10-QPeriod: Q1 FY2017

REPUBLIC SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 28, 2017For Securities:RSG

Summary

Republic Services, Inc. reported solid financial results for the first quarter of 2017, demonstrating revenue growth and improved profitability. Total revenue increased by 6.4% year-over-year, driven by increases in average yield, recycled commodity prices, and volume. Net income attributable to the company rose to $187.8 million, or $0.55 per diluted share, up from $156.7 million, or $0.45 per diluted share, in the prior year's first quarter. The company's operational efficiency appears to be improving, with cost of operations as a percentage of revenue slightly increasing but managed effectively. Significant initiatives, such as restructuring efforts aimed at consolidating back-office functions and customer service locations, are expected to continue through 2017, contributing to future cost savings. Republic Services also maintained a strong liquidity position, with substantial availability under its credit facilities, supporting its ongoing capital expenditure and acquisition strategies.

Financial Highlights

54 data points
Beta

Revenue

$2.39B

38.0% Gross Margin

Net Income

$187.80M

7.8% Net Margin

EPS (Diluted)

$0.55

Total Assets

$20.60B

Cash & Equivalents

$33.20M

Free Cash Flow

$220.50M

Financial Statements
Beta
Revenue$2.39B
Cost of Revenue$1.48B
Gross Profit$908.70M
SG&A Expenses$253.50M
Operating Income$388.10M
Interest Expense$89.40M
Net Income$187.80M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)339.87M
Shares Outstanding (Diluted)341.88M

Key Highlights

  • 1Revenue increased by 6.4% to $2.39 billion in Q1 2017 compared to $2.25 billion in Q1 2016.
  • 2Net income attributable to Republic Services, Inc. grew to $187.8 million, a significant increase from $156.7 million in the prior year.
  • 3Diluted earnings per share improved to $0.55 from $0.45 year-over-year.
  • 4The company generated $444.3 million in cash flow from operating activities, indicating strong operational cash generation.
  • 5Investments in property and equipment were $223.9 million, supporting ongoing business needs and growth.
  • 6The company continued its share repurchase program, buying back 1.7 million shares for $98.9 million during the quarter.
  • 7Republic Services highlighted the positive impact of higher recycled commodity prices on revenue, noting a substantial increase in average prices for old corrugated containers and old newsprint.

Frequently Asked Questions

The primary drivers of the revenue increase were higher average yield (pricing), increased recycled commodity prices, and a modest increase in volume. Specifically, average yield contributed 2.3%, recycled commodities contributed 2.1%, and volume contributed 1.0% to the revenue growth.

While the cost of operations as a percentage of revenue slightly increased from 61.4% to 62.0%, the company managed this increase effectively given the revenue growth. Key cost increases were related to labor, fuel, and landfill operating costs, partially offset by favorable adjustments in risk management expenses and cost of goods sold related to recycling rebates.

The results indicate a positive trend with growing revenue and net income. Ongoing restructuring efforts are expected to yield further efficiencies. The company's strong operating cash flow and access to credit facilities provide ample liquidity to fund capital expenditures, acquisitions, dividends, and share repurchases, suggesting a stable and growth-oriented outlook.

Yes, the company has significant accrued landfill and environmental costs, totaling $1.81 billion. A notable item is the Bridgeton Landfill, with a recorded remediation liability of $192.9 million, and potential for significantly higher costs. Investors should monitor developments related to these environmental matters and the company's accruals for them.