Republic Services, Inc.
) reported fiscal 2011 fourth quarter results, posting an EPS of 53
cents in the quarter, a 26% increase from the year-earlier quarter
and above the Zacks Consensus Estimate of 45 cents.
The quarter's EPS excluded a loss of 1 cent related to
extinguishment of debt and the prior-year quarter excluded a loss
on extinguishment of debt of 2 cents and restructuring charges and
costs of achieving synergies of 1 cent each. Including these items,
EPS amounted to 51 cents compared with 38 cents in the year-ago
Total revenue remained flat at $2.02 billion, falling short of
the Zacks Consensus Estimate of $2.03 billion. Positives like 0.6%
increase in core prices, 1% hike in fuel recovery fees, net effect
of 0.3% from acquisitions/divestitures were negatively impacted by
1.4% due to the expiration of the company's contracts with San
Mateo County and the City of Toronto, decreases in recycling
commodities pricing of 0.1% and volume of 0.2%.
Costs and Margins
Cost of goods sold was $1.21 billion in the reported quarter, up
from $1.18 billion in the year-ago quarter. Selling, general and
administrative expenses declined to $213.9 million from $227.5
million in the year-ago quarter.
Adjusted operating income dipped 3% to $370 million during the
quarter and operating margins contracted 70 basis points year over
year to 18.3% in the quarter.
Total revenue from the Collection segment was essentially flat
at $1.53 billion from year-ago levels. During the quarter,
residential collections dipped 2% year over year to $534 million
while commercial collections remained flat at $616 million.
Industrial collections increased 3% year over year to $374
million and other collections improved remained flat at $8.5
million. The Transfer and Disposal segment reported total revenue
of $239 million, a 2% decline from the year ago levels.
Fiscal 2011 Performance
Adjusted EPS in fiscal 2011 was $1.96, up 15% from $1.71 in
fiscal 2010 and above the Zacks Consensus Estimate of $1.88.
Fiscal 2011 EPS excluded a loss of 34 cents related to
extinguishment of debt and fiscal 2010 excluded a loss on
extinguishment of debt of 26 cents and restructuring charges and
costs of achieving synergies of 2 cents and 5 cents, respectively.
Including these items, EPS stood at $1.56 compared with $1.32 in
the prior year.
Revenues inched up 1% to $8.192 billion, falling short of the
Zacks Consensus Estimate of $8.196 billion by a small margin.
As of December 31, 2011, cash and cash equivalents decreased to
$66.3 million, from $88.3 million as of December 31, 2010. As of
December 31, 2011, the debt-to-capitalization ratio increased to
47.4% from 46.2% as of December 31, 2010.
During the year Republics Services expended $770 million toward
share repurchase and dividends. The company has $650 million
remaining under its share repurchase authorization. Adjusted free
cash flow during the year improved to $909 million from $776
million in the prior year. Cash from operations for 2011 improved
to $1.77 billion from $1.43 billion during the prior year.
Fiscal 2012 Outlook
Revenues are expected to increase in the range of 1.5 to 2.0%.
Core price increases are expected to contribute 1.0 to 1.5% to the
increase along with 0.5% increase in volume and net increase from
acquisitions / divestitures each. However, a net decline of 0.5%
from fuel recovery fees and commodities pricing has also been
factored into the guidance. Adjusted EPS is envisioned in the range
of $1.98-$2.02 and free cash flow in the range of $775 million to
Revenue declines to flat revenues at the majority of its
business lines remain a concern. However, the company has secured a
number of new contracts that is expected to improve its performance
in 2012. The company is also witnessing volume expansion in the
collection lines of business. Looking forward, collection volumes
are expected to improve further. Besides, share repurchases are
sure to bring bottom-line benefits to the company in the upcoming
quarters. We currently have a Zacks #3 Rank (short-term hold
rating) on the stock.
Republic Services is the second largest domestic non-hazardous
solid waste company in the U.S. It provides non-hazardous solid
waste disposal services for commercial, industrial, municipal and
residential applications through a network of 375 collection
companies in 40 states and Puerto Rico. Republic Services competes
Waste Management Inc.
) and privately held Waste Industries USA, Inc.
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