Republic Services releases 2014 financial results

By Katie Fletcher | February 16, 2015

On Feb. 12, Republic Services Inc. released 2014 fourth quarter and full year earnings, reporting a net income for the quarter of $50.3 million, or 14 cents per diluted share, out of a total year net income of $547.6 million, or $1.53 per diluted share. Republic also reported it returned $779 million total cash to shareholders in the year, which represents a cash yield of 6 percent. 

Included in the company’s recap of the year’s progress was the announcement that seven compressed natural gas (CNG) fueling stations were added, which brings the company to a total of 36 operating stations. Fourteen percent of Republic Services’ fleet is now operating on natural gas. “We still think that the movement into CNG makes sense, so we’re going to continue that initiative,” said Don Slager, president and CEO during an investor call.

Chuck Serianni, chief financial officer of the company, said that this year the CNG trucks that Republic Services are purchasing will be delivered into facilities where infrastructure is already in place. “We won’t be putting in as many new CNG filling station as we have over the last couple of years,” Serianni said. “We’ll just continue to bring density to the fleets where we already have the investments made.”

While the company added seven CNG-fueling stations, Republic Services closed seven older recycling facilities that were not earning an adequate return during 2014.

Republic Services continues its activity with landfill gas-to-energy (LFGTE) projects. Biomass Magazine reported mid-December the company announced the start of operations on a 6 MW power project at County Line Landfill in Argos, Indiana. This project joins 72 other LFGTE projects nationwide implemented by Republic Services.

The company also mentioned the acquirement of Rainbow Disposal on the earnings call, which was part of a $231 million investment to acquire $132 million of solid waste revenue at a post-synergy earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 5.6 times. Republic Services has also entered into a definitive agreement to acquire Tervita LLC for approximately $485 million.

Amongst financial highlights Slager shared was a fourth quarter adjusted earnings per share (EPS) of 50 cents, which includes a 2 cent benefit from the extension of CNG fuel tax credits. The CNG tax credit of $10 million aided in the decrease in fuel costs of about $22 million compared to the prior year.

The average price per gallon of diesel decreased to $3.58 in the fourth quarter, from $3.87 in the prior year. The current average price of diesel is $2.83 per gallon. Republic Services reported it currently recovers approximately 80 percent of its total fuel costs. Additionally, fourth quarter recycling volume of 568,000 tons was down approximately 5 percent from the prior year. “The impact of lower net fuel and lower recycling commodity prices, results in a 4 cent EPS headwind consisting of a decrease of 6 cents due to lower commodity prices, and an increase of 2 cents due to the timing difference of Republic’s fuel recovery fee program,” Serianni said.

Full year adjusted EPS was $1.96 and adjusted free cash flow was $709 million. Republic’s net income per diluted share for the quarter includes a 32 cent charge for future remediation and other related costs at Bridgeton Landfill. The charge primarily reflects expected future costs to operate and manage the landfill over the next 35 years, but was recorded as an up-front charge in 2014.

Republic Services also reported the highest level of average yield in the last four years at 1.7 percent, and fourth quarter volumes increased to 1.6 percent with a concentration in construction and demolition (C&D) waste.

The increases in average yield, volume and acquisitions make up revenue growth of 3.9 percent, partially offset by a decrease in fuel recovery fees of 0.2 percent and recycled commodities of 0.5 percent.

Average yield in the post-collection business was 1.1 percent, which includes 1.6 percent landfill municipal solid waste (MSW). Post-collection was up 60 basis points, and included 1.4 percent landfill growth, partially offset by a decline in transfer station volumes of 1.3 percent. Within landfill growth, MSW was up 2.1 percent, C&D increased 5.5 percent and special waste grew 50 basis points.

As for 2015 fiscal year guidance, Republic expects adjusted free cash flow to be $710 million to $740 million in 2015 with diluted earnings per share in the range of $1.98 to $2.04. Also, the company expects an increase in revenue for 2015 of 2.5 to 3.5 percent.