01—Abstract
Summary
Summary of the 10-Q filed May 3, 2018. Cited figures are marked; the original filing is the authoritative source.
Republic Services, Inc. (RSG) reported solid financial results for the first quarter of 2018.
The company demonstrated revenue growth and improved profitability compared to the same period in the prior year. Revenue increased by 1.4% to $2.43 billiona, driven by positive pricing ("average yield") and increased volume across key service lines. Net income attributable to Republic Services, Inc. rose significantly to $237.7 million, or $0.72 per diluted share, up from $187.8 million, or $0.55 per diluted share, in Q1 2017.
This performance reflects effective operational management and a favorable impact from the Tax Cuts and Jobs Act, which reduced the effective tax rate. Key drivers for the quarter included growth in average yield across all lines of business and increased volume, particularly in large-container collection, landfill, and transfer station services. The company also saw growth in its energy services segment.
Despite a decline in revenue from recycled commodities due to lower market prices, the overall revenue growth and profitability improvement highlight the company's resilience and ability to manage costs effectively. The company continued its active share repurchase program, demonstrating a commitment to returning value to shareholders.
02—Key points
Key Highlights
- Revenue increased by 1.4% to $2.43 billion in Q1 2018 compared to Q1 2017.
- Net income attributable to Republic Services, Inc. grew to $237.7 million, or $0.72 per diluted share, from $187.8 million, or $0.55 per diluted share, year-over-year.
- The effective tax rate decreased to 23.4% in Q1 2018 from 36.6% in Q1 2017, benefiting from the Tax Cuts and Jobs Act.
- Volume growth in large-container collection, landfill, and transfer station services contributed positively to revenue.
- Energy services revenue saw an increase, driven by higher drilling activity.
- The company repurchased $254.5 million of its common stock in Q1 2018, a significant increase from $98.9 million in Q1 2017.
- The adoption of new revenue recognition standards (ASC 606) had a noticeable impact on reported revenue and cost of operations, reclassifying certain items.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Republic Services, Inc. kept $0.10.
- Revenue$2.43B100.0%
- Cost of revenue−$1.47B60.5%
- Gross profit$957.7M39.5%
- Operating costs−$553.5M22.8%
- Operating income$404.2M16.7%
- Interest, other & tax−$166.3M6.9%
- Net income$237.9M9.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 3, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $2.43B$2.39B | +1.5% |
| Cost of Revenue | $1.47B$1.48B | −1.0% |
| Gross Profit | $957.70M$908.70M | +5.4% |
| SG&A Expenses | $261.20M$253.50M | +3.0% |
| Operating Income | $404.20M$388.10M | +4.1% |
| Interest Expense | $94.80M$89.40M | +6.0% |
| Net Income | $237.90M$187.80M | +26.7% |
| EPS (Basic) | $0.72$0.55 | +30.9% |
| EPS (Diluted) | $0.72$0.55 | +30.9% |
| Shares Outstanding (Basic) | 330.65M339.87M | −2.7% |
| Shares Outstanding (Diluted) | 332.21M341.88M | −2.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the first quarter of 2018?
Revenue growth was primarily driven by an increase in average yield (revenue growth from changes in average price per unit of service) across all lines of business, alongside increased volume in key segments like large-container collection, landfill, and transfer stations. Energy services also contributed positively due to increased drilling activity.
How did the new revenue recognition standard (ASC 606) impact Republic Services' financials in this quarter?
The adoption of ASC 606, effective January 1, 2018, led to a reclassification of certain items. Municipal franchise fees and costs paid to suppliers for recycled commodities, previously recorded as cost of operations, were presented as a reduction of revenue in Q1 2018. This reclassification impacted reported revenue and cost of operations, with the adoption of the new standard contributing a (4.2)% effect on total revenue compared to the prior period's presentation.
What is the company's stance on returning capital to shareholders?
Republic Services demonstrated a strong commitment to shareholder returns in the first quarter of 2018. The company significantly increased its share repurchases, spending $254.5 million on buybacks, compared to $98.9 million in the prior year's quarter. Additionally, the board of directors approved a quarterly dividend of $0.345 per share, totaling $113.3 million in cash dividends declared for the quarter.
Are there any significant environmental or legal matters that investors should be aware of?
The company is involved in ongoing legal proceedings and environmental matters, including those related to the Bridgeton Landfill and West Lake Landfill Superfund site. While the company has accrued liabilities for these matters, it notes that future changes in estimates for remediation costs could materially affect its financial position. The company also received notices of violation and potential penalties related to other landfill operations, which it is actively managing and negotiating.
06—Continue