Republic Services (RSG)

 

As of December 31, 2008, we are the second largest provider of services in the domestic non-hazardous solid waste industry. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 400 collection companies in 40 states and Puerto Rico. We also own or operate 242 transfer stations, 213 active solid waste landfills and 78 recycling facilities.

 

In early 2008, we began to experience the impact of the economic slowdown on our operations. This slowdown intensified during 2008 which, combined with a tightening of the credit markets, resulted in unprecedented changes in the U.S. and global economies. Against this backdrop, consumption in the U.S. slowed dramatically. New housing construction, a primary driver of our temporary industrial collection business, declined in excess of 40% compared to 2007. More recently we are seeing a slowdown in commercial construction. A slowdown in manufacturing has resulted in a decrease in our permanent industrial collection business. Furthermore, volumes in our commercial collection business began to decline in the second half of 2008 as consumers decreased discretionary spending. We are also beginning to see lower commercial volumes due to store closures and increased commercial vacancies. Fuel prices, which reached historic highs in the summer, dropped quickly in the fall of 2008. This decrease in fuel prices was offset by corresponding declines in fuel surcharges and, therefore, did not significantly improve our profitability. In addition, prices for recycling commodities declined in response to a decline in global demand. Although we hedged a portion of our commodity sales, declines in commodity prices have had, and will continue to have, a significant impact on our profitability.

 

Despite the challenging economic environment, our business performed well during 2008 due in large part to the indispensible nature of our services and the scalability of our business. Our internal revenue growth during 2008 was 2.5%. Increases in core price and fuel recovery fees offset volume declines. This increase in price and fuel recovery fees, 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 due to decreases in service volumes.

 

During December 2008, we completed our merger with Allied, forming the second largest waste management company in the U.S. We believe that this merger creates a strong operating platform that will allow us to continue to provide quality service to our customers and superior returns to our stockholders.

 

We expect that the economic challenges we experienced during the latter part of 2008 will continue throughout 2009. We anticipate a decrease in volumes in all lines of our business. We also anticipate that prices for recycling commodities will remain depressed. However, we believe that we will benefit from our cost control and pricing initiatives. Ours is a capital intensive business. Slower growth allows us to reduce capital spending, thus maintaining strong free cash flow despite a weaker economy. In addition, we intend to focus our attention on integrating our newly merged company and achieving cost synergies as a result of the merger.

 

 

As of December 31, 2008, we are the second largest provider of services in the domestic non-hazardous solid waste industry. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 400 collection companies in 40 states and Puerto Rico. We also own or operate 242 transfer stations, 213 active solid waste landfills and 78 recycling facilities.

 

In early 2008, we began to experience the impact of the economic slowdown on our operations. This slowdown intensified during 2008 which, combined with a tightening of the credit markets, resulted in unprecedented changes in the U.S. and global economies. Against this backdrop, consumption in the U.S. slowed dramatically. New housing construction, a primary driver of our temporary industrial collection business, declined in excess of 40% compared to 2007. More recently we are seeing a slowdown in commercial construction. A slowdown in manufacturing has resulted in a decrease in our permanent industrial collection business. Furthermore, volumes in our commercial collection business began to decline in the second half of 2008 as consumers decreased discretionary spending. We are also beginning to see lower commercial volumes due to store closures and increased commercial vacancies. Fuel prices, which reached historic highs in the summer, dropped quickly in the fall of 2008. This decrease in fuel prices was offset by corresponding declines in fuel surcharges and, therefore, did not significantly improve our profitability. In addition, prices for recycling commodities declined in response to a decline in global demand. Although we hedged a portion of our commodity sales, declines in commodity prices have had, and will continue to have, a significant impact on our profitability.

 

Despite the challenging economic environment, our business performed well during 2008 due in large part to the indispensible nature of our services and the scalability of our business. Our internal revenue growth during 2008 was 2.5%. Increases in core price and fuel recovery fees offset volume declines. This increase in price and fuel recovery fees, 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 due to decreases in service volumes.

 

During December 2008, we completed our merger with Allied, forming the second largest waste management company in the U.S. We believe that this merger creates a strong operating platform that will allow us to continue to provide quality service to our customers and superior returns to our stockholders.

 

We expect that the economic challenges we experienced during the latter part of 2008 will continue throughout 2009. We anticipate a decrease in volumes in all lines of our business. We also anticipate that prices for recycling commodities will remain depressed. However, we believe that we will benefit from our cost control and pricing initiatives. Ours is a capital intensive business. Slower growth allows us to reduce capital spending, thus maintaining strong free cash flow despite a weaker economy. In addition, we intend to focus our attention on integrating our newly merged company and achieving cost synergies as a result of the merger.

 

 

As of December 31, 2008, we are the second largest provider
of services in the domestic non-hazardous solid waste industry.
We provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers
through 400 collection companies in 40 states and Puerto
Rico. We also own or operate 242 transfer stations, 213 active
solid waste landfills and 78 recycling facilities.

 

In early 2008, we began to experience the impact of the economic
slowdown on our operations. This slowdown intensified during
2008 which, combined with a tightening of the credit markets,
resulted in unprecedented changes in the U.S. and global
economies. Against this backdrop, consumption in the U.S. slowed
dramatically. New housing construction, a primary driver of our
temporary industrial collection business, declined in excess of
40% compared to 2007. More recently we are seeing a slowdown in
commercial construction. A slowdown in manufacturing has
resulted in a decrease in our permanent industrial collection
business. Furthermore, volumes in our commercial collection
business began to decline in the second half of 2008 as
consumers decreased discretionary spending. We are also
beginning to see lower commercial volumes due to store closures
and increased commercial vacancies. Fuel prices, which reached
historic highs in the summer, dropped quickly in the fall of
2008. This decrease in fuel prices was offset by corresponding
declines in fuel surcharges and, therefore, did not
significantly improve our profitability. In addition, prices for
recycling commodities declined in response to a decline in
global demand. Although we hedged a portion of our commodity
sales, declines in commodity prices have had, and will continue
to have, a significant impact on our profitability.

 

Despite the challenging economic environment, our business
performed well during 2008 due in large part to the
indispensible nature of our services and the scalability of our
business. Our internal revenue growth during 2008 was 2.5%.
Increases in core price and fuel recovery fees offset volume
declines. This increase in price and fuel recovery fees,
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 due to decreases in service volumes.

 

During December 2008, we completed our merger with Allied,
forming the second largest waste management company in the U.S.
We believe that this merger creates a strong operating platform
that will allow us to continue to provide quality service to our
customers and superior returns to our stockholders.

 

We expect that the economic challenges we experienced during the
latter part of 2008 will continue throughout 2009. We anticipate
a decrease in volumes in all lines of our business. We also
anticipate that prices for recycling commodities will remain
depressed. However, we believe that we will benefit from our
cost control and pricing initiatives. Ours is a capital
intensive business. Slower growth allows us to reduce capital
spending, thus maintaining strong free cash flow despite a
weaker economy. In addition, we intend to focus our attention on
integrating our newly merged company and achieving cost
synergies as a result of the merger.