10-QPeriod: Q2 FY2020

REPUBLIC SERVICES, INC. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 7, 2020For Securities:RSG

Summary

Republic Services, Inc. (RSG) reported its second-quarter 2020 financial results, showing a slight decrease in revenue compared to the prior year, largely impacted by the COVID-19 pandemic. The company experienced reduced volumes in its collection and landfill services as businesses and consumers adjusted service levels. Despite revenue headwinds, RSG demonstrated resilience through effective cost management and operational efficiencies. The company maintained a strong balance sheet with substantial cash reserves and manageable debt levels. Management highlighted efforts to navigate the pandemic's challenges, including increased safety protocols and cost containment measures. RSG's focus on essential services and operational agility positions it to manage the ongoing economic uncertainty while continuing to serve its customer base.

Financial Highlights

55 data points
Beta

Revenue

$2.45B

40.2% Gross Margin

Net Income

$226.30M

9.2% Net Margin

EPS (Diluted)

$0.71

Total Assets

$22.83B

Cash & Equivalents

$269.70M

Free Cash Flow

$456.10M

Financial Statements
Beta
Revenue$2.45B
Cost of Revenue$1.47B
Gross Profit$986.50M
SG&A Expenses$262.10M
Operating Income$395.40M
Interest Expense$91.80M
Net Income$226.30M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)319.05M
Shares Outstanding (Diluted)319.56M

Key Highlights

  • 1Revenue for the six months ended June 30, 2020, decreased by 1.3% to $5,008.3 million compared to $5,075.9 million in the same period of 2019.
  • 2Net income attributable to Republic Services, Inc. for the six months ended June 30, 2020, was $471.8 million, or $1.47 per diluted share, compared to $485.7 million, or $1.50 per diluted share, for the same period in 2019.
  • 3The company reported significant increases in cash provided by operating activities, up to $1,333.5 million for the six months ended June 30, 2020, from $1,135.6 million in the prior year.
  • 4COVID-19 pandemic-related costs amounted to $34.2 million for the first six months of 2020, impacting profitability.
  • 5Republic Services took on a $31.6 million liability in June 2020 related to a withdrawal event from a multiemployer pension fund.
  • 6The company amended its credit facility in July 2020 to enhance flexibility for future acquisitions, revising its sole remaining financial covenant to a total debt to EBITDA ratio.
  • 7Available cash and cash equivalents, including restricted cash, increased to $350.7 million as of June 30, 2020, from $177.4 million as of December 31, 2019.

Frequently Asked Questions

The COVID-19 pandemic led to a decrease in service levels for certain customers, resulting in lower volumes for collection and landfill services. This impacted revenue, although the company also experienced decreases in certain variable operating costs. Additionally, Republic Services incurred incremental costs related to the pandemic, such as for safety equipment and hygiene products, totaling $34.2 million for the first six months of 2020.

Republic Services maintained a strong liquidity position. Cash and cash equivalents, including restricted cash, increased significantly to $350.7 million as of June 30, 2020, from $177.4 million as of December 31, 2019. The company also had substantial availability under its $2.25 billion unsecured revolving credit facility.

The company has a well-structured debt portfolio with varying maturities. In February 2020, Republic Services issued new senior notes with lower interest rates and used the proceeds to repay higher-coupon senior notes that matured. The company amended its credit facility in July 2020 to provide more flexibility for acquisitions and ensure continued compliance with its debt covenants. As of June 30, 2020, its total debt to EBITDA ratio was within the allowed covenant limit.

The company disclosed potential liabilities related to environmental remediation, including ongoing efforts at the Bridgeton and West Lake Landfills in Missouri. Additionally, Republic Services recorded a $31.6 million liability related to a withdrawal event from a multiemployer pension fund in June 2020. While the company believes its recorded liabilities are adequate, significant uncertainties remain regarding the ultimate costs of certain environmental matters.