UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) July 26, 2006
Republic Services, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 1-14267 | 65-0716904 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| 110 SE 6th Street, 28th Floor, Fort Lauderdale, Florida | 33301 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(954) 769-2400
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13d-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On July 26, 2006, Republic Services, Inc. issued a press release to announce operating results for
the three and six months ended June 30, 2006, a copy of which is incorporated herein by reference
and attached hereto as Exhibit 99.1.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
| July 26, 2006 | REPUBLIC SERVICES, INC. |
|||
| By: | /s/ Tod C. Holmes | |||
| Tod C. Holmes | ||||
| Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
||||
| By: | /s/ Charles F. Serianni | |||
| Charles F. Serianni | ||||
| Vice President and Chief Accounting Officer (Principal Accounting Officer) |
||||
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Exhibit 99.1
| REPUBLIC CONTACTS | ||||||
| Media Inquiries: Investor Inquiries: |
Will Flower Tod Holmes Ed Lang |
(954) 769-6392 (954) 769-2387 (954) 769-3591 |
||||
REPUBLIC SERVICES, INC. REPORTS
QUARTERLY EARNINGS AND
INCREASES EARNINGS GUIDANCE
QUARTERLY EARNINGS AND
INCREASES EARNINGS GUIDANCE
| ● | Record earnings of $0.52 per share | ||
| ● | Internal growth of 8.5 percent | ||
| ● | Operating profit margins expand | ||
| ● | Dividend increased by 14 percent |
Fort Lauderdale, Fla., July 26, 2006 — Republic Services, Inc. (NYSE: RSG) today reported net
income of $70.8 million, or $0.52 per diluted share, for the three months ended June 30, 2006,
versus $64.4 million, or $0.44 per diluted share, for the comparable period last year. Revenue in
the second quarter of 2006 grew to $779.8 million from $718.6 million for the same period in 2005.
This 8.5 percent increase in revenue consists of 4.9 percent from price and 3.6 percent from
volume. Operating income for the three months ended June 30, 2006 was $134.0 million, compared to
$122.9 million for the same quarter last year. Operating margins for the three months ended June
30, 2006 increased to 17.2 percent from 17.1 percent for same period in 2005.
For the six months ended June 30, 2006, net income was $135.4 million, or $0.98 per diluted share,
compared to $129.9 million, or $0.88 per diluted share, for the comparable period last year.
Revenue for the six months ended June 30, 2006 was $1,517.3 million compared to $1,395.8 million
for the same period in 2005. Operating income for the six months ended June 30, 2006 was $256.4
million compared to $242.4 million for the same period last year.
Republic Services also announced today that it is increasing its 2006 guidance for free cash flow
and earnings per share to reflect the Company’s first six month performance and current favorable
business conditions.
| ● | Free Cash Flow: The Company increased the range of anticipated normalized free cash flow for 2006 to approximately $280 million to $290 million. The previous guidance for free cash flow was $270 million to $280 million. |
| ● | Earnings Per Share: The Company raised earnings per share guidance to a new range of $1.94 to $1.97 per diluted share. The previous guidance was a range of $1.90 to $1.93 per diluted share. |
Separately, Republic announced that its Board of Directors has approved a 14 percent increase in
the Company’s regular quarterly dividend from $0.14 per share to $0.16 per share. The quarterly
dividend of $0.16 per share will be paid on October 16, 2006 to shareholders of record on October
2, 2006.
“We are focused on growing free cash flow and expanding our operating profit margins,” said James
E. O’Connor, Chairman and Chief Executive Officer of Republic Services, Inc. “Our increase in
earnings guidance is based on our performance during the first six months of 2006 and our
expectation that we will continue to experience favorable price and volume growth in the future.
Our continued success in the growth of free cash flow and the expansion of our operating margin
resulted in the Boards’ decision to reward shareholders with a 14 percent increase in the quarterly
dividend.”
Republic Services, Inc. is a leading provider of solid waste collection, transfer and disposal
services in the United States. The Company’s operating units are focused on providing solid waste
services for commercial, industrial, municipal and residential customers.
Certain statements and information included herein constitute “forward-looking statements” within
the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause the
actual results, performance, or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied in or by such forward-looking
statements. Such factors include, among other things, whether the Company’s estimates and
assumptions concerning its selected balance sheet
2
accounts, final capping, closure, post-closure and remediation costs, available airspace, and
projected costs and expenses related to the Company’s landfills and property and equipment, and
labor, fuel rates and economic and inflationary trends, turn out to be correct or appropriate, and
various factors that will impact the actual business and financial performance of the Company such
as competition and demand for services in the solid waste industry; the Company’s ability to manage
growth; compliance with, and future changes in, environmental regulations; the Company’s ability to
obtain approval from regulatory agencies in connection with expansions at the Company’s landfills;
the ability to obtain financing on acceptable terms to finance the Company’s operations and growth
strategy and for the Company to operate within the limitations imposed by financing arrangements;
the ability of the Company to repurchase common stock at prices that are accretive to earnings per
share; the Company’s dependence on key personnel; general economic and market conditions including,
but not limited to, inflation and changes in commodity pricing, fuel, labor and other variable
costs that are generally not within the control of the Company; dependence on large, long-term
collection contracts; dependence on acquisitions for growth; risks associated with undisclosed
liabilities of acquired businesses; risks associated with pending legal proceedings; and other
factors contained in the Company’s filings with the Securities and Exchange Commission.
###
3
REPUBLIC SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
| June 30, | December 31, | |||||||
| 2006 | 2005 | |||||||
| (Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 30.7 | $ | 131.8 | ||||
Accounts receivable, less allowance for doubtful accounts
of $18.2 and $17.3, respectively |
302.1 | 280.0 | ||||||
Other current assets |
65.2 | 70.5 | ||||||
Total Current Assets |
398.0 | 482.3 | ||||||
RESTRICTED CASH |
232.5 | 255.3 | ||||||
PROPERTY AND EQUIPMENT, NET |
2,153.5 | 2,115.3 | ||||||
GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
1,587.7 | 1,590.8 | ||||||
OTHER ASSETS |
118.0 | 106.8 | ||||||
| $ | 4,489.7 | $ | 4,550.5 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Accounts payable, deferred revenue and other current
liabilities |
$ | 524.0 | $ | 664.0 | ||||
Notes payable and current maturities of long-term debt |
2.9 | 3.0 | ||||||
Total Current Liabilities |
526.9 | 667.0 | ||||||
LONG-TERM DEBT, NET OF CURRENT MATURITIES |
1,659.1 | 1,472.1 | ||||||
ACCRUED LANDFILL AND ENVIRONMENTAL COSTS |
278.9 | 259.7 | ||||||
OTHER LIABILITIES |
561.8 | 545.9 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
STOCKHOLDERS’ EQUITY: |
||||||||
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; none issued |
— | — | ||||||
Common stock, par value $.01 per share; 750,000,000
shares authorized; 192,896,860 and 190,119,521 issued,
including shares held in treasury, respectively |
1.9 | 1.9 | ||||||
Additional paid-in capital |
1,592.7 | 1,509.1 | ||||||
Deferred compensation |
— | (1.1 | ) | |||||
Retained earnings |
1,500.3 | 1,402.8 | ||||||
Treasury stock, at cost (59,594,400 and 51,516,900
shares,
respectively) |
(1,634.6 | ) | (1,308.8 | ) | ||||
Accumulated other comprehensive income, net of tax |
2.7 | 1.9 | ||||||
Total Stockholders’ Equity |
1,463.0 | 1,605.8 | ||||||
| $ | 4,489.7 | $ | 4,550.5 | |||||
4
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenue |
$ | 779.8 | $ | 718.6 | $ | 1,517.3 | $ | 1,395.8 | ||||||||
Expenses: |
||||||||||||||||
Cost of operations |
492.5 | 451.3 | 948.9 | 870.0 | ||||||||||||
Depreciation, amortization and depletion |
74.4 | 70.7 | 147.5 | 131.8 | ||||||||||||
Accretion |
3.8 | 3.5 | 7.6 | 7.0 | ||||||||||||
Selling, general and administrative |
75.1 | 70.2 | 156.9 | 144.6 | ||||||||||||
Operating income |
134.0 | 122.9 | 256.4 | 242.4 | ||||||||||||
Interest expense, net |
(20.5 | ) | (18.7 | ) | (39.3 | ) | (36.1 | ) | ||||||||
Other income (expense), net |
0.7 | (0.3 | ) | 1.3 | 3.2 | |||||||||||
Income before income taxes |
114.2 | 103.9 | 218.4 | 209.5 | ||||||||||||
Provision for income taxes |
43.4 | 39.5 | 83.0 | 79.6 | ||||||||||||
Net income |
$ | 70.8 | $ | 64.4 | $ | 135.4 | $ | 129.9 | ||||||||
Basic earnings per share |
$ | 0.52 | $ | 0.45 | $ | 0.99 | $ | 0.89 | ||||||||
Weighted average common shares outstanding |
135.0 | 142.5 | 136.3 | 145.3 | ||||||||||||
Diluted earnings per share |
$ | 0.52 | $ | 0.44 | $ | 0.98 | $ | 0.88 | ||||||||
Weighted average common and common
equivalent shares outstanding |
136.7 | 145.4 | 138.1 | 148.2 | ||||||||||||
Cash dividends per common share |
$ | 0.14 | $ | 0.12 | $ | 0.28 | $ | 0.24 | ||||||||
5
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Six Months Ended June 30, | ||||||||
| 2006 | 2005 | |||||||
CASH PROVIDED BY OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 135.4 | $ | 129.9 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Depreciation, amortization, and depletion |
147.5 | 131.8 | ||||||
Accretion |
7.6 | 7.0 | ||||||
Other |
20.0 | 38.3 | ||||||
Change in operating assets and liabilities, net of effects from
business acquisitions and dispositions |
(163.7 | ) | 28.1 | |||||
| 146.8 | 335.1 | |||||||
CASH USED IN INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
(178.2 | ) | (137.4 | ) | ||||
Proceeds from sales of property and equipment |
8.6 | 6.6 | ||||||
Cash used in business acquisitions, net of cash acquired |
(3.3 | ) | (2.5 | ) | ||||
Cash proceeds from business dispositions |
3.8 | 28.8 | ||||||
Change in restricted cash |
22.8 | 8.8 | ||||||
Other |
(0.3 | ) | 37.2 | |||||
| (146.6 | ) | (58.5 | ) | |||||
CASH USED IN FINANCING ACTIVITIES: |
||||||||
Proceeds from notes payable and long-term debt |
270.0 | 8.8 | ||||||
Payment of premium to exchange notes payable |
— | (27.6 | ) | |||||
Payments of notes payable and long-term debt |
(76.7 | ) | (23.0 | ) | ||||
Issuances of common stock |
59.3 | 26.6 | ||||||
Windfall income tax benefits from stock option exercises |
10.6 | — | ||||||
Purchases of common stock for treasury |
(325.8 | ) | (337.1 | ) | ||||
Cash dividends |
(38.7 | ) | (35.5 | ) | ||||
| (101.3 | ) | (387.8 | ) | |||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(101.1 | ) | (111.2 | ) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
131.8 | 141.5 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 30.7 | $ | 30.3 | ||||
6
REPUBLIC SERVICES, INC.
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
The following information should be read in conjunction with the Company’s audited
Consolidated Financial Statements and notes thereto appearing in the Company’s Form 10-K as of and
for the year ended December 31, 2005. It should also be read in conjunction with the Company’s
Unaudited Condensed Consolidated Financial Statements and notes thereto appearing in the Company’s
Form 10-Q as of and for the three months ended March 31, 2006.
EQUITY-BASED COMPENSATION EXPENSE
The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004),
“Share-Based Payment” (“SFAS 123(R)”) effective January 1, 2006. Stock options granted prior to
the effective date of SFAS 123(R) were fully vested as of December 31, 2005, and, consequently, no
compensation expense will be recognized for these options.
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 generally accepted accounting principles (GAAP), for the
three and six months ended June 30, 2006 and 2005 is calculated as follows (in millions):
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income |
$ | 70.8 | $ | 64.4 | $ | 135.4 | $ | 129.9 | ||||||||
Provision for income taxes |
43.4 | 39.5 | 83.0 | 79.6 | ||||||||||||
Other (income) expense, net |
(.7 | ) | .3 | (1.3 | ) | (3.2 | ) | |||||||||
Interest expense, net |
20.5 | 18.7 | 39.3 | 36.1 | ||||||||||||
Depreciation, amortization and depletion |
74.4 | 70.7 | 147.5 | 131.8 | ||||||||||||
Accretion |
3.8 | 3.5 | 7.6 | 7.0 | ||||||||||||
Operating income before depreciation, amortization,
depletion and accretion |
$ | 212.2 | $ | 197.1 | $ | 411.5 | $ | 381.2 | ||||||||
The Company believes that the presentation of operating income before depreciation,
amortization, depletion and accretion is useful to investors because it provides important
information concerning the Company’s operating performance exclusive of certain non-cash costs.
Operating income before depreciation, amortization, depletion and accretion demonstrates the
Company’s ability to execute its 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 the Company’s customer base and services provided, pursuing strategic acquisitions that augment
the Company’s existing business platform, repurchasing shares of common stock at prices that
provide value to the Company’s shareholders, paying cash dividends, maintaining the Company’s
investment grade rating and minimizing debt. This measure has material 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.
7
CASH FLOW
During the three months ended June 30, 2006, cash provided by operating activities was $142.6
million, cash used in investing activities was $48.6 million and cash used in financing activities
was $78.2 million. During the six months ended June 30, 2006, cash provided by operating
activities was $146.8 million, cash used in investing activities was $146.6 million and cash used
in financing activities was $101.3 million.
The Company defines 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 the Company’s consolidated statements of cash
flows. The Company’s free cash flow for the three and six months ended June 30, 2006 is calculated
as follows (in millions):
| Three months ended | Six months ended | |||||||
| June 30, 2006 | June 30, 2006 | |||||||
Cash provided by operating activities |
$ | 142.6 | $ | 146.8 | ||||
Purchases of property and equipment |
(87.7 | ) | (178.2 | ) | ||||
Proceeds from sales of property and
equipment |
1.1 | 8.6 | ||||||
Free cash flow |
$ | 56.0 | $ | (22.8 | ) | |||
Free cash flow for the six months ended June 30, 2006 was negative because of an $83.0 million
federal tax payment for 2005 that had been deferred until February 2006 as a result of an Internal
Revenue Service notice issued in response to Hurricane Katrina, and because of payments made during
the three months ended March 31, 2006 for capital and other expenditures incurred in 2005.
The Company expects normalized free cash flow for 2006 to exceed 100% of net income. Normalized
free cash flow excludes $113.4 million of federal tax payments and approximately $60 million of
payments for capital and other expenditures that relate to 2005 that will be made during 2006.
The Company believes that the presentation of free cash flow provides useful information regarding
the Company’s recurring cash provided by operating activities after expenditures for property and
equipment, net of proceeds from sales of property and equipment. It also demonstrates the Company’s
ability to execute its financial strategy as previously discussed and is a key metric used by the
Company to determine compensation. The presentation of free cash flow has material limitations.
Free cash flow does not represent the Company’s cash flow available for discretionary expenditures
because it excludes certain expenditures that are required or that the Company has committed to
such as debt service requirements and dividend payments. The Company’s definition of free cash flow
may not be comparable to similarly titled measures presented by other companies.
Capital expenditures include $.6 million and $.3 million of capitalized interest for the three
months ended June 30, 2006 and 2005, respectively, and $.9 million and $.5 million for the six
months ended June 30, 2006 and 2005, respectively.
As of June 30, 2006, accounts receivable were $302.1 million, net of allowance for doubtful
accounts of $18.2 million, resulting in days sales outstanding of approximately 35 (or 22 net of
deferred revenue).
STOCK REPURCHASE PROGRAM
During the three months ended June 30, 2006, the Company paid $185.2 million to repurchase 4.5
million shares of its common stock. During the six months ended June 30, 2006, the Company
repurchased a total of 8.1 million shares of its common stock for $325.8 million. As of June 30,
2006, the Company was authorized to repurchase up to an additional $165.4 million under its
existing stock repurchase program.
8
DIVIDENDS
In April 2006, the Company paid a dividend of $19.2 million to shareholders of record as of
April 3, 2006. As of June 30, 2006, the Company recorded a dividend payable of approximately $18.7
million to shareholders of record at the close of business on July 3, 2006, which has been paid.
In July 2006, the Company’s Board of Directors declared a regular quarterly dividend of $.16 per
share for shareholders of record on October 2, 2006.
REVENUE
The following table reflects total revenue of the Company by revenue source for the three and
six months ended June 30, 2006 and 2005 (in millions):
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Collection: |
||||||||||||||||
Residential |
$ | 182.4 | $ | 167.6 | $ | 360.4 | $ | 334.2 | ||||||||
Commercial |
212.4 | 190.9 | 420.7 | 380.3 | ||||||||||||
Industrial |
166.7 | 151.7 | 323.5 | 288.6 | ||||||||||||
Other |
18.2 | 15.8 | 36.3 | 31.0 | ||||||||||||
Total collection |
579.7 | 526.0 | 1,140.9 | 1,034.1 | ||||||||||||
Transfer and disposal |
309.3 | 278.6 | 587.2 | 528.1 | ||||||||||||
Less: Intercompany |
(153.2 | ) | (138.5 | ) | (293.7 | ) | (264.0 | ) | ||||||||
Transfer and disposal, net |
156.1 | 140.1 | 293.5 | 264.1 | ||||||||||||
Other |
44.0 | 52.5 | 82.9 | 97.6 | ||||||||||||
Total revenue |
$ | 779.8 | $ | 718.6 | $ | 1,517.3 | $ | 1,395.8 | ||||||||
The following table reflects the Company’s revenue growth for the three and six months ended
June 30, 2006 and 2005:
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Core price |
3.3 | % | 2.6 | % | 3.2 | % | 2.4 | % | ||||||||
Fuel surcharges |
1.5 | .5 | 1.4 | .5 | ||||||||||||
Environmental fee |
.3 | — | .4 | — | ||||||||||||
Commodities |
(.2 | ) | .1 | (.4 | ) | .2 | ||||||||||
Total price |
4.9 | 3.2 | 4.6 | 3.1 | ||||||||||||
Core volume |
3.7 | 2.4 | 4.3 | 2.4 | ||||||||||||
Non-core volume |
(.1 | ) | .2 | — | .1 | |||||||||||
Total volume |
3.6 | 2.6 | 4.3 | 2.5 | ||||||||||||
Total internal growth |
8.5 | 5.8 | 8.9 | 5.6 | ||||||||||||
Acquisitions, net of divestitures |
(.1 | ) | (.6 | ) | (.3 | ) | .1 | |||||||||
Taxes |
.1 | — | .1 | — | ||||||||||||
Total revenue growth |
8.5 | % | 5.2 | % | 8.7 | % | 5.7 | % | ||||||||
9