Date: February 12, 2010
Source: Republic Services, Inc.
2009 results exceed original guidance for adjusted earnings per share, free cash flow and EBITDA margins - Achieves annual run rate synergy savings of $150 million one year ahead of schedule
2010 guidance anticipates double digit earnings growth
Republic Services, Inc. (NYSE: RSG) today reported net income of $35.6 million, or $0.09 per diluted share, including merger-related costs and other charges as further described in this release, for the three months ended December 31, 2009, versus a loss of $(131.7) million, or $(0.55) per diluted share, for the comparable period last year. Results for the three and twelve months ended December 31, 2009 and 2008 include Allied Waste Industries, Inc. from December 5, 2008, the date on which Allied merged with Republic.
Republic's net income for the three months ended December 31, 2009 includes a loss on extinguishment of debt, restructuring charges, costs to achieve synergies, loss on disposition of assets and impairments, net, and remediation charges. Republic's net income for the three months ended December 31, 2008 includes restructuring charges, costs to achieve synergies, loss on disposition of assets and impairments, net, remediation charges, and the tax effect of permanent items. A detail of these costs and charges is contained in the Reconciliation of Non-GAAP Measures section of this document. Excluding these items, net income for the three months ended December 31, 2009 and 2008 would have been $126.0 million, or $0.33 per diluted share, and $58.1 million, or $0.26 per diluted share, respectively.
Earnings before interest, taxes, depreciation, amortization, depletion and accretion (EBITDA) for the three months ended December 31, 2009 was $561.6 million compared to $26.0 million for the comparable period in 2008. Excluding certain costs and charges recorded during 2009 and 2008 as previously described, adjusted EBITDA for the three months ended December 31, 2009 would have been $588.2 million, or 29.4% as a percentage of revenue, compared to $289.2 million, or 23.2% as a percentage of revenue, for the comparable 2008 period.
Revenue for the three months ended December 31, 2009 increased to $1,999.0 million compared to $1,244.4 million for the same period in 2008. This increase in revenue is attributable to our merger with Allied. Core price for the three months ended December 31, 2009 (assuming the merger with Allied had occurred on January 1, 2008) increased 2.5% and commodity pricing increased 0.7%. Offsetting this growth of 3.2% for the three months ended December 31, 2009 were decreases of 9.7% in core volume and 2.2% in fuel charges.
For the year ended December 31, 2009, net income was $495.0 million, or $1.30 per diluted share, versus $73.8 million, or $0.37 per diluted share, for the comparable period in 2008. Republic's net income for the twelve months ended December 31, 2009 includes a loss on extinguishment of debt, restructuring charges, costs to achieve synergies, gains on disposition of assets and impairments, net, and remediation recoveries. Republic's net income for the twelve months ended December 31, 2008 includes restructuring charges, costs to achieve synergies, loss on disposition of assets and impairments, net, remediation charges, and the tax effect of permanent items. Excluding these items, net income for the years ended December 31, 2009 and 2008 would have been $564.6 million, or $1.48 per diluted share, and $305.2 million, or $1.54 per diluted share, respectively.
EBITDA for the year ended December 31, 2009 was $2,548.3 million compared to $661.2 million for the comparable period in 2008. Excluding certain costs and charges recorded during 2009 and 2008 as previously described, adjusted EBITDA for the year ended December 31, 2009 would have been $2,509.5 million, or 30.6% as a percentage of revenue, compared to $992.4 million, or 26.9% as a percentage of revenue, for the comparable period in 2008.
Revenue for the year ended December 31, 2009 increased to $8,199.1 million compared to $3,685.1 million for the same period in 2008. This increase in revenue is attributable to our merger with Allied. Core price for the year ended December 31, 2009 (assuming the merger with Allied had occurred on January 1, 2008) increased 3.0%. Offsetting the core price growth of 3.0% for the year ended December 31, 2009 were decreases of 9.5% in core volume, 1.7% of commodity pricing and 2.5% in fuel charges.
"We are pleased to report that we have exceeded our original 2009 guidance for earnings, free cash flow and margins," said James E. O'Connor, Chairman and Chief Executive Officer of Republic Services, Inc. "We achieved annual run rate synergy savings of $150 million, well ahead of our plan. During 2009, we repaid $740 million of our debt. We also took advantage of the favorable interest rate environment by issuing $1.25 billion of new debt and using the proceeds to repay existing debt. Our strong operational and financial performance during 2009 has left us well positioned for future success, as evidenced by our double digit 2010 earnings growth guidance."
Quarterly Dividend Declared
Republic Services also announced that its Board of Directors declared a regular quarterly dividend of $0.19 per share for shareholders of record on April 1, 2010. The dividend will be paid on April 15, 2010.
Fiscal Year 2010 Outlook
Our objectives for 2010 remain consistent with previous years and focus on enhancing shareholder value by increasing returns on invested capital and through the efficient use of free cash flow. We remain committed to continuing our broad-based pricing program across all lines of business to recover increasing costs and to expand our operating margins.
Our guidance is based on current economic conditions and does not assume any improvement or deterioration in the overall economy in 2010.
Specific guidance is as follows:
Adjusted Free Cash Flow: Adjusted free cash flow for 2010 is expected to be $700 million to $725 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, plus merger related expenditures, net of tax, plus tax settlement related to BFI risk management companies.
Adjusted Earnings Per Diluted Share: We expect adjusted 2010 earnings per diluted share to be in the range of $1.63 to $1.67. Adjusted earnings per diluted share exclude restructuring charges, costs to achieve synergies and loss on extinguishment of debt.
Revenue: We expect 2010 revenue to decrease by approximately 0.5 to 2.0 percent. This consists of an increase of 2.0 to 2.5 percent resulting from price increases offset by a decline of 3.0 to 4.0 percent due to 2009 volume declines and divestitures, as shown below:
Increase
(Decrease)
---------------
Price 2.0 to 2.5%
Volume (4.0) to (3.0)%
Divestitures (1.0)%
Fuel fees
0.5%
Commodities 0.5%
---------------
Total change (2.0) to (0.5)%
===============
Property and Equipment: In 2010, we anticipate receiving $790 million of property and equipment. Purchases of property and equipment as reflected on our consolidated statement of cash flows for 2010 are expected to be $870 million and represents amounts paid during 2010 for such expenditures. The difference between property and equipment received and purchases of property and equipment is adjustments for approximately $80 million of property and equipment received during 2009 but paid for in 2010.
Margins: EBITDA margins for 2010 are anticipated to be approximately 31% excluding restructuring charges and costs to achieve synergies.
Taxes: Our provision for income taxes is expected to be 42%.
Merger Synergies: We expect to achieve run rate synergies of $165 to $175 million by the end of 2010.
Commenting on the Company's performance, Donald W. Slager, President and Chief Operating Officer, said "Our field organization remains focused on revenue and cost control initiatives while providing superior service to our customers and a safe work environment for our employees. This focus, coupled with our integration efforts, provides us with the platform we need to achieve strong earnings growth in 2010."
Republic Services, Inc. provides recycling and solid waste collection, transfer and disposal services in the United States and Puerto Rico. 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 web site at www.republicservices.com.
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
AND OPERATING DATA
(in millions, except per share amounts and percentages)
REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2009 2008
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $48.0 $68.7
Accounts receivable, less
allowance for doubtful accounts
of $55.2 and $65.7, respectively 865.1 945.5
Prepaid expenses and
other current assets 156.5 174.7
Deferred tax assets 195.3 136.8
----- -----
Total current assets 1,264.9 1,325.7
Restricted cash and
marketable securities 240.5 281.9
Property and equipment, net 6,657.7 6,738.2
Goodwill, net 10,667.1 10,521.5
Other intangible assets, net 500.0 564.1
Other assets 210.1 490.0
----- -----
Total assets $19,540.3 $19,921.4
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 592.8 564.0
Notes payable and current
maturities of long-term debt 543.0 504.0
Deferred revenue 331.1 359.9
Accrued landfill and
environmental costs, current
portion 245.4 233.4
Accrued interest 96.2 107.7
Other accrued liabilities 740.2 796.8
----- -----
Total current liabilities 2,548.7 2,565.8
Long-term debt, net of
current maturities 6,419.6 7,198.5
Accrued landfill and
environmental costs, net
of current portion 1,383.2 1,197.1
Deferred income taxes and
other long-term liabilities 1,040.5 1,239.9
Self-insurance reserves,
net of current portion 302.0 234.5
Other long-term liabilities 279.2 203.1
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value
$0.01 per share; 50.0 shares
authorized; none issued - -
Common stock, par value $0.01
per share; 750.0 shares
authorized; 395.7 and 393.4
issued including shares held
in treasury, respectively 4.0 3.9
Additional paid-in capital 6,316.1 6,260.1
Retained earnings 1,683.1 1,477.2
Treasury stock, at
cost (14.9 shares) (457.7) (456.7)
Accumulated other comprehensive
income (loss), net of tax 19.0 (3.1)
---- ----
Total Republic Services,
Inc. stockholders' equity 7,564.5 7,281.4
Noncontrolling interests 2.6 1.1
--- ---
Total stockholders' equity 7,567.1 7,282.5
------- -------
Total liabilities and
stockholders' equity $19,540.3 $19,921.4
========= =========
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ ----------------
2009 2008 2009 2008
------ ------ ------ ------
Revenue $1,999.0 $1,244.4 $8,199.1 $3,685.1
Expenses:
Cost of operations 1,201.1 863.2 4,844.2 2,416.7
Depreciation, amortization
and depletion 211.0 127.2 869.7 354.1
Accretion 21.4 10.4 88.8 23.9
Selling, general and
administrative 221.7 182.7 880.4 434.7
Loss (gain) on disposition
of assets and impairments,
net 7.3 89.8 (137.0) 89.8
Restructuring charges 7.3 82.7 63.2 82.7
--- ---- ---- ----
Operating income (loss) 329.2 (111.6) 1,589.8 283.2
Interest expense (147.1) (66.8) (595.9) (131.9)
Loss on extinguishment of debt (102.3) - (134.1) -
Interest income 0.3 1.7 2.0 9.6
Other income (expense), net 0.4 (0.9) 3.2 (1.6)
--- ---- --- ----
Income (loss) before
income taxes 80.5 (177.6) 865.0 159.3
Provision (benefit) for
income taxes 44.6 (46.0) 368.5 85.4
---- ----- ----- ----
Net income (loss) 35.9 (131.6) 496.5 73.9
Less: net income
attributable to
noncontrolling
interests (0.3) (0.1) (1.5) (0.1)
---- ---- ---- ----
Net income (loss)
attributable to
Republic
Services, Inc. $35.6 $(131.7) $495.0 $73.8
===== ======= ====== =====
Basic earnings per share
attributable to Republic
Services, Inc. stockholders:
Basic earnings per
share $0.09 $(0.55) $1.30 $0.38
===== ====== ===== =====
Weighted average
common shares
outstanding 380.8 239.1 379.7 196.7
===== ===== ===== =====
Diluted earnings per share
attributable to Republic
Services, Inc. stockholders:
Diluted earnings per
share $0.09 $(0.55) $1.30 $0.37
===== ====== ===== =====
Weighted average
common and
common equivalent
shares outstanding 382.6 239.1 381.0 198.4
===== ===== ===== =====
Cash dividends per common share $0.19 $0.19 $0.76 $0.72
===== ===== ===== =====
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended
December 31,
-------------
2009 2008
---- ----
Cash Provided by Operating Activities:
Net income $496.5 $73.9
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization of property
and equipment 520.6 222.6
Landfill depletion and amortization 278.5 119.7
Amortization of intangible and other assets 70.6 11.8
Accretion 88.8 23.9
Non-cash interest expense - debt 92.1 10.1
Non-cash interest expense - other 58.1 0.5
Restructuring and synergy related charges 34.0 -
Stock-based compensation 15.0 24.0
Deferred tax benefit (24.6) (30.4)
Provision for doubtful accounts, net of
adjustments 27.3 36.5
Excess income tax benefit from stock
option exercises (2.5) 2.8
Asset impairments 7.1 89.8
Loss on extinguishment of debt 134.1 -
Gain on disposition of assets, net (147.1) (1.4)
Other non-cash items (0.1) 7.3
Change in assets and liabilities, net of effects
from business acquisitions and divestitures:
Accounts receivable 53.1 21.1
Prepaid expenses and other assets (11.9) 15.8
Accounts payable and accrued liabilities (121.0) (198.2)
Restructuring and synergy related expenditures (66.5) -
Capping, closure and post-closure expenditures (100.9) (27.9)
Remediation expenditures (56.2) (43.3)
Other liabilities 51.5 153.6
---- -----
Cash Provided by Operating Activities 1,396.5 512.2
------- -----
Cash Used in Investing Activities:
Purchases of property and equipment (826.3) (386.9)
Proceeds from sales of property and equipment 31.8 8.2
Cash used in acquisitions, net of cash acquired (0.1) (553.8)
Cash proceeds from divestitures, net of
cash divested 511.1 3.3
Change in restricted cash and marketable
securities 41.6 (5.3)
Other (0.6) (0.2)
---- ----
Cash Used in Investing Activities (242.5) (934.7)
------ ------
Cash (Used in) Provided by Financing Activities:
Proceeds from notes payable and long-term debt 1,472.6 1,453.4
Proceeds from issuance of senior notes, net
of discount 1,245.4 -
Payments of notes payable and long-term debt (3,583.9) (740.6)
Premiums paid on extinguishment of debt (47.3) -
Fees paid to issue and retire senior notes
and certain hedging relationships (14.3) -
Issuances of common stock 39.6 24.6
Excess income tax benefit from stock
option exercises 2.5 4.5
Payments of deferred stock units - (4.0)
Equity issuance costs - (1.8)
Purchases of common stock for treasury (1.0) (138.4)
Cash dividends paid (288.3) (128.3)
------ ------
Cash (Used in) Provided by Financing Activities (1,174.7) 469.4
-------- -----
(Decrease) Increase in Cash and Cash Equivalents (20.7) 46.9
Cash and Cash Equivalents at Beginning of Period 68.7 21.8
---- ----
Cash and Cash Equivalents at End of Period $48.0 $68.7
===== =====
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, 2008 and 2009 when filed and our current report on Form 8-K filed June 5, 2009. It should also be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing in our Form 10-Q as of and for the nine months ended September 30, 2009. All amounts below are in millions, except per share data.
REVENUE
The following table reflects our total revenue by line of business for the three and twelve months ended December 31, 2009 and 2008:
Three Months Ended Year Ended
December 31, December 31,
------------------ --------------
2009 2008 2009 2008
------ ------ ------ ------
Collection:
Residential $542.4 $332.6 $2,187.0 $966.0
Commercial 626.6 398.9 2,553.4 1,161.4
Industrial 368.0 235.1 1,541.4 711.4
Other 6.8 7.0 26.9 23.2
--- --- ---- ----
Total collection 1,543.8 973.6 6,308.7 2,862.0
Transfer and disposal 738.6 456.8 3,113.5 1,343.4
Less: Intercompany (372.8) (228.3) (1,564.1) (683.5)
------ ------ -------- ------
Transfer and disposal, net 365.8 228.5 1,549.4 659.9
Other 89.4 42.3 341.0 163.2
---- ---- ----- -----
Total revenue $1,999.0 $1,244.4 $8,199.1 $3,685.1
======== ======== ======== ========
The following table summarizes our adjusted revenue for the three and twelve months ended December 31, 2009 and 2008 which assumes our merger with Allied occurred on January 1, 2008:
Three Months Ended Year Ended
December 31, December 31,
------------------ ----------------
2009 2008 2009 2008
------ ------ ------ ------
Republic Services, Inc. $1,999.0 $1,244.4 $8,199.1 $3,685.1
Allied Waste Industries, Inc. - 1,004.4 - 5,677.1
------- ------- ------- -------
1,999.0 2,248.8 8,199.1 9,362.2
Less: Divestitures - (56.1) (9.0) (160.6)
Less: Intercompany revenue - (3.1) - (25.2)
------- ---- ------- -----
Adjusted revenue $1,999.0 $2,189.6 $8,190.1 $9,176.4
======== ======== ======== ========
Adjusted revenue is used to calculate internal growth for the three and twelve months ended December 31, 2009. Intercompany revenue relates to prior year transactions between Republic and Allied that would have been eliminated if the companies had merged on January 1, 2008.
The following table reflects changes in our core adjusted revenue for the three and twelve months ended December 31, 2009 and 2008. For comparative purposes, we have presented the components of our revenue changes for the three and twelve months ended December 31, 2009 assuming our merger with Allied occurred on January 1, 2008. Our presentation also eliminates revenue associated with divested assets in the quarter the assets were sold and the comparable quarter in the prior year.
Three Months Ended Year Ended
December 31, December 31,
------------------ --------------
2009 2008 2009 2008
------ ------ ------ ------
Core price 2.5% 4.8% 3.0% 4.4%
Fuel surcharges (2.2) 1.1 (2.5) 1.8
Commodities 0.7 (1.3) (1.7) 0.1
--- ---- ---- ---
Total price 1.0 4.6 (1.2) 6.3
Core volume (9.7) (6.6) (9.5) (3.8)
---- ---- ---- ----
Total internal growth (8.7)% (2.0)% (10.7)% 2.5%
==== ==== ===== ===
Certain prior year amounts have been reclassified to conform to
the current year's presentation.
We believe that the presentation of adjusted revenue and changes in adjusted revenue above provides useful information to investors because it allows investors to understand increases or decreases in our revenue that are driven by changes in the operations of the newly combined company, and not merely by the addition of Allied's revenues for periods after the merger. This information has been prepared for illustrative purposes and is not intended to be indicative of the revenue that would have been realized had the merger been consummated at the beginning of the periods presented or the future results of the combined operations.
MERGER WITH ALLIED
We completed our acquisition of Allied effective December 5, 2008. In accordance with the purchase method of accounting, the purchase price paid was allocated to assets and liabilities acquired based upon their estimated fair values as of the effective date of the merger, with the excess of the purchase price over the net assets acquired being recorded as goodwill. Future adjustments, if any, made to assets and liabilities acquired will be recorded in the consolidated statement of income.
The following table summarizes our revenue, costs and expenses for the three and twelve months ended December 31, 2008 assuming the merger with Allied occurred on January 1, 2008:
Three Months Ended Year Ended
December 31, 2008 December 31, 2008
------------------------- ------------------------
Allied Republic Total Allied Republic Total
------ -------- ----- ------ -------- -----
Revenue $1,004.4 $1,244.4 $2,248.8 $5,677.1 $3,685.1 $9,362.2
Cost of
operations 594.5 863.2 1,457.7 3,463.3 2,416.7 5,880.0
----- ----- ------- ------- ------- -------
Gross profit 409.9 381.2 791.1 2,213.8 1,268.4 3,482.2
Depreciation,
amortization,
depletion, and
accretion 94.0 137.6 231.6 548.6 378.0 926.6
Selling,
general and
administrative 113.5 182.7 296.2 555.7 434.7 990.4
Loss on
disposition of
assets and
merger related
costs 61.3 172.5 233.8 106.3 172.5 278.8
---- ----- ----- ----- ----- -----
Operating income
(loss) $141.1 $(111.6) $29.5 $1,003.2 $283.2 $1,286.4
====== ======= ===== ======== ====== ========
We believe that the presentation of revenue and expenses above provides useful information to investors because it allows investors to understand increases or decreases in our revenue and expenses that are driven by changes in the operations of the newly combined company, and not merely by the addition of Allied's revenues and expenses for periods after the merger. This information has been prepared for illustrative purposes and is not intended to be indicative of the results of operations that would have actually occurred had the acquisition been consummated at the beginning of the periods presented or the future results of the combined operations.
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
Earnings before Interest, Taxes, Depreciation, Depletion, Amortization and Accretion
Earnings before interest, taxes, depreciation, depletion, amortization and accretion (EBITDA), which is not a measure determined in accordance with GAAP, for the three and twelve months ended December 31, 2009 and 2008 is calculated as follows:
Three Months Ended Year Ended
December 31, December 31,
------------------ --------------
2009 2008 2009 2008
------- ------ ------ ------
Net income (loss) attributable to
Republic Services, Inc. $35.6 $(131.7) $495.0 $73.8
Net income attributable to
noncontrolling interest 0.3 0.1 1.5 0.1
Provision (benefit) for income
taxes 44.6 (46.0) 368.5 85.4
Other (income) expense, net (0.4) 0.9 (3.2) 1.6
Interest income (0.3) (1.7) (2.0) (9.6)
Loss on extinguishment of debt 102.3 - 134.1 -
Interest expense 147.1 66.8 595.9 131.9
Depreciation, amortization and
depletion 211.0 127.2 869.7 354.1
Accretion 21.4 10.4 88.8 23.9
---- ---- ---- ----
EBITDA $561.6 $26.0 $2,548.3 $661.2
====== ===== ======== ======
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 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, 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. Our definition of EBITDA may not be comparable to similarly titled measures presented by other companies.
Adjusted Earnings
We reported diluted earnings per share were $0.09 and $(0.55) for the three months ended December 31, 2009 and 2008, respectively, and $1.30 and $0.37 for the twelve months ended December 31, 2009 and 2008, respectively. During the three and twelve months ended December 31, 2009 and 2008, we recorded a number of gains, charges (recoveries) and other expenses 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:
Three Months Ended December 31, 2009
---------------------------------------------
Net Diluted
Pre-tax Income - Earnings
EBITDA Income Republic per Share
------ ------- -------- ---------
As reported $561.6 $80.5 $35.6 $0.09
Loss on
extinguishment of
debt - 102.3 63.7 0.17
Restructuring charges 7.3 7.3 4.5 0.01
Costs to achieve
synergies 9.9 9.9 6.1 0.02
Loss on disposition
of assets and
impairments, net 7.3 7.3 14.8 0.04
Remediation charges 2.1 2.1 1.3 -
Tax effect of
permanent items - - - -
--- --- --- ---
Adjusted $588.2 $209.4 $126.0 $0.33
====== ====== ====== =====
Three Months Ended December 31, 2008
---------------------------------------------
Pre-tax Net Income Diluted
Income (Loss) - Earnings
EBITDA (Loss) Republic per Share
------ ------- -------- ---------
As reported $26.0 $(177.6) $(131.7) $(0.55)
Loss on
extinguishment
of debt - - - -
Restructuring
charges 82.7 82.7 49.9 0.21
Costs to
achieve
synergies 2.9 2.9 1.7 0.01
Loss on
disposition of
assets and
impairments, net 89.8 89.8 54.1 0.23
Remediation
charges 87.8 87.8 53.0 0.22
Tax effect of
permanent
items - - 31.1 0.14
--- --- ---- ----
Adjusted $289.2 $85.6 $58.1 $0.26
====== ===== ===== =====
Year Ended December 31, 2009
---------------------------------------------
Net Diluted
Pre-tax Income - Earnings
EBITDA Income Republic per Share
------ ------- -------- ---------
As reported $2,548.3 $865.0 $495.0 $1.30
Loss on
extinguishment of
debt - 134.1 83.3 0.22
Restructuring charges 63.2 63.2 38.6 0.10
Costs to achieve
synergies 41.8 41.8 25.6 0.06
(Gain) loss on
disposition of
assets and
impairments, net (137.0) (137.0) (73.8) (0.19)
Remediation
(recoveries) charges (6.8) (6.8) (4.1) (0.01)
Tax effect of
permanent items - - - -
--- --- --- ---
Adjusted $2,509.5 $960.3 $564.6 $1.48
======== ====== ====== =====
Year Ended December 31, 2008
---------------------------------------------
Net Diluted
Pre-tax Income - Earnings
EBITDA Income Republic per Share
------ ------- -------- ---------
As reported $661.2 $159.3 $73.8 $0.37
Loss on
extinguishment of
debt - - - -
Restructuring charges 82.7 82.7 49.9 0.25
Costs to achieve
synergies 2.9 2.9 1.7 0.01
(Gain) loss on
disposition of
assets and
impairments, net 89.8 89.8 54.1 0.27
Remediation
(recoveries) charges 155.8 156.8 94.6 0.48
Tax effect of
permanent items - - 31.1 0.16
--- --- ---- ----
Adjusted $992.4 $491.5 $305.2 $1.54
====== ====== ====== =====
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.
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 consolidated statements of cash flows. Our free cash flow for the three and twelve months ended December 31, 2009 and 2008 is calculated as follows:
Three Months Ended Year Ended
December 31, December 31,
------------------ --------------
2009 2008 2009 2008
------ ------ ------ ------
Cash provided by operating activities $384.1 $38.0 $1,396.5 $512.2
Purchases of property and equipment (283.8) (122.8) (826.3) (386.9)
Proceeds from sales of property and
equipment 9.0 2.4 31.8 8.2
--- --- ---- ---
Free cash flow $109.3 $(82.4) $602.0 $133.5
====== ====== ====== ======
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:
Three Months Ended Year Ended
December 31, December 31,
------------------ --------------
2009 2008 2009 2008
------ ------ ------ ------
Purchases of property and equipment
per the consolidated statements of
cash flows $283.8 $122.8 $826.3 $386.9
Adjustments for property and equipment
received during the prior period but
paid for in the following period, net 77.8 11.5 36.3 (14.9)
---- ---- ---- -----
Property and equipment received during
the period $361.6 $134.3 $862.6 $372.0
====== ====== ====== ======
The adjustments noted above do not affect either our net change in cash and cash equivalents as reflected in our consolidated statements of cash flows.
We define adjusted free cash flow, which is not a measure determined in accordance with GAAP, as cash provided by operating activities, less property and equipment received, plus proceeds from sales of property and equipment, plus merger related expenditures, net of tax, plus tax settlement related to BFI risk management companies, plus divesture related tax payments. Our adjusted free cash flow for the twelve months ended December 31, 2009 is calculated as follows:
Year
Ended
December 31,
2009
-------------
Cash provided by operating activities $1,396.5
Property and equipment received (862.6)
Proceeds from sales of property and equipment 31.8
Merger related expenditures, net of tax 75.4
Divestiture related tax payments 105.0
-----
Adjusted free cash flow $746.1
======
We believe that the presentation of adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after expenditures for property and equipment received, plus proceeds from sales of property and equipment, plus merger related expenditures, net of tax, plus tax settlement related to BFI risk management companies, plus divesture related tax payments. 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 that 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.
As of December 31, 2009, accounts receivable was $865.1 million, net of allowance for doubtful accounts of $55.2 million, resulting in days sales outstanding of approximately 39 (or 24 net of deferred revenue).
CASH DIVIDENDS
In October 2009, we paid a cash dividend of $72.2 million to stockholders of record as of October 1, 2009. As of December 31, 2009, we recorded a dividend payable of $72.4 million to stockholders of record at the close of business on January 4, 2010, which has been paid. In February 2010, our Board of Directors declared a regular quarterly dividend of $0.19 per share payable to stockholders of record as of April 1, 2010, which will be paid on April 15, 2010.
2010 FINANCIAL GUIDANCE
Adjusted Diluted Earnings per Share
The following is a summary of anticipated adjusted diluted earnings per share for the year ended December 31, 2010 compared to the actual adjusted diluted earnings per share for the year ended December 31, 2009 excluding loss on extinguishment of debt, restructuring charges and costs to achieve synergies, gain on the disposition of assets and impairments (net) and remediation recoveries:
(Anticipated) (Actual)
Year Year
Ended Ended
December 31, December 31,
2010 2009
------------- ------------
Diluted earnings per share $1.48 - 1.52 $1.30
Loss on extinguishment of
debt 0.08 0.22
Restructuring charges and
cost to achieve synergies 0.07 0.16
Gain on disposition of
assets and impairments, net - (0.19)
Remediation recoveries - (0.01)
--- -----
Adjusted diluted earnings per
share $1.63 - 1.67 $1.48
============ =====
We believe that the presentation of adjusted diluted earnings per share, which excludes loss on extinguishment of debt, restructuring charges and costs to achieve synergies, gains on the disposition of assets and impairments (net) and remediation recoveries 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 when the integration process is complete. 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 diluted earnings per share may not be comparable to similarly titled measures presented by other companies.
Adjusted Free Cash Flow
We define adjusted free cash flow, which is not a measure determined in accordance with GAAP, as cash provided by operating activities, less property and equipment received, plus proceeds from sales of property and equipment, plus merger related expenditures, net of tax, plus tax settlement related to BFI risk management companies, plus divestiture related tax payments. Our anticipated adjusted free cash flow for the year ended December 31, 2010 and our actual adjusted free cash flow for the year ended December 31, 2009 are calculated as follows:
(Anticipated) (Actual)
Year Year
Ended Ended
December 31, December 31,
2010 2009
------------- ------------
Cash provided by operating
activities $1,340 - 1,365 $1,396.5
Property and equipment
received (790) (862.6)
Proceeds from sales of
property and equipment 15 31.8
Merger related
expenditures, net of tax 10 75.4
Tax settlement related to
BFI risk management
companies 125 -
Divestiture related tax
payments - 105.0
------------ -----
Adjusted free cash flow $700 - 725 $746.1
============ ======
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:
(Anticipated) (Actual)
Year Year
Ended Ended
December 31, December 31,
2010 2009
------------- ------------
Purchases (cash payment) of property and
equipment per the consolidated statements of
cash flows $870 $826.3
Adjustments for property and equipment
received during the prior period but paid for
in the following period, net (80) 36.3
--- ----
Property and equipment received during
the period $790 $862.6
==== ======
We believe that the presentation of adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after expenditures for property and equipment received, plus proceeds from sales of property and equipment, plus merger related expenditures, net of tax, plus tax settlement related to BFI risk management companies, plus divestiture related tax payments. 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 that 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.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information included herein constitute 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," "could" and similar expressions are intended to identify forward-looking statements. These statements include statements about the expected benefits of the merger, 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 risk 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 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:
our ability to successfully integrate Allied's and Republic's operations and to achieve synergies or create long-term value for stockholders as expected, including the possibility that we will experience significant and unexpected transaction- and integration-related costs;
the impact on us of our substantial post-merger 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 and the fact that any downgrade in our bond ratings could adversely impact us;
general economic and market conditions including, but not limited to, 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 or changes in commodity prices may not be adequate to offset the impact of increased costs, including but not limited to 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;
the fact that our business is capital intensive and may consume cash in excess of cash flow from operations;
that 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 any future legal proceedings, including our matters currently pending with the Department of Justice and Internal Revenue Service;
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;
any litigation, audits or investigations brought by or before any governmental body;
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;
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; and
the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond our control.
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, 2008 and 2009 when filed, 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, nor 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. Readers are cautioned not to 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.
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