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Republic Services, Inc. Reports Strong First Quarter 2020 Results

Republic Services logo (PRNewsfoto/Republic Services)

- Reported Earnings and Adjusted Earnings of $0.77 Per Share, a 5 Percent Increase in Adjusted Earnings Over the Prior Year

- Invested $63 Million in Acquisitions

- Launched $20 Million "Committed to Serve" Initiative to Support Employees, Customers and Communities

- Named to the 2020 World's Most Ethical Companies® List by Ethisphere for Fourth Consecutive Year

PHOENIX , May 5, 2020 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $246.3 million , or $0.77 per diluted share, for the three months ended March 31, 2020 , versus $234.2 million , or $0.72 per diluted share, for the comparable 2019 period. Excluding certain gains and expenses, on an adjusted basis, net income for the three months ended March 31, 2020 was also $246.3 million , or $0.77 per diluted share, versus $237.2 million , or $0.73 per diluted share, for the comparable 2019 period.

"In all my time at Republic Services, I've never been more proud to be a part of the Republic team. Our 36,000 employees remain committed to operating safely and efficiently while continuing to provide consistent, reliable service to our customers during these unprecedented times," said Donald W. Slager , chief executive officer. "Over the years, we've made several key investments, including developing standardized processes and procedures, implementing innovative technology to enhance employee safety and efficiency, consolidating our customer service operations and building world-class procurement and business continuity functions. These investments are yielding strong returns and enabling us to quickly adapt and adjust our business to align with today's dynamic market conditions. We have built a strong foundation and resilient business, which positions us well to manage through this crisis and come out of it stronger than ever."

"The safety and well-being of our people is our top priority and at the forefront of every decision we make. We have taken several steps to keep our employees safe, including providing masks, implementing enhanced cleaning procedures and expanding employee benefits," said Jon Vander Ark, president. "We also launched our $20 million 'Committed to Serve' initiative to recognize our frontline employees who are serving our customers every day, while also helping support our small-business customers across the nation. Our goal is to support the economy at the local level, benefiting our small-business customers and communities as well as our employees."

First-Quarter Highlights:

  • EPS was $0.77 per share. Adjusted EPS, a non-GAAP measure, was $0.77 per share, an increase of 5 percent over the prior year.
  • Cash provided by operating activities was $570 million , an increase of 3 percent versus the prior year. Adjusted free cash flow, a non-GAAP measure, was $267 million , which decreased versus the prior year primarily due to the timing of capital expenditures and cash taxes.
  • Cash flow invested in acquisitions was $63 million . The annual revenue acquired was approximately $30 million .
  • Total cash returned to shareholders through dividends and share repurchases was $228 million .
  • As of March 31, 2020 , Republic had $1.9 billion of available liquidity, including $1.6 billion of available borrowing capacity under its credit facilities and $282 million of cash.
  • Core price increased revenue by 5.2 percent, and average yield was 2.9 percent.
  • Adjusted EBITDA, a non-GAAP measure, was $723 million and adjusted EBITDA margin was 28.3 percent of revenue, consistent with the prior year. Adjusted EBITDA margin was impacted by the following: a 20 basis point headwind from lower recycled commodity prices, a 50 basis point headwind from an additional workday in the quarter relative to the prior year, and a 40 basis point benefit from lower fuel prices and CNG tax credits. Normalizing for these items, adjusted EBITDA margin increased 30 basis points.
  • The Company continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The Company now has approximately $815 million in annual revenue, or 33 percent of its approximately $2.5 billion CPI-based book of business, tied to either a waste-related index or a fixed-rate increase of 3 percent or greater.
  • The Company's average recycled commodity price per ton sold in the first quarter was $76 . This represents a sequential increase from the fourth quarter of $10 per ton and a decrease versus the prior year of $17 per ton.
  • Republic was named to the elite 2020 World's Most Ethical Companies List® by Ethisphere, a global leader in defining and advancing the standards of ethical business practices.
  • The Company launched its $20 million "Committed to Serve" initiative. The initiative is designed to help frontline employees, customers and local communities. For more information, visit RepublicServices.com/CommittedToServe.

Business Update

The Company is suspending its full-year 2020 detailed financial guidance. At this time, the full impact of the COVID-19 pandemic on the U.S. economy remains uncertain, and the Company has limited visibility into the timing and sequencing of increases in economic activity in the markets where it operates.

"We had a strong start to the year. Despite the impact of the pandemic in March, we delivered solid first quarter results. We increased both revenue and adjusted EBITDA by 3.4 percent and expanded underlying adjusted EBITDA margin by 30 basis points," said Mr. Slager. "While the future remains uncertain, we are beginning to see signs of increasing economic activity. We remain confident in our ability to quickly adjust our costs and capital expenditures to align with changes in demand. Assuming the economy continues to recover, and GDP sequentially improves in the third and fourth quarter as currently predicted by economists, we expect to generate over $1 billion of adjusted free cash flow in 2020."

Company Declares Quarterly Dividend

Republic previously announced that its Board of Directors declared a regular quarterly dividend of $0.405 per share for stockholders of record on July 1, 2020 . The dividend will be paid on July 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.

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)






March 31,


December 31,


2020


2019


(Unaudited)



ASSETS

Current assets:




Cash and cash equivalents

$

281.6



$

47.1


Accounts receivable, less allowance for doubtful accounts and other of $32.4 and $34.0, respectively

1,095.3



1,125.9


Prepaid expenses and other current assets

377.0



433.0


Total current assets

1,753.9



1,606.0


Restricted cash and marketable securities

117.7



179.4


Property and equipment, net

8,442.0



8,383.5


Goodwill

11,667.5



11,633.4


Other intangible assets, net

130.0



133.9


Other assets

797.8



747.6


Total assets

$

22,908.9



$

22,683.8


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Accounts payable

$

660.6



$

777.9


Notes payable and current maturities of long-term debt

24.5



929.9


Deferred revenue

342.9



336.0


Accrued landfill and environmental costs, current portion

131.1



132.6


Accrued interest

77.9



74.0


Other accrued liabilities

743.6



814.2


Total current liabilities

1,980.6



3,064.6


Long-term debt, net of current maturities

8,952.2



7,758.6


Accrued landfill and environmental costs, net of current portion

1,716.5



1,703.2


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

1,191.9



1,180.6


Insurance reserves, net of current portion

262.6



276.5


Other long-term liabilities

684.9



579.4


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; 354.0 and 353.3 issued including shares held in treasury, respectively

3.5



3.5


Additional paid-in capital

5,013.1



4,994.8


Retained earnings

5,433.6



5,317.3


Treasury stock, at cost; 35.9 and 34.5 shares, respectively

(2,315.4)



(2,199.6)


Accumulated other comprehensive income (loss), net of tax

(17.6)



2.2


Total Republic Services, Inc. stockholders' equity

8,117.2



8,118.2


Non-controlling interests in consolidated subsidiary

3.0



2.7


Total stockholders' equity

8,120.2



8,120.9


Total liabilities and stockholders' equity

$

22,908.9



$

22,683.8


 

REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 (in millions, except per share data)






Three Months Ended March 31,


2020


2019

Revenue

$

2,553.9



$

2,470.6


Expenses:




Cost of operations

1,550.1



1,506.1


Depreciation, amortization and depletion

268.6



251.5


Accretion

20.9



20.5


Selling, general and administrative

277.1



266.4


Withdrawal costs - multiemployer pension funds

4.3




(Gain) loss on business divestitures and impairments, net

(3.9)



0.3


Restructuring charges

3.8



3.0


Operating income

433.0



422.8


Interest expense

(96.6)



(100.4)


Loss from unconsolidated equity method investments

(13.2)



(11.6)


Interest income

0.3



1.9


Other (loss) income, net

(0.9)



0.1


Income before income taxes

322.6



312.8


Provision for income taxes

75.8



77.9


Net income

246.8



234.9


Net income attributable to non-controlling interests in consolidated subsidiary

(0.5)



(0.7)


Net income attributable to Republic Services, Inc.

$

246.3



$

234.2


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




Basic earnings per share

$

0.77



$

0.73


Weighted average common shares outstanding

319.6



322.3


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




Diluted earnings per share

$

0.77



$

0.72


Weighted average common and common equivalent shares outstanding

320.2



323.5


Cash dividends per common share

$

0.405



$

0.375


 

REPUBLIC SERVICES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (in millions)


Three Months Ended March 31,


2020


2019

Cash provided by operating activities:




Net income

$

246.8



$

234.9


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




Depreciation, amortization, depletion and accretion

289.5



272.0


Non-cash interest expense

14.9



11.0


Restructuring related charges

3.8



3.0


Stock-based compensation

9.9



11.1


Deferred tax provision

17.6



27.7


Provision for doubtful accounts, net of adjustments

4.9



7.5


Gain on disposition of assets and asset impairments, net

(4.9)



(1.4)


Withdrawal costs - multiemployer pension funds

4.3




Environmental adjustments

(0.4)



(10.5)


Loss from unconsolidated equity method investments

13.2



11.6


Other non-cash items

1.2



(0.1)


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




Accounts receivable

28.0



23.2


Prepaid expenses and other assets

88.2



56.8


Accounts payable

(63.5)



(45.6)


Restructuring expenditures

(3.8)



(4.6)


Capping, closure and post-closure expenditures

(8.7)



(8.4)


Remediation expenditures

(17.2)



(7.2)


Other liabilities

(54.3)



(27.3)


Cash provided by operating activities

569.5



553.7


Cash used in investing activities:




Purchases of property and equipment

(346.8)



(299.3)


Proceeds from sales of property and equipment

6.0



4.1


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

(61.0)



(62.7)


Cash received from business divestitures

(0.2)




Purchases of restricted marketable securities

(14.0)



(5.0)


Sales of restricted marketable securities

5.6



5.1


Other

(25.0)



(1.3)


Cash used in investing activities

(435.4)



(359.1)


Cash provided by (used in) financing activities:




Proceeds from notes payable and long-term debt, net of fees

1,974.9



1,104.9


Proceeds from issuance of senior notes, net of discount and fees

985.6




Payments of notes payable and long-term debt and senior notes

(2,688.7)



(1,052.6)


Issuances of common stock, net

(9.5)



(9.1)


Purchases of common stock for treasury

(98.8)



(111.5)


Cash dividends paid

(129.2)



(121.0)


Distributions paid to non-controlling interests in consolidated subsidiary

(0.2)




Contingent consideration payments

(2.2)



(2.1)


Cash provided by (used in) financing activities

31.9



(191.4)


Increase in cash, cash equivalents, restricted cash and restricted cash equivalents

166.0



3.2


Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year

177.4



133.3


Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

$

343.4



$

136.5


You should read the following information in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2019 as well as our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 , expected to be filed with the Securities and Exchange Commission on or about May 6, 2020 . All amounts below are in millions and as a percentage of our revenue, except per share data.

REVENUE
The following table reflects our total revenue by line of business for the three months ended March 31, 2020 and 2019:


Three Months Ended March 31,


2020


2019

Collection:








Residential

$

568.5



22.3

%


$

557.4



22.6

%

Small-container

805.7



31.5



777.9



31.5


Large-container

552.4



21.6



530.7



21.5


Other

12.3



0.5



10.8



0.4


Total collection

1,938.9



75.9



1,876.8



76.0


Transfer

323.0





294.9




Less: intercompany

(186.0)





(172.0)




Transfer, net

137.0



5.4



122.9



5.0


Landfill

558.3





536.4




Less: intercompany

(252.3)





(239.6)




Landfill, net

306.0



12.0



296.8



12.0


Environmental services

46.8



1.8



45.0



1.8


Other:








Recycling processing and commodity sales

67.1



2.6



72.9



3.0


Other non-core

58.1



2.3



56.2



2.2


Total other

125.2



4.9



129.1



5.2


Total revenue

$

2,553.9



100.0

%


$

2,470.6



100.0

%









The following table reflects changes in components of our revenue, as a percentage of total revenue, for the three months ended March 31, 2020 and 2019:


Three Months Ended March 31,


2020


2019

Average yield

2.9

%


2.9

%

Fuel recovery fees

(0.2)



0.2


Total price

2.7



3.1


Volume (1)

...