News Releases

PHOENIX, Feb. 7, 2019 /PRNewswire/ -- Republic Services, Inc. (NYSE: RSG) today reported net income of $301.0 million, or $0.92 per diluted share, for the three months ended December 31, 2018, versus $664.4 million, or $1.98 per diluted share, for the comparable 2017 period. Excluding certain benefits and expenses, on an adjusted basis, net income for the three months ended December 31, 2018, was $260.0 million, or $0.80 per diluted share, versus $203.8 million, or $0.61 per diluted share, for the comparable 2017 period.

For the year ended December 31, 2018, net income was $1,036.9 million, or $3.16 per diluted share, versus $1,278.4 million, or $3.77 per diluted share, for the comparable 2017 period. On an adjusted basis, net income for the year ended December 31, 2018, was $1,014.9 million, or $3.09 per diluted share, versus $822.2 million, or $2.43 per diluted share, for the comparable 2017 period.

"We are very pleased with our strong finish to the year, which positions us well for 2019. Despite significant headwinds from recycling, we achieved our EPS guidance and exceeded our free cash flow guidance, demonstrating the underlying strength of the solid waste business," said Donald W. Slager, president and chief executive officer. "We delivered double-digit growth in earnings and free cash flow per share, invested over $200 million in value-enhancing acquisitions, and increased our return on invested capital and cash returned to shareholders. Our solid results continue to reflect the positive contributions from effectively investing in the business and successfully executing our strategy of profitable growth through differentiation."

Fourth Quarter and Full-Year Highlights:

• Fourth quarter adjusted EPS, a non-GAAP measure, was $0.80 per share, an increase of 31 percent over the prior year.
• Full-year adjusted EPS was $3.09 per share, an increase of 27 percent over the prior year.
• Full-year cash provided by operating activities was $2.2 billion and adjusted free cash flow was $1.2 billion. Adjusted free cash flow increased 26 percent over the prior year and exceeded the upper-end of the Company's full-year guidance range.
• Fourth quarter revenue increased 2.6 percent over the prior year, excluding the impact of the new revenue standard. Revenue growth from average yield was 2.7 percent, the Company's highest level of average yield in nearly 10 years. Volume decreased 70 basis points, in line with management's expectations.
• Full-year revenue increased 4.0 percent over the prior year, excluding the impact of the new revenue standard. Revenue growth from average yield was 2.4 percent. Volume increased 40 basis points.
• Full-year adjusted EBITDA, a non-GAAP measure, was $2.8 billion and adjusted EBITDA margin was 28.0 percent. The solid waste business contributed 70 basis points of margin expansion, which was more than offset by a 140 basis point headwind from the recycling business, excluding the impact of the new revenue standard.
• Republic returned $1.2 billion to shareholders in 2018 through share repurchases and dividends, representing a cash yield of 5.1 percent.
• Total shareholder return was 9 percent for the full year as compared to the S&P 500's negative return of 4 percent.
• The Company invested over $200 million in acquisitions during 2018.
• Republic continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The Company now has approximately $660 million in annual revenue tied to either a waste-related index or a fixed-rate increase of 3 percent or greater.
• Republic received many notable awards for its continued leadership in Environmental, Social and Governance (ESG) matters in 2018, including:
• Named to the first annual Barron's "100 Most Sustainable Companies" list.
• Earned the RobecoSAM Sustainability Yearbook "Gold Class" award.
• Included in the Dow Jones Sustainability World and North America Indices for the third consecutive year.
• Listed as one of the "World's Most Ethical Companies" by the Ethisphere Institute.
• Recognized as one of the "World's Most Innovative Companies" by Forbes.
• Received a score of 100 percent on the Human Rights Campaign's Corporate Equality Index.

2019 Financial Guidance

Republic's financial guidance is based on current economic conditions and does not assume any significant changes in the overall economy in 2019. Please refer to the Information Regarding Forward-Looking Statements section of this document.

Full-year 2019 financial guidance is as follows:

• Adjusted Diluted Earnings per Share: The Company expects adjusted diluted earnings per share to be in the range of $3.23 to $3.28. Detail relating to the computation of adjusted diluted earnings per share is contained in the Reconciliation of 2019 Financial Guidance section of this document.
• Adjusted Free Cash Flow: Republic expects adjusted free cash flow to be in the range of $1,125 million to $1,175 million. Detail relating to the computation of adjusted free cash flow is contained in the Reconciliation of 2019 Financial Guidance section of this document.
• Revenue: Republic expects an increase in revenue of 4.25 to 4.75 percent. The expected change in revenue is comprised of the following:

• Property and Equipment: The Company anticipates receiving $1.2 billion of property and equipment, net of proceeds from the sale of property and equipment.
• Adjusted EBITDA Margin: Republic expects adjusted EBITDA margin to expand by approximately 30 to 50 basis points.
• Taxes: The Company expects an effective tax rate of approximately 24 percent and a non-cash charge of approximately $60 million related to solar energy investments that qualify for tax credits. The charge will be recorded as a loss from unconsolidated equity method investments.
• Cash Utilization: Republic expects to invest approximately $200 million in tuck-in acquisitions. Additionally, the Company expects to return approximately $1.4 billion of cash to shareholders, through $500 million of dividends and $875 million in share repurchases.

"Our 2019 financial guidance is consistent with the preliminary outlook we provided last October, demonstrating the visibility we have into our business and the stability of our earnings and cash flows," added Slager. "In 2019, we expect to continue to profitably grow our business through the advancement of our strategy, which includes attracting and retaining the best people, strengthening our market position, and leveraging technology to enhance the customer experience and improve operational efficiency."

Company Declares Quarterly Dividend

Republic announced that its Board of Directors declared a regular quarterly dividend of $0.375 per share for stockholders of record on April 1, 2019. The dividend will be paid on April 15, 2019.

Presentation of Certain Non-GAAP Measures

Adjusted diluted earnings per share, adjusted net income, adjusted EBITDA, and adjusted free cash flow are described in the Reconciliation of Certain Non-GAAP Measures section of this press release. The adjusted diluted earnings per share and adjusted free cash flow related to the 2019 financial guidance are described in the Reconciliation of 2019 Financial Guidance section of this press release.

Unaudited Supplemental Schedules

Included in Exhibit 99.2 to Republic's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2019 is a proforma presentation of our 2017 financial results had we adopted the new revenue standard as of January 1, 2017.

About Republic Services

Republic Services, Inc. is an industry leader in U.S. recycling and non-hazardous solid waste disposal. Through its subsidiaries, Republic's collection companies, recycling centers, transfer stations and landfills focus on providing effective solutions to make proper waste disposal effortless for its 14 million customers. We'll handle it from here.^®, the brand's promise, lets customers know they can count on Republic to provide a superior experience while fostering a sustainable Blue Planet^® for future generations to enjoy a cleaner, safer and healthier world.

For more information, visit the Republic Services website at RepublicServices.com. "Like" Republic on Facebook at Facebook.com/RepublicServices and follow on Twitter @RepublicService and Instagram @republic_services.

You should read the following information in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K as of and for the year ended December 31, 2018 (when filed). All amounts below are in millions and as a percentage of our revenue, except per share data.

The results presented below for the three months and year ended December 31, 2017 reflect our historical presentation prior to the adoption of the new revenue recognition standard. A pro forma presentation of our financial results for the three months and year ended December 31, 2017 had we adopted the new revenue recognition standard as of January 1, 2017 is included as Exhibit 99.2 to Republic's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 7, 2019.

REVENUE

The following table reflects our total revenue by line of business for the three months and years ended December 31, 2018 and 2017:

The following table reflects changes in components of our revenue, as a percentage of total revenue, for the three months and years ended December 31, 2018 and 2017:

Average yield is defined as revenue growth from the change in average price per unit of service, expressed as a percentage. Core price is defined as price increases to our customers and fees, excluding fuel recovery, net of price decreases to retain customers. We also measure changes in average yield and core price as a percentage of related-business revenue, defined as total revenue excluding recycled commodities and fuel recovery fees, to determine the effectiveness of our pricing strategies. Average yield as a percentage of related-business revenue was 3.0% and 2.5% for the three months and year ended December 31, 2018, respectively, and 2.6% for both of the same periods in 2017. Core price as a percentage of related-business revenue was 4.6% and 4.2% for the three months and year ended December 31, 2018, respectively, and 4.4% and 4.3% for the same periods in 2017, respectively.

COST OF OPERATIONS

The following table summarizes the major components of our cost of operations for the three months and years ended December 31, 2018 and 2017:

These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our cost of operations by cost component to that of other companies.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The following table provides the components of our selling, general and administrative expenses for the three months and years ended December 31, 2018 and 2017:

These cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies. As such, you should take care when comparing our selling, general and administrative expenses by cost component to those of other companies.

RECONCILIATION OF CERTAIN NON-GAAP MEASURES

EBITDA

The following table calculates EBITDA, which is not a measure determined in accordance with U.S. generally accepted accounting principles (U.S. GAAP), for the three months and years ended December 31, 2018 and 2017:

We believe that presenting EBITDA is useful to investors because it provides important information concerning our operating performance exclusive of certain non-cash and other costs. EBITDA demonstrates our ability to execute our financial strategy, which includes reinvesting in existing capital assets to ensure a high level of customer service, investing in capital assets to facilitate growth in our customer base and services provided, maintaining our investment grade credit ratings and minimizing debt, paying cash dividends, repurchasing our common stock, and maintaining and improving our market position through business optimization. This measure has limitations. Although depreciation, depletion, amortization and accretion are considered operating costs in accordance with U.S. GAAP, they represent the allocation of non-cash costs generally associated with long-lived assets acquired or constructed in prior years. Our definition of EBITDA may not be comparable to similarly titled measures presented by other companies.

Adjusted Earnings

Reported diluted earnings per share was $0.92 and $3.16 for the three months and year ended December 31, 2018, respectively, as compared to $1.98 and $3.77 for the same periods in 2017. During the three months and years ended December 31, 2018 and 2017, we recorded a number of charges and other expenses and gains that impacted our EBITDA, pre-tax income, net income attributable to Republic Services, Inc. (net income – Republic) and diluted earnings per share. The tables below set forth such measures on an adjusted basis to exclude such charges, other expenses and gains:

We believe that presenting adjusted EBITDA, adjusted pre-tax income, adjusted net income - Republic, and adjusted diluted earnings per share, which are not measures determined in accordance with U.S. GAAP, provides an understanding of operational activities before the financial impact of certain items. We use these measures, and believe investors will find them helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges and costs in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Although our business regularly incurs startup costs under municipal contracts, we specifically identify in the tables above the startup costs with respect to an individual municipal contract (and do not adjust for other startup costs under other contracts).  We do this because of the magnitude of the costs involved with this particular municipal contract and the unusual nature for the time period in which they are incurred. We also made an adjustment to exclude the impact associated with our adoption of the Tax Cuts and Jobs Act (the "Tax Act") due to the significant decrease in the federal corporate tax rate and the magnitude of the effect on our operating results. In the case of the Bridgeton insurance recovery, we adjusted for the impact due to the significant effect on our operating results; however, in the ordinary course of our business, we often incur recoveries that we do not adjust from our operating results. Our definition of adjusted EBITDA, adjusted pre-tax income, adjusted net income - Republic, and adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.

Adjusted Free Cash Flow

The following table calculates our adjusted free cash flow, which is not a measure determined in accordance with U.S. GAAP, for the years ended December 31, 2018 and 2017:

We believe that presenting adjusted free cash flow provides useful information regarding our recurring cash provided by operating activities after certain payments. It also demonstrates our ability to execute our financial strategy and is a key metric we use to determine compensation. The presentation of adjusted free cash flow has material limitations. Adjusted free cash flow does not represent our cash flow available for discretionary payments because it excludes certain payments that are required or to which we have committed, such as debt service requirements and dividend payments. Our definition of adjusted free cash flow may not be comparable to similarly titled measures presented by other companies.

Purchases of property and equipment as reflected on our consolidated statements of cash flows represent amounts paid during the period for such expenditures. A reconciliation of property and equipment expenditures reflected on our consolidated statements of cash flows to property and equipment received during the period follows for the years ended December 31, 2018 and 2017:

The adjustments noted above do not affect our net change in cash and cash equivalents as reflected in our consolidated statements of cash flows.

ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, accounts receivable were $1,102.7 million and $1,105.9 million, net of allowance for doubtful accounts of $34.3 million and $38.9 million, respectively, resulting in days sales outstanding of 39.7, or 27.5 days net of deferred revenue, compared to 40.8, or 29.3 days net of deferred revenue (adjusted for the impact of the new revenue recognition standard), respectively.

CASH DIVIDENDS

In October 2018, we paid a cash dividend of $121.7 million to shareholders of record as of October 1, 2018. As of December 31, 2018, we recorded a quarterly dividend payable of $121.0 million to shareholders of record at the close of business on January 2, 2019, which was paid on January 15, 2019.

SHARE REPURCHASE PROGRAM

During the three months ended December 31, 2018, we repurchased 2.2 million shares of our stock for $162.0 million at a weighted average cost per share of $73.74. The amount remaining under the share repurchase authorization as of December 31, 2018 was $1.1 billion.

RECONCILIATION OF 2019 FINANCIAL GUIDANCE

Adjusted Diluted Earnings per Share

The following is a summary of anticipated adjusted diluted earnings per share for the year ending December 31, 2019 compared to the actual adjusted diluted earnings per share for the year ended December 31, 2018. Adjusted diluted earnings per share is not a measure determined in accordance with U.S. GAAP:

We believe that presenting adjusted diluted earnings per share provides an understanding of operational activities before the financial impact of certain items. We use this measure, and believe investors will find it helpful, in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period. We have incurred comparable charges in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods. Although our business regularly incurs startup costs under municipal contracts, we specifically identify in the table above the startup costs with respect to an individual municipal contract (and do not adjust for other startup costs under other contracts in 2018).  We do this because of the magnitude of the costs involved with this particular municipal contract and the unusual nature for the time period in which they are incurred. In the case of the Bridgeton insurance recovery, we adjusted for the impact due to the significant effect on our operating results; however, in the ordinary course of our business, we often incur recoveries that we do not adjust from our operating results. Our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies.

Adjusted Free Cash Flow

Our anticipated adjusted free cash flow for the year ending December 31, 2019, and our actual adjusted free cash flow for the year ended December 31, 2018, which are not measures determined in accordance with U.S. GAAP, are calculated as follows:

Purchases of property and equipment as reflected on our consolidated statements of cash flows represent amounts paid during the period for such expenditures. A reconciliation of property and equipment reflected on our consolidated statements of cash flows to property and equipment received during the period is as follows: