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Republic Services, Inc. Reports Fourth Quarter and Full-Year Results; Provides 2020 Full-Year Guidance

Republic Services logo (PRNewsfoto/Republic Services)

- Achieved Fourth Quarter Earnings of $0.90 Per Share and Adjusted Earnings of $0.91 Per Share, a 14 Percent Increase Over the Prior Year

- Generated $2.4 Billion of Cash Flow from Operations and $1.2 Billion of Adjusted Free Cash Flow in 2019

- Outperformed 2019 Adjusted Free Cash Flow and EPS Guidance

- Expanded Adjusted EBITDA Margin by 30 Basis Points for the Full Year

- Invested Over $525 Million in Acquisitions and Returned Approximately $900 Million of Cash to Shareholders in 2019

- Provided 2020 Financial Guidance

- Recognized on CDP Climate "A List" for Taking Lead on Climate Change

PHOENIX , Feb. 13, 2020 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $289.3 million , or $0.90 per diluted share, for the three months ended December 31, 2019, versus $301.0 million , or $0.92 per diluted share, for the comparable 2018 period. Excluding certain benefits and expenses, on an adjusted basis, net income for the three months ended December 31, 2019 , was $291.7 million , or $0.91 per diluted share, versus $260.0 million , or $0.80 per diluted share, for the comparable 2018 period.

For the year ended December 31, 2019 , net income was $1,073.3 million , or $3.33 per diluted share, versus $1,036.9 million , or $3.16 per diluted share, for the comparable 2018 period. On an adjusted basis, net income for the year ended December 31, 2019 , was $1,075.1 million , or $3.34 per diluted share, versus $1,014.9 million , or $3.09 per diluted share, for the comparable 2018 period.

"The Republic Services team finished the year strong, and we are well-positioned for continued success in 2020. By focusing on delivering superior service to our customers and increasing employee engagement, we profitably grew our business and outperformed our adjusted EPS and free cash flow guidance for the year," said Donald W. Slager , chief executive officer. "In 2019, we invested over $525 million in value-enhancing acquisitions to expand our leading market position and increase the scale of our service offerings. Our acquisition pipeline remains strong, and we could see another outsized year of investment in 2020."

Fourth Quarter and Full-Year Highlights:

  • Fourth quarter EPS was $0.90 per share, and adjusted EPS, a non-GAAP measure, was $0.91 per share, an increase of 14 percent over the prior year.
  • Full-year EPS was $3.33 per share, and adjusted EPS was $3.34 per share, an increase of 8 percent over the prior year. Adjusted EPS exceeded the Company's upwardly revised full-year guidance range.
  • Full-year cash provided by operating activities was $2.4 billion and adjusted free cash flow was $1.2 billion . Adjusted free cash flow exceeded the Company's full-year guidance range.
  • Cash flow invested in acquisitions was $526 million , or $463 million net of divestitures. The year-to-date annual revenue acquired, net of divestitures, was approximately $181 million .
  • Full-year cash returned to shareholders through dividends and share repurchases was $891 million and total shareholder return was 27 percent.
  • Full-year core price increased revenue by 4.7 percent. Core price consisted of 5.7 percent in the open market and 3.2 percent in the restricted portion of the business. This is the highest level of core price the Company has achieved in over a decade.
  • Full-year revenue growth from average yield was 2.8 percent, driven by small-container yield of 3.9 percent and landfill municipal solid waste of 3.3 percent.
  • Full-year adjusted EBITDA, a non-GAAP measure, was $2.9 billion and adjusted EBITDA margin was 28.3 percent, an increase of 30 basis points over the prior year. Underlying margin expanded 70 basis points after normalizing for the 40 basis point headwind from lower recycled commodity prices.
  • Republic continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The Company now has approximately $780 million in annual revenue, or 31 percent of its legacy $2.5 billion CPI-based book of business, tied to the water-sewer-trash index or a fixed-rate increase of 3 percent or greater.
  • The Company continued to reprice and de-risk its recycling collection and processing businesses. Through the end of the year, the Company repriced approximately 36 percent of its recycling collection contracts and 55 percent of its contracted recycling processing volume. The Company also implemented a recycling processing charge to its open market customers. As a result, the Company's earnings sensitivity to changes in recycled commodity prices is expected to decrease in 2020.
  • The Company was named to the prestigious CDP Climate "A List" for its science-based goals, strategies and actions to lower greenhouse gas emissions and mitigate climate risks.

2020 Financial Guidance

Republic's financial guidance is based on current economic conditions and does not assume any significant changes in the overall economy in 2020. Please refer to the Information Regarding Forward-Looking Statements section of this document.

Full-year 2020 financial guidance is as follows:

  • Adjusted Diluted Earnings per Share The Company expects adjusted diluted earnings per share to be in the range of $3.48 to $3.53 . This guidance includes a benefit from CNG tax credits of approximately 4-cents . Detail relating to the computation of adjusted diluted earnings per share is contained in the Reconciliation of 2020 Financial Guidance section of this document.
  • Adjusted Free Cash Flow:  Republic expects adjusted free cash flow to be in the range of $1,175 million to $1,225 million . This guidance includes a net benefit from CNG tax credits of approximately $30 million . Detail relating to the computation of adjusted free cash flow is contained in the Reconciliation of 2020 Financial Guidance section of this document.
  • Revenue:   Republic expects an increase in revenue of 4.25 to 5.00 percent. The expected change in revenue is comprised of the following:

 



Increase

(Decrease)


Average yield

3.0%


Volume

0.75 to 1.0


Environmental services

(0.25) to 0.0


Fuel recovery fees

-


Recycling processing and commodity sales

(0.25) to 0.0


Acquisitions / divestitures, net

1.0


Total change

4.25 to 5.00%

 

  • Property and Equipment: The Company anticipates receiving $1.2 billion of property and equipment, net of proceeds from the sale of property and equipment.
  • Adjusted EBITDA Margin: Republic expects adjusted EBITDA margin to expand by approximately 20 to 40 basis points.
  • Taxes: The Company expects an effective tax rate of approximately 21 percent and a non-cash charge of approximately $110 million related to solar energy investments that qualify for tax credits. The charge will be recorded as a loss from unconsolidated equity method investments.
  • Cash Utilization: Republic expects to invest approximately $200 million in tuck-in acquisitions and $120 million in solar energy investments that qualify for tax credits. Additionally, the Company expects to return approximately $925 million of cash to shareholders through approximately $525 million of dividends and $400 million in share repurchases.

"We increased our 2020 adjusted EPS and free cash flow guidance relative to the outlook we provided last October," added Mr. Slager. "We have a lot of positive momentum heading into 2020, including one of the strongest acquisition pipelines we have seen in quite some time. Additionally, this year we will continue the steady roll-out of our 'RISE' platform and in-cab technology. Through this technology, we look to further enhance the customer experience, empower our employees and increase productivity."

Company Declares Quarterly Dividend
Republic announced that its Board of Directors declared a regular quarterly dividend of $0.405 per share for stockholders of record on April 1, 2020 . The dividend will be paid on April 15, 2020 .

Presentation of Certain Non-GAAP Measures
Adjusted diluted earnings per share, adjusted net income, adjusted EBITDA, adjusted EBITDA margin and adjusted free cash flow are described in the Reconciliation of Certain Non-GAAP Measures section of this document. The adjusted diluted earnings per share and adjusted free cash flow related to the 2020 financial guidance are described in the Reconciliation of 2020 Financial Guidance section of this press release.

About Republic Services
Republic Services, Inc. is an industry leader in U.S. recycling and non-hazardous solid waste disposal. Through its subsidiaries, Republic's collection companies, transfer stations, recycling centers, landfills, and environmental services provide effective solutions to make responsible recycling and waste disposal effortless for its customers across the country. Its 36,000 employees are committed to providing a superior experience while fostering a sustainable Blue Planet ® for future generations to enjoy a cleaner, safer and healthier world. For more information, visit RepublicServices.com , or follow us at Facebook.com/RepublicServices , @RepublicService on Twitter and @republic_services on Instagram.

SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION

AND OPERATING DATA





REPUBLIC SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

 (in millions, except per share amounts)






December 31,


December 31,


2019


2018


(Unaudited)



ASSETS

Current assets:




Cash and cash equivalents

$

47.1



$

70.5


Accounts receivable, less allowance for doubtful accounts and other of $34.0 and $34.3, respectively

1,125.9



1,102.7


Prepaid expenses and other current assets

433.0



391.2


Total current assets

1,606.0



1,564.4


Restricted cash and marketable securities

179.4



108.1


Property and equipment, net

8,383.5



8,020.1


Goodwill

11,633.4



11,400.1


Other intangible assets, net

133.9



106.5


Other assets

747.6



417.8


Total assets

$

22,683.8



$

21,617.0


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Accounts payable

$

777.9



$

761.5


Notes payable and current maturities of long-term debt

929.9



690.7


Deferred revenue

336.0



338.7


Accrued landfill and environmental costs, current portion

132.6



130.6


Accrued interest

74.0



68.5


Other accrued liabilities

788.9



728.6


Total current liabilities

3,039.3



2,718.6


Long-term debt, net of current maturities

7,758.6



7,646.8


Accrued landfill and environmental costs, net of current portion

1,703.2



1,701.6


Deferred income taxes and other long-term tax liabilities, net

1,180.6



1,028.3


Insurance reserves, net of current portion

276.5



270.8


Other long-term liabilities

604.7



321.4


Commitments and contingencies




Stockholders' equity:




Preferred stock, par value $0.01 per share; 50 shares authorized; none issued




Common stock, par value $0.01 per share; 750 shares authorized; 353.3 and 351.9 issued including shares held in treasury, respectively

3.5



3.5


Additional paid-in capital

4,994.8



4,924.9


Retained earnings

5,317.3



4,750.5


Treasury stock, at cost; 34.5 and 29.4 shares, respectively

(2,199.6)



(1,782.6)


Accumulated other comprehensive income, net of tax

2.2



30.8


Total Republic Services, Inc. stockholders' equity

8,118.2



7,927.1


Non-controlling interests in consolidated subsidiary

2.7



2.4


Total stockholders' equity

8,120.9



7,929.5


Total liabilities and stockholders' equity

$

22,683.8



$

21,617.0


 

REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 (in millions, except per share data)










Three Months Ended

December 31,


Years Ended

December 31,


2019


2018


2019


2018

Revenue

$

2,576.7



$

2,530.0



$

10,299.4



$

10,040.9


Expenses:








Cost of operations

1,544.0



1,525.7



6,298.4



6,150.0


Depreciation, amortization and depletion

257.4



252.4



1,040.5



1,033.4


Accretion

20.4



20.0



81.9



80.7


Selling, general and administrative

285.7



284.5



1,091.9



1,059.5


Gain on disposition of assets and impairments, net

8.8



(39.8)



(14.7)



(44.9)


Restructuring charges

1.2



3.9



14.2



26.4


Operating income

459.2



483.3



1,787.2



1,735.8


Interest expense

(95.1)



(96.4)



(392.0)



(383.8)


Loss from unconsolidated equity method investments

(85.0)



(30.0)



(112.2)



(35.8)


Loss on extinguishment of debt







(0.3)


Interest income

1.0



0.6



6.4



1.6


Other (expense) income, net

4.9



(0.1)



6.4



3.4


Income before income taxes

285.0



357.4



1,295.8



1,320.9


Provision (benefit) for income taxes

(5.0)



56.3



222.0



283.3


Net income

290.0



301.1



1,073.8



1,037.6


Net income attributable to non-controlling interests in consolidated subsidiary

(0.7)



(0.1)



(0.5)



(0.7)


Net income attributable to Republic Services, Inc.

$

289.3



$

301.0



$

1,073.3



$

1,036.9


Basic earnings per share attributable to Republic Services, Inc. stockholders:








Basic earnings per share

$

0.91



$

0.93



$

3.34



$

3.17


Weighted average common shares outstanding

319.6



324.1



321.1



326.9


Diluted earnings per share attributable to Republic Services, Inc. stockholders:








Diluted earnings per share

$

0.90



$

0.92



$

3.33



$

3.16


Weighted average common and common equivalent shares outstanding

320.5



325.5



322.0



328.4


Cash dividends per common share

$

0.405



$

0.375



$

1.560



$

1.440


 

...

REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in millions)


Years Ended December 31,


2019


2018

Cash provided by operating activities:




Net income

$

1,073.8



$

1,037.6


Adjustments to reconcile net income to cash provided by operating activities:




Depreciation, amortization, depletion and accretion

1,122.4



1,114.1


Non-cash interest expense

48.8



41.2


Restructuring related charges

14.2



26.4


Stock-based compensation

39.5



39.0


Deferred tax provision (benefit)

166.1



152.1


Provision for doubtful accounts, net of adjustments

34.0



34.8


Loss on extinguishment of debt



0.3


Gain on disposition of assets and asset impairments, net

(13.8)



(58.9)


Environmental adjustments

(11.9)



5.0


Loss from unconsolidated equity method investment

112.2



35.8


Other non-cash items

(5.6)



0.6


Change in assets and liabilities, net of effects from business acquisitions and divestitures:




Accounts receivable

(38.3)



(29.6)


Prepaid expenses and other assets

(109.7)



(152.5)


Accounts payable

6.4



85.9


Restructuring expenditures

(10.6)



(24.7)


Capping, closure and post-closure expenditures

(78.2)



(71.9)


Remediation expenditures

(49.1)



(48.8)


Other liabilities

51.9



25.3


Proceeds from retirement of certain hedging relationships



31.1


Cash provided by operating activities

2,352.1



2,242.8


Cash used in investing activities:




Purchases of property and equipment

(1,207.1)



(1,071.8)


Proceeds from sales of property and equipment

21.7



31.6


Cash used in acquisitions and investments, net of cash and restricted cash acquired

(575.1)