Leading waste management company Republic Services, Inc.’s (RSG) fourth quarter 2013 adjusted earnings increased to $193.1 million or 53 cents per share from $155.7 million or 43 cents in the year-earlier quarter. The year-over-year increase in earnings was primarily attributable to healthy volume growth. Adjusted earnings for the reported quarter exceeded the Zacks Consensus Estimate by 7 cents.
GAAP net income for the reported quarter was $236.6 million or 65 cents per share compared with $127.0 million or 35 cents per share in the year-ago quarter. The sharp year-over-year rise in net income was largely driven by decent top-line growth.
For full year 2013, Republic Services recorded adjusted earnings of $715.3 million or $1.97 per share compared with $708.1 million or $1.92 in 2012. Adjusted earnings for the reported year comfortably beat the Zacks Consensus Estimate of $1.90. GAAP net income for 2013 was $588.9 million or $1.62 per share compared with $571.8 million or $1.55 per share in 2012.
Revenues improved 5.6% to $2,141.5 million in the reported quarter from $2,028.3 million in the prior-year period. The year-over-year increase was driven by 1.3% rise in average yield, 2.5% increase in volume, higher commodity prices (up 6% to an average of $116 per ton) and higher recycling commodity volume (up 13.6% from the prior year).
Revenues for fourth quarter 2013 exceeded the Zacks Consensus Estimate of $2,115 million. Adjusted EBITDA was $648.1 million versus $572.1 million in the year-ago quarter.
For full year 2013, revenues increased 3.7% year over year to $8,417.2 million. The modest improvement in the top line was led by an average yield growth (up 1.3%), healthy volume (up 1.3%), accretive acquisitions (up 0.5%), higher recycled commodities (up 0.3 %) and higher fuel recovery fees (up 0.3%).
Segment Performance
Revenues from the Collection segment increased 3.4% year over year to $1,632.0 million as all the sub-segments, namely Residential, Commercial, and Industrial fared relatively better. The Transfer segment revenues gained 5.7% year over year to $100.7 million. Revenues from the Landfill segment were up 9.6% to $265.3 million, while sale from the Other segment climbed 27.7% year over year to $143.5 million.
Financial Update
Cash and cash equivalents at year-end 2013 were $213.3 million, significantly up from $67.6 million in the prior-year period. Long-term debt (excluding current maturities) decreased to $7,002.4 million at year-end 2013 from $7,051.1 million in the previous year. Cash from operating activities totaled $1,548.2 million for full year 2013 compared with $1,513.8 million in the prior-year period. Adjusted free cash flow for 2013 was $714.1 million versus $768.2 million in 2012.
Share Repurchase
Republic Services has a share repurchase program in place since Nov 2010. By year-end 2013, the company had repurchased 35.5 million shares under this program for $1,039.2 million at an average price of $29.30 per share, including 6.5 million shares bought back for $213.6 million at $32.92 per share during 2013.
Outlook
On the back of strong fourth quarter and full year 2013 results, Republic Services is focused on driving its North American solid waste and recycling businesses. For full year 2014, the company expects earnings in the range of $1.93 to $1.98 per share. Revenues are expected to increase by 3.5%–4.5% year over year with an average yield of 1% to 1.5%, volume growth of 1.5% to 2% and a 1% contribution from acquisitions. Adjusted free cash flow is expected to be within $675 million and $725 million for the ongoing year with an EBITDA margin of 28.5% to 29.0%.
Moving Forward
Republic Services is committed to its long-term strategy, which involves the maintenance of a healthy cash flow and a disciplined approach to cash utilization. Republic Services presently has a Zacks Rank #3 (Hold). Players in the industry worth reckoning include Franklin Electric Co., Inc. (FELE), Xylem Inc. (XYL) and Barnes Group Inc. (B), each with a Zacks Rank #2 (Buy).
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