<PAGE> 1
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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 MARCH 31, 1999
OR
[ ] 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.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 65-0716904
(State of Incorporation) (IRS Employer Identification No.)
110 S.E. 6TH STREET, 28TH FLOOR
FT. LAUDERDALE, FLORIDA 33301
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
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 [ ]
On May 6, 1999 the registrant had outstanding 175,412,500 shares of Class A
Common Stock, par value $.01 per share.
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<PAGE> 2
REPUBLIC SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999
(Unaudited) and December 31, 1998............................. 3
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1999 and 1998............ 4
Unaudited Condensed Consolidated Statement of Stockholders'
Equity for the Three Months Ended March 31, 1999.............. 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1999 and 1998............ 6
Notes to Unaudited Condensed Consolidated Financial
Statements.................................................... 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 14
ITEM 3. Quantitative and Qualitative Disclosures about Market
Risk.......................................................... 20
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................................ 20
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 15.3 $ 556.6
Restricted cash........................................... 6.8 7.1
Accounts receivable, less allowance for doubtful accounts
of $17.3 and $22.1, respectively....................... 207.8 182.7
Prepaid expenses and other current assets................. 43.7 37.6
-------- --------
Total Current Assets.............................. 273.6 784.0
PROPERTY AND EQUIPMENT, NET................................. 1,391.4 1,096.1
INTANGIBLE AND OTHER ASSETS, NET............................ 1,123.3 932.0
-------- --------
$2,788.3 $2,812.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 45.0 $ 64.7
Accrued liabilities....................................... 156.5 146.2
Deferred revenue.......................................... 52.0 46.6
Notes payable and current maturities of long-term debt.... 385.2 499.9
Other current liabilities................................. 54.9 26.4
-------- --------
Total Current Liabilities......................... 693.6 783.8
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 557.4 557.2
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS.................... 102.1 77.3
DEFERRED INCOME TAXES....................................... 73.9 71.4
OTHER LIABILITIES........................................... 16.8 23.3
COMMITMENTS AND CONTINGENCIES...............................
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; none issued......................... -- --
Common Stock:
Class A, par value $.01 per share; 250,000,000 shares
authorized; 175,412,500 and 79,724,417 issued and
outstanding, respectively............................. 1.8 .8
Class B, par value $.01 per share; 125,000,000 shares
authorized; none and 95,688,083 issued and
outstanding, respectively............................. -- 1.0
Additional paid-in capital................................ 1,205.5 1,203.5
Retained earnings......................................... 137.2 93.8
-------- --------
Total Stockholders' Equity........................ 1,344.5 1,299.1
-------- --------
$2,788.3 $2,812.1
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
<S> <C> <C>
REVENUE..................................................... $403.5 $300.8
EXPENSES:
Cost of operations........................................ 244.7 185.9
Depreciation, amortization and depletion.................. 33.4 23.8
Selling, general and administrative....................... 46.0 32.1
------ ------
OPERATING INCOME............................................ 79.4 59.0
INTEREST EXPENSE............................................ (11.3) (5.4)
INTEREST INCOME............................................. 2.6 .5
OTHER INCOME (EXPENSE), NET................................. (.1) .3
------ ------
INCOME BEFORE INCOME TAXES.................................. 70.6 54.4
PROVISION FOR INCOME TAXES.................................. 27.2 19.6
------ ------
NET INCOME.................................................. $ 43.4 $ 34.8
====== ======
BASIC AND DILUTED EARNINGS PER
SHARE..................................................... $ .25 $ .36
====== ======
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING............................................... 175.4 95.7
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------- PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS
------- ------- ---------- --------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998.............................. $ .8 $ 1.0 $ 1,203.5 $ 93.8
Net income.............................................. -- -- -- 43.4
Conversion of Common Stock owned by AutoNation, Inc..... 1.0 (1.0) -- --
Issuance of compensatory stock options.................. -- -- 2.0 --
---- ----- --------- ------
BALANCE AT MARCH 31, 1999................................. $1.8 $ -- $ 1,205.5 $137.2
==== ===== ========= ======
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------
1999 1998
------- ------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income................................................ $ 43.4 $ 34.8
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, amortization and depletion of property
and equipment......................................... 26.3 20.3
Amortization of intangible assets...................... 7.1 3.5
Deferred tax provision................................. 7.1 7.6
Non-cash charge........................................ 2.0 --
Changes in assets and liabilities, net of
effects from business acquisitions:
Accounts receivable............................... (22.6) (3.3)
Prepaid expenses and other assets................. (6.4) (2.9)
Accounts payable and accrued liabilities.......... (18.4) (3.0)
Other liabilities................................. 25.5 23.3
------- ------
64.0 80.3
------- ------
CASH USED IN INVESTING ACTIVITIES:
Purchases of property and equipment....................... (55.7) (29.0)
Cash used in business acquisitions, net of cash
acquired............................................... (432.5) 1.8
Other..................................................... (.9) 6.0
------- ------
(489.1) (21.2)
------- ------
CASH USED IN FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt............ 1.3 .5
Payments of notes payable and long-term debt.............. (15.5) (16.3)
Net payments on revolving credit facility................. (102.0) --
Decrease in notes payable to AutoNation................... -- (27.3)
Other..................................................... -- (16.0)
------- ------
(116.2) (59.1)
------- ------
DECREASE IN CASH AND CASH EQUIVALENTS....................... (541.3) --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 556.6 --
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 15.3 $ --
======= ======
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN MILLIONS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
Republic Services, Inc. and its subsidiaries (the "Company") is a leading
provider of non-hazardous solid waste collection and disposal services in the
United States.
The accompanying Unaudited Condensed Consolidated Financial Statements
include the accounts of the Company and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
All significant intercompany accounts and transactions have been eliminated.
Certain information related to the Company's organization, significant
accounting policies and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. In the opinion of management, these Unaudited
Condensed Consolidated Financial Statements reflect all material adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and the results of operations for the periods presented, and
the disclosures herein are adequate to make the information presented not
misleading. Operating results for interim periods are not necessarily indicative
of the results that can be expected for a full year. These interim financial
statements should be read in conjunction with the Company's audited Consolidated
Financial Statements and notes thereto appearing in the Company's Form 10-K as
of and for the year ended December 31, 1998.
The Unaudited Condensed Consolidated Financial Statements reflect the
accounts of the Company as a subsidiary of AutoNation subject to corporate
general and administrative expense allocations or charges under the Services
Agreement as described in Note 11, Related Party Transactions. Such information
does not necessarily reflect the financial position or results of operations of
the Company as a separate, stand-alone entity.
As of March 31, 1999, approximately 63.9% of the Company's stock was owned
by AutoNation, Inc., formerly known as Republic Industries, Inc. (together with
its subsidiaries, "AutoNation"). All historical share and per share data of the
Company's common stock, par value $.01 per share ("Common Stock," which is
designated when issued as "Class A Common Stock" or "Class B Common Stock") for
the three months ended March 31, 1998 in the Unaudited Condensed Consolidated
Financial Statements and the notes thereto have been retroactively adjusted for
the recapitalization of AutoNation's 100 shares of Common Stock previously
outstanding into 95,688,083 shares of Class B Common Stock in July 1998.
In July 1998, the Company completed an initial public offering of its Class
A Common Stock ("Initial Public Offering") resulting in net proceeds of
approximately $1.4 billion. In addition, in July 1998 the Company repaid in full
all amounts due to AutoNation as of June 30, 1998 through the issuance of 16.5
million shares of Class A Common Stock and through all of the proceeds from the
Initial Public Offering. Following the Initial Public Offering and the repayment
of amounts due to AutoNation, approximately 63.9% of the outstanding shares of
Common Stock were owned by AutoNation.
In March 1999, AutoNation converted all 95.7 million shares of its Class B
Common Stock into Class A Common Stock on a one-for-one basis. Subject to
stockholder approval at the Company's annual meeting in May 1999, the Company
intends to amend its certificate of incorporation to eliminate the
classifications of common stock.
In April 1999, AutoNation transferred all of its Class A Common Stock to
its indirect, wholly-owned subsidiary, AutoNation Insurance Company, and the
Company registered all 112.2 million shares of its Common Stock owned by
AutoNation. On May 3, 1999, the Company completed a secondary offering, in which
AutoNation sold substantially all of the Class A Common Stock it owned in the
Company.
During the three months ended March 31, 1999, the Company recorded other
charges of approximately $4.0 million, which are included in selling, general
and administrative expenses in the Unaudited Condensed Consolidated Financial
Statements. These costs relate to the Company's separation from AutoNation and
7
<PAGE> 8
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
consist of $2.0 million of compensation expenses related to the granting of
certain replacement employee stock options at exercise prices below the quoted
market price of the Company's Common Stock at the date of grant (see Note 8,
Stock Options) and $2.0 million of additional charges directly related to the
separation. The Company expects to incur an additional $1.5 to $2.0 million in
additional separation costs during the second quarter of 1999.
The following unaudited pro forma consolidated statement of operations data
for the three months ended March 31, 1999 excludes the $4.0 million pre-tax
charge resulting from the Company's separation from AutoNation:
<TABLE>
<S> <C>
Revenue..................................................... $403.5
Expenses:
Cost of operations........................................ 244.7
Depreciation, amortization and depletion.................. 33.4
Selling, general and administrative....................... 42.0
------
Operating income............................................ 83.4
Interest expense............................................ (11.3)
Interest income............................................. 2.6
Other income (expense), net................................. (.1)
------
Income before income taxes.................................. 74.6
Provision for income taxes.................................. 28.7
------
Net income.................................................. $ 45.9
======
Basic and diluted earnings per share........................ $ .26
======
Weighted average common and common equivalent shares
outstanding............................................... 175.4
======
</TABLE>
The unaudited pro forma consolidated statement of operations data are
provided for informational purposes only and do not project the Company's
results of operations for any future date or period.
The Company has no components of other comprehensive income. Accordingly,
net income equals comprehensive income for all periods presented.
2. BUSINESS COMBINATIONS
Prior to the Initial Public Offering, AutoNation acquired various
businesses operating in the solid waste services industry using cash and/or
shares of its common stock. The aggregate purchase price paid by AutoNation in
transactions accounted for under the purchase method of accounting during the
three months ended March 31, 1998 was $101.7 million consisting of cash and 2.6
million shares of AutoNation common stock. These businesses were contributed by
AutoNation to the Company subsequent to their acquisition.
The Company uses the purchase method of accounting to account for business
acquisitions. Businesses acquired are included in the Unaudited Condensed
Consolidated Financial Statements from the date of acquisition.
In September 1998, the Company entered into an agreement with Waste
Management, Inc. ("Waste Management") to acquire certain assets. The assets to
be acquired included 16 landfills, 11 transfer stations and 136 commercial
collection routes across the United States, as well as disposal agreements at
various Waste Management facilities. By March 1999, the Company had completed
the purchases of the assets for approximately $438.0 million in cash plus
properties, $251.1 million of which were acquired during the three months ended
March 31, 1999.
8
<PAGE> 9
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the acquisitions from Waste Management, the Company also
acquired various other solid waste businesses during the three months ended
March 31, 1999. The aggregate purchase price paid by the Company in these
transactions was $189.9 million in cash.
The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting
consummated during the three months ended March 31:
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Property and equipment...................................... $295.7 $ 13.2
Cost in excess of net assets acquired....................... 206.1 109.7
Other assets................................................ 2.2 --
Working capital deficit..................................... (44.0) (8.0)
Debt assumed................................................ (1.7) (13.8)
Other liabilities........................................... (25.8) (1.2)
Investment by AutoNation.................................... -- (101.7)
------ -------
Cash used in acquisitions, net of cash acquired............. $432.5 $ (1.8)
====== =======
</TABLE>
The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions during the three months ended March 31,
1999 accounted for under the purchase method of accounting had occurred as of
the beginning of each three month period presented are as follows:
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Revenue..................................................... $418.4 $ 330.3
Net income.................................................. $ 43.6 $ 35.5
Basic and diluted earnings per share........................ $ .25 $ .37
Weighted average common and common equivalent shares
outstanding............................................... 175.4 95.7
</TABLE>
The unaudited pro forma consolidated results of operations are presented
for informational purposes only and may not necessarily reflect the future
results of operations of the Company or what the results of operations would
have been had the Company owned and operated these businesses as of the
beginning of each period presented.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
Land, landfills and improvements............................ $ 903.3 $ 611.7
Furniture, fixtures, trucks and equipment................... 826.3 806.8
Buildings and improvements.................................. 154.7 150.6
-------- --------
1,884.3 1,569.1
Less: accumulated depreciation, amortization and
depletion................................................. (492.9) (473.0)
-------- --------
$1,391.4 $1,096.1
======== ========
</TABLE>
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist primarily of the cost of acquired
businesses in excess of the fair value of net assets acquired and other
intangible assets. The cost in excess of the fair value of net assets acquired
is
9
<PAGE> 10
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
amortized over 40 years on a straight-line basis. Other intangible assets
include values assigned to customer lists, long-term contracts and covenants not
to compete and are amortized generally over periods ranging from 5 to 25 years.
Accumulated amortization of intangible assets at March 31, 1999 and
December 31, 1998 was $78.0 million and $73.0 million, respectively.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
$1.0 billion unsecured revolving credit facility; interest
payable using LIBOR-based rates; $500.0 million matures
July 1999 and $500.0 million matures 2003................. $ 878.0 $ 980.0
Bonds payable under loan agreements with California
Pollution Control Financing Authority; interest at
prevailing market rates................................... 42.0 42.0
Other notes; secured by real property, equipment and other
assets.................................................... 22.6 35.1
-------- --------
942.6 1,057.1
Less: current portion....................................... (385.2) (499.9)
-------- --------
$ 557.4 $ 557.2
======== ========
</TABLE>
Interest expense paid was $10.7 million (net of $1.7 million of capitalized
interest) and $5.4 million for the three months ended March 31, 1999 and 1998,
respectively.
6. ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
The Company accrues for environmental and landfill costs which include
landfill site closure and post-closure costs. Landfill site closure and
post-closure costs include estimated costs to be incurred for final closure of
the landfills and estimated costs for providing required post-closure monitoring
and maintenance of landfills. These costs are accrued based on consumed
airspace. Available airspace is generally based on estimates of remaining
permitted and likely to be permitted airspace developed by independent engineers
together with the Company's engineers and accounting personnel utilizing
information provided by aerial surveys of landfills which are generally
performed annually. These aerial surveys form the basis for the volume available
for disposal. The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
its interpretation of the technical standards of the United States Environmental
Protection Agency's Subtitle D regulations. These estimates do not take into
account discounts for the present value of such total estimated costs. The
Company periodically reassesses such costs based on various methods and
assumptions regarding landfill airspace and the technical requirements of the
Environmental Protection Agency's Subtitle D regulations and adjusts such
accruals accordingly. Estimated aggregate closure and post-closure costs will be
fully accrued for these landfills at the time that such facilities cease to
accept waste and are closed.
In the normal course of business, the Company is subject to ongoing
environmental investigations by certain regulatory agencies, as well as other
claims and disputes that could result in litigation. Environmental costs are
accrued by the Company through a charge to income in the period such liabilities
become probable and can be reasonably estimated. No material amounts were
charged to expense during the three months ended March 31, 1999 and 1998.
10
<PAGE> 11
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
Income taxes have been provided for based upon the Company's anticipated
annual effective income tax rate. Income taxes paid were $6.3 million and $0.0
million for the three months ended March 31, 1999 and 1998, respectively.
8. STOCK OPTIONS
In July 1998, the Company adopted the 1998 Stock Incentive Plan ("Stock
Incentive Plan") to provide for grants of options to purchase shares of Class A
Common Stock to employees, non-employee directors and independent contractors of
the Company who are eligible to participate in the Stock Incentive Plan. The
Company has reserved 20.0 million shares of Class A Common Stock for issuance
pursuant to options granted under the Stock Incentive Plan.
Prior to the Initial Public Offering, employees of the Company were granted
stock options under AutoNation stock option plans. As of March 2, 1999, options
to purchase approximately 8.3 million shares of AutoNation common stock held by
the Company's employees were canceled by AutoNation, and the Company's
Compensation Committee granted replacement options on a one-for-one basis. The
replacement options to purchase shares of Class A Common Stock retained the
vesting and exercise rights of the original options, subject to certain exercise
limitations for individuals who signed stock option repricing agreements with
AutoNation. The exercise prices for individual replacement options was
determined to maintain the unrealized gain or loss on each option for AutoNation
stock that was cancelled. Compensation expense related to the granting of
certain replacement options at exercise prices below the fair market value of
the Common Stock at the date of grant is approximately $2.0 million, and has
been included in selling, general and administrative expense in the Company's
Unaudited Condensed Consolidated Statement of Operations for the three months
ended March 31, 1999.
A summary of stock option transactions for the three months ended March 31,
1999 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ ----------------
<S> <C> <C>
Options outstanding at beginning of year.................... .6 $18.12
Granted to replace AutoNation options....................... 8.3 18.54
Granted, other.............................................. 3.7 18.30
Exercised................................................... -- --
Cancelled................................................... -- --
---- ------
Options outstanding at March 31, 1999....................... 12.6 $18.45
==== ======
</TABLE>
As of March 31, 1999, options to purchase approximately 12.6 million shares
of Class A Common Stock were outstanding under the Company's Stock Incentive
Plan, approximately 2.1 million of which were exercisable.
9. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is based on the combined weighted average number of common shares and
common share equivalents outstanding which include, where appropriate, the
assumed exercise of employee stock options. In computing diluted earnings per
share, the Company utilizes the treasury stock method.
11
<PAGE> 12
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
Earnings per share for the three months ended March 31, 1998 includes the
retroactive effect of the recapitalization of the 100 shares of Common Stock
held by AutoNation into 95,688,083 shares of Class B Common Stock.
Earnings per share for the three months ended March 31 is calculated as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Numerator:
Net income................................................ $ 43,420 $34,816
-------- -------
Denominator:
Denominator for basic earnings per share.................. 175,412 95,688
Effect of dilutive securities -- Options to purchase
common stock........................................... 26 --
-------- -------
Denominator for diluted earnings per share................ 175,438 95,688
-------- -------
Basic and diluted earnings per share........................ $ 0.25 $ 0.36
======== =======
Antidilutive securities not included in the diluted earnings
per share calculation:
Options to purchase common stock....................... 11,999 --
Weighted average exercise price........................ $ 18.65 --
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
The Company is a party to various general legal proceedings which have
arisen in the ordinary course of business. While the results of these matters
cannot be predicted with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position. However, unfavorable resolution could affect the
consolidated results of operations or cash flows for the quarterly periods in
which they are resolved.
LIABILITY INSURANCE
The Company carries general liability, vehicle liability, workers
compensation and employer's liability coverage, as well as umbrella liability
policies to provide excess coverage over the underlying limits contained in
these primary policies. The Company also carries property insurance.
The Company's liabilities for unpaid and incurred but not reported claims
at March 31, 1999 was $26.6 million and are included in other current and other
liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets.
While the ultimate amount of claims incurred is dependent on future
developments, in management's opinion, recorded reserves are adequate to cover
the future payment of claims. However, it is reasonably possible that recorded
reserves may not be adequate to cover the future payment of claims. Adjustments,
if any, to estimates recorded resulting from ultimate claim payments will be
reflected in operations in the periods in which such adjustments are known.
OTHER MATTERS
In the normal course of business, the Company is required to post
performance bonds, letters of credit, and/or cash deposits as a financial
guarantee of the Company's performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies by making cash
deposits, obtaining bank
12
<PAGE> 13
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
letters of credit or by obtaining surety bonds. At March 31, 1999, surety bonds
and letters of credit totaling $430.0 million were outstanding and will expire
on various dates through 2007.
The Company's business activities are conducted in the context of a
developing and changing statutory and regulatory framework. Governmental
regulation of the waste management industry requires the Company to obtain and
retain numerous governmental permits to conduct various aspects of its
operations. These permits are subject to revocation, modification or denial. The
costs and other capital expenditures which may be required to obtain or retain
the applicable permits or comply with applicable regulations could be
significant.
11. RELATED PARTY TRANSACTIONS
Prior to the Initial Public Offering, AutoNation's corporate general and
administrative costs not specifically attributable to its operating subsidiaries
were allocated to the Company based upon the ratio of the Company's invested
capital to AutoNation's consolidated invested capital. Such allocations are
included in the Company's selling, general and administrative expenses and were
approximately $3.8 million for the three months ended March 31, 1998. These
amounts approximate management's estimate of AutoNation's corporate general and
administrative costs required to support the Company's operations. Management
believes that the amounts allocated to the Company are reasonable and are no
less favorable to the Company than the expenses the Company would have incurred
to obtain such services on its own or from unaffiliated third parties.
In June 1998, the Company and AutoNation entered into a services agreement
(the "Services Agreement") pursuant to which AutoNation agreed to provide to the
Company certain accounting, auditing, cash management, corporate communications,
corporate development, financial and treasury, human resources and benefit plan
administration, insurance and risk management, legal, purchasing and tax
services. The Services Agreement has a one-year term and will expire June 30,
1999. In exchange for the provision of such services, fees were payable by the
Company to AutoNation in the amount of $1.25 million per month, subject to
review and adjustment from time to time as the Company reduces the amount of
services it obtains from AutoNation. Effective January 1, 1999, such fees
payable by the Company to AutoNation were reduced to $.9 million per month. The
Company believes that the fees for services provided under the Services
Agreement are no less favorable to the Company than could be obtained by the
Company internally or from unaffiliated third parties. Charges under the
Services Agreement during the three months ended March 31, 1999 were
approximately $2.7 million and are included in selling, general and
administrative expenses.
Prior to the Initial Public Offering, the Company participated in
AutoNation's combined risk management programs for property, casualty and
general liability insurance. The Company was charged for annual premiums of $4.2
million for the three months ended March 31, 1998.
Interest expense on notes payable to AutoNation was $4.8 million for the
three months ended March 31, 1998. All amounts due AutoNation were repaid in
full in July 1998 through the issuance of shares of Class A Common Stock and
proceeds from the Initial Public Offering.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements and notes thereto included under
Item 1. In addition, reference should be made to the Company's audited
Consolidated Financial Statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing in the Company's Form 10-K as of and for the year ended December 31,
1998. As of March 31, 1999, approximately 63.9% of the Company's common stock
was owned by AutoNation, Inc. (together with its subsidiaries, the
"AutoNation"). All references to historical share and per share data of the
Company's Common Stock, par value $.01 per share ("Common Stock," which is
designated when issued as either "Class A Common Stock" or "Class B Common
Stock") have been retroactively adjusted for the recapitalization of
AutoNation's 100 shares of Common Stock previously outstanding into 95,688,083
shares of Class B Common Stock in July 1998.
The accompanying Unaudited Condensed Consolidated Financial Statements
reflect the accounts of the Company as a subsidiary of AutoNation subject to
corporate general and administrative expense allocations or charges under the
Services Agreement as described in Note 11, Related Party Transactions, of the
Notes to Unaudited Condensed Consolidated Financial Statements. The historical
consolidated financial information contained in this Form 10-Q does not
necessarily reflect the financial position or results of operations of the
Company as a separate, stand-alone entity.
BUSINESS COMBINATIONS
The Company makes decisions to acquire or invest in businesses based on
financial and strategic considerations.
Prior to the Initial Public Offering, AutoNation acquired various
businesses operating in the solid waste services industry using cash and/or
shares of its common stock. The aggregate purchase price paid by AutoNation in
transactions accounted for under the purchase method of accounting during the
three months ended March 31, 1998 was $101.7 million consisting of cash and 2.6
million shares of AutoNation common stock. These businesses were contributed by
AutoNation to the Company subsequent to their acquisition.
The Company uses the purchase method of accounting to account for business
acquisitions. Businesses acquired are included in the Unaudited Condensed
Consolidated Financial Statements from the date of acquisition.
In September 1998, the Company entered into an agreement with Waste
Management, Inc. ("Waste Management") to acquire certain assets. The assets to
be acquired included 16 landfills, 11 transfer stations and 136 commercial
collection routes across the United States as well as disposal agreements at
various Waste Management facilities. By March 1999, the Company had completed
the purchases of the assets for approximately $438.0 million in cash plus
properties, $251.1 million of which were acquired during the three months ended
March 31, 1999.
In addition to the acquisitions from Waste Management, the Company also
acquired various other solid waste businesses during the three months ended
March 31, 1999. The aggregate purchase price paid by the Company in these
transactions was $189.9 million in cash.
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
Pro forma net income was $45.9 million, or $.26 per share, for the three
months ended March 31, 1999. Pro forma operating results exclude the $4.0
million pre-tax charge that was recorded during the quarter resulting from the
Company's separation from AutoNation. See Note 1, Basis of Presentation, of the
Notes to Unaudited Condensed Consolidated Financial Statements, for further
discussion of pro forma operating results.
14
<PAGE> 15
CONSOLIDATED RESULTS OF OPERATIONS
Net income was $43.4 million for the three months ended March 31, 1999, or
$.25 per share, as compared to $34.8 million, or $.36 per share, for the three
months ended March 31, 1998.
The following table sets forth revenue and cost of operations,
depreciation, amortization and depletion, selling, general and administrative
expenses, other charges and operating income with percentages of revenue for the
three months ended March 31 (in millions):
<TABLE>
<CAPTION>
1999 % 1998 %
------ ----- ------ -----
<S> <C> <C> <C> <C>
Revenue........................................... $403.5 100.0 $300.8 100.0
Expenses:
Cost of operations.............................. 244.7 60.6 185.9 61.8
Depreciation, amortization and depletion........ 33.4 8.3 23.8 7.9
Selling, general and administrative expenses.... 42.0 10.4 32.1 10.7
Other charges................................... 4.0 1.0 -- --
------ ----- ------ -----
Operating Income.................................. $ 79.4 19.7 $ 59.0 19.6
====== ===== ====== =====
</TABLE>
Revenue was $403.5 million and $300.8 million for the three months ended
March 31, 1999 and 1998, respectively, an increase of 34.1%. Internal growth,
consisting of price and primarily volume, accounted for 8.1% of the increase,
and "tuck-in" acquisitions contributed 10.8%. Other acquisitions accounted for
the remaining 15.2% of the increase.
All of the Company's revenue sources showed increases in aggregate dollar
amounts for the three months ended March 31, 1999 versus the comparable 1998
period. The following table reflects total revenue of the Company by revenue
source excluding intercompany disposal revenue for the three months ended March
31 (in millions):
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C> <C> <C>
Collection........................................ $310.9 77.1% $239.9 79.8%
Transfer and disposal............................. 57.1 14.1% 30.4 10.1%
Other............................................. 35.5 8.8% 30.5 10.1%
------ ----- ------ -----
Total Revenue................................... $403.5 100.0% $300.8 100.0%
====== ===== ====== =====
</TABLE>
Cost of operations was $244.7 million for the three months ended March 31,
1999, versus $185.9 million for the comparable 1998 period. The increase in
aggregate dollars is primarily due to acquisitions. Cost of operations as a
percentage of revenue was 60.6% for the three months ended March 31, 1999,
versus 61.8% for the comparable 1998 period. The decrease in such costs as a
percentage of revenue is primarily a result of improved operating efficiencies
and an increase in higher margin landfill operations primarily due to
acquisitions.
Depreciation, amortization and depletion expenses were $33.4 million for
the three months ended March 31, 1999, versus $23.8 million for the comparable
1998 period. The increase in aggregate dollars is primarily due to acquisitions.
Depreciation, amortization and depletion expenses as a percentage of revenue
were 8.3% for the three months ended March 31, 1999, versus 7.9% for the
comparable 1998 period. The increase in such expenses as a percentage of revenue
is primarily the result of an increase in amortization expense due to
acquisitions.
Selling, general and administrative expenses were $42.0 million for the
three months ended March 31, 1999, versus $32.1 million for the comparable 1998
period. The increase in aggregate dollars is primarily due to acquisitions.
Selling, general and administrative expenses as a percentage of revenue were
10.4% for the three months ended March 31, 1999, versus 10.7% for the comparable
1998 period. The decrease in such expenses as a percentage of revenue is
primarily due to leveraging the existing overhead structure over an expanding
revenue base.
15
<PAGE> 16
Included in selling, general and administrative expenses are fees paid to
AutoNation under the Services Agreement of $2.7 million for the three months
ended March 31, 1999 and allocations of AutoNation's corporate general and
administrative costs of $3.8 million for the three months ended March 31, 1998.
See Note 11, Related Party Transactions, of the Notes to Unaudited Condensed
Consolidated Financial Statements for further information.
Other charges were $4.0 million for the three months ended March 31, 1999.
These costs relate to the Company's separation from AutoNation and consist of
$2.0 million of compensation expense related to the granting of certain
replacement employee stock options at exercise prices below the quoted market
price of the Company's Common Stock at the date of grant (see Note 8, Stock
Options, of the Notes to Unaudited Condensed Consolidated Financial Statements)
and $2.0 million of additional charges directly related to the separation. The
Company expects to incur an additional $1.5 to $2.0 million in additional
separation costs during the second quarter of 1999.
INTEREST EXPENSE
Interest expense was $11.3 million for three months ended March 31, 1999,
versus $5.4 million for the comparable 1998 period. Interest expense for the
three months ended March 31, 1999 is primarily due to revolving credit facility
borrowings and debt assumed in acquisitions. Borrowings under the revolving
credit facility were used primarily to fund acquisitions. Interest expense for
the three months ended March 31, 1998 was primarily due to $4.8 million of
interest expense on borrowings from AutoNation, and interest expense on debt
assumed in acquisitions. All amounts due to AutoNation were repaid in full in
July 1998 through the issuance of shares of Class A Common Stock and proceeds
from the Initial Public Offering.
INTEREST INCOME
Interest income was $2.6 million for the three months ended March 31, 1999,
versus $.5 million for the comparable 1998 period. The increase in interest
income for the three months ended March 31, 1999 versus the comparable period in
1998 is primarily due to higher average cash balances on hand during 1999.
INCOME TAXES
The provision for income taxes was $27.2 million for the three months ended
March 31, 1999, versus $19.6 million for the comparable 1998 period. The
effective income tax rate was 38.5% and 36.0% for the three months ended March
31, 1999 and 1998, respectively. Income taxes have been provided based upon the
Company's anticipated annual effective tax rate.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company accrues for environmental and landfill costs which include
landfill site closure and post-closure costs. Landfill site closure and
post-closure costs include estimated costs to be incurred for final closure of
the landfills and estimated costs for providing required post-closure monitoring
and maintenance of landfills. These costs are accrued based on consumed
airspace. The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
its interpretation of the technical standards of the Environmental Protection
Agency's Subtitle D regulations. These estimates do not take into account
discounts for the present value of such total estimated costs. Engineering
reviews of the future cost requirements for closure and post-closure monitoring
and maintenance for the Company's operating landfills are generally performed on
an annual basis. Such reviews provide the basis upon which the Company estimates
future costs and revises the related accruals. Changes in these estimates
primarily relate to modifications in available airspace, inflation and changes
in regulations, all of which are taken into consideration annually.
The current and long-term portion of accrued closure and post-closure costs
associated with landfills are included in other current liabilities and accrued
environmental and landfill costs, respectively, in the Company's Unaudited
Condensed Consolidated Balance Sheets. The increase in such accruals results
primarily from landfill acquisitions.
16
<PAGE> 17
Costs related to environmental remediation activities are accrued by the
Company through a charge to income in the period such liabilities become
probable and can be reasonably estimated. No material amounts were charged to
expense during the three months ended March 31, 1999 and 1998, respectively.
FINANCIAL CONDITION
At March 31, 1999, the Company had $15.3 million of unrestricted cash. The
cash on hand as of December 31, 1998 was used primarily to fund acquisitions in
the first quarter of 1999.
Prior to the Initial Public Offering, the Company's needs for working
capital and capital for general corporate purposes, including acquisitions, were
satisfied pursuant to AutoNation corporate-wide cash management policies.
Following the Initial Public Offering, the Company has been financed
autonomously and AutoNation has not provided funds to finance the Company's
operations or acquisitions. The Company's operating cash flow is used by the
Company to finance its working capital, acquisitions and other requirements.
Additionally, in July 1998, the Company entered into a $1.0 billion unsecured
revolving credit facility with a group of banks. $500.0 million of the facility
expires July 1999 and the remaining $500.0 million expires July 2003. Borrowings
under the facility bear interest at LIBOR-based rates. At March 31, 1999, the
Company had approximately $109.0 million of availability under this facility.
Proceeds from the facility are used to satisfy working capital requirements,
capital expenditures and acquisitions.
The Company expects to offer investment grade debt securities in the public
market during the second quarter of 1999. In addition, the Company intends to
extend the maturity of the credit facility expiring July 1999 to July 2000. At
present, management believes it will be able to raise additional debt or equity
financing to fund general corporate needs and to complete acquisitions; however,
there can be no assurance that the Company will be able to obtain additional
financing under favorable terms.
CASH FLOWS
Cash and cash equivalents decreased by $541.3 million during the three
months ended March 31, 1999. The major components of this change are discussed
below.
Management believes that it has sufficient financial resources available to
meet anticipated capital requirements and obligations as they come due.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $64.0 million and $80.3 million
during the three months ended March 31, 1999 and 1998, respectively. The
decrease is due to increased working capital requirements as a result of
business acquisitions.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows from investing activities consist primarily of cash used for
capital additions and business acquisitions. Capital additions were $55.7
million and $29.0 million during the three months ended March 31, 1999 and 1998,
respectively. Cash (used in) provided by business acquisitions, net of cash
acquired was $(432.5) million and $1.8 million during the three months ended
March 31, 1999 and 1998, respectively. Business acquisitions for the three
months ended March 31, 1998 were funded by AutoNation.
The Company believes capital expenditures and cash used in business
acquisitions will increase during the remainder of 1999 and in the foreseeable
future due to expansion of the Company's business. In addition, the Company
expects to use primarily cash for business acquisitions. The Company intends to
finance capital expenditures and acquisitions through cash on hand, cash flow
from operations, the Company's $1.0 billion revolving credit facility and other
financings.
17
<PAGE> 18
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities during the three months ended March
31, 1999 and 1998 included commercial bank and affiliate borrowings and
repayments of debt. Proceeds from bank and affiliate borrowings were used to
fund acquisitions and capital additions, and to repay debt.
SEASONALITY
The Company's operations can be adversely affected by periods of inclement
weather which could delay the collection and disposal of waste, reduce the
volume of waste generated or delay the construction or expansion of the
Company's landfill sites and other facilities.
YEAR 2000
The Company utilizes software and related technologies throughout its
business that will be affected by the date change in the year 2000 ("Y2K"). The
Company is currently addressing the impact of Y2K on its computer programs,
embedded chips and third party suppliers. The Company has developed a dedicated
Y2K project office to coordinate the compliance efforts and monitor and report
project status throughout the organization.
The Company has identified four core phases in preparing for Y2K:
Assessment. In the assessment phase, an inventory of software, hardware,
telecommunications equipment, embedded chip technology and significant third
party suppliers is performed and critical systems and vendors are identified and
prioritized.
Analysis. In the analysis phase, each system or item assessed as critical
is reviewed to determine its Y2K compliance. Key vendors are also evaluated at
this time to determine their compliance status.
Remediation. In the remediation phase, modifications or replacements are
made to critical systems and equipment to make them Y2K compliant or the systems
and/or vendors are replaced with compliant systems or vendors. Decisions are
also made as to whether changes are necessary or feasible for key third party
suppliers.
Testing and Validation. In this phase, the Company prepares, executes and
verifies the testing of critical systems.
Six critical systems or processes have been the focus of the Company's Y2K
compliance efforts. These are hauling and disposal fleet operations, electrical
systems, telecommunications, payroll processing, billing systems and payments to
critical third parties. The Company primarily uses industry standard automated
applications in most of its locations, which are provided by third parties. The
majority of these applications are believed to be Y2K compliant, but the Company
is currently testing compliance in coordination with its vendors. The Company
expects to complete the testing and validation of these applications by the
third quarter of 1999. Three of the Company's locations using proprietary
software are currently in the remediation phase, which is expected to be
complete by the second quarter of 1999. The Company expects to complete testing
and validation of the software at these locations by the third quarter of 1999.
The Company is currently finalizing its assessment of embedded chips and
third party suppliers. The Company expects to complete the inventory and
assessment of this information during the second quarter of 1999. As information
related to these areas is received, the Company analyzes the compliance of
products and develops strategies for repair or replacement of non-compliant
systems through testing and validation. The Company expects to complete the
testing and validation phases by the third quarter of 1999.
To date, the Company estimates that it has spent approximately $1.7 million
on Y2K efforts across all areas of the Company and expects to have spent a total
of approximately $4.0 million when complete. The Company expects to fund Y2K
costs through operating cash flows. All system modification costs associated
with Y2K will be expensed as incurred. Y2K expenditures vary significantly in
project phases and vary depending on remedial methods used. Past expenditures in
relation to total estimated costs should not be
18
<PAGE> 19
considered or relied on as a basis for estimating progress to completion for any
element of the Company's Y2K project.
The Company presently believes that, upon remediation of its business
software applications, as well as other equipment with embedded technology, the
Y2K issue will not present a materially adverse risk to the Company's future
consolidated results of operations, liquidity or capital resources. However, if
such remediation is not completed in a timely manner or the level of timely
compliance by key suppliers or vendors is not sufficient, the Company believes
that the most likely reasonable worst-case scenario would involve the failure of
one of the Company's critical systems, delaying or disrupting the delivery of
services, resulting in loss of revenue, increased operating costs, loss of
customers or suppliers, or other significant disruptions to the Company's
business. In response to this scenario, comprehensive contingency and business
continuation plans, which address the six critical processes described above are
currently being tested. The Company expects its contingency and business
continuation plans to be implemented by the third quarter of 1999. These plans
include the manual performance of processes that are currently automated, such
as billing, accounts payable and payroll.
Determining the Y2K readiness of third party products (information
technology and other computerized equipment) and business dependencies
(including suppliers, distributors or ancillary industry groups) requires
pursuit, collection and appraisal of voluntary statements made or provided by
those parties, if available, together with independent factual research. The
Company has identified a number of material third party relationships, the most
significant of which includes billing services provided by municipalities,
delivery of fuel for collection vehicles and delivery of parts and supplies for
collection vehicles. Surveys have been distributed to each of the material third
parties identified and results are being analyzed as surveys are received. The
Company expects to complete this task by the second quarter of 1999. In
addition, employees of the Company will independently verify and validate these
responses by the third quarter of 1999. Although the Company has taken, and will
continue to take, reasonable efforts to gather information to determine and
verify the readiness of products and dependencies, there can be no assurance
that reliable information will be offered or otherwise available. In addition,
verification methods (including testing methods) may not be reliable or fully
implemented. Accordingly, notwithstanding the foregoing efforts, there are no
assurances that the Company is correct in its determination or belief that a
product or a business dependency is Y2K ready.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. SFAS 133 cannot
be applied retroactively. The Company will adopt SFAS 133 beginning January 1,
2000. Adoption of this statement is not expected to have a material impact on
the Company's consolidated financial position or results of operations.
FORWARD-LOOKING STATEMENTS
Certain statements and information included herein constitute
"forward-looking statements" within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, competition in the solid waste industry; dependence on acquisitions for
growth; the Company's ability to manage growth; compliance with environmental
regulations; the ability to obtain financing on acceptable terms to finance the
Company's operations and growth strategy and for the Company to operate within
the limitations imposed by financing arrangements; the Company's dependence on
key personnel; general
19
<PAGE> 20
economic conditions; dependence on large, long-term collection contracts; risks
associated with undisclosed liabilities of acquired businesses; the risks and
costs associated with the date change in the year 2000; and other factors
contained in the Company's filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market sensitive financial instruments consist primarily of
variable rate debt. Therefore, the Company's market risk exposure is with
changing interest rates in the United States and fluctuations in LIBOR. The
Company intends to manage interest rate risk through a combination of fixed and
floating rate debt.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule for the Three Months Ended March 31, 1999 and
1998 (for SEC use only)
(b) Reports on Form 8-K:
Form 8-K, dated February 12, 1999 (filed February 16, 1999), Item 5,
reporting the Company's acquisitions through February 12, 1999 from Waste
Management, Inc. under an agreement dated September 27, 1998.
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Republic Services, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REPUBLIC SERVICES, INC.
By: /s/ Tod C. Holmes
------------------------------------
Tod C. Holmes
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
Date: May 6, 1999
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 15,300 0
<SECURITIES> 0 0
<RECEIVABLES> 225,100 154,600
<ALLOWANCES> 17,300 15,600
<INVENTORY> 0 0
<CURRENT-ASSETS> 273,600 184,200
<PP&E> 1,884,300 1,256,400
<DEPRECIATION> 492,900 429,900
<TOTAL-ASSETS> 2,788,300 1,488,200
<CURRENT-LIABILITIES> 700,700 2,430,200
<BONDS> 557,400 61,400
0 0
0 0
<COMMON> 1,800 0
<OTHER-SE> 1,342,700 (1,112,700)
<TOTAL-LIABILITY-AND-EQUITY> 2,788,300 1,488,200
<SALES> 0 0
<TOTAL-REVENUES> 403,500 300,800
<CGS> 0 0
<TOTAL-COSTS> 244,700 185,900
<OTHER-EXPENSES> 79,400 55,900
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,300 5,400
<INCOME-PRETAX> 70,600 54,400
<INCOME-TAX> 27,200 19,600
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 43,400 34,800
<EPS-PRIMARY> .25 .36
<EPS-DILUTED> .25 .36
</TABLE>
