Republic Services, Inc.
Filed by Republic Services, Inc. pursuant to Rule 425
under the Securities Act of 1933, as amended, and
deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934, as amended.
Subject Company: Republic Services, Inc.
(Commission File No. 1-14267)
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
CORPORATE PARTICIPANTS
James E. OConnor
Republic Services, Inc. Chairman & CEO
Tod C. Holmes
Republic Services, Inc. CFO & SVP
CONFERENCE CALL PARTICIPANTS
William Fisher
Raymond James Analyst
Jonathan Ellis
Merrill Lynch Analyst
Corey Greendale
First Analysis Analyst
Leone Young
Citigroup Analyst
Brian Butler
FBR Analyst
Scott Levine
J.P. Morgan Analyst
PRESENTATION
Operator
Good morning, and welcome to the second quarter conference call for investors in Republic
Services. Republic is traded on the New York Stock exchange under the symbol RSG. Your host this
morning is Republics Chairman and CEO, Jim OConnor. Todays call is being recorded, and all
participants are in a listen-only mode. There will be a question-and-answer session following
Republics summary of quarterly earnings, and I will provide you with specific instructions for
questions later in the call.
At this time, it is my pleasure to turn the call over to Mr. OConnor. Good morning, Mr. OConnor
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, and thank you all for joining us. This is Jim OConnor, and I would like to
welcome everyone to Republic Services second quarter conference call. Tod Holmes, our Chief
Financial Officer, and Ed Lang, our Treasurer, are joining me as we discuss our second quarter
performance. I would like to take a moment to remind everyone that some of the information that we
discuss on todays call contains forward-looking statements, which involves risks and uncertainties
and may be materially different from actual results. Our SEC filings discuss factors that could
cause actual results to differ materially from expectations. Additionally, the material that we
discuss today is time-sensitive. If in the future you listen to a rebroadcast or recording of the
conference call, you should be sensitive to the date of the original call, which is July 25th,
2008. Please note that this call is the property of Republic Services, Incorporated. Any
redistribution, retransmission or rebroadcast of this call in any form without the express written
consent of Republic Services is strictly prohibited. Yesterday, Waste Management filed an 8-K
regarding their intent to acquire Republic Services.
As we stated in our response, we believe our merger with Allied Waste is in the best interest of
our stockholders because it creates significant value-generating opportunities. I will have no
further comment regarding Waste Managements proposal, including in the Q&A portion of this call.
During the second quarter, we continued to deliver on our pricing initiative, which has offset
significantly higher fuel costs. We believe current pricing environment is sustainable across all
lines of business. Key results in the quarter: Republic had revenue growth of 2.4% to $828 million;
we achieved internal growth of 3.9%, with 7% of price improvement, and volume decline of 3.1%. Our
second quarter volume decline
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
was affected by the slow down in residential housing construction activity. C&D volumes in our
temporary roll off business and third party C&D volumes at our transfer stations and landfills
continue to be weak. Price growth continues to be strong. Core price is up 4.1%. Pricing is the
most important factor for covering rising costs and improving return on invested capital. Within
our landfill business, our core price was up approximately 3.7% in the quarter. We continue to see
sequential improvement in landfill pricing, particularly in our MSW volumes.
The landfill business is capital intensive and requires continued focus on pricing in order to
achieve appropriate risk adjusted returns. As landfill and residential contracts renew, we are
seeing consistent price increases at high levels of retention; and we continue to utilize our
return on investment pricing tools on to renewals of franchises and municipal contracts. The
biggest impact on our volume was in our temporary roll off business, which decreased approximately
16%. The decrease is primarily due to the weakening of the residential construction volumes and is
similar to a trend we have experienced during the past three quarters. Additionally, construction
related landfill volumes are down 16%. Despite the net volume reductions, temporary roll off
pricing has remained stable. We have continued to adjust our work force and capital spending to
reflect lower activity in our temporary roll off line of business. By making these adjustments, we
have maintained our labor productivity. Operating margins adjusted for remediation expenses for the
second quarter were 18.6. Fuel costs increased 220 basis points compared to the second quarter of
2007. We remain focused on all of the components of our cost structure to be sure we remain
competitive in our market places.
Republic has had number of significant achievements in the quarter. Our free cash flow for the
second quarter was $82 million We believe our full-year cash flow performance will be at the high
end of our guidance of 340 to $350 million, excluding merger-related costs. During the quarter, we
continued to return cash to our shareholders. In the second quarter, we repurchased approximately
1.3 million shares of stock for $41 million. Republic discontinued the share repurchase program
during the second quarter when it appeared that we would come to an agreement in our merger
negotiations with Allied Waste. Our board has approved a 12% increase in our quarterly dividend
beginning in October. The new quarterly dividend is $0.19 per share. We have increased our dividend
every year since we initiated the dividend five years ago. And at this time, I would like to turn
the call over to Tod Holmes for a financial review of the second quarter. Tod?
Tod C. Holmes - Republic Services, Inc. CFO & SVP
Thank you, Jim. I will begin the review of the Companys financial results by discussing
revenue. Second quarter 2008 revenue rose by 2.4% to $828 million from $808 million last year. As
Jim indicated, internal growth was a positive 3.9%. Total price was 7%, with a 4.1% increase from
core price, a 1.9% increase from fuel surcharges, a .4% increase for environmental fees and a .6%
increase from commodity improvement. During the quarter, Republic continues to benefit from its
ongoing price increase strategy and discipline in all lines of business. Second quarter core volume
declined 3.4%, while the landfill volume was down 5% and temporary roll off volume was down 16%.
Divestitures in noncore operations accounted for the remaining 1.2% reduction in our revenue and
primarily relate to our divestiture of the LETCO business in the fourth quarter of 2007. Second
year, excuse me. Second quarter year-over-year operating margins: What we see here is
year-over-year operating margins decrease by 440 basis points from 18.9% to 14.5%. However, this is
due to a unique circumstance.
During the second quarter of 2008, we recorded a pretax charge of $34 million related to estimated
costs to comply with orders issued by the Ohio and U.S. EPAs in response to environmental
conditions at our county-wide landfill. Excluding this charge, operating margins for the second
quarter were 18.6%. Fee components of our year over year operating margin change are as follows:
The charge associated with county-wide, negative 410 basis points; truck maintenance improved
positive 20 basis points; higher fuel costs were a negative 220 basis point impact on margin for
the quarter. This follows on sub-contracting costs, positive 80 basis points; labor, positive 60,
landfill operating costs excluding county-wide, positive 50 basis points; DD&A, positive 30 basis
points; and SG&A, a negative 50 basis points; for a total of negative 444 basis points. Now, let me
briefly comment on the components of these margin change. First truck maintenance. Again, during
the second quarter of 2008, the Companys continued focused on preventative maintenance and cost
saving initiatives and improved pricing resulted in a reduction in truck maintenance expense as a
percentage of revenue.
Next is fuel. Republics average wholesale price per gallon increased from $2.69 a gallon in the
second quarter of 07 to $4.23 in the second quarter of 2008. And current fuel prices are
approximately $4.56 per gallon for Republic. Third, our disposal and subcontracting costs. Again,
this is our largest cost category, through which the impact of improved pricing is clearly visible.
Next, fourth and labor. During the second quarter, we continued to benefit from productivity
improvements which contributed to our margin growth; and it is particularly important to note, in
the roll off construction area, we were able to maintain our productivity despite the housing
slowdown. Fifth, landfill and operating costs. Lower landfill volumes and continued focus on cost savings helped reduce landfill operating
expense. Sixth, DD&A. The decrease in DD&A as a percentage of revenue is again primarily due to
improved pricing.
And finally, SG&A. Year-over-year SG&A as a percentage of revenue was unchanged at 9.9% excluding
the county-wide charge. We had also a $4 million reduction in our allowance for doubtful accounts,
which was a benefit in the second quarter of 2007. And that was a function of the
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
excellent accounts receivable working capital management that our entire field organization
delivers. Despite a year-to-date 200 basis point increase in fuel expense, we continue to believe
that operating margins for fiscal 2008 will be at or slightly higher than those of the prior year,
excluding the remediation charge at county-wide and the increase in fuel expense. Year-over-year
gross operating profit increased by 220 basis points from 28.4% to 30.6%. Next, I will discuss our
free cash flow. Again, as Jim indicated, free cash flow for the second quarter was $82 million.
This is based on cash from operating activities of 164 million, less the purchases of property and
equipment. It was paid in cash of 84 million, plus the proceeds from the sale of old equipment of 2
million, for a net of 82 million free cash flow. For the six months ended June 30th, free cash flow
was 149 million, cash from operations was 311, purchases of property and equipment was 165 million,
and we received 3 million from the proceeds of the sale of equipment.
As you are aware, earlier this year, Congress passed the Economic Stimulus Act of 2008. This act
allows companies that purchase new equipment to deduct an additional 50% of the cost of the
equipment in the 2008 tax returns. We believe this will save Republic approximately $25 million of
cash during 2008. However, we currently anticipate increasing our truck capital expenditures in
2008 to pre-buy 2008 and 2009 trucks prior to new diesel engine requirements effective January 1st,
2010. Therefore, we remain comfortable with our cash flow guidance of 350 million, which is at the
high end of our range from our original guidance for cash flows. And again, this guidance excludes
merger-related costs. Now let me talk just briefly about items that impact cash balances. During
the second quarter, as Jim indicated, we repurchased 1.3 million shares for about $41 million or
about $30.83 a share. Republics actual share count on June 30th, 2008 was 181.9 million shares.
And as Jim indicated, in June, after announcing our agreement to merge with Allied, we suspended
the share repurchase program.
Republics balance sheet remains very strong. At June 30th, accounts receivable was 320 million,
days sales outstanding was 35 days, which is consistent with second quarter of last year, despite a
weakening economic environment. Republics net debt is 1,500,000,000, which is up slightly from
1,450,000,000 million at the December 31st. And our net debt to total capital at June 30th is 54%.
Now, let me turn the call back over to Jim.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Thank you, Tod. Republic CPS for the second quarter was $0.46 excluding remediation costs,
which is a 2% improvement versus the second quarter of 2007. We would like to reiterate our current
earnings guidance of $1.78 to $1.82 of earnings per share for the full year 2008, excluding
remediation costs. We provided 2008 cash flow guidance of 340 to $350 million; and as Tod said, we
believe that well be at the high end of this guidance even though we will increase our cap
spending for collection vehicles to be able to take advantage of bonus depreciation. We also expect
operating margins to be at or above the full-year 2007 results, excluding remediation costs. Again,
2008 business objectives continue to be focused on improving margins by achieving appropriate price
increases to offset inflation rate costs and business risks, improving our market position,
standardizing significant business processes, maximizing efficiency of service delivery and
customer service and rationalizing our cost structure.
On June 22nd, Republic signed a definitive merger agreement with Allied Waste. This agreement was
signed after an extensive and cooperative due diligence process that identified the benefits and
the risks associated with this transaction. This thoughtful process clearly identified $150 million
in tangible near-term synergies that can be delivered to Republic and Allied shareholders. Last
week, 40 key managers met in Florida to begin the process of developing integration plans along
with extracting synergies of $150 million. I have instructed our combined teams to complete this
process by October 1st. Our companies have the best management team in the industry, scalable
systems, and a commitment to meet and exceed expectations. I would like to thank the managers from
Allied Waste and Republic who participated in the planning process and will continue to participant
in the planning process for their hard work and commitment. We have received strong support from
this transaction from investors who trust us over the years. Due to its financial discipline due
to our financial discipline, best in class information technology and strong management team,
Republic has provided the highest total return to shareholders during the past ten years of the
three largest companies. I am committed to bring the same discipline to Republic Services
post-merger. Recently, Republic Services celebrated its ten-year anniversary as a publicly traded
company. I want to thank all of the Republic employees who have contributed to the effort of making
Republic the best performing company in the solid waste industry. With that, operator, at this
time, Id like to open the call for questions.
QUESTION AND ANSWER
Operator
(OPERATOR INSTRUCTIONS). One moment please. Bill Fisher of Raymond James, you may ask your
question.
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
William Fisher - Raymond James Analyst
Good morning.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, Bill.
William Fisher - Raymond James Analyst
Two unrelated questions. First on the franchise business, kind of when during the year do you
get the bulk of the annual increases and how have they been this year? And you know, with fuel
where it is, if you look to 2009, what kind of increases would you expect to get built into that?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Well, Las Vegas being a large component of our franchise, we are at July 1st, we received
3%. And we would anticipate that right now looking at the CPI if you annualized it out, it is
approximately running 4 or a little just north of 4%. So, in the case of, lets say, Las Vegas
specifically, we would get adjusted next July based on the change from December to December
December of 07 to December of 08 probably at the run rate we are looking at a little north of
4%. Okay.
William Fisher - Raymond James Analyst
Great. And then I dont know if you can touch on this or not, but on the DOJ process with
Allied, can you just touch on getting approval, where you are in that process, and touch on the
steps that it would take to relate it to divestitures?
James E. OConnor - Republic Services, Inc. Chairman & CEO
As soon as we announced the transaction, we filed simultaneously with that announcement with
the Department of Justice. We have been having regular meetings with them. I think we went through
a very thoughtful process, Bill, in getting prepared for announcement day and that filing. We
believe that we have been very forthright in our filing on markets, and I think thats been the
feedback that we have got from the Department of Justice thus far. We did receive, on July 23rd, a
request for second a request for additional information, which is statutory. So it is nothing
out of the ordinary, and it is as we expected it. So we see the process moving just as we expected
it right now, and would anticipate closing some time in the fourth quarter. But again, I think the
important part here is is that that the integration planning build that we are going through is
looking for day one readiness October 1st just in case we get an early release from the Department
of Justice.
Operator
Jonathan Ellis of Merrill Lynch, you may ask your question.
Jonathan Ellis - Merrill Lynch Analyst
Thanks, good morning, guys.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, Jonathan.
Jonathan Ellis - Merrill Lynch Analyst
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
Want to talk a little bit more about volumes. You mentioned that residential construction
volumes were down about 16%, which I believe was fairly consistent with the year rate of decline
last quarter. Yet overall volumes were down 3.4% this quarter versus only being down 2.5% last
quarter. What can you contribute the incremental weakness to in volumes?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Well, I think some of it is last year as we were moving through the year we had a pretty
strong second quarter. So, you know, I think as we look at I think thats probably some of the
noise in there, you know. As we look ahead our guidance for the full year is about 3%; and as you
will recall, the second half of last year we saw continued weakness, particularly in the housing
sector, and we believe that the comparables become easier particularly in the latter part of the
year latter part of the third quarter and fourth quarter. But our commercial business, we have
got modest growth, and commercial residential we had a contract with the City of Houston that
basically we lost on June 30th of last year. That anniversaries out. Excluding that, we have modest
growth there. So the other aspects of the business are holding up from a volume standpoint. It is
really isolated to this temporary roll off activity.
Jonathan Ellis - Merrill Lynch Analyst
Great. And just my follow up question on landfill contracts, could you update us on what
portion of the contract rate base has been repriced at this point, and whats kind of the average
price increase you are achieving on those contracts?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Jonathan, I think again, I think a number I think probably about a year and a half ago,
we talked to landfill pricing starting to move because some of these contracts were anniversarying
out and the market appear to be much more rational as it relates to disposal. I think weve
probably got about another three or four quarters to run. I think you can see as the pricing has
improved over the last two years from probably as little as 2% now to 3.7%, that the cause for that
is really these contracts anniversarying out and our ability to secure additional price increases
at that time. But I think I have said this when we were out on the road the last week or two, but I
think I have been consistent here in saying that landfill pricing is probably going to move up,
barring inflation and other costs. You know, probably it will be escalating more so than our
pricing in our collection business because it has lagged for so long. So I think you will continue
to see pricing improvement here through 09.
Operator
Corey Greendale of First Analysis, you may ask your question.
Corey Greendale - First Analysis Analyst
Hi, good morning.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, Corey.
Corey Greendale - First Analysis Analyst
First of all, I just wanted to ask you on the hauling side in competitive markets whether you
are starting to see more customer push back on price or on fuel surcharges, just given how tough
things are in general, and if you could in anyway take a stab at what percent of the volume loss in
the quarter might have been competitive versus economic.
James E. OConnor - Republic Services, Inc. Chairman & CEO
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
Again, I dont think thats the you know, I mean, there may be some economic impact, but it
is not material to what we are seeing. When we look at retention rates, our retention rates are
still available and you know and so I guess what I would say you to you is we are not seeing
very much push back at all; and again, I think the pricing environment out there is pretty good.
And again, when you look at the lack of returns this business has got over the over the course
of the last five or six or seven years, I think the pricing that we are getting right now is very
reasonable pricing.
Corey Greendale - First Analysis Analyst
Okay. And then on the volume front, I think it sounds like it is fair to say things are kind
of bumping along the bottom, but can you just talk about the trends monthly as you went through the
quarter and into kind of realtime, whether things are getting better, worse or indifferent?
James E. OConnor - Republic Services, Inc. Chairman & CEO
I think we are seeing pretty much the same thing we saw in the earlier quarter. And again, I
think thats what is giving rise to us looking at the balance of the year and saying that we think
we should see the volumes start to anniversary out. So I guess if one wants to draw a conclusion
from that statement, that we would say that maybe we are at the bottom.
Operator
Our last question does come from Leone Young of Citi. You may ask your question.
Leone Young - Citigroup Analyst
Yes, good morning.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, Leone.
Leone Young - Citigroup Analyst
It is encouraging to hear that the commercial business still stays up slightly. Can you talk a
little bit more about what you are seeing then in terms of service intervals or lost business? It
sounds like theres been no significant deterioration, then, given the economy?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Yes, there hasnt been any we can see. We have looked at our commercial small container
volumes which are, you know, in terms of volume we are close to 1%, increase in volumes, which has
historically been its low in relation to a better economy, but still growing. And we see
comparable trends in our other permanent and annuity kinds of work, barring adjustments for
contracts such as the City of Houston. So again, I think we feel pretty good about it right now.
You know, thats not to say that we can predict where the economy really is at and where it is
going; but at the end of the day, based on what we see in our business, we feel pretty good about
it.
Leone Young - Citigroup Analyst
And given the high fuel costs, have you seen any change in terms of the independents behavior
with regard to price?
James E. OConnor - Republic Services, Inc. Chairman & CEO
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Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
No. I think you know, again, when you look at retention rates at our business and we look at
some of the ways we track the available organic growth in the markets, and then we look at the
price we are able to secure, I would say that again, we are not seeing any independent impact. When
you look even at the temporary roll out pressures where the real pressure is at, we still report
stable pricing. And based on our recognizance with the field, we dont believe that weve lost any
of the opportunities and we dont believe there has been any substantial change in market share. So
again, we feel very confident that we are going to be rewarded and were confident that we will be
able to meet our earnings guidance.
Operator
Brian Butler of FBR, you may ask your question.
Brian Butler - FBR Analyst
Good morning, guys.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Good morning, Brian.
Brian Butler - FBR Analyst
Just one question, just on the expenses. Were there any associated with the Allied-Republic
merger talks in the second quarter, and do you have any idea of kind of whats the right way to
think about those kind of expenses in the third and the fourth quarter?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Sure. You know, we have obviously incurred expenses associated with due diligence, and also
obviously some legal costs, particularly with our work in Washington with the Justice Department.
So, you know, right now we have a small amount thats on the balance sheet. Essentially under I
guess its Pronouncement 141, we would capitalize those costs upon consummation of the merger.
However, if for some reason we didnt merge prior to year end, they would be expensed. But, you
know, at this point theres a very small amount on the balance sheet and theres nothing in our
results.
Brian Butler - FBR Analyst
Okay. Thank you very much.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Thank you, Brian.
Operator
Scott Levine of J.P. Morgan, you may ask your question.
Scott Levine - J.P. Morgan Analyst
Good morning.
James E. OConnor - Republic Services, Inc. Chairman & CEO
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
Good morning, Scott.
Scott Levine - J.P. Morgan Analyst
Regarding volumes, could you talk to maybe any differences you are seeing across geographies,
either from a cyclical standpoint or due to the comping maybe in different parts of the country,
and also maybe the differences in what you are seeing in the franchise?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Well, most of our franchise work is in the areas that have been hardest impacted by the
residential housing market. So you know, Florida continues to be very weak, Nevada, and Southern
California. Parts of the economy where we see still housing remaining not strong lets say
strong as it relates to several years ago but in the Carolinas, specifically in Charlotte, we
still see some strength, and Texas.
Scott Levine - J.P. Morgan Analyst
Okay. And a follow up on CapEx. From the high end of the guidance for free cash flow, last
couple of years we have seen you guys lower your CapEx budget when volumes have come in a little
bit lower than expectations. Do you think you have some additional head room there, or have you
already factored in some reductions, maybe outside of your planned fleet purchases?
James E. OConnor - Republic Services, Inc. Chairman & CEO
Well, I mean, I think what we have done when we tell you that we are moving up our capital
spend guidance, basically, I mean, if you go through the really the math of it, the first thing
we have done is we have taken the original guidance, which I think what was what, 325 for capital?
Tod C. Holmes - Republic Services, Inc. CFO & SVP
Yes, yes.
James E. OConnor - Republic Services, Inc. Chairman & CEO
325. We have reduced it for what we are seeing in the cyclical component of our business,
which would be our Industrial Collection business and some related disposal capital spend, and let
say that number roughly is about $10 million. So now you are down to 315, and then so the balance
between that and the new guidance really is the pre-purchase of trucks in the balance of 08 and
09 to beat the new engines that will come out in 2010. So its going to be predominately related
to that. And again, theres two benefits here: The bonus depreciation; as well as the savings on
the trucks that would probably have price escalation anywhere from 7 to $15,000 per unit related to
the engine changes. So, that kind of gives you a run down on the capital. Could we tighten it up if
we had to? Yes. But we dont see any reason to. Tod, do you have anything you want to add to that?
Tod C. Holmes - Republic Services, Inc. CFO & SVP
No, well, I guess the only thing I would say, again, is we have a fleet age thats about 6.5
years. And so what we are doing in the short term is maybe getting a slightly younger fleet. And
you know, as we have looked at particularly in the due diligence with Allied at our fleet age
and Allied fleet age well, their fleet age is maybe its 7.5 years or so. We think theres a
relevant range of age theres not a specific age thats appropriate and it depends on how the
equipment is being maintained. So as we put this business together,there may actually be an
opportunity from a capital standpoint to allow the fleet age to go from 6.5 to 7 years and still maintain our
maintenance costs and the improvement that we have achieved in maintenance costs over the past
number of years.
James E. OConnor - Republic Services, Inc. Chairman & CEO
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Final Transcript
Jul. 25. 2008 / 8:30AM ET, RSG Q2 2008 Republic Services, Inc. Earnings Conference Call
Yes, let me just expand on that for a second so everybody understands. It has nothing really
to do necessarily with the merger. I think internally Republic has looked at lengthening the life
cycle of their trucks because we have already gone through almost a full cycle. When you look at
when we instituted our maintenance programs and the age of the Company now and the replacement
cycle, we are now to a point where a lot of the old equipment that wasnt well-maintained prior to
acquisition has pretty much gone through the fleet and it has been replaced, and the new trucks
have been maintained under our new maintenance program. And so some of the thought process prior to
even the merger was that possibly that the economic life cycle replacement may move up a half a
year. So it has nothing to do with the merger, but it obviously would come at an opportune time if
we believed that was the case, because we could then funnel that capital into the Allied assets. So
again, I think it just is the timing was right. But it had nothing to do with the merger. If we
lengthen the life cycle of the truck, it is related to our internal information.
Operator
At this time, we show no further questions.
James E. OConnor - Republic Services, Inc. Chairman & CEO
Okay, operator. Thank you very much, and I would like to thank all of you for participating. I
would like to remind everyone that a recording of this call is available for the next 24 hours by
calling 203-369-0486; and additionally, a recording of the call will be available on Republics
website at republicservices.com. And I would like to thank all of you for joining us today, and
have a great day.
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-XXX-
Additional Information and Where to Find It
This communication is being made in respect of the proposed business combination involving Republic
and Allied. In connection with the proposed transaction, Republic plans to file with the SEC a
Registration Statement on Form S-4 containing a Joint Proxy Statement/Prospectus and each of
Republic and Allied plan to file with the SEC other documents regarding the proposed transaction.
The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of Republic and
Allied. INVESTORS AND SECURITY HOLDERS OF REPUBLIC AND ALLIED ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of the Registration Statement and
the definitive Joint Proxy Statement/Prospectus (when available) and other documents filed with the
SEC by Republic and Allied through the website maintained by the SEC at www.sec.gov. Free
copies of the Registration Statement and the definitive Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC can also be obtained by directing a request to
Republic Services, Inc., 110 SE 6th Street, 28th Floor, Fort Lauderdale, Florida, 33301 Attention:
Investor Relations or by directing a request to Allied Waste Industries, Inc., 18500 North Allied
Way, Phoenix, Arizona 85054, Attention: Investor Relations.
Participants in Solicitation
Republic, Allied and their respective directors and executive officers and other persons may be
deemed to be participants in the solicitation of proxies in respect of the proposed transaction.
Information regarding Republics directors and executive officers is available in its Annual Report
on Form 10-K for the year ended December 31, 2007, which was filed with the SEC on February 21,
2008, and its proxy statement for its 2008 annual meeting of stockholders, which was filed with the
SEC on April 2, 2008, and information regarding Allieds directors and executive officers is
available in Allieds Annual Report on Form 10-K, for the year ended December 31, 2007, which was
filed with the SEC on February 21, 2008 and its proxy statement for its 2008 annual meeting of
stockholders, which was filed with the SEC on April 10, 2008. Other information regarding the
participants in the proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the definitive Joint Proxy
Statement/Prospectus and other relevant materials to be filed with the SEC when they become
available.
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© 2008 Thomson Financial. Republished with permission. No part of this publication may be
reproduced or transmitted in any form or by any means without the prior written consent of Thomson
Financial.
Information Regarding Forward-Looking Statements
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 that 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:
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whether the Companys estimates and assumptions concerning its selected balance sheet
accounts, income tax accounts, final capping, closure, post-closure and remediation costs,
available airspace, and projected costs and expenses related to the Companys landfills and
property and equipment, and labor, fuel rates, and economic and inflationary trends, turn
out to be correct or appropriate; |
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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; |
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the Companys ability to manage growth; |
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the Companys ability to complete its merger with Allied Waste Industries, Inc.; |
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the Companys ability to realize the benefits of a merger with Allied, should the
transaction be completed; |
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compliance with, and future changes in, environmental regulations; |
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the Companys ability to obtain approvals from regulatory agencies in connection with
operating and expanding the Companys landfills; |
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the ability to obtain financing on acceptable terms to finance the Companys operations and
growth strategy and for the Company to operate within the limitations imposed by financing
arrangements; |
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the ability of the Company to repurchase common stock at prices that are accretive to
earnings per share; |
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the Companys dependence on key personnel; |
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general economic and market conditions including, but not limited to, inflation and changes
in commodity pricing, fuel, labor, risk and health insurance, and other variable costs that
are generally not within control of the Company; |
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the Companys dependence on large, long-term collection, transfer and disposal contracts; |
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the Companys dependence on acquisitions for growth; |
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risks associated with undisclosed liabilities of acquired businesses; |
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risks associated with pending legal proceedings; and |
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other factors contained in the Companys filings with the Securities and Exchange Commission. |
Contact:
Republic Services
Media:
Will Flower, 954-769-6392
or
Investors:
Tod Holmes, 954-769-2387
Ed Lang, 954-769-3591
or
The Abernathy MacGregor Group
Chuck Burgess, 212-371-5999
Source: Republic Services, Inc.