01—Abstract
Summary
Summary of the 10-Q filed July 24, 2015. Cited figures are marked; the original filing is the authoritative source.
Republic Services, Inc. (RSG) reported a solid financial performance for the second quarter and first half of 2015.
Revenue grew by 3.7%a 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.
02—Key points
Key Highlights
- Revenue 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.
- Net 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.
- The company completed the acquisition of Tervita, LLC in February 2015 for $479.6 million, expanding its environmental solutions and oilfield waste services.
- Capital expenditures for the six months ended June 30, 2015 were $499.2 million, reflecting ongoing investment in property and equipment.
- Republic Services raised its full-year 2015 diluted earnings per share guidance to a range of $2.02 to $2.05.
- The company's board of directors approved an increase in the quarterly dividend by 7.1% to $0.30 per share.
- Free cash flow for the six months ended June 30, 2015 was $410.1 million, demonstrating strong cash generation capabilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2015, Republic Services, Inc. kept $0.08.
- Revenue$2.31B100.0%
- Cost of revenue−$1.42B61.5%
- Gross profit$891.0M38.5%
- Operating costs−$501.8M21.7%
- Operating income$389.2M16.8%
- Interest, other & tax−$198.9M8.6%
- Net income$190.3M8.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed July 24, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $2.31B$2.23B | +3.7% |
| Cost of Revenue | $1.42B$1.38B | +3.2% |
| Gross Profit | $891.00M$852.30M | +4.5% |
| SG&A Expenses | $236.20M$221.00M | +6.9% |
| Operating Income | $389.20M$378.30M | +2.9% |
| Interest Expense | $91.50M$86.90M | +5.3% |
| Net Income | $190.30M$179.00M | +6.3% |
| EPS (Basic) | $0.54$0.50 | +8.0% |
| EPS (Diluted) | $0.54$0.50 | +8.0% |
| Shares Outstanding (Basic) | 350.66M356.21M | −1.6% |
| Shares Outstanding (Diluted) | 352.02M357.58M | −1.6% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in the reported period?
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.
How did the acquisition of Tervita, LLC impact the company's financials?
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).
What is the company's outlook for the remainder of 2015?
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.
Are there any significant environmental liabilities or legal proceedings that investors should be aware of?
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.
06—Continue