Republic Services (RSG) Q2 2012 Earnings Call July 26, 2012 5:00 pm ET Executives Edward A. Lang - Senior Vice President of Treasury and Risk Management Donald W. Slager - Chief Executive Officer, President and Director Tod C. Holmes - Chief Financial Officer and Executive Vice President Analysts Hamzah Mazari - Crédit Suisse AG, Research Division Corey Greendale - First Analysis Securities Corporation, Research Division Albert Leo Kaschalk - Wedbush Securities Inc., Research Division Michael E. Hoffman - Wunderlich Securities Inc., Research Division Scott J. Levine - JP Morgan Chase & Co, Research Division William H. Fisher - Raymond James & Associates, Inc., Research Division Vance H. Edelson - Morgan Stanley, Research Division Adam R. Thalhimer - BB&T Capital Markets, Research Division Presentation Operator
Before we get started, I would like to take a moment to remind everyone that some of the information that we discuss on today's call contains forward-looking statements, which involve 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 this conference call, you should be sensitive to the date of the original call, which is July 26, 2012. 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. With that, I would like to turn the call over to Don. Donald W. Slager Thanks, Ed. Good afternoon, everyone, and thank you for joining us as we discuss Republic Services' second quarter performance. I would now review our second quarter financial performance before discussing our updated 2012 guidance. Revenue approximately $2.1 billion. Core price growth in the quarter was 0.6%, which was in line with our expectations. MSW landfill price was 2.4%. Volumes decreased by 1.3%, a majority of the volume decline can be attributed to a loss of Oakleaf and the large national account, both of which we discussed in April. Our second quarter adjusted earnings per share was $0.59. Approximately $0.09 of our earnings resulted from a favorable tax rate. All material tax disputes have now been resolved. Our adjusted free cash flow was $156 million. Our adjusted EBITDA margin was 30.3%, and SG&A was 9.6%. We repurchased 5.3 million shares in the second quarter for $141 million. We have approximately $480 million remaining under our authorization through 2013.
We remain committed to an efficient cash utilization strategy, which includes increasing cash returns to our shareholders through share repurchase and dividends. Total cash returned to the shareholders was $223 million during the second quarter. Our Board of Directors has approved an increase in the quarterly dividend to $0.235 per share which is a 7% increase.Some of our achievements during the second quarter include: Our safety performance continues to improve with a 3.5% favorable reduction in our frequency rate. We have closed around $73 million of acquisitions through June 30, that represents $47 million of annual run rate revenue. We remain on track to complete $100 million of acquisitions for the full year which was the high end of our guidance range. Our pipeline remains strong for future growth acquisition. We continue to invest in fleet automation and converting the fleet to CNG. As of June 30, 61% of our residential routes are now automated, and we have placed 223 CNG vehicles into service. In April, we opened a single stream processing facility in Jacksonville, Florida, that increased our capacity in that market by 90,000 tons per year. Our largest single stream recycling facility, which services the San Jose market, went into operation in July. This startup coincides with converting the city of San Jose commercial and industrial collection service offerings from open market to franchise. In May, we completed a debt refinancing and renewed our 5-year bank facility at lower rates, which together reduced our annual interest expense by approximately $25 million. Republic does not have a material debt maturity until 2016. Tod and Ed will now update our financial performance. Tod C. Holmes Thanks, Don. As Don indicated, second quarter revenue of approximately $2.1 billion reflects the following components of internal growth: First, core price growth of 0.6%. This level of core price was consistent with our Q1 performance and is also in line with our expectations. Core price is positive in both the collection and disposal businesses, [indiscernible] higher prices in the disposal business due to landfill MSW price increases of 2.4%. We expect price levels to be comparable between the first and second quarters, which was the case, and we expect prices to modestly rise in the second half of the year as the impact from higher CPI-based pricing takes hold on a restricted customer base. Read the rest of this transcript for free on seekingalpha.com