Date: February 27, 2009
Source: Republic Services Inc.
Operating loss for the three months ended
For the year ended
Operating income for the year ended
"I am very pleased with our progress to date concerning the integration of
Republic and Allied following the merger that took place on
Quarterly Dividend Declared
We also announced that our Board of Directors declared a regular quarterly
dividend of
Fiscal Year 2009 Outlook
"Despite a weaker economy, we expect 2009 free cash flow, excluding
merger-related payments, to be approximately
Our objectives for 2009 remain consistent with previous years and once again focus on enhancing shareholder value through the generation and efficient use of free cash flow. We remain committed to implementing a broad- based pricing initiative across all lines of business to recover increasing costs and provide an adequate return on invested capital. We anticipate using free cash flow to pay regular quarterly dividends and reduce debt. Additionally, we expect to use proceeds from sales of asset divestitures to reduce debt.
Our guidance is based on current economic conditions and does not assume any improvement or deterioration in the overall economy in 2009 from that experienced at the end of 2008.
Specific guidance is as follows:
Increase
(Decrease)
Price 4.0 %
Volume (8.0)
Divestitures (1.5)
Fuel fees (2.5)
Commodities (2.0)
Total change (10.0)%
About
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
December 31, December 31,
2008 2007
Assets
Current Assets -
Cash and cash equivalents $68.7 $21.8
Accounts receivable, net of allowance
for doubtful accounts of $65.7
and $14.7, respectively 945.5 298.2
Prepaid expenses and other current assets 174.7 68.5
Deferred tax assets 136.8 25.3
Total Current Assets 1,325.7 413.8
Restricted cash 281.9 165.0
Property and equipment, net 6,738.2 2,164.3
Goodwill and other intangible assets, net 11,085.6 1,582.2
Other assets 490.0 142.5
Total Assets $19,921.4 $4,467.8
Liabilities and Stockholders' Equity
Current Liabilities -
Accounts payable, deferred revenue
and other current liabilities $2,061.8 $626.4
Notes payable and current maturities
of long-term debt 504.0 2.3
Total Current Liabilities 2,565.8 628.7
Long-term debt, net of current maturities 7,198.5 1,565.5
Accrued landfill and environmental
costs, net of current portion 1,197.1 279.2
Other long-term liabilities 1,678.6 690.6
Commitments and Contingencies
Stockholders' Equity -
Preferred stock, par value $.01 per
share; 50.0 shares authorized;
none issued - -
Common stock, par value $.01 per
share; 750.0 shares authorized;
393.4 and 195.7 shares
issued, including shares
held in treasury, respectively 3.9 2.0
Additional paid-in capital 6,260.1 38.7
Retained earnings 1,477.2 1,572.3
Treasury stock, at cost (14.9 and
10.3 shares, respectively) (456.7) (318.3)
Accumulated other comprehensive
income (loss), net of tax (3.1) 9.1
Total Stockholders' Equity 7,281.4 1,303.8
Total Liabilities and Stockholders'
Equity $19,921.4 $4,467.8
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenue $1,244.4 $796.0 $3,685.1 $3,176.2
Expenses:
Cost of operations 863.2 497.2 2,416.7 2,003.9
Depreciation, amortization and
depletion 127.2 71.6 354.1 305.5
Accretion 10.4 4.5 23.9 17.1
Selling, general and administrative 182.7 82.8 434.7 313.7
Asset impairments 89.8 - 89.8 -
Restructuring charges 82.7 - 82.7 -
Operating income (loss) (111.6) 139.9 283.2 536.0
Interest expense (66.8) (23.7) (131.9) (94.8)
Interest income 1.7 3.3 9.6 12.8
Other income (expense), net (0.9) 11.5 (1.6) 14.1
Income (loss) before income taxes (177.6) 131.0 159.3 468.1
Provision (benefit) for income taxes (46.0) 48.9 85.4 177.9
Minority interests 0.1 - 0.1 -
Net income (loss) $(131.7) $82.1 73.8 $290.2
Basic Earnings Per Share:
Basic earnings per share $(0.55) $0.44 $0.38 $1.53
Weighted average common shares
outstanding 239.1 186.2 196.7 190.1
Diluted Earnings Per Share:
Diluted earnings per share $(0.55) $0.44 $0.37 $1.51
Weighted average common and common
equivalent shares outstanding 239.1 188.2 198.4 192.0
Cash dividends per common share $0.19 $0.17 $0.72 $0.55
UNAUDITED SUMMARY DATA SHEET - STATEMENT OF OPERATIONS DATA
(in millions, except percentages)
The following information should be read in conjunction with our audited
consolidated financial statements and notes thereto appearing in our Form
10-K as of and for the year ended December 31, 2007 . It should also be
read in conjunction with our unaudited condensed consolidated financial
statements and notes thereto appearing in our Form 10-Q as of and for the
nine months ended September 30, 2008 .
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Collection:
Residential $332.6 $203.4 $966.0 $802.1
Commercial 398.9 242.6 1,161.4 944.4
Industrial 235.1 157.3 711.4 645.6
Other 7.0 4.8 23.2 19.5
Total collection 973.6 608.1 2,862.0 2,411.6
Transfer and disposal 456.8 293.0 1,343.4 1,192.5
Less: Intercompany (228.3) (150.4) (683.5) (612.3)
Transfer and disposal, net 228.5 142.6 659.9 580.2
Other 42.3 45.3 163.2 184.4
Total revenue $1,244.4 $796.0 $3,685.1 $3,176.2
The following table reflects our revenue growth for the three and twelve
months ended December 31, 2008 and 2007:
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Core price 4.1 % 4.3 % 4.0 % 4.2 %
Fuel surcharges 1.1 0.6 1.8 0.2
Environmental fees 0.7 - 0.4 0.2
Commodities (1.3) 1.1 0.1 0.9
Total price 4.6 6.0 6.3 5.5
Core volume (6.4) (1.5) (3.9) (1.5)
Non-core volume (0.2) 0.2 0.1 (0.1)
Total volume (6.6) (1.3) (3.8) (1.6)
Total internal growth (2.0) 4.7 2.5 3.9
Acquisitions, net of divestitures 58.0 (0.7) 13.4 (0.5)
Taxes 0.3 (0.1) 0.1 -
Total revenue growth 56.3 % 3.9 % 16.0 % 3.4 %
The increase in our revenue and our revenue growth for the three months
ended December 31, 2008 is primarily due to our acquisition of
Allied Waste Industries, Inc. (Allied) on December 5, 2008 .
REPUBLIC SERVICES, INC.
UNAUDITED SUMMARY DATA SHEET - STATEMENT OF OPERATIONS DATA
(in millions, except as noted)
SUMMARY OF CHARGES
We incurred various charges and costs during the three and twelve months
ended December 31, 2008 and 2007 that are reported within our unaudited
consolidated statements of income and are reflected in the following
table:
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Expenses:
Cost of operations (1) $87.8 $- $153.9 $49.1
Depreciation, amortization and
depletion (1) (2) (3) 8.4 - 8.4 3.6
Selling, general and administrative
(1) (4) (5) (6) 46.8 - 48.7 1.5
Asset impairments (7) 89.8 - 89.8 -
Restructuring charges (8) 82.7 - 82.7 -
Operating loss (315.5) - (383.5) (54.2)
Interest expense (9) (10.1) - (10.1) -
Other income (expense), net (1) - - (1.0) (0.7)
Income (Loss) before income taxes $(325.6) $- $(394.6) $(54.9)
(1) During the three months ended December 31, 2008 , we recorded $65.9
million and $21.9 million of remediation and related charges
related to our Countywide disposal facility in Ohio and our closed
disposal facility in Contra Costa County, California , respectively.
During the twelve months ended December 31, 2008 , we recorded $99.9
million , $21.9 million and $35.0 million of remediation and related
charges related to our Countywide facility, our Contra Costa County
facility and the Sunrise Landfill in Nevada . Of the $99.9 million
charge recognized for the Countywide facility, $98.0 million and $1.9
million were recorded in cost of operations and selling, general and
administrative expenses, respectively. The $21.9 million charge for
our Contra Costa County facility was recorded to cost of operations.
Of the $35.0 million charge recognized for the Sunrise landfill, $34.0
million and $1.0 million were recorded in cost of operations and other
income (expense), respectively.
During the twelve months ended December 31, 2007 , we recorded $45.3
million of remediation charges for our Countywide disposal facility,
of which $41.0 million was recorded in cost of operations, $2.1
million was recorded in depreciation, amortization and depletion, $1.5
million was recorded in selling, general and administrative expenses,
and $.7 million was recorded to other income (expense), net. Also
during the twelve months ended December 31, 2007, we recorded a $9.6
million charge related to our Contra Costa County disposal facility,
of which $8.1 million was recorded in cost of operations and $1.5
million was recorded in depreciation, amortization and depletion.
(2) During the three and twelve months ended December 31, 2008 , we
recorded $2.8 million of incremental landfill amortization expense as
compared to the amortization expense Allied would have recorded for
the same period. The increase in the landfill amortization expense is
the result of conforming Allied's policies for estimating the costs
and timing for capping, closure and post-closure obligations to
Republic's.
(3) During the three and twelve months ended December 31, 2008 , we
recorded $5.6 million of intangible asset amortization expense related
to the intangible assets we recorded in the purchase price allocation
for the acquisition of Allied.
(4) During the three and twelve months ended December 31, 2008 , we
recorded $14.2 million of bad debt expense related to conforming
Allied's methodology for recording allowance for doubtful accounts
with our methodology and $5.4 million to provide for specific
bankruptcy exposures.
(5) During the three and twelve months ended December 31, 2008 , we
recorded $24.3 million of settlement charges related to our estimates
of the outcome of various legal matters.
(6) During the three and twelve months ended December 31, 2008 , we
recorded $2.9 million to accrue for the synergy incentive plan pro
rata over the periods earned.
(7) During the three and twelve months ended December 31, 2008 , we
recorded $89.8 million of asset impairment charges, which consist
primarily of $75.9 million related to our Countywide facility, $6.0
million related to our former corporate headquarters in Florida and
$6.1 million related to losses on the expected sales of Department of
Justice required divestitures as a result of our merger with Allied.
(8) During the three and twelve months ended December 31, 2008 , we
recorded $82.7 million of restructuring charges primarily related to
severance and other employee termination and relocation benefits
attributable to integrating our operations with Allied.
(9) During the three and twelve months ended December 31, 2008 , we
incurred $10.1 million of non-cash interest expense primarily
associated with amortizing the discount on the debt we acquired from
Allied that was recorded at fair value in purchase accounting.
REPUBLIC SERVICES, INC.
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
MERGER WITH ALLIED
We completed our acquisition of Allied effective
Our allocation of purchase price included allocating values to intangible
assets other than goodwill. The purchase price assigned to each of these
intangible assets and the life over which these assets will be amortized is as
follows:
Other Intangibles: Amount Estimated Life
(years)
Customer relationships $420.0 10.0
Franchise agreements 60.0 9.0
Other municipal agreements 30.0 3.0
Non-compete agreements 1.0 2.0
Tradename 30.0 5.0
Total $541.0
Amortization expense for 2009 arising from the
The debt we acquired from Allied was recorded at fair value. At the date
of the merger, the fair value of Allied's variable rate debt approximated its
book value. However, because of the tightening of the credit markets, the
fair value of Allied's fixed rate debt was significantly below its book value,
which resulted in the recognition of a
Fixed-Rate Debt:
Estimated Discount
Fair Value
$350.0 million senior notes due 2010 $332.5 $17.5
$400.0 million senior notes due 2011 370.0 30.0
$275.0 million senior notes due 2011 257.1 17.9
$450.0 million senior notes due 2013 421.9 28.1
$425.0 million senior notes due 2014 369.8 55.2
$400.0 million senior notes due 2014 363.0 37.0
$600.0 million senior notes due 2015 531.0 69.0
$600.0 million senior notes due 2016 518.0 82.0
$750.0 million senior notes due 2017 645.0 105.0
$99.5 million debentures due 2021 92.8 6.7
$360.0 million debentures due 2035 265.9 94.1
$230.0 million convertible debentures due 2034 201.2 28.8
Other, maturing 2014 through 2027 215.3 53.0
Total $4,583.5 $624.3
In accordance with U.S. generally accepted accounting principles (GAAP), various liabilities acquired from Allied were recorded at their fair values using present value techniques to account for changes in the related liabilities due to the passage of time. The differences between the estimated fair values and the undiscounted values for these liabilities will be amortized into either accretion expense or interest expense, depending on the type of liability recorded, over the expected term of the applicable liability. The estimated fair values, undiscounted values and estimated lives for these liabilities are as follows:
Estimated Undiscounted Estimated
Fair Value Amount Average Life
(years)
Accrued Capping, Closure, and
Post-Closure Costs $813.1 $3,726.0 38.5
Accrued Environmental
Remediation $208.1 $325.9 5.9
Self-Insurance Reserves $172.6 $216.3 3.2
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
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 GAAP, for the
three and twelve months ended December 31, 2008 and 2007 is calculated as
follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Net income (loss) $(131.7) $82.1 $73.8 $290.2
Provision (benefit) for
income taxes (46.0) 48.9 85.4 177.9
Minority interests .1 - .1 -
Other (income) expense,
net .9 (11.5) 1.6 (14.1)
Interest income (1.7) (3.3) (9.6) (12.8)
Interest expense 66.8 23.7 131.9 94.8
Depreciation, amortization
and depletion 127.2 71.6 354.1 305.5
Accretion 10.4 4.5 23.9 17.1
Operating income before
depreciation, amortization,
depletion and accretion $26.0 $216.0 $661.2 $858.6
We believe that the presentation of operating income before depreciation, amortization, depletion and accretion is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash costs. Operating income before depreciation, amortization, depletion and accretion 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 rating and minimizing debt, paying cash dividends, and maintaining and improving our market position through business optimization. This measure has 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.
For a discussion of significant items impacting our operating income before depreciation, amortization, depletion and accretion for the periods presented above, see Summary of Charges.
Diluted Earnings per Share
Following is a summary of adjusted diluted earnings per share for the
three and twelve months ended
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Diluted earnings per share $(.55) $.44 $.37 $1.51
Remediation and related
charges (1) .22 - .48 .18
Asset impairments (2) .23 - .27 -
Restructuring charges (3) .21 - .25 -
Landfill amortization
expense (4) .01 - .01 -
Intangible amortization
expense (5) .01 - .02 -
Bad debt expense (6) .05 - .06 -
Legal settlement reserves (7) .06 - .07 -
Synergy incentive plan (8) .01 - .01 -
Non-cash interest expense (9) .02 - .03 -
Tax impact of non-deductible
items (10) .14 - .16 -
Adjusted diluted earnings
per share $.41 $.44 $1.73 $1.69
(1) Remediation and related charges of $87.8 million during the three
months ended December 31, 2008 consist primarily of changes to our
estimates of costs incurred at our Countywide facility in Ohio and our
closed disposal facility in Contra Costa County, California .
Remediation and related charges of $156.8 million during the twelve
months ended December 31, 2008 were attributable to the aforementioned
disposal facilities as well as the Sunrise Landfill in Nevada .
(2) During the three and twelve months ended December 31, 2008 , asset
impairments of $89.8 million primarily relate to our Countywide
facility, our former corporate headquarters in Florida and losses on
expected sales of Department of Justice required divestitures as a
result of our merger with Allied.
(3) During the three and twelve months ended December 31, 2008 , we
incurred restructuring charges of $82.7 million , consisting primarily
of severance and other employee termination and relocation benefits
attributable to integrating our operations with Allied.
(4) During the three and twelve months ended December 31, 2008 , we
recorded $2.8 million of incremental landfill amortization expense as
compared to the amortization expense Allied would have recorded for
the same period. The increase in the landfill amortization expense is
the result of conforming Allied's policies for estimating the costs
and timing for capping, closure and post-closure obligations to
Republic's.
(5) During the three and twelve months ended December 31, 2008 , we
recorded $5.6 million of intangible asset amortization expense related
to the intangible assets we recorded in the purchase price allocation
for the acquisition of Allied.
(6) During the three and twelve months ended December 31, 2008 , we
recorded bad debt expense of $14.2 million related to conforming
Allied's methodology for recording the allowance for doubtful accounts
with our methodology and $5.4 million to provide for specific
bankruptcy exposures.
(7) During the three and twelve months ended December 31, 2008 , we
incurred $24.3 million of settlement charges related to our estimates
of the outcome of various legal matters.
(8) During the three and twelve months ended December 31, 2008 , we
recorded $2.9 million to accrue for the synergy incentive plan pro
rata over the periods earned.
(9) During the three and twelve months ended December 31, 2008 , we
incurred $10.1 million of non-cash interest expense primarily
with amortizing the discount on the debt we acquired from Allied that
was recorded at fair value in purchase accounting.
(10)During the three and twelve months ended December 31, 2008 , our
effective tax rate was impacted by several expenses associated with
the merger that are not tax deductible.
We believe that the presentation of adjusted diluted earnings per share, which excludes charges for remediation and related costs, asset impairments, restructuring, landfill and intangible asset amortization expense, bad debt expense, legal settlement reserves, the synergy incentive plan, non-cash interest expense and the tax impact of non-deductible items, provides an understanding of operational activities before the financial impact of certain non-operational items and strategic and other decisions made for the long-term benefit of the company. 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. Comparable costs have been incurred in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods.
Cash Flow
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 unaudited condensed consolidated statements of cash flows. Our free
cash flow for the three and twelve months ended
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Cash provided by operating
activities $38.0 $190.7 $512.2 $661.3
Purchases of property and
equipment (122.8) (76.5) (386.9) (292.5)
Proceeds from sales of
property and equipment 2.4 1.4 8.2 6.1
Free cash flow $(82.4) $115.6 $133.5 $374.9
Purchases of property and equipment as reflected on our unaudited condensed 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 the unaudited condensed consolidated statements of cash flows to property and equipment received during the period is as follows (in millions):
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Purchases of property and
equipment per the unaudited
condensed consolidated
statements of cash flows $122.8 $76.5 $386.9 $292.5
Adjustments for property and
equipment received during the
prior period but paid for
in the following period, net 11.5 35.5 (14.9) 3.2
Property and equipment received
during the current period $134.3 $112.0 $372.0 $295.7
The adjustments noted above do not affect either our net change in cash and cash equivalents as reflected in our unaudited condensed consolidated statements of cash flows or our free cash flow.
A reconciliation of our projected cash provided by operating activities to the 2009 free cash flow outlook is as follows (in millions):
2009 Outlook
Cash provided by operating activities $1,395.0
Purchases of property and equipment (860.0)
Proceeds from sales of property and equipment 15.0
Free cash flow $550.0
Free cash flow for 2009 includes approximately
We believe that the presentation of free cash flow provides useful information regarding our recurring cash provided by operating activities after expenditures for property and equipment, net of proceeds from sales of property and equipment. It also demonstrates our ability to execute our financial strategy as previously discussed and is a key metric we use to determine compensation. The presentation of free cash flow has material limitations. Free cash flow does not represent our cash flow available for discretionary expenditures because it excludes certain expenditures that are required or that we have committed to such as debt service requirements and dividend payments. Our definition of free cash flow may not be comparable to similarly titled measures presented by other companies.
Capital expenditures include
As of
SHARE REPURCHASE PROGRAM AND DEBT REPAYMENT
During 2008, we repurchased a total of 4.6 million shares of our common
stock for
CASH DIVIDENDS
In
Information Regarding Forward-Looking Statements
Certain statements and information included herein constitute "forward- looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995, including statements with respect to the expected results of the integration of our merger with Allied and our anticipated 2009 financial results. Words such as "will", "expect," "anticipate" and similar words and phrases are used in this press release to identify the forward-looking statements. These forward-looking statements, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual results, events or conditions to differ materially from those expressed or implied by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance 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:
Other factors which could materially affect our forward-looking statements
can be found in our periodic reports filed with the
For more information, contact:
Media,
or Investors,
Web site: http://www.republicservices.com.
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