Republic Services Inc. (RSG, Financial) filed Quarterly Report for the period ended 2009-06-30.
Republic Services Inc. is a leading provider of services in the domestic non-hazardous solid waste industry. They provide non-hazardous solid waste collection services for commercial industrial municipal and residential customers through their collection companies. They also own or operate transfer stations and solid waste landfills. Republic Services Inc. has a market cap of $9.27 billion; its shares were traded at around $24.46 with a P/E ratio of 14.2 and P/S ratio of 2.4. The dividend yield of Republic Services Inc. stocks is 3.2%. Republic Services Inc. had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated Republic Services Inc. the business predictability rank of 5-star.
On December 5, 2008 we acquired all the issued and outstanding shares of Allied in a stock-for-stock transaction for an aggregate purchase price of $11.5 billion which includes approximately $5.4 billion of debt, at fair value. The allocation of purchase price to the fair value of the assets and liabilities acquired in the acquisition of Allied is preliminary and subject to revision. Due to the volume and complexity of the information required to assess these assets and liabilities, our valuation of certain significant balances, including landfill development costs, property and equipment, intangible assets, goodwill, accrued landfill and environmental costs (which includes landfill asset retirement obligations and environmental remediation liabilities), deferred taxes and other long-term tax liabilities, and, included in other long-term liabilities, liabilities for litigation, claims and assessments, and self-insurance, is not completed. Our purchase price allocation includes values we finalized to date and estimates of the values not yet finalized. We expect our purchase price allocation for the acquisition of Allied to be completed during 2009. Any further adjustments after the allocation period made to assets and liabilities acquired, once finalized, will be recorded in the consolidated statement of income in the period in which such adjustments become known. Of the approximate $9.0 billion of goodwill generated in the transaction, we expect substantially all of it will be non-deductible for income tax purposes.
consolidated balance sheets at June 30, 2009 and December 31, 2008. Certain of the Republic assets classified as held for sale were adjusted to their estimated fair values less costs to sell, resulting in the recognition of an asset impairment loss of $1.8 million and $6.1 million in our consolidated statements of income for the quarter ended March 31, 2009 and for the year ended December 31, 2008, respectively. There were no subsequent impairment charges in the quarter ended June 30, 2009. Certain of the Allied assets classified as held for sale were adjusted to their estimated net proceeds with any changes in estimated proceeds recognized as part of the allocation of purchase price. During the three and six months ended June 30, 2009, we recorded a net gain on disposition of $150.1 million and $145.2 million, respectively. Proceeds of $424.2 million related to these divestitures were used to repay amounts borrowed under our Credit Facilities. As of the date of this filing we entered into agreements to divest the remaining assets and related liabilities as required by the settlement with DOJ. We have closed or expect to close on these divestitures during the third quarter of 2009.
As a result of our acquisition of Allied, we committed to a restructuring plan related to our corporate overhead and other administrative and operating functions. The plan included closing our corporate office in Florida, consolidating administrative functions to Arizona, the former headquarters of Allied, and reducing staffing levels. The plan also included closing and consolidating certain operating locations and terminating certain leases. During the three and six months ended June 30, 2009, we incurred $12.3 million and $43.6 million of restructuring and integration charges related to our integration of Allied of which, $26.4 million for the six months ended June 30, 2009 consists of charges for severance and other employee termination and relocation benefits. The remainder of the charges primarily related to consulting and professional fees. We expect to be substantially complete with our plan by the fourth quarter of 2009. We expect to incur additional charges approximating $22.7 million to complete our plan. Substantially, all the charges are recorded in our Corporate segment. We expect the majority of these benefit payments will be paid during the remainder of 2009.
By the end of 2009, we anticipate realizing $125 million of annual run rate synergies as a result of the merger of Republic Services and Allied. Our previous guidance for 2009 annual run rate synergies was $100 million. We expect to achieve $165 million to $175 million of annual run rate synergies by the end of 2010.
Our net income attributable to Republic Services, Inc. was $225.9 million and $338.9 million, or $.59 and $.89 per diluted share, for the three and the six months ended June 30, 2009, as compared to $40.7 million and $116.8 million, or $.22 and $.63 per diluted share, for the three and six months ended June 30, 2008.
Read the The complete ReportRSG is in the portfolios of Bill Gates of Cascade Investment, LLC, Richard Aster Jr of Meridian Fund, Ron Baron of Baron Funds.
Republic Services Inc. is a leading provider of services in the domestic non-hazardous solid waste industry. They provide non-hazardous solid waste collection services for commercial industrial municipal and residential customers through their collection companies. They also own or operate transfer stations and solid waste landfills. Republic Services Inc. has a market cap of $9.27 billion; its shares were traded at around $24.46 with a P/E ratio of 14.2 and P/S ratio of 2.4. The dividend yield of Republic Services Inc. stocks is 3.2%. Republic Services Inc. had an annual average earning growth of 11.6% over the past 10 years. GuruFocus rated Republic Services Inc. the business predictability rank of 5-star.
Highlight of Business Operations:
Despite the challenging economic environment, our business performed well during the first six months of 2009 due in large part to the indispensable nature of our services and the scalability of our business. Revenue during the six months ended June 30, 2009 increased by 157% to $4,126.6 million compared to $1,606.7 million during the comparable period in 2008. This increase in revenue is attributable to our merger with Allied. Assuming the merger with Allied occurred on January 1, 2008, the revenue associated with the related divestitures is eliminated in the period the assets were sold along with the comparable prior year period, internal revenue growth for the six months ended June 30, 2009 would have been a decrease of 10.6% consisting of a 3.4% increase in core price offset by decreases of 9.1% in core volume, 2.7% in commodity price and 2.2% in fuel charges. See Consolidated Results of Operations Revenue for a presentation of revenue for the six months June 30, 2008 assuming the merger had occurred on January 1, 2008 and the revenue associated with the related divestitures is eliminated in the period in which the assets were sold along with the comparable prior year period. The increase in core price partially offset volume declines, lower commodity prices and lower fuel charges. This increase in price, together with cost control steps taken by our operations management to scale the business down for lower volumes, also served to moderate profit margin declines associated with rising costs and declining revenue resulting from decreases in service volumes.On December 5, 2008 we acquired all the issued and outstanding shares of Allied in a stock-for-stock transaction for an aggregate purchase price of $11.5 billion which includes approximately $5.4 billion of debt, at fair value. The allocation of purchase price to the fair value of the assets and liabilities acquired in the acquisition of Allied is preliminary and subject to revision. Due to the volume and complexity of the information required to assess these assets and liabilities, our valuation of certain significant balances, including landfill development costs, property and equipment, intangible assets, goodwill, accrued landfill and environmental costs (which includes landfill asset retirement obligations and environmental remediation liabilities), deferred taxes and other long-term tax liabilities, and, included in other long-term liabilities, liabilities for litigation, claims and assessments, and self-insurance, is not completed. Our purchase price allocation includes values we finalized to date and estimates of the values not yet finalized. We expect our purchase price allocation for the acquisition of Allied to be completed during 2009. Any further adjustments after the allocation period made to assets and liabilities acquired, once finalized, will be recorded in the consolidated statement of income in the period in which such adjustments become known. Of the approximate $9.0 billion of goodwill generated in the transaction, we expect substantially all of it will be non-deductible for income tax purposes.
consolidated balance sheets at June 30, 2009 and December 31, 2008. Certain of the Republic assets classified as held for sale were adjusted to their estimated fair values less costs to sell, resulting in the recognition of an asset impairment loss of $1.8 million and $6.1 million in our consolidated statements of income for the quarter ended March 31, 2009 and for the year ended December 31, 2008, respectively. There were no subsequent impairment charges in the quarter ended June 30, 2009. Certain of the Allied assets classified as held for sale were adjusted to their estimated net proceeds with any changes in estimated proceeds recognized as part of the allocation of purchase price. During the three and six months ended June 30, 2009, we recorded a net gain on disposition of $150.1 million and $145.2 million, respectively. Proceeds of $424.2 million related to these divestitures were used to repay amounts borrowed under our Credit Facilities. As of the date of this filing we entered into agreements to divest the remaining assets and related liabilities as required by the settlement with DOJ. We have closed or expect to close on these divestitures during the third quarter of 2009.
As a result of our acquisition of Allied, we committed to a restructuring plan related to our corporate overhead and other administrative and operating functions. The plan included closing our corporate office in Florida, consolidating administrative functions to Arizona, the former headquarters of Allied, and reducing staffing levels. The plan also included closing and consolidating certain operating locations and terminating certain leases. During the three and six months ended June 30, 2009, we incurred $12.3 million and $43.6 million of restructuring and integration charges related to our integration of Allied of which, $26.4 million for the six months ended June 30, 2009 consists of charges for severance and other employee termination and relocation benefits. The remainder of the charges primarily related to consulting and professional fees. We expect to be substantially complete with our plan by the fourth quarter of 2009. We expect to incur additional charges approximating $22.7 million to complete our plan. Substantially, all the charges are recorded in our Corporate segment. We expect the majority of these benefit payments will be paid during the remainder of 2009.
By the end of 2009, we anticipate realizing $125 million of annual run rate synergies as a result of the merger of Republic Services and Allied. Our previous guidance for 2009 annual run rate synergies was $100 million. We expect to achieve $165 million to $175 million of annual run rate synergies by the end of 2010.
Our net income attributable to Republic Services, Inc. was $225.9 million and $338.9 million, or $.59 and $.89 per diluted share, for the three and the six months ended June 30, 2009, as compared to $40.7 million and $116.8 million, or $.22 and $.63 per diluted share, for the three and six months ended June 30, 2008.
Read the The complete ReportRSG is in the portfolios of Bill Gates of Cascade Investment, LLC, Richard Aster Jr of Meridian Fund, Ron Baron of Baron Funds.
