Republic Services, Inc. Reports Fourth Quarter Results and Provides 2012 Outlook PHOENIX, Feb. 9, 2012 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $191.0 million, or $0.51 per share, for the three months ended December 31, 2011, versus $147.6 million, or $0.38 per share, for the comparable period last year. Logo: http://photos.prnewswire.com/prnh/20100304/RSLOGO Republic's net income for the three months ended December 31, 2011 and 2010 includes a number of charges and other expenses that impacted its results. A detail of these charges and other expenses is contained in the Reconciliation of Certain Non-GAAP Measures section of this document. Excluding these items, net income for the three months ended December 31, 2011 and 2010 would have been $195.3 million, or $0.53 per diluted share, and $160.8 million, or $0.42 per diluted share, respectively. Excluding certain charges and other expenses recorded during 2011 and 2010 as described in the Reconciliation of Certain Non-GAAP Measures section of this document, adjusted earnings before interest, taxes, depreciation, depletion, amortization and accretion (adjusted EBITDA) for the three months ended December 31, 2011 would have been $603.6 million, or 29.8% as a percentage of revenue, compared to $616.8 million, or 30.5% as a percentage of revenue, for the comparable 2010 period. Revenue for the three months ended December 31, 2011 increased to $2,025.2 million compared to $2,020.8 million for the same period in 2010. Core price for the three months ended December 31, 2011 increased 0.6%, fuel recovery fees increased 1.0% and acquisitions / divestitures, net increased 0.3%. Partially offsetting this revenue growth of 1.9% were decreases in recycling commodities pricing of 0.1%, volume of 0.2% and 1.4% due to the end of our San Mateo County collection contract and our disposal and transportation contract with the City of Toronto effective December 31, 2010. For the year ended December 31, 2011, net income was $589.2 million, or $1.56 per diluted share, versus $506.5 million, or $1.32 per diluted share, for the comparable period last year. Republic's net income for the years ended December 31, 2011 and 2010 includes a number of charges and other expenses that impacted its results. Excluding these items, net income for the years ended December 31, 2011 and 2010 would have been $738.3 million, or $1.96 per diluted share, and $657.8 million, or $1.71 per diluted share, respectively. Excluding certain charges and other expenses recorded during 2011 and 2010 as described in the Reconciliation of Certain Non-GAAP Measures section of this document, adjusted EBITDA for the year ended December 31, 2011 would have been $2,502.4 million, or 30.5% as a percentage of revenue, compared to $2,517.1 million, or 31.1% as a percentage of revenue, for the comparable 2010 period. Revenue for the year ended December 31, 2011 increased to $8,192.9 million compared to $8,106.6 million for 2010. Core price for the year ended December 31, 2011 increased 0.8%, fuel recovery fees increased 1.0%, commodities pricing increased 1.0% and acquisitions / divestitures, net increased 0.1%. Partially offsetting this revenue growth of 2.9% were decreases of 0.4% from core volume and 1.4% due to the end of our San Mateo County collection contract and our disposal and transportation contract with the City of Toronto effective December 31, 2010. "I am very pleased with our 2011 performance," said Donald W. Slager, President and Chief Executive Officer. Our strong operational focus allowed the Company to achieve a record level of free cash flow. We continue to have a disciplined approach in the utilization of cash flow, which includes re-investing in our business, acquisitions and returning cash through share repurchases and dividends. During 2011, Republic returned approximately $770 million to its owners through repurchases and dividends. We remain focused on improving our return on capital through pricing that exceeds cost increases and initiatives that enhance our productivity. Additionally, we remain committed to maintaining our strong credit profile and investment grade ratings as we continue to grow the business. Company Declares Quarterly Dividend Republic also announced that its Board of Directors declared a regular quarterly dividend of $0.22 per share for stockholders of record on April 2, 2012. The dividend will be paid on April 16, 2012. Fiscal Year 2012 Outlook Republic's guidance is based on current economic conditions which assume modest improvement in the overall economy in 2012. Please refer to the Information Regarding Forward-Looking Statements section of this document. Specific guidance is as follows: Adjusted Free Cash Flow: We expect adjusted free cash flow for 2012 to be $775 million to $800 million. Adjusted free cash flow consists of cash provided by operating activities, less property and equipment received, plus proceeds from the sales of property and equipment. Adjusted free cash flow guidance excludes merger related expenditures, certain legacy tax settlement payments and the cash tax benefit for debt extinguishment. Adjusted Diluted Earnings per Share: We expect 2012 adjusted diluted earnings per share to be in the range of $1.98 to $2.02. Adjusted diluted earnings per share exclude loss on extinguishment of debt. Revenue: We expect an increase in revenue for 2012 of 1.5 to 2.0%. This consists of an increase of 1.0 to 1.5% resulting from core price increases, 0.5% increase in volume, 0.5% increase from acquisitions / divestitures, net, partially offset by a net decline of 0.5% from fuel recovery fees and commodities pricing, as shown below: Decrease Core price 1.0 to 1.5% Fuel recovery fees Recycling commodities Acquisitions / divestitures, net Total change 1.5 to 2.0% Our guidance for fuel recovery fees and commodities assumes pricing at December 2011 levels. Property and Equipment: In 2012, we anticipate receiving $860 million of property and equipment. Purchases of property and equipment as reflected on our consolidated statement of cash flows for 2012 are expected to be $920 million and represent amounts to be paid during 2012 for such expenditures. The difference between property and equipment received and purchases of property and equipment is adjustments for $60 million of property and equipment received during 2011, but to be paid for in 2012. Margins: We expect EBITDA margins for 2012 to be 30.5%, consistent with our 2011 performance. Taxes: We expect our provision for income taxes in 2012, excluding loss on extinguishment of debt, to be 39.0%. In 2012, we expect cash taxes as a percentage of the overall tax provision, included in our adjusted earnings per share and adjusted free cash flow, to be approximately 80%. Mr. Slager, commenting on the Company's priorities, stated, "In 2012, we will continue to focus on and invest in productivity and cost improvement projects that will enhance our customers' experience with Republic. These projects include investing in automated collection vehicles, implementing a standardized maintenance program and expanding our fleet of natural gas vehicles. We also will continue to invest in people who assure our success with customers and allow us to be an employer of choice for top talent. About Republic Republic Services, Inc. provides recycling and solid waste collection, transfer and disposal services in the United States. The Company's various operating units, including collection companies, transfer stations, recycling centers and landfills, are focused on providing reliable environmental services and solutions for commercial, industrial, municipal and residential customers. For more information, visit the Republic Services website at www.republicservices.com. The Company participates in investor presentations and conferences throughout the year. Interested parties can find a schedule of these conferences at www.republicservices.com by selecting "Calendar" under the Investor Relations tab. Live audio presentations from earnings calls and investor conferences are webcast on the Republic website. Accounts receivable, less allowance for doubtful accounts of $48.1 and $50.9, respectively Restricted cash and marketable securities Notes payable and current maturities of long-term debt Accrued landfill and environmental costs, current portion Long-term debt, net of current maturities Accrued landfill and environmental costs, net of current portion Deferred income taxes and other long-term tax liabilities Self-insurance reserves, net of current portion Preferred stock, par value $0.01 per share; 50 shares authorized; none issued Common stock, par value $0.01 per share; 750 shares authorized; 402.1 and 400.2 issued including shares held in treasury, respectively Treasury stock, at cost (32.2 and 16.5 shares, respectively) Accumulated other comprehensive (loss) income, net of tax Total Republic Services, Inc. stockholders' equity Cost of operations Depreciation, amortization and depletion Accretion Loss (gain) on disposition of assets and impairments, net Net (income) loss attributable to noncontrolling interests Net income attributable to Republic Services, Inc. Basic earnings per share attributable to Republic Services, Inc. stockholders: Diluted earnings per share attributable to Republic Services, Inc. stockholders: Weighted average common and common equivalent shares outstanding Cash dividends per common share Cash provided by operating activities: Depreciation and amortization of property and equipment Landfill depletion and amortization Amortization of intangible and other assets Non-cash interest expense - debt Non-cash interest expense - other Restructuring related charges Deferred tax provision Provision for doubtful accounts, net of adjustments Excess income tax benefit from stock option exercises Loss on disposition of assets, net Other non-cash items Change in assets and liabilities, net of effects from business acquisitions and divestitures: Restructuring and synergy related expenditures Capping, closure and post-closure expenditures Remediation expenditures Cash provided by operating activities Cash used in investing activities: Proceeds from sales of property and equipment Cash used in acquisitions, net of cash acquired Cash proceeds from divestitures, net of cash divested Change in restricted cash and marketable securities Cash used in investing activities Cash used in financing activities: Proceeds from notes payable and long-term debt Proceeds from issuance of senior notes, net of discount Payments of notes payable and long-term debt Premiums paid on extinguishment of debt Fees paid to issue and retire senior notes and certain hedging relationships Issuances of common stock Purchases of common stock for treasury Cash dividends paid Distributions paid to noncontrolling interests Cash used in financing activities (Decrease) increase in cash and cash equivalents 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, 2010. All amounts below are in millions and as a percentage of our revenue, except per share data. The following table reflects our total revenue by line of business for the three and twelve months ended December 31: Collection: Residential Commercial Industrial Total collection Transfer Less: Intercompany Transfer, net Landfill Landfill, net Sale of recycling materials Other non-core The following table reflects changes in our revenue for the three and twelve months ended December 31: Total price San Mateo and Toronto contract losses Total internal growth Cost of operations includes labor and related benefits, which consists of salaries and wages, health and welfare benefits, incentive compensation and payroll taxes. It also includes transfer and disposal costs representing tipping fees paid to third party disposal facilities and transfer stations; maintenance and repairs relating to our vehicles, equipment and containers, including related labor and benefit costs; transportation and subcontractor costs, which include costs for independent haulers who transport our waste to disposal facilities and costs for local operators who provide waste handling services associated with our national accounts in markets outside our standard operating areas; fuel, which includes the direct cost of fuel used by our vehicles, net of fuel credits; disposal franchise fees and taxes consisting of landfill taxes, municipal franchise fees, host community fees and royalties; landfill operating costs, which includes landfill accretion, financial assurance, leachate disposal and other landfill maintenance costs; risk management, which includes casualty insurance premiums and claims; cost of goods sold, which includes material costs paid to suppliers associated with recycling commodities; and other, which includes expenses such as facility operating costs, equipment rent and gains or losses on sale of assets used in our operations. The following table summarizes the major components of our cost of operations for the three and twelve months ended December 31: Labor and related benefits Transfer and disposal costs Maintenance and repairs Transportation and subcontract costs Fuel Franchise fees and taxes Landfill operating costs Risk management Total cost of operations The cost categories shown above may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies. Selling, general and administrative expenses include salaries, health and welfare benefits and incentive compensation for corporate and field general management, field support functions, sales force, accounting and finance, legal, management information systems and clerical and administrative departments. Other expenses include rent and office costs, fees for professional services provided by third parties, marketing, investor and community relations, directors' and officers' insurance, general employee relocation, travel, entertainment and bank charges, but excludes any such amounts recorded as restructuring charges. The following table provides the components of our selling, general and administrative costs for the three and twelve months ended December 31: Salaries Provision for doubtful accounts Costs to achieve synergies Total selling, general and administrative expenses As such, you should take care when comparing our selling, general and administrative expenses by cost component to that of other companies. Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization and Accretion The following table calculates earnings before interest, taxes, depreciation, depletion, amortization and accretion (EBITDA), which is not a measure determined in accordance with U.S. generally accepted accounting principles (GAAP), for the three and twelve months ended December 31: Net income (loss) attributable to noncontrolling interests We believe that the presentation of EBITDA is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash and other costs. EBITDA demonstrates our ability to execute our financial strategy, which includes reinvesting in existing capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit rating and minimizing debt, paying cash dividends, repurchasing our common stock, and maintaining and improving our market position through business optimization. This measure has limitations. Although depreciation, depletion, amortization and accretion are considered operating costs in accordance with GAAP, they represent the allocation of non-cash costs generally associated with long-lived assets acquired or constructed in prior years. Our definition of EBITDA may not be comparable to similarly titled measures presented by other companies. Adjusted Earnings Reported diluted earnings per share were $0.51 and $1.56 for the three and twelve months ended December 31, 2011 versus $0.38 and $1.32 for the comparable 2010 periods. We recorded a number of charges, other expenses and net (gain) loss on disposition of assets that impacted our EBITDA, pre-tax income, net income attributable to Republic Services, Inc. (Net Income - Republic) and diluted earnings per share; these items primarily consist of the following: Pre-tax Income - Republic per Share Loss on disposition of assets and impairments, net During December 2011, we reached a settlement with the IRS on the treatment of a transaction involving partnership interests that were exchanged by Allied in 2002. Also during December 2011, the IRS completed its examination of Allied's 2000 through 2003 tax years. The resolution of these matters reduced our effective tax rate for the quarter and year. We believe that the presentation of adjusted EBITDA, adjusted pre-tax income, adjusted net income attributable to Republic Services, Inc., and adjusted diluted earnings per share, which are not measures determined in accordance with GAAP, provide an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. Comparable charges and costs have been incurred in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Our definition of adjusted EBITDA, adjusted pre-tax income, adjusted net income attributable to Republic Services Inc., and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. We define free cash flow, which is not a measure determined in accordance with GAAP, as cash provided by operating activities less purchases of property and equipment plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows. The following table calculates our free cash flow for the three and twelve months ended December 31: Adjusted free cash flow, which is not a measure determined in accordance with GAAP, for the twelve months ended December 31, is calculated in the following table: Property and equipment received Merger related expenditures, net of tax Divestiture related tax payments Cash tax benefit for debt extinguishment Tax settlement related to BFI risk management companies Adjusted free cash flow We believe that the presentation of adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after certain expenditures. It also demonstrates our ability to execute our financial strategy and is a key metric we use to determine compensation. The presentation of adjusted free cash flow has material limitations. Adjusted free cash flow does not represent our cash flow available for discretionary expenditures because it excludes certain expenditures that are required or to which we have committed such as debt service requirements and dividend payments. Our definition of adjusted free cash flow may not be comparable to similarly titled measures presented by other companies. Purchases of property and equipment as reflected on our consolidated statements of cash flows and the free cash flow presented above represent amounts paid during the period for such expenditures. A reconciliation of property and equipment reflected on our consolidated statements of cash flows to property and equipment received during the period is as follows for the three and twelve months ended December 31: Purchases of property and equipment per the unaudited consolidated statements of cash flows Adjustments for property and equipment received during the prior period but paid for in the following period, net Property and equipment received during the period The adjustments noted above do not affect our net change in cash and cash equivalents as reflected in our consolidated statements of cash flows. As of December 31, 2011 and 2010, accounts receivable were $825.8 million and $828.9 million, net of allowance for doubtful accounts of $48.1 million and $50.9 million, resulting in days sales outstanding of approximately 37 (or 24 net of deferred revenue) and 37 (or 24 net of deferred revenue), respectively. In October 2011, we paid a cash dividend of $81.6 million to stockholders of record as of October 3, 2011. As of December 31, 2011, we recorded a dividend payable of $81.4 million to stockholders of record at the close of business on January 3, 2012, which was paid on January 17, 2012. In February 2012, our board of directors declared a regular quarterly dividend of $0.22 per share to be paid on April 16, 2012 to stockholders of record on April 2, 2012. In August 2011, our board of directors authorized the repurchase of up to $750 million of our common stock through December 31, 2013. This authorization is in addition to the $400 million repurchase program authorized in November 2010. As of December 31, 2011, we had used $500.8 million under the programs to repurchase 17.1 million shares at an average cost per share of $29.21. As of December 31, 2011, we had 369.9 million shares of common stock issued and outstanding. Adjusted Diluted Earnings per Share The following is a summary of anticipated adjusted diluted earnings per share for the year ended December 31, 2012 compared to the actual adjusted diluted earnings per share for the year ended December 31, 2011, which are not measures determined in accordance with GAAP, excluding loss on extinguishment of debt, and loss on the disposition of assets and impairments, net: (Anticipated) Year Ended December 31, 2012 (Actual) Year Ended December 31, 2011 Adjusted diluted earnings per share We believe that the presentation of adjusted diluted earnings per share, which excludes loss on extinguishment of debt, and loss on the disposition of assets and impairments, net provides an understanding of operational activities before the financial impact of certain items. We use this measure, and believe investors will find it helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. Our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies. Adjusted Free Cash Flow Our anticipated adjusted free cash flow for the year ended December 31, 2012 and our actual adjusted free cash flow for the year ended December 31, 2011, which are not measures determined in accordance with GAAP, are calculated as follows: BFI risk management and Allied exchange of partnership interest tax payments We anticipate our adjusted free cash flow for 2012 will decrease from 2011 due to an increase in cash paid for income taxes of approximately $140 million primarily due to bonus depreciation. Purchases of property and equipment as reflected on our consolidated statements of cash flows represent amounts paid during the period for such expenditures. A reconciliation of property and equipment reflected on our consolidated statements of cash flows to property and equipment received during the period is as follows: This document contains certain forward-looking information about us that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as "guidance," "expect," "will," "may," "anticipate," "plan," "estimate," "project," "intend," "should," "can," "likely," "could," and similar expressions are intended to identify forward-looking statements. These statements include statements about our plans, strategies and prospects. Forward-looking statements are not guarantees of performance. These statements are based upon the current beliefs and expectations of our management and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that the expectations will prove to be correct. Among the factors that could cause actual results to differ materially from the expectations expressed in the forward-looking statements are: the impact on us of our substantial indebtedness, including on our ability to obtain financing on acceptable terms to finance our operations and growth strategy and to operate within the limitations imposed by financing arrangements; general economic and market conditions, including the current global economic and financial market crisis, inflation and changes in commodity pricing, fuel, labor, risk and health insurance and other variable costs that are generally not within our control, and our exposure to credit and counterparty risk; whether our estimates and assumptions concerning our selected balance sheet accounts, income tax accounts, final capping, closure, post-closure and remediation costs, available airspace, and projected costs and expenses related to our landfills and property and equipment (including our estimates of the fair values of the assets and liabilities acquired in our acquisition of Allied), and labor, fuel rates and economic and inflationary trends, turn out to be correct or appropriate; competition and demand for services in the solid waste industry; the fact that price increases to our customers may not be adequate to offset the impact of increased costs, including labor, third-party disposal and fuel, and may cause us to lose volume; our ability to manage growth and execute our growth strategy; our compliance with, and future changes in, environmental and flow control regulations and our ability to obtain approvals from regulatory agencies in connection with operating and expanding our landfills; our ability to retain our investment grade ratings for our debt; our dependence on key personnel; our dependence on large, long-term collection, transfer and disposal contracts; our business is capital intensive and may consume cash in excess of cash flow from operations; any exposure to environmental liabilities, to the extent not adequately covered by insurance, could result in substantial expenses; risks associated with undisclosed liabilities of acquired businesses; risks associated with pending and future legal proceedings, including litigation, audits or investigations brought by or before any governmental body; severe weather conditions, which could impair our financial results by causing increased costs, loss of revenue, reduced operational efficiency or disruptions to our operations; compliance with existing and future legal and regulatory requirements, including limitations or bans on disposal of certain types of wastes or on the transportation of waste, which could limit our ability to conduct or grow our business, increase our costs to operate or require additional capital expenditures; workforce factors, including potential increases in our costs if we are required to provide additional funding to any multi-employer pension plan to which we contribute and the negative impact on our operations of union organizing campaigns, work stoppages or labor shortages; the negative effect that trends toward requiring recycling, waste reduction at the source and prohibiting the disposal of certain types of wastes could have on volumes of waste going to landfills; changes by the Financial Accounting Standards Board or other accounting regulatory bodies to generally accepted accounting principles or policies; and acts of war, riots or terrorism, including the events taking place in the Middle East and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the United States. The risks included here are not exhaustive. Refer to "Part I, Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2010 for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, or to assess the impact such risk factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except to the extent required by applicable law or regulation, we undertake no obligation to update or publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. SOURCE Republic Services, Inc.