Republic Services increases income in Q3

Company has invested $385 million in acquisitions so far in 2017.

November 3, 2017
Waste Today Staff
Municipal / IC&I

Republic Services Inc., Phoenix, has reported net income of $223.2 million, or 66 cents per diluted share, for the three months ended Sept. 30, 2017, versus $85.6 million, or 25 cents per diluted share, for the comparable 2016 period. Excluding certain gains and expenses, on an adjusted basis, net income for the three months ended Sept. 30, 2017, was $225.2 million, or 67 cents per diluted share, versus $212.6 million, or 62 cents per diluted share, for the comparable 2016 period.

"We are pleased with our third-quarter performance, which included high-single-digit growth in earnings and free cash flow per share," Donald W. Slager, president and CEO, says. "Thus far in 2017, we have invested approximately $385 million in acquisitions, including the purchase of ReCommunity. Our pipeline for the remainder of the year and into 2018 is robust and will serve as a catalyst for future growth.

"Our continued ability to profitably grow the business both organically and through acquisitions illustrates the effectiveness of our strategy and our commitment to creating long-term shareholder value," Slager adds.

Q3 financial highlights include:

Earnings per share (EPS) was 66 cents per share. Adjusted EPS, a non-GAAP (generally accepted accounting principles) measure, was 67 cents per share, an increase of 8 percent over the prior year despite a 1-cent headwind from the hurricanes.

Year-to-date cash provided by operating activities was $1.4 billion and adjusted free cash flow, a non-GAAP measure, was $606 million, an increase of approximately 5 percent over the prior year.

Total cash returned to shareholders through dividends and share repurchases was $227 million. Year-to-date cash returned to shareholders was $682 million.

Total revenue increased 6.3 percent over the prior year.

Revenue growth from average yield was 2.5 percent and volumes increased 1.6 percent.

Core price increased revenues by 4.1 percent, which consisted of 5.1 percent in the open market and 2.3 percent in the restricted portion of the business.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $718 million and the EBITDA margin was 28 percent of revenue.

Q3 operational highlights include:

The company invested $129 million in tuck-in acquisitions during the quarter and $220 million year-to-date through Sept. 30, 2017.

In October, the company acquired ReCommunity Holdings for approximately $165 million, which included certain tax benefits valued at approximately $50 million.

Republic continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The company now has approximately $510 million in annual revenue tied to either a waste-related index or a fixed-rate increase of 3 percent or greater.

The company, which operates the seventh-largest vocational fleet in the U.S., advanced its fleet-based initiatives designed to improve productivity and lower costs. Currently, 19 percent of its fleet operates on compressed natural gas, up from 18 percent in the prior year, while 75 percent of its residential fleet is automated, up from 74 percent in the prior year.

Republic was recently named to the 2017 Dow Jones Sustainability Index (DJSI) World and North America Indices for the second consecutive year.Republic is the only recycling and solid waste service provider in the world to be included in either index this year.

Republic is providing a preliminary financial outlook for 2018. It should be noted that the preliminary outlook does not represent full detailed guidance, but rather a point-in-time estimate based on its current projections of 2017 performance, early reviews of the 2018 budget process and current business and economic conditions. Consistent with prior practice, the company will provide formal financial guidance in February 2018 once the budget process is complete and full-year 2017 results are reported. 2018 Preliminary Financial Outlook:

Adjusted diluted earnings per share are expected to be in a range of $2.53 to $2.58, which excludes the impact of restructuring charges.

Adjusted free cash flow is expected to be in a range of $925 million to $950 million. Adjusted free cash flow consists of cash provided by operating activities, less property and equipment received, plus proceeds from the sale of property and equipment, and is exclusive of cash paid for restructuring, net of tax.

Slager comments, "We expect current business and economic conditions to continue into 2018, positioning us well for high-single-digit growth in earnings and free cash flow per share despite a headwind from recycled commodity prices."

Republic also announces its board of directors declared a regular quarterly dividend of 34.5 cents per share for shareholders of record as of Jan. 2, 2018. The dividend will be paid Jan. 16, 2018.

Republic continues to increase cash returns to shareholders while maintaining its investment-grade credit rating, and announces its board of directors approved a $2 billion share repurchase authorization which extends through Dec. 31, 2020. This was added to the amount remaining under the prior authorization, which was $95.1 million as of Sept. 30, 2017. At current prices, $2.1 billion represents approximately 10 percent of the company's outstanding shares of stock.

Adjusted diluted earnings per share, adjusted net income, adjusted EBITDA, and adjusted free cash flow are described in the Reconciliation of Certain Non-GAAP Measures section of this document. The adjusted diluted earnings per share and adjusted free cash flow related to the preliminary outlook are described in the 2018 Preliminary Financial Outlook section of this press release. The full release is available here.