REPUBLIC SERVICES, INC. PHOENIX, Oct. 27, 2016 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $85.6 million, or $0.25 per diluted share, for the three-months ended Sept. 30, 2016, versus $215.0 million, or $0.61 per diluted share, for the comparable 2015 period. Excluding certain expenses, on an adjusted basis, net income for the three-months ended Sept. 30, 2016, was $212.6 million, or $0.62 per diluted share, versus $184.7 million, or $0.53 per diluted share, for the comparable 2015 period. A majority of the expenses excluded from the 2016 adjusted EPS relate to the tender offer for certain outstanding bonds, which closed in early July.
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For the nine-months ended Sept. 30, 2016, net income was $423.1 million, or $1.23 per diluted share, versus $577.7 million, or $1.64 per diluted share, for the comparable 2015 period. On an adjusted basis, net income for the nine-months ended Sept. 30, 2016, was $569.4 million, or $1.65 per diluted share, versus $547.4 million, or $1.55 per diluted share, for the comparable 2015 period.
"Our third-quarter performance underscores our ability to profitably grow our business, expand margins, increase earnings and free cash flow and efficiently return cash to our shareholders," said Donald W. Slager, president and chief executive officer. "Continued strength in our business and a favorable tax rate drove results that exceeded our expectations during the quarter. Given our solid results, we are updating our guidance to reflect our expected outperformance for the year."
Third-Quarter Financial Highlights:
-- Third-quarter revenue growth from average yield was 2.1 percent and
volumes increased 0.6 percent. Average yield improved sequentially
overcoming a step-down in CPI-based pricing.
-- Core price increased revenue by 3.2 percent, which consisted of 4.3
percent in the open market and 1.4 percent in the restricted portion of
the business.
-- Third-quarter adjusted diluted EPS was $0.62 per share, which exceeded
the Company's expectations.
-- Adjusted EBITDA margin was 28.9 percent of revenue, an improvement of 80
basis points from the prior year.
-- Year-to-date cash provided by operating activities was approximately
$1.4 billion and adjusted free cash flow was $576 million.
-- During the third quarter we returned $212 million to our shareholders
through share repurchases and dividends, and $622 million on a
year-to-date basis.
-- The Company completed a tender offer for certain outstanding bonds and
issued new debt in early July that will save $17 million in annual
interest expense.
Third-Quarter Operational Highlights:
-- Republic advanced its revenue-enhancing initiatives that focus on
creating a better customer experience and further differentiating its
service offerings. For example, the Company:
-- continued to increase the number of customers that do business with
Republic digitally. Approximately 1.7 million customers are now
enrolled in the MyResource(TM) customer portal and mobile app. These
tools significantly enhance customer interaction and connectivity.
-- expanded ecommerce capabilities to include the small-container
commercial business. Republic's customers can now purchase
residential, small-container and temporary large-container services
online.
-- The Company advanced its fleet-based initiatives designed to improve
productivity and lower costs. Currently:
-- 18 percent of the fleet operates on natural gas, up from 16 percent
in the prior year.
-- 74 percent of the residential fleet is automated, up from 71 percent
in the prior year.
-- 90 percent of the fleet is certified under Republic's standardized
maintenance program, up from 74 percent in the prior year. The
entire fleet will be certified under the program by the second
quarter of 2017.
-- Republic made continued progress on the consolidation of its over 100
customer service locations and opened its third and final Customer
Resource Center in Indianapolis. The state-of-the-art centers enhance
the customer experience and will lower the Company's cost structure once
the transition is complete by the end of 2017.
-- The Company was named to the 2016 Dow Jones Sustainability World Index
and North America Index. Republic was the only company in the solid
waste industry to be named to both indices.
Updated Full-Year 2016 Guidance
Republic now expects its full-year adjusted diluted EPS to be in a range of $2.19 to $2.20, which is an increase from the original guidance of $2.13 to $2.17. Additionally, the Company expects full-year adjusted free cash flow to be in a range of $840 million to $850 million. The original adjusted free cash flow guidance range was $820 million to $840 million.
Fiscal Year 2017 Preliminary Outlook
Republic is providing preliminary outlook for 2017. This does not represent full detailed guidance, but rather a point-in-time estimate based on current projections of 2016 performance, early reviews of the 2017 budget process and current economic conditions. Consistent with prior practice, the Company will provide formal guidance in February 2017 once the budget process is complete and full-year 2016 results are reported.
2017 Preliminary Outlook:
-- Adjusted diluted earnings per share is expected to be in a range of
$2.31 to $2.36, which assumes an effective tax rate of 39.5 percent.
Adjusted diluted earnings per share excludes the impact of restructuring
charges.
-- Adjusted free cash flow is expected to be in a range of $875 million to
$900 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.
Mr. Slager commented, "We expect current trends to continue into 2017, positioning us well for mid- to high-single digit earnings and free cash flow growth."
Company Declares Quarterly Dividend
Republic announced today that its Board of Directors declared a regular quarterly dividend of $0.32 per share for shareholders of record on Jan. 3, 2017. The dividend will be paid on Jan. 16, 2017.
Presentation of Certain Non-GAAP Measures
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 press release. The adjusted diluted earnings per share and adjusted free cash flow related to the full-year guidance and the preliminary outlook are described in the 2016 Financial Guidance section and 2017 Preliminary Outlook section of this press release, respectively.
About Republic Services
Republic Services, Inc. is an industry leader in U.S. recycling and non-hazardous solid waste. Through its subsidiaries, Republic's collection companies, recycling centers, transfer stations and landfills focus on providing effective solutions to make proper waste disposal effortless for its 14 million customers. We'll handle it from here.(TM), the brand's promise, lets customers know they can count on Republic to provide a superior experience while fostering a sustainable Blue Planet(TM) for future generations to enjoy a cleaner, safer and healthier world.
For more information, visit the Republic Services website at RepublicServices.com. "Like" Republic on Facebook at www.facebook.com/RepublicServices and follow on Twitter @RepublicService.
SUPPLEMENTAL UNAUDITED FINANCIAL INFORMATION
AND OPERATING DATA
REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
September 30, December 31,
2016 2015
---- ----
(Unaudited)
ASSETS
Current assets:
Cash
and
cash
equivalents $55.0 $32.4
Accounts
receivable, and
less $46.7,
allowance respectively
for
doubtful
accounts
and
other
of
$50.2 1,016.7 962.9
Prepaid
expenses
and
other
current
assets 229.9 235.0
----- -----
Total
current
assets 1,301.6 1,230.3
Restricted
cash
and
marketable
securities 85.6 100.3
Property
and
equipment,
net 7,616.0 7,552.8
Goodwill 11,163.1 11,145.5
Other
intangible
assets,
net 201.4 246.4
Other
assets 294.0 260.6
----- -----
Total
assets $20,661.7 $20,535.9
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts
payable $542.8 $577.4
Notes
payable
and
current
maturities
of
long-
term
debt 5.7 5.5
Deferred
revenue 320.2 313.9
Accrued
landfill
and
environmental
costs,
current
portion 177.0 149.8
Accrued
interest 68.0 71.6
Other
accrued
liabilities 704.2 716.6
----- -----
Total
current
liabilities 1,817.9 1,834.8
Long-
term
debt,
net
of
current
maturities 7,739.6 7,527.4
Accrued
landfill
and
environmental
costs,
net
of
current
portion 1,650.0 1,677.9
Deferred
income
taxes
and
other
long-
term
tax
liabilities 1,194.7 1,131.8
Insurance
reserves,
net
of
current
portion 280.1 278.1
Other
long-
term
liabilities 337.9 309.3
Commitments and
contingencies
Stockholders' equity:
Preferred
stock, issued
par
value
$0.01
per
share;
50
shares
authorized;
none - -
Common
stock, and
par 346.0
value issued
$0.01 including
per shares
share; held
750 in
shares treasury,
authorized; respectively
347.7 3.5 3.5
Additional
paid-
in
capital 4,741.5 4,677.7
Retained
earnings 3,243.9 3,138.3
Treasury
stock,
at
cost
(6.9
and
0.4
shares,
respectively) (326.7) (14.9)
Accumulated
other
comprehensive
loss,
net
of
tax (23.0) (30.5)
----- -----
Total
Republic
Services,
Inc.
stockholders'
equity 7,639.2 7,774.1
Noncontrolling
interests 2.3 2.5
--- ---
Total
stockholders'
equity 7,641.5 7,776.6
------- -------
Total
liabilities
and
stockholders'
equity $20,661.7 $20,535.9
========= =========
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2016 2015 2016 2015
---- ---- ---- ----
Revenue $2,409.3 $2,344.0 $7,008.5 $6,824.8
Expenses:
Cost of operations 1,476.7 1,390.2 4,298.7 4,114.9
Depreciation, amortization and
depletion 252.4 247.1 745.7 726.3
Accretion 19.7 19.7 59.3 59.2
Selling, general and
administrative 235.4 244.1 720.1 719.5
Withdrawal costs -multiemployer
pension funds - - 5.6 -
Restructuring charges 7.2 - 33.5 -
--- --- ---- ---
Operating income 417.9 442.9 1,145.6 1,204.9
Interest expense (96.3) (91.8) (281.3) (272.0)
Loss on extinguishment of debt (196.2) - (196.2) -
Interest income 0.2 0.1 0.9 0.6
Other (expense) income, net 1.3 (0.4) 2.2 0.5
--- ---- --- ---
Income before income taxes 126.9 350.8 671.2 934.0
Provision for income taxes 41.2 135.6 247.6 356.0
---- ----- ----- -----
Net income 85.7 215.2 423.6 578.0
Net income attributable to
noncontrolling interests (0.1) (0.2) (0.5) (0.3)
---- ---- ---- ----
Net income attributable to
Republic Services, Inc. $85.6 $215.0 $423.1 $577.7
===== ====== ====== ======
Basic earnings per share attributable to Republic
Services, Inc. stockholders:
Basic earnings per share $0.25 $0.62 $1.23 $1.65
===== ===== ===== =====
Weighted average common shares
outstanding 342.6 348.9 344.0 351.0
===== ===== ===== =====
Diluted earnings per share attributable to
Republic Services, Inc. stockholders:
Diluted earnings per share $0.25 $0.61 $1.23 $1.64
===== ===== ===== =====
Weighted average common and common
equivalent shares outstanding 344.0 350.3 345.3 352.4
===== ===== ===== =====
Cash dividends per common share $0.32 $0.30 $0.92 $0.86
===== ===== ===== =====
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Nine Months Ended September 30,
-------------------------------
2016 2015
---- ----
Cash provided by operating
activities:
Net income $423.6 $578.0
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation,
amortization,
depletion and
accretion 805.0 785.5
Non-cash
interest
expense 41.9 35.2
Restructuring
charges 33.5 -
Stock-based
compensation 17.7 15.1
Deferred tax
provision
(benefit) 58.2 (12.3)
Provision for
doubtful
accounts,
net of
adjustments 17.5 17.3
Loss on
extinguishment
of debt 196.2 -
Gain on
disposition
of assets,
net and
asset
impairments (0.3) (1.6)
Withdrawal
liability -
multiemployer
pension
funds 5.6 -
Environmental
adjustments 0.3 (1.3)
Excess income
tax benefit
from stock-
based
compensation
activity and
other non-
cash items (20.5) (7.0)
Change in assets and
liabilities, net of effects
from business acquisitions
and divestitures:
Accounts
receivable (70.8) (39.8)
Prepaid
expenses and
other assets (52.0) (64.2)
Accounts
payable (19.5) 11.7
Restructuring
expenditures (24.2) -
Capping,
closure and
post-
closure
expenditures (56.7) (50.4)
Remediation
expenditures (50.7) (50.1)
Other
liabilities 54.8 108.4
---- -----
Cash provided
by operating
activities 1,359.6 1,324.5
------- -------
Cash used in investing
activities:
Purchases of
property and
equipment (738.7) (732.0)
Proceeds from
sales of
property and
equipment 7.4 17.1
Cash used in
business
acquisitions,
net of cash
acquired (30.7) (535.9)
Change in
restricted
cash and
marketable
securities 10.0 8.4
Other (0.4) (0.8)
---- ----
Cash used in
investing
activities (752.4) (1,243.2)
------ --------
Cash used in financing
activities:
Proceeds from
notes
payable and
long-term
debt 3,068.6 895.4
Proceeds from
issuance of
senior
notes, net
of discount 498.9 497.9
Payments of
notes
payable and
long-term
debt (3,388.4) (908.9)
Premiums paid
on
extinguishment
of debt (176.9) -
Fees paid to
issue senior
notes and
retire
certain
hedging
relationships (9.5) (3.2)
Issuances of
common stock 35.4 52.3
Excess income
tax benefit
from stock-
based
compensation
activity 8.4 6.2
Purchases of
common stock
for treasury (306.6) (293.3)
Cash
dividends
paid (309.9) (295.0)
Distributions
paid to
noncontrolling
interests (0.7) (0.4)
Other (3.9) (5.0)
---- ----
Cash used in
financing
activities (584.6) (54.0)
------ -----
Increase in
cash and
cash
equivalents 22.6 27.3
Cash and cash
equivalents
at beginning
of year 32.4 75.2
---- ----
Cash and cash
equivalents
at end of
period $55.0 $102.5
===== ======
You should read the following information in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2015, and Form 8-K filed on June 3, 2016. All amounts below are in millions and as a percentage of our revenue, except per share data.
REVENUE
The following table reflects our total revenue by line of business for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2016 2015 2016 2015
---- ---- ---- ----
Collection:
Residential $564.4 23.4 % $564.9 24.1 % $1,675.5 23.9 % $1,682.4 24.7 %
Small-container
commercial 728.0 30.2 704.2 30.0 2,150.6 30.7 2,098.1 30.7
Large-container
industrial 511.7 21.2 497.2 21.2 1,480.5 21.1 1,412.1 20.7
Other 9.4 0.4 10.9 0.5 28.3 0.4 30.2 0.4
--- --- ---- --- ---- --- ---- ---
Total collection 1,813.5 75.2 1,777.2 75.8 5,334.9 76.1 5,222.8 76.5
Transfer 304.9 289.3 869.9 831.7
Less: intercompany (179.1) (174.9) (521.9) (510.3)
------ ------ ------ ------
Transfer, net 125.8 5.2 114.4 4.9 348.0 5.0 321.4 4.7
Landfill 543.0 536.5 1,568.6 1,523.9
Less: intercompany (249.7) (246.4) (726.9) (714.3)
------ ------ ------ ------
Landfill, net 293.3 12.2 290.1 12.4 841.7 12.0 809.6 11.9
Energy services 17.3 0.7 22.1 0.9 53.1 0.8 73.3 1.1
Other:
Sale of recycled
commodities 114.6 4.8 99.4 4.2 302.8 4.3 277.7 4.1
Other non-core 44.8 1.9 40.8 1.8 128.0 1.8 120.0 1.7
---- --- ---- --- ----- --- ----- ---
Total other 159.4 6.7 140.2 6.0 430.8 6.1 397.7 5.8
----- --- ----- --- ----- --- ----- ---
Total revenue $2,409.3 100.0 % $2,344.0 100.0 % $7,008.5 100.0 % $6,824.8 100.0 %
======== ===== ======== ===== ======== ===== ======== =====
The following table reflects changes in components of our revenue, as a percentage of total revenue, for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2016 2015 2016 2015
---- ---- ---- ----
Average
yield 2.1% 2.5% 2.0% 2.4%
Fuel
recovery
fees (0.6) (1.5) (1.0) (1.3)
---- ---- ---- ----
Total
price 1.5 1.0 1.0 1.1
Volume 0.6 0.6 1.2 1.2
Recycled
commodities 0.7 (0.6) 0.3 (0.8)
Energy
services (0.3) - (0.5) -
---- --- ---- ---
Total
internal
growth 2.5 1.0 2.0 1.5
Acquisitions
/
divestitures,
net 0.3 2.4 0.7 2.3
--- --- ---
Total 2.8% 3.4% 2.7% 3.8%
=== === === ===
Core
price 3.2% 3.6% 3.2% 3.6%
=== === === ===
Average yield is defined as revenue growth from the change in average price per unit of service, expressed as a percentage. Core price is defined as price increases to our customers and fees, excluding fuel recovery fees, net of price decreases to retain customers. We also measure changes in average yield and core price as a percentage of related-business revenue, defined as total revenue excluding recycled commodities and fuel recovery fees, to determine the effectiveness of our pricing strategies. Average yield as a percentage of related-business revenue was 2.3% and 2.2% for the three and nine months ended September 30, 2016, respectively, and 2.8% and 2.6% for the same periods in 2015, respectively. Core price as a percentage of related-business revenue was 3.5% and 3.7% for the three and nine months ended September 30, 2016, respectively, and 4.0% for each of the same periods in 2015.
COST OF OPERATIONS
The following table summarizes the major components of our cost of operations for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2016 2015 2016 2015
---- ---- ---- ----
Labor and related
benefits $484.3 20.1 % $475.5 20.3 % $1,432.2 20.4 % $1,379.0 20.2 %
Transfer and
disposal costs 194.8 8.1 188.3 8.0 568.6 8.1 537.5 7.9
Maintenance and
repairs 231.7 9.6 223.7 9.5 673.7 9.6 636.5 9.3
Transportation and
subcontract costs 142.3 5.9 132.6 5.7 397.9 5.7 382.0 5.6
Fuel 82.0 3.4 94.9 4.0 232.6 3.3 288.9 4.2
Franchise fees and
taxes 116.0 4.8 115.1 4.9 339.0 4.8 332.2 4.9
Landfill operating
costs 43.6 1.8 35.3 1.5 131.5 1.9 110.2 1.6
Risk management 49.3 2.0 43.6 1.9 141.7 2.0 118.9 1.8
Cost of goods sold 49.3 2.0 43.8 1.9 131.8 1.9 125.3 1.8
Other 83.4 3.6 87.4 3.7 249.7 3.6 254.4 3.7
Subtotal 1,476.7 61.3 1,440.2 61.4 4,298.7 61.3 4,164.9 61
Bridgeton insurance
recovery - - (50.0) (2.1) - - (50.0) (0.7)
Total cost of
operations $1,476.7 61.3 % $1,390.2 59.3 % $4,298.7 61.3 % $4,114.9 60.3 %
======== ==== ======== ==== ======== ==== ======== ====
These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The following table summarizes our selling, general and administrative expenses for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2016 2015 2016 2015
---- ---- ---- ----
Salaries $161.6 6.7 % $158.6 6.8 % $474.8 6.8 % $466.9 6.8 %
Provision for
doubtful
accounts 6.0 0.2 6.2 0.2 17.5 0.2 17.3 0.3
Other 67.8 2.9 79.3 3.4 227.8 3.3 235.3 3.4
Total selling,
general and
administrative
expenses $235.4 9.8 % $244.1 10.4 % $720.1 10.3 % $719.5 10.5 %
====== === ====== ==== ====== ==== ====== ====
These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to those of other companies.
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
EBITDA
The following table calculates EBITDA, which is not a measure determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2016 2015 2016 2015
---- ---- ---- ----
Net income
attributable to
Republic
Services, Inc. $85.6 $215.0 $423.1 $577.7
Net income
attributable to
noncontrolling
interests 0.1 0.2 0.5 0.3
Provision for
income taxes 41.2 135.6 247.6 356.0
Other expense
(income), net (1.3) 0.4 (2.2) (0.5)
Interest income (0.2) (0.1) (0.9) (0.6)
Interest expense 96.3 91.8 281.3 272.0
Depreciation,
amortization and
depletion 252.4 247.1 745.7 726.3
Accretion 19.7 19.7 59.3 59.2
---- ---- ---- ----
EBITDA $493.8 $709.7 $1,754.4 $1,990.4
====== ====== ======== ========
We believe that presenting EBITDA is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash and other 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 ratings and minimizing debt, paying cash dividends, repurchasing our common stock, and maintaining and improving our market position through business optimization. This measure has limitations. Although depreciation, depletion, amortization and accretion are considered operating costs in accordance with U.S. 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
Reported diluted earnings per share were $0.25 and $1.23 for the three and nine months ended September 30, 2016, respectively, as compared to $0.61 and $1.64 for the same periods in 2015. During each of the three and nine months ended September 30, 2016 and 2015, we recorded a number of charges and other expenses and gains that impacted our EBITDA, pre-tax income, net income attributable to Republic Services, Inc. (net income - Republic) and diluted earnings per share.
Three Months Ended September 30, 2016 Three Months Ended September 30, 2015
------------------------------------- -------------------------------------
Net Diluted Net Diluted
Pre-tax Income - Earnings Pre-tax Income - Earnings
EBITDA Income Republic per Share EBITDA Income Republic per Share
------ ------ -------- --------- ------ ------ -------- ---------
As reported $493.8 $126.9 $85.6 $0.25 $709.7 $350.8 $215.0 $0.61
Loss on
extinguishment of
debt and other
related costs 196.2 203.4 122.7 0.36 - - - -
Restructuring charges 7.2 7.2 4.3 0.01 - - - -
Bridgeton insurance
recovery - - - - (50.0) (50.0) (30.3) (0.08)
--- --- --- ----- ----- -----
Total adjustments 203.4 210.6 127.0 0.37 (50.0) (50.0) (30.3) (0.08)
----- ----- ----- ---- ----- ----- ----- -----
As adjusted $697.2 $337.5 $212.6 $0.62 $659.7 $300.8 $184.7 $0.53
====== ====== ====== ===== ====== ====== ====== =====
Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015
------------------------------------ ------------------------------------
Net
Diluted Net Diluted
Pre-tax Income - Earnings Pre-tax Income - Earnings
EBITDA Income Republic per Share(1) EBITDA Income Republic per Share(2)
------ ------ -------- ----------- ------ ------ -------- -----------
As reported $1,754.4 $671.2 $423.1 $1.23 $1,990.4 $934.0 $577.7 $1.64
Loss on
extinguishment of
debt and other
related costs 196.2 203.4 122.7 0.36 - - - -
Restructuring charges 33.5 33.5 20.2 0.06 - - - -
Withdrawal costs -
multiemployer
pension funds 5.6 5.6 3.4 0.01 - - - -
Bridgeton insurance
recovery - - - - (50.0) (50.0) (30.3) (0.08)
--- --- --- ----- ----- -----
Total adjustments 235.3 242.5 146.3 0.42 (50.0) (50.0) (30.3) (0.08)
----- ----- ----- ---- ----- ----- ----- -----
As adjusted $1,989.7 $913.7 $569.4 $1.65 $1,940.4 $884.0 $547.4 $1.55
======== ====== ====== ===== ======== ====== ====== =====
(1) Line items in this
column do not total to
$0.42 per share due to
rounding.
(2) Line items in this
column do not total to
$1.55 per share due to
rounding.
We believe that presenting adjusted EBITDA, adjusted pre-tax income, adjusted net income - Republic, and adjusted diluted earnings per share, which are not measures determined in accordance with U.S. GAAP, provides 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. We have incurred comparable charges and costs 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 - Republic, and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.
Adjusted Free Cash Flow
The following table calculates our adjusted free cash flow, which is not a measure determined in accordance with U.S. GAAP, for the nine months ended September 30, 2016 and 2015:
Nine Months Ended September 30,
-------------------------------
2016 2015
---- ----
Cash provided by
operating
activities $1,359.6 $1,324.5
Property and
equipment
received (725.0) (746.7)
Proceeds from
sales of
property and
equipment 7.4 17.1
Cash paid related
to negotiation
and withdrawal
costs -Central
States Pension
and Other Funds,
net of tax - 7.4
Restructuring
payments, net of
tax 14.6 0.6
Cash tax benefit
for debt
extinguishment
and other
related costs (80.7) -
Adjusted free
cash flow $575.9 $602.9
====== ======
We believe that presenting adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after certain 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 payments because it excludes certain payments that are required or to which 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.
Purchases of property and equipment as reflected on our consolidated statements of cash flows and the adjusted 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 follows for the nine months ended September 30, 2016 and 2015:
Nine Months Ended September 30,
-------------------------------
2016 2015
---- ----
Purchases of property
and equipment per the
unaudited consolidated
statements of cash
flows $738.7 $732.0
Adjustments for
property and equipment
received during the
prior period but paid
for in the following
period, net (13.7) 14.7
-----
Property and equipment
received during the
period $725.0 $746.7
====== ======
The adjustments noted above do not affect our net change in cash and cash equivalents as reflected in our consolidated statements of cash flows.
ACCOUNTS RECEIVABLE
As of September 30, 2016 and December 31, 2015, accounts receivable were $1,016.7 million and $962.9 million, net of allowance for doubtful accounts of $50.2 million and $46.7 million, respectively, resulting in days sales outstanding of 38, or 26 days net of deferred revenue, compared to 38, or 26 days net of deferred revenue, respectively.
CASH DIVIDENDS
In July 2016, we paid a cash dividend of $102.8 million to shareholders of record as of July 1, 2016. As of September 30, 2016, we recorded a quarterly dividend payable of $109.0 million to shareholders of record at the close of business on October 3, 2016, which was paid on October 14, 2016.
STOCK REPURCHASE PROGRAM
During the three months ended September 30, 2016, we repurchased 2.3 million shares of our stock for $109.6 million at a weighted average cost per share of $47.34.
As of September 30, 2016, we had 340.8 million shares of common stock issued and outstanding.
2016 FINANCIAL GUIDANCE
Adjusted Diluted Earnings per Share
We are increasing our 2016 adjusted diluted earnings per share guidance. The following is a summary of anticipated adjusted diluted earnings per share guidance for the year ending December 31, 2016, which is not a measure determined in accordance with U.S. GAAP:
(Anticipated)
Year Ending
December 31, 2016
-----------------
Diluted earnings per share $1.75 - $1.76
Withdrawal costs -multiemployer
pension funds 0.01
Restructuring charges 0.07
Loss on extinguishment of debt and
other related costs 0.36
Adjusted diluted earnings per share $2.19 - $2.20
=============
We believe that the presentation of adjusted diluted earnings per share guidance, which excludes withdrawal costs - multiemployer pension funds, restructuring charges, loss on extinguishment of debt, and gain/(loss) on disposition of assets and impairments, net, 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 separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges and costs 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 guidance may not be comparable to similarly titled measures presented by other companies.
Adjusted Free Cash Flow
We are increasing our 2016 adjusted free cash flow guidance. Our adjusted free cash flow guidance for the year ending December 31, 2016, which is not a measure determined in accordance with U.S. GAAP, is calculated as follows:
(Anticipated)
Year Ending
December 31,
2016
------------
Cash provided by operating
activities $ 1,814 - 1,824
Property and equipment received (930)
Proceeds from sales of property and
equipment 15
Cash paid related to withdrawal
costs -multiemployer pension
funds -
Restructuring payments, net of tax 22
Cash tax benefit for debt
extinguishment and other related
costs (81)
Adjusted free cash flow $ 840 - 850
============
We believe that presenting adjusted free cash flow guidance provides useful information regarding our recurring cash provided by operating activities after certain expenditures. 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 to which we have committed such as debt service requirements and dividend payments. Our definition of adjusted free cash flow guidance may not be comparable to similarly titled measures presented by other companies.
2017 PRELIMINARY OUTLOOK
Adjusted Diluted Earnings per Share
We are providing our preliminary outlook for 2017. This does not represent full detailed guidance, but rather a point-in-time estimate based on current projections of 2016 performance, early reviews of the 2017 budget process and current economic conditions. Consistent with prior practice, we will provide formal guidance in February 2017 once the budget process is complete and full year 2016 results are reported. The following is a summary of anticipated adjusted diluted earnings per share preliminary outlook for the year ending December 31, 2017, which is not a measure determined in accordance with U.S. GAAP:
(Preliminary Outlook)
Year Ending
December 31, 2017
-----------------
Diluted earnings per share $2.29 - $2.34
Restructuring charges 0.02
Adjusted diluted earnings per
share $2.31 - $2.36
=============
We believe that the presentation of an adjusted diluted earnings per share preliminary outlook, which excludes withdrawal costs - multiemployer pension funds, restructuring charges, loss on extinguishment of debt and gain/(loss) on disposition of assets and impairments, net, 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 separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges and costs 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 guidance may not be comparable to similarly titled measures presented by other companies.
Adjusted Free Cash Flow
With respect to the Company's preliminary outlook for adjusted free cash flow, a reconciliation to the closest corresponding GAAP financial measure is not available without unreasonable effort on a forward-looking basis due to low visibility that limits our ability to make accurate projections and estimates related to certain measures such as the purchase and sale of property and equipment, which could vary significantly, either individually or in the aggregate.
We believe that presenting an adjusted free cash flow preliminary outlook provides useful information regarding our recurring cash provided by operating activities after certain expenditures. 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 to which we have committed such as debt service requirements and dividend payments. Our definition of adjusted free cash flow guidance may not be comparable to similarly titled measures presented by other companies.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This press release contains certain 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," "plan," "estimate," "project," "intend," "should," "can," "likely," "could," "outlook" and similar expressions are intended to identify forward-looking statements. These statements include statements about 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 cannot assure you 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:
-- general economic and market conditions, including inflation and changes
in commodity pricing, fuel, interest rates, labor, risk, health
insurance and other variable costs that generally are 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, projected costs
and expenses related to our landfills, fair values of acquired assets
and liabilities assumed in our acquisitions, 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 and recycling
industry;
-- price increases to our customers may not be adequate to offset the
impact of increased costs, including 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;
-- the impact on us of our substantial 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;
-- our ability to retain our investment grade credit ratings for our debt;
-- our dependence on key personnel;
-- our dependence on large, long-term collection, transfer and disposal
contracts;
-- our business is capital intensive and may consume cash in excess of cash
flow from operations;
-- exposure to environmental liabilities or remediation requirements, 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 future legal proceedings, including
litigation, audits or investigations brought by or before any
governmental body;
-- severe weather conditions, including those brought about by climate
change, 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;
-- potential increases in our costs if we are required to provide
additional funding to any multiemployer pension plan to which we
contribute or if a withdrawal event occurs with respect to any such
plan;
-- 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;
-- a cyber-security incident could negatively impact our business and our
relationships with customers; and
-- acts of war, riots or terrorism, including 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.
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, 2015 for further discussion regarding our exposure to risks. You should be aware that any forward-looking statement in this press release speaks only as of the date on which we make it. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such risk factors, or 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 statement made in this press release. You should not place undue reliance on any forward-looking statement. 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 of this press release, or to reflect the occurrence of unanticipated events.
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SOURCE Republic Services, Inc.
