Closing the year on a positive note, Phoenix-based Republic Services Inc. ended 2017 with $10 billion in revenues, an increase of 7.6 percent over 2016’s figures.
"We finished the year strong and delivered full-year results that exceeded the upper end of our guidance range," said Donald W. Slager, president and CEO of Republic Services, in a conference call with investors. "By continuing to focus on attracting and retaining the best employees and delivering products and services that meet our customers' wants and needs, we delivered high single-digit growth in revenue, earnings and free cash flow per share as well as increased our return on invested capital and cash returned to shareholders. Our solid results continue to reflect positive contributions from effectively investing in the business and successfully executing our strategy of profitable growth through differentiation."
Republic also reported net income of $664.4 million, or $1.98 per diluted share, for the three-months ended December 31, 2017, versus $189.5 million, or $0.55 per diluted share, for the comparable 2016 period. Excluding certain benefits and expenses, on an adjusted basis, net income for the three-months ended December 31, 2017, was $203.8 million, or $0.61 per diluted share, versus $193.8 million, or $0.57 per diluted share, for the comparable 2016 period.
"Aside from the impact of tax reform, our 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," said Slager in a conference call with investors. "Republic will benefit substantially from tax reform. As a result, it is our responsibility and intention to invest and deploy the additional cash flow in a manner that will provide benefits to our employees, customers, communities and shareholders that are not only meaningful, but also sustainable."
With the new tax reform, the company expects cash tax savings of approximately $190 million in 2018.
Republic also addressed China’s new waste import ban and contamination standard and how its adjusting to the new rules.
“We have $135 a ton in the plan for the year through 2018, and January is a little weaker than that at $120 a ton,” said Slager. “Based on what we know about the business, we think that it [commodities prices] will come back up throughout the year and that our assumption of budgeting $135 a ton for the year is pretty safe. Historically, we have told you that about 30 percent of our fiber moves to China, but over the past few months, we have been moving fiber to different locations. Now, only about 10 percent of the fiber goes to China, and we have isolated the issue for the time being. We think the increase in consumer packaging will help mark the price back up to where it belongs, but some of the bad actors who caused the problem in the first place will have to get their act together for the market to improve.”
Other highlights from the firm’s performance:
- Full-year cash provided by operating activities was $1.9 billion and adjusted free cash flow was $934 million, which exceeded Republic's full-year guidance.
- Fourth-quarter revenue growth from average yield was 2.4 percent and volumes increased 2.7 percent, resulting in more than 5 percent organic revenue growth.
- Full-year revenue growth from average yield was 2.5 percent, marking Republic’s highest level of average yield since 2009. Volumes increased 1.8 percent.
- Full-year adjusted EBITDA was $2.8 billion and adjusted EBITDA margin was 27.7 percent.
- Average yield as a percentage of related-business revenue was 2.6 percent for both the three months and year ended December 31, 2017, and 2.4 percent and 2.3 percent for the same periods in 2016, respectively.
- Average yield in the collection business was 2.8 percent, which included 3.8 percent in the small container business, 2.4 percent in the large container business and 2 percent in the residential business.
- Average yield in its post-collection business was 1.5 percent, which included landfill MSW of 2.1 percent.
- Core price as a percentage of related-business revenue was 4.4 percent and 4.3 percent for the three-months and year ended December 31, 2017, respectively, and 3.7 percent for the same periods in 2016, respectively.
- Core price consisted of 5.1 percent in the open market and 2.4 percent in the restricted portion of its business.
- Volumes in the collection business increased 20 basis points. Within the collection business, large container volume increased 2.3 percent and included a 3.7 percent increase in temporary C&D hauls and a 1.2 percent increase in recurring hauls. Residential collection volumes decreased 1.2 percent, which was expected in result to not renewing certain contracts that fell below the company’s return criteria. Small container volume decreased 50 basis points and included a 110 basis point impact from potentially shedding broker work, which the company views as non-regrettable. Excluding these losses, small container volume increased by 60 basis points. In the post-collection business, which includes landfills and transfer stations, third-party volumes increased 9 percent, landfill volumes increased 16.5 percent and included growth in special waste of 37.9 percent and C&D of 31.6 percent and MSW volumes decreased 1 percent.
- The company invested $437 million in acquisitions during 2017.
- The company was named to the Forbes 2017 America’s Best Large Employers list, Ethisphere Institute’s 2017 World’s Most Ethical Companies List and 2017 Dow Jones Sustainability World and North America Indices for its leading performance in several key areas including employee engagement, ethics and sustainability.
- Republic completed its standardized maintenance initiative and certified its entire fleet under the program.
- The company also completed the transition to its three customer resource centers, which are designed to enhance customers’ experiences through a more professional trained customer service team, improve technology and additional communications channels.
- In 2017, Republic continued to see a favorable reduction in employee incidents.
- The company advanced its fleet-based initiatives. Now 19 percent of the fleet operates on natural gas, up from 18 percent in the prior year. And 75 percent of the residential fleet is automated, up from 74 percent in the prior year.