Republic Services Inc. (RSG) reported earnings per share from continuing operations of 41 cents for the first quarter of 2010, exceeding the Zacks Consensus Estimate of 37 cents. Quarterly revenue stood at $1,957.7 million, compared to $2,060.5 million in the year-ago period.
The company witnessed significant improvement in its risk costs, which is a result of its focus on safety. Core price increase for the first quarter was 2.2%. Volumes declined approximately 6.2% after accounting for weather conditions, which was better than expectations. It also benefited from strong pricing for recycled paper, particularly OCC which had an average price of $145 per ton in the quarter. Currently OCC is selling for approximately $135 per ton.
RSG exited the first quarter with annual run rate synergies of $180 million. This includes $150 million from operating and SG&A savings and $30 million from debt refinancing. The company has raised the cost synergies estimate to $190 million for FY10.
Senior management team recently developed plans for post-integration business initiatives which fall into two broad categories. First, profitable growth and second, operational effectiveness. The opportunities in profitable growth include enhancements to pricing systems and tools, sales support systems and sales reporting, customer service and call centers, and national accounts management capability.

The opportunities within operational effectiveness includes benefits from disposal optimization, repair and maintenance systems and processes, data dashboards and decision support tools for field managers, and ePro, which is the company’s electronic procurement system.
The company is investing $8 million in 2010 in these initiatives. It expects to realize an additional $40 million to $60 million in annual run rate earnings from these efforts by 2013.
The company is beginning to witness improved volume in its cyclical revenue streams. It is seeing the improvement across the country and from different industries, particularly in permanent industrial and landfill volumes.
Revenue for the quarter was $1.960 billion as compared to $2.06 billion last year, a decrease of about 5%. It divested of some operations in 2009 and that contributed to a 2.3% decline of that 5%. The remaining 2.7% decrease on a same store basis consists of primarily core price growth of 2.2% which was within its guidance range.
Volumes were down 7%. This is a sequential improvement from fourth quarter 2009 of about 270 basis points. The year-over-year change of 7% includes a 40 basis point decrease due to Hurricane Ike volumes in the prior year and then the adverse impact of weather in the first couple months of the fist quarter of 30 to 40 basis points. The company saw a mid-single digit decline in collection business; volume loss was in the low double digit range for industrial, driven primarily by the temporary business. It is witnessing an up-tick of volumes in its permanent manufacturing customers.
First quarter year-over-year operating margins for 2010 excluding one-time items was 31.7% compared to 30.4% in the prior year, an improvement of 30 basis points.
During the quarter the company issued $850 million 10-year debt at 5% and $650 million 30 year debt at 6.2%. With the proceeds of $1.5 billion, the company called $1.025 billion in existing notes with an average interest rate of 6.8% maturing in 2014 and 2015. Adjusted free cash flow was $245 million for the quarter. Long-term debt was at $7.1 billion. The Board has approved a dividend payment of 19 cents per share, payable on July 15, 2010.
Republic Services provides non-hazardous solid waste collection, transfer, and disposal services in the United States. The company primarily engages in residential collection operations that include curbside collection of refuse from small containers into collection vehicles for transport to transfer stations or directly to landfills.

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