Republic Services (RSG) Q3 2010 Earnings Call November 04, 2010 5:00 pm ET Executives Donald Slager - President and Chief Operating Officer Tod Holmes - Chief Financial Officer and Executive Vice President James O’Connor - Chairman and Chief Executive Officer Analysts Scott Levine - JP Morgan Chase & Co Hamzah Mazari - Crédit Suisse AG Michael Hoffman - Wunderlich Securities Inc. Vance Edelson - Morgan Stanley Albert Kaschalk - Wedbush Securities Inc. William Fisher - Raymond James & Associates Corey Greendale - First Analysis Securities Corporation Jonathan Ellis - BofA Merrill Lynch Presentation Operator
Previous Statements by RSG
» Republic Services, Inc. Q2 2010 Earnings Call Transcript
» Republic Services, Inc. Q1 2010 Earnings Call Transcript
» Republic Services, Inc. Q4 2009 Earnings Call Transcript
Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited.I'm very pleased to report that we continue to achieve record performance in a weak but stable economy. We are raising our free cash flow guidance to $800 million due to the benefit of bonus depreciation. We're on target to achieve the revised upward earnings guidance of $1.69 to $1.71 we provided you in July. We remain on track to meet or exceed the full year EBITDA margin guidance, and we continue to see improvement in year-over-year volumes. Based on our strong earnings and cash flow visibility, our Board of Directors has authorized a share repurchase program of $400 million. In less than two years since the closing of our merger, we have completed the first successful large implementation integration in the solid waste industry on a timely basis. All operating locations are on a single IT platform. We have achieved $190 million of run rate synergies and exceeded our goal by 27%, and we have repaid $1.1 billion of debt and have the highest credit ratings in the industry. And we returned to Republic's long-term strategy of paying free cash flow to shareholders through share repurchase now and our annual dividend. Now I'd like to turn the call over to Don Slager to discuss our third quarter highlights. Donald Slager Thanks, Jim. Our third quarter results reflect our continued focus on safety, cost control, systems integration and intelligently pricing our business. Financial highlights for the third quarter and year-to-date are revenue of approximately $2.1 billion. This is the second consecutive quarter with [ph] positive internal growth. Net income adjusted primarily for merger-related expenses was $173 million, or $0.45 per share. Adjusted EBITDA margin in the third quarter was 30.8%. As Jim just mentioned, we are on track to meet or exceed our full year EBITDA margin guidance.
Our field organization has maintained their focus on pricing, and continues to achieve open market pricing in excess of inflation. Core price increase for the third quarter was 1.5%. If we adjust for a few isolated areas were required to divest of operations, core price was approximately 2%.Our total price improvement, including fuel surcharges and higher commodity values was 2.6%. We continue to use our ROI pricing tools to be sure all business activity meets our requirements. Our volumes declined year-over-year by 2.5%, which is an 80 basis point improvement versus the second quarter. The areas that showed the strongest volume improvement were in the Commercial and Industrial businesses, with sequential improvements of 110 and 230 basis points respectively. Landfill special waste continues to be strong, which resulted in year-over-year volume growth in the Landfill business for the second quarter in a row. Third quarter adjusted free cash flow was $177 million and $579 million on a year-to-date basis. Adjusted free cash flow per share of $1.51 for the year is 117% of adjusted book earnings. As you know, free cash flow is the best measure of the quality of earnings. I would now like to mention a few of our achievements in the quarter that demonstrate our ongoing focus on cost controls. We continue to experience positive results from our safety initiatives, as accident frequency is down more than 15% compared to last year. Ensuring a safe environment is key to our long-term success. Our field management has continued to achieve labor productivity gains over the prior year, and reduce labor costs in an absolute dollars, as well as a percentage of revenue. Read the rest of this transcript for free on seekingalpha.com