SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | ||
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
|
| For the quarterly period ended September 30, 2003 | ||
| OR | ||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number: 1-14267
REPUBLIC SERVICES, INC.
| DELAWARE (State of Incorporation) |
65-0716904 (IRS Employer Identification No.) |
| 110 S.E. 6TH STREET, 28TH FLOOR FT. LAUDERDALE, FLORIDA (Address of Principal Executive Offices) |
33301 (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (954) 769-2400
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o
On November 10, 2003, the registrant had outstanding 158,413,497 shares of Common Stock, par value $.01 per share.
REPUBLIC SERVICES, INC.
INDEX
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| ITEM 1. | Financial Statements | |||
| Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and December 31, 2002. | 3 | |||
| Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2003 and 2002. | 4 | |||
| Unaudited Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the Nine Months Ended September 30, 2003. | 5 | |||
| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002. | 6 | |||
| Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 35 | ||
| ITEM 4. | Controls and Procedures | 35 | ||
| PART II. OTHER INFORMATION | ||||
| ITEM 6. | Exhibits and Reports on Form 8-K | 36 | ||
| Signatures | 37 |
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | ||||||||||||
| 2003 | 2002 | ||||||||||||
| (Unaudited) | |||||||||||||
| ASSETS | |||||||||||||
CURRENT ASSETS: |
|||||||||||||
Cash and cash equivalents |
$ | 124.7 | $ | 141.5 | |||||||||
Accounts receivable, less
allowance for doubtful accounts
of $19.5 and $19.0, respectively |
266.3 | 238.6 | |||||||||||
Prepaid expenses and other current assets |
72.5 | 63.0 | |||||||||||
Deferred tax assets |
6.8 | 9.2 | |||||||||||
Total Current Assets |
470.3 | 452.3 | |||||||||||
RESTRICTED CASH |
219.5 | 175.0 | |||||||||||
RESTRICTED MARKETABLE SECURITIES |
141.7 | — | |||||||||||
PROPERTY AND EQUIPMENT, NET |
1,873.7 | 1,910.0 | |||||||||||
GOODWILL, NET |
1,554.7 | 1,544.2 | |||||||||||
OTHER INTANGIBLE ASSETS, NET |
25.6 | 25.7 | |||||||||||
OTHER ASSETS |
109.9 | 101.9 | |||||||||||
| $ | 4,395.4 | $ | 4,209.1 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
CURRENT LIABILITIES: |
|||||||||||||
Accounts payable |
$ | 118.7 | $ | 123.5 | |||||||||
Accrued liabilities |
130.5 | 109.3 | |||||||||||
Amounts due to former owners |
12.3 | 7.5 | |||||||||||
Deferred revenue |
85.1 | 82.9 | |||||||||||
Long-term debt, current |
235.4 | 2.8 | |||||||||||
Other current liabilities |
98.5 | 66.2 | |||||||||||
Total Current Liabilities |
680.5 | 392.2 | |||||||||||
LONG-TERM DEBT, NET OF CURRENT MATURITIES |
1,261.2 | 1,439.3 | |||||||||||
ACCRUED LANDFILL, ENVIRONMENTAL AND LEGAL
COSTS |
238.8 | 234.7 | |||||||||||
DEFERRED INCOME TAXES |
215.4 | 195.0 | |||||||||||
OTHER LIABILITIES |
105.6 | 66.8 | |||||||||||
COMMITMENTS AND CONTINGENCIES |
|||||||||||||
STOCKHOLDERS’ EQUITY: |
|||||||||||||
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; none issued |
— | — | |||||||||||
Common stock, par value $.01 per share; 750,000,000 shares
authorized; 182,722,590 and 180,825,749 issued, including
shares held in treasury, respectively |
1.8 | 1.8 | |||||||||||
Additional paid-in capital |
1,334.4 | 1,298.7 | |||||||||||
Retained earnings |
993.0 | 880.7 | |||||||||||
Treasury stock, at cost (23,598,400 and 17,167,600 shares,
respectively) |
(435.6 | ) | (300.1 | ) | |||||||||
Accumulated other comprehensive income, net of tax |
.3 | — | |||||||||||
Total Stockholders’ Equity |
1,893.9 | 1,881.1 | |||||||||||
| $ | 4,395.4 | $ | 4,209.1 | ||||||||||
The accompanying notes are an integral part of these statements.
3
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
REVENUE |
$ | 648.0 | $ | 609.7 | $ | 1,879.9 | $ | 1,759.8 | ||||||||||
EXPENSES: |
||||||||||||||||||
Cost of operations |
433.7 | 377.6 | 1,200.7 | 1,091.1 | ||||||||||||||
Depreciation, amortization and depletion |
61.7 | 53.4 | 177.9 | 147.2 | ||||||||||||||
Accretion |
3.2 | — | 9.4 | — | ||||||||||||||
Selling, general and administrative |
62.1 | 60.5 | 185.7 | 180.1 | ||||||||||||||
OPERATING INCOME |
87.3 | 118.2 | 306.2 | 341.4 | ||||||||||||||
INTEREST EXPENSE |
(18.6 | ) | (19.3 | ) | (58.8 | ) | (57.7 | ) | ||||||||||
INTEREST INCOME |
2.4 | 1.4 | 6.9 | 3.1 | ||||||||||||||
OTHER INCOME (EXPENSE), NET |
.9 | .1 | 3.2 | .5 | ||||||||||||||
INCOME BEFORE INCOME TAXES |
72.0 | 100.4 | 257.5 | 287.3 | ||||||||||||||
PROVISION FOR INCOME TAXES |
27.3 | 38.2 | 97.8 | 109.2 | ||||||||||||||
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES |
44.7 | 62.2 | 159.7 | 178.1 | ||||||||||||||
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES, NET OF TAX |
— | — | (37.8 | ) | — | |||||||||||||
NET INCOME |
$ | 44.7 | $ | 62.2 | $ | 121.9 | $ | 178.1 | ||||||||||
BASIC AND DILUTED EARNINGS PER SHARE: |
||||||||||||||||||
Before cumulative effect of changes in accounting
principles |
$ | .28 | $ | .38 | $ | .98 | $ | 1.07 | ||||||||||
Cumulative effect of changes in accounting
principles, net of tax |
— | — | (.23 | ) | — | |||||||||||||
Basic and diluted earnings per share |
$ | .28 | $ | .38 | $ | .75 | $ | 1.07 | ||||||||||
WEIGHTED AVERAGE DILUTED COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING |
162.2 | 164.8 | 162.7 | 167.1 | ||||||||||||||
CASH DIVIDENDS PER SHARE |
$ | .06 | $ | — | $ | .06 | $ | — | ||||||||||
PRO FORMA AMOUNTS ASSUMING THE
CHANGES IN ACCOUNTING PRINCIPLES ARE
APPLIED RETROACTIVELY: |
||||||||||||||||||
Net income |
$ | 44.7 | $ | 61.5 | $ | 159.7 | $ | 176.3 | ||||||||||
Basic and diluted earnings per share |
$ | .28 | $ | .37 | $ | .98 | $ | 1.06 | ||||||||||
The accompanying notes are an integral part of these statements.
4
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
| Common Stock | Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Comprehensive | |||||||||||||||||||||||||||
| Shares, | Par | Paid-In | Retained | Treasury | Comprehensive | Income | |||||||||||||||||||||||
| Net | Value | Capital | Earnings | Stock | Income | For the Period | |||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2002 |
163.6 | $ | 1.8 | $ | 1,298.7 | $ | 880.7 | $ | (300.1 | ) | $ | — | — | ||||||||||||||||
Net income |
— | — | — | 121.9 | — | — | $ | 121.9 | |||||||||||||||||||||
Cash dividends ($.06 per share) |
— | — | — | (9.6 | ) | — | — | — | |||||||||||||||||||||
Issuance of common stock |
1.9 | — | 35.7 | — | — | — | — | ||||||||||||||||||||||
Purchase of common stock for treasury |
(6.4 | ) | — | — | — | (135.5 | ) | — | — | ||||||||||||||||||||
Change in value of investments, net of tax |
— | — | — | — | — | .3 | .3 | ||||||||||||||||||||||
Total comprehensive income |
— | — | — | — | — | — | $ | 122.2 | |||||||||||||||||||||
BALANCE AT SEPTEMBER 30, 2003 |
159.1 | $ | 1.8 | $ | 1,334.4 | $ | 993.0 | $ | (435.6 | ) | $ | .3 | |||||||||||||||||
The accompanying notes are an integral part of this statement.
5
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2003 | 2002 | ||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES: |
|||||||||||
Net income |
$ | 121.9 | $ | 178.1 | |||||||
Adjustments to reconcile net income to net cash provided
by operating activities: |
|||||||||||
Depreciation and amortization of property and equipment |
104.5 | 92.2 | |||||||||
Landfill depletion and amortization |
69.4 | 50.1 | |||||||||
Amortization of intangible and other assets |
4.0 | 4.9 | |||||||||
Accretion |
9.4 | — | |||||||||
Deferred tax provision |
45.7 | 41.5 | |||||||||
Provision for doubtful accounts |
7.4 | 9.1 | |||||||||
Income tax benefit from stock option exercises |
(4.2 | ) | (1.5 | ) | |||||||
Other non-cash items |
(1.9 | ) | .7 | ||||||||
Cumulative effect of changes in accounting principles, net of tax |
37.8 | — | |||||||||
Changes in assets and liabilities, net of effects from
business acquisitions and dispositions: |
|||||||||||
Accounts receivable |
(36.1 | ) | (22.6 | ) | |||||||
Prepaid expenses and other assets |
(17.8 | ) | 1.6 | ||||||||
Accounts payable and accrued liabilities |
(1.6 | ) | 10.8 | ||||||||
Other liabilities |
93.9 | 48.3 | |||||||||
| 432.4 | 413.2 | ||||||||||
CASH USED IN INVESTING ACTIVITIES: |
|||||||||||
Purchases of property and equipment |
(180.8 | ) | (162.3 | ) | |||||||
Proceeds from sale of property and equipment |
4.0 | 11.3 | |||||||||
Cash used in business acquisitions, net of cash acquired |
(30.2 | ) | (43.1 | ) | |||||||
Cash proceeds from business dispositions |
3.2 | 15.1 | |||||||||
Amounts due and contingent payments to former owners |
(4.5 | ) | (2.6 | ) | |||||||
Restricted cash |
(44.0 | ) | 1.2 | ||||||||
Restricted marketable securities |
(141.8 | ) | — | ||||||||
| (394.1 | ) | (180.4 | ) | ||||||||
CASH USED IN FINANCING ACTIVITIES: |
|||||||||||
Proceeds from notes payable and long-term debt |
56.3 | 41.3 | |||||||||
Payments of notes payable and long-term
debt |
(2.0 | ) | (1.9 | ) | |||||||