.2 million, reflecting ongoing investment in property and equipment.
  • 5Republic Services raised its full-year 2015 diluted earnings per share guidance to a range of $2.02 to $2.05.
  • 6The company's board of directors approved an increase in the quarterly dividend by 7.1% to $0.30 per share.
  • 7Free cash flow for the six months ended June 30, 2015 was $410.1 million, demonstrating strong cash generation capabilities.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in average yield (pricing power) of 2.3% and a volume increase of 1.4% for the six months ended June 30, 2015. Strategic acquisitions, notably Tervita, LLC, contributed an additional 2.5% to revenue growth, partially offset by a decrease in fuel recovery fees and recycled commodity prices.

The acquisition of Tervita, LLC in February 2015 for $479.6 million expanded Republic Services' presence in oilfield exploration and production (E&P) waste services. While the acquisition contributed to revenue growth, it also involved integration costs. The company is still finalizing purchase price allocations, with a significant portion assigned to goodwill ($275.4 million for all acquisitions in the period).

Republic Services raised its full-year 2015 guidance for diluted earnings per share to a range of $2.02 to $2.05, indicating management's optimism about continued performance. This upward revision reflects confidence in their operational execution and strategic initiatives.

The company has ongoing accruals for landfill and environmental costs, totaling $1.86 billion, with specific remediation liabilities noted for the Bridgeton Landfill ($225.4 million) and Congress Landfill ($85.4 million). While the company believes its recorded reserves are adequate, future changes in estimates could impact results. Additionally, the company is involved in legal proceedings, with an aggregate accrual of $52.9 million, none of which management believes will have a material adverse impact on the company's financial position.