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Republic Services, Inc. Reports Quarterly Earnings and Increases Earnings Guidance
* Record earnings of $0.52 per share
* Internal growth of 8.5 percent
* Operating profit margins expand
* Dividend increased by 14 percent
FORT LAUDERDALE, Fla., July 26 /PRNewswire-FirstCall/ -- Republic
Services, Inc. (NYSE: RSG) today reported net income of $70.8 million, or
$0.52 per diluted share, for the three months ended June 30, 2006, versus
$64.4 million, or $0.44 per diluted share, for the comparable period last
year. Revenue in the second quarter of 2006 grew to $779.8 million from
$718.6 million for the same period in 2005. This 8.5 percent increase in
revenue consists of 4.9 percent from price and 3.6 percent from volume.
Operating income for the three months ended June 30, 2006 was $134.0
million, compared to $122.9 million for the same quarter last year.
Operating margins for the three months ended June 30, 2006 increased to
17.2 percent from 17.1 percent for same period in 2005.
For the six months ended June 30, 2006, net income was $135.4 million,
or $0.98 per diluted share, compared to $129.9 million, or $0.88 per
diluted share, for the comparable period last year. Revenue for the six
months ended June 30, 2006 was $1,517.3 million compared to $1,395.8
million for the same period in 2005. Operating income for the six months
ended June 30, 2006 was $256.4 million compared to $242.4 million for the
same period last year.
Republic Services also announced today that it is increasing its 2006
guidance for free cash flow and earnings per share to reflect the Company's
first six month performance and current favorable business conditions.
* Free Cash Flow: The Company increased the range of anticipated
normalized free cash flow for 2006 to approximately $280 million to $290
million. The previous guidance for free cash flow was $270 million to $280
million.
* Earnings Per Share: The Company raised earnings per share guidance to
a new range of $1.94 to $1.97 per diluted share. The previous guidance was
a range of $1.90 to $1.93 per diluted share.
Separately, Republic announced that its Board of Directors has approved
a 14 percent increase in the Company's regular quarterly dividend from
$0.14 per share to $0.16 per share. The quarterly dividend of $0.16 per
share will be paid on October 16, 2006 to shareholders of record on October
2, 2006.
"We are focused on growing free cash flow and expanding our operating
profit margins," said James E. O'Connor, Chairman and Chief Executive
Officer of Republic Services, Inc. "Our increase in earnings guidance is
based on our performance during the first six months of 2006 and our
expectation that we will continue to experience favorable price and volume
growth in the future. Our continued success in the growth of free cash flow
and the expansion of our operating margin resulted in the Boards' decision
to reward shareholders with a 14 percent increase in the quarterly
dividend."
Republic Services, Inc. is a leading provider of solid waste
collection, transfer and disposal services in the United States. The
Company's operating units are focused on providing solid waste services for
commercial, industrial, municipal and residential customers.
Certain statements and information included herein constitute "forward-
looking statements" within the meaning of the Federal Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be
materially different from any future results, performance, or achievements
expressed or implied in or by such forward-looking statements. Such factors
include, among other things, whether the Company's estimates and
assumptions concerning its selected balance sheet accounts, final capping,
closure, post-closure and remediation costs, available airspace, and
projected costs and expenses related to the Company's landfills and
property and equipment, and labor, fuel rates and economic and inflationary
trends, turn out to be correct or appropriate, and various factors that
will impact the actual business and financial performance of the Company
such as competition and demand for services in the solid waste industry;
the Company's ability to manage growth; compliance with, and future changes
in, environmental regulations; the Company's ability to obtain approval
from regulatory agencies in connection with expansions at the Company's
landfills; the ability to obtain financing on acceptable terms to finance
the Company's operations and growth strategy and for the Company to operate
within the limitations imposed by financing arrangements; the ability of
the Company to repurchase common stock at prices that are accretive to
earnings per share; the Company's dependence on key personnel; general
economic and market conditions including, but not limited to, inflation and
changes in commodity pricing, fuel, labor and other variable costs that are
generally not within the control of the Company; dependence on large,
long-term collection contracts; dependence on acquisitions for growth;
risks associated with undisclosed liabilities of acquired businesses; risks
associated with pending legal proceedings; and other factors contained in
the Company's filings with the Securities and Exchange Commission.
REPUBLIC SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
June 30, December 31,
2006 2005
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $30.7 $131.8
Accounts receivable, less allowance
for doubtful accounts of $18.2 and $17.3,
respectively 302.1 280.0
Other current assets 65.2 70.5
Total Current Assets 398.0 482.3
RESTRICTED CASH 232.5 255.3
PROPERTY AND EQUIPMENT, NET 2,153.5 2,115.3
GOODWILL AND OTHER INTANGIBLE ASSETS,
NET 1,587.7 1,590.8
OTHER ASSETS 118.0 106.8
$4,489.7 $4,550.5
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, deferred revenue
and other current liabilities $524.0 $664.0
Notes payable and current maturities
of long-term debt 2.9 3.0
Total Current Liabilities 526.9 667.0
LONG-TERM DEBT, NET OF CURRENT
MATURITIES 1,659.1 1,472.1
ACCRUED LANDFILL AND ENVIRONMENTAL
COSTS 278.9 259.7
OTHER LIABILITIES 561.8 545.9
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per
share; 50,000,000 shares
authorized; none issued -- --
Common stock, par value $.01 per
share; 750,000,000 shares
authorized; 192,896,860 and
190,119,521 issued, including shares
held in treasury, respectively 1.9 1.9
Additional paid-in capital 1,592.7 1,509.1
Deferred compensation -- (1.1)
Retained earnings 1,500.3 1,402.8
Treasury stock, at cost (59,594,400
and 51,516,900 shares,
respectively) (1,634.6) (1,308.8)
Accumulated other comprehensive
income, net of tax 2.7 1.9
Total Stockholders' Equity 1,463.0 1,605.8
$4,489.7 $4,550.5
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Three Months Six Months Ended
Ended June 30, June 30,
2006 2005 2006 2005
Revenue $779.8 $718.6 $1,517.3 $1,395.8
Expenses:
Cost of operations 492.5 451.3 948.9 870.0
Depreciation, amortization and
depletion 74.4 70.7 147.5 131.8
Accretion 3.8 3.5 7.6 7.0
Selling, general and
administrative 75.1 70.2 156.9 144.6
Operating income 134.0 122.9 256.4 242.4
Interest expense, net (20.5) (18.7) (39.3) (36.1)
Other income (expense), net 0.7 (0.3) 1.3 3.2
Income before income taxes 114.2 103.9 218.4 209.5
Provision for income taxes 43.4 39.5 83.0 79.6
Net income $70.8 $64.4 $135.4 $129.9
Basic earnings per share $0.52 $0.45 $0.99 $0.89
Weighted average common shares
outstanding 135.0 142.5 136.3 145.3
Diluted earnings per share $0.52 $0.44 $0.98 $0.88
Weighted average common and common
equivalent shares outstanding 136.7 145.4 138.1 148.2
Cash dividends per common share $0.14 $0.12 $0.28 $0.24
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Six Months Ended June 30,
2006 2005
CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $135.4 $129.9
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, amortization, and
depletion 147.5 131.8
Accretion 7.6 7.0
Other 20.0 38.3
Change in operating assets and
liabilities, net of effects from
business acquisitions and
dispositions (163.7) 28.1
146.8 335.1
CASH USED IN INVESTING ACTIVITIES:
Purchases of property and equipment (178.2) (137.4)
Proceeds from sales of property and
equipment 8.6 6.6
Cash used in business acquisitions,
net of cash acquired (3.3) (2.5)
Cash proceeds from business
dispositions 3.8 28.8
Change in restricted cash 22.8 8.8
Other (0.3) 37.2
(146.6) (58.5)
CASH USED IN FINANCING ACTIVITIES:
Proceeds from notes payable and long-
term debt 270.0 8.8
Payment of premium to exchange notes
payable -- (27.6)
Payments of notes payable and long-
term debt (76.7) (23.0)
Issuances of common stock 59.3 26.6
Windfall income tax benefits from
stock option exercises 10.6 --
Purchases of common stock for
treasury (325.8) (337.1)
Cash dividends (38.7) (35.5)
(101.3) (387.8)
DECREASE IN CASH AND CASH EQUIVALENTS (101.1) (111.2)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 131.8 141.5
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $30.7 $30.3
REPUBLIC SERVICES, INC.
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
The following information should be read in conjunction with the
Company's audited Consolidated Financial Statements and notes thereto
appearing in the Company's Form 10-K as of and for the year ended December
31, 2005. It should also be read in conjunction with the Company's
Unaudited Condensed Consolidated Financial Statements and notes thereto
appearing in the Company's Form 10-Q as of and for the three months ended
March 31, 2006.
EQUITY-BASED COMPENSATION EXPENSE
The Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004), "Share-Based Payment" ("SFAS 123(R)") effective January 1,
2006. Stock options granted prior to the effective date of SFAS 123(R) were
fully vested as of December 31, 2005, and, consequently, no compensation
expense will be recognized for these options.
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION, DEPLETION AND
ACCRETION
Operating income before depreciation, amortization, depletion and
accretion, which is not a measure determined in accordance with generally
accepted accounting principles (GAAP), for the three and six months ended
June 30, 2006 and 2005 is calculated as follows (in millions):
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
Net income $70.8 $64.4 $135.4 $129.9
Provision for
income taxes 43.4 39.5 83.0 79.6
Other (income)
expense, net (.7) .3 (1.3) (3.2)
Interest expense, net 20.5 18.7 39.3 36.1
Depreciation,
amortization and
depletion 74.4 70.7 147.5 131.8
Accretion 3.8 3.5 7.6 7.0
Operating income before
depreciation,
amortization,
depletion and
accretion $212.2 $197.1 $411.5 $381.2
The Company believes that the presentation of operating income before
depreciation, amortization, depletion and accretion is useful to investors
because it provides important information concerning the Company's
operating performance exclusive of certain non-cash costs. Operating income
before depreciation, amortization, depletion and accretion demonstrates the
Company's ability to execute its 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 the Company's
customer base and services provided, pursuing strategic acquisitions that
augment the Company's existing business platform, repurchasing shares of
common stock at prices that provide value to the Company's shareholders,
paying cash dividends, maintaining the Company's investment grade rating
and minimizing debt. This measure has material limitations. Although
depreciation, amortization, depletion 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.
CASH FLOW
During the three months ended June 30, 2006, cash provided by operating
activities was $142.6 million, cash used in investing activities was $48.6
million and cash used in financing activities was $78.2 million. During the
six months ended June 30, 2006, cash provided by operating activities was
$146.8 million, cash used in investing activities was $146.6 million and
cash used in financing activities was $101.3 million.
The Company defines 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 the Company's consolidated statements of cash
flows. The Company's free cash flow for the three and six months ended June
30, 2006 is calculated as follows (in millions):
Three months ended Six months ended
June 30, 2006 June 30, 2006
Cash provided by
operating activities $142.6 $146.8
Purchases of property
and equipment (87.7) (178.2)
Proceeds from sales of
property and equipment 1.1 8.6
Free cash flow $56.0 $(22.8)
Free cash flow for the six months ended June 30, 2006 was negative
because of an $83.0 million federal tax payment for 2005 that had been
deferred until February 2006 as a result of an Internal Revenue Service
notice issued in response to Hurricane Katrina, and because of payments
made during the three months ended March 31, 2006 for capital and other
expenditures incurred in 2005.
The Company expects normalized free cash flow for 2006 to exceed 100%
of net income. Normalized free cash flow excludes $113.4 million of federal
tax payments and approximately $60 million of payments for capital and
other expenditures that relate to 2005 that will be made during 2006.
The Company believes that the presentation of free cash flow provides
useful information regarding the Company's recurring cash provided by
operating activities after expenditures for property and equipment, net of
proceeds from sales of property and equipment. It also demonstrates the
Company's ability to execute its financial strategy as previously discussed
and is a key metric used by the Company to determine compensation. The
presentation of free cash flow has material limitations. Free cash flow
does not represent the Company's cash flow available for discretionary
expenditures because it excludes certain expenditures that are required or
that the Company has committed to such as debt service requirements and
dividend payments. The Company's definition of free cash flow may not be
comparable to similarly titled measures presented by other companies.
Capital expenditures include $.6 million and $.3 million of capitalized
interest for the three months ended June 30, 2006 and 2005, respectively,
and $.9 million and $.5 million for the six months ended June 30, 2006 and
2005, respectively.
As of June 30, 2006, accounts receivable were $302.1 million, net of
allowance for doubtful accounts of $18.2 million, resulting in days sales
outstanding of approximately 35 (or 22 net of deferred revenue).
STOCK REPURCHASE PROGRAM
During the three months ended June 30, 2006, the Company paid $185.2
million to repurchase 4.5 million shares of its common stock. During the
six months ended June 30, 2006, the Company repurchased a total of 8.1
million shares of its common stock for $325.8 million. As of June 30, 2006,
the Company was authorized to repurchase up to an additional $165.4 million
under its existing stock repurchase program.
DIVIDENDS
In April 2006, the Company paid a dividend of $19.2 million to
shareholders of record as of April 3, 2006. As of June 30, 2006, the
Company recorded a dividend payable of approximately $18.7 million to
shareholders of record at the close of business on July 3, 2006, which has
been paid. In July 2006, the Company's Board of Directors declared a
regular quarterly dividend of $.16 per share for shareholders of record on
October 2, 2006.
REVENUE
The following table reflects total revenue of the Company by revenue
source for the three and six months ended June 30, 2006 and 2005 (in
millions):
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
Collection:
Residential $182.4 $167.6 $360.4 $334.2
Commercial 212.4 190.9 420.7 380.3
Industrial 166.7 151.7 323.5 288.6
Other 18.2 15.8 36.3 31.0
Total collection 579.7 526.0 1,140.9 1,034.1
Transfer and disposal 309.3 278.6 587.2 528.1
Less: Intercompany (153.2) (138.5) (293.7) (264.0)
Transfer and disposal,
net 156.1 140.1 293.5 264.1
Other 44.0 52.5 82.9 97.6
Total revenue $779.8 $718.6 $1,517.3 $1,395.8
The following table reflects the Company's revenue growth for the three
and six months ended June 30, 2006 and 2005:
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
Core price 3.3% 2.6% 3.2% 2.4%
Fuel surcharges 1.5 .5 1.4 .5
Environmental fee .3 -- .4 --
Commodities (.2) .1 (.4) .2
Total price 4.9 3.2 4.6 3.1
Core volume 3.7 2.4 4.3 2.4
Non-core volume (.1) .2 -- .1
Total volume 3.6 2.6 4.3 2.5
Total internal growth 8.5 5.8 8.9 5.6
Acquisitions, net of
divestitures (.1) (.6) (.3) .1
Taxes .1 -- .1 --
Total revenue growth 8.5% 5.2% 8.7% 5.7%
SOURCE Republic Services, Inc.
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