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Republic Services Misses Estimates

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Republic Services, Inc. (RSG), a leading waste management company, reported lackluster fourth quarter and full year 2012 results as the continued challenging macroeconomic environment took its toll on the performance. The company reported a net income of $127.0 million or 35 cents per share in fourth quarter 2012 versus $191.0 million or 51 cents per share in the year-earlier quarter. Excluding one-time items, adjusted earnings for the reported quarter were $133.4 million or 37 cents per share compared to $195.3 million or 53 cents in the year-ago quarter. The adjusted earnings for the quarter missed the Zacks Consensus Estimate by 6 cents.

For full year 2012, Republic Services reported a net income of $571.8 million or $1.55 per share vis-à-vis $589.2 million or $1.56 per share in the preceding year. Excluding one-time items, adjusted earnings for 2012 were $663.4 million or $1.80 per share compared to $738.3 million or $1.96 per share in the previous year. The adjusted earnings for 2012 fell short of the Zacks Consensus Estimate by 7 cents.

Total revenue increased marginally to $2.028 billion in the reported quarter from $2.025 billion in the prior-year period. For full year 2012, total revenue decreased to $8.118 billion from $8.193 billion in 2011. The 0.9% year-over-year decrease in revenues was primarily due to a decline in volume and recycling commodities.

Adjusted EBITDA for fourth quarter 2012 were $535.1 million versus $603.6 million in the year-ago quarter. For full year 2012, adjusted EBITDA were $2.289 billion compared to $2.502 in 2011.

Segment Performance

Revenues from the Collection segment increased 3.0% year over year to $1.58 billion as all the sub-segments, namely Residential, Commercial, and Industrial fared relatively better. The Transfer segment revenues fell 7.9% year over year to $95.3 million. Revenues from the Landfill segment declined 5.7% year over year in the reported quarter, while sale from Other segment plummeted 15.4% year over year.

Financial Update

Cash and cash equivalents were $67.6 million at year-end 2012, compared with $66.3 million in the prior-year period. Long-term debt, excluding current maturities, totaled $7.05 billion at year-end 2012 compared to $6.89 billion as of Dec 31, 2011.

Cash from operating activities aggregated $1.5 billion for full year 2012 compared to $1.8 billion in the previous year. Adjusted free cash flow was $768.2 million for 2012 versus $908.8 million for 2011.

Share Repurchase

Republic Services has a share repurchase program in place since Nov 2010. By the end of 2012, the company repurchased 29.0 million shares under this program at an average price of $28.49 each, including 4.3 million shares for $117.3 million at $27.56 per share during the fourth quarter.


Adjusted earnings are projected to be in the range of $1.86-$1.91 per share in 2013. The company expects adjusted free cash flow of $675 million to $700 million in the ongoing year, with total revenue increasing 2.0% to 2.5% year over year.

Moving Forward

Republic Services expects to remain committed to its long-term strategy with a healthy cash flow and disciplined approach to cash utilization. At the same time, the company expects to face severe competitive pressure from industry bigwigs such as Clean Harbors, Inc. (CLH) and Waste Management, Inc. (WM), carrying a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively. Another competitor worth mentioning is Stericycle Inc. (SRCL). Republic Services has a Zacks Rank #2 (Buy).

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