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Republic Services, Inc. (RSG - Analyst Report), a leading waste management company, reported lackluster fourth quarter and full year 2012 results as the continued challenging macroeconomic environment took its toll on the performance. The company reported a net income of $127.0 million or 35 cents per share in fourth quarter 2012 versus $191.0 million or 51 cents per share in the year-earlier quarter. Excluding one-time items, adjusted earnings for the reported quarter were $133.4 million or 37 cents per share compared to $195.3 million or 53 cents in the year-ago quarter. The adjusted earnings for the quarter missed the Zacks Consensus Estimate by 6 cents.

For full year 2012, Republic Services reported a net income of $571.8 million or $1.55 per share vis-à-vis $589.2 million or $1.56 per share in the preceding year. Excluding one-time items, adjusted earnings for 2012 were $663.4 million or $1.80 per share compared to $738.3 million or $1.96 per share in the previous year. The adjusted earnings for 2012 fell short of the Zacks Consensus Estimate by 7 cents.

Total revenue increased marginally to $2.028 billion in the reported quarter from $2.025 billion in the prior-year period. For full year 2012, total revenue decreased to $8.118 billion from $8.193 billion in 2011. The 0.9% year-over-year decrease in revenues was primarily due to a decline in volume and recycling commodities.

Adjusted EBITDA for fourth quarter 2012 were $535.1 million versus $603.6 million in the year-ago quarter. For full year 2012, adjusted EBITDA were $2.289 billion compared to $2.502 in 2011.

Segment Performance

Revenues from the Collection segment increased 3.0% year over year to $1.58 billion as all the sub-segments, namely Residential, Commercial, and Industrial fared relatively better. The Transfer segment revenues fell 7.9% year over year to $95.3 million. Revenues from the Landfill segment declined 5.7% year over year in the reported quarter, while sale from Other segment plummeted 15.4% year over year.

Financial Update

Cash and cash equivalents were $67.6 million at year-end 2012, compared with $66.3 million in the prior-year period. Long-term debt, excluding current maturities, totaled $7.05 billion at year-end 2012 compared to $6.89 billion as of Dec 31, 2011.

Cash from operating activities aggregated $1.5 billion for full year 2012 compared to $1.8 billion in the previous year. Adjusted free cash flow was $768.2 million for 2012 versus $908.8 million for 2011.

Share Repurchase

Republic Services has a share repurchase program in place since Nov 2010. By the end of 2012, the company repurchased 29.0 million shares under this program at an average price of $28.49 each, including 4.3 million shares for $117.3 million at $27.56 per share during the fourth quarter.


Adjusted earnings are projected to be in the range of $1.86-$1.91 per share in 2013. The company expects adjusted free cash flow of $675 million to $700 million in the ongoing year, with total revenue increasing 2.0% to 2.5% year over year.

Moving Forward

Republic Services expects to remain committed to its long-term strategy with a healthy cash flow and disciplined approach to cash utilization. At the same time, the company expects to face severe competitive pressure from industry bigwigs such as Clean Harbors, Inc. (CLH - Snapshot Report) and Waste Management, Inc. (WM - Analyst Report), carrying a Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively. Another competitor worth mentioning is Stericycle Inc. (SRCL - Analyst Report). Republic Services has a Zacks Rank #2 (Buy).

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