Republic Services reports increased volumes, revenue

By Katie Fletcher | July 27, 2015

On July 23, Republic Services Inc. released financial results for the second quarter of 2015, reporting a net income of $190.3 million, or 54 cents per share, compared to $179 million, or 50 cents per share, for the comparable period in 2014.

Don Slager, president and CEO of Republic Services said the quarter benefited on a slightly higher earnings per share (EPS) due to a lower tax rate. For the six months ended June 30, net income was $362.7 million, or $1.03 per diluted share. This compares to $311.5 million, or 87 cents per diluted share, for the comparable period in 2014.

Second-quarter, 2015 revenue was approximately $2.3 billion, an increase of $82 million over the prior year. This increase in revenue includes internal growth of 1 percent and acquisitions of 2.7 percent. The components of internal growth include an average yield of 2.4 percent, an average yield in the collection business of 2.9 percent, an average yield in the post-collection business of 0.9 percent, which includes landfill MSW of 1.4 percent. Volumes also increased 1.1 percent year-over-year. “This reflects our focus on achieving strong pricing levels while profitably growing our business,” Slager said.

According to CFO Chuck Serianni, the post-collection business, made up of third-party landfill and transfer station volumes, increased 0.6 percent. Landfill was up 0.9 percent, which includes positive contribution from MSW of 4 percent and construction and demolition (C&D) of 1.9 percent, partially offset by a decline in special waste of 2.1 percent.

Year-to-date adjusted free cash flow was $410 million, which was in line with expectations, according to Slager. Second quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 28.3 percent, which was consistent with prior year and full-year guidance.

Core price in the second quarter was 3.8 percent and average yield was 2.4 percent. “This sequential improvement in yield performance reflects an increase in the level of pricing a favorable reduction in rollbacks and an improvement in the impact from churn,” Slager said.

He added that this is the second straight quarter of reporting average yield in excess of 2 percent while growing volumes in excess of 1 percent, which clearly demonstrates the company’s ability to grow both price and volume simultaneously.

Year-to-date investment in solid waste acquisitions was $116 million, which includes normal tuck-in transactions and approximately $80 million of consideration for a life-of-site agreement to operate the Sonoma County landfill and transfer station network. “We commenced operations of Sonoma County on April 1 of this year,” Slager said. He added on the call that the company’s integration of Tervita is going well and on track. However, performance is short due to a sharper decline in the rig counts and drilling activity.

In regards to the company’s fleet, Slager said 15 percent of the total fleet operates on natural gas. Seventy percent of the residential fleet is currently automated, as well as 70 percent of total fleet has been certified under the One Fleet maintenance program. In the company’s quarter one financial results, Slager reported that 69 percent of the residential fleet was automated and 64 percent was certified under the company’s maintenance program.

Republic Services raised its full-year financial guidance in the quarter based on its expected outperformance for the year. Slager said, “We now expect diluted EPS to be in a range of $2.02 to $2.05.”

The original guidance was $1.98 to $2.04. The adjusted free cash flow is now expected to be in a range of $720 million to $745 million. The original guidance was $710 million to $740 million.

“We continue to see a broad and sustained recovery in our solid waste business,” Slager said. “Improving fundamentals, together with solid operational execution, have resulted in EPS and free cash flow growth and margin expansion.”